PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the first report to shareholders of Federated
International Growth Fund, which is managed for long-term growth of capital.
This report contains information about the fund from July 1, 1997 the date of
inception, through November 30, 1997.
The report begins with a discussion by portfolio manager, Drew Collins, Senior
Vice President, Federated Global Research Corp. His discussion covers the fund's
objective and strategy, and market conditions. Following his commentary is a
complete listing of the fund's investments and the financial statements.
The fund offers shareholders significant long-term growth opportunities by
investing in five different international stock mutual funds managed by
Federated Global Research. This "fund-of-funds" approach provides an extremely
high level of diversification, far beyond what a single international fund can
achieve. It also gives investors one-investment access to a very broad range of
regions, industries, companies (both large cap and small cap+), and markets
(both developed and emerging). The fund's management performs all of the
research and quantitative work needed to determine the optimum investment mix
among the different funds.*
When it comes to performance, it's important to remember that the true measure
of the fund's performance is clearly in years rather than months. There will be
periods of short-term fluctuation and negative, as well as positive returns.
While its diversification can go a long way toward reducing the risks of
investing in a single sector or region, the fund began operation during a very
difficult international investment climate. Consequently, the fund's total
return performance was negative during the five-month reporting period, as was
the overall performance of the international stock market.
Please take this opportunity to read about the fund's strategy. We will continue
to keep you up-to-date on the details of your investment on a regular basis. I
recommend that you add to your account on a regular basis to increase the number
of shares you own for future income and to take advantage of price fluctuations
and dollar-cost averaging.**
Thank you for your investment in Federated International Growth Fund and for the
confidence you have placed in our firm.
Sincerely,
/S/RICHARD B. FISHER
Richard B. Fisher
President
January 15, 1998
+ Small Cap Stocks have historically experienced greater volatility than
average.
* International investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
** Systematic investing does not ensure a profit or protect against loss in
declining markets.
INVESTMENT REVIEW
FEDERATED INTERNATIONAL GROWTH FUND
July 1, 1997 - November 30, 1997
Drew Collins
Senior Vice President
Federated Global Research Corp.
Federated International Growth Fund, which began operation on July 1, 1997, is
designed for investors seeking long-term growth of capital from the
international marketplace. This fund provides a "one-stop," core international
holding that:
* offers an extremely well-diversified portfolio by investing in five
international stock funds that seeks to generate higher risk-adjusted returns
over time;
* strives to reduce risks associated with investing in a single
international sector or region fund; and
* provides broad regional and international asset class diversification beyond
that of the Morgan Stanley Capital International Europe, Australia, and Far
East Index
("MSCI-EAFE").*
The five international funds in which Federated International Growth Fund
invests are:
1. Federated Asia Pacific Growth Fund which invests in large and small companies
based in and doing business in the Asia Pacific region.
2. Federated Emerging Markets Fund which is a broadly diversified fund that
invests in at least 250 companies across a wide range of economic sectors in
20 or more emerging market countries.
3. Federated European Growth Fund which invests in 100 -150 large and small
companies with proven performance records based in and doing business
in the European region.
4. Federated International Small Company Fund which invests in 175-225 small
foreign companies in developed and emerging markets, with a majority of its
assets invested in Asia, Europe and Latin America.
5. Federated Latin American Growth Fund which invests in 50-100 large and small
Latin American companies headquartered in Mexico, Central America, South
America and the Spanish-speaking islands of the Caribbean.
STRATEGY
Our strategy is to capture the returns of the broad international equity markets
by keeping the fund invested in both the developed and emerging markets, in both
small and large capitalization companies. We review allocations formally on a
quarterly basis, but may change allocations at any time. The initial allocation
of the fund was 30% for the Federated European Growth Fund, 30% for the
Federated Asia Pacific Growth Fund, 15% for the Federated Emerging Markets Fund,
15% for the Federated International Small Company Fund, and 10% for the
Federated Latin American Growth Fund. During the reporting period, we began
shifting the allocation of new monies toward emerging markets and smaller
companies, and away from the Asia Pacific region. We continue to believe that
some of the best bargains exist in the international small cap area.
The fund's assets were allocated among the following as of November 30, 1997:
PERCENTAGE OF
FEDERATED
INTERNATIONAL
GROWTH FUND
FUND PORTFOLIO
- ------------------------------------------ ------------
Federated European Growth Fund 33.05%
Federated Asia Pacific Growth Fund 23.20
Federated International Small Company Fund 16.89
Federated Emerging Markets Fund 14.16
Federated Latin American Growth Fund 10.59
Cash 2.11
The fund was diversified among emerging/developed and small cap/large cap
sectors as follows:
AREA OF EXPOSURE ALLOCATION PERCENTAGE
- ---------------- ---------------------
Emerging Markets 30%
Developed Markets 70%
Small Cap 40%
Large Cap 60%
FUND PERFORMANCE
The first five months of the fund's operation was a difficult period, as many
regions -- notably Asia Pacific and emerging markets -- were impacted by
negative economic developments and a strong U.S. dollar. As a result, the return
of the general international marketplace, as measured by MSCI-EAFE, was -9.27%
for the five-month reporting period.*
In this environment, the fund's total return was also negative. The share class
returns for the five-month reporting period were: Class A Shares -12.70%, Class
B Shares -12.90%, and Class C Shares -12.80%.** Of course, these returns
represent only a very brief period of what is designed to be a long-term
investment. The true measure of performance in the international marketplace is
across years, rather than a few months.
OUTLOOK
Our outlook remains favorable toward Europe, which in the aggregate is the
largest single region represented in the fund, with 50.53% of the assets in
European equities, including both developed and emerging Europe. Although we are
cautious on Asia, we are still finding value in the region and on a longer term,
view believe growth will be restored. The Asian region, in total, accounts for
25.53% of the fund's investments. Latin America is still encouraging and
represents 13.55% of the fund, while the countries of the Middle East and Africa
are 5.52%.
Ultimately, Federated International Growth Fund gives investors the opportunity
to pursue growth through an extremely diversified, international portfolio.
While creating a strategic combination of international growth, mutual funds can
be a time-consuming process and involve considerable research and quantitative
work. This fund seeks to provide an optimum fund mix in one convenient
investment.
* The Morgan Stanley Capital International Europe, Australia, and Far East
Index (MSCI-EAFE) is a market capitalization-weighted equity index comprising
20 of the 48 countries in the MSCI universe and representing the developed
world outside North America. Each MSCI country index is created separately,
then aggregated, without change, into regional MSCI indices. This index is
unmanaged and investments cannot be made in an index.
** Past performance quoted is based on net asset value 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 reporting period based on offering price
for Class A, B and C Shares were -17.49%, -17.70%, and -13.70%, respectively.
Federated International Growth Fund
(Class A Shares)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL GROWTH FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
International Growth Fund (Class A Shares) (the "Fund") from July 1, 1997 (start
of performance), to November 30, 1997, compared to the Morgan Stanley Capital
International All Country World EX U.S. (MSEUACWZ)+ and the Morgan Stanley
Capital International Europe
Australia Far East Index (MSCIEAFE)+.
[GRAPHIC PRESENTATION OMITTED. REFER TO APPENDIX A.1]
Date The Fund MSEUACWZ MSCIEAFE
7/1/97 9,450* 10,000 10,000
11/30/97 8,250 8,818 9,016
CUMULATIVE TOTAL RETURN** FOR THE PERIOD ENDED NOVEMBER 30, 1997 Start of
Performance (7/1/97) (17.49)%
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 5.50 % ($10,000 investment minus $550 sales
charge = $ 9,450). The Fund's performance assumes the reinvestment of all
dividends and distributions. The MSEUACWZ and the MSCIEAFE have been adjusted
to reflect reinvestment of dividends on securities in the indices.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUACWZ and the MSCIEAFE are not adjusted to reflect sales charges,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance. The indices are unmanaged.
Federated International Growth Fund
(Class B Shares)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL GROWTH FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in Federated
International Growth Fund (Class B Shares) (the "Fund") from July 1, 1997 (start
of performance), to November 30, 1997, compared to the Morgan Stanley Capital
International All Country World EX U.S. (MSEUACWZ)+ and the Morgan Stanley
Capital International Europe
Australia Far East Index (MSCIEAFE)+.
[GRAPHIC PRESENTATION OMITTED. REFER TO APPENDIX A.2]
Date The Fund MSEUACWZ MSCIEAFE
7/1/97 10,000 10,000 10,000
11/30/97 8,230* 8,818 9,016
CUMULATIVE TOTAL RETURN** FOR THE PERIOD ENDED NOVEMBER 30, 1997 Start of
Performance (7/1/97) (17.70)%
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 contingent deferred sales charge of 5.50% on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The MSEUACWZ and
the MSCIEAFE have been adjusted to reflect reinvestment of dividends on
securities in the indices.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUACWZ and the MSCIEAFE are not adjusted to reflect sales charges,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance. The indices are unmanaged.
Federated International Growth Fund
(Class C Shares)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL GROWTH FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000 in Federated
International Growth Fund (Class C Shares) (the "Fund") from July 1, 1997 (start
of performance), to November 30, 1997, compared to the Morgan Stanley Capital
International All Country World EX U.S. (MSEUACWZ)+ and the Morgan Stanley
Capital International Europe
Australia Far East Index (MSCIEAFE)+.
[GRAPHIC PRESENTATION OMITTED. REFER TO APPENDIX A.3]
Date The Fund MSEUACWZ MSCIEAFE
7/1/97 10,000 10,000 10,000
11/30/97 8,630* 8,818 9,016
CUMULATIVE TOTAL RETURN** FOR THE PERIOD ENDED NOVEMBER 30, 1997 Start of
Performance (7/1/97) (13.70)%
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 contingent deferred sales charge of 1.00% on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The MSEUACWZ and
the MSCIEAFE have been adjusted to reflect reinvestment of dividends on
securities in the indices.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUACWZ and the MSCIEAFE are not adjusted to reflect sales charges,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance. The indices are unmanaged.
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
FEDERATED INTERNATIONAL GROWTH FUND
NOVEMBER 30, 1997
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ---------- -------------------------------------------------------------------------- -----------
<S> <C> <C>
MUTUAL FUND SHARES -- 97.7%
- ---------------------------------------------------------------------------------------
482,827 Federated Asia Pacific Growth Fund, Class A $3,770,876
--------------------------------------------------------------------------
197,141 Federated Emerging Markets Fund, Class A 2,300,634
--------------------------------------------------------------------------
402,914 Federated European Growth Fund, Class A 5,370,849
--------------------------------------------------------------------------
192,621 Federated International Small Company Fund, Class A 2,744,846
--------------------------------------------------------------------------
128,507 Federated Latin American Growth Fund, Class A 1,720,709
-------------------------------------------------------------------------- -----------
TOTAL MUTUAL FUND SHARES (IDENTIFIED COST $17,935,809) 15,907,914
-------------------------------------------------------------------------- -----------
(A)REPURCHASE AGREEMENT -- 1.0%
- ---------------------------------------------------------------------------------------
$ 165,000 BT Securities Corp., 5.73%, dated 11/28/1997, due 12/1/1997 (AT
AMORTIZED COST) 165,000
-------------------------------------------------------------------------- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $18,100,809)(B) $16,072,914
-------------------------------------------------------------------------- ===========
(a) 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.
(b) The cost of investments for federal tax purposes amounts to $18,174,267. The
net unrealized depreciation of investments on a federal tax basis amounts to
$2,101,353 at November 30, 1997.
Note: The categories of investments are shown as a percentage of net
assets ($16,277,980) at November 30, 1997.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED INTERNATIONAL GROWTH FUND
NOVEMBER 30, 1997
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------------------
Total investments in underlying funds, at value (identified cost $18,100,809 and tax cost $18,174,267) $16,072,914
- -----------------------------------------------------------------------------------------------------
Cash 971
- -----------------------------------------------------------------------------------------------------
Income receivable 79
- -----------------------------------------------------------------------------------------------------
Receivable for shares sold 229,374
- ----------------------------------------------------------------------------------------------------- -----------
Total assets 16,303,338
- -----------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for shares redeemed $ 1,500
- -------------------------------------------------------------------------------------------
Accrued expenses 23,858
- ------------------------------------------------------------------------------------------- ---------
Total liabilities 25,358
- ----------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 1,866,296 shares outstanding $16,277,980
- ----------------------------------------------------------------------------------------------------- ===========
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------------------
Paid in capital $18,379,333
- -----------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments (2,027,895)
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (73,458)
- ----------------------------------------------------------------------------------------------------- -----------
Total Net Assets $16,277,980
- ----------------------------------------------------------------------------------------------------- ===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------------------
CLASS A SHARES:
- -----------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($10,562,135 (divided by) 1,210,410 shares outstanding) $8.73
- ----------------------------------------------------------------------------------------------------- ===========
Offering Price Per Share (100 / 94.50 of $8.73)* $9.24
- ----------------------------------------------------------------------------------------------------- ===========
Redemption Proceeds Per Share $8.73
- ----------------------------------------------------------------------------------------------------- ===========
CLASS B SHARES:
- -----------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($5,036,341 (divided by) 577,978 shares outstanding) $8.71
- ----------------------------------------------------------------------------------------------------- ===========
Offering Price Per Share $8.71
- ----------------------------------------------------------------------------------------------------- ===========
Redemption Proceeds Per Share (94.50 / 100 of $8.71)** $8.23
- ----------------------------------------------------------------------------------------------------- ===========
CLASS C SHARES:
- -----------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($679,504 (divided by) 77,908 shares outstanding) $8.72
- ----------------------------------------------------------------------------------------------------- ===========
Offering Price Per Share $8.72
- ----------------------------------------------------------------------------------------------------- ===========
Redemption Proceeds Per Share (99 / 100 of $8.72)** $8.63
- ----------------------------------------------------------------------------------------------------- ===========
* See "Investing in the Fund" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FEDERATED INTERNATIONAL GROWTH FUND
PERIOD ENDED NOVEMBER 30, 1997*
<S> <C> <C> <C>
Investment Income:
- -----------------------------------------------------------------------------------------------------
Interest $ 2,304
- -----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee $ 77,041
- ----------------------------------------------------------------------------------------
Custodian fees 660
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 18,018
- ----------------------------------------------------------------------------------------
Auditing fees 168
- ----------------------------------------------------------------------------------------
Legal fees 1,004
- ----------------------------------------------------------------------------------------
Portfolio accounting fees 32,811
- ----------------------------------------------------------------------------------------
Distribution services fee -- Class B Shares 7,755
- ----------------------------------------------------------------------------------------
Distribution services fee -- Class C Shares 973
- ----------------------------------------------------------------------------------------
Shareholder services fee -- Class A Shares 6,913
- ----------------------------------------------------------------------------------------
Shareholder services fee -- Class B Shares 2,585
- ----------------------------------------------------------------------------------------
Shareholder services fee -- Class C Shares 324
- ----------------------------------------------------------------------------------------
Share registration costs 9,331
- ----------------------------------------------------------------------------------------
Printing and postage 1,620
- ----------------------------------------------------------------------------------------
Insurance premiums 3,183
- ----------------------------------------------------------------------------------------
Miscellaneous 864
- ---------------------------------------------------------------------------------------- ------------
Total expenses 163,250
- ----------------------------------------------------------------------------------------
Waivers and reimbursements --
- --------------------------------------------------------------------
Waiver of shareholder services fee -- Class A Shares $ (6,913)
- --------------------------------------------------------------------
Waiver of shareholder services fee -- Class B Shares (2,585)
- --------------------------------------------------------------------
Waiver of shareholder services fee -- Class C Shares (324)
- --------------------------------------------------------------------
Reimbursement of other operating expenses (141,903)
- -------------------------------------------------------------------- ------------
Total waivers and reimbursements (151,725)
- ----------------------------------------------------------------------------------- ------------
Net expenses 11,525
- ----------------------------------------------------------------------------------------------------- ------------
Net operating loss (9,221)
- ----------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments (73,458)
- -----------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments (2,027,895)
- ----------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized loss on investments (2,101,353)
- ----------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ (2,110,574)
- ----------------------------------------------------------------------------------------------------- ============
* For the period from July 1, 1997 (date of initial public investment) to
November 30, 1997.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED INTERNATIONAL GROWTH FUND
PERIOD ENDED
NOVEMBER 30,
1997*
------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------------------------------
OPERATIONS --
- ----------------------------------------------------------------------------------------------------------------
Net operating loss $ (9,221)
- ----------------------------------------------------------------------------------------------------------------
Net realized loss on investments ($0 as computed for federal tax purposes) (73,458)
- ----------------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation (2,027,895)
- ---------------------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations (2,110,574)
- ---------------------------------------------------------------------------------------------------------------- -------------
SHARE TRANSACTIONS --
- ----------------------------------------------------------------------------------------------------------------
Proceeds from sale of shares 19,590,876
- ----------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,202,322)
- ---------------------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from share transactions 18,388,554
- ---------------------------------------------------------------------------------------------------------------- -------------
Change in net assets 16,277,980
- ----------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------------------------------
Beginning of period --
- ---------------------------------------------------------------------------------------------------------------- -------------
End of period $ 16,277,980
- ---------------------------------------------------------------------------------------------------------------- =============
* For the period from July 1, 1997 (date of initial public investment) to
November 30, 1997.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD ENDED
NOVEMBER 30,
1997(A)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Net operating loss (0.01)
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (1.26)
- -------------------------------------------------------------------------------------------------------------- --------
Total from investment operations (1.27)
- -------------------------------------------------------------------------------------------------------------- --------
NET ASSET VALUE, END OF PERIOD $ 8.73
- -------------------------------------------------------------------------------------------------------------- ========
TOTAL RETURN(B) (12.70%)
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------------------
Expenses 0.07%*
- --------------------------------------------------------------------------------------------------------------
Net operating loss (0.01%)*
- --------------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement(c) 4.32%*
- --------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $10,562
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover 3%
- --------------------------------------------------------------------------------------------------------------
* Computed on an annualized basis.
(a) Reflects operations for the period from July 1, 1997 (date of initial public
investment) to November 30, 1997. (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)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD ENDED
NOVEMBER 30,
1997(A)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Net operating loss (0.01)
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (1.28)
- -------------------------------------------------------------------------------------------------------------- --------
Total from investment operations (1.29)
- -------------------------------------------------------------------------------------------------------------- --------
NET ASSET VALUE, END OF PERIOD $ 8.71
- -------------------------------------------------------------------------------------------------------------- ========
TOTAL RETURN(B) (12.90%)
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------------------
Expenses 0.82%*
- --------------------------------------------------------------------------------------------------------------
Net operating loss (0.77%)*
- --------------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement(c) 2.78%*
- --------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $5,036
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover 3%
- --------------------------------------------------------------------------------------------------------------
* Computed on an annualized basis.
(a) Reflects operations for the period from July 1, 1997 (date of initial public
offering) to November 30, 1997. (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)
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
PERIOD ENDED
NOVEMBER 30,
1997(A)
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- --------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------
Net operating loss (0.01)
- --------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss on investments (1.27)
- -------------------------------------------------------------------------------------------------------------- --------
Total from investment operations (1.28)
- -------------------------------------------------------------------------------------------------------------- --------
NET ASSET VALUE, END OF PERIOD $ 8.72
- -------------------------------------------------------------------------------------------------------------- ========
TOTAL RETURN(B) (12.80%)
- --------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------------------
Expenses 0.82%*
- --------------------------------------------------------------------------------------------------------------
Net operating loss (0.77%)*
- --------------------------------------------------------------------------------------------------------------
Expense waiver/reimbursement(c) 2.69%*
- --------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $680
- --------------------------------------------------------------------------------------------------------------
Portfolio turnover 3%
- --------------------------------------------------------------------------------------------------------------
* Computed on an annualized basis.
(a) Reflects operations for the period from July 1, 1997 (date of initial public
offering) to November 30, 1997. (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)
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FEDERATED INTERNATIONAL GROWTH FUND
NOVEMBER 30, 1997
ORGANIZATION
World Investment 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 eight portfolios. The
financial statements included herein are only those of Federated International
Growth Fund (the "Fund"). 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 of the Fund is to provide long-term growth of
capital.
The Fund pursues its investment objective by investing in shares of other
open-end management investment companies for which affiliates of Federated
Investors serve as investment adviser, transfer and dividend disbursing agent,
portfolio accountant, and principal underwriter (the "Federated Funds," herein
referred to as the "underlying funds") that invest primarily in foreign equity
securities. The underlying funds in which the Fund will invest include, but are
not limited to, Federated Asia Pacific Growth Fund, Federated Emerging Markets
Fund, Federated European Growth Fund, Federated International Small Company Fund
and Federated Latin American Growth Fund.
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
Investments in other open-end regulated investment companies are valued at net
asset value. 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.
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 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 net operating
losses. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
- ------------------------------------
UNDISTRIBUTED NET
PAID-IN CAPITAL INVESTMENT INCOME
- --------------- -----------------
($9,221) $9,221
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.
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.
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.
<TABLE>
<CAPTION>
CAPITAL STOCK
At November 30, 1997, par value shares ($0.001 per share) authorized were as
follows:
<S> <C>
# OF PAR VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
- -------------------------------------------- ----------------------
Class A 100,000,000
- -------------------------------------------- ----------------------
Class B 100,000,000
- -------------------------------------------- ----------------------
Class C 100,000,000
- -------------------------------------------- ----------------------
Total 300,000,000
- -------------------------------------------- ======================
</TABLE>
<TABLE>
<CAPTION>
Transactions in capital stock were as follows:
PERIOD ENDED
NOVEMBER 30, 1997(A)
-----------------------
CLASS A SHARES SHARES AMOUNT
- -------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Shares sold 1,322,127 $12,959,645
- --------------------------------------------------------------------------------
Shares redeemed (111,717) (1,020,921)
- -------------------------------------------------------------------------------- ---------- -----------
Net change resulting from Class A Share transactions 1,210,410 $11,938,724
- -------------------------------------------------------------------------------- ========== ===========
(a) For the period from July 1, 1997 (date of initial public investment) to
November 30, 1997.
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1997(A)
-----------------------
CLASS B SHARES SHARES AMOUNT
- -------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Shares sold 594,767 $5,850,398
- ---------------------------------------------------------------------------------
Shares redeemed (16,789) (156,418)
- --------------------------------------------------------------------------------- ---------- -----------
Net change resulting from Class B Share transactions 577,978 $5,693,980
- -------------------------------------------------------------------------------- ========== ===========
(a) For the period from July 1, 1997 (date of initial public offering) to
November 30, 1997.
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1997(A)
-----------------------
CLASS C SHARES SHARES AMOUNT
- ------------------------------------------------------------------------------ ---------- -----------
<S> <C> <C>
Shares sold 80,472 $780,833
- -------------------------------------------------------------------------------
Shares redeemed (2,564) (24,983)
- ------------------------------------------------------------------------------- ---------- -----------
Net change resulting from Class C Share transactions 77,908 $755,850
- ------------------------------------------------------------------------------- ========== ===========
Net change resulting from share transactions 1,866,296 $18,388,554
- ------------------------------------------------------------------------------- ========== ===========
(a) For the period from July 1, 1997 (date of initial public offering) to
November 30, 1997.
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE
Federated Global Research Corp. is the Fund's investment adviser (the
"Adviser"). The advisory fee is contingent upon the grant of certain exemptive
relief from the SEC. If the Fund were paying or accruing the advisory fee, the
Fund would be able to pay up to 1.25% of its average daily net assets which are
invested in individual stocks, bonds or money market investments, and not on
those assets invested in shares of the underlying funds. If an asset allocation
fee were to be charged to the Fund, it could range up to an annual fee of 0.20%
of the average daily net assets invested in the underlying funds. The Fund did
not pay or accrue the asset allocation fee during the period.
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 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. FServ may voluntarily choose to waive any portion of
its fee. Fserv can modify or terminate this voluntary waiver at any time at its
sole discretion.
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., the principal distributor, from the net assets of the Fund to
finance activities intended to result in the sale of the Corporation'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 Federated Securities Corp.
SHARE CLASS NAME % OF AVG. 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. The Class A Shares did not pay or accrue the 12b-1 fee during
the fiscal year ending November 30, 1997.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund shares for the period. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS 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, Federated Shareholder Services Company ("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.
INVESTMENT TRANSACTIONS
Purchases and sales of underlying funds, excluding short-term securities, for
the period ended November 30, 1997, were as follows:
PURCHASES $18,359,267
- ------------------------------------------ ===========
SALES $ 350,000
- ------------------------------------------ ===========
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated International Growth Fund, (a
portfolio of World Investment Series, Inc.) as of November 30, 1997, and the
related statement of operations, the statement of changes in net assets and
financial highlights for the period then ended. 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 audit.
We conducted our audit 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, 1997, by
correspondence with the custodian and brokers or other appropriate auditing
procedures where replies from brokers were not received. 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 audit provides 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 Growth Fund at November 30, 1997, the results of its
operations, the changes in its net assets, and financial highlights for the
period then ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 31, 1997
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer,
and Secretary
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 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 contain facts concerning
its objective and policies, management fees, expenses and other information.
[LOGO OMITTED]
Federated
International
Growth Fund
ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1997
Established 1997
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 981487739
Cusip 981487721
Cusip 981487713
G02270-01 (1/98)
[RECYCLE LOGO OMITTED]
WORLD INVESTMENT SERIES, INC.
Federated International Growth Fund (the "Fund")
A1. 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 Federated International Growth Fund., based on a 5.50% sales charge
are represented by a solid line. The Morgan Stanley Capital International All
Country World EX U.S. (the "MSEUACWZ") is represented by a dotted line. The
Morgan Stanley Capital International Europe Australia Far East Index (the
"MSCIEAFE") 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 the Fund, and the MSEUACWZ and MSCIEAFE. The
"x" axis reflects computation periods from 7/1/97 to 11/30/97. The "y" axis,
measured in increments of $5,000 and ranging from $5,000 to $15,000, reflects
the cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class A Shares, based on a 5.50% sales
charge, as compared to the MSEUACWZ and the MSCIEAFE. The ending values were
$8,250 for the Fund, $8,818 for the MSEUACWZ, and $9,016 for the MSCIEAFE,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Fund's Class A Shares Cumulative Total Return, reflecting all
applicable sales charges and contingent deferred sales charge, for the start of
performance period 7/1/97 ending 11/30/97. The cumulative total return was
(17.49%).
A2. 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 Federated International Growth Fund., based on a 5.50% contingent
deferred sales charge are represented by a solid line. The Morgan Stanley
Capital International All Country World EX U.S. (the "MSEUACWZ") is represented
by a dotted line. The Morgan Stanley Capital International Europe Australia Far
East Index (the "MSCIEAFE") 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 the Fund, and the MSEUACWZ and
MSCIEAFE. The "x" axis reflects computation periods from 7/1/97 to 11/30/97. The
"y" axis, measured in increments of $5,000 and ranging from $5,000 to $15,000,
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the Fund's Class B Shares, based on a 5.50%
contingent deferred sales charge, as compared to the MSEUACWZ and the MSCIEAFE.
The ending values were $8,230 for the Fund, $8,818 for the MSEUACWZ, and $9,016
for the MSCIEAFE, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class B Shares Cumulative Total Return,
reflecting all applicable sales charges and contingent deferred sales charge,
for the start of performance period 7/1/97 ending 11/30/97. The cumulative total
return was (17.70%).
A3. 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 Federated International Growth Fund., based on a 1.00% contingent
deferred sales charge are represented by a solid line. The Morgan Stanley
Capital International All Country World EX U.S. (the "MSEUACWZ") is represented
by a dotted line. The Morgan Stanley Capital International Europe Australia Far
East Index (the "MSCIEAFE") 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 the Fund, and the MSEUACWZ and
MSCIEAFE. The "x" axis reflects computation periods from 7/1/97 to 11/30/97. The
"y" axis, measured in increments of $5,000 and ranging from $5,000 to $15,000,
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the Fund's Class C Shares, based on a 1.00%
contingent deferred sales charge, as compared to the MSEUACWZ and the MSCIEAFE.
The ending values were $8,630 for the Fund, $8,818 for the MSEUACWZ, and $9,016
for the MSCIEAFE, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class C Shares Cumulative Total Return,
reflecting all applicable sales charges and contingent deferred sales charge,
for the start of performance period 7/1/97 ending 11/30/97. The cumulative total
return was (13.70%).
