[Graphic]
Federated Investors
Federated International Equity Fund
15th Annual Report
November 30, 1998
ESTABLISHED 1984
PRESIDENT'S MESSAGE
Dear Valued Shareholder:
Federated International Equity Fund was created in 1984, and I am
pleased to present its 15th Annual Report. This report covers the
12-month reporting period from December 1, 1997 through November 30,
1998. It begins with an interview with the fund's portfolio manager,
Drew Collins, Senior Vice President of Federated Global Investment
Management Corp. (formerly, Federated Global Research Corp.).
Following his discussion are three additional items of shareholder
interest. First is a series of graphs showing the fund's long-term
investment performance. Second is a complete listing of the fund's
diversified international stock holdings, and third is the publication
of the fund's financial statements.
This international stock fund is designed for total return.* The fund's
$222 million portfolio was invested in 23 countries on 4 continents
across 126 securities. The United Kingdom and France were the two
largest commitments.
While it was a volatile period for international markets, Europe was a
bright spot. The fund's focus in that region and strong security
selection produced positive performance that was competitive with the
benchmark index and far above that of the average international equity
fund. Individual share class total return performance for the 12-month
reporting period, including realized gains, follows.**
TOTAL CAPITAL NET ASSET
RETURN GAINS VALUE INCREASE
Class A Shares 17.78% $1.350 $17.93 to $19.56 = 9.1%
Class B Shares 16.92% $1.350 $17.48 to $18.89 = 8.1%
Class C Shares 16.94% $1.350 $17.28 to $18.66 = 8.0%
* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
** Performance quoted is based on net asset value, represents past
performance, and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the period, based on offering price (i.e., less any
applicable sales charge), for Class A, B, and C Shares were 11.32%,
11.42%, and 15.94%, respectively.
Thank you for joining the growing number of Federated International
Equity Fund shareholders who have diversified their equity assets
internationally and entrusted this fund with more than $222 million.
I recommend that shareholders add to their investment accounts on a
regular basis, using the dollar-cost averaging method of investing to
take advantage of price fluctuations.+
As always, we welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
January 15, 1999
+ Dollar-cost averaging does not ensure a profit or protect against loss in
declining markets. Since such a plan of investing involves continuous
investing regardless of fluctuating price levels, investors should
consider whether to continue to invest in periods of low price levels.
INVESTMENT REVIEW
[Graphic]
Drew Collins
Senior Vice President
Federated Global Investment Management Corp.
[Graphic]
OVERALL, IT WAS A POSITIVE, ALTHOUGH VOLATILE, YEAR FOR THE
INTERNATIONAL EQUITY MARKETPLACE. WHAT ARE YOUR COMMENTS?
The economic climate in Western Europe was robust during the first half
of the fiscal year, and the equity markets were extremely buoyant
relative to their international peers. Financial, automotive, and
telecommunications stocks lead the bull charge in Europe. During the
third quarter of 1998, the international equity markets corrected
sharply as fears of a banking crisis and general economic slowdown
squashed investor confidence. The banking industry was
disproportionately affected by eruptions in Russia, Asia, and the
U.S., as well as by growing concerns over Latin America. Most notably,
the Russian government defaulted on its debt and the U.S. government
had to step in to rescue a highly leveraged hedge fund. Expensive
stocks, those with high price to earnings ratios, which sold off most
severely in the third quarter, rebounded with equal vigor in the fourth
quarter of 1998. The key to this reversal was a swift response by
central bankers who cut interest rates across the board. In
November 1998 alone, 15 countries cut their interest rates, re-
inspiring investors and stimulating their demand for equities. At the
conclusion of a volatile year, the markets are comfortably ahead of
where they started.
[Graphic]
IN THIS ENVIRONMENT, HOW DID THE FUND PERFORM DURING THE REPORTING
PERIOD COMPARED TO ITS BENCHMARKS?
For the fiscal year ended November 30, 1998, the fund's Class A, B, and
C Shares produced strong total returns, based on net asset value, of
17.78%, 16.92% and 16.94%, respectively.* These returns were competitive
with the 14.72% return of the Morgan Stanley Capital International
Europe, Australia, and Far East Index (the "EAFE Index")** for the same
period. Additionally, the returns for Class A, B, and C Shares were
higher than the 10.43% average total return of all 511 international
equity funds tracked by Lipper Analytical Services, Inc.+
[Graphic]
WHAT WERE THE MAJOR INFLUENCES ON THE FUND'S PERFORMANCE?
The fund's performance can be mainly attributed to security selection,
but looking at the overall makeup of the fund, a few characteristics
should be noted. First, the fund was consistently overweighted in
Europe during the year versus its benchmark, the EAFE Index, and almost
entirely out of the Asia Pacific markets. This was clearly the right
strategy as fundamentals in Europe are strong and Asia, dominated by
Japan, remains sluggish. Second, the fund had substantial investments
in the financial services and telecommunications sectors, both of
which experienced strong earnings and revenue growth along with a re-
rating by the markets. Though these sectors have been extremely
volatile, we believe they represent the best opportunities for
substantial price appreciation in Western Europe.
* Performance quoted is based on net asset value, represents past
performance, and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the period, based on offering price (i.e., less any
applicable sales charge), for Class A, B, and C Shares were 11.32%,
11.42%, and 15.94%, respectively.
** The EAFE Index is a market capitalization-weighted foreign securities
index widely used to measure the performance of European, Australian, New
Zealand, and Far Eastern stock markets. This index is unmanaged, and
investments cannot be made in an index.
+ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated. These figures do not reflect sales
charges.
[Graphic]
WHAT INDIVIDUAL STOCKS MADE A SIGNIFICANT IMPACT?
Investments in alternative telecommunications carriers have been
among the best performing and most influential stocks in the
portfolio. The following five stocks in our top ten holdings fall into
this category: COLT TELECOM GROUP PLC, ENERGIS PLC, EQUANT NV, CABLE
& WIRELESS COMMUNICATIONS (CWC), and GLOBAL CROSSING LTD. Though they
focus on differing regions and have different business models, these
five companies are essentially taking advantage of the tremendous
growth in transferring digital traffic, packets of data rather than
voice via non-traditional means, i.e., coax cable and/or fiber-optic
cable. As our use of the Internet, e-mail and video expands, this puts
increasing demands on the networks over which this traffic travels.
These five companies are addressing these demands by installing high-
capacity networks, regionally in the cases of Colt, Energis and CWC,
and on a worldwide basis, in the cases of Equant and Global Crossing.
It is our belief that the data boom which is just getting underway
will provide enduring opportunities for these five companies with
significant first mover advantages.
[Graphic]
HOW WERE THE FUND'S ASSETS DIVERSIFIED AT THE END OF THE 12-MONTH
REPORTING PERIOD, AND WHAT WERE THE FUND'S TOP 10 HOLDINGS?
As of November 30, 1998, the fund's assets were invested as follows:
22.10% in the United Kingdom, 13.30% in France, 10.20% in Italy, and
11.90% in the Netherlands. Our exposure to Japan was 3.30%. The balance
was spread across 18 other countries. Details on the fund's country and
regional weightings along with the fund's top 10 holdings as of
November 30, 1998, follow:
PERCENTAGE OF PERCENTAGE OF
COUNTRY NET ASSETS COUNTRY NET ASSETS
United Kingdom 22.10% Portugal 2.40%
France 13.30% Bermuda 1.80%
Netherlands 11.90% Spain 1.70%
Italy 10.20% Finland 1.50%
Australia 6.30% Belgium 0.80%
Canada 5.70% Norway 0.70%
Switzerland 4.80% New Zealand 0.50%
Ireland 4.40% Austria 0.50%
Germany 4.30% Luxembourg 0.20%
Sweden 3.60% Greece 0.10%
Japan 3.30% Singapore 0.03%
Denmark 2.60%
PERCENTAGE OF
REGION NET ASSETS
Europe 85.1%
Canada 5.7%
Asia Pacific 3.3%
Other countries 6.1%
TOP 10 HOLDINGS
PERCENTAGE OF
NAME COUNTRY NET ASSETS
Energis PLC United Kingdom 2.60%
Colt Telecom
Group PLC United Kingdom 2.15%
The Laser Center, Inc. Canada 2.08%
Benckiser NV Netherlands 2.02%
Sanofi SA France 1.99%
Equant NV Netherlands 1.98%
Cable & Wireless
Communications PLC United Kingdom 1.97%
BioChem Pharma, Inc. Canada 1.82%
Global Crossing Ltd. Bermuda 1.78%
Synthelabo SA France 1.76%
TOTAL 20.15%
[Graphic]
WHAT WERE SOME OF YOUR NOTABLE RECENT PURCHASES FOR THE FUND DURING THE
12-MONTH REPORTING PERIOD?
Our recent purchases included the following:
SECURICOR (1.40% of net assets): Securicor owns 40% of Cellnet, the
third largest operator in the United Kingdom's cellular phone market
(60% owned by British Telecom). Currently, Securicor, which
represents parcel delivery and guarding businesses, in addition to
the interest in Cellnet, is trading at a significant discount to the
true value of its individual assets.
EUROPOLITAN (0.50% of net assets): Europolitan is a Swedish mobile
phone operator which initially entered the high value business market
with much success, and is now focusing its attention on consumer
business, which, with the advent of pre-paid phones, is booming.
Swedish mobile phone penetration is accelerating at a rate of over 40%,
second only to Finland, where more than one in two people have a cell
phone.
GLAXO WELLCOME PLC (1.70% of net assets): This United Kingdom-based
pharmaceutical company should provide relatively stable earnings
growth, especially considering the domestic economy which, by most
measures, is entering a manufacturing recession.
[Graphic]
AS WE LEAVE WHAT HAS BEEN A POSITIVE YET INCREASINGLY VOLATILE YEAR,
PARTICULARLY WITH RESPECT TO EUROPE, WHAT IS YOUR OUTLOOK AND
STRATEGY?
Due principally to the swift and substantial interest rate cuts
worldwide, we are clearly more bullish than we were at the end of the
third quarter of 1998, when markets were falling precipitously.
However, with the backdrop of slowing corporate earnings in 1999, the
concerns surrounding the Y2K problem and political uncertainty in the
U.S., we are erring on the side of caution. Thus, we are not only
buying aggressive growth stories, but we are balancing our portfolio
with some defensive stocks in industries such as pharmaceuticals and
food retailing. With regards to companies, we continue to focus on two
critical themes: earning visibility and domestic sales.
Across markets, we are concentrating on Western Europe and carefully
watching Japan for any signs of a turnaround. Currently, the European
Economic and Monetary Union ("EMU") and the Euro, which started trading
with the new year, are creating opportunities in Europe. Domestic money
managers, once restricted to investments in their home markets, are
putting money to work within "Euroland," thus creating tremendous
technical demand for the large, liquid stocks present in the Dow Jones
Euro Stoxx 50 Index.++ Simultaneously, differing interest rates across
countries are converging to lower levels, spurring equity markets and
creating additional opportunities. In 1999, we will focus our
attention on this dynamic market, taking advantage of the
opportunities created under the EMU.
Generally, we will continue to look for opportunities around the world
that offer substantial return potential, concentrating our efforts
primarily in developed markets, but also taking advantage of the
diversification benefits offered by carefully selected investments in
emerging markets.
++ The Dow Jones Euro Stoxx 50 Index is a capitalization-weighted index
calculated on 50 blue-chip stocks of the Euro countries. This index is
unmanaged, and investments cannot be made in an index.
WHERE IN THE WORLD SHOULD YOU INVEST?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic]
FEDERATED EMERGING MARKETS FUND
[Graphic]
FEDERATED EUROPEAN GROWTH FUND
[Graphic]
FEDERATED GLOBAL EQUITY INCOME FUND
[Graphic]
FEDERATED GLOBAL FINANCIAL SERVICES FUND
[Graphic]
FEDERATED INTERNATIONAL EQUITY FUND
[Graphic]
FEDERATED INTERNATIONAL GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic]
FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic]
FEDERATED WORLD UTILITY FUND
Federated employs highly qualified, experienced managers in global
investing to select countries and companies outside the U.S. for
long-term growth potential.
Call your investment representative to buy shares of 10 international
equity funds and 2 international income funds from Federated
Securities Corp.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL
1-800-341-7400 TO ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU
INVEST.
Foreign investing involves special risks including currency risks, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED INTERNATIONAL EQUITY FUND
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $15,000 IN THE CLASS A SHARES
OF FEDERATED INTERNATIONAL EQUITY FUND ON 8/17/84, REINVESTED
DIVIDENDS AND CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR
ACCOUNT WOULD HAVE BEEN WORTH $80,256 ON 11/30/98. YOU WOULD HAVE
EARNED A 12.45%* AVERAGE ANNUAL TOTAL RETURN FOR THE INVESTMENT LIFE
SPAN.
One key to investing wisely is to reinvest all distributions
in fund shares. This increases the number of shares on which
you can earn future dividends, and you gain the benefit of compounding.
As of 12/31/98, the Class A Shares' average annual 1-year,
5-year, and 10-year total returns were 17.85%, 7.39%, and
7.10%, respectively. Class B Shares' average annual 1-year
and since inception (9/28/94) total returns were 18.24% and
7.05%, respectively. Class C Shares' average annual 1-year,
5-year, and since inception (4/1/93) total returns were
22.79%, 7.68%, and 10.41%, respectively.**
"Graphic representation "A1" omitted. See Appendix."
* Total return represents the change in the value of an
investment after reinvesting all income and capital gains, and
takes into account the 5.50% sales charge applicable to an
initial investment in Class A Shares.
Data quoted represents past performance and does not
guarantee future results. Investment return and principal
value will fluctuate, so an investor's shares, when
redeemed, may be worth more or less than their original cost.
** The total returns stated take into account the 5.50% sales
charge for Class A Shares, the 5.50% contingent deferred sales
charge for Class B Shares, and the 1.00% contingent deferred sales
charge for Class C Shares.
FEDERATED INTERNATIONAL EQUITY FUND
ONE STEP AT A TIME:
$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH
YEAR FOR 14 YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO
$29,835.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares
of Federated International Equity Fund on 8/17/84, reinvested your
dividends and capital gains and did not redeem any shares, you would
have invested only $15,000, but your account would have reached a
total value of $29,835* by 11/30/98. You would have earned an average
annual total return of 8.93%.
A practical investment plan helps you pursue long-term
capital growth through a diversified portfolio primarily
invested in equity securities of non-U.S. issuers. Through
systematic investing, you buy shares on a regular basis and
reinvest all earnings. An investment plan works for you
when you invest only $1,000 annually. You can take it one
step at a time. Put time, money, and compounding to work.
"Graphic representation "A2" omitted. See Appendix."
* This chart assumes that the subsequent annual investments are
made on the last day of each anniversary month. No method of
investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying
shares at various prices, investors can purchase more
shares at lower prices. All accumulated shares have the
ability to pay income to the investor.
Because such a plan involves continuous investment, regardless
of changing price levels, the investor should consider whether
or not to continue purchases through periods of low price levels.
FEDERATED INTERNATIONAL EQUITY FUND
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR LONG-TERM GROWTH
Dan and Gigi Hardwick are a two-income suburban couple who, like many
others, want to be able to afford their present lifestyle after they
retire.
They decided an international stock fund, though possibly volatile in the
short-term, offered excellent opportunities for long-term growth. They
invested $10,000 in Federated International Equity Fund (Class A Shares)
on August 17, 1984 and-to take advantage of dollar cost averaging-have
invested $5,000 every August since.
By November 30, 1998, they were pleased to see that their $80,000
investment had grown to $176,982 for an average annual total return of
9.66%. Gigi's already picturing a long Mediterranean cruise to
celebrate their retirement.
The couple is fictional, but the figures are real.
"Graphic representation "A3" omitted. See Appendix."
This hypothetical scenario is provided for illustrative purposes only
and does not represent the results obtained by any particular
shareholder. Past performance does not guarantee future results.
FEDERATED INTERNATIONAL EQUITY FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL EQUITY FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated International Equity Fund (Class A Shares)
(the "Fund") from November 30, 1988 to November 30, 1998 compared to
the Morgan Stanley Capital International Europe Australia Far-East
Index (EAFE).+
"Graphic representation "A4" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund with no sales
charge. As of October 1, 1994, the maximum sales charge is 5.50%. The
Fund's performance assumes the reinvestment of all dividends and
distributions. The EAFE has been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The EAFE is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.
FEDERATED INTERNATIONAL EQUITY FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL EQUITY FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000*
in the Federated International Equity Fund (Class B Shares) (the
"Fund") from September 28, 1994 (start of performance) to
November 30, 1998 compared to the Morgan Stanley Capital International
Europe Australia Far-East Index (EAFE).+
"Graphic representation "A5" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a 2.00% contingent deferred sales charge on
any redemption less than five years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The EAFE has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The EAFE is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.
FEDERATED INTERNATIONAL EQUITY FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL EQUITY FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000*
in the Federated International Equity Fund (Class C Shares) (the
"Fund") from April 1, 1993 (start of performance) to November 30,
1998 compared to the Morgan Stanley Capital International Europe
Australia Far-East Index (EAFE).+
"Graphic representation "A6" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The EAFE has been
adjusted to reflect reinvestment of dividends on securities in the
index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The EAFE is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.
FEDERATED INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS-101.2%
AUSTRALIA-5.6%
539,000 Australia & New Zealand Banking Group, Melbourne $ 3,559,533
757,231 (a) Biota Holdings Ltd. 2,521,772
131,410 (a) Cable & Wireless Optus Ltd. 246,063
173,000 Commonwealth Installment Receipt Trustee Ltd. 2,386,064
393,000 Fosters Brewing Group 1,029,746
604,000 Mayne Nickless Ltd. 2,580,759
Total 12,323,937
AUSTRIA-0.5%
24,000 Flughafen Wien AG 1,067,828
BELGIUM-0.8%
35,000 (a) Mobistar S.A. 1,665,428
BERMUDA-1.8%
104,500 (a) Global Crossing Ltd. 3,957,938
(a) CANADA-5.7%
95,100 Alliance Atlantis Communications, Inc., Class B 1,497,147
93,000 (a) Alliance Communications Corp., Class B 1,464,087
166,000 (a) BioChem Pharma, Inc. 4,046,250
72,800 (a) Informisssion Group 470,371
48,800 (a) Telesystem International Wireless, Inc. 670,620
227,000 (a) The Laser Center Inc. 4,452,148
8,000 (a) The Laser Center Inc., ADR 156,500
Total 12,757,123
DENMARK-2.6%
24,000 Kobenhavn Lufthave 2,746,472
17,000 Tele Danmark AS, Class B 1,897,969
15,000 Unidanmark, Class A 1,223,445
Total 5,867,886
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
FINLAND-1.5%
55,450 Helsingin Puhelin Oyj $ 2,956,043
19,350 (a) Sonera Group 277,581
Total 3,233,624
FRANCE-13.3%
27,000 AXA 3,488,188
16,000 Banque Nationale de Paris 1,223,371
70,000 (a) CNP Assurances 2,116,290
8,600 Canal Plus 1,975,708
2,000 DEX 1,799,198
5,200 Essilor International 2,024,538
10,000 Etablissements Economiques du Casino Guichard- Perrachon 949,167
24,800 Sanofi S.A. 4,424,524
40,000 Scor S.A. 2,555,720
5,500 Societe Generale, Paris 866,203
18,700 Synthelabo 3,908,159
17,500 TFL - TV Francaise 3,060,624
14,000 Valeo 1,198,411
Total 29,590,101
GERMANY, FEDERAL REPUBLIC OF-4.3%
11,000 Bayerische Vereinsbank AG, Munich 951,870
18,500 Beiersdorf AG 1,210,469
24,000 Mannesmann AG 2,596,009
62,000 Merck KGAA 2,521,736
6,000 Preussag AG 2,196,351
Total 9,476,435
GREECE-0.1%
12,560 (a) Panafon S.A. 224,979
IRELAND-4.4%
144,000 Allied Irish Banks PLC 2,214,778
12,300 (a) Elan Corp. PLC, ADR 837,937
24,300 (a) Esat Telecom Group PLC, ADR 838,350
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
IRELAND-CONTINUED
81,100 (a) ICON PLC, ADR $ 2,301,213
140,000 Irish Life 1,164,475
180,500 Irish Permanent PLC 2,445,667
Total 9,802,420
ITALY-10.2%
276,000 (a) AEM SPA 414,062
100,000 Arn Mondadori Edit 1,256,139
75,000 Assicurazioni Generali 2,799,524
1,082,700 Banca Nazionale del Lavoro 3,042,324
1,173,000 Bca Di Roma 2,028,614
135,850 Istituto Bancario San Paolo di Torino 2,228,110
185,000 Mediaset SPA 1,305,105
3,200,000 (a) Seat Pagine Gialle SPA 2,811,847
311,000 Telecom Italia SPA 2,518,919
460,000 Unicredito Italiano SPA 2,613,901
3,280,000 (a) Unione Immobiliare SPA 1,640,244
Total 22,658,789
JAPAN-3.3%
84,000 Daiwa House Industry Co. Ltd. 889,773
96,000 Fujitsu Ltd. 1,108,052
65,000 Nomura Securities Co. Ltd. 631,534
59,000 Pioneer Electronic Corp. 969,765
41,000 Sony Chemicals Corp. 1,477,597
29,600 Sony Music Entertainment, Inc. 1,302,208
166,000 Sumitomo Marine & Fire 990,341
Total 7,369,270
LUXEMBOURG-0.2%
2,500 (a) Societe Europeenne des Satellites 390,636
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
NETHERLANDS-11.9%
61,000 Ahold NV $ 2,114,611
76,000 (a) Benckiser NV 4,490,340
16,900 Cap Gemini NV 1,207,048
107,000 Elsevier NV 1,404,251
78,000 (a) Equant NV, ADR 4,402,125
21,000 Heineken NV 1,066,168
68,000 Koninklijke Numico NV 2,933,257
225,000 (a) Magnus Holding NV 1,999,948
30,000 (a) Qiagen NV 1,830,293
466,000 (a) TAS Groep NV 2,119,788
20,000 VNU - Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 687,041
11,700 Wolters Kluwer NV 2,229,824
Total 26,484,694
NEW ZEALAND-0.5%
346,000 Fisher & Paykel 1,083,597
NORWAY-0.7%
118,000 Merkantildata ASA 1,284,407
106,760 (a) Sensonor ASA 242,393
Total 1,526,800
PORTUGAL-1.7%
31,600 Banco Commercial Portugues, Class R 962,541
9,000 Banco Pinto & Sotto Mayor 164,050
33,100 Compania de Seguros Tranquilidade 1,079,772
7,500 Telecel - Comunicacoes Pessoai 1,465,812
Total 3,672,175
SINGAPORE-0.0%
10,000 Overseas-Chinese Banking Corp. Ltd. 61,231
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
SPAIN-1.7%
50,000 Argentaria S.A. $ 1,163,838
24,030 Banco Pastor S.A. 1,498,233
90,000 Corp Fin Reunida 1,206,443
Total 3,868,514
SWEDEN-3.6%
42,000 Autoliv, Inc., ADR 1,514,746
40,000 Enator AB 1,135,414
11,000 Europolitan Holdings AB 1,011,059
40,000 ForeiningsSparbanken AB 1,120,668
164,200 (a) Modern Times Group, Class B 2,108,491
100,000 Skand Enskilda BKN, Class A 1,136,643
Total 8,027,021
SWITZERLAND-4.8%
4,964 (a) Barry Callebaut AG 1,164,299
47 Lindt & Spruengli AG 1,198,310
1,500 Novartis AG 2,814,581
3,000 Schweizerische Lebensversicherungs - und Rentenanstalt 2,096,971
7,300 The Swatch Group AG 975,041
3,400 Zurich Versicherungsgesellschaft 2,427,702
Total 10,676,904
UNITED KINGDOM-22.0%
270,000 Avis Europe PLC 1,036,199
1 Bank of Ireland 6
72,800 Bespak PLC 1,050,699
145,000 British Sky Broadcasting Group PLC 1,198,242
491,750 (a) Cable & Wireless Communications PLC 4,380,030
295,000 Carlton Communications PLC 2,369,681
366,000 (a) Colt Telecom Group PLC 4,781,291
95,000 (a) ECsoft Group PLC, ADR 2,410,625
319,800 (a) Energis PLC 5,776,058
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
UNITED KINGDOM-CONTINUED
20,000 (a) Garban PLC $ 78,184
120,000 Glaxo Wellcome PLC 3,794,393
150,000 Granada Group PLC 2,340,568
117,968 Hays PLC 996,261
348,500 National Grid Co. PLC 2,769,258
68,000 National Westminster Bank, PLC, London 1,240,518
101,500 Pearson 1,824,868
80,000 Prudential Corp. PLC 1,166,490
115,000 Royal & Sun Alliance Insurance Group PLC 959,814
75,000 Royal Bank of Scotland PLC, Edinburgh 1,129,460
380,000 Securicor PLC 3,058,739
200,292 Smithkline Beecham Corp. 2,457,964
275,000 Somerfield PLC 2,066,141
200,000 United News & Media PLC 1,931,505
Total 48,816,994
TOTAL COMMON STOCKS (IDENTIFIED COST $189,031,304) 224,604,324
CORPORATE BONDS-0.9%
AUSTRALIA-0.8%
$ 487,000 Suncorp-Metway Ltd., Conv. Bond, 8.00%, 10/31/2001 1,719,756
UNITED KINGDOM-0.1%
95,000 National Grid Group PLC, Bond, 4.25%, 2/17/2008 195,284
TOTAL CORPORATE BONDS (IDENTIFIED COST $1,827,480) 1,915,040
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
PREFERRED STOCKS-0.7%
PORTUGAL-0.7%
144,720 Lusomundo Sociedade Gestora de Participacoes
Sociais SA, Pfd. (IDENTIFIED COST $1,985,770) $ 1,680,421
REPURCHASE AGREEMENT(B)-3.5%
$7,705,000 Westdeutsche Landesbank Girozentrale, 5.35%, dated 11/30/1998,
due 12/1/1998 (AT AMORTIZED COST) 7,705,000
TOTAL INVESTMENTS (IDENTIFIED COST $200,549,554)(C) $235,904,785
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to
$201,108,426. The net unrealized appreciation of investments on a
federal tax basis amounts to $34,796,359 which is comprised of
$38,200,548 appreciation and $3,404,189 depreciation at November 30,
1998.
Note: The categories of investments are shown as a percentage of net assets
($221,993,991) at November 30, 1998.
The following acronyms are used throughout this portfolio:
ADR -American Depository Receipt
PLC -Public Limited Company
SA -Support Agreement
SPA -Standby Purchase Agreement
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $200,549,554
and tax cost $201,108,426) $ 235,904,785
Cash 233
Cash denominated in foreign currencies (at identified cost $3,449) 3,349
Income receivable 339,224
Receivable for investments sold 1,946,982
Receivable for shares sold 1,272,589
Total assets 239,467,162
LIABILITIES:
Payable for investments purchased $ 8,639,701
Payable for shares redeemed 8,704,786
Net payable for foreign currency exchange contracts purchased 14,893
Payable for taxes withheld 12,121
Accrued expenses 101,670
Total liabilities 17,473,171
NET ASSETS for 11,449,647 shares outstanding $ 221,993,991
NET ASSETS CONSIST OF:
Paid in capital $ 170,221,452
Net unrealized appreciation of investments and translation of
assets and liabilities in foreign currency 35,434,045
Accumulated net realized gain on investments and foreign
currency transactions 16,616,129
Distributions in excess of net investment income (277,635)
Total net assets $ 221,993,991
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($172,160,015 / 8,802,185 shares outstanding) $19.56
Offering Price Per Share (100/94.50 of $19.56)* $20.70
Redemption Proceeds Per Share $19.56
CLASS B SHARES:
Net Asset Value Per Shares ($35,689,087 / 1,889,456 shares outstanding) $18.89
Offering Price Per Share $18.89
Redemption Proceeds Per Share (94.50/100 of $18.89)* $17.85
CLASS C SHARES:
Net Asset Value Per Share ($14,144,889 / 758,006 shares outstanding) $18.66
Offering Price Per Share $18.66
Redemption Proceeds Per Share (99.00/100 of $18.66)* $18.47
</TABLE>
* See "What do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $436,909) $ 2,888,652
Interest 450,076
Total income 3,338,728
EXPENSES:
Investment advisory fee $ 2,137,661
Administrative personnel and
services fee 185,000
Custodian fees 127,119
Transfer and dividend
disbursing agent fees and
expenses 264,139
Directors'/Trustees' fees 5,672
Auditing fees 24,353
Legal fees 3,240
Portfolio accounting fees 95,588
Distribution services fee-
Class B Shares 233,953
Distribution services fee-
Class C Shares 93,921
Shareholder services fee-Class
A Shares 425,124
Shareholder services fee-Class
B Shares 77,984
Shareholder services fee-Class
C Shares 31,307
Share registration costs 41,227
Printing and postage 59,748
Insurance premiums 304
Total expenses 3,806,340
Net operating loss (467,612)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on
investments and foreign
currency transactions 15,242,814
Net change in unrealized
appreciation of investments
and translation of assets and
liabilities in foreign
currency 15,948,792
Net realized and unrealized gain on
investments and foreign currency 31,191,606
Change in net assets
resulting from operations $ 30,723,994
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C>
1998 1997
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS-
Net investment income/
operating loss $ (467,612) $ 167,546
Net realized gain (loss) on
investments and foreign
currency transactions
($16,952,671 and $12,680,273,
respectively, as computed for
federal tax purposes) 15,242,814 10,781,853
Net change in unrealized
appreciation of investments
and translation of assets and
liabilities in foreign
currency 15,948,792 1,272,361
Change in net assets
resulting from operations 30,723,994 12,221,760
DISTRIBUTIONS TO SHAREHOLDERS-
Distributions from net
realized gains on investments
and foreign currency
transactions
Class A Shares (10,030,621) (3,655,308)
Class B Shares (1,891,979) (386,187)
Class C Shares (810,275) (169,128)
Change in net assets
resulting from distributions
to shareholders (12,732,875) (4,210,623)
SHARE TRANSACTIONS-
Proceeds from sale of shares 434,539,857 226,245,226
Net asset value of shares
issued to shareholders in
payment of distributions
declared 10,460,757 2,860,246
Cost of shares redeemed (408,325,936) (267,012,751)
Change in net assets
resulting from share
transactions 36,674,678 (37,907,279)
Change in net assets 54,665,797 (29,896,142)
NET ASSETS:
Beginning of period 167,328,194 197,224,336
End of period $ 221,993,991 $ 167,328,194
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS-CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $17.93 $17.32 $17.89 $18.53 $16.49
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) (0.01) * 0.04 * 0.03 0.09 0.15
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.99 0.95 1.38 0.17 1.96
Total from investment
operations 2.98 0.99 1.41 0.26 2.11
LESS DISTRIBUTIONS
Distributions from net
investment income - - (0.09) (0.003) (0.07)
Total distributions from net
investment income - - (0.09) (0.003) (0.07)
Distributions from net
realized gain on investments
and foreign currency
transactions (1.35) (0.38) (1.89) (0.90) -
Total distributions (1.35) (0.38) (1.98) (0.90) (0.07)
NET ASSET VALUE, END OF PERIOD $19.56 $17.93 $17.32 $17.89 $18.53
TOTAL RETURN(A) 17.78% 5.89% 8.63% 1.60% 12.82%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.63% 1.71% 1.68% 1.57% 1.61%
Net investment income (loss) (0.06% ) 0.23% 0.15% 0.42% -
Expense waiver/
reimbursement(b) - 0.10% 0.15% 0.18% -
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $172,160 $134,858 $172,938 $191,911 $261,178
Portfolio turnover 243% 210% 119% 166% 73%
</TABLE>
* Amount based on average outstanding Shares.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS-CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $17.48 $17.04 $17.70 $18.50 $19.61
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) (0.16)** (0.10) ** (0.03) (0.08) (0.01)
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.92 0.92 1.26 0.18 (1.10)
Total from investment
operations 2.76 0.82 1.23 0.10 (1.11)
LESS DISTRIBUTIONS
Distributions from net
investment income - - (0.00)(b) - -
Distributions in excess of
net investment income - 0.00 - - -
Total distributions from net
investment income - 0.00 - - -
Distributions from net
realized gain on investments
and foreign currency
transactions (1.35) (0.38) (1.89) (0.90) -
Total distributions (1.35) (0.38) (1.89) (0.90) -
NET ASSET VALUE, END OF PERIOD $18.89 $17.48 $17.04 $17.70 $18.50
TOTAL RETURN(C) 16.92% 4.97% 7.59% 0.68% (5.27% )
RATIOS TO AVERAGE NET ASSETS
Expenses 2.38% 2.56% 2.58% 2.52% 2.59% *
Net investment income (loss) (0.84% ) ( 0.59% ) (0.74% ) (0.52% ) (0.88% )*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $35,689 $23,629 $16,707 $6,370 $1,214
Portfolio turnover 243% 210% 119% 166% 73%
</TABLE>
* Computed on an annualized basis.
** Amount based on average outstanding Shares.
(a) Reflects operations for the period from September 19, 1994 (date of
initial public investment) to November 30, 1994.
(b) Distributions from net investment income is less than $0.01 per share.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS-CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $17.28 $16.85 $17.50 $18.30 $16.41
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) (0.16) * (0.11) * (0.10) (0.12) (0.05)
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.89 0.92 1.34 0.22 1.98
Total from investment
operations 2.73 0.81 1.24 0.10 1.93
LESS DISTRIBUTIONS
Distributions from net
investment income - - 0.00(a) (0.00)(a) -
Distributions in excess of
net investment income(b) - - - - (0.04)
Total distributions from net
investment income - - 0.00 (0.00) (0.04)
Distributions from net
realized gain on investments
and foreign currency
transactions (1.35) (0.38) (1.89) (0.90) -
Total distributions (1.35) (0.38) (1.89) (0.90) (0.04)
NET ASSET VALUE, END OF PERIOD $18.66 $17.28 $16.85 $17.50 $18.30
TOTAL RETURN(C) 16.94% 4.96% 7.75% 0.69% 11.75%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.38% 2.56% 2.57% 2.46% 2.55%
Net investment income (loss) (0.83% ) (0.67% ) (0.72% ) (0.47% ) (0.91% )
Expense waiver/
reimbursement(d) 0.00% 0.00 0.01% 0.04% 0.00%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $14,145 $8,841 $7,580 $7,146 $8,836
Portfolio turnover 243% 210% 119% 166% 73%
</TABLE>
* Amount based on average outstanding Shares.
(a) Distribution from net investment income is less than $0.01 per share.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income
tax purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
1. ORGANIZATION
International Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of two
portfolios. The financial statements included herein are only those of
Federated International Equity Fund (the "Fund"), a diversified
portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held.
The Fund offers three classes of shares: Class A Shares, Class B
Shares, and Class C Shares. The investment objective is to obtain a
total return on its assets.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS-Foreign equity securities are valued at the
last sale price reported in the market in which they are primarily
traded. If no sale on the recognized exchange is reported or the
security is traded over the counter, the foreign securities are valued
at the mean between the last closing bid and asked prices. Listed
corporate bonds, unlisted securities and private placement securities
are generally valued at the mean of the latest bid and asked price as
furnished by an independent pricing service. Short-term securities are
valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days
or less at the time of purchase may be valued at amortized cost, which
approximates fair market value. With respect to valuation of foreign
securities, trading in foreign cities may be completed at times which
vary from the closing of the New York Stock Exchange. Therefore,
foreign securities are valued at the latest closing price on the
exchange on which they are traded prior to the closing of the New York
Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. Dollars at the foreign exchange rate in effect at
noon, eastern time, on the day the value of the foreign security is
determined.
REPURCHASE AGREEMENTS-It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions. The following
reclassifications have been made to the financial statements.
INCREASE/(DECREASE)
UNDISTRIBUTED NET
INVESTMENT
INCOME/ACCUMULATED
ACCUMULATED DISTRIBUTIONS IN EXCESS OF
PAID-IN CAPITAL NET REALIZED GAIN/LOSS NET INVESTMENT INCOME
$(3,425,787) $1,425,917 $1,999,870
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES-It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition
of certain investments in passive foreign investment companies.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS-The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. The Fund enters into foreign currency contract
transactions to protect assets against adverse changes in foreign
currency exchange rates or exchange control regulations. Risks may
arise upon entering these transactions from the potential inability of
counterparts to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates.
The foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded
for financial statement purpose as unrealized until the settlement
date. At November 30, 1998, the Fund had no outstanding forward foreign
currency commitments.
FOREIGN CURRENCY TRANSLATION-The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3.CAPITAL STOCK
At November 30, 1998, par value shares ($0.0001 per share) authorized
were as follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 500,000,000
Class B Shares 500,000,000
Class C Shares 500,000,000
TOTAL 1,500,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 19,112,297 $ 382,682,504 11,656,518 $ 203,925,963
Shares issued to shareholders
in payment of distributions
declared 470,456 7,974,243 138,301 2,327,602
Shares redeemed (18,302,055) (369,516,756) (14,255,933) (251,791,018)
Net change resulting from
Class A Share transactions 1,280,698 $ 21,139,991 (2,461,114) $ (45,537,453)
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,517,731 $ 30,124,357 788,772 $ 13,786,500
Shares issued to shareholders
in payment of distributions
declared 107,723 1,775,576 22,438 371,580
Shares redeemed (1,087,709) (20,903,207) (440,071) (7,739,343)
Net change resulting from
Class B Share transactions 537,745 $ 10,996,726 371,139 $ 6,418,737
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,120,914 $ 21,732,996 482,587 $ 8,532,763
Shares issued to shareholders
in payment of distributions
declared 43,647 710,938 9,851 161,064
Shares redeemed (918,179) (17,905,973) (430,628) (7,482,390)
Net change resulting from
Class C Share transactions 246,382 $ 4,537,961 61,810 $ 1,211,437
Net change resulting from
share transactions 2,064,825 $ 36,674,678 (2,028,165) $ (37,907,279)
</TABLE>
4.INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.00% of the Fund's
average daily net assets.
ADMINISTRATIVE FEE-Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with
administrative personnel and services. The fee paid to FServ is based
on the level of average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class B and
Class C Shares. The Plan provides that the Fund may incur distribution
expenses according to the following schedule annually, to compensate
FSC.
PERCENTAGE OF AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
Class B Shares 0.75%
Class C Shares 0.75%
SHAREHOLDER SERVICES FEE-Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
for the period. The fee paid to FSSC is used to finance certain
services for shareholders and to maintain shareholder accounts. FSSC
can modify or terminate this voluntary waiver at any time at its sole
discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-FServ,
through its subsidiary, FSSC, serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
GENERAL- Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended November 30, 1998, were as follows:
PURCHASES $529,278,541
SALES $495,121,223
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or
economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
At November 30, 1998, the diversification of industries was as
follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
<S> <C> <C> <C>
Appliances & Household Durables 0.9% Health & Personal Care 17.1%
Banking 14.7% Industrial Components 1.2%
Beverage & Tobacco 0.9% Insurance 9.4%
Broadcasting & Publishing 7.8% Leisure & Tourism 2.8%
Business & Public Services 9.5% Merchandising 2.3%
Chemicals 0.7% Multi-Industry 3.5%
Construction & Housing 0.4% Real Estate 0.7%
Data Processing & Reproduction 1.5% Recreation, Other Consumer Goods 1.0%
Electrical & Electronics 2.5% Telecommunications 17.4%
Financial Services 2.2% Transportation - Road & Rail 0.5%
Food & Household Products 4.4% Utilities - Electrical & Gas 1.5%
</TABLE>
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
Administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8. SUBSEQUENT EVENT
On January 7, 1999, the Adviser, Federated Global Research Corp.,
changed its name to Federated Global Investment Management Corp.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
INTERNATIONAL SERIES, INC.
(Federated International Equity Fund):
We have audited the accompanying statement of assets and liabilities of
Federated International Equity Fund (an investment portfolio of
International Series, Inc., a Maryland corporation), including the
schedule of portfolio investments, as of November 30, 1998, the
related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then
ended, and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion
on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated International Equity Fund (an
investment portfolio of International Series, Inc.) as of November 30,
1998 the results of its operations for the year then ended, the changes
in its net assets for each of the two years in the period then ended,
and its financial highlights for the periods presented, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 15, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Richard B. Fisher
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 46031P308
Cusip 46031P605
Cusip 46031P407
G00267-01 (1/99)
[Graphic]
Federated Investors
[Graphic]
Federated International Income Fund
8th Annual Report
November 30, 1998
ESTABLISHED 1991
PRESIDENT'S MESSAGE
Dear Valued Shareholder:
Federated International Income Fund was created in 1991, and I
am pleased to present its eighth Annual Report. This report covers
the 12-month reporting period from December 1, 1997 through November
30, 1998. It begins with an interview with Robert M. Kowit, Vice
President, who co-manages the fund with Micheal W. Casey, Vice
President, both of Federated Global Investment Management Corp.
(formerly, Federated Global Research Corp.). Following their
discussion are three additional items of shareholder interest. First
is a series of graphs showing the fund's long-term investment
performance. Second is a complete listing of the fund's diversified
international bond holdings, and third is the publication of the fund's
financial statements.
The fund's assets of $158 million were invested in high-quality debt
issues of 13 countries to pursue generous quarterly income and capital
appreciation. Germany and Japan were the largest commitments at the end
of the reporting period.*
During the reporting period, the international bond marketplace turned
in positive performance as the bond market enjoyed a flight-to-
quality, and the U.S. dollar weakened in value. In this environment,
the fund's total return performance was also positive, and competitive
with the 9.60% total return of the Lipper International Income Funds
Average.**
* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
** Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated. These figures do not reflect sales
charges.
Individual share class total return performance for the 12-month
reporting period, including income distributions, follows.***
TOTAL NET ASSET
RETURN INCOME VALUE INCREASE
Class A Shares 10.22 % $0.480 $10.65 to $11.22 = 5%
Class B Shares 9.45% $0.400 $10.62 to $11.19 = 5%
Class C Shares 9.42% $0.400 $10.63 to $11.20 = 5%
Thank you for joining the growing number of shareholders who have
diversified their fixed-income assets internationally through this
fund. Remember, adding to your account and reinvesting your quarterly
dividends in additional shares is a convenient, painless way to "pay
yourself first" and enjoy the benefit of compounding.+
As always, we welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
January 15, 1999
*** Performance quoted is based on net asset value, represents past
performance and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the period, based on offering price (i.e., less any
applicable sales charge), for Class A, B, and C Shares were 5.27%, 3.95%,
and 8.42%, respectively.
+ Systematic investing does not ensure a profit or protect against loss in
declining markets. Since such a plan of investing involves continuous
investing regardless of fluctuating price levels, investors should
consider whether to continue to invest in periods of low price levels.
INVESTMENT REVIEW
Robert M. Kowit
Vice President
Federated Global Investment Management Corp.
Micheal W. Casey
Vice President
Federated Global Investment Management Corp.
[Graphic]
FEDERATED INTERNATIONAL INCOME FUND'S OVERALL PERFORMANCE IMPROVED
CONSIDERABLY IN THE SECOND HALF OF ITS FISCAL YEAR, WHICH HELPED THE
FUND ACHIEVE POSITIVE 12-MONTH PERFORMANCE BY NOVEMBER 30, 1998. WHAT
ARE YOUR COMMENTS?
The developed bond markets benefited from the flight-to-quality that
resulted from the turmoil in the emerging markets, the U.S. high-yield
markets, and the mortgage-backed securities markets. Performance was
also helped by a weak U.S. dollar. Just as the U.S. Treasury market
outperformed other domestic bond markets, the international fixed-
income market, which is mainly high-quality and sovereign debt, was
able to outperform domestic fixed-income securities.
The global concerns about a lack of liquidity and the negative impact
on the emerging markets resulted in a series of interest rate cuts by
all developed countries that pushed bond prices higher. In addition,
investor concerns that the Euro would start off as a weak currency were
put to rest as it became evident that the new European Central Bank
would maintain its independence, and many countries would reduce their
reserves of U.S. dollars and replace them with the Euro.
[Graphic]
HOW DID THE FUND PERFORM OVER THE 12-MONTH REPORTING PERIOD?
For the fiscal year ended November 30, 1998, the fund's total returns,
based on net asset value, for Class A, B, and C Shares were 10.22%,
9.45%, and 9.42%, respectively.* These returns were less than the
14.03% total return of the international bond market as measured by the
J.P. Morgan Non-Dollar Bond Index,** but very competitive with the
9.60% average total return of the 57 international income funds tracked
by Lipper Analytical Services, Inc.
* Performance quoted is based on net asset value, represents past
performance and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the period, based on offering price (i.e., less any
applicable sales charge), for Class A, B, and C Shares were 5.27%, 3.95%,
and 8.42%, respectively.
** The J.P. Morgan Non-Dollar Bond Index is a total return, trade-weighted
index of over 360 government and high-grade bonds in 12 developed
countries. This index is unmanaged, and investments cannot be made in an
index.
[Graphic]
INCOME, OF COURSE, IS A PRIMARY CONSIDERATION FOR SHAREHOLDERS. WHAT
WAS THE TOTAL INCOME PAID PER SHARE DURING THE 12-MONTH REPORTING
PERIOD ENDED NOVEMBER 30, 1998?
The fund's income dividends totaled $0.480 per share for Class A
Shares, $0.400 per share for Class B Shares, and $0.400 per share for
Class C Shares. Income generated by the fund declined over the year as
international interest rates decreased. The yield on the fund was
consistent with the overall yield levels of the international markets.
[Graphic]
HOW WERE THE FUND'S HIGH-QUALITY BOND HOLDINGS DIVERSIFIED AMONG
COUNTRIES AS OF NOVEMBER 30, 1998?
More than half of the fund's holdings were concentrated among Germany,
Japan, the United Kingdom, and Italy. The balance was spread across 10
other countries as indicated below:
PERCENTAGE OF
COUNTRY NET ASSETS
Germany 29.1%
Japan 9.0%
United Kingdom 8.0%
Italy 7.4%
Spain 7.3%
Australia 5.2%
Sweden 4.3%
Canada 4.0%
France 4.0%
Norway 3.1%
Denmark 3.0%
Greece 2.8%
Portugal 2.2%
Ireland 1.2%
[Graphic]
WHAT WERE THE FUND'S TOP FIVE BOND HOLDINGS AS OF
NOVEMBER 30, 1998?
PERCENTAGE
OF NET
ISSUER COUPON AND MATURITY COUNTRY ASSETS
Sovereign 6.00% due 6/20/2016 Germany 8.20%
KFW Int'l. Finance 6.75% due 6/20/2005 Germany 6.48%
Sovereign 10.30% due 6/15/2002 Spain 5.76%
Import-Export Bank 6.50% due 5/19/2000 Germany 5.03%
Sovereign 5.30% due 12/20/1999 Japan 4.53%
Total 30.00%
[Graphic]
AS WE END 1998 WITH A RELATIVELY FAVORABLE YEAR BEHIND US, WHAT
OPPORTUNITIES DO YOU SEE AHEAD FOR INTERNATIONAL BOND INVESTORS? HOW
SIGNIFICANT A ROLE WILL CURRENCIES PLAY, AND WHAT IMPACT WILL THE EURO
HAVE?
International yield curves are still quite a bit steeper than that of
the U.S., which means that investors have been compensated with higher
yields for investing in securities with longer maturities. Most
European markets have a spread of 50 to 80 basis points between 2-year
yields and 10-year yields while the U.S. yield curve is essentially
flat. Further cuts in short-term interest rates are expected which
would benefit the bond markets.
The successful launch of the Euro will also help international bonds by
supporting European bond prices. So far, the Euro has strengthened
against the U.S. dollar and is expected to remain relatively strong as
trade flows are redenominated in Euros, and central banks rebalance
their reserves to include the Euro.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED INTERNATIONAL INCOME FUND
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $8,000 IN THE CLASS A SHARES
OF FEDERATED INTERNATIONAL INCOME FUND ON 6/30/91, REINVESTED
DIVIDENDS AND CAPITAL GAINS AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT
WOULD HAVE BEEN WORTH $14,469 ON 11/30/98. YOU WOULD HAVE EARNED A
8.62%* AVERAGE ANNUAL TOTAL RETURN FOR THE INVESTMENT LIFE SPAN.
One key to investing wisely is to reinvest all distributions
in fund shares. This increases the number of shares
on which you can earn future dividends, and you gain the
benefit of compounding.
As of 12/31/98, the Class A Shares' 1-year,
5-year, and since inception (6/4/91) average annual total
returns were 9.28%, 5.22%, and 8.84%, respectively. Class B
Shares' 1-year and since inception (9/28/94) average
annual total returns were 8.16% and 8.23%, respectively.
Class C Shares 1-year, 5-year, and since inception (4/1/93)
average annual total returns were 12.74%, 5.40%, and 8.90%, respectively.**
"Graphic representation "B1" omitted. See Appendix."
* Total return represents the change in the value of an
investment after reinvesting all income and capital gains, and
takes into account the 4.50% sales charge applicable to an
initial investment in Class A Shares.
Data quoted represents past performance and does not
guarantee future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than their original cost.
** The total returns stated take into account the 4.50% sales
charge for Class A Shares, the 5.50% contingent deferred
sales charge for Class B Shares, and the 1.00% contingent deferred
sales charge for Class C Shares.
FEDERATED INTERNATIONAL INCOME FUND
ONE STEP AT A TIME:
$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH
YEAR FOR SEVEN YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW
TO $10,645.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of
Federated International Income Fund on 6/30/91, reinvested your
dividends and capital gains and did not redeem any shares, you would
have invested only $8,000, but your account would have reached a total
value of $10,645* by 11/30/98. You would have earned an average annual
total return of 7.22%.
A practical investment plan helps you pursue a high level of income by
investing in high-quality debt securities denominated primarily in
foreign currencies. Through systematic investing, you buy shares on a
regular basis and reinvest all earnings. An investment plan works for
you when you invest only $1,000 annually. You can take it one step at a
time. Put time, money, and compounding to work.
"Graphic representation "B2" omitted. See Appendix."
* This chart assumes that the subsequent annual investments are made on the
last day of each anniversary month. No method of investing can guarantee
a profit or protect against loss in down markets. However, by investing
regularly over time and buying shares at various prices, investors can
purchase more shares at lower prices. All accumulated shares have the
ability to pay income to the investor.
Because such a plan involves continuous investment, regardless
of changing price levels, the investor should consider
whether or not to continue purchases through periods of low
price levels.
FEDERATED INTERNATIONAL INCOME FUND
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR INCOME FROM ABROAD
Bob Griffin, an upwardly mobile computer analyst, discovered his
talents were in great demand and switched jobs in 1991. That June, he
rolled over $10,000 from his 401(k) into an IRA account invested in
Federated International Income Fund and has added $2,000 to his account
every June since then. As of November 30, 1998, he had invested a total
of $24,000 and his account totaled $35,760, giving him an average
annual total return of 7.80%.
For the last few years, Bob has had his eye on a hunting cabin in the
Allegheny Mountains, and based on the healthy numbers he sees in his
fund account, he figures he can use part of his IRA to buy it when he
retires. Good news for Bob, bad news for the deer.
"Graphic representation "B3" omitted. See Appendix."
This hypothetical scenario is provided for illustrative purposes only and
does not represent the results obtained by any particular shareholder.
Past performance does not guarantee future results.
FEDERATED INTERNATIONAL INCOME FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL INCOME FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated International Income Fund (Class A Shares) (the "Fund")
from June 4, 1991 to November 30, 1998 compared to the J.P. Morgan
Global Traded Index Excluding U.S. (JPMGXUS).+
"Graphic representation "B4" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 4.50% ($10,000 investment minus
$450 sales charge = $9,550). The Fund's performance assumes the
reinvestment of all dividends and distributions. The JPMGXUS has been
adjusted to reflect reinvestment of income earned on securities in the
index.
** Total return quoted reflects all applicable sales charges.
+ The JPMGXUS is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
This index is unmanaged.
FEDERATED INTERNATIONAL INCOME FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL INCOME FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated International Income Fund (Class B Shares) (the "Fund")
from September 28, 1994 (start of performance) to November 30, 1998
compared to the J.P. Morgan Global Traded Index Excluding U.S.
(JPMGXUS).+
"Graphic representation "B5" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a 2.00% contingent deferred sales charge on
any redemption less than five years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The JPMGXUS has been
adjusted to reflect reinvestment of income earned on securities in the
index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPMGXUS is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
This index is unmanaged.
FEDERATED INTERNATIONAL INCOME FUND
CLASS C SHARES
GROWTH OF $ 10,000 INVESTED IN FEDERATED INTERNATIONAL INCOME FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated International Income Fund (Class C Shares) (the "Fund")
from April 1, 1993 (start of performance) to November 30, 1998 compared
to the J.P. Morgan Global Traded Index Excluding U.S. (JPMGXUS).+
"Graphic representation "B6" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The JPMGXUS has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPMGXUS is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
This index is unmanaged.
FEDERATED INTERNATIONAL INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
FOREIGN
CURRENCY CREDIT VALUE IN
PAR AMOUNT RATING* U.S. DOLLARS
<C> <S> <C> <C>
BONDS--90.6%
AUSTRALIAN DOLLAR--5.2%
AGENCY--2.9%
7,000,000 Federal National Mortgage Association, Series EMTN,
6.50%, 7/10/2002 AAA $ 4,641,376
STATE/PROVINCIAL--2.3%
5,500,000 New South Wales Treasury, Local Gov't. Guarantee, 6.50%,
5/1/2006 AAA/Aaa 3,701,295
TOTAL AUSTRALIAN DOLLARS 8,342,671
BRITISH POUND--8.0%
RETAILERS--2.4%
2,000,000 Kingfisher PLC, 8.125%, 2/14/2007 A/A3 3,750,584
SOVEREIGN--5.6%
1,000,000 United Kingdom Treasury, Foreign Gov't. Guarantee, 11.75%,
1/22/2007 AAA/Aaa 2,053,564
1,600,000 United Kingdom Treasury, 9.00%, 8/6/2012 AAA/Aaa 3,756,785
1,800,000 UK Treasury, 7.00%, 11/6/2001 AAA/Aaa 3,124,882
Total 8,935,231
TOTAL BRITISH POUND 12,685,815
CANADIAN DOLLAR--4.0%
AGENCY--2.3%
4,000,000 Quebec, Province of, Deb., 9.375%, 1/16/2023 A+/A2 3,622,224
SOVEREIGN--1.7%
3,000,000 Canada, Government of, Deb., 8.00%, 6/1/2023 AAA/Aa1 2,674,319
TOTAL CANADIAN DOLLAR 6,296,543
DANISH KRONE--3.0%
FINANCIAL INTERMEDIARIES--1.6%
15,740,000 Nykredit, Mtg. Bond, 8.00%, 10/1/2026 NR/Aa3 2,512,689
SOVEREIGN--1.4%
11,200,000 Kingdom of Denmark, Bond, 7.00%, 11/10/2024 AAA/Aaa 2,186,162
TOTAL DANISH KRONE 4,698,851
</TABLE>
FEDERATED INTERNATIONAL INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY CREDIT VALUE IN
PAR AMOUNT RATING* U.S. DOLLARS
<C> <S> <C> <C>
BONDS--CONTINUED
DEUTSCHE MARK--29.1%
AGENCY--11.5%
13,000,000 Export-Import Bank Japan, Foreign Gov't. Guarantee, 6.50%,
5/19/2000 AAA/Aaa $ 7,965,752
15,000,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 AAA/Aaa 10,259,454
Total 18,225,206
FINANCIAL INTERMEDIARIES--3.2%
7,500,000 Baden Wurt L-Finance NV, Bank Guarantee, 6.75%, 6/22/2005 AAA/Aaa 5,062,041
SOVEREIGN--14.4%
18,500,000 Deutschland Republic, Bond, 6.00%, 6/20/2016 AAA/Aaa 12,984,733
6,487,000 Germany, 7.375%, 1/3/2005 AAA/Aaa 4,555,373
8,000,000 Germany (Fed Republic) 6.50%, 7/15/2003 AAA/Aaa 5,295,293
Total 22,835,399
TOTAL DEUTSCHE MARK 46,122,646
EUROPEAN CURRENCY UNIT (ECU)--5.5%
SOVEREIGN--5.5%
2,000,000 Bonos Y Oblig. Del Estado, Bond, 5.15%, 7/30/2009 Aa2 2,393,118
4,500,000 France O.A.T., Bond, 7.50%, 4/25/2005 AAA/Aaa 6,289,990
TOTAL EUROPEAN CURRENCY UNIT 8,683,108
GREEK DRACHMA--2.8%
SOVEREIGN--2.8%
500,000,000 Hellenic Republic, 9.20%, 10/31/2002 A-/A2 1,752,599
750,000,000 (a)Hellenic Republic, Bond, 13.10%, 10/23/2003 A-/A2 2,674,997
TOTAL GREEK DRACHMA 4,427,596
IRISH POUND--1.2%
SOVEREIGN--1.2%
1,000,000 Irish Government, Deb., 9.00%, 9/1/2006 AA+/Aaa 1,929,874
TOTAL IRISH POUND 1,929,874
</TABLE>
FEDERATED INTERNATIONAL INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY CREDIT VALUE IN
PAR AMOUNT RATING* U.S. DOLLARS
<C> <S> <C> <C>
BONDS--CONTINUED
ITALIAN LIRA--7.4%
SOVEREIGN--7.4%
8,000,000,000 Buoni Poliennali Del Tes, Bond, 10.50%, 11/1/2000 AAA/Aa3 $ 5,370,799
1,500,000,000 Buoni Poliennali Del Tes, Deb., 8.50%, 1/1/2004 AAA/Aa3 1,083,643
8,750,000,000 (a)Cert Di Credito Del Tes, Note, 5.10%, 1/1/2004 AA/A1 5,238,280
TOTAL ITALIAN LIRA 11,692,722
JAPANESE YEN--9.0%
FINANCIAL INTERMEDIARIES--0.3%
60,000,000 Eksportfinans, Sr. Note, 2.65%, 7/10/2002 AAA/Aaa 521,347
SOVEREIGN--8.7%
780,000,000 Japan, 5.00%, 9/20/1999 Aaa 6,572,133
840,000,000 Japan, 5.30%, 12/20/1999 Aaa 7,180,909
Total 13,753,042
TOTAL JAPANESE YEN 14,274,389
NORWEGIAN KRONE--3.1%
SOVEREIGN--3.1%
36,000,000 Norwegian Government, Foreign Gov't. Guarantee,
5.75%, 11/30/2004 AAA/Aaa 4,928,214
TOTAL NORWEGIAN KNONE 4,928,214
PORTUGUESE ESCUDO--2.2%
SOVEREIGN--2.2%
405,000,000 Portuguese Government, Bond, 11.875%, 2/23/2000 AA-/Aa2 2,556,670
130,000,000 Portuguese Government, Deb., 8.875%, 1/23/2004 AA-/Aa2 916,236
TOTAL PORTUGUESE ESCUDO 3,472,906
SPANISH PESETA--5.8%
SOVEREIGN--5.8%
1,080,000,000 Spain (Government), Foreign Gov't. Guarantee,
10.30%, 6/15/2002 AA/Aa2 9,120,407
TOTAL SPANISH PESETA 9,120,407
</TABLE>
FEDERATED INTERNATIONAL INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY CREDIT VALUE IN
PAR AMOUNT RATING* U.S. DOLLARS
<C> <S> <C> <C>
BONDS--CONTINUED
SWEDISH KRONA--4.3%
FINANCIAL INTERMEDIARIES--0.9%
12,000,000 Statens Bostads, Deb., 11.00%, 1/21/1999 AA-/NR $ 1,487,894
SOVEREIGN--3.4%
9,600,000 Swedish Government, Deb., 9.00%, 4/20/2009 AAA/Aa1 1,628,378
28,000,000 Sweden (Kingdom of), 6.00%, 2/9/2005 AAA/Aa1 3,778,073
Total 5,406,451
TOTAL SWEDISH KRONA 6,894,345
TOTAL BONDS (IDENTIFIED COST $146,298,816) 143,570,087
(B)REPURCHASE AGREEMENT--6.9%
$ 10,880,000 Westdeutsche Landesbank Girozentrale, 5.35%,
dated 11/30/1998, due 12/1/1998 (AT AMORTIZED COST) 10,880,000
TOTAL INVESTMENTS (IDENTIFIED COST $157,178,816)(C) $ 154,450,087
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information
for an explanation of the credit ratings. Current credit ratings are
unaudited.
(a) Denotes variable rate securities which show current rate and next demand
date.
(b) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a
joint account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to
$157,178,816. The net unrealized depreciation of investments on a
federal tax basis amounts to $2,728,729 which is comprised of $3,852,033
appreciation and $6,580,762 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($158,395,503) at November 30, 1998.
The following acronym is used throughout this portfolio:
PLC --Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and
tax cost $157,178,816) $ 154,450,087
Cash 720
Income receivable 3,779,865
Foreign cash 276,460
Receivable for shares sold 84,397
Total assets 158,591,529
LIABILITIES:
Payable for shares redeemed $ 97,937
Income distribution payable 492
Payable for taxes withheld 23,524
Accrued expenses 74,073
Total liabilities 196,026
NET ASSETS for 14,124,835 shares outstanding $ 158,395,503
NET ASSETS CONSIST OF:
Paid in capital $ 170,812,881
Net unrealized depreciation of investments and translation
of assets and liabilities in foreign currency (2,694,702)
Accumulated net realized loss on investments and foreign
currency transactions (7,285,009)
Distributions in excess of net investment income (2,437,667)
Total net assets $ 158,395,503
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER
SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($138,567,297 / 12,353,533 shares outstanding) $11.22
Offering Price Per Share (100/95.50 of $11.22)* $11.75
Redemption Proceeds Per Share $11.22
CLASS B SHARES:
Net Asset Value Per Share ($13,173,964 / 1,177,165 shares outstanding) $11.19
Offering Price Per Share $11.19
Redemption Proceeds Per Share (94.50/100 of $11.19)* $10.57
CLASS C SHARES:
Net Asset Value Per Share ($6,654,242 / 594,137 shares outstanding) $11.20
Offering Price Per Share $11.20
Redemption Proceeds Per Share (99.00/100 of $11.20)* $11.09
</TABLE>
* See "What do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign taxes withheld of $119,797) $ 11,102,073
EXPENSES:
Investment advisory fee $ 1,306,572
Administrative personnel and services fee 185,000
Custodian fees 90,474
Transfer and dividend disbursing agent fees and expenses 95,812
Directors'/Trustees' fees 4,566
Auditing fees 22,941
Legal fees 8,180
Portfolio accounting fees 77,666
Distribution services fee--Class A Shares 386,290
Distribution services fee--Class B Shares 93,308
Distribution services fee--Class C Shares 54,395
Shareholder services fee--Class A Shares 386,290
Shareholder services fee--Class B Shares 31,103
Shareholder services fee--Class C Shares 18,132
Share registration costs 35,377
Printing and postage 26,484
Insurance premiums 273
Miscellaneous 13,416
Total expenses 2,836,279
Waivers--
Waiver of investment advisory fee $ (37,551)
Waiver of distribution services fee--Class A Shares (231,774)
Waiver of shareholder services fee--Class A Shares (108,161)
Total waivers (377,486)
Net expenses 2,458,793
Net investment income 8,643,280
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY:
Net realized gain on investments and foreign currency
transactions 234,909
Net change in unrealized depreciation of investments and
translation of assets and liabilities in foreign currency 7,248,956
Net realized and unrealized gain on investments and
foreign currency 7,483,865
Change in net assets resulting from operations $ 16,127,145
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 8,643,280 $ 12,374,664
Net realized gain (loss) on investments and foreign currency
transactions ($(2,474,371) and $(2,459,905), respectively,
as computed for federal tax purposes) 234,909 2,723,605
Net change in unrealized appreciation/depreciation of
investments and translation of assets and liabilities in
foreign currency 7,248,956 (23,621,509)
Change in net assets resulting from operations 16,127,145 (8,523,240)
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (7,234,725) (14,451,238)
Class B Shares (469,562) (678,030)
Class C Shares (279,458) (917,505)
Change in net assets resulting from distributions
to shareholders (7,983,745) (16,046,773)
SHARE TRANSACTIONS--
Proceeds from sale of shares 53,208,304 113,690,620
Net asset value of shares issued to shareholders in payment
of distributions declared 2,553,943 6,459,682
Cost of shares redeemed (106,730,637) (118,734,614)
Change in net assets resulting from share transactions (50,968,390) 1,415,688
Change in net assets (42,824,990) (23,154,325)
NET ASSETS:
Beginning of period 201,220,493 224,374,818
End of period (including undistributed net investment income
of $0 and $1,879,156, respectively) $ 158,395,503 $ 201,220,493
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL INCOME FUND
FINANCIAL HIGHLIGHTS--CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.65 $11.92 $11.38 $10.52 $11.86
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.52* 0.63* 0.74* 0.79 0.70
Net realized and unrealized
gain (loss) on investments and foreign currency 0.53 (1.07) 0.67 0.84 (0.76)
Total from investment operations 1.05 (0.44) 1.41 1.63 (0.06)
LESS DISTRIBUTIONS
Distributions from net investment income (0.48) (0.83) (0.87) (0.77) (0.63)
Total distributions from net realized gain on investments
and foreign currency transactions -- -- -- -- (0.65)
Total distributions (0.48) (0.83) (0.87) (0.77) (1.28)
NET ASSET VALUE, END OF PERIOD $11.22 $10.65 $11.92 $11.38 $10.52
TOTAL RETURN(A) 10.22% (3.70%) 13.27% 16.12% (0.84%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.33% 1.30% 1.30% 1.30% 1.30%
Net investment income 5.04% 5.83% 6.58% 6.79% 6.67%
Expense waiver/reimbursement(b) 0.24% 0.26% 0.34% 0.40% 0.20%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $138,567 $180,415 $200,758 $173,905 $209,008
Portfolio turnover 37% 67% 92% 41% 136%
</TABLE>
* Per share information presented is based upon monthly average number of
shares outstanding.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL INCOME FUND
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.62 $11.89 $11.36 $10.51 $10.21
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.46** 0.56** 0.84** 0.77 0.08
Net realized and unrealized gain (loss) on investments
and foreign currency 0.51 (1.08) 0.48 0.78 0.22
Total from investment operations 0.97 (0.52) 1.32 1.55 0.30
LESS DISTRIBUTIONS
Distributions from net investment income (0.40) (0.75) (0.79) (0.70) --
NET ASSET VALUE, END OF PERIOD $11.19 $10.62 $11.89 $11.36 $10.51
TOTAL RETURN(B) 9.45% (4.43%) 12.41% 15.28% 2.44%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.05% 2.06% 2.11% 2.10% 2.11%*
Net investment income 4.31% 5.06% 5.76% 5.76% 7.07%*
Expense waiver/reimbursement(c) 0.02% -- 0.02% 0.10% 0.10%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $13,174 $12,521 $8,641 $1,123 $101
Portfolio turnover 37% 67% 92% 41% 136%
</TABLE>
* Computed on an annualized basis.
** Per share information presented is based upon the monthly average number
of shares outstanding.
(a) Reflects operations for the period from September 19, 1994 (date of
initial public investment) to November 30, 1994.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL INCOME FUND
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.63 $11.89 $11.36 $10.48 $11.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.46* 0.56* 0.67* 0.60 0.58
Net realized and unrealized
gain (loss) on investments and foreign currency 0.51 (1.08) 0.64 0.95 (0.72)
Total from investment operations 0.97 (0.52) 1.31 1.55 (0.14)
LESS DISTRIBUTIONS
Distributions from net investment income (0.40) (0.74) (0.78) (0.67) (0.57)
Distributions from net realized gain on investments
and foreign currency transactions -- -- -- -- (0.65)
Total distributions (0.40) (0.74) (0.78) (0.67) (1.22)
NET ASSET VALUE, END OF PERIOD $11.20 $10.63 $11.89 $11.36 $10.48
TOTAL RETURN(A) 9.42% (4.42%) 12.31% 15.32% (1.54%)
RATIOS TO AVERAGE NET ASSETS
Expenses 2.05% 2.06% 2.09% 2.06% 2.05%
Net investment income 4.32% 5.10% 5.80% 5.96% 6.00%
Expense waiver/reimbursement(b) 0.02% -- 0.04% 0.14% 0.10%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $6,654 $8,285 $14,976 $12,015 $8,098
Portfolio turnover 37% 67% 92% 41% 136%
</TABLE>
* Per share information presented is based upon the monthly average number
of shares outstanding.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
1. ORGANIZATION
International Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of two
portfolios. The financial statements included herein are only those of
Federated International Income Fund (the "Fund"), a non-diversified
portfolio. The financial statements of the other portfolio are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Class A Shares, Class B
Shares, and Class C Shares. The Fund's objective is to seek a high
level of current income in U.S. dollars consistent with prudent
investment risk. The Fund has a secondary investment objective of
capital appreciation.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS--Foreign government securities and listed
foreign corporate bonds are valued according to the last reported sale
price on a recognized securities exchange, if available. If no sale on
a recognized exchange is reported or if the security is traded over the
counter, a security is valued according to the last reported bid price.
Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value. With
respect to valuation of foreign securities, trading in foreign cities
may be completed at times which vary from the closing of the New York
Stock Exchange. Therefore, foreign securities are valued at the latest
closing price on the exchange on which they are traded prior to the
closing of the New York Stock Exchange. Foreign securities quoted in
foreign currencies are translated into U.S. Dollars at the foreign
exchange rate in effect at noon, eastern time, on the day the value of
the foreign security is determined.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend date.
Income and capital distributions are determined in accordance with
income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions. The following
reclassifications have been made to the financial statements.
INCREASE (DECREASE)
ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT
GAIN/LOSS INCOME
$4,976,358 $(4,976,358)
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
Withholding taxes on foreign interest have been provided for in
accordance with the Fund's understanding of the applicable country's
tax rules and rates.
At November 30, 1998, the Fund, for federal tax purposes, had a capital
loss carryforward of $10,021,905, which will reduce the Fund's taxable
income arising from future net realized gain on investments, if any, to
the extent permitted by the Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax. Pursuant to the
Code, such capital loss carryforward will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2002 $5,255,753
2003 $4,766,152
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. The Fund may enter into foreign currency
contract transactions to protect assets against adverse changes in
foreign currency exchange rates or exchange control regulations. Risks
may arise upon entering these transactions from the potential
inability of counterparts to meet the terms of their commitments and
from unanticipated movements in security prices or foreign exchange
rates. The foreign currency transactions are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purposes as unrealized until the
settlement date. At November 30, 1998, the Fund had no outstanding
foreign currency commitments.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.0001 per share) authorized
were as follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 500,000,000
Class B Shares 500,000,000
Class C Shares 500,000,000
Total 1,500,000,000
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 4,595,435 $ 48,567,577 9,374,565 $ 102,068,473
Shares issued to shareholders in
payment of distributions declared 193,153 2,028,259 477,630 5,236,339
Shares redeemed (9,378,472) (99,619,319) (9,757,111) (105,992,259)
Net change resulting from
Class A Share transactions (4,589,884) $ (49,023,483) 95,084 $ 1,312,553
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 285,642 3,017,521 652,967 $ 7,092,111
Shares issued to shareholders in
payment of distributions declared 30,969 325,089 41,746 455,100
Shares redeemed (317,928) (3,355,129) (242,871) (2,612,799)
Net change resulting from
Class B Share transactions (1,317) $ (12,519) 451,842 $ 4,934,412
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 153,899 $ 1,623,206 417,391 $ 4,530,036
Shares issued to shareholders in
payment of distributions declared 19,121 200,595 69,887 768,243
Shares redeemed (358,323) (3,756,189) (967,042) (10,129,556)
Net change resulting from
Class C Share transactions (185,303) $ (1,932,388) (479,764) $ (4,831,277)
Net change resulting from Share transactions (4,776,504) (50,968,390) 67,162 1,415,688
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive
any portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with
administrative personnel and services. The fee paid to FServ is based
on the level of average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A,Class B
and Class C Shares. The Plan provides that the Fund may incur
distribution expenses according to the following schedule annually, to
compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
The distributor may voluntarily choose to waive any portion of its fee.
The distributor can modify or terminate this voluntary waiver at any
time at its sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
for the period. The fee paid to FSSC is used to finance certain
services for shareholders and to maintain shareholder accounts. FSSC
may voluntarily choose to waive any portion of its fee. FSSC can modify
or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ,
through its subsidiary, (FSSC) serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
GENERAL--Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.
5. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
Administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended November 30, 1998, were as follows:
PURCHASES $ 62,240,965
SALES $114,301,097
7. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. The political or
economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
8. SUBSEQUENT EVENT
On January 7, 1999, the Adviser, Federated Global Research Corp.,
changed its name to Federated Global Investment Management Corp.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
INTERNATIONAL SERIES, INC.
(Federated International Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated International Income Fund (an investment portfolio of
International Series Inc., a Maryland corporation), including the
schedule of portfolio investments, as of November 30, 1998, the
related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods presented.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated International Income Fund (an
investment portfolio of International Series, Inc.) as of November 30,
1998, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and its financial highlights for each of the periods presented
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 15, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Richard B. Fisher
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 46031P100
Cusip 46031P506
Cusip 46031P209
3010401 (1/99)
[Graphic]
A1. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 8/17/84
to 11/30/98. The "y" axis is measured in increments of $18,000 ranging from $0
to $90,000 and indicates that the ending value of hypothetical initial
investment of $15,000 in the Federated International Equity Fund's Class A
Shares, assuming a 5.50% sales charge and the reinvestment of all capital gains
and dividends, would have grown to $80,256 on 11/30/98.
A2. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 8/17/84
to 11/30/98. The "y" axis is measured in increments of $7,000 ranging from $0 to
$35,000 and indicates that the ending value of hypothetical yearly investments
of $1,000 in the Federated International Equity Fund's Class A Shares, assuming
the reinvestment of all capital gains and dividends, would have grown to $29,835
on 11/30/98.
A3. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text beneath it. The "x" axis reflects computation periods from
8/17/84 to 11/30/98. The "y" axis is measured in increments of $40,000 ranging
from $0 to $200,000 and indicates that the ending value of a hypothetical
initial investment of $10,000 and subsequent investments of $5,000 every August
over 14 years in the Federated International Equity Fund's Class A Shares would
have grown to 176,982 on 11/30/98.
A4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of the Federated International Equity Fund are represented by a solid
line. The Morgan Stanley Capital International Europe Australia Far-East Index
(EAFE) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class A Shares of Federated International Equity Fund and the
EAFE. The "x" axis reflects computation periods from 11/30/88 to 11/30/98. The
"y" axis reflects the cost of the investment. The right margin reflects the
ending value of the hypothetical investment in the Federated International
Equity Fund's Class A Shares, as compared to the EAFE; the ending values were
$19,451 and $16,348, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the Federated International Equity Fund's Class A
Shares Average Annual Total Returns for the one-year, five-year, 10-year and
start of performance periods ended 11/30/98, which were 11.32%, 7.97%, 6.28% and
12.45%, respectively.
A5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of the Federated International Equity Fund are represented by a solid
line. The Morgan Stanley Capital International Europe Australia Far-East Index
(EAFE) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class B Shares of Federated International Equity Fund and the
EAFE. The "x" axis reflects computation periods from 9/28/94 to 11/30/98. The
"y" axis reflects the cost of the investment. The right margin reflects the
ending value of the hypothetical investment in the Federated International
Equity Fund's Class B Shares, as compared to the EAFE; the ending values were
$12,219 and $13,507, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the Federated International Equity Fund's Class B
Shares Average Annual Total Returns for the one-year and start of performance
periods ended 11/30/98, which were 11.42% and 5.29%, respectively.
A6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the Federated International Equity Fund are represented by a solid
line. The Morgan Stanley Capital International Europe Australia Far-East Index
(EAFE) is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class C Shares of Federated International Equity Fund and the
EAFE. The "x" axis reflects computation periods from 4/1/93 to 11/30/98. The "y"
axis reflects the cost of the investment. The right margin reflects the ending
value of the hypothetical investment in the Federated International Equity
Fund's Class C Shares, as compared to the EAFE; the ending values were $16,411
and $18,934, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Federated International Equity Fund's Class C Shares
Average Annual Total Returns for the one-year, five-year and start of
performance periods ended 11/30/98, which were 15.94%, 8.28%, and 9.13%,
respectively.
B1. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 6/30/91
to 11/30/98. The "y" axis is measured in increments of $4,000 ranging from $0 to
$16,000 and indicates that the ending value of hypothetical initial investment
of $8,000 in the Federated International Income Fund's Class A Shares, assuming
a 4.50% sales charge and the reinvestment of all capital gains and dividends,
would have grown to $14,469 on 11/30/98.
B2. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 6/30/91
to 11/30/98. The "y" axis is measured in increments of $3,000 ranging from $0 to
$12,000 and indicates that the ending value of hypothetical yearly investments
of $1,000 in the Federated International Income Fund's Class A Shares, assuming
the reinvestment of all capital gains and dividends, would have grown to $10,645
on 11/30/98.
B3. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text beneath it. The "x" axis reflects computation periods from
6/30/91 to 11/30/98. The "y" axis is measured in increments of $10,000 ranging
from $0 to $40,000 and indicates that the ending value of a hypothetical initial
investment of $10,000 in June 1991 and subsequent investments of $2,000 every
June since then in the Federated International Income Fund's Class A Shares
would have grown to 35,760 on 11/30/98.
B4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of the Federated International Income Fund are represented by a solid
line. The J.P. Morgan Global Traded Index Excluding U.S. (JPMGXUS) is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
A Shares of Federated International Income Fund and the JPMGXUS. The "x" axis
reflects computation periods from 6/4/91 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Federated International Income Fund's Class A
Shares, as compared to the JPMGXUS; the ending values were $18,576 and $20,778,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Federated International Income Fund's Class A Shares Average
Annual Total Returns for the one-year, five-year, and start of performance
periods ended 11/30/98, which were 5.27%, 5.74%, and 8.62%, respectively.
B5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of the Federated International Income Fund are represented by a solid
line. The J.P. Morgan Global Traded Index Excluding U.S. (JPMGXUS) is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
B Shares of Federated International Income Fund and the JPMGXUS. The "x" axis
reflects computation periods from 9/28/94 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Federated International Income Fund's Class B
Shares, as compared to the JPMGXUS; the ending values were $13,480 and $14,183,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Federated International Income Fund's Class B Shares Average
Annual Total Returns for the one-year and start of performance periods ended
11/30/98, which were 3.95% and 7.80%, respectively.
B6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the Federated International Income Fund are represented by a solid
line. The J.P. Morgan Global Traded Index Excluding U.S. (JPMGXUS) is
represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
C Shares of Federated International Income Fund and the JPMGXUS. The "x" axis
reflects computation periods from 4/1/93 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Federated International Income Fund's Class C
Shares, as compared to the JPMGXUS; the ending values were $15,960 and $16,085,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Federated International Income Fund's Class C Shares Average
Annual Total Returns for the one-year, five-year and start of performance
periods ended 11/30/98, which were 8.42%, 5.93%, and 8.60%, respectively.
