Federated World Utility Fund
[Graphic]
3rd Annual Report
November 30, 1996
Established 1994
GROWTH & INCOME
President's Message
Dear Fellow Shareholder:
Federated World Utility Fund was established in 1994, and I am pleased to
present the third Annual Report for the fund, which covers the 12-month
period from December 1, 1995, through November 30, 1996.
Your fund has had another good year in 1996. The fund pursues income and
opportunities for capital growth by owning over 60 stocks in the electric,
natural gas, water and telecommunications industries in the U.S. and around
the world.+
First, you'll find a discussion with the fund's portfolio manager, Michael
J. Donnelly, Assistant Vice President, Federated Global Research Corp. Next
is a series of investment illustrations showing the fund's performance,
which are followed by a complete listing of the fund's global investments,
and the fund's financial statements.
I urge you to review Michael's comments on the global utility market and the
strategies that should guide the fund through 1997 and beyond. The fund's
investments are positioned to benefit from dynamic opportunities through the
worldwide deregulation, lower tariffs, and privatization of utilities, as
well as for growth in the cellular telephone sector.
The environment for international utilities continued to be decidedly
favorable. In addition, the fund significantly outperformed the overall
global market due in part to gains in the cellular telephone sector. In
short, it was another strong year for the fund, as the following share class
performance as of November 30, 1996, shows.*
NET ASSET INCOME TOTAL
VALUE INCREASE DISTRIBUTION RETURN
Class A Shares $10.96 to $12.69=16% $0.37 19.54%
Class B Shares $10.95 to $12.68=16% $0.29 18.79%
Class C Shares $10.95 to $12.67=16% $0.29 18.61%
Class F Shares $10.96 to $12.70=16% $0.36 19.55%
* Performance quoted is based on net asset value and represents past
performance. 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 for
Class A, B, C, and F Shares were 12.94%, 13.17%, 17.58%, and 17.33%,
respectively.
+ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
Please note that, in December 1996, Federated World Utility Fund declared a
special one-time dividend of $0.06 per share in addition to a regular
quarterly dividend of $0.11 per share. The special dividend is due to an
extraordinary cash distribution from one of the fund's international utility
holdings. The December 1996 quarterly dividend amount on shareholder
statements reflects both special and regular dividends. As a result, this
amount is larger than normal, and is not indicative of the level of future
quarterly dividends.
We trust that you are pleased with the positive performance of your
investment in Federated World Utility Fund. Utilities are an essential part
of the fabric of society in every country. The appetite for these basic
services worldwide is enormous. The fund is well-positioned to benefit as
the standard of living around the world changes.
Thank you for joining the growing number of shareholders who have purchased
shares in this global utility fund. Assets now exceed more than $26 million.
The Federated Global Research unit in New York City now has a total of 23
people including 9 investment analysts and 7 portfolio managers. The total
assets under its management exceed $600 million. The portfolio managers meet
regularly to exchange investment ideas and opinions regarding the
improvement of the funds.
Remember, adding money to your investment account and reinvesting your
quarterly dividends in additional shares is a convenient way to "pay
yourself first," and enjoy the benefit of compounding and future income from
the shares you buy today.
We welcome your comments and suggestions.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1997
Investment Review
[Graphic]
Michael J. Donnelly
Assistant Vice President
Federated Global
Research Corp.
THE GLOBAL UTILITY SECTOR SEEMS TO BE DEVELOPING IN A DYNAMIC MANNER AS
EVIDENT BY MERGER ACTIVITY IN THE UNITED STATES AND INCREASED PRIVATIZATION
ABROAD. CAN YOU COMMENT ON THESE DEVELOPMENTS AND THE OUTLOOK FOR THE
FUTURE?
These two trends are rapidly changing the utilities industry, at home and
abroad. Worldwide deregulation in the electric and telecommunications
industries is forcing companies to seek strategic partnerships in order to
stay financially strong and also to expand market reach. The recently
announced Duke/Panenergy merger is just one example of this trend, which is
accelerating in the United States and will entrench itself in Europe in the
next five years.
Additionally, privatizations are bringing more private capital to the
industry and facilitating the globalization of services. For example, in
September 1996, a Brazilian state took bids from companies headquartered in
Japan, France, Korea, Spain, Chile, Argentina and the U.S. for participation
in a telecommunications company privatization.
We strongly believe that both corporate activity in the form of mergers and
acquisitions, and privatizations will continue to significantly impact the
landscape of the global utilities market and will offer increasing
opportunities for our shareholders.
HOW DID THE GLOBAL UTILITIES MARKET AND FEDERATED WORLD UTILITY FUND PERFORM
OVER THE YEAR ENDED NOVEMBER 30, 1996?
The global utilities market, as measured by the Financial Times/Standard &
Poor's Global Utility Index,* achieved a total return of 9.60% for the
12-month period. Federated World Utility Fund experienced a very good year.
Class A, B, C, and F Shares produced total returns of 19.54%, 18.79%,
18.61%, and 19.55%, respectively, based on net asset value.** All share
classes also outperformed the Lipper Utility Funds Average of 13.35%***
total return for the year ended November 30, 1996. According to Lipper, the
Fund's Class A Shares ranked eighth out of 90 utility funds in total return
for the one-year period ended December 31, 1996.***
* Financial Times/Standard & Poor's Global Utility Index is an unmanaged,
market cap-weighted index of utility securities from 24 countries, both
developed and developing, with approximately 174 companies. Investments
cannot be made in an index.
** Performance quoted represents past performance. 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 for Class A, B, C, and F Shares were 12.94%,
13.17%, 17.58%, and 17.33%, respectively.
*** Lipper figures represent the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services as falling
into the respective categories indicated. These figures and the rankings
cited do not reflect sales charges. During the time period, fees and
expenses have been waived, otherwise total return would have been lower.
EMPHASIZING EXPOSURE TO CELLULAR COMMUNICATIONS COMPANIES HAS BEEN MENTIONED
IN PAST REPORTS AS A KEY STRATEGY FOR THE FUND. CAN YOU SHARE WITH
SHAREHOLDERS THE LATEST RESULTS OF THIS STRATEGY AND ITS PROSPECTS FOR THE
FUTURE?
Throughout 1996, we have increased our holdings in cellular operators,
equipment providers and full-service telecommunications companies with
expanding cellular exposure. We have pursued this strategy because growth
rates are constantly underestimated and because we view the cellular
customer as a long-term, valuable strategic asset of phone companies. We are
happy to report that two companies involved directly in these industries,
Nokia AB and NordicTel Holdings AB, have been among the strongest performers
for the fund this year, with price returns of 44% and 107%, respectively,
from the beginning of the year through the end of November. The fund has
participated in much of these gains. The prospects for this industry appear
bright, due to growth in system coverage and continued strong demand for
such telecommunications services.
THE FUND'S ASSETS ARE INVESTED IN INCOME AND GROWTH UTILITY STOCKS IN KEY
WORLD REGIONS: ASIA, THE UNITED STATES, OTHER AMERICAS, AND EUROPE. CAN YOU
DESCRIBE THE STRUCTURE AND RATIONALE FOR THE CURRENT ASSET ALLOCATION AND
GIVE US YOUR INSIGHT INTO FUTURE ASSET PLACEMENT?
A goal of the fund is to provide truly global exposure. As of November 30,
1996, weightings were approximately 44% in the United States, 23% in Europe,
14% in Latin America and Canada, and 19% in Asia. Allocating in this manner
helps reduce exposure to any single geographic region and allows us to take
advantage of the broad range of opportunities worldwide.
In the past, we targeted a minimum weighting of 40% of assets in the United
States, essentially to pursue a high level of dividend income and to allay
concerns that significant weightings may be allocated to emerging nations.
However, we feel that the future growth of utility industries overseas
promises to be substantial relative to that of utilities in the United
States, and we believe that such a minimum might be unduly restrictive over
the longer term.
We foresee continuing a balanced strategy, but one that allows us more
flexibility with respect to weighting regions, including the United States.
We are confident that this slight change in strategy will be beneficial to
shareholders in the long run.
Where in the world should
you invest?
FEDERATED ASIA PACIFIC GROWTH FUND
FEDERATED EMERGING MARKETS FUND
FEDERATED EUROPEAN GROWTH FUND
FEDERATED INTERNATIONAL EQUITY FUND
FEDERATED INTERNATIONAL HIGH INCOME FUND
FEDERATED INTERNATIONAL INCOME FUND
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FEDERATED LATIN AMERICAN GROWTH FUND
FEDERATED WORLD UTILITY FUND
Employ highly qualified, experienced managers in global investing. Employ
experts to select countries and companies outside the U.S. for long-term
growth potential.
Call your investment representative to buy shares of 7 international equity
funds and 2 international income funds from Federated Investors.
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.
International 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 WORLD UTILITY FUND
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $3,000 IN THE CLASS A SHARES OF
FEDERATED WORLD UTILITY FUND ON 4/22/94, REINVESTED YOUR DIVIDENDS AND
CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD BE WORTH
$3,877 ON 11/30/96. YOU WOULD HAVE EARNED A 10.34%* AVERAGE ANNUAL TOTAL
RETURN FOR THE 2-YEAR INVESTMENT LIFESPAN.
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,
gaining the benefit of compounding at the same time.
As of 12/31/96, the Class A Shares' average annual one-year and since
inception (4/22/94) total returns were 11.20% and 10.74%, respectively. The
Class B Shares' average annual one-year and since inception (7/27/95) total
returns were 10.96% and 14.75%, respectively. The Class C Shares' average
annual one-year and since inception (7/27/95) total returns were 15.77% and
18.01%, respectively. The Class F Shares' average annual one-year and since
inception (4/22/94) total returns were 15.36% and 12.22%, respectively.*
GRAPHIC REPRESENTATION "A" OMITTED. SEE APPENDIX.
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and taking into account the 5.50%
sales charge for Class A Shares, the 5.50% contingent deferred sales charge
applicable to Class B Shares, the 1.00% contingent deferred sales charge
applicable to Class C Shares, and the 1.00% sales charge and 1.00%
contingent deferred sales charge applicable to Class F Shares.
Data quoted represents past performance and does not guarantee 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.
FEDERATED WORLD UTILITY FUND
ONE STEP AT A TIME:
$1,000 INVESTED EACH YEAR FOR 2 YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL
GAINS) GREW TO $3,582.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of
Federated World Utility Fund on 4/22/94, reinvested your dividends and
capital gains, and did not redeem any shares, you would have invested only
$3,000, but your account would have reached a total value of $3,582* by
11/30/96. You would have earned an average annual total return of 11.52%.
A practical investment plan helps you pursue long-term performance from
utility securities. Through systematic investing, you buy shares on a
regular basis and reinvest all earnings. This investment plan works for you
even if you invest only $1,000 annually. You can take it one step at a time.
Put time, money, and compounding to work!
GRAPHIC REPRESENTATION "B" OMITTED. SEE APPENDIX.
* 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 WORLD UTILITY FUND (CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED WORLD UTILITY FUND (CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated World Utility Fund (Class A Shares) (the "Fund") from April 22,
1994 (start of performance) to November 30, 1996, compared to the Standard
and Poor's 500 Index (S&P 500),+ FT - Actuaries/S&P Global Utility Index
(FTGUI)+ and the Lipper Utility Funds Average (LPUFA).++
GRAPHIC REPRESENTATION "C" 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) that was in effect prior to October 1, 1994. As of
October 1, 1994, the maximum sales charge was 5.50%. The Fund's performance
assumes the reinvestment of all dividends and distributions.
** Total return quoted reflects the maximum sales charge of 5.50% and any
applicable contingent deferred sales charges.
+ The S&P 500 and the FTGUI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission ("SEC")
requires to be reflected in the Fund's performance. The indices are
unmanaged. The S&P 500, FTGUI and the LPUFA have been adjusted to reflect
reinvestment of dividends on securities in the indices and average.
++ The LPUFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the category, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that
the SEC requires to be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND (CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED WORLD UTILITY FUND (CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated World Utility Fund (Class B Shares) (the "Fund") from July 27,
1995 (start of performance) to November 30, 1996, compared to the Standard
and Poor's 500 Index (S&P 500),+ FT - Actuaries/S&P Global Utility Index
(FTGUI)+ and the Lipper Utility Funds Average (LPUFA).++
GRAPHIC REPRESENTATION "D" 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 4.75% contingent deferred sales charge on any
redemption less than 2 years from the purchase date. The maximum contingent
deferred sales charge is 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGUI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission ("SEC")
requires to be reflected in the Fund's performance. The indices are
unmanaged. The S&P 500, FTGUI and the LPUFA have been adjusted to reflect
reinvestment of dividends on securities in the indices and average.
++ The LPUFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the category, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that
the SEC requires to be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND (CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED WORLD UTILITY FUND (CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated World Utility Fund (Class C Shares) (the "Fund") from July 27,
1995 (start of performance) to November 30, 1996, compared to the Standard
and Poor's 500 Index (S&P 500),+ FT - Actuaries/S&P Global Utility Index
(FTGUI)+ and the Lipper Utility Funds Average (LPUFA).++
GRAPHIC REPRESENTATION "E" 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 1 year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGUI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission ("SEC")
requires to be reflected in the Fund's performance. The indices are
unmanaged. The S&P 500, FTGUI and the LPUFA have been adjusted to reflect
reinvestment of dividends on securities in the indices and average.
++ The LPUFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the category, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that
the SEC requires to be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND (CLASS F SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED WORLD UTILITY FUND (CLASS F SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated World Utility Fund (Class F Shares) (the "Fund") from April 22,
1994 (start of performance) to November 30, 1996, compared to the Standard
and Poor's 500 Index (S&P 500),+ FT - Actuaries/S&P Global Utility Index
(FTGUI)+ and the Lipper Utility Funds Average (LPUFA).++
GRAPHIC REPRESENTATION "F" 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 1.00% ($10,000 investment minus $100
sales charge = $9,900). The ending value of the Fund reflects a contingent
deferred sales charge of 1.00% on any redemption less than 4 years from the
purchase date. The Fund's performance assumes the reinvestment of all
dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGUI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission ("SEC")
requires to be reflected in the Fund's performance. The indices are
unmanaged. The S&P 500 and the FTGUI have been adjusted to reflect
reinvestment of dividends on securities in the indices and average.
FEDERATED WORLD UTILITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- 82.8%
ARGENTINA -- 3.4%
ENERGY MINERALS -- 1.0%
11,000 YPF Sociedad Anonima, ADR $ 255,750
UTILITIES -- 2.4%
125,000 Central Costanera SA, Class B 401,411
20,000 Transportadora de Gas de Sur SA, Class B, ADR 247,500
Total 648,911
TOTAL ARGENTINA 904,661
AUSTRALIA -- 3.3%
FINANCE -- 1.1%
44,000(a)Commonwealth Installment Receipt Trustee Ltd. 277,910
FOREIGN REAL ESTATE -- 1.0%
320,000 Darling Park Trust 260,459
UTILITIES -- 1.2%
58,000 Australian Gas Light Co. 323,376
TOTAL AUSTRALIA 861,745
AUSTRIA -- 1.0%
UTILITIES -- 1.0%
3,800 Oest Elektrizitats 271,757
BOLIVIA -- 1.1%
UTILITIES -- 1.1%
6,700 Compania Boliviana de Energia Electrica 287,262
BRAZIL -- 2.3%
FOREIGN TEXTILE -- 0.0%
260,000,000 Texpar SA 2,517
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
BRAZIL -- CONTINUED
UTILITIES -- 2.3%
260,000,000 Cia Forca Luz Cataguazes Leo $ 296,999
4,000 Telecomunicacoes Brasileras, ADR 303,000
Total 599,999
TOTAL BRAZIL 602,516
CANADA -- 1.2%
UTILITIES -- 1.2%
17,000 Westcoast Energy, Inc. 303,875
CHILE -- 0.8%
UTILITIES -- 0.8%
10,000 Chilgener SA, ADR 211,250
CHINA -- 1.2%
UTILITIES -- 1.2%
17,000(b)Huaneng Power International Inc., Class N, ADR 310,250
FINLAND -- 2.2%
CELLULAR TELEPHONE -- 2.2%
10,300 OY Nokia AB, ADR 578,087
GERMANY -- 1.6%
UTILITIES -- 1.6%
7,200 Veba AG 421,065
HONG KONG -- 3.4%
UTILITIES -- 3.4%
90,000 Hong Kong Electric Holdings Ltd. 288,670
300,000 Hong Kong and China Gas Co. Ltd. 595,577
TOTAL HONG KONG 884,247
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
INDONESIA -- 1.4%
UTILITIES -- 1.4%
11,000 PT Telecom, Class CS, ADR $ 361,625
ITALY -- 2.0%
UTILITIES -- 2.0%
170,000 STET-Societa Finanziaria Telefonica S.P.A. 522,577
JAPAN -- 4.0%
UTILITIES -- 4.0%
55 DDI Corp. 393,547
51 Nippon Telegraph & Telephone Corp. 363,582
12,900 Tokyo Electric Power 291,071
TOTAL JAPAN 1,048,200
KOREA -- 1.9%
UTILITIES -- 1.9%
13,000 Korea Electric Power Corp., ADR 229,125
3,500 Samchully Co. 282,466
TOTAL KOREA 511,591
MEXICO -- 1.3%
CELLULAR TELEPHONE -- 1.3%
36,000(b)Grup Iusacell SA, ADR 337,500
NETHERLANDS -- 1.0%
ENERGY MINERALS -- 1.0%
1,500 Royal Dutch Petroleum Co., ADR 254,813
PERU -- 0.7%
UTILITIES -- 0.7%
9,000 CPT Telefonica del Peru SA, Class B, ADR 174,375
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
PHILIPPINES -- 0.9%
CELLULAR COMMUNICATIONS -- 0.9%
278,000(b)Pilipino Telephone Corp. $ 243,247
SPAIN -- 4.1%
ENERGY MINERALS -- 1.1%
8,000 Repsol SA 296,125
UTILITIES -- 3.0%
3,900 Empresa Nacional de Electricidad SA, ADR 259,837
45,800 Iberdrola SA 528,570
Total 788,407
TOTAL SPAIN 1,084,532
SWEDEN -- 1.3%
CELLULAR TELEPHONE -- 1.3%
16,500(b)NordicTel Holdings AB 341,518
UNITED KINGDOM -- 9.4%
CELLULAR TELEPHONE -- 2.3%
138,200 Vodafone Group PLC 598,294
UTILITIES -- 7.1%
101,000 British Gas PLC 370,175
20,000 Hyder PLC 249,159
29,380 National Grid Group PLC 96,320
16,700 National Power Co. PLC, ADR 532,313
40,000 Powergen PLC 390,047
20,000 Southern Electric PLC 235,373
Total 1,873,387
TOTAL UNITED KINGDOM 2,471,681
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED STATES -- 32.1%
HEALTH CARE -- 2.5%
6,000 American Home Products Corp. $ 385,500
7,000 Meditrust, REIT 261,625
Total 647,125
MAJOR U.S. TELECOMMUNICATIONS -- 7.3%
7,100 AT&T Corp. 278,675
6,400 BellSouth Corp. 258,400
9,300 GTE Corp. 417,337
13,100 MCI Communications Corp. 399,550
8,500 Pacific Telesis Group 314,500
4,900 SBC Communications, Inc. 257,863
Total 1,926,325
NATURAL GAS DISTRIBUTION -- 2.0%
8,000 Equitable Resources, Inc. 244,000
9,000 Pacific Enterprises 275,625
Total 519,625
OIL/GAS TRANSMISSION -- 1.9%
6,000 Panenergy Corp. 264,000
4,500 Sonat, Inc. 232,875
Total 496,875
OTHER TELEPHONE/COMMUNICATIONS -- 1.3%
9,000 Telephone and Data System, Inc. 336,375
UTILITIES -- 17.1%
13,600 Boston Edison Co. 348,500
8,700 CMS Energy Corp. 282,750
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED STATES -- CONTINUED
UTILITIES -- CONTINUED
7,000 Cinergy Corp. $ 234,500
13,000 DPL, Inc. 316,875
10,200 DQE, Inc. 300,900
5,000 FPL Group, Inc. 230,625
9,000 Illinova Corp. 238,500
9,000 NIPSCO Industries, Inc. 348,750
11,000 Pacificorp 231,000
9,500 Peco Energy Co. 242,250
10,000 Pinnacle West Capital Corp. 311,250
7,700 Portland General Corp. 331,100
10,300 Southern Co. 229,175
10,000 TECO Energy, Inc. 243,750
6,900 Texas Utilities Co. 272,550
12,400 Unicom Corp. 330,150
Total 4,492,625
TOTAL UNITED STATES 8,418,950
VENEZUELA -- 1.2%
UTILITIES -- 1.2%
12,000(b)Compania Anonima Nacional Telefonos de Venezuela, Class D, ADR 304,500
TOTAL COMMON STOCKS (IDENTIFIED COST $20,728,490) 21,711,824
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
CONVERTIBLE SECURITIES -- 11.3%
BRAZIL -- 1.1%
UTILITIES -- 1.1%
$ 2,500,000(b)Eletropaulo-Electricidade de Sao Paulo SA, Preference, Class B $ 302,517
CHINA -- 1.0%
UTILITIES -- 1.0%
220,000(a)New World Infrastructure, Conv. Bond, 5.00%, 7/15/2001 263,175
JAPAN -- 1.8%
BASIC INDUSTRY -- 0.9%
30,000,000 Kawasaki Steel, Conv. Bond, 1.60%, 9/30/2004 237,840
FINANCE -- 0.9%
20,000,000 Bank of Tokyo Cayman Finance Ltd., Conv. Bond, 4.25%, 3/31/2049 247,147
TOTAL JAPAN 484,987
MEXICO -- 1.0%
UTILITIES -- 1.0%
8,000(a)Nacional Financiera, SNC, PRIDES 250,000
UNITED STATES -- 6.4%
BASIC INDUSTRY -- 2.0%
16,200 Coeur d'Alene Mines Corp., Conv. Pfd., $1.49 277,425
5,000 Reynolds Metals Co., PRIDES, $3.30 245,625
Total 523,050
CELLULAR TELEPHONE -- 1.2%
6,700 Airtouch Communications, Inc., Conv. Pfd., Series C, $2.13 308,200
CONSUMER NON-DURABLES -- 0.9%
36,000 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $.60 229,500
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
CONVERTIBLE SECURITIES -- CONTINUED
UNITED STATES -- CONTINUED
FINANCE -- 1.2%
3,500 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12 $ 229,688
1,300 Salomon, Inc., DECS, Series CSN, $3.48 78,650
Total 308,338
NATURAL GAS DISTRIBUTION -- 1.1%
10,000 MCN Corp., Conv. Pfd., $2.01 285,000
TOTAL UNITED STATES 1,654,088
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $694,223) 2,954,767
(C)REPURCHASE AGREEMENT -- 5.3%
$ 1,380,000 BT Securities Corporation, 5.72%, dated 11/29/1996, due 12/2/1996
(AT AMORTIZED COST) 1,380,000
TOTAL INVESTMENTS (IDENTIFIED COST $22,802,713)(D) $ 26,046,591
</TABLE>
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1996, these securities
amounted to $791,085 which represents 3.02% of net assets.
(b) Non-income producing security.
(c) 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.
(d) The cost of investments for federal tax purposes amounts to $22,803,579.
The net unrealized appreciation of investments on a federal tax basis
amounts to $3,243,012 which is comprised of $3,769,089 appreciation and
$526,077 depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($26,230,222) at November 30, 1996.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
DECS -- Dividend Enhanced Convertible Stock
PLC -- Public Limited Company
PRIDES -- Preferred Redeemable Increased Dividend Equity Securities
REIT -- Real Estate Investment Trust
STRYPES -- Structured Yield Product Exchangeable for Stock
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $22,802,713 and tax cost $ 26,046,591
$22,803,579)
Cash 3,327
Income receivable 96,924
Receivable for investments sold 681,811
Receivable for shares sold 118,111
Deferred expenses 19,387
Total assets 26,966,151
LIABILITIES:
Payable for investments purchased $652,028
Payable for shares redeemed 34,663
Payable for taxes withheld 4,213
Accrued expenses 45,025
Total liabilities 735,929
Net Assets for 2,066,938 shares outstanding $ 26,230,222
NET ASSETS CONSIST OF:
Paid in capital $ 21,798,402
Net unrealized appreciation of investments and translation of assets and liabilities in 3,240,502
foreign currency
Accumulated net realized gain on investments and foreign currency transactions 888,800
Undistributed net investment income 302,518
Total Net Assets $ 26,230,222
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($12,670,511 / 998,210 shares outstanding) $12.69
Offering Price Per Share (100/94.50 of $12.69)* $13.43
Redemption Proceeds Per Share** $12.69
CLASS B SHARES:
Net Asset Value Per Share ($4,091,280 / 322,761 shares outstanding) $12.68
Offering Price Per Share* $12.68
Redemption Proceeds Per Share (94.50/100 of $12.68)** $11.98
CLASS C SHARES:
Net Asset Value Per Share ($1,071,992 / 84,581 shares outstanding) $12.67
Offering Price Per Share* $12.67
Redemption Proceeds Per Share (99.00/100 of $12.67)** $12.54
CLASS F SHARES:
Net Asset Value Per Share ($8,396,439 / 661,386 shares outstanding) $12.70
Offering Price Per Share (100/99.00 of $12.70)* $12.83
Redemption Proceeds Per Share (99.00/100 of $12.70)** $12.57
</TABLE>
* See "What Shares Cost" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $66,491) $ 958,538
Interest (net of foreign taxes withheld of $294) 100,947
Total income 1,059,485
EXPENSES:
Investment advisory fee $ 214,584
Administrative personnel and services fee 215,000
Custodian fees 37,750
Transfer and dividend disbursing agent fees and expenses 91,614
Directors'/Trustees' fees 4,347
Auditing fees 17,561
Legal fees 14,186
Portfolio accounting fees 92,355
Distribution services fee -- Class B Shares 19,710
Distribution services fee -- Class C Shares 5,453
Distribution services fee -- Class F Shares 18,194
Shareholder services fee -- Class A Shares 27,064
Shareholder services fee -- Class B Shares 6,570
Shareholder services fee -- Class C Shares 1,818
Shareholder services fee -- Class F Shares 18,194
Share registration costs 56,622
Printing and postage 53,607
Insurance premiums 4,294
Taxes 802
Miscellaneous 37,553
Total expenses 937,278
Waivers and reimbursements
Waiver of investment advisory fee $ (204,186)
Waiver of distribution services fee -- Class F Shares (16,858)
Reimbursement of other operating expenses (463,715)
Total waivers and reimbursements (684,759)
Net expenses 252,519
Net investment income 806,966
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments and foreign currency transactions 1,134,559
Net change in unrealized appreciation of investments and translation of assets and liabilities in 1,930,763
foreign currency
Net realized and unrealized gain on investments and foreign 3,065,322
currency
Change in net assets resulting from operations $ 3,872,288
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 806,966 $ 513,871
Net realized gain (loss) on investments and foreign currency
transactions ($1,104,981 net gain and $175,486, net loss, respectively,
as
computed for federal tax purposes) 1,134,559 (213,222)
Net change in unrealized appreciation (depreciation) of investments
and translation of assets and liabilities in foreign currency 1,930,763 1,701,368
Change in net assets resulting from operations 3,872,288 2,002,017
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Class A Shares (332,945) ( 241,857)
Class B Shares (59,524) (3,135)
Class C Shares (15,981) (261)
Class F Shares (221,379) (196,003)
Change in net assets resulting from distributions to shareholders (629,829) (441,256)
SHARE TRANSACTIONS --
Proceeds from sale of shares 9,401,101 6,182,954
Net asset value of shares issued to shareholders in payment of
distributions declared 461,046 274,697
Cost of shares redeemed (3,219,504) (1,442,701)
Change in net assets resulting from share transactions 6,642,643 5,014,950
Change in net assets 9,885,102 6,575,711
NET ASSETS:
Beginning of period 16,345,120 9,769,409
End of period (including undistributed net investment income of
$(302,518 and $142,202, respectively) $ 26,230,222 $ 16,345,120
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.96 $ 9.67 $10.06
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.43 0.42 0.24
Net realized and unrealized gain (loss) on investments and
foreign currency 1.67 1.27 (0.46)
Total from investment operations 2.10 1.69 (0.22)
LESS DISTRIBUTIONS
Distributions from net investment income (0.37) (0.40) (0.17)
NET ASSET VALUE, END OF PERIOD $12.69 $10.96 $ 9.67
TOTAL RETURN(B) 19.54% 17.94% (3.00%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.05% 0.25% 0.25%*
Net investment income 3.87% 4.39% 5.10%*
Expense waiver/reimbursement(c) 3.11% 4.78% 4.43%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $12,671 $8,875 $4,948
Average commission rate paid $0.0001 -- --
Portfolio turnover 50% 46% 7%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 21, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 17, 1994, to April 20, 1994, Class A Shares had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the periods ended November 30, 1995, and 1994, the Adviser waived
all of its investment advisory fee, 1.00% and 1.00%, respectively, and
reimbursed other operating expenses, 0.34% and 0.86%, respectively, to
comply with certain state expense limitations. The remainder of the
reimbursement was voluntary. This expense decrease is reflected in both the
expenses and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.95 $10.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.35 0.11
Net realized and unrealized gain (loss) on investments
and foreign currency 1.67 0.41
Total from investment operations 2.02 0.52
LESS DISTRIBUTIONS
Distributions from net investment income (0.29) (0.10)
NET ASSET VALUE, END OF PERIOD $12.68 $10.95
TOTAL RETURN(B) 18.79% 5.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.80% 1.00%*
Net investment income 3.18% 2.99%*
Expense waiver/reimbursement(c) 3.11% 4.78%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $4,091 $1,068
Average commission rate paid $0.0001 --
Portfolio turnover 50% 46%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 27, 1995 (date of initial
public investment) to November 30, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the period ended November 30, 1995, the Adviser waived all of its
investment advisory fee, 1.00%, and reimbursed other operating expenses,
0.34%, to comply with certain state expense limitations. The remainder of
the reimbursement was voluntary. This 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 WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.95 $10.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.33 0.15
Net realized and unrealized gain (loss) on investments
and foreign currency 1.68 0.37
Total from investment operations 2.01 0.52
LESS DISTRIBUTIONS
Distributions from net investment income (0.29) (0.10)
NET ASSET VALUE, END OF PERIOD $12.67 $10.95
TOTAL RETURN(B) 18.61% 4.92%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.80% 1.00%*
Net investment income 3.17% 3.03%*
Expense waiver/reimbursement(c) 3.11% 4.77%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,072 $374
Average commission rate paid $0.0001 --
Portfolio turnover 50% 46%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 27, 1995 (date of initial
public investment) to November 30, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the period ended November 30, 1995, the Adviser waived all of its
investment advisory fee, 1.00%, and reimbursed other operating expenses,
0.34%, to comply with certain state expense limitations. The remainder of
the reimbursement was voluntary. This 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 WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS -- CLASS F SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.96 $ 9.66 $10.04
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.43 0.43 0.21
Net realized and unrealized gain (loss) on investments and
foreign currency 1.67 1.25 (0.43)
Total from investment operations 2.10 1.68 (0.22)
LESS DISTRIBUTIONS
Distributions from net investment income (0.36) (0.38) (0.16)
NET ASSET VALUE, END OF PERIOD $12.70 $10.96 $ 9.66
TOTAL RETURN(B) 19.55% 17.79% (3.07%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.07% 0.50% 0.50%*
Net investment income 3.87% 4.19% 4.59%*
Expense waiver/reimbursement(c) 3.34% 4.78% 4.43%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $8,396 $6,028 $4,821
Average commission rate paid $0.0001 -- --
Portfolio turnover 50% 46% 7%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 21, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start of
business, March 28, 1994 to April 20, 1994, Fortress Shares had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the periods ended November 30, 1995, and 1994, the Adviser waived
all of its investment advisory fee, 1.00% and 1.00%, respectively, and
reimbursed other operating expenses, 0.34% and 0.86%, respectively, to
comply with certain state expense limitations. The remainder of the
reimbursement was voluntary. This expense decrease is reflected in both the
expenses and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. 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 seven portfolios.
The financial statements included herein are only those of Federated World
Utility 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 four classes of shares: Class A Shares, Class B Shares,
Class C Shares, and Class F Shares. The Fund's investment objective is to
provide total return.
Effective January 31, 1996, the Board of Directors ("Directors") changed the
name of the Fund from World Utility Fund to Federated World Utility Fund.
Effective January 31, 1996, Fortress Shares changed its name to Class F
Shares.
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 -- Market values of the Fund's foreign and domestic
equity securities are determined according to the last reported sale price
on a recognized securities exchange, if available. If unavailable, or if the
securities trade over the counter, the securities are generally valued
according to the mean between the last closing bid and asked prices, if no
sale on the recognized exchange is reported or if the security is traded
over-the-counter. Short-term foreign and domestic securities are valued at
the prices provided by an independent pricing service. However, short-term
foreign and domestic 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 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 and wash sales. The following
reclassifications have been made to the financial statements:
INCREASE (DECREASE)
ACCUMULATED NET UNDISTRIBUTED NET
REALIZED GAIN/LOSS INVESTMENT INCOME
$16,821 $(16,821)
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 upon 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.
DEFERRED EXPENSES -- The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized over a period not to exceed five years from the Fund's
commencement date.
FOREIGN EXCHANGE CONTRACTS --The Fund may enter into foreign currency
exchange contracts as a way of managing foreign exchange rate risk. The Fund
may enter into these contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date as a hedge or cross hedge
against either specific transactions or portfolio positions. The objective
of the Fund's foreign currency hedging transactions is to reduce the risk
that the U.S. dollar value of the Fund's foreign currency denominated
securities will decline in value due to changes in foreign currency exchange
rates. All foreign currency exchange contracts are "marked to market" daily
at the applicable translation rates resulting in unrealized gains or losses.
Realized gains or losses are recorded at the time the foreign currency
exchange contract is offset by entering into a closing transaction or by the
delivery or receipt of the currency. Risk may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar.
At November 30, 1996, the Fund had outstanding foreign currency contracts as
follows:
CONTRACTS IN CONTRACTS UNREALIZED
SETTLEMENT TO EXCHANGE AT APPRECIATION
SALES DATE DELIVER FOR VALUE (DEPRECIATION)
Australian 12/02/96 103,747 $83,827 84,443 (616)
Dollar
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, and 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.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee.
Additional information on each restricted security held at November 30, 1996
is as follows:
<TABLE>
<CAPTION>
FUND
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Commonwealth Installment Receipt Trustee Ltd. 7/15/96 $211,626
National Financiera, SNC, PRIDES 12/22/94-4/22/96 273,805
New World Infrastructure, Conv. Bond 5/15/96 220,000
</TABLE>
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1996, par value shares ($ 0.001 per share) authorized were
as follows:
SHARES OF
PAR VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Class F Shares 135,000,000
Total 540,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 338,469 $ 3,933,948 366,211 $ 3,790,807
Shares issued to
shareholders in payment of
distributions declared 23,491 269,640 17,953 180,929
Shares redeemed (173,419) (2,031,192) (86,001) (884,844)
Net change
resulting from
Class A Share
transactions 188,541 $ 2,172,396 298,163 $ 3,086,892
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995(A)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 249,058 $ 2,890,530 99,124 $ 1,064,086
Shares issued to
shareholders in payment of
distributions declared 4,171 48,165 281 2,996
Shares redeemed (27,954) (330,601) (1,919) (20,958)
Net change resulting
from Class B Share
transactions 225,275 $ 2,608,094 97,486 $ 1,046,124
<CAPTION>
YEAR ENDED PERIOD ENDED
NOVEMBER 30, NOVEMBER 30,
1996 1995(A)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 54,907 $ 642,653 34,326 $ 369,138
Shares issued to
shareholders in payment of
distributions declared 368 4,254 24 261
Shares redeemed (4,827) (57,104) (217) (2,322)
Net change resulting from
Class C Share
transactions 50,448 $ 589,803 34,133 $ 367,077
<CAPTION>
YEAR ENDED NOVEMBER 30,
1996 1995
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
(FORMERLY,
FORTRESS SHARES)
<S> <C> <C> <C> <C>
Shares sold 167,886 $ 1,933,970 95,261 $ 958,923
Shares issued to
shareholders in payment
of distributions declared 12,102 138,987 8,964 90,511
Shares redeemed (68,696) (800,607) (53,272) (534,577)
Net change
resulting from
Class F Share
transactions 111,292 $ 1,272,350 50,953 $ 514,857
Net change resulting
from share
transactions 575,556 $ 6,642,643 480,735 $ 5,014,950
</TABLE>
(a) For the period from July 27, 1995 (date of initial public investment) to
November 30, 1995.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research 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. Federated Global Research Corp. became the Fund's investment adviser
on November 20, 1995. Prior to November 20, 1995, Federated Management
served as the Fund's investment adviser and received for its services an
annual investment advisory fee equal to 1.00% of the Fund's average daily
net assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement 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 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., 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 Shares, Class C Shares and Class
F Shares. The Plan provides that the Fund may incur distribution expenses
according to the following schedule annually, to compensate Federated
Securities Corp.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class B Shares 0.75%
Class C Shares 0.75%
Class F Shares 0.25%
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, the Fund will pay Federated
Shareholder Services up to 0.25% of average daily net assets of the Fund for
the period. The fee paid to Federated Shareholder Services is used to
finance certain services for shareholders and to maintain shareholder
accounts.
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.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $75,061 and start-up
administrative service expenses of $39,069 were borne initially by the
Administrator.
The Fund has agreed to reimburse the Administrator for the organizational
and start-up administrative expenses during the five-year period following
the Fund's effective date. For the period ended November 30, 1996, the Fund
paid $19,354 and $9,767 pursuant to this agreement.
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, 1996 were as follows:
PURCHASES $16,373,633
SALES $10,038,038
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.
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 World Utility Fund (a
portfolio of World Investment Series, Inc.) as of November 30, 1996, the
related statement of operations for the year then ended and 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, 1996, by correspondence with the
custodian and brokers. 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 present
fairly, in all material respects, the financial position of Federated World
Utility Fund of World Investment Series, Inc. at November 30, 1996, the
results of its operations for the year then ended, changes in its net assets
for each of the two years in the period then ended, and the financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 17, 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
Gregor F. Meyer
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
J. Crilley Kelly
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 Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 981487309
Cusip 981487408
Cusip 981487101
Cusip 981487200
G00259-06 (1/97)
Federated
Asia Pacific
Growth Fund
[Graphic]
Annual Report
November 30, 1996
Established 1996
GROWTH
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
I am pleased to present the first Annual Report to Shareholders of Federated
Asia Pacific Growth Fund. This report contains information about the fund
from February 28, 1996, the date of the fund's inception, through November
30, 1996. This international stock fund is designed for long-term capital
growth.+ The fund's $7 million in assets is invested in over 100
corporations in 14 countries.
The report begins with a commentary by the fund's co-portfolio managers,
Alexandre deBethmann and Mark Kopinski, both vice presidents of Federated
Global Research Corp., covering international economic and market conditions
and fund strategy. Following their commentary are a complete list of the
fund's investments and the financial statements.
This fund is managed to bring you significant long-term opportunities from
an extremely well-researched portfolio of many large- and small-company
stocks in Asia and the Pacific Rim countries. It is important to remember
that the true measure of this fund's performance is clearly in years rather
than months, and the first few months of the fund's existence have been
volatile.
With that in mind, in its very limited period of operation, Federated Asia
Pacific Growth Fund delivered total returns of 2.50% for Class A Shares,
1.90% for Class B Shares, and 2.00% for Class C Shares based on net asset
value as of November 30, 1996.* These returns were due to the fund's
increase in share price. For the reporting period ended November 30, 1996,
the Federated Asia Pacific Growth Fund outperformed its benchmark, the
Morgan Stanley Capital International Asia Pacific Average.**
* Performance quoted represents past performance. 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 for Class A, B, and C Shares were (3.12%),
(3.60)%, and 1.00%, respectively.
** Morgan Stanley Capital International Asia Pacific Average is an
unmanaged, market value-weighted average of the performance of securities
listed on the stock exchanges of 13 countries in the Pacific and Asian
regions.
+ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
Please take time to review this report and read about the fund's strategy. I
recommend that you add to your account on a regular basis to take advantage
of price fluctuations and to utilize the dollar-cost averaging method of
investing.++
We will continue to keep you up-to-date on the details of your investment on
a regular basis. Thank you for your investment in Federated Asia Pacific
Growth Fund.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1997
++ 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]
Alexandre deBethmann
Vice President
Federated Global
Research Corp.
[Graphic]
Mark Kopinski
Vice President
Federated Global
Research Corp.
WHAT IS YOUR ANALYSIS OF THE ASIAN PACIFIC MARKETS SINCE THE FUND BEGAN
OPERATION?
No one single theme set the tone for the Asian Pacific markets this period.
They did not move in lock step but instead were moved by fundamentals that
were very market specific. The Japanese stock market produced negative
returns (-6.4%) mainly due to the strength of the U.S. dollar. Singapore was
also a poor performing market (-14.0%), which reflected the concentration of
gross domestic product in the electronics industry -- an industry that
experienced an export slowdown. The measures adopted by the government to
halt the rise in domestic property prices also influenced stock prices.
Other markets in the Pacific Rim, however, produced very strong returns.
Good earnings performance and optimism surrounding the handover of Hong Kong
from the British government to the People's Republic of China (PRC) helped
that market rise by over 20.0%. Malaysia and New Zealand also posted strong
returns -- 15.8% and 14.7%, respectively. Both a lower interest rate
environment and an improving corporate earnings outlook had a salutary
effect on the stock markets.
WHAT WERE YOUR STRATEGIES IN TERMS OF COUNTRY WEIGHTINGS DURING THE PERIOD?
We kept the fund overweight in southern Asia at the expense of northern Asia
because of the many undervalued opportunities we found in Australia, Hong
Kong and Malaysia. High interest rates in Australia took their toll earlier
in the year and allowed us to make investments in companies where valuations
had fallen below long-term averages.
The Hong Kong market remained very attractive, and we were overweight in the
fund based on the brighter overall earnings picture due to improving
economic activity at its largest trading partner, the PRC. Malaysia, in
contrast, had suffered due to worries about higher interest rates; however,
the skeptics proved incorrect as the government managed a soft landing of
the economy and rates flattened out.
Holdings in Japan and South Korea were kept below their respective index
weightings. Despite the fact that earnings were recovering in Japan, we
believed that the yen would continue to be weak and negatively impact the
returns of the portfolio. Investments were concentrated in international
blue-chip stocks and firms such as CANARE ELECTRIC, NIPPON COMSYS and
SHISEIDO that were expected to benefit from deregulation. In addition, we
felt that earnings of South Korean companies would continue to suffer during
the period because currency rate movements had damaged their competitiveness
vis-a-vis their Japanese counterparts.
The top 10 holdings in the fund as of November 30, 1996 were:
PERCENTAGE
SECURITY NAME COUNTRY OF NET ASSETS
Konami Co., Ltd. Japan 2.35%
Shiseido Co., Ltd. Japan 2.32%
Fuji Photo Film Co., Ltd. Japan 2.15%
Matsushita Kotobuki Electric Japan 2.12%
Promise Co., Ltd. Japan 2.07%
Dai Nippon Printing Co., Ltd. Japan 2.01%
Nintendo Corp., Ltd. Japan 1.95%
People Co., Ltd. Japan 1.87%
Sankyo Co., Ltd. Japan 1.85%
Daito Trust Construction Co., Ltd. Japan 1.77%
HOW DID FEDERATED ASIA PACIFIC GROWTH FUND PERFORMANCE SINCE INCEPTION
THROUGH NOVEMBER 30, 1996 COMPARE TO ITS BENCHMARK?
During the nine-month period since the fund began operation on February 28,
1996, it has delivered the following total returns based on net asset value:
Class A Shares, 2.50%; Class B Shares, 1.90%; and Class C Shares 2.00%.* By
comparison, the fund's benchmark, the Morgan Stanley Capital International
Asia Pacific Average, had a total return of (3.21%) during the same period
of time.
* Performance quoted represents past performance. 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 for Class A, B, and C Shares were (3.12%),
(3.60%), and 1.00%, respectively.
CAN YOU REVIEW ONE OF THE FUND'S HOLDINGS THAT CONTRIBUTED TO THE FUND'S
PERFORMANCE?
SHANGHAI INDUSTRIAL HOLDINGS was our best performing investment with a price
return of 270.0%. The company is a conglomerate listed in Hong Kong that
specializes in consumer products and is located in Shanghai, China. It
counts cosmetics and personal care products among its principal business
areas and is capitalizing on the rapid economic growth of Shanghai. In
addition, the firm is demonstrating an ability to expand its asset base
internally as well as through external acquisitions.
WHAT IS THE FUND'S EXPOSURE TO THE JAPANESE MARKET AND WHAT IS YOUR OUTLOOK
FOR THIS MARKET IN THE YEAR AHEAD?
Japanese companies currently make up just under 51% of the fund's assets.
Although the sharp depreciation of the yen over the past year has negatively
impacted the return to U.S. investors on their Japanese investments, we
believe the pace of downward pressure we have seen on the currency will be
alleviated in the months ahead. The currency is now at levels that make
Japanese exporters and manufacturers competitive once again. For example,
Japanese automotive manufacturers regained roughly three percentage points
of market share in the U.S. over a year ago. Moreover, the companies in
which we are investing are attractively valued by historical standards and
should perform well in the current environment, showing significantly
improved profitability.
AS WE LEAVE 1996, WHAT OPPORTUNITIES DO YOU SEE AHEAD IN THE ASIA PACIFIC
MARKETS?
We believe that the continuation of deregulation and market reform in Japan
will create more opportunities that the fund will attempt to take advantage
of. As we have stated before, the depreciation of the yen over the past year
or so has restored the competitive position of much of Japanese industry,
and we expect this improvement to show through in higher equity prices in
the year to come. Elsewhere in the region, attention will be focused on the
transfer of control of Hong Kong to the Chinese at the end of June, 1997. We
remain very positive on the outlook here and believe that the Chinese have a
strong vested interest in a smooth transition. However, while 1996 was a
bull market for most listed securities, we believe that 1997 will become
very stock specific with a focus on companies with strong businesses in the
PRC. We anticipate the creation of numerous additional avenues for portfolio
investment within the region over the next few years, as many of the Asian
economies are in transition.
The countries of the region are attempting to move up the value-added chain
in an effort to continue their record of strong economic growth. Thailand is
strengthening its education system and fostering a regional center for
automobile production which will bring higher paying skilled jobs. India is
struggling to satisfy the needs of the poor while it removes the constraints
of the bureaucracy in an effort to keep the economy competitive in the new
millennium. Regardless of these transitions, the managers of the fund will
continue to search for companies that are attractively valued and likely to
provide superior investment returns.
Where in the world should
you invest?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND
FEDERATED EMERGING MARKETS FUND
FEDERATED EUROPEAN GROWTH FUND
FEDERATED INTERNATIONAL EQUITY FUND
FEDERATED INTERNATIONAL HIGH INCOME FUND
FEDERATED INTERNATIONAL INCOME FUND
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FEDERATED LATIN AMERICAN GROWTH FUND
FEDERATED WORLD UTILITY FUND
Employ highly qualified, experienced managers in global investing. Employ
experts to select countries and companies outside the U.S. for long-term
growth potential.
Call your investment representative to buy shares of 7 international equity
funds and 2 international income funds from Federated Investors.
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.
International investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
FEDERATED ASIA PACIFIC GROWTH FUND (CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Asia Pacific Growth Fund (Class A Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1996, compared to
the Morgan Stanley Capital International Asia Pacific Average (MSEUCAP).+
GRAPHIC REPRESENTATION `G'' 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 5.50% ($10,000 investment minus $550
sales charge = $9,450). The Fund's performance assumes the reinvestment of
all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUCAP is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected in
the Fund's performance. This average is unmanaged. The MSEUCAP has been
adjusted to reflect reinvestment of dividends on securities in the average.
FEDERATED ASIA PACIFIC GROWTH FUND (CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND (CLASS B
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Asia Pacific Growth Fund (Class B Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1996, compared to
the Morgan Stanley Capital International Asia Pacific Average (MSEUCAP).+
GRAPHIC REPRESENTATION `H'' 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 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUCAP is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected in
the Fund's performance. This average is unmanaged. The MSEUCAP has been
adjusted to reflect reinvestment of dividends on securities in the average.
FEDERATED ASIA PACIFIC GROWTH FUND (CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND (CLASS C
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Asia Pacific Growth Fund (Class C Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1996, compared to
the Morgan Stanley Capital International Asia Pacific Average (MSEUCAP).+
GRAPHIC REPRESENTATION `I'' 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 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSEUCAP is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected in
the Fund's performance. This average is unmanaged. The MSEUCAP has been
adjusted to reflect reinvestment of dividends on securities in the average.
FEDERATED ASIA PACIFIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- 97.4%
AUSTRALIA -- 7.8%
BROADCASTING & PUBLISHING -- 1.3%
21,100 Austereo Ltd. $ 35,207
11,000 News Corp., Ltd. 58,555
Total 93,762
ENERGY SOURCES -- 0.7%
7,000 Woodside Petroleum Ltd. 49,170
FINANCIAL SERVICES -- 0.4%
4,200(a) Commonwealth Installment Receipt Trustee Ltd. 26,528
LEISURE & TOURISM -- 2.2%
26,000(b) Aristocrat Leisure Ltd. 73,645
105,000(b) Cinema Plus Ltd. 85,463
Total 159,108
OIL -- 1.5%
24,000(b) Orogen Minerals Ltd. 51,376
3,000(b) Orogen Minerals Ltd., GDR 60,390
Total 111,766
REAL ESTATE -- 1.7%
65,000 Darling Park Trust 52,906
4,100 Lend Lease Corp., Ltd. 76,087
Total 128,993
TOTAL AUSTRALIA 569,327
CHINA-0.7%
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.7%
129,000 Sinocan Holdings Ltd. 54,223
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
HONG KONG-14.5%
BANKING -- 1.0%
3,600 HSBC Holdings PLC $ 74,961
BROADCASTING & PUBLISHING -- 1.0%
134,000 Oriental Press Group 75,388
FINANCIAL SERVICES -- 2.1%
224,000 Aeon Credit Service 75,323
42,000 Peregrine Investment 77,677
Total 153,000
HEALTH & PERSONAL CARE -- 1.2%
26,000(b)(a)Shanghai Industrial Holdings Ltd. 84,571
MULTI-INDUSTRY -- 1.1%
10,000 Hutchison Whampoa 77,276
REAL ESTATE -- 7.2%
51,000 Amoy Properties Ltd. 71,236
11,000 Cheung Kong 96,741
38,000(b)(a)Cheung Kong 92,395
12,000(b)(a)China Resources Beijing Land 7,450
43,000 Henderson Investment Ltd. 52,276
12,000 New World Development Co. Ltd. 81,092
6,000 Sun Hung Kai Properties 74,496
29,500(b)Winsor Property Holdings Ltd. 44,448
Total 520,134
TELECOMMUNICATIONS -- 0.9%
38,000 Hong Kong Telecom 65,856
TOTAL HONG KONG 1,051,186
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
INDIA -- 1.5%
AUTOMOBILE -- 0.3%
2,000(b)(a)Mahindra and Mahindra, GDR $ 21,000
ELECTRICAL & ELECTRONICS -- 0.2%
4,000(b) Crompton Greaves Ltd., GDR 13,000
ENERGY EQUIPMENT & SERVICES -- 0.5%
2,000(b)(a)Bombay Suburban Electric Supply, GDR 39,500
MACHINERY & ENGINEERING -- 0.3%
1,500(b)(a)Larsen & Toubro Ltd., GDR 21,750
METALS - NON FERROUS -- 0.1%
450(b)Hindalco Industries Ltd., GDR 9,180
METALS - STEEL -- 0.1%
1,000(b) (a)Steel Authority of India, GDR 8,500
TOTAL INDIA 112,930
INDONESIA -- 2.4%
APPLIANCES & HOUSEHOLD DURABLES -- 0.2%
7,200 Tigaraksa Satria 11,360
BANKING -- 0.2%
26,500(b)PT Bank Negara Indonesia 13,278
BUILDING MATERIALS & COMPONENTS -- 0.2%
6,000 PT Semen Gresik 18,294
FOREST PRODUCTS & PAPER -- 0.3%
22,680 Pab K Tjiwi Kimia 21,761
MINING -- 0.1%
4,000 Tambang Timah 6,311
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
INDONESIA -- CONTINUED
RECREATION, OTHER CONSUMER GOODS -- 0.3%
10,000 PT Modern Photo Film Co. $ 25,053
TOBACCO -- 0.4%
6,000 PT Gudang Garam 25,522
TRANSPORTATION - ROAD & RAIL -- 0.7%
26,000 PT Citra Marga Nusaphala Persada 21,898
22,667 PT Steady Safe 26,582
Total 48,480
TOTAL INDONESIA 170,059
JAPAN -- 49.9%
BANKING -- 1.2%
8,000 Sumitomo Trust & Banking 88,499
BROADCASTING & PUBLISHING -- 1.6%
200 Asahi Broadcasting Corp. 21,949
10,000 Shochiku Co. 93,064
Total 115,013
BUSINESS & PUBLIC SERVICES -- 4.4%
8,000 Dai Nippon Printing Co., Ltd. 146,093
5,000 Konami Co. 170,764
Total 316,857
CONSTRUCTION & HOUSING -- 2.6%
9,800 Daito Trust Construction 128,200
5,000 Nippon Comsys Corp. 62,335
Total 190,535
ELECTRICAL & ELECTRONICS -- 8.2%
7,400 Canon Copyer Sales Co. 77,314
3,000 Japan Radio Co. 36,611
6,000 Matsushita Kotobuki Electric 153,819
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
JAPAN -- CONTINUED
ELECTRICAL & ELECTRONICS -- CONTINUED
18,000 Minolta Co. $ 113,310
4,000 Pioneer Electronic Corp. 86,040
2,000 Sony Corp. 128,007
Total 595,101
ELECTRONIC COMPONENTS, INSTRUMENTS -- 4.2%
3,000 Canare Electric Co., Ltd. 63,213
2,000 Hirose Electric 121,159
4,000 Hitachi Maxell 82,529
2,000 Japan Cash Machine Co., Ltd. 35,645
Total 302,546
FINANCIAL SERVICES -- 2.1%
3,000 Promise Co., Ltd. 150,132
HEALTH & PERSONAL CARE -- 4.2%
5,000 Sankyo Co. 133,889
14,000 Shiseido Co. 168,393
Total 302,282
INSURANCE -- 0.9%
6,000 Tokio Marine and Fire Insurance Co. 66,374
LEISURE & TOURISM -- 1.9%
4,000(b)People Co., Ltd. 135,558
MACHINERY & ENGINEERING -- 6.4%
9,000 Amada Co. 75,224
10,000 JGC Corp. 92,186
9,000 Mitsubishi Heavy Industries Ltd. 73,486
17,000(b)Nachi Fujikoshi Corp. 69,851
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
JAPAN -- CONTINUED
MACHINERY & ENGINEERING -- CONTINUED
5,000 Nissei ASB Machine Co. $ 69,798
14,000 Tsubakimoto Chain 82,476
Total 463,021
MERCHANDISING -- 2.0%
100 Iuchi Seieido Co., Ltd. 3,644
5,000 Mycal Corp. 74,627
5,000 Takashimaya Co. 66,725
Total 144,996
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.1%
400 Sanyo Pax Co., Ltd. 6,778
PHARMACEUTICALS -- 1.5%
5,000 Taisho Pharmaceutical Co. 111,501
REAL ESTATE -- 2.3%
3,000(b)Meiwa Estate 87,445
18,000(b)Tokyo Tatemono Co., Ltd. 82,494
Total 169,939
RECREATION, OTHER CONSUMER GOODS -- 4.1%
5,000 Fuji Photo Film - Ord 156,716
2,000 Nintendo Corp., Ltd. 141,352
Total 298,068
TOBACCO -- 1.1%
12(a)Japan Tobacco Inc. 85,443
TELECOMMUNICATIONS -- 1.1%
11 DDI Corp. 78,709
TOTAL JAPAN 3,621,352
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
KOREA, REPUBLIC OF -- 2.8%
BANKING -- 0.6%
1,900 Korea Exchange Bank $ 17,878
1,500 Shinhan Bank 26,491
Total 44,369
BEVERAGE & TOBACCO -- 0.4%
200 Lotte Chilsung Beverage Co. 28,228
BUILDING MATERIALS & COMPONENTS -- 0.2%
750 Chonggu Housing & Construction 17,190
FINANCIAL SERVICES -- 0.2%
1,500 Dongsuh Securities Co. 17,009
FOREST PRODUCTS & PAPER -- 0.2%
750 Hankuk Paper Manufacturing Co. 17,009
HEALTH & PERSONAL CARE -- 0.3%
1,170 Pacific Corp. 21,877
INDUSTRIAL COMPONENTS -- 0.3%
250 Dongah Tire Ind 18,095
METALS - STEEL -- 0.3%
1,000 Dongkuk Steel Mill 19,422
TELECOMMUNICATIONS -- 0.3%
1,450(b)Korea Mobile Telecomm Corp., ADR 18,850
TOTAL KOREA, REPUBLIC OF 202,049
MALAYSIA -- 5.8%
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.7%
12,000 Malaysian Pacific Industries 48,912
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
MALAYSIA -- CONTINUED
FINANCIAL SERVICES -- 2.1%
39,000 Malaysian Industrial Development Bhd $ 80,253
34,666 Public Bank Bhd 74,079
Total 154,332
MACHINERY & ENGINEERING -- 0.3%
5,000 UMW Holdings Bhd 23,744
MERCHANDISING -- 1.0%
15,000 Kentucky Fried Chicken Berhad 66,482
3,000(b)Kentucky Fried Chicken Berhad, Warrants 3,657
Total 70,139
MULTI-INDUSTRY -- 0.6%
23,000 Time Engineering 43,142
REAL ESTATE -- 0.7%
23,000 Eastern and Oriental Berhad 50,059
TRANSPORTATION - ROAD & RAIL -- 0.4%
9,000 Metacorp Berhad 27,780
TOTAL MALAYSIA 418,108
NEW ZEALAND -- 4.0%
BUILDING MATERIALS & COMPONENTS -- 1.5%
40,000 Fletcher Challenge Building 112,376
FOOD PROCESSING -- 0.9%
70,000 Wrightson Ltd. 62,233
TRANSPORTATION - AIRLINES -- 1.6%
44,000 Air New Zealand Ltd., Class B 115,789
TOTAL NEW ZEALAND 290,398
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
PAKISTAN -- 0.4%
BANKING -- 0.2%
20,000(b)Faysal Bank $ 11,976
ENERGY SOURCES -- 0.2%
630(b)Hub Power Co., GDR 13,545
TOTAL PAKISTAN 25,521
PHILIPPINES -- 1.6%
BANKING -- 0.4%
2,200 Philippine Commercial International Bank 29,293
CONSTRUCTION & HOUSING -- 0.2%
49,924(b)Davao Union Cement Corp., Class B 16,334
ENERGY SOURCES -- 0.7%
195,000 Belle Corp. 51,929
REAL ESTATE -- 0.3%
64,050(b)Filinvest Land, Inc. 22,661
TOTAL PHILIPPINES 120,217
SINGAPORE -- 4.2%
AUTOMOBILE -- 0.6%
4,000 Cycle & Carriage Ltd. 45,348
BANKING -- 0.7%
5,000 United Overseas Bank Ltd. 53,119
BROADCASTING & PUBLISHING -- 0.5%
2,000 Singapore Press Holdings Ltd. 37,790
MACHINERY & ENGINEERING -- 0.9%
7,000 Far East Levingston Shipbuilding Ltd. 37,184
5,000 Sembawang Corp. Ltd. 27,094
Total 64,278
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SINGAPORE -- CONTINUED
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.4%
43,700 Roly International Holdings $ 28,842
MULTI-INDUSTRY -- 0.5%
13,000 Wing Tai Holdings, Ltd. 35,594
REAL ESTATE -- 0.6%
5,000 City Developments 44,207
TOTAL SINGAPORE 309,178
THAILAND -- 1.8%
BANKING -- 0.6%
1,500 Bangkok Bank Public Co., Ltd. 17,149
4,200 Krung Thai Bank PLC 12,004
13,000 Siam City Bank 15,270
Total 44,423
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.2%
3,300 Hana Microelectronics Co., Ltd. 17,701
FINANCIAL SERVICES -- 0.6%
13,300 Industrial Finance Corporation of Thailand 41,920
UTILITIES - ELECTRICAL & GAS -- 0.4%
1,700 PTT Exploration and Production Public Co. 25,027
TOTAL THAILAND 129,071
TOTAL COMMON STOCKS (IDENTIFIED COST $6,946,227) 7,073,619
</TABLE>
FEDERATED ASIA PACIFIC GROWTH FUND
<TABLE>
<CAPTION>
SHARE OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BOND -- 0.3%
JAPAN -- 0.3%
BANKING -- 0.3%
$ 2,000,000(a)Sumitomo Bank Ltd., Osaka, Conv. Bond, .75%, 5/31/2001
(IDENTIFIED COST $18,360) $ 19,074
PREFERRED STOCK -- 0.8%
JAPAN -- 0.8%
FINANCIAL SERVICES -- 0.8%
1(a)Sakura Finance (Bermuda), Conv. Pfd., Series 144A
(IDENTIFIED COST $54,397) 56,832
(C)REPURCHASE AGREEMENT -- 4.5%
$ 325,000 BT Securities Corporation, 5.72%, dated 11/29/1996, due 12/2/1996
(AT AMORTIZED COST) 325,000
TOTAL INVESTMENTS (IDENTIFIED COST $7,343,984)(D) $ 7,474,525
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1996, these securities
amounted to $1,088,317 which represents 14.99% of net assets.
(c) 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.
(d) The cost of investments for federal tax purposes amounts to $7,349,310.
The net unrealized appreciation of investments on a federal tax basis
amounts to $125,215 which is comprised of $437,280 appreciation and $312,065
depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($7,262,076) at November 30, 1996.
The following acronyms are used throughout this portfolio:
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $7,343,984 and tax cost $ 7,474,525
$7,349,310)
Cash 4,033
Income receivable 6,222
Receivable for investments sold 144,593
Receivable for shares sold 279,426
Total assets 7,908,799
LIABILITIES:
Payable for investments purchased $ 608,571
Payable for taxes withheld 630
Net payable for foreign exchange contracts 1,700
Accrued expenses 35,822
Total liabilities 646,723
Net Assets for 709,939 shares outstanding $ 7,262,076
NET ASSETS CONSIST OF:
Paid in capital $ 7,139,312
Net unrealized appreciation of investments and translation of assets and liabilities in 128,090
foreign currency
Accumulated net realized loss on investments and foreign currency transactions (3,139)
Net investment loss (2,187)
Total Net Assets $ 7,262,076
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($4,592,518 / 448,080 shares outstanding) $10.25
Offering Price Per Share (100/94.50 of $10.25)* $10.85
Redemption Proceeds Per Share $10.25
CLASS B SHARES:
Net Asset Value Per Share ($2,272,521 / 222,921 shares outstanding) $10.19
Offering Price Per Share $10.19
Redemption Proceeds Per Share (94.50/100 of $10.19)** $ 9.63
CLASS C SHARES:
Net Asset Value Per Share ($397,037 / 38,938 shares outstanding) $10.20
Offering Price Per Share $10.20
Redemption Proceeds Per Share (99.00/100 of $10.20)** $10.10
</TABLE>
* See "What Shares Cost" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1996(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $6,606) $ 54,510
Interest 26,323
Total income 80,833
EXPENSES:
Investment advisory fee $ 48,769
Administrative personnel and services fee 141,023
Custodian fees 43,686
Transfer and dividend disbursing agent fees and expenses 45,438
Legal fees 10,870
Portfolio accounting fees 62,616
Distribution services fee -- Class B Shares 6,544
Distribution services fee -- Class C Shares 1,629
Shareholder services fee -- Class A Shares 8,360
Shareholder services fee -- Class B Shares 2,181
Shareholder services fee -- Class C Shares 543
Share registration costs 8,606
Printing and postage 13,015
Insurance premiums 3,609
Miscellaneous 4,524
Total expenses 401,413
Waivers and reimbursements --
Waiver of investment advisory fee $ (48,769)
Reimbursement of other operating expenses (262,290)
Total waivers and reimbursements (311,059)
Net expenses 90,354
Net operating loss (9,521)
REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments and foreign currency transactions (18,571)
Net change in unrealized appreciation of investments and translation of assets and liabilities in 128,090
foreign currency
Net realized and unrealized gain on investments and foreign 109,519
currency transactions
Change in net assets resulting from operations $ 99,998
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net operating loss $ (9,521)
Net realized loss on investments and foreign currency transactions
($3,404 net gain as computed for federal tax purposes) (18,571)
Net change in unrealized appreciation of investments and translation of
assets and liabilities in foreign currency 128,090
Change in net assets resulting from operations 99,998
SHARE TRANSACTIONS --
Proceeds from sale of shares 14,841,199
Cost of shares redeemed (7,679,121)
Change in net assets resulting from share transactions 7,162,078
Change in net assets 7,262,076
NET ASSETS:
Beginning of period --
End of period $ 7,262,076
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.00
Net realized and unrealized gain on investments and foreign currency 0.25
Total from investment operations 0.25
NET ASSET VALUE, END OF PERIOD $10.25
TOTAL RETURN(B) 2.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.85%*
Net investment income --
Expense waiver/reimbursement(c) 7.02%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $4,593
Average commission rate paid $0.0039
Portfolio turnover 99%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(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 ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.03)
Net realized and unrealized gain on investments and foreign currency 0.22
Total from investment operations 0.19
NET ASSET VALUE, END OF PERIOD $10.19
TOTAL RETURN(B) 1.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60%*
Net operating loss (0.86%)*
Expense waiver/reimbursement(c) 7.02%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $2,273
Average commission rate paid $0.0039
Portfolio turnover 99%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.05)
Net realized and unrealized gain on investments and foreign currency 0.25
Total from investment operations 0.20
NET ASSET VALUE, END OF PERIOD $10.20
TOTAL RETURN(B) 2.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60%*
Net operating loss (0.90%)*
Expense waiver/reimbursement(c) 7.02%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $397
Average commission rate paid $0.0039
Portfolio turnover 99%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. 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 seven portfolios.
The financial statements included herein are only those of Federated Asia
Pacific Growth 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 Fund seeks to provide long-term growth of capital.
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 on a national securities exchange or the over the
counter market. In the absence of recorded sales for equity securities they
are recorded according to the mean between the last closing bid and asked
prices. Short-term domestic and foreign securities are valued at the prices
provided by an independent pricing service. However, short-term domestic and
foreign 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").
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, and net operating losses. The following
reclassifications have been made to the financial statements.
INCREASE (DECREASE)
UNDISTRIBUTED NET
INVESTMENT INCOME/
ACCUMULATED ACCUMULATED DISTRIBUTIONS
NET REALIZED IN EXCESS OF NET
PAID-IN CAPITAL GAIN/LOSS INVESTMENT LOSS
$(22,766) $15,432 $7,334
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. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Fund's
securities against currency fluctuations. Risks may arise upon entering into
these transactions from the potential inability of counter-parts 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, 1996, the Fund had outstanding foreign currency commitments
as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <S> <C> <C> <C>
12/02/96 1,166,513 Hong Kong $150,878 $150,868 $ (10)
Dollar
12/02/96 3,756,283 Japanese Yen 32,956 32,979 23
12/04/96 113,181 Malaysian 44,877 44,788 (89)
Ringit
12/04/96 161,045 New Zealand 114,954 114,541 (413)
Dollar
12/04/96 39,826 Singapore 28,427 28,397 (30)
Dollar
12/03/96 17,850 Japanese Yen 157 157 --
12/03/96 163,240 New Zealand 114,921 116,102 (1,181)
Dollar
Total $ (1,700)
</TABLE>
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.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee.
Additional information on each restricted security held at November 30, 1996
is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATES COST
<S> <C> <C>
Aristocrat Leisure Ltd. 11/22/96, 11/21/96, 6/27/96 $82,376
Cinema Plus Ltd. 11/22/96, 11/21/96, 10/25/96, 9/28/96 89,738
Orogen Minerals Ltd. 11/14/96 46,321
Orogen Minerals Ltd. 10/31/96 47,511
Shanghai Industrial Holdings Ltd. 5/22/96, 10/31/96 24,719
Cheung Kong 5/27/96 78,965
China Resources Beijing Land 11/5/96 3,700
Winsor Property Holdings Ltd. 10/25/96 35,467
Mahindra and Mahindra, GDR 8/26/96, 2/26/96 19,150
Crompton Greaves Ltd., GDR 8/26/96, 7/1/96, 7/2/96 29,598
Bombay Suburban Electric Supply, GDR 2/29/96 28,800
Larsen & Tiubro Ltd., GDR 8/29/96, 8/27/96, 3/1/96 23,413
Hindalco Industries Ltd., GDR 9/24/96, 2/26/96 11,025
Steel Authority of India, GDR 3/6/96 12,975
PT Bank Negara Indonesia 10/25/96 9,776
People Co. Ltd. 9/26/96, 9/2/96 148,718
Nachi Fujikoshi Corp. 2/27/96 72,878
Meiwa Estate 2/26/96 90,487
Tokyo Tatemono Co. Ltd 2/27/96, 9/26/96 96,947
Korea Mobile Telecomm Corp. ADR 10/8/96 20,300
Kentucky Fried Chicken Berhad, Warrants 10/17/96 3,992
Faysal Bank 10/24/96 11,390
Hub Power Co., GDR 10/24/96, 5/3/96 13,771
Davao Union Cement Corp., Class B 11/20/96, 7/26/96 16,265
Filinvest Land, Inc 5/15/96, 2/27/96 19,407
</TABLE>
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1996, par value shares ($ 0.001 per share) authorized were
as follows:
NUMBER OF SHARES
OF PAR VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 405,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1996(A)
<S> <C> <C>
CLASS A SHARES SHARES AMOUNT
Shares sold 1,121,851 $ 11,556,721
Shares redeemed (673,771) (7,122,242)
Net change resulting from Class A Share transactions 448,080 $ 4,434,479
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 251,041 $ 2,607,100
Shares redeemed (28,120) (287,998)
Net change resulting from Class B Share transactions 222,921 $ 2,319,102
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 64,647 $ 677,378
Shares redeemed (25,709) (268,881)
Net change resulting from Class C Share transactions 38,938 $ 408,497
Net change resulting from share transactions 709,939 $ 7,162,078
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering)
to November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.10% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its fee
and/or reimburse certain operating expenses of the Fund. The Adviser can
modify or terminate this voluntary waiver and/or reimbursement 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 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%
Class A Shares did not incur a distribution services fee for the period
ended November 30, 1996, and has no present intention of paying or accruing
a distribution services fee.
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 for the period. The fee
paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts.
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.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $48,248 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five-year period following effective
date. For the period ended November 30, 1996, the Fund paid $2,680 pursuant
to this agreement.
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, 1996, were as follows:
PURCHASES $12,335,497
SALES $ 5,281,767
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.
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 Asia Pacific Growth
Fund (a portfolio of World Investment Series, Inc.) as of November 30, 1996,
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 audits.
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, 1996, by correspondence with the
custodian and brokers. 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 present
fairly, in all material respects, the financial position of Federated Asia
Pacific Growth Fund of World Investment Series, Inc. at November 30, 1996,
and the results of its operations, 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
January 17, 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
Gregor F. Meyer
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
J. Crilley Kelly
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.
[Graphicl
Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 981487507
Cusip 981487606
Cusip 981487705
G01934-01 (1/97)
Federated Emerging
Markets Fund
[Graphic]
Annual Report
November 30, 1996
Established 1996
INTERNATIONAL
President's Message
[Graphic]
Dear Fellow Shareholder:
I am pleased to present the first Annual Report to shareholders of Federated
Emerging Markets Fund. This report contains information about the fund from
February 28, 1996, the date of inception, through November 30, 1996. This
international stock fund is designed for long-term growth of capital through
ownership of corporations in emerging market countries.+ The countries are
found in Africa, Latin America, most of Asia and parts of Europe. Currently,
the fund's holdings represent 26 countries and 214 corporations. The fund's
assets total $21.9 million as of November 30, 1996.
The report begins with a discussion by portfolio manager, Jolanta Wysocka,
Vice President, Federated Global Research Corp. Her discussion covers
emerging market economic and market conditions and fund strategy. Following
her commentary is a complete list of the fund's investments and the
financial statements.
The fund offers shareholders significant long-term investment opportunities
from a select portfolio of many large- and small-company stocks issued by
international emerging companies. It is important to remember that the true
measure of this fund's performance is clearly in years rather than months.
There will be periods of short-term fluctuation, of negative as well as
positive returns. The fund's performance was positive, and assets grew
nicely.
With that in mind, as of November 30, 1996, Federated Emerging Markets Fund
delivered a total return of: Class A Shares, 11.00%; Class B Shares, 10.40%;
and Class C Shares 10.50% based on net asset value.* The fund's broad
diversification across many stock issues, with holdings averaging less than
1% of the fund's total assets in any one stock, helped the fund share value
increase.
* Performance quoted represents past performance. 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 for Class A, B, and C Shares were 4.91%,
4.90%, and 9.50%, respectively.
+ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards. In addition, emerging markets structures may be
less diverse and mature, and their political systems may be less stable.
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. You may add to your investment account at any time and thus
increase the number of shares you own for future income. I recommend you add
to your account on a regular basis to take advantage of price fluctuations
and dollar-cost averaging.++
Thank you for your investment in Federated Emerging Markets Fund and for the
confidence you have placed in our firm.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1997
++ 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]
Jolanta Wysocka
Vice President
Federated Global
Research Corp.
[Graphic]
WHAT IS YOUR ANALYSIS OF THE EMERGING MARKET ARENA SINCE THE FUND BEGAN
OPERATION?
In general, 1996 has been a volatile period in emerging markets. Broad-based
indexes posted single-digit gains for the year; however all of these gains
were realized during the first quarter of the year.
Europe and Russia captivated investor attention throughout the year. All of
the European markets posted strong double-digit gains led by a rise of over
100% in the Russian equity market. Improvements in the political stability
of the region, as well as macroeconomic improvements combined with
attractive valuations, provided a positive environment for significant
rallies in equity prices.
Latin American countries continued along the path of economic recovery.
Individual country performance varied throughout the region with Brazil
being the strongest market and Chile the weakest.
Asian markets exhibited a great deal of volatility throughout the year as
investors shied away from Korea and Thailand (both posting over 50% losses
for the year) and favored the Philippines, China, and Malaysia.
The South African market was one of extreme disappointment this year as the
currency devalued sharply and investors realized that inflated expectations
leave plenty of room for disappointment.
[Graphic]
WHAT WAS THE FUND'S INVESTMENT STRATEGY THIS YEAR?
Federated Emerging Markets Fund's strategy is designed to capture the
returns of developing markets. Premium returns are sought through
participation in the long-term economic growth in these markets. The fund
pursues its objective through a top-down contrarian approach using a unique
methodology of country selection and allocation. This past year, we were
overweighted in Europe and underweighted in Asia. Eliminating South Africa
and Korea from the country lineup helped us in avoiding significant losses
in both of these markets this year.
The fund's strong performance relative to the emerging market benchmarks can
be attributed mainly to country selection and allocation. Stock selection
was positive this past year, however, its contribution to the overall
outperfomance was relatively less significant.
[Graphic]
HOW DID FEDERATED EMERGING MARKETS FUND PERFORM DURING THE PERIOD COMPARED
TO ITS BENCHMARK AND THE UNIVERSE OF EMERGING MARKETS FUNDS?
In the nine-month period since the fund began operation on February 28,
1996, it has delivered a strong total return. Total returns based on net
asset value were: Class A Shares, 11.00%; Class B Shares, 10.40%; and Class
C Shares 10.50%.* By comparison, the fund's benchmark, the International
Finance Corporation Investable Composite Index,** was negative: (1.12%)
during the same period of time.
* Performance quoted represents past performance. 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 for Class A, Class B, and Class C Shares were
4.91%, 4.90%, and 9.50%, respectively.
** International Finance Corporation Investable Composite Index is an
investable, unmanaged market capitalization-weighted index of over 1,000
securities in 26 emerging market countries. Investments may not be made in
an index.
[Graphic]
WHAT COUNTRIES WERE REPRESENTED IN THE PORTFOLIO AS OF NOVEMBER 30, 1996?
The portfolio was well diversified across the following countries:
<TABLE>
<CAPTION>
PERCENTAGE
BREAKDOWN OF NET ASSETS
<S> <C>
Argentina 6.54%
Mexico 6.52%
Poland 6.34%
Brazil 6.08%
Russia 5.86%
Greece 5.80%
India 5.66%
Portugal 5.44%
Turkey 5.34%
Peru 5.23%
Chile 4.38%
Mauritius 4.30%
Hungary 4.08%
Czech Republic 3.98%
Indonesia 3.73%
Malaysia 2.88%
Philippines 2.67%
Thailand 2.19%
Croatia 1.75%
China 1.39%
Hong Kong 1.33%
Pakistan 1.22%
Egypt 0.66%
Colombia 0.48%
Uruguay 0.36%
</TABLE>
[Graphic]
WHAT WERE THE FUND'S TOP HOLDINGS?
The top 10 holdings at the end of the period were as follows:
<TABLE>
<CAPTION>
% OF
NET
NAME COUNTRY ASSETS INDUSTRY
<S> <S> <C> <S>
Irkutskenergo RDC Russia 1.47% Utilities --
Electrical & Gas
Lukoil Oil Co., ADR Russia 1.35% Energy -- Oil & Gas
Commerce Asset Holdings Bhd Malaysia 1.25% Banking
PT Bank International Indonesia Indonesia 1.24% Banking
Mosenergo, ADR, 144A Russia 1.23% Utilities --
Electrical & Gas
Hub Power Co., GDR Pakistan 1.22% Energy Sources
Zagrebacka Banka, GDR Croatia 1.16% Banking
Celulosa Argentina S.A. Argentina 1.04% Forest Products
& Paper
Belle Corp. Philippines 0.91% Energy Sources
United Engineers Ltd. Malaysia 0.91% Machinery &
Engineering
</TABLE>
[Graphic]
WHAT IS YOUR CURRENT OUTLOOK FOR EMERGING MARKETS, AND WHAT IS YOUR STRATEGY
FOR THE FUND AS WE ENTER 1997?
Our long-term outlook for emerging markets remains bullish. Equities in the
developing countries should continue to be the beneficiaries of rapid
economic growth, falling inflation rates, lowering of trade barriers as well
as improvements in the political stability throughout the globe.
Going forward, the developing economies should also continue to benefit from
investment flows as well as access to modern technology and know-how.
Emerging markets offer not only growth potential, but also diversification
benefits. It is likely that some of the gains taken in the U.S. market could
be reallocated to emerging markets, which have underperformed for the past 3
years. There is certainly room for asset rebalancing as emerging markets
continue to be underrepresented in investors' portfolios with an average
allocation of just over 2%, while they represent an over 7% share of the
global equity capitalization, 20% of global Gross Domestic Product, and 85%
of global population.
Shareholders of the Federated Emerging Markets Fund are uniquely positioned
to participate in this exciting asset class through a long-term, diversified
global strategy.
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 INTERNATIONAL EQUITY 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
Employ highly qualified, experienced managers in global investing. Employ
experts to select countries and companies outside the U.S. for long-term
growth potential.
Call your investment representative to buy shares of 7 international equity
funds and 2 international income funds from Federated Investors.
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.
International investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
SHAREHOLDER MEETING RESULTS
A Special Meeting of Shareholders of Blanchard Worldwide Emerging Markets
Fund was held on August 16, 1996. On June 20, 1996, the record date for
shareholders voting at the meeting, there were 1,161,120 total outstanding
shares. The following item was considered by shareholders and the results of
their voting were as follows:
<TABLE>
<CAPTION>
ABSTENTIONS WITHHELD
AGENDA AND BROKER AUTHORITY
ITEM FOR AGAINST NON-VOTES TO VOTE
<S> <C> <C> <C> <C>
1. To approve or disapprove an agreement and plan of reorganization
providing for the transfer of the assets of Blanchard Worldwide Emerging
Markets Fund to the Class A Shares of Federated Emerging Markets Fund, a
portfolio of World Investment Series, Inc.
661,658 12,571 18,659 0
</TABLE>
FEDERATED EMERGING MARKETS FUND (CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Emerging Markets Fund (Class A Shares) (the "Fund") from February
28, 1996 (start of performance) to November 30, 1996, compared to the
International Finance Corporation Investable Composite Index (IFCICI).+
`Graphic representation ``J'' 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 5.50% ($10,000 investment minus $550
sales charge = $9,450). The Fund's performance assumes the reinvestment of
all dividends and distributions.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The IFCICI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
IFCICI has been adjusted to reflect reinvestment of dividends on securities
in the index. This index is unmanaged.
FEDERATED EMERGING MARKETS FUND (CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND (CLASS B
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Emerging Markets Fund (Class B Shares) (the "Fund") from February
28, 1996 (start of performance) to November 30, 1996, compared to the
International Finance Corporation Investable Composite Index (IFCICI).+
`Graphic representation ``K'' 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 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.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The IFCICI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
IFCICI has been adjusted to reflect reinvestment of dividends on securities
in the index. This index is unmanaged.
FEDERATED EMERGING MARKETS FUND (CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND (CLASS C
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Emerging Markets Fund (Class C Shares) (the "Fund") from February
28, 1996 (start of performance) to November 30, 1996, compared to the
International Finance Corporation Investable Composite Index (IFCICI).+
`Graphic representation ``L'' 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 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.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The IFCICI is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
IFCICI has been adjusted to reflect reinvestment of dividends on securities
in the index. This index is unmanaged.
FEDERATED EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- 90.1%
ARGENTINA -- 6.6%
BANKING -- 1.3%
6,000 Banco Frances del Rio de la Plata S.A., ADR $ 181,500
9,100 Bansud S.A., Class B 100,140
Total 281,640
BEVERAGE & TOBACCO -- 0.1%
7,500 Nobleza Piccardo S.A.I.C. y F. 31,138
ENERGY EQUIPMENT & SERVICES -- 0.5%
8,000 Transportadora de Gas de Sur S.A., Class B, ADR 99,000
ENERGY SOURCES -- 0.7%
6,400 YPF Sociedad Anonima 149,820
FOREST PRODUCTS & PAPER -- 1.0%
820,000 (a)Celulosa Argentina S.A. 228,052
METALS - STEEL -- 0.6%
96,000 (a)Acindar Industria Argentina de Aceros S.A. 123,890
MULTI-INDUSTRY -- 1.4%
26,195 Compania Naviera Perez Companc S.A., Class B 179,246
100,000 Ledesma Agricola S.A. 123,049
Total 302,295
TELECOMMUNICATIONS -- 1.0%
17,000 Telecom Argentina S.A. 67,858
59,000 Telefonica de Argentina S.A., Class B 152,282
Total 220,140
TOTAL ARGENTINA 1,435,975
BRAZIL -- 1.5%
TELECOMMUNICATIONS -- 0.9%
2,520 Telecomunicacoes Brasileras, ADR 190,890
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
BRAZIL -- CONTINUED
MISCELLANEOUS -- 0.0%
49,000,000 (a)Texpar S.A. $ 475
UTILITIES - ELECTRICAL & GAS -- 0.6%
112,600,000 Cia Forca Luz Cataguazes Leo 128,624
TOTAL BRAZIL 319,989
CHILE -- 4.4%
BANKING -- 0.4%
3,800 Banco O'Higgins, ADR 87,400
BEVERAGE & TOBACCO -- 0.9%
5,600 Compania Cervecerias Unidas S.A., ADR 107,800
2,600 Embotelladora Andina S.A., ADR 81,576
Total 189,376
MERCHANDISING -- 0.3%
3,000 Santa Isabel S.A., ADR 75,376
METALS - NON FERROUS -- 1.2%
5,000 Madeco S.A., ADR 118,750
2,700 Sociedad Quimica Y Minera De Chile, ADR 140,400
Total 259,150
PHARMACEUTICALS -- 0.5%
6,400 Laboratorio Chile, ADR 112,000
TELECOMMUNICATIONS -- 0.5%
20,000 Telex-Chile S.A., ADR 112,500
UTILITIES - ELECTRICAL & GAS -- 0.6%
4,500 Enersis S.A., ADR 127,125
TOTAL CHILE 962,927
CHINA -- 1.4%
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.3%
147,200 Shanghai Diesel Engine Co. Ltd., Class B 61,824
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
CHINA -- CONTINUED
HOUSEHOLD APPLIANCES -- 0.2%
124,800 Shanghai Shangling Electric Appliances Co. Ltd., Class B $ 40,934
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.3%
148,000 Sinocan Holdings Ltd. 62,209
TRANSPORTATION - ROAD & RAIL -- 0.3%
1,950 (a)Guangshen Railway Co. Ltd., Class H, ADR 38,513
39,000 Shanghai Dazhong Taxi Co., Class B 25,662
Total 64,175
UTILITIES - ELECTRICAL & GAS -- 0.3%
4,200 (a)Huaneng Power International Inc., Class N, ADR 76,650
TOTAL CHINA 305,792
COLOMBIA -- 0.5%
BANKING -- 0.3%
3,400 Banco Industrial Colombiano, ADR 54,825
BUILDING MATERIALS & COMPONENTS -- 0.2%
4,000 Cementos Diamante S.A., GDR 50,500
TOTAL COLOMBIA 105,325
CROATIA -- 1.8%
BANKING -- 1.2%
13,000 (a)(b)Zagrebacka Banka, GDR 255,125
HEALTH & PERSONAL CARE -- 0.6%
2,670 (a)(b)Pliva D.D., GDR 129,495
TOTAL CROATIA 384,620
CZECH REPUBLIC -- 4.0%
BEVERAGE & TOBACCO -- 0.5%
1,350 (a)Prazske Pivovary A.S. 119,307
DATA PROCESSING & REPRODUCTION -- 0.4%
660 (a)PVT 82,838
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
CZECH REPUBLIC -- CONTINUED
FOREST PRODUCTS & PAPER -- 0.5%
3,806 (a)Biocel Paskov AS $ 99,895
MACHINERY & ENGINEERING -- 0.6%
8,700 (a)CKD Praha Holding AS 131,677
MANUFACTURING -- 0.8%
3,100 (a)Ceska Zbrojovka A.S. 186,533
TELECOMMUNICATIONS -- 0.5%
950 (a)SPT Telekom A.S. 107,313
UTILITIES - ELECTRICAL & GAS -- 0.7%
800 (a)CEZ A.S. 28,056
2,400 (a)Prvni Severozapadni 118,365
Total 146,421
TOTAL CZECH REPUBLIC 873,984
EGYPT -- 0.7%
BUILDING MATERIALS & COMPONENTS -- 0.7%
9,000 (a)(b)Suez Cement Co -- GDR 144,450
TOTAL EGYPT 144,450
GREECE -- 5.8%
BANKING -- 0.7%
2,366 Alpha Credit Bank 147,832
BEVERAGE & TOBACCO -- 0.5%
3,900 Hellenic Bottling Co., S.A. 112,492
BUILDING MATERIALS & COMPONENTS -- 0.7%
2,800 Titan Cement Co. 153,891
CONSTRUCTION & HOUSING -- 0.6%
18,800 Proodeftiki S.A. 123,526
ENGINEERING -- 0.5%
18,400 Ergas 104,170
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
GREECE -- CONTINUED
FOOD PROCESSING -- 0.6%
7,300 Goody's S.A. $ 133,034
METALS - NON FERROUS -- 0.6%
3,500 Aluminum of Greece S.A. 135,016
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.4%
6,080 Hellas Can Packaging Manufacturers, S.A. 96,983
TELECOMMUNICATIONS -- 0.6%
8,170 (b)Hellenic Telecommunications Organization 141,799
TRANSPORTATION - SHIPPING -- 0.6%
18,500 Attica Enterprises S.A. 125,377
TOTAL GREECE 1,274,120
HONG KONG -- 1.3%
CONSTRUCTION & HOUSING -- 0.6%
45,000 (a)New World Infrastructure 133,859
REAL ESTATE -- 0.4%
70,000 Amoy Properties Ltd. 97,775
TELECOMMUNICATIONS -- 0.3%
2,400 (a)Asia Satellite Telecommunications Holdings Ltd., ADR 60,900
UTILITIES - ELECTRICAL & GAS -- 0.0%
40,000 (a)Star Paging International Holding, Ltd., Warrants 383
TOTAL HONG KONG 292,917
HUNGARY -- 4.1%
CHEMICALS -- 0.7%
4,700 Pannonplast RT 146,722
ENERGY SOURCES -- 0.7%
13,600 (a)MOL Magyar Olajes Gazipari RT 156,100
FOOD PROCESSING -- 0.7%
3,200 Pick Szeged Rt 159,430
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
HUNGARY -- CONTINUED
LEISURE & TOURISM -- 0.8%
7,800 (a)Danubius Hotels RT $ 171,185
MANUFACTURING -- 0.5%
2,900 Zalakeramia Rt 115,221
PHARMACEUTICALS -- 0.7%
2,700 Gedeon Richter RT 147,801
TOTAL HUNGARY 896,459
INDIA -- 5.9%
AUTOMOBILE -- 1.0%
3,700 (b)Bajaj Auto Ltd., GDR 103,600
3,500 (a)(b)Mahindra and Mahindra, GDR 36,750
8,200 (b)Tata Engineering & Locomotive Co. Ltd., GDR 82,000
Total 222,350
BEVERAGE & TOBACCO -- 0.5%
13,000 (a)(b)ITC Ltd., GDR 117,000
CHEMICALS -- 0.2%
4,800 DCW, Ltd., GDR 14,400
18,200 (b)Indo Gulf Fetrilizer & Chemical 144-A, GDR 10,920
2,000 (a)Reliance Industries, GDR 23,050
Total 48,370
CONSTRUCTION & HOUSING -- 0.5%
13,480 (b)Gujarat Ambuja, GDR 107,840
ENERGY EQUIPMENT & SERVICES -- 0.6%
7,000 (a)(b)Bombay Suburban Electric Supply, GDR 138,250
FINANCIAL SERVICES -- 0.7%
10,000 (a)(b)State Bank of India, GDR 162,750
LEISURE & TOURISM -- 0.8%
9,000 (a)(b)East India Hotels, GDR 169,200
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
INDIA -- CONTINUED
MACHINERY & ENGINEERING -- 0.6%
8,800 (a)(b)Larsen & Toubro Ltd., GDR $ 127,600
METALS - NON FERROUS -- 0.6%
5,850 Hindalco Industries Ltd., GDR 119,340
PHARMACEUTICALS -- 0.3%
10,000 Dr. Reddy's Laboratories, GDR 45,000
1,100 (b)Ranbaxy Laboratories, GDR 144-A 21,175
Total 66,175
TEXTILES & APPAREL -- 0.1%
2,100 Indian Rayon & Industries Ltd., GDR 15,540
UTILITIES - ELECTRICAL & GAS -- 0.0%
7,000 Cesc Limited-Sponsored, GDR 5,950
TOTAL INDIA 1,300,365
INDONESIA -- 3.7%
AUTOMOBILE -- 0.3%
84,000 PT Gadjah Tunggal 35,821
14,000 PT United Tractors 29,851
Total 65,672
BANKING -- 1.8%
105,000 PT Bank Dagang Nasional 104,104
293,546 PT Bank International Indonesia 272,267
28,800 PT Bank Tiara Asia 28,554
Total 404,925
BEVERAGE & TOBACCO -- 0.1%
5,000 PT Hanjaya Mandala Sampoerna 25,480
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
INDONESIA -- CONTINUED
BUILDING MATERIALS & COMPONENTS -- 0.3%
41,000 Keramika Indonesia Associates $ 47,207
8,000 PT Semen Gresik 24,392
Total 71,599
ENGINEERING -- 0.2%
55,000 PT Bukaka Teknik Utama 43,977
MANUFACTURING -- 0.5%
238,000 PT Andayani Megah 101,492
PHARMACEUTICALS -- 0.1%
13,000 PT Darya Varia Laboratoria 20,373
TELECOMMUNICATIONS -- 0.3%
1,500 PT Indosat, ADR 41,438
18,000 PT Telekomunikasi Indonesia 29,744
Total 71,182
TEXTILES & APPAREL -- 0.1%
39,000 PT Concord Benefit Enterprise 14,136
TOTAL INDONESIA 818,836
KOREA -- 0.0%
APPLIANCES & HOUSEHOLD DURABLES -- 0.0%
2 (a)(b)Samsung Electronics Co., GDR 101
TOTAL KOREA 101
MALAYSIA -- 2.9%
BANKING -- 1.3%
36,000 Commerce Asset Holdings Bhd 274,951
FINANCIAL SERVICES -- 0.2%
9,000 Rashid Hussain Bhd 56,272
MACHINERY & ENGINEERING -- 0.9%
22,000 United Engineers Ltd. 199,367
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
MALAYSIA -- CONTINUED
MULTI-INDUSTRY -- 0.5%
55,000 Renong Berhad $ 101,425
TOTAL MALAYSIA 632,015
MAURITIUS -- 4.3%
BANKING -- 1.3%
38,700 (a)Mauritius Commercial Bank 140,447
338,500 State Bank Mauritius 149,771
Total 290,218
BEVERAGE & TOBACCO -- 0.3%
11,177 Mauritius Breweries Ltd. 68,346
ENERGY - OIL & GAS -- 0.4%
183,500 Mauritius Oil Refineries Ltd. 84,840
FINANCIAL SERVICES -- 0.2%
13,500 (a)Fincorp Investment Co. Ltd. 48,658
FOOD PROCESSING -- 0.2%
17,211 (a)Mon Tresor & Mon Desert Ltd. 32,086
INDUSTRIAL COMPONENTS -- 0.6%
30,000 Rogers and Company Ltd. 136,465
INSURANCE -- 0.3%
130,000 British American Insurance Co. 47,179
16,977 (a)Swan Insurance Co., Ltd. 27,852
Total 75,031
LEISURE & TOURISM -- 1.0%
107,500 (a)Sun Resorts Ltd. 186,515
11,598 United Docks Ltd. 21,968
Total 208,483
TOTAL MAURITIUS 944,127
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
MEXICO -- 6.5%
BANKING -- 0.7%
74,900 Grupo Financiero Banamex, Class B $ 147,768
1,767 Grupo Financiero Banamex, Class L 3,208
Total 150,976
BEVERAGE & TOBACCO -- 0.7%
45,500 Fomento Economico Mexicano, S.A. de C.V., Class B 155,474
BROADCASTING & PUBLISHING -- 0.6%
9,300 Grupo Televisa S.A. 127,349
BUILDING MATERIALS & COMPONENTS -- 0.7%
22,900 Apasco S.A. de CV 153,886
FINANCIAL SERVICES -- 0.0%
390 Grupo Financiero Inbursa, S.A. de C.V., Class B 1,276
FOOD & HOUSEHOLD PRODUCTS -- 0.6%
110,000 Grupo Industrial Maseca S.A. de CV, Class B 136,959
HEALTH & PERSONAL CARE -- 0.7%
7,800 Kimberly-Clark de Mexico 150,917
METALS - NON FERROUS -- 1.3%
52,000 Grupo Mexico S.A., Class B 171,421
30,000 Industrias Penoles S.A. 107,645
Total 279,066
MULTI-INDUSTRY -- 1.1%
29,126 Alfa, S.A. de C.V., Class A 129,621
12,500 (a)Grupo Carso S.A. de CV 63,633
5,600 Grupo Carso S.A. de CV, ADR 57,050
Total 250,304
TELECOMMUNICATIONS -- 0.1%
11,200 (a)Carso Global Telecom, Class A-1 25,845
TOTAL MEXICO 1,432,052
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
PAKISTAN -- 1.2%
ENERGY SOURCES -- 1.2%
12,500 (a)Hub Power Co., GDR $ 268,750
TOTAL PAKISTAN 268,750
PERU -- 5.2%
BUILDING MATERIALS & COMPONENTS -- 1.2%
85,578 Cementos Lima S.A. 120,859
96,762 Cementos Norte Pacasmayo 135,530
Total 256,389
FINANCIAL SERVICES -- 0.4%
6,000 (a)Credicorp Ltd. 103,500
FOOD PROCESSING -- 0.1%
65,000 D'Onofrino S.A. 28,419
METALS - NON FERROUS -- 1.2%
5,032 Cia de Minas Buenaventura S.A. 36,156
12,000 Compania de Minas Buenaventura S.A., Class C 90,075
16,000 (a)Minsur S.A. 141,149
Total 267,380
REAL ESTATE -- 0.3%
240,996 (a)Peru Real Estate S.A. 60,610
TELECOMMUNICATIONS -- 1.4%
85,000 (a)Tele 2000 S.A.- La Nueva Com de Telefonos 131,553
85,874 Telefonica Del Peru CPT, Class B 168,459
Total 300,012
WHOLESALE & INTERNATIONAL TRADE -- 0.6%
128,260 Enrique Ferreyros S.A. 131,510
TOTAL PERU 1,147,820
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
PHILIPPINES -- 2.6%
BANKING -- 0.6%
4,750 Metro Bank and Trust Co. $ 110,230
2,200 (a)Philippine National Bank 27,410
Total 137,640
BUILDING MATERIALS & COMPONENTS -- 0.0%
20,000 (a)Sanitary Wares Manufacturing Corp. 1,567
CONSTRUCTION & HOUSING -- 0.2%
85,000 (a)Empire East Land Holdings, Inc. 41,229
ELECTRICAL & ELECTRONICS -- 0.1%
400,000 EEI Corp. 25,869
ENERGY SOURCES -- 0.9%
750,000 (a)Belle Corp. 199,726
MULTI-INDUSTRY -- 0.2%
16,000 First Philippine Holdings Corp., Class B 33,782
REAL ESTATE -- 0.5%
33,000 Ayala Land, Inc., Class B 35,779
200,000 Guoco Holdings (Philippines) 46,412
172,000 (a)Robinson's Land Corp., Class B 32,063
Total 114,254
UTILITIES - ELECTRICAL & GAS -- 0.1%
4,420 Manila Electric Co., Class B 32,789
TOTAL PHILIPPINES 586,856
POLAND -- 6.4%
BANKING -- 1.3%
4,700 Bank Rozwoju Eksportu S.A. 152,448
1,440 Bank Slaski S.A. 139,870
Total 292,318
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
POLAND -- CONTINUED
CHEMICALS -- 0.7%
5,800 Debica S.A. $ 124,062
6,700 Polifarb-Cieszyn S.A. 33,831
Total 157,893
DATA PROCESSING & REPRODUCTION -- 0.6%
6,600 (a)ComputerLand Poland S.A. 128,445
ENGINEERING -- 1.0%
13,300 (a)Exbud S.A. 111,463
42,000 Mostostal Export S.A. 99,411
Total 210,874
FINANCIAL SERVICES -- 0.7%
106,000 Bank Inicjatyw Gospodarczych 144,961
FOOD PROCESSING -- 0.5%
4,900 Agros Holding S.A. 118,557
INDUSTRIAL COMPONENTS -- 0.1%
3,100 (a)Fabryka Kotlow Rafako S.A. 16,414
MACHINERY & ENGINEERING -- 0.3%
7,100 Stalexport S.A. 74,690
PHARMACEUTICALS -- 0.6%
8,300 (a)Jelfa S.A. 121,365
WHOLESALE & INTERNATIONAL TRADE -- 0.6%
13,900 Elektrim Spolka Akcyina S.A. 126,727
TOTAL POLAND 1,392,244
PORTUGAL -- 5.5%
AUTOMOBILE -- 0.2%
2,800 Salvador Caetano Industrias Metalurgicas e Veiculos de Transporte S.A. 52,376
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
PORTUGAL -- CONTINUED
BANKING -- 1.0%
2,714 Banco Commercial Portugues, Class R $ 35,336
8,800 Banco Espirito Santo e Comercial de Lisboa 152,371
1,500 Banco Totta & Acores Nationalisiert, Class B 26,417
Total 214,124
BROADCASTING & PUBLISHING -- 0.7%
4,700 (a)Investec-Consultoria Internacional 151,320
CHEMICALS -- 0.2%
1,200 CIN-Corparacao Industrial do Norte S.A. 42,491
CONSTRUCTION & HOUSING -- 0.8%
20,000 Somague-Sociedade Gestora de Participacoes 180,296
FOOD & HOUSEHOLD PRODUCTS -- 0.7%
1,600 Estabelecimentos Jeronimo Martins & Filho SGPS, S.A. 147,019
MACHINERY & ENGINEERING -- 0.5%
14,000 Efacec-Emp Fabril 113,496
14,000 Efacec-Emp Fabril, Rights 0
Total 113,496
MULTI-INDUSTRY -- 0.7%
5,000 Sonae Investimentos Sociedade Gestora de Participacoes Sociais, S.A. 149,646
TELECOMMUNICATIONS -- 0.7%
5,400 (a)Portugal Telecom S.A. 143,258
TOTAL PORTUGAL 1,194,026
RUSSIA -- 5.9%
ENERGY - OIL & GAS -- 1.8%
6,800 (a)Lukoil Oil Co., ADR 295,800
2,500 (a)Tatneft, ADR 97,750
Total 393,550
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
RUSSIA -- CONTINUED
TELECOMMUNICATIONS -- 1.4%
90,000 Nizhny Novgordo Svyazinform, RDC $ 162,000
60,000 (a)Rostelecom RDC 139,200
Total 301,200
UTILITIES - ELECTRICAL & GAS -- 2.7%
2,600,000 Irkutskenergo, RDC 322,400
9,300 (a)(b)Mosenergo, ADR 269,700
Total 592,100
TOTAL RUSSIA 1,286,850
THAILAND -- 2.2%
BANKING -- 0.4%
35,000 Thai Military Bank 92,500
BUILDING MATERIALS & COMPONENTS -- 0.4%
14,000 Siam City Cement 93,185
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.6%
24,400 Hana Microelectronics Co., Ltd. 130,883
FINANCIAL SERVICES -- 0.1%
8,400 Industrial Finance Corporation of Thailand 26,476
MINING -- 0.1%
1,200 Banpu Public Company Ltd. 23,868
TELECOMMUNICATIONS -- 0.1%
1,500 Advanced Information Service PCL 17,384
TRANSPORTATION - AIRLINES -- 0.5%
55,000 Thai Airways International Ltd. 95,828
TOTAL THAILAND 480,124
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TURKEY -- 5.3%
APPLIANCE & HOUSEHOLD DURABLES -- 0.5%
500,000 Vestel Elektronik Sanayi Ve Ticaret AS $ 117,245
BANKING -- 0.5%
2,900,000 Demirbank T.A.S. 106,253
BEVERAGE & TOBACCO -- 0.1%
180,000 Erciyas Biracilik Ve Malt Sanayii 21,104
CHEMICALS -- 0.0%
700 Aksa Akrilik Kimya Sanayii AS 96
ELECTRICAL & ELECTRONICS -- 0.4%
100,000 Kepez Elektrik 97,704
ENERGY SOURCES -- 0.3%
1,000,000 Turcas Petrolculuk 72,300
FOREST PRODUCTS & PAPER -- 0.3%
740,000 Kartonsan Karton Sanayi Ve Ticaret AS 68,685
INDUSTRIAL COMPONENTS -- 0.4%
190,000 (a)Brisa Bridgestone Sabanci, Class Y 83,537
MERCHANDISING -- 1.1%
110,300 Migros Turk 107,767
500,000 Net Turzim Ticaret Ve Sanayi 139,228
Total 246,995
METALS - STEEL -- 0.6%
860,000 Eregli Demir Ve Celik Fabrikalari T.A.S. 121,836
MULTI-INDUSTRY -- 0.7%
5,000,000 (a)Demir Yat Ort 31,754
5,250,000 (a)Dogan Sirketler Grubu Holding AS 97,460
168,000 Koc Yatirim Ve Sanayi Mamulleri Pazarlama S.A. 27,083
Total 156,297
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TURKEY -- CONTINUED
TRANSPORTATION - AIRLINES -- 0.4%
300,000 (a)Turk Hava Yollari A.O. $ 80,606
TOTAL TURKEY 1,172,658
URUGUAY -- 0.4%
BANKING -- 0.4%
4,700 Banco Comercial S.A., GDR 79,900
TOTAL URUGUAY 79,900
TOTAL COMMON STOCKS (IDENTIFIED COST $19,115,144) 19,733,282
PREFERRED STOCKS -- 4.6%
BRAZIL -- 4.6%
BANKING -- 0.7%
4,050,000 Banco Bradesco S.A., Preference 29,561
330,000 Banco Itau S.A., Preference 129,380
Total 158,941
ENERGY SOURCES -- 0.7%
1,185,000 Petroleo Brasileiro S.A., Preference 162,855
METALS - STEEL -- 0.1%
27,000,000 Usinas Siderurgicas de Minas Gerais, Pfd. 26,883
MINING -- 1.2%
8,000 Companhia Vale Do Rio Doce, Preference 168,054
9,800 (a)Usiminas USI SD MG, Pfd. 98,490
Total 266,544
TELECOMMUNICATIONS -- 0.2%
180,000 Telecomunicacoes de Sao Paulo S.A., Preference 31,888
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
PREFERRED STOCKS -- CONTINUED
BRAZIL -- CONTINUED
UTILITIES - ELECTRICAL & GAS -- 1.7%
100,000 Centrais Eletricas Brasileiras, Preference, Series B 32,778
4,900,000 Companhia Energetica de Minas Gerais, Preference 157,918
1,470,000 (a)Eletropaulo-Electricidade de Sao Paulo S.A., Preference, Class B 177,880
Total 368,576
TOTAL BRAZIL 1,015,687
TOTAL PREFERRED STOCKS (IDENTIFIED COST $964,342) 1,015,687
(C) REPURCHASE AGREEMENTS -- 5.5%
$ 1,215,000 BT Securities Corporation, 5.72%, dated 11/29/1996, due 12/2/1996
(AT AMORTIZED COST) 1,215,000
TOTAL INVESTMENTS (IDENTIFIED COST $21,294,486)(D) $ 21,963,969
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1996, these securities
amounted to $2,017,755 which represents 9.2% of net assets.
(c) 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.
(d) The cost of investments for federal tax purposes amounts to $21,298,492.
The net unrealized appreciation of investments on a federal tax basis
amounts to $665,477 which is comprised of $2,186,223 appreciation and
$1,520,746 depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($21,920,820) at November 30, 1996.
The following acronyms are used throughout this portfolio:
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
RDC -- Russian Depositary Certificate
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $21,294,486 and $ 21,963,969
tax cost $21,298,492)
Cash 82,664
Income receivable 18,738
Receivable for investments sold 41,429
Receivable for shares sold 151,895
Total assets 22,258,695
LIABILITIES:
Payable for investments purchased $ 233,653
Payable for shares redeemed 53,738
Payable for taxes withheld 1,274
Accrued expenses 49,210
Total liabilities 337,875
Net Assets for 1,977,201 shares outstanding $ 21,920,820
NET ASSETS CONSIST OF:
Paid in capital $ 21,578,711
Net unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 669,181
Accumulated net realized loss on investments and foreign currency (323,066)
transactions
Net investment loss (4,006)
Total Net Assets $ 21,920,820
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($17,326,534 / 1,561,040 shares outstanding) $11.10
Offering Price Per Share (100/94.50 of $11.10)* $11.75
Redemption Proceeds Per Share $11.10
CLASS B SHARES:
Net Asset Value Per Share ($3,747,585 / 339,513 shares outstanding) $11.04
Offering Price Per Share $11.04
Redemption Proceeds Per Share (94.50/100 of $11.04)** $10.43
CLASS C SHARES:
Net Asset Value Per Share ($846,701 / 76,648 shares outstanding) $11.05
Offering Price Per Share $11.05
Redemption Proceeds Per Share (99.00/100 of $11.05)** $10.94
</TABLE>
* See "What Shares Cost" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1996(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $12,072) $ 124,335
Interest 94,053
Total income 218,388
EXPENSES:
Investment advisory fee $ 121,495
Administrative personnel and services fee 141,023
Custodian fees 71,215
Transfer and dividend disbursing agent fees and 50,126
expenses
Legal fees 11,134
Portfolio accounting fees 62,834
Distribution services fee -- Class B Shares 8,070
Distribution services fee -- Class C Shares 1,762
Shareholder services fee -- Class A Shares 21,022
Shareholder services fee -- Class B Shares 2,690
Shareholder services fee -- Class C Shares 587
Share registration costs 14,472
Printing and postage 11,675
Insurance premiums 3,680
Taxes 16
Miscellaneous 4,563
Total expenses 526,364
Waivers
Waiver of investment advisory fee $ (121,495)
Reimbursement of other operating expenses (203,135)
Total waivers and reimbursements (324,630)
Net expenses 201,734
Net investment income 16,654
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on investments and foreign (343,726)
currency transactions
Net change in unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 669,181
Net realized and unrealized gain on investments 325,455
and foreign currency
Change in net assets resulting from operations $ 342,109
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 16,654
Net realized loss on investments and foreign currency transactions
($310,725 as computed for federal tax purposes) (343,726)
Net change in unrealized appreciation of investments
and translation of assets and liabilities in foreign currency 669,181
Change in net assets resulting from operations 342,109
SHARE TRANSACTIONS --
Proceeds from sale of shares 29,998,514
Net asset value of shares issued in connection with the acquisition of the
Blanchard Worldwide Emerging Markets Fund 6,732,148
Cost of shares redeemed (15,151,951)
Change in net assets resulting from share transactions 21,578,711
Change in net assets 21,920,820
NET ASSETS:
Beginning of period --
End of period $ 21,920,820
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02
Net realized and unrealized gain on investments and foreign currency 1.08
Total from investment operations 1.10
NET ASSET VALUE, END OF PERIOD $11.10
TOTAL RETURN(B) 11.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.97%*
Net investment income 0.31%*
Expense waiver/reimbursement(c) 3.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $17,327
Average commission rate paid $0.0029
Portfolio turnover 32%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(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 EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.02)
Net realized and unrealized gain on investments and foreign currency 1.06
Total from investment operations 1.04
NET ASSET VALUE, END OF PERIOD $11.04
TOTAL RETURN(B) 10.40%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.72%*
Net operating loss (0.71%)*
Expense waiver/reimbursement(c) 3.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,747
Average commission rate paid $0.0029
Portfolio turnover 32%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.02)
Net realized and unrealized gain on investments and foreign currency 1.07
Total from investment operations 1.05
NET ASSET VALUE, END OF PERIOD $11.05
TOTAL RETURN(B) 10.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.72%*
Net operating loss (0.77%)*
Expense waiver/reimbursement(c) 3.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $847
Average commission rate paid $0.0029
Portfolio turnover 32%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. 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 seven portfolios.
The financial statements included herein are only those of Federated
Emerging Markets 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 of the Fund is to provide long-term growth of
capital.
On August 19, 1996, the Fund acquired all the net assets of The Blanchard
Worldwide Emerging Markets Fund pursuant to a Plan of reorganization
approved by The Blanchard Worldwide Emerging Markets Fund shareholders on
August 16, 1996. The acquisition was accomplished by a tax-free exchange of
619,772 of the Fund's Class A Shares (valued at $6,732,148) for the
1,096,761 shares of The Blanchard Worldwide Emerging Markets Fund on August
16, 1996. The Blanchard Worldwide Emerging Markets Fund net assets at that
date ($6,745,897), including $472,330 of unrealized depreciation were
combined with those of the Fund. The aggregate net assets of the Fund and
The Blanchard Worldwide Emerging Markets Fund immediately before acquisition
were $14,135,447 and $6,745,897, respectively. Immediately after the
acquisition, the combined aggregate net assets of the Fund were $20,872,401
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. 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").
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 and net operating losses. The following
reclassifications have been made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
<S>
ACCUMULATED ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
GAIN/LOSS NET INVESTMENT INCOME
<C> <C>
$20,660 $(20,660)
</TABLE>
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 and dividends have been provided for
in accordance with the Fund's understanding of the applicable country's tax
rules and rates.
At November 30, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $3,440,821 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:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2004 $3,130,096(a)
2004 $ 310,725
</TABLE>
(a) Capital loss carryforward is attributable to the acquisition of the
assets of The Blanchard Worldwide Emerging Markets Fund.
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. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Fund's
securities against currency fluctuations. Risks may arise upon entering
these transactions from the potential inability of counter-parts 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, 1996, the Fund had outstanding foreign currency commitments
as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C>
12/02/96 780,209 Hong Kong Dollars $100,913 $100,906 $(7)
</TABLE>
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.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee.
Additional information on each restricted security held at November 30, 1996
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <S> <C>
Zagrebacka Banka, GDR 10/24/96 $255,125
Pliva DD, GDR 3/29/96 - 10/24/96 113,036
Suez Cement Co., GDR 11/25/96 132,750
Hellenic Telecommunications Organization 4/4/96 138,866
Bajaj Auto Ltd., GDR 8/20/96 89,700
Mahindna and Mahindna, GDR 2/27/96 30,625
Tata Engineering & Locomotive Co. Ltd., GDR 2/28/96 - 8/20/96 123,550
ITC Ltd., GDR 2/27/96 - 8/20/96 122,625
Indo Gulf Fertilizer & Chemical., GDR 2/28/96 29,120
Gujarat Ambuja, GDR 8/20/96 69,350
Bombay Suburban Electric Supply 8/20/96 123,375
State Bank of India, GDR 10/3/96 141,500
East India Hotels, GDR 8/20/96 - 11/29/96 120,000
Larsen & Toubro Ltd., GDR 8/20/96 126,500
Ranbaxy Laboritories, GDR 2/28/96 30,250
Samsung Electronics Co., GDR 8/17/96 --
Monsenegro, ADR 3/12/96 177,687
</TABLE>
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, 1996, par value shares ($0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 165,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 435,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 2,289,480 $ 25,292,447
Shares issued in connection with acquisition of The Blanchard
Worldwide Emerging Markets Fund 619,772 6,732,148
Shares redeemed (1,348,212) (14,945,833)
Net change resulting from Class A Share transactions 1,561,040 $ 17,078,762
<CAPTION>
NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 348,457 $ 3,768,962
Shares redeemed (8,944) (97,907)
Net change resulting from Class B Share transactions 339,513 $ 3,671,055
<CAPTION>
NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 86,670 $ 937,105
Shares redeemed (10,022) (108,211)
Net change resulting from Class C Share transactions 76,648 $ 828,894
Net change resulting from Fund share transactions 1,977,201 $ 21,578,711
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering)
to November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.25% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its fee
and/or reimburse certain operating expenses of the Fund. The Adviser can
modify or terminate this voluntary waiver and/or reimbursement 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 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 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 FSC.
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
Class A Shares did not incur a distribution services fee for the period
ended November 30, 1996, and has no present intention of paying or accruing
a distribution services fee.
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 for the period. The fee
paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts.
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.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $48,748 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five-year period following effective
date. For the period ended November 30, 1996, the Fund paid $2,708 pursuant
to this agreement.
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, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 20,899,542
SALES $ 2,843,926
</TABLE>
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.
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Directors of and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Emerging Markets Fund
(a portfolio of World Investment Series, Inc.) as of November 30, 1996, the
related statement of operations, the statement of changes in net assets, and
the 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 the
securities owned as of November 30, 1996 by correspondence with the
custodian and brokers. 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 Emerging Markets Fund of World Investment Series, Inc. at November
30, 1996, and the results of its operations, the changes in its net assets,
and the financial highlights for the period then ended, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 17, 1997
<TABLE>
DIRECTORS OFFICERS
<S> <S>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Richard B. Fisher Edward C. Gonzales
Edward L. Flaherty, Jr. Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President, Treasurer,
John E. Murray, Jr. and Secretary
Wesley W. Posvar J. Crilley Kelly
Marjorie P. Smuts Assistant Secretary
</TABLE>
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 Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 981487804
Cusip 981487887
Cusip 981487879
G01967-01 (1/97)
Federated European Growth Fund
[Graphic]
Annual Report
November 30, 1996
GROWTH
Established 1996
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
I am pleased to present the first Annual Report to Shareholders of Federated
European Growth Fund. This report contains information about the fund from
February 28, 1996, the date of inception, through November 30, 1996. The
Report begins with a discussion by the fund's portfolio manager, Frank
Semack, Vice President of Federated Global Research Corp. His discussion
covers international economic and market conditions and fund strategy.
Following his commentary are a complete list of the fund's common stock
investments and the financial statements.
The fund offers shareholders very significant long-term investment
opportunities from a select portfolio of 134 stocks issued by major European
companies+. It is important to remember that the true measure of this fund's
performance is clearly in years rather than months. There will be periods of
short-term fluctuation, of negative as well as positive returns.
With that in mind, the fund's first year of performance was very positive.
For the reporting period ended November 30, 1996, Federated European Growth
Fund delivered a total return of 18.00% for Class A Shares, 17.40% for Class
B Shares, and 17.30% for Class C Shares based on net asset value.* The
fund's broad diversification across many stock issues, with holdings
averaging less than 1% of the fund's total assets in any one stock, helped
the fund share value increase.
Thank you for entrusting a portion of your wealth in Federated European
Growth Fund.
Please take this opportunity to review this report and familiarize yourself
with your fund's strategy and holdings. We will continue to keep you
up-to-date on the details of your investment on a regular basis.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1997
* Performance quoted represents past performance. 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 for Class A Shares, Class B Shares, and Class
C Shares were 11.53%, 11.90%, and 16.30%, respectively.
+ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
INVESTMENT REVIEW
[Graphic]
Frank Semack
Vice President
Federated Global Research Corp.
WHAT IS YOUR ANALYSIS OF THE EUROPEAN MARKETS SINCE THE FUND BEGAN OPERATION
THROUGH NOVEMBER 30, 1996?
In general, the best way to describe developments in Europe in the past year
is "A Tale of Two Halves." Looking at Europe's performance in dollar terms,
the markets achieved little between the start of the year and the end of
July, as they sold off during the U.S. market's July correction. Subsequent
performance was much better, again inspired by the Wall Street rally, but
also solidly grounded in Europe's different circumstances. Apart from the
United Kingdom, most European countries did not experience strong domestic
demand, and this contributed heavily to the perception (and reality) that
interest rates on the continent would continue to trend lower.
At the start of the year, the consensus was that economic growth would pick
up, especially in continental Europe, and this was reflected in a rally in
cyclical stocks. Reality began to bite during the second quarter with
earnings downgrades and a switch in investors' focus from industrials to
financial stocks and utilities -- the latter two tend to be viewed as bond
market proxies. The U.K. market was out of tune with the rest of Europe for
much of the period, however, because consumer demand was generally stronger.
Utilities were held back for much of the year by political and regulatory
uncertainties, and the outlook for U.K. interest rates was also decidedly
different. To illustrate the point, it is worth recalling that whereas the
German Bundesbank surprised markets by cutting its key money market rate by
30 basis points to 3% in late August, the Bank of England, in sharp
contrast, eventually scored a victory of sorts in its battle with the
Treasury when it was given the go-ahead to increase short-term interest
rates in the U.K. by 25 basis points to 6% at the end of October.
In a sense, therefore, the "Tale of Two Halves" generalization also applies
geographically, but you must always remember that, like any generalization,
it brushes over a lot of important details. Europe consists of fourteen
markets not counting the various emerging markets in the area, so by
definition you are going to see a number of cross-currents at any point in
time, and that is exactly what happened in 1996.
The Italian market, for instance, continued to live up to its reputation for
extreme volatility. Currencies such as sterling, the Swedish kroner and the
Italian lira strengthened dramatically at different times, and the German
mark and French franc weakened. By the same token, if you look at sector
performances in Europe, a number of discrepancies become apparent. For
example, financial stocks tended to do better in the U.K. than in Europe, as
a whole, despite expectations of higher interest rates. U.K. media,
airlines, and retail stocks also did better, while Europe ex-U.K. fared much
better in the utilities and telecommunication sectors. More often than not,
the determining factor in sector divergencies was restructuring or
consolidation in the names making up the sectors.
WHAT WERE YOUR STRATEGIES IN TERMS OF COUNTRY WEIGHTINGS DURING THE PERIOD
ENDED NOVEMBER 30, 1996?
We kept the U.K. weighting around 34%-36% of the total throughout the
period, and Germany, with a weighting around the mid-teens, represented our
second largest exposure. Other major weightings throughout the period were
in France, Switzerland, the Netherlands, Spain, Italy, and Scandinavia, and
we also had some investments in Eastern Europe -- specifically in Croatia,
Poland, and Russia.
Bear in mind, though, that in many of the smaller markets, market exposure
is often the result of individual stock or sector decisions. Even in the
larger markets, their marginal weight is again often driven by individual
stocks. That, at any rate, was true in 1996 as we did not see as many
valuation discrepancies at the market level as we did at the sector level.
If you look at the composition of individual markets in Europe, it is
striking that only the U.K. and, arguably, France, are heavily diversified.
Elsewhere, there is quite a bit of sector concentration, and market
valuations and views can be substantially influenced by that, as I have
explained.
HOW DID THE EUROPEAN MARKET AND FEDERATED EUROPEAN GROWTH FUND PERFORM SINCE
THE FUND BEGAN OPERATION?
As measured by the Morgan Stanley Capital International (Europe) Average,**
Europe achieved a total return of 15.77% during the period ended November
30, 1996. Federated European Growth Fund outperformed the market, delivering
a total return of 18.00% for Class A Shares, 17.40% for Class B Shares, and
17.30% for Class C Shares based on net asset value.*
* Performance quoted represents past performance. 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 based on
offering price for Class A, B, and C Shares were 11.53%, 11.90%, and 16.30%,
respectively.
** Morgan Stanley Capital International (Europe) Average is an unmanaged,
market value-weighted average of the performance of over 500 securities
listed on the stock exchanges of 13 countries in the European region.
WHICH COUNTRIES WERE REPRESENTED IN THE PORTFOLIO AS OF NOVEMBER 30, 1996?
The portfolio was diversified across the following countries:
<TABLE>
<CAPTION>
PERCENTAGE OF
COUNTRY NET ASSETS
<S> <C>
United Kingdom (U.K.) 34.28%
Germany 12.62%
France 11.69%
Switzerland 9.84%
Netherlands 8.13%
Spain 4.97%
Italy 4.64%
Sweden 2.44%
Russia 1.22%
Norway 0.99%
Croatia 0.78%
Denmark 0.43%
Belgium 0.40%
Austria 0.33%
</TABLE>
WHAT WERE THE FUND'S TOP HOLDINGS?
The top 10 holdings at the end of November, 1996 were as
follows:
<TABLE>
<CAPTION>
MARKET
SECURITY PERCENTAGE OF CAPITALIZATION
NAME COUNTRY NET ASSETS (BILLIONS)
<S> <C> <C> <C>
Bayer AG Germany 1.71% $28.6
Commerzbank AG Germany 1.57% 9.5
Credit Suisse
Group -- Registered Switzerland 1.56% 19.3
Roche Holding AG Switzerland 1.46% 53.2
Pearson U.K. 1.26% 7.0
BASF AG Germany 1.18% 22.9
Cookson Group U.K. 1.13% 2.5
ABN Amro Holding Netherlands 1.10% 21.3
Telefonica de Spain 1.07% 20.5
Espana
ING Groep, N.V. Netherlands 1.02% 27.2
</TABLE>
AS WE LEAVE 1996, WHAT OPPORTUNITIES DO YOU SEE AHEAD IN THE EUROPEAN
MARKETS?
There are two ways to approach this. We saw a considerable amount of
volatility in all markets in December, triggered by Federal Reserve Board
Chairman Greenspan's warnings about the dangers of "irrational exuberance"
in the market, specifically the U.S. market. The old adage that bull markets
climb a wall of worry has certainly been amply borne out, both here and
overseas. In the last few years, stock markets racked up impressive gains in
the face of economic worries, which generated a good deal of skepticism
among professional investors.
Now, first of all, let us assume that the U.S. market is currently very
fully valued. If you compare Europe to the U.S., at present, on the basis of
widely used valuation criteria such as price/earnings ratios, dividend
yields, and bond yields, it is striking that Europe is cheap relative to the
U.S. For instance, with a bit of arithmetic, you can work out from the
respective values of these three measures how much more earnings growth
equity markets currently expect in the U.S. relative to Europe, and for how
long. Depending on the exact figures, the result you get at present is that
foreign market valuations impute much better prospects than the U.S. for
anywhere between the next 11 and 50 years!
For a start, markets do not, in real life, discount the future as far ahead
as the formula and the numbers suggest. However, I really want to stress a
second aspect of this, which explains why Wall Street as well as other
markets have exceeded expectations for such a long time. The reason is a
profound change in the way the world economy works. The quickest way to
describe it is to use a few overworked buzzwords such as "globalization,"
"restructuring," "efficiency improvements," etc. The fact is that this
describes a mega-trend -- excuse another buzzword -- that started in the
U.S. 15 years ago and is only now beginning to catch up with most of Europe.
So, regardless of any short-term market corrections, which are quite
possible, I believe that the underlying prospects for large parts of the
corporate sector in Europe are and should remain favorable. (You can
conclude that I am bullish on Europe!)
One final point: the importance of these trends is, to my mind, greater than
most of the headline-grabbing material concerning the single currency,
budget deficit targets, etc. We will, of course, pay a great deal of
attention to those issues as well because they do have an impact on markets,
but they have to be seen in the context of the more fundamental shifts
taking place globally.
Where in the world should
you invest?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND
FEDERATED EMERGING MARKETS FUND
FEDERATED EUROPEAN GROWTH FUND
FEDERATED INTERNATIONAL EQUITY FUND
FEDERATED INTERNATIONAL HIGH INCOME FUND
FEDERATED INTERNATIONAL INCOME FUND
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FEDERATED LATIN AMERICAN GROWTH FUND
FEDERATED WORLD UTILITY FUND
Employ highly qualified, experienced managers in global investing. Employ
experts to select countries and companies outside the U.S. for long-term
growth potential.
Call your investment representative to buy shares of 7 international equity
funds and 2 international income funds from Federated Investors.
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.
International investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
FEDERATED EUROPEAN GROWTH FUND (CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated European Growth Fund (Class A Shares) (the "Fund") from February
28, 1996 (start of performance) to November 30, 1996, compared to the Morgan
Stanley Capital International (Europe) Average (MTDUE14).+
GRAPHIC REPRESENTATION `M'' 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 5.50% ($10,000 investment minus $550
sales charge = $9,450). The Fund's performance assumes the reinvestment of
all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MTDUE14 is a market value-weighted average of the performance of over
500 securities listed on the stock exchanges of 13 countries in the European
region. The MTDUE14 is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This average is unmanaged. The MTDUE14
has been adjusted to reflect reinvestment of dividends on securities in the
average.
FEDERATED EUROPEAN GROWTH FUND (CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS B
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated European Growth Fund (Class B Shares) (the "Fund") from February
28, 1996 (start of performance) to November 30, 1996 compared to the Morgan
Stanley Capital International (Europe) Average (MTDUE14).+
GRAPHIC REPRESENTATION `N'' 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 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MTDUE14 is a market value-weighted average of the performance of over
500 securities listed on the stock exchanges of 13 countries in the European
region. The MTDUE14 is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This average is unmanaged. The MTDUE14
has been adjusted to reflect reinvestment of dividends on securities in the
average.
FEDERATED EUROPEAN GROWTH FUND (CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS C
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated European Growth Fund (Class C Shares) (the "Fund") from February
28, 1996 (start of performance) to November 30, 1996, compared to the Morgan
Stanley Capital International (Europe) Average (MTDUE14).+
GRAPHIC REPRESENTATION `O'' 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 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MTDUE14 is a market value-weighted average of the performance of over
500 securities listed on the stock exchanges of 13 countries in the European
region. The MTDUE14 is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This average is unmanaged. The MTDUE14
has been adjusted to reflect reinvestment of dividends on securities in the
average.
FEDERATED EUROPEAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- 91.9%
AUSTRIA -- 0.3%
MANUFACTURING -- 0.3%
170 VAE Eisenbahnsysteme $ 15,709
BELGIUM -- 0.4%
MERCHANDISING -- 0.4%
320 Delhaize-Le Lion 18,782
CROATIA -- 0.8%
BANKING -- 0.4%
1,000 (b)Zagrebacka Banka, GDR 19,625
HEALTH & PERSONAL CARE -- 0.4%
350 (b)Pliva D.D., GDR 16,975
TOTAL CROATIA 36,600
DENMARK -- 0.4%
TEXTILES & APPAREL -- 0.4%
450 (a)(b)Inwear Group AS 20,388
FRANCE -- 11.7%
AUTOMOBILE -- 0.7%
280 Peugeot SA 34,412
BANKING -- 1.8%
470 Compagnie Financiere de Paribas, Class A 32,291
530 Credit Commerical De France 25,669
300 Credit Local de France 27,158
Total 85,118
BEVERAGE & TOBACCO -- 0.6%
110 LVMH (Moet-Hennessy) 27,880
BROADCASTING & PUBLISHING -- 0.5%
337 Havas SA 23,870
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
FRANCE -- CONTINUED
BUSINESS & PUBLIC SERVICES -- 1.2%
165 Financiere Sogeparc SA $ 23,500
150 Societe Industrielle de Transporte Automobiles SA 33,252
Total 56,752
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.6%
600 Schneider SA 28,542
ENERGY SOURCES -- 0.6%
378 Total SA-B 30,225
FINANCIAL SERVICES -- 0.8%
315 Compagnie Bancaire SA 35,819
FOOD RETAILING -- 1.1%
680 Groupe Casino 30,786
140 Groupe Danone 20,610
Total 51,396
HEALTH & PERSONAL CARE -- 0.7%
350 Synthelabo 33,413
INSURANCE -- 0.5%
398 AXA 23,916
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.8%
250 Compagnie de St. Gobain 35,941
MULTI-INDUSTRY -- 0.6%
275 Lyonnaise des Eaux SA 26,174
PHARMACEUTICALS -- 0.7%
430 Rhone-Poulenc Rorer, Inc. 31,981
REAL ESTATE -- 0.5%
265 Unibail SA 25,289
TOTAL FRANCE 550,728
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
GERMANY -- 11.9%
AUTOMOBILE -- 1.0%
700 (a)Daimler Benz AG $ 45,716
BANKING -- 2.5%
3,000 Commerzbank AG 73,727
1,410 Dresdner Bank AG 41,848
Total 115,575
CHEMICALS -- 2.9%
1,500 BASF AG 55,481
2,000 Bayer AG 80,476
Total 135,957
FOOD & HOUSEHOLD PRODUCTS -- 0.2%
150 Henkel KGAA 7,314
HEALTH & PERSONAL CARE -- 1.8%
500 Schering AG 41,057
600 Schwarz Pharma AG 44,666
Total 85,723
MACHINERY & ENGINEERING -- 1.7%
60 Linde AG 36,435
110 Mannesmann AG 45,878
Total 82,313
UTILITIES - ELECTRICAL & GAS -- 1.8%
900 RWE AG 39,789
810 Veba AG 47,370
Total 87,159
TOTAL GERMANY 559,757
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ITALY -- 4.6%
BANKING -- 1.2%
5,500 Banca Popolare di Milano $ 28,118
3,500 IMI S.P.A. 29,402
Total 57,520
BUILDING MATERIALS & COMPONENTS -- 0.6%
4,070 (a)Unicem S.P.A. 27,465
ENERGY - OIL & GAS -- 0.7%
6,700 ENI S.P.A. 35,269
FOREST PRODUCTS & PAPER -- 0.5%
4,920 Burgo (Cartiere) S.P.A. 23,530
MERCHANDISING -- 0.0%
191 (a)La Rinascente S.P.A., Warrants 89
TELECOMMUNICATIONS -- 1.6%
9,400 STET-Societa Finanziaria Telefonica S.P.A. 39,933
14,410 Telecom Italia Mobile 33,887
Total 73,820
TOTAL ITALY 217,693
NETHERLANDS -- 8.1%
BANKING -- 1.1%
800 ABN-Amro Hldgs N.V. 51,824
BROADCASTING & PUBLISHING -- 2.3%
1,000 (a)Endemol Entertainment BV 34,043
1,300 VNU -- Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 26,538
343 Wolters Kluwer N.V. 44,857
Total 105,438
CHEMICALS -- 0.7%
260 Akzo Nobel N.V. 34,515
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
NETHERLANDS -- CONTINUED
CONSTRUCTION & HOUSING -- 0.7%
1,700 Boskalis Westminster $ 33,718
DIVERSIFIED INDUSTRIALS -- 0.9%
630 Hunter Douglas N.V. 41,213
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.9%
1,000 (a)ASM Lithography Holding N.V. 44,018
FINANCIAL SERVICES -- 1.0%
1,372 ING Groep, N.V. 48,059
MERCHANDISING -- 0.5%
550 Vendex International 23,891
TOTAL NETHERLANDS 382,676
NORWAY -- 1.0%
INSURANCE -- 0.4%
2,700 (a)Storebrand ASA 16,113
METALS -- 0.4%
1,000 Elkem A/S, Class A 15,581
TRANSPORTATION - SHIPPING -- 0.2%
575 Storli ASA, Class B 10,303
TOTAL NORWAY 41,997
RUSSIA -- 1.2%
ENERGY - OIL & GAS -- 0.4%
470 (b)Lukoil Oil Co., ADR 20,445
UTILITIES - ELECTRICAL & GAS -- 0.8%
200,000 (b)Irkutskenergo, RDC 24,800
420 (b)Mosenergo, ADR 12,180
Total 36,980
TOTAL RUSSIA 57,425
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SPAIN -- 5.0%
BANKING -- 1.0%
920 Banco Bilbao Vizcaya $ 46,518
CONSTRUCTION & HOUSING -- 0.4%
210 Fomento de Construcciones y Contratas SA 17,751
ENERGY SOURCES -- 0.4%
500 Repsol SA 18,508
INSURANCE -- 0.4%
360 Corporacion Mapfre SA 19,037
MACHINERY & ENGINEERING -- 0.4%
187 Zardoya-Otis SA 19,921
TELECOMMUNICATIONS -- 1.1%
2,300 Telefonica de Espana 50,425
UTILITIES - ELECTRICAL & GAS -- 1.3%
290 Empresa Nac De Electridad 19,589
3,700 Iberdrola SA 42,701
Total 62,290
TOTAL SPAIN 234,450
SWEDEN -- 2.4%
FOREST PRODUCTS & PAPER -- 0.5%
1,790 Stora Kopparbergs, Class A 24,522
HEALTH & PERSONAL CARE -- 0.7%
730 Astra AB, Class A 35,002
INSURANCE -- 0.6%
960 Skandia Forsakrings AB 27,375
METALS - STEEL -- 0.6%
2,700 Avesta Sheffield AB, Class 27,741
TOTAL SWEDEN 114,640
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SWITZERLAND -- 9.8%
BANKING -- 1.6%
690 CS Holding AG $ 73,446
CHEMICALS -- 0.8%
30 Ciba-Giegy AG 37,123
FOOD & HOUSEHOLD PRODUCTS -- 0.7%
31 Nestle SA 33,652
HEALTH & PERSONAL CARE -- 2.2%
9 Roche Holding AG 69,183
30 Sandoz AG 34,891
Total 104,074
INSURANCE -- 0.7%
121 Zurich Versicherungsgesellschaft 34,346
LEISURE & TOURISM -- 0.9%
20 Reiseburo Kuoni AG, Class B 44,496
MACHINERY & ENGINEERING -- 0.7%
27 ABB AG 33,784
MANUFACTURING -- 0.8%
65 Sulzer AG 37,399
MULTI-INDUSTRY -- 0.8%
367 (a)Oerlikon-Buhrle Holding AG 37,868
TRANSPORTATION - AIRLINES -- 0.6%
36 (a)Swissair AG 27,342
TOTAL SWITZERLAND 463,530
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- 34.3%
AEROSPACE & MILITARY TECHNOLOGY -- 0.8%
1,911 British Aerospace $ 37,180
BANKING -- 0.8%
2,228 Barclays PLC 38,322
BROADCASTING & PUBLISHING -- 3.5%
3,800 Carlton Communications PLC 32,135
8,300 Mirror Group PLC 32,095
4,800 Pearson 59,314
2,200 Reed International PLC 42,628
Total 166,172
BUILDING MATERIALS & COMPONENTS -- 0.5%
15,000 Rugby Group PLC 24,210
BUSINESS & PUBLIC SERVICES -- 2.0%
4,100 BAA 33,776
4,680 Chubb Security 26,988
3,400 Compass Group 34,669
Total 95,433
CHEMICALS -- 1.1%
1,826 BOC Group PLC 27,200
1,900 Imperial Chemical Industries, PLC 24,644
Total 51,844
CONSTRUCTION -- 0.7%
3,000 Berkeley Group PLC 30,741
ELECTRICAL & ELECTRONICS -- 1.1%
4,500 General Electric Co. PLC 28,182
5,500 Racal Electronics PLC 25,429
Total 53,611
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.7%
2,700 Premier Farnell PLC 32,320
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
ENERGY SOURCES -- 0.8%
3,228 British Petroleum Co. PLC $ 37,324
FOOD & HOUSEHOLD PRODUCTS -- 2.8%
4,250 Associated British Foods 31,546
3,269 Cadbury Schweppes PLC 28,112
5,973 Grand Metropolitan PLC 46,650
2,375 Reckitt & Colman PLC 27,991
Total 134,299
FOREST PRODUCTS & PAPER -- 1.3%
8,577 Bunzl PLC 32,012
5,500 David S. Smith (Holdings) PLC 29,174
Total 61,186
HEALTH & PERSONAL CARE -- 2.3%
2,100 Glaxo Wellcome PLC 34,538
2,463 Smithkline Beecham 33,966
1,400 Zeneca Group 38,601
Total 107,105
INDUSTRIAL COMPONENTS -- 0.8%
6,200 Delta PLC 37,890
INSURANCE -- 1.9%
2,500 General Accident 30,788
6,889 Guardian Royal Exchange 31,040
12,500 Sedgwick Group PLC 26,374
Total 88,202
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
LEISURE & TOURISM -- 1.3%
9,690 Ladbroke Group PLC $ 33,399
3,500 Rank Group PLC 25,597
Total 58,996
MANUFACTURING -- 2.5%
14,000 Cookson Group 53,194
8,600 FKI PLC 31,158
2,120 Siebe PLC 33,842
Total 118,194
MERCHANDISING -- 2.8%
10,000 Asda Group 19,923
2,900 Boots Co. PLC 30,911
4,000 Marks & Spencer PLC 34,028
3,000 Safeway PLC 19,670
4,000 Smith, W.H. Group PLC 28,447
Total 132,979
MISCELLANEOUS MATERIALS & COMMODITIES -- 1.5%
8,200 Caradon PLC 32,880
5,000 Morgan Crucible PLC 38,416
Total 71,296
MULTI-INDUSTRY -- 0.6%
6,300 Tomkins PLC 26,321
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
RECREATION, OTHER CONSUMER GOODS -- 0.8%
1,600 EMI Group PLC $ 36,960
TELECOMMUNICATIONS -- 0.6%
4,600 British Telecom PLC 29,117
TRANSPORTATION - SHIPPING -- 1.4%
4,800 Cowie Group PLC 31,957
3,375 Peninsular & Oriental Steam Navigation Co. 33,563
Total 65,520
UTILITIES - ELECTRICAL & GAS -- 1.1%
3,500 National Power Co. PLC 27,128
2,300 Powergen PLC 22,428
Total 49,556
WHOLESALE & INTERNATIONAL TRADE -- 0.6%
6,600 Inchcape PLC 29,904
TOTAL UNITED KINGDOM 1,614,682
TOTAL COMMON STOCKS (IDENTIFIED COST $3,954,983) 4,329,057
PREFERRED STOCKS -- 0.7%
GERMANY -- 0.7%
MACHINERY & ENGINEERING -- 0.7%
115 Gea AG, Vorzugsaktien (IDENTIFIED COST $37,442) 34,468
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT U.S. DOLLARS
<S> <C>
(C)REPURCHASE AGREEMENT -- 12.6%
$ 590,000 BT Securities Corporation, 5.72%, dated 11/29/1996, due
12/2/1996 (AT AMORTIZED COST) $ 590,000
TOTAL INVESTMENTS (IDENTIFIED COST $4,582,425)(D) $ 4,953,525
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1996, these securities
amounted to $114,413 which represents 2.4% of net assets.
(c) 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.
(d) The cost of investments for federal tax purposes amounts to $4,582,425.
The net unrealized appreciation of investments on a federal tax basis
amounts to $371,100 which is comprised of $408,858 appreciation and $37,758
depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($4,709,596) at November 30, 1996.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
PLC -- Public Limited Company
RDC -- Russian Depository Certificate
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 590,000
Investments in securities 4,363,525
Total investments in securities, at value (identified and tax cost $4,582,425) $ 4,953,525
Cash 4,433
Income receivable 12,277
Receivable for shares sold 106,280
Total assets 5,076,515
LIABILITIES:
Payable for investments purchased $ 337,569
Net payable for foreign exchange contracts 2,658
Payable for taxes withheld 821
Accrued expenses 25,871
Total liabilities 366,919
Net Assets for 399,688 shares outstanding $ 4,709,596
NET ASSETS CONSIST OF:
Paid in capital $ 4,117,751
Net unrealized appreciation of investments and translation of
assets and liabilities in foreign currency 370,916
Accumulated net realized gain on investments and foreign currency transactions 178,546
Undistributed net investment income 42,383
Total Net Assets $ 4,709,596
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($3,318,542 / 281,161 shares outstanding) $11.80
Offering Price Per Share (100/94.50 of $11.80)* $12.49
Redemption Proceeds Per Share $11.80
CLASS B SHARES:
Net Asset Value Per Share ($1,215,042 / 103,525 shares outstanding) $11.74
Offering Price Per Share $11.74
Redemption Proceeds Per Share (94.50/100 of $11.74)** $11.09
CLASS C SHARES:
Net Asset Value Per Share ($176,012 / 15,002 shares outstanding) $11.73
Offering Price Per Share $11.73
Redemption Proceeds Per Share (99.00/100 of $11.73)** $11.61
</TABLE>
* See "What Shares Cost" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1996(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $11,912) $ 75,779
Interest 12,362
Total income 88,141
EXPENSES:
Investment advisory fee $ 27,135
Administrative personnel and services fee 141,023
Custodian fees 26,861
Transfer and dividend disbursing agent fees and expenses 45,767
Legal fees 10,893
Portfolio accounting fees 62,674
Distribution services fee -- Class B Shares 2,527
Distribution services fee -- Class C Shares 194
Shareholder services fee -- Class A Shares 5,877
Shareholder services fee -- Class B Shares 842
Shareholder services fee -- Class C Shares 65
Share registration costs 8,310
Printing and postage 11,425
Insurance premiums 3,591
Miscellaneous 4,433
Total expenses 351,617
Waivers and reimbursements --
Waiver of investment advisory fee $ (27,135)
Reimbursement of other operating expenses (274,156)
Total waivers and reimbursements (301,291)
Net expenses 50,326
Net investment income 37,815
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain on investments and foreign currency transactions 183,114
Net change in unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 370,916
Net realized and unrealized gain on investments and foreign currency 554,030
Change in net assets resulting from operations $ 591,845
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 37,815
Net realized gain on investments and foreign currency transactions
($178,546 as computed for federal tax purposes) 183,114
Net change in unrealized appreciation (depreciation) of investments and
translation of assets and liabilities in foreign currency 370,916
Change in net assets resulting from operations 591,845
SHARE TRANSACTIONS --
Proceeds from sale of shares 8,968,714
Cost of shares redeemed (4,850,963)
Change in net assets resulting from share transactions 4,117,751
Change in net assets 4,709,596
NET ASSETS:
Beginning of period --
End of period (including undistributed net investment income of $42,383) $ 4,709,596
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.14
Net realized and unrealized gain (loss) on investments and foreign currency 1.66
Total from investment operations 1.80
NET ASSET VALUE, END OF PERIOD $ 11.80
TOTAL RETURN(B) 18.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.75%*
Net investment income 1.60%*
Expense waiver/reimbursement(c) 11.10%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,318
Average commission rate paid $0.0223
Portfolio turnover 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(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 EUROPEAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01
Net realized and unrealized gain (loss) on investments and foreign currency 1.73
Total from investment operations 1.74
NET ASSET VALUE, END OF PERIOD $ 11.74
TOTAL RETURN(B) 17.40%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.50%*
Net investment income 0.08%*
Expense waiver/reimbursement(c) 11.10%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,215
Average commission rate paid $0.0223
Portfolio turnover 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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 EUROPEAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01
Net realized and unrealized gain (loss) on investments and foreign currency 1.72
Total from investment operations 1.73
NET ASSET VALUE, END OF PERIOD $ 11.73
TOTAL RETURN(B) 17.30%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.50%*
Net investment income 0.09%*
Expense waiver/reimbursement(c) 11.06%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $176
Average commission rate paid $0.0223
Portfolio turnover 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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 EUROPEAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. 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 seven portfolios.
The financial statements included herein are only those of Federated
European Growth 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
of the Fund is to provide long-term growth of capital.
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 and domestic equity securities are valued
at the last sale price reported on a national securities exchange or
over-the-counter market. In the absence of recorded sales for equity
securities, they are all valued according to the mean between the last
closing bid and asked prices. Short-term foreign and domestic securities are
valued at the prices provided by an independent pricing service. However,
short-term foreign and domestic 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").
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)
ACCUMULATED
PAID-IN NET REALIZED UNDISTRIBUTED NET
CAPITAL GAIN INVESTMENT INCOME
-- $(4,568) $4,568
Net investment income, net realized gains, 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
exchange contracts as a way of managing foreign exchange rate risk. The Fund
may enter into these contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date as a hedge or cross-
hedge against either specific transactions or portfolio positions. The
objective of the Fund's foreign currency hedging transactions is to reduce
the risk that the U.S. dollar value of the Fund's foreign currency
denominated securities will decline in value due to changes in foreign
currency exchange rates. All foreign currency exchange contracts are
"marked-to-market" daily at the applicable translation rates resulting in
unrealized gains or losses. Realized gains or losses are recorded at the
time the foreign currency exchange contract is offset into a closing
transaction or by delivery or receipt of the currency. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
At November 30, 1996, the Fund had outstanding foreign exchange contracts as
set forth below:
<TABLE>
<CAPTION>
CONTRACTS TO IN EXCHANGE FOR CONTRACTS UNREALIZED
DELIVER/ CONTRACTS AT APPRECIATION
SETTLEMENT DATE RECEIVE PURCHASED VALUE (DEPRECIATION)
<S> <S> <C> <C> <C>
Contracts Purchased:
December 3, 1996 116,917 Deutsche Mark $ 76,919 $ 76,014 $ (905)
December 3, 1996 9,004,551 Spanish Peseta 70,348 69,512 (836)
December 31, 1996 486,785 French Franc 93,974 93,186 (788)
December 3, 1996 56,949 Pound Sterling 95,875 95,746 (129)
Net Unrealized Depreciation on Foreign Exchange Contracts $(2,658)
</TABLE>
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.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under securities laws or in transactions exempt
from such registration. In some cases, the issuer of restricted securities
has agreed to register such securities for resale, at the issuer's expense
either upon demand by the Fund or in connection with another registered
offering of the securities. Many restricted securities may be resold in the
secondary market in transactions exempt from registration. Such restricted
securities may be determined to be liquid under criteria established by the
Directors. The Fund will not incur any registration costs upon such resales.
The Fund's restricted securities are valued at the price provided by dealers
in the secondary market or, if no market prices are available, at the fair
value as determined by the Fund's pricing committee.
Additional information on each restricted security held at November 30, 1996
is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Inwear Group AS 11/22/96-11/25/96 $ 18,371
Irkutskenergo R.D.C. 10/10/96 22,400
Lukoil Oil Co., ADR 10/10/96 20,210
Mosenergo, ADR 10/10/96 12,810
Pliva D.D., GDR 3/20/96 6,549
Zagrebacka Banka, GDR 10/24/96 19,625
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, 1996, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 405,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 731,810 $ 7,658,479
Shares redeemed (450,649) (4,847,403)
Net change resulting from Class A Share transactions 281,161 $ 2,811,076
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(B)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 103,835 $ 1,140,538
Shares redeemed (310) (3,560)
Net change resulting from Class B Share transactions 103,525 $ 1,136,978
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(B)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 15,002 $ 169,697
Net change resulting from Class C Share transactions 15,002 $ 169,697
Net change resulting from share transactions 399,688 $ 4,117,751
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering)
to November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research 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.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement 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 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 Shares, Class B Shares, 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 A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the period
ended November 30, 1996, and has no present intention of paying or accruing
the distribution services fee.
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 for the period. The fee
paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts.
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.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $42,822 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five year period following the
effective date. For the period ended November 30, 1996, the Fund paid $2,379
pursuant to this agreement.
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, 1996, were as follows:
PURCHASES $ 5,698,261
SALES $ 1,939,523
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.
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 European Growth Fund (a
portfolio of World Investment Series, Inc.) as of November 30, 1996, and the
related statement of operations, the statement of changes in net assets, and
the 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, 1996, by correspondence with the
custodian and brokers. 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 present
fairly, in all material respects, the financial position of Federated
European Growth Fund of World Investment Series, Inc. at November 30, 1996,
and the results of its operations, the changes in its net assets, and the
financial highlights for the period then ended, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 17, 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
Gregor F. Meyer
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
J. Crilley Kelly
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 Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 981487861
Cusip 981487853
Cusip 981487846
G01979-01 (1/97)
Federated International
Small Company Fund
ANNUAL REPORT
NOVEMBER 30, 1996
ESTABLISHED 1996
INTERNATIONAL
PRESIDENT'S MESSAGE
[Graphic]
Dear Shareholder:
I am pleased to present the first Annual Report to Shareholders for
Federated International Small Company Fund. This report combines information
about the fund from February 28, 1996, the date of inception, through
November 30, 1996. This $36 million fund is invested in over 160 small-cap
corporations in over 30 countries on 3 continents. This broad
diversification is a hallmark of successful international investing.
The report begins with a commentary by the fund's portfolio manager, Tracy
Stouffer, Vice President of Federated Global Research Corp., which covers
international economic and market conditions and fund strategy. Following
her commentary is a complete list of the fund's investments and the
financial statements.
This fund is managed to bring shareholders significant long-term
opportunities from a well-researched portfolio of many small-company
international stocks.+ It is important to remember that the true measure of
this fund's performance is clearly in years rather than months. There will
be periods of short-term fluctuation, of negative as well as positive
returns. Since the fund's inception in February of 1996, we have enjoyed a
positive environment for small-cap stocks around the world.
As of November 30, 1996, Federated International Small Company Fund
delivered strong total returns of 22.60% for Class A Shares, 22.00% for
Class B Shares, and 21.90% for Class C Shares based on net asset value.*
These returns were due to an increase in the fund's share price.
Thank you for your confidence in Federated International Small Company Fund.
Please review this report and familiarize yourself with the fund's strategy
and holdings. We will continue to keep you up-to-date on the details of your
investment on a regular basis. We appreciate the fact that you have placed a
portion of your wealth with us.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1997
* Performance quoted represents past performance. 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 based on
offering price for Class A, B, and C Shares were 15.88%, 16.50%, and 20.90%,
respectively.
+ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards. Small cap stocks have historically experienced
greater volatility than average.
Investment Review
[Graphic]
Tracy Stouffer
Vice President
Federated Global
Research Corp.
[Graphic]
HOW WOULD YOU DESCRIBE THE MARKET FOR INTERNATIONAL SMALL COMPANY STOCKS
SINCE THE FUND BEGAN OPERATION AT THE END OF FEBRUARY 1996?
In general terms, the macroeconomic environment of benign inflation and
interest rates around the world provided a very positive backdrop for all
financial assets and small-cap issues in particular. The small-cap sector
has been very dynamic this year, but gains were more stock specific than
broad-based in nature. This was particularly evident in the second quarter
of the year when most of the gains for the period were captured. For the
balance of the year, the large-cap stocks, which were beneficiaries of
mergers and acquisitions and/or restructuring activities, were more in
demand.
1996 was an important year on the capital markets side for small stocks in
three ways. In Europe, the introduction of capital structures supportive of
small growth companies, including the Brussels-based EASDAQ and the NOUVEAU
MARCHE in France, was a very positive first step in providing financing
options previously unavailable to small companies.
Another successful financing model that became prevalent in Europe was for
large, diversified companies to spin off non-core units as separately listed
companies. This style of releasing value in these "hidden champions" is
likely to continue, creating new small-cap investing opportunities.
The reverse trend was evident in Asia, particularly in China-related "Red
Chip" companies, many of which are small-cap in size. Value was created via
low-multiple, high-growth asset injections from parent companies or
state-owned enterprises into listed vehicles. This proved to be a powerful
and shareholder friendly formula for stock appreciation.
[Graphic]
WHAT WERE YOUR INVESTMENT STRATEGIES DURING THE PERIOD FOR EACH OF THE
SPECIFIC REGIONS?
The International Small Company Fund focuses on stock specific opportunities
first rather than country/regional strategies. Throughout the period, the
fund was positioned to take advantage of several long-term investment themes
and trends in various regions, as well as some unique situations where we
found exceptional growth opportunities.
In the developed markets, some of the strong themes included Luxury Goods,
Leisure, Data Security and solving the "Year 2000" problem. Luxury Goods is
a play on the ongoing creation of wealth and polarization of incomes around
the world. Portfolio companies that performed well as a result of this
included BULGARI (Italy), BANG & OLUFSON (Denmark), and HARVEY NICHOLS
(U.K.). Leisure is a demographic play -- not just limited to the U.S. The
aging Baby Boomers are spending more time and money on recreation and
leisure activities. Fund holdings that benefited from this included FILA
(Italy), AIRTOURS (U.K.), and PEOPLE (Japan). Data Security concerns the
challenge of protecting data from outside corruption and is particularly
critical in both intranet and internet environments. Fund investments that
excelled as a result of this include those providing firewall, anti-virus,
access control and/or data retrieval software such as CHECKPOINT (Israel),
MEMCO (Israel), and NORMAN DATA DEFENSE (Norway).
The millennium, or "Year 2000," problem looms as a result of the way dates
are stored in most mainframe computers via the last 2 digits of the year.
The GARTNER GROUP has estimated it will cost $400 billion on a global basis
for companies to resolve the problem. Information Technology companies
around the world are benefiting as they are contracted to examine and modify
existing computer systems. Compounding the challenge, European companies
need to deal with the outgoing national currency and the introduction of the
new Euro during the transition period leading up to full monetary unity in
1999. Examples of portfolio investments that faired well as a result include
AXIME (France), SIMAC (Netherlands), and CMG (U.K.).
In the emerging markets, themes continue to be consumption-related including
such companies as WANT WANT HOLDINGS (Taiwan), CHIPITA (Greece), CINZANO
(Argentina) and infrastructure plays such as CEMENTO ITAU (Brazil) and
SEMAPA (Portugal).
There were a number of special situations that provided excellent return
opportunities: RAISION TEHTAAT, the Finnish producer of Benecol, the world's
first LDL-cholesterol lowering margarine; TELEPIZZA (Spain) the second
largest fast food company in Spain after McDonalds; and NORITSU KOKI
(Japan), the photofinishing equipment company that provides Advanced Photo
System (APS) compatible equipment to mini-photolabs around the world.
[Graphic]
WHAT IS YOUR CURRENT OUTLOOK FOR INTERNATIONAL SMALL COMPANY STOCKS, AND
WHAT IS YOUR STRATEGY FOR THE FUND AS WE ENTER 1997?
The prospects for international small stocks are very bright for 1997 and
beyond. The scope of the market is enormous. In dollar terms, there are
almost $2 trillion of stocks under $1 billion in market cap in developed
countries alone outside the U.S. This number should grow as capital markets,
most notably in Europe and Japan, relax listing requirements taking their
lead from NASDAQ.
Throughout 1996, we consistently found more interesting opportunities in the
European and Latin American markets than in the markets of the Asia Pacific
region, with the exception of Hong Kong. It is anticipated, however, that as
the Asia Pacific economies rebound cyclically, more interesting investment
opportunities will emerge, particularly leading up to the return of Hong
Kong to China in July 1997.
Small-cap companies could continue to be beneficiaries of ongoing trends in
the developed world such as outsourcing, where foreign companies trail the
U.S. The large-cap companies look to small companies as providers of
specialized, cost-effective goods and services. We will continue to seek out
very strong growth companies that boast high growth rates, strong
management, generate free cash flow and strong market share positions.
[Graphic]
HOW DID FEDERATED INTERNATIONAL SMALL COMPANY FUND PERFORM DURING THE PERIOD
COMPARED TO THE OVERALL INTERNATIONAL SMALL-COMPANY MARKET?
In the 9-month period since the fund began operation on February 28, 1996,
it has delivered very strong total returns. Total returns based on net asset
value were: Class A Shares, 22.60%; Class B Shares, 22.00%; and Class C
Shares, 21.90%.* By comparison, the international small-company market, as
measured by the FT-Actuaries/S&P World Medium-Small Capital Index
(ex-U.S.)** achieved a total return of 3.82%.
* Performance quoted represents past performance. 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 based on
offering price for Class A, B, and C Shares were 15.88%, 16.50%, and 20.90%,
respectively.
** The FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.) is an
unmanaged, market cap-weighted index of 1,092 companies from 25 countries.
Investments may not be made in an index. [Graphic]
WHAT COUNTRIES WERE REPRESENTED IN THE PORTFOLIO AS OF NOVEMBER 30, 1996?
The portfolio was extremely well diversified across the following 32
countries. The issues selected in the fund have a market capital of $370
million on average. The percent of the fund's assets in each individual
holding is less than 1%.
<TABLE>
<CAPTION>
PERCENTAGE
COUNTRY OF NET ASSETS
<S> <C>
United Kingdom (U.K.) 7.83
Sweden 7.71
Malaysia 7.52
Hong Kong 7.01
Australia 6.56
France 6.35
Netherlands 5.44
Singapore 5.43
Norway 5.12
Brazil 4.72
Germany 3.40
Finland 3.06
Denmark 3.04
Israel 2.87
Spain 2.86
Poland 2.69
Japan 1.98
Greece 1.92
Canada 1.83
Argentina 1.55
Croatia 1.36
Ireland 1.33
Belgium 1.32
Italy 1.08
Mexico 0.95
Thailand 0.89
Portugal 0.86
New Zealand 0.84
Taiwan 0.61
Egypt 0.47
Philippines 0.43
Hungary 0.41
</TABLE>
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 INTERNATIONAL EQUITY 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
Employ highly qualified, experienced managers in global investing. Employ
experts to select countries and companies outside the U.S. for long-term
growth potential.
Call your investment representative to buy shares of 7 international equity
funds and 2 international income funds from Federated Investors.
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.
International investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
FEDERATED INTERNATIONAL SMALL COMPANY FUND (CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Small Company Fund (Class A Shares) (the "Fund")
from February 28, 1996 (start of performance) to November 30, 1996, compared
to the FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.)
(FTSPWMSC).+
"Graphic representation "P" 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 5.50% ($10,000 investment minus $550
sales charge = $9,450). The Fund's performance assumes the reinvestment of
all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The FTSPWMSC is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. The
FTSPWMSC has been adjusted to reflect reinvestment of dividends on
securities in the index. The index is unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND (CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Small Company Fund (Class B Shares) (the "Fund")
from February 28, 1996 (start of performance) to November 30, 1996, compared
to the FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.)
(FTSPWMSC).+
"Graphic representation "Q" 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 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.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The FTSPWMSC is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. The
FTSPWMSC has been adjusted to reflect investment of dividends on securities
in the index. The index is unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND (CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International Small Company Fund (Class C Shares) (the "Fund")
from February 28, 1996 (start of performance) to November 30, 1996, compared
to the FT-Actuaries/S&P World Medium-Small Capital Index (ex-U.S.)
(FTSPWMSC).+
"Graphic representation "R" 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 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.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The FTSPWMSC is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the fund's performance. The
FTSPWMSC has been adjusted to reflect investment of dividends on securities
in the index. The index is unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- 95.9%
ARGENTINA -- 1.5%
FOOD & BEVERAGE -- 0.2%
50,000 Cinba $ 83,033
MERCHANDISING -- 0.3%
14,000 Importadora y Exportadora 117,647
METALS - STEEL -- 0.5%
65,000 (a)Siderar S.A., Class A 177,521
UTILITIES - ELECTRICAL & GAS -- 0.5%
96,000 Astra Cia Argentina De Petro 178,631
TOTAL ARGENTINA 556,832
AUSTRALIA -- 6.6%
BROADCASTING & PUBLISHING -- 0.6%
88,000 (a)Beyond International Ltd. 215,595
ENERGY - OIL & GAS -- 0.7%
271,000 Command Petroleum Ltd. 242,634
FINANCIAL SERVICES -- 1.8%
66,000 (a)Orogen Minerals Ltd. 141,283
10,000 (a)Orogen Minerals Ltd., GDR 201,300
165,000 Tyndall Australia Ltd. 288,743
Total 631,326
HEALTH & PERSONAL CARE -- 0.7%
177,000 Sonic Healthcare Ltd. 244,913
LEISURE & TOURISM -- 1.0%
55,000 Aristocrat Leisure Ltd. 155,787
274,000 (a)Cinema Plus Ltd. 223,018
Total 378,805
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
AUSTRALIA -- CONTINUED
MINING -- 0.4%
400,000 (a)Buka Minerals Ltd. $ 146,508
REAL ESTATE -- 0.6%
250,000 Darling Park Trust 203,484
TEXTILES & APPAREL -- 0.5%
227,000 (a)Colly Cotton Ltd. 188,458
UTILITIES - ELECTRICAL & GAS -- 0.3%
59,000 Novus Petroleum Ltd. 112,852
TOTAL AUSTRALIA 2,364,575
BELGIUM -- 1.4%
BUSINESS & PUBLIC SERVICES -- 0.8%
13,800 (a)Lernout and Hauspie Speech Products N.V. 272,550
TELECOMMUNICATIONS -- 0.6%
4,550 (a)Telinfo S.A. 202,446
TOTAL BELGIUM 474,996
BRAZIL -- 2.4%
BROADCASTING & PUBLISHING -- 0.5%
13,000 (a)TV Filme, Inc. 178,750
RETAIL -- 0.8%
30,300 (a)Bompreco Supermercados Do Nordeste 278,654
TELECOMMUNICATIONS -- 0.6%
278,000 (a)Cia Riograndense De Telecomunicacoes 203,454
TEXTILES & APPAREL -- 0.0%
115,000,000 (a)Texpar S.A. 1,113
UTILITIES - ELECTRICAL & GAS -- 0.5%
156,000,000 Cia Forca Luz Cataguazes Leo 178,199
TOTAL BRAZIL 840,170
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
CANADA -- 1.8%
BUSINESS & PUBLIC SERVICES -- 0.8%
32,000 Ontario Stores Inc $ 308,468
DATA PROCESSING & REPRODUCTION -- 0.6%
7,000 (a)Hummingbird Communications Ltd. 221,375
PHARMACEUTICALS -- 0.4%
6,700 (a)QLT Phototherapeutics 130,165
TOTAL CANADA 660,008
CROATIA -- 1.3%
BANKING -- 0.7%
13,100 (a)(b)Zagrebacka Banka, GDR 257,088
HEALTH & PERSONAL CARE -- 0.6%
4,800 (a)(b)Pliva D.D., GDR 232,800
TOTAL CROATIA 489,888
DENMARK -- 3.0%
BROADCASTING & PUBLISHING -- 0.8%
1,400 Sondagsavisen 273,192
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.7%
6,600 Bang & Olufsen Hlg, Class B 268,780
TEXTILES & APPAREL -- 1.5%
6,000 (a)Carli Gry International AS 302,377
5,550 (a)(b)Inwear Group AS 251,447
Total 553,824
TOTAL DENMARK 1,095,796
EGYPT -- 0.5%
BUILDING MATERIALS & COMPONENTS -- 0.5%
10,500 (a)(b)Suez Cement Co., GDR 168,525
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
FINLAND -- 3.1%
BUSINESS & PUBLIC SERVICES -- 0.9%
4,200 TT Tieto OY, Class B $ 324,576
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.7%
20,000 Suunto OY 250,405
PRODUCER MANUFACTURING -- 0.8%
6,500 Huhtamaki Oy, Class I 280,626
UNASSIGNED -- 0.7%
6,900 Instrumentarium Group, Class B 245,764
TOTAL FINLAND 1,101,371
FRANCE -- 6.4%
BROADCASTING & PUBLISHING -- 0.6%
3,300 Dauphin O.T.A. 208,469
COMMERCIAL SERVICES -- 0.5%
950 Penauille Polyservices 176,404
DATA PROCESSING & REPRODUCTION -- 0.6%
1,700 (a)Axime (Ex Segin) 203,396
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.5%
1,500 CIPE France S.A. 176,021
FINANCIAL SERVICES -- 0.4%
1,520 Union Financiere de France Banque S.A. 161,492
FOOD PROCESSING -- 0.6%
1,120 LDC S.A. 203,469
INSURANCE -- 1.1%
3,350 Union Des Assurances Federal 413,636
MACHINERY & ENGINEERING -- 0.4%
775 (a)Gebo Industries 129,073
MANUFACTURING -- 0.5%
1,300 GFI Industries S.A. 188,885
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
FRANCE -- CONTINUED
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.4%
2,600 Europeenne D'Extincteurs 156,285
PHARMACEUTICALS -- 0.2%
3,700 (a)Genset 63,363
TELECOMMUNICATIONS -- 0.4%
470 Altran Technologies S.A. 151,964
UTILITIES - ELECTRICAL & GAS -- 0.2%
240 Elf Gabon 56,281
TOTAL FRANCE 2,288,738
FEDERAL REPUBLIC OF GERMANY -- 2.6%
APPLIANCES & HOUSEHOLD DURABLES -- 0.4%
2,180 Moebel Walther AG 140,316
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.7%
18,500 (a)Rofin-Sinar Technologies, Inc. 238,188
FINANCIAL SERVICES -- 0.0%
5 Marschollek, Lautenschlaeger und Partner AG, Rights 4
MACHINERY & ENGINEERING -- 0.4%
9,000 Pfeiffer Vacuum Technology AG, ADR 153,000
MISCELLANEOUS MATERIALS & COMMODITIES -- 1.1%
15,300 Turbon International AG 399,386
TOTAL FEDERAL REPUBLIC OF GERMANY 930,894
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
GREECE -- 1.9%
BUILDING MATERIALS & COMPONENTS -- 0.5%
3,500 Titan Cement Co. $ 192,363
FOOD & HOUSEHOLD PRODUCTS -- 0.7%
11,000 Chipita International 255,465
TRANSPORTATION - SHIPPING -- 0.7%
35,800 Attica Enterprises S.A. 242,622
TOTAL GREECE 690,450
HONG KONG -- 7.0%
BANKING -- 0.6%
455,000 FPB Bank Holding Co. Ltd. 204,491
FINANCIAL SERVICES -- 1.4%
648,000 Aeon Credit Service 217,899
130,000 JCG Holdings Ltd. 123,577
105,000 Peregrine Investment 194,193
Total 535,669
FOOD & HOUSEHOLD PRODUCTS -- 0.2%
82,000 Guangnan Holdings 64,692
HEALTH & PERSONAL CARE -- 0.8%
90,000 (a)(b)Shanghai Industrial Holdings Ltd. 292,744
HOTELS -- 0.9%
946,000 Regal Hotels International 311,989
REAL ESTATE -- 2.3%
51,000 (a)(b)China Resources Bejing Land 31,661
214,000 China Resources Enterprises Ltd. 307,217
223,200 HKR International Ltd. 330,528
96,000 (a)Winsor Property Holdings Ltd. 144,646
Total 814,052
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
HONG KONG -- CONTINUED
TRANSPORTATION - SHIPPING -- 0.8%
153,000 Hong Kong Ferry Hd $ 302,755
TOTAL HONG KONG 2,526,392
HUNGARY -- 0.4%
PHARMACEUTICALS -- 0.4%
2,700 Gedeon Richter Rights 147,801
IRELAND -- 1.3%
DATA PROCESSING & REPRODUCTION -- 1.3%
4,000 (a)CBT Group PLC, ADR 230,000
6,000 (a)Saville Systems Ireland PLC, ADR 249,750
TOTAL IRELAND 479,750
ISRAEL -- 2.9%
DATA PROCESSING & REPRODUCTION -- 0.6%
11,000 (a)Memco Software, LTD 210,375
FOOD & HOUSEHOLD PRODUCTS -- 1.0%
27,400 Blue Square Chain Stores Properties & Investments 211,532
10,000 (a)Blue Square Chain Stores Properties & Investments, ADR 141,250
Total 352,782
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.4%
10,000 (a)Zag Industries LTD, ADR 161,250
PHARMACEUTICALS -- 0.9%
41,000 Agis Industries 311,369
TOTAL ISRAEL 1,035,776
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
ITALY -- 1.1%
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.7%
31,000 (a)Zucchini SPA $ 258,478
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.4%
7,000 Bulgari SPA 129,523
TOTAL ITALY 388,001
JAPAN -- 1.9%
BROADCASTING & PUBLISHING -- 0.6%
1,800 Asahi Broadcasting Corp. 197,542
BUILDING MATERIALS & COMPONENTS -- 0.1%
3,000 Kondotec, Inc. 35,294
DATA PROCESSING & REPRODUCTION -- 0.5%
3,000 (a)Imagineer Co. Ltd. 187,006
ELECTRICAL & ELECTRONICS -- 0.0%
1,000 Canon Copyer Sales Co 10,448
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.2%
4,000 Canare Electric Co. Ltd. 84,284
FOOD & HOUSEHOLD PRODUCTS -- 0.5%
4,300 Hokuto Corp. 180,457
MERCHANDISING -- 0.0%
300 Iuchi Seiedo Co. Ltd. 10,931
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.0%
200 King Jim 4,232
TEXTILES & APPAREL -- 0.0%
100 Maruko Co Ltd. 3,556
TOTAL JAPAN 713,750
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
MALAYSIA -- 7.5%
AUTOMOBILE -- 1.4%
67,000 Hirotako Holdings Berhad $ 296,953
88,000 MBM Resources Berhad 210,685
Total 507,638
BANKING -- 0.9%
116,000 Southern Bank BHD 325,920
BROADCASTING & PUBLISHING -- 0.7%
65,000 Nanyang Press BHD 240,503
BUILDING MATERIALS & COMPONENTS -- 0.7%
38,000 ACP Industries 264,662
FINANCIAL SERVICES -- 2.4%
50,000 Arab Malaysian Finance Berhad 314,602
118,000 Malaysian Industrial Development BHD 242,818
162,000 United Merchant Group BHD 288,484
Total 845,904
MERCHANDISING -- 0.4%
36,666 Kentucky Fried Chicken Berhad 162,509
7,333 Kentucky Fried Chicken Berhad, Warrants 8,938
Total 171,447
REAL ESTATE -- 1.0%
75,000 Eastern and Oriental Berhad 163,237
171,000 Selangor Properties BHD 189,474
Total 352,711
TOTAL MALAYSIA 2,708,785
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
MEXICO -- 1.0%
DATA PROCESSING & REPRODUCTION -- 0.5%
9,500 (a)(b)Acer, Inc., ADR $ 171,000
UTILITIES - ELECTRICAL & GAS -- 0.5%
22,000 (a)Grupo Elektra 169,874
TOTAL MEXICO 340,874
NETHERLANDS -- 5.4%
BUILDING MATERIALS & COMPONENTS -- 1.1%
4,300 Ballast Nedam NV 206,733
2,200 Volker Stevin 199,037
Total 405,770
DATA PROCESSING & REPRODUCTION -- 0.5%
3,850 (a)Ordina Beheer NV 178,623
ELECTRICAL & ELECTRONICS -- 0.7%
5,300 Simac Techniek 261,573
FOOD & HOUSEHOLD PRODUCTS -- 1.3%
4,000 De Boer Winkelbedrijven NV 271,414
2,300 Van Melle NV 197,413
Total 468,827
LEISURE & TOURISM -- 0.7%
7,800 (a)Entertainment BV 265,534
TRANSPORTATION - SHIPPING -- 1.1%
4,200 Koninklijke Frans Maas Groep NV 170,017
4,800 Van Ommeren (Kon) 208,780
Total 378,797
TOTAL NETHERLANDS 1,959,124
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
NEW ZEALAND -- 0.8%
FOOD PROCESSING -- 0.8%
340,000 Wrightson Ltd. $ 302,276
NORWAY -- 5.1%
DATA PROCESSING & REPRODUCTION -- 0.8%
38,000 Ark ASA 275,319
ELECTRICAL & ELECTRONICS -- 0.8%
29,000 (a)Sensonor ASA 277,890
MACHINERY & ENGINEERING -- 0.3%
5,000 Kverneland AS 127,766
MANUFACTURING -- 0.6%
15,700 Tomra Systems ASA 232,393
PRINTING & PUBLISHING -- 0.8%
16,000 Schibsted A/S 291,680
TECHNOLOGY SERVICES -- 1.1%
20,500 Norman Data Defense 386,491
TELECOMMUNICATIONS -- 0.7%
6,200 Nera AS 254,067
TOTAL NORWAY 1,845,606
PERU -- 0.0%
BUILDING MATERIALS & COMPONENTS -- 0.0%
1 Cementos Norte Pacasmayo 1
WHOLESALE & INTERNATIONAL TRADE -- 0.0%
1 Enrique Ferreyros S.A. 1
TOTAL PERU 2
PHILIPPINES -- 0.4%
BEVERAGE & TOBACCO -- 0.4%
75,000 La Tondena Distillers, Inc. 155,501
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
POLAND -- 2.6%
DATA PROCESSING & REPRODUCTION -- 0.5%
8,700 (a)ComputerLand Poland S.A. $ 169,314
FINANCIAL SERVICES -- 0.5%
136,000 Bank Inicjatyw Gospodarczych 185,988
FOOD & HOUSEHOLD PRODUCTS -- 0.6%
180,000 (a)Sokolow 201,978
FOOD PROCESSING -- 0.5%
6,200 Agros Holding S.A. 150,011
2,588 Zaklady Przemyslu Cukierniczego Jutrzenka S.A. 50,820
Total 200,831
PHARMACEUTICALS -- 0.1%
2,000 (a)Kutnowskie Zaklady Farmaceutyczne Polfa S.A. 54,001
WHOLESALE & INTERNATIONAL TRADE -- 0.4%
17,100 Elektrim Spolka Akcyina S.A. 155,902
TOTAL POLAND 968,014
PORTUGAL -- 0.8%
BUILDING MATERIALS & COMPONENTS -- 0.8%
20,000 Semapa-Sociedade de Investimento E Gestao 309,079
SINGAPORE -- 5.4%
ELECTRONIC COMPONENTS, INSTRUMENTS -- 1.4%
73,000 Elec & Eltek International Co. Ltd. 252,580
300,000 Thakral Corp. Ltd. 249,000
Total 501,580
FINANCIAL SERVICES -- 0.7%
200,000 Keppel Finance Ltd. 243,850
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.8%
459,000 Roly International Holdings 302,940
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
SINGAPORE -- CONTINUED
MULTI-INDUSTRY -- 0.5%
75,000 Genting International PLC $ 183,750
REAL ESTATE -- 0.5%
113,000 Hotel Properties Ltd. 186,923
TELECOMMUNICATIONS -- 0.8%
205,000 Datacraft Asia Ltd. 287,000
TRANSPORTATION - ROAD & RAIL -- 0.7%
290,000 Comfort Group Ltd. 250,196
TOTAL SINGAPORE 1,956,239
SPAIN -- 2.8%
CONSTRUCTION & HOUSING -- 1.7%
6,500 (a)ABENGOA S.A. 225,548
5,000 Cubiertas Y Mzov 397,175
Total 622,723
FOOD PROCESSING -- 1.1%
16,800 (a)Tele Pizza S.A. 408,522
TOTAL SPAIN 1,031,245
SWEDEN -- 7.7%
BUSINESS & PUBLIC SERVICES -- 0.7%
2,900 WM-Data AB 242,689
DATA PROCESSING & REPRODUCTION -- 2.4%
17,400 Caran AB, Class B 181,369
17,400 Caran AB, Rights 18,137
12,000 Intentia International AB 189,410
27,000 Maldata AB, Class B 327,670
1,750 (a)Scala International AB 153,747
Total 870,333
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
SWEDEN -- CONTINUED
ELECTRONIC COMPONENTS, INSTRUMENTS -- 1.8%
14,000 Allgon AB, Class B $ 336,679
18,320 (a)Frontec AB, Class B 332,813
Total 669,492
HEALTH TECHNOLOGY -- 1.1%
25,000 (a)Biacore International AB 397,396
REAL ESTATE -- 0.9%
21,800 (a)Fastighets AB Tornet 308,386
TRANSPORTATION - SHIPPING -- 0.8%
145,000 (a)Argonaut AB, Class B 291,485
TOTAL SWEDEN 2,779,781
TAIWAN, PROVINCE OF CHINA -- 0.6%
TELECOMMUNICATIONS -- 0.6%
13,000 (a)ASE Test Limited 221,000
THAILAND -- 0.9%
AUTOMOBILE -- 0.4%
29,600 Thai Rung Union 157,616
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.5%
30,100 Hana Microelectronics Co., Ltd. 161,457
TOTAL THAILAND 319,073
UNITED KINGDOM -- 7.8%
BROADCASTING & PUBLISHING -- 0.9%
58,000 Atlantic Telecom Group PLC 119,939
13,000 (a)Getty Communications PLC, Class A, ADR 203,125
Total 323,064
BUSINESS & PUBLIC SERVICES -- 0.7%
52,100 CRT Group PLC 240,879
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
DATA PROCESSING & REPRODUCTION -- 1.2%
20,000 CMG PLC $ 286,651
21,000 JBA Holdings PLC 165,938
Total 452,589
ELECTRICAL & ELECTRONICS -- 0.6%
60,000 Pressac Holdings PLC 211,836
ELECTRONIC COMPONENTS, INSTRUMENTS -- 1.0%
25,400 (a)Eidos PLC 358,709
ENGINEERING -- 0.6%
60,000 Ashtead Group PLC 215,367
LEISURE & TOURISM -- 0.5%
15,600 Airtours PLC 175,985
MERCHANDISING -- 0.8%
50,200 Flying Flowers Ltd. 151,917
21,400 (b)Harvey Nichols 127,364
Total 279,281
TELECOMMUNICATIONS -- 0.7%
68,000 (a)(b)Pace Micro Technology PLC 270,948
TRANSPORTATION - ROAD & RAIL -- 0.2%
20,000 FirstBus PLC 65,064
1,000 (a)Stagecoach Holdings PLC, Rights 10,609
Total 75,673
WHOLESALE & INTERNATIONAL TRADE -- 0.6%
52,000 Christies International PLC 218,561
TOTAL UNITED KINGDOM 2,822,892
TOTAL COMMON STOCKS (IDENTIFIED COST $ 32,033,712) 34,673,204
FEDERATED INTERNATIONAL SMALL COMPANY FUND
</TABLE>
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C>
BRAZIL -- 2.4%
BUILDING MATERIALS & COMPONENTS -- 0.6%
800,000 Cim Port Itau $ 228,460
MANUFACTURING -- 0.6%
27,000 Cofap-Cia Fab Peca, Preference 220,862
METALS - STEEL -- 0.8%
318,000 Sider Paulista 289,370
TEXTILES & APPAREL -- 0.3%
37,000 Confeccoes Guararapes S.A., Pfd. 121,781
TOTAL BRAZIL 860,473
FEDERAL REPUBLIC OF GERMANY, -- 0.8%
FINANCIAL SERVICES -- 0.8%
2,106 Marschollek, Lautenschlaeger und Partner AG 293,013
TOTAL PREFERRED STOCKS (IDENTIFIED COST $ 1,063,865) 1,153,486
TOTAL INVESTMENTS (IDENTIFIED COST $33,097,577)(C) $ 35,826,690
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1996, these securities
amounted to $1,803,577 which represents 4.99% of net assets.
(c) The cost of investments for federal tax purposes amounts to $33,097,577.
The net unrealized appreciation of investments on a federal tax basis
amounts to $2,729,113 which is comprised of $3,136,326 appreciation and
$407,213 depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($36,159,626) at November 30, 1996.
The following acronyms are used throughout this portfolio:
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $33,097,577) $ 35,826,690
Income receivable 6,923
Receivable for investments sold 1,957,100
Receivable for shares sold 1,102,437
Total assets 38,893,150
LIABILITIES:
Payable for investments purchased $ 2,498,285
Payable for shares redeemed 28,533
Payable to bank 110,274
Payable for taxes withheld 1,483
Net payable for foreign exchange contracts 4,397
Accrued expenses 90,552
Total liabilities 2,733,524
Net Assets for 2,957,633 shares outstanding $ 36,159,626
NET ASSETS CONSIST OF:
Paid in capital $ 33,442,310
Net unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 2,717,316
Total Net Assets $ 36,159,626
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($16,398,543 / 1,337,440 shares outstanding) $12.26
Offering Price Per Share (100/94.50 of $12.26)* $12.97
Redemption Proceeds Per Share $12.26
CLASS B SHARES:
Net Asset Value Per Share ($16,721,349 / 1,370,872 shares outstanding) $12.20
Offering Price Per Share $12.20
Redemption Proceeds Per Share (94.50/100 of $12.20)** $11.53
CLASS C SHARES:
Net Asset Value Per Share ($3,039,734 / 249,321 shares outstanding) $12.19
Offering Price Per Share $12.19
Redemption Proceeds Per Share (99.00/100 of $12.19)** $12.07
</TABLE>
* See "How to Purchase Shares" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1996(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $10,259) $ 92,732
Interest 48,463
Total income 141,195
EXPENSES:
Investment advisory fee $ 131,036
Administrative personnel and services fee 141,022
Custodian fees 96,183
Transfer and dividend disbursing agent fees and expenses 53,629
Legal fees 11,147
Portfolio accounting fees 63,031
Distribution services fee -- Class B Shares 26,092
Distribution services fee -- Class C Shares 5,372
Shareholder services fee -- Class A Shares 15,718
Shareholder services fee -- Class B Shares 8,698
Shareholder services fee -- Class C Shares 1,791
Share registration costs 21,562
Printing and postage 9,680
Insurance premiums 3,677
Taxes 17
Miscellaneous 4,496
Total expenses 593,151
Waivers and reimbursements --
Waiver of investment advisory fee $ (131,036)
Reimbursement of other operating expenses (223,677)
Total waivers and reimbursements (354,713)
Net expenses 238,438
Net operating loss (97,243)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on investments and foreign currency transactions (92,852)
Net change in unrealized appreciation of investments and translation of
assets and liabilities in foreign currency 2,717,316
Net realized and unrealized gain on investments and foreign currency 2,624,464
Change in net assets resulting from operations $ 2,527,221
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net operating loss $ (97,243)
Net realized loss on investments and foreign currency transactions
($30,327 as computed for federal tax purposes) (92,852)
Net change in unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 2,717,316
Change in net assets resulting from operations 2,527,221
SHARE TRANSACTIONS --
Proceeds from sale of shares 44,965,507
Cost of shares redeemed (11,333,102)
Change in net assets resulting from share transactions 33,632,405
Change in net assets 36,159,626
NET ASSETS:
Beginning of period --
End of period $ 36,159,626
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.02)
Net realized and unrealized gain on investments and foreign currency 2.28
Total from investment operations 2.26
NET ASSET VALUE, END OF PERIOD $12.26
TOTAL RETURN(B) 22.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.97%*
Net operating loss (0.48%)*
Expense waiver/reimbursement(c) 3.38%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $16,399
Average commission rate paid $0.0006
Portfolio turnover 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.04)
Net realized and unrealized gain on investments and foreign currency 2.24
Total from investment operations 2.20
NET ASSET VALUE, END OF PERIOD $12.20
TOTAL RETURN(B) 22.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.72%*
Net operating loss (1.61%)*
Expense waiver/reimbursement(c) 3.38%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $16,721
Average commission rate paid $0.0006
Portfolio turnover 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.05)
Net realized and unrealized gain on investments and foreign currency 2.24
Total from investment operations 2.19
NET ASSET VALUE, END OF PERIOD $12.19
TOTAL RETURN(B) 21.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.72%*
Net operating loss (1.58%)*
Expense waiver/reimbursement(c) 3.38%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,040
Average commission rate paid $0.0006
Portfolio turnover 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. 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 seven portfolios.
The financial statements included herein are only those of Federated
International Small Company 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 of the Fund is to provide long-term growth of capital.
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. Short-term securities are valued at the
prices provided by an independent pricing service. However, short-term
foreign and domestic 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.
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 and net operating losses. The following
reclassifications have been made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
<S>
ACCUMULATED ACCUMULATED
NET REALIZED DISTRIBUTIONS IN EXCESS OF
PAID-IN CAPITAL GAIN/LOSS NET INVESTMENT INCOME
<C> <C> <C>
$(190,095) $92,852 $97,243
</TABLE>
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 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. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Fund's
securities against currency fluctuations. Risks may arise upon entering
these transactions from the potential inability of counter-parts 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, 1996, the Fund had outstanding foreign currency commitments
as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
PURCHASED DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <S> <C> <C> <C> <C>
Australian Dollar 12/02/96 101,625 $ 82,621 $ 82,716 $ 95
Canadian Dollar 12/05/96 416,000 309,064 308,468 (596)
British Pound 12/04/96 4,946 8,328 8,315 (13)
Malaysian Ringgit 12/02/96 --
12/03/96 866,208 344,387 342,781 (1,606)
Swedish Krona 12/03/96 2,668,750 399,454 397,396 (2,058)
CONTRACTS
SOLD
Canadian Dollar 12/02/96 172,577 $ 127,750 $ 127,968 $ (218)
Finnish Markka 12/02/96 549,479 118,935 118,614 321
French Franc 12/31/96 787,332 150,398 150,720 (322)
Total unrealized
depreciation $(4,397)
</TABLE>
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.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee.
Additional information on each restricted security held at November 30, 1996
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <S> <C>
Zagrebacka Banka, GDR 9/20/96 -- 8/23/96 $211,288
Pliva D.D., GDR 3/29/96 -- 11/18/96 249,188
Inwear Group AS 11/22/96 -- 11/25/96 226,579
Suez Cement Co., ADR 11/25/96 154,875
Shanghai Industrial Holdings Ltd. 11/25/96 -- 5/23/96 185,323
China Resources Bejing Land 11/5/96 15,724
Acer, Inc., ADR 9/13/96 -- 7/19/96 146,490
Harvey Nichols 8/6/96 -- 4/22/96 94,414
Pace Micro Technology PLC 10/24/96 -- 6/20/96 224,196
</TABLE>
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1996, par value shares ($ 0.001 per share) authorized were
as follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 405,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 2,313,613 $ 25,684,395
Shares redeemed (976,173) (10,868,944)
Net change resulting from Class A Share transactions 1,337,440 $ 14,815,451
<CAPTION>
NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 1,398,394 $ 16,261,633
Shares redeemed (27,522) (323,940)
Net change resulting from Class B Share transactions 1,370,872 $ 15,937,693
<CAPTION>
NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 261,457 $ 3,019,479
Shares redeemed (12,136) (140,218)
Net change resulting from Class C Share transactions 249,321 $ 2,879,261
Net change resulting from Fund share transactions 2,957,633 $ 33,632,405
</TABLE>
(a) For the period from February 28, 1996 (date of intial public investment)
to Novmeber 30, 1996.
(b) For the period from February 28, 1996 (date of intial public offering)
to November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.25% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its fee
and/or reimburse certain operating expenses of the Fund. The Adviser can
modify or terminate this voluntary waiver and/or reimbursement 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 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.
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
Class A Shares did not incur a Distribution services fee for the period
ended November 30, 1996, and has no present intention of paying or accruing
the Distribution services fee.
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 for the period. The fee
paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts.
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.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $47,932 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five-year period following effective
date. For the period ended November 30, 1996, the Fund paid $2,668 pursuant
to this agreement.
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, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 55,399,300
SALES $ 22,465,291
</TABLE>
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.
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Directors of 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 Small
Company Fund (a portfolio of World Investment Series, Inc.) as of November
30, 1996, the related statement of operations, the statement of changes in
net assets, and the 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 the
securities owned as of November 30, 1996, by correspondence with the
custodian and brokers. 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 Small Company Fund of World Investment Series, Inc.
at November 30, 1996, and the results of its operations, the changes in its
net assets, and the financial highlights for the period then ended, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 17, 1997
<TABLE>
DIRECTORS OFFICERS
<S> <S>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Richard B. Fisher Edward C. Gonzales
Edward L. Flaherty, Jr. Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President, Treasurer,
John E. Murray, Jr. and Secretary
Wesley W. Posvar J. Crilley Kelly
Marjorie P. Smuts Assistant Secretary
</TABLE>
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 Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 981487838
Cusip 981487820
Cusip 981487812
G01968-01 (1/97)
Federated
Latin American
Growth Fund
ANNUAL REPORT
NOVEMBER 30, 1996
ESTABLISHED 1996
GROWTH
PRESIDENT'S MESSAGE
[Graphic]
Dear Shareholder:
I am pleased to present the first Annual Report to Shareholders for
Federated Latin American Growth Fund. This report contains information about
the fund from February 28, 1996, the date of initial public investment,
through November 30, 1996.
The Report begins with a commentary by the fund's portfolio manager,
Alexandre de Bethmann, Vice President of Federated Global Research Corp.,
which covers international economic and market conditions and fund strategy.
Following his commentary are a complete list of the fund's investments and
the financial statements.
Of course, this fund is managed by experts at Federated Global Research
Corp. to bring you and other shareholders very significant long-term
opportunities from an extremely well-researched portfolio of as many as 50
large- and small-company stocks in Latin American countries.+ It is
important to remember that the true measure of this fund's performance is
clearly in years rather than months. There will be periods of short-term
fluctuation, of negative as well as positive returns.
With that in mind, in its limited period of operation, Federated Latin
American Growth Fund delivered a total return of 15.60% for Class A Shares,
15.00% for Class B Shares, and 14.80% for Class C Shares based on net asset
value.* These returns were due to the fund's increase in share price.
Thank you for your confidence in Federated Latin American Growth Fund.
Please take this opportunity to review this report and familiarize yourself
with your fund's strategy and holdings. We will continue to keep you
up-to-date on the details of your investment on a regular basis and will
continue to provide the highest level of service possible.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1997
* Performance quoted represents past performance. 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 for Class A, B, and C Shares were 9.26%,
9.50%, and 13.80%, respectively.
+ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
Investment Review
[Graphic]
Alexandre de Bethmann
Vice President
Federated Global
Research Corp.
[Graphic]
WHAT IS YOUR ANALYSIS OF THE LATIN AMERICAN MARKETS SINCE THE FUND BEGAN
OPERATIONS THROUGH NOVEMBER 30, 1996?
There are two general trends. First, the three largest Latin American
markets (Brazil, Argentina and Mexico) continued to show signs of economic
recovery. Second, Latin American markets, even during the relatively modest
third quarter, outperformed most other international equity markets.
During the period, the BRAZILIAN market was up 20.4% in U.S. dollar terms as
a result of an improving corporate earnings environment. While this
demonstrates strong performance, it is important to note that the market
experienced quite a bit of volatility as well. Politically, President
Cardoso's proposed amendment to the constitution, which would allow the
president to serve two 6-year terms, encountered some resistance from
opposition parties. Without the assurance of re-election, the President has
little incentive to support important constitutional reforms on labor and
social security issues. Recent concerns over weak export figures and a
subsequent deteriorating trade balance further contributed to market
volatility.
Of all the Latin American markets, MEXICO traditionally reacts most strongly
to Wall Street, which recently resulted in some heavy sell-offs alongside
the Dow Jones Industrial Average. Nevertheless, the market return was a
positive 12.5%. The recent nervousness on the political front also brought
short-term volatility to the market. However, improving economic conditions
and increasing domestic demand due to Mexico's large export sector and
competitive exchange rate continued to fuel Mexico's recovery.
ARGENTINA returned a positive 17.9%. Earlier in the third quarter, the
Finance Minister (Cavallo) and the architect of Argentina's convertibility
plan, the cornerstone of Argentina's economic restructuring, resigned.
Although the market experienced short-term volatility as a result,
international investors were not dissuaded from investing, and viewed this
event as a buying opportunity. As a result, the Argentine market bounced
back and jumped 9.1% during the month of September. Then the investment
community turned its attention to the new Finance Minister's (Fernandez)
fiscal reform package, and how it would be received both by the Argentine
Congress and the International Monetary Fund.
[Graphic]
WHAT WERE YOUR STRATEGIES IN TERMS OF COUNTRY WEIGHTINGS DURING THE PERIOD?
The fund remained diversified within each Latin American country. In Brazil,
we increased our position in the state-controlled company TELEBRAS in an
effort to benefit from further consolidation through privatization and a
proposal in Congress establishing a general telecommunications law and
regulatory agency. In Mexico, the fund maintained its exposure to the
construction sector, which is growing because of declining interest rates
and an improving domestic economy. We have added positions in ACER and TAMSA
that should benefit from increased consumer spending and accelerating
economic growth. In Argentina, the fund added exposure to TELEFONICA
ARGENTINA. The fund also maintained its market weighting in Peru and
Colombia and will continue to seek attractive investment opportunities
within these countries. Finally, in Chile the fund remained underweight due
to uncompelling valuations combined with tight monetary conditions.
[Graphic]
HOW DID FEDERATED LATIN AMERICAN GROWTH FUND PERFORM DURING THE PERIOD
COMPARED TO ITS BENCHMARK?
In the nine-month period since the fund began operation on February 28,
1996, it has delivered strong total returns based on net asset value as
follows: Class A Shares, 15.60%; Class B Shares, 15.00%; and Class C Shares
14.80%,* which outperformed the Morgan Stanley Capital International Latin
American-Free Average's return of 10.49%.**
* Performance quoted represents past performance. 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 for Class A, B, and C Shares were 9.26%,
9.50%, and 13.80%, respectively.
** Morgan Stanley Capital International Latin American-Free Average is an
unmanaged, market value-weighted average of the performance of securities
listed on the stock exchanges of 7 countries in the Latin-American region.
[Graphic]
WHICH COUNTRIES WERE REPRESENTED IN THE PORTFOLIO AS OF NOVEMBER 30, 1996?
The portfolio was diversified across the following countries:
<TABLE>
<CAPTION>
% OF
COUNTRY NET ASSETS
<S> <C>
Brazil 36.94%
Mexico 30.32%
Argentina 11.20%
Chile 8.76%
Venezuela 2.81%
Colombia 2.75%
Peru 2.23%
</TABLE>
[Graphic]
WHAT WERE THE FUND'S TOP HOLDINGS?
As of November 30, 1996, the top 10 holdings were as follows:
<TABLE>
<CAPTION>
% OF
NET
NAME COUNTRY ASSETS INDUSTRY
<S> <S> <C> <S>
Grupo Industrial
Maseca SA de CV Mexico 4.45% Food & Household Products
Corporacion GEO,
S.A. de CV Mexico 4.25% Construction & Housing
Companhia Energetica
de Minas Gerais Brazil 4.12% Utilities -- Electric & Gas
Telecomunicacoes
Brasileras, ADR Brazil 3.94% Telecommunications
Lojas Renner S.A. Brazil 3.92% Merchandising
Companhia Energetica
de Minas Gerais Brazil 4.10% Utilities -- Electric & Gas
Telecomunicacoes de
Sao Paulo S.A. Brazil 3.60% Telecommunications
Banco Bradesco S.A. Brazil 3.35% Banking
Pan American
Beverages Mexico 3.20% Beverage & Tobacco
Centrais Eletricas
Brasileiras Preference
Series B Brazil 3.70% Utilities -- Electric & Gas
TOTAL % OF PORTFOLIO
ASSETS 38.63%
</TABLE>
[Graphic]
AS WE LEAVE 1996, WHAT OPPORTUNITIES DO YOU SEE AHEAD IN THE LATIN AMERICAN
MARKETS?
We believe that the Latin American markets should experience another year of
strong economic growth in 1997. The majority of the Latin American economies
in the region are expected to have higher gross domestic product growth
rates in 1997 than in 1996. The combination of higher investment spending,
sound economic policies, privatizations, and ongoing fiscal reforms should
foster a low interest rate environment in the region and bodes well for
further equity appreciation. We also believe that positive earnings growth
will further encourage investors. Incidentally, analysts and economists, in
our opinion, have been too pessimistic and conservative in their estimates
and should consequently be forced to revise upward their forecasts early in
1997. It is expected that the combination of forced corporate restructuring
due to the recently experienced "tequila effect," and the continuous
transfer of state-controlled enterprises to the private sector will result
in large productivity gains that should be reflected in strong earnings
growth.
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 INTERNATIONAL EQUITY 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
Employ highly qualified, experienced managers in global investing. Employ
experts to select countries and companies outside the U.S. for long-term
growth potential.
Call your investment representative to buy shares of 7 international equity
funds and 2 international income funds from Federated Investors.
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.
International investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
FEDERATED LATIN AMERICAN GROWTH FUND (CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND (CLASS A
SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Latin American Growth Fund (Class A Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1996 compared to
the Morgan Stanley Capital International Latin American-Free Average
(MGEUEGFL).+
GRAPHIC REPRESENTATION `S'' 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 5.50% ($10,000 investment minus $550
sales charge = $9,450). The Fund's performance assumes the reinvestment of
all dividends and distributions.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MGEUEGFL is a market value-weighted average of the performance of
securities listed on the stock exchanges of 7 countries in the
Latin-American Region. The MGEUEGFL is not adjusted to reflect sales
charges, expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This average is
unmanaged. The MGEUEGFL has been adjusted to reflect reinvestment of
dividends on securities in the average.
FEDERATED LATIN AMERICAN GROWTH FUND (CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of
$10,000 in the Federated Latin American Growth Fund (Class B Shares)
(the "Fund") from February 28, 1996 (start of performance) to November 30,
1996 compared to the Morgan Stanley Capital International Latin American-Free
Average (MGEUEGFL).+
GRAPHIC REPRESENTATION `T'' 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 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MGEUEGFL is a market value-weighted average of the performance of
securities listed on the stock exchanges of 7 countries in the
Latin-American region. The MGEUEGFL is not adjusted to reflect sales
charges, expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This average is
unmanaged. The MGEUEGFL has been adjusted to reflect reinvestment of
dividends on securities in the average.
FEDERATED LATIN AMERICAN GROWTH FUND (CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Latin American Growth Fund (Class C Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1996 compared
to the Morgan Stanley Capital International Latin American-Free
Average (MGEUEGFL).+
GRAPHIC REPRESENTATION `U'' 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 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MGEUEGFL is a market value-weighted average of the performance of
securities listed on the stock exchanges of 7 countries in the
Latin-American region. The MGEUEGFL is not adjusted to reflect sales
charges, expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This average is
unmanaged. The MGEUEGFL has been adjusted to reflect reinvestment of
dividends on securities in the average.
FEDERATED LATIN AMERICAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <S> <C>
COMMON STOCKS -- 67.3%
ARGENTINA -- 11.2%
BANKING -- 2.2%
4,600 Banco Frances del Rio de la Plata S.A., ADR $139,150
BEVERAGE & TOBACCO -- 1.8%
11,500 Quilmes Industrial S.A., ADR 119,313
ENERGY SOURCES -- 1.8%
5,000 YPF Sociedad Anonima, ADR 116,250
MULTI-INDUSTRY -- 2.1%
20,000 Compania Naviera Perez Companc S.A., Class B 136,855
REAL ESTATE -- 1.8%
3,700 IRSA Inversiones y Representaciones S.A., GDR 114,700
TELECOMMUNICATIONS -- 1.5%
3,700 Telefonica de Argentina S.A., ADR 94,350
TOTAL ARGENTINA 720,618
BRAZIL -- 9.4%
MACHINERY & ENGINEERING -- 2.8%
17,000 (a)Elevadores Atlas 182,672
TELECOMMUNICATIONS -- 4.0%
3,350 Telecomunicacoes Brasileras, ADR 253,763
MISCELLANEOUS -- 2.6%
890,000 (a)Light Participacoes S.A. 167,231
TOTAL BRAZIL 603,666
CHILE -- 8.7%
BANKING -- 2.3%
3,800 (a)Banco BHIF, ADR 64,125
4,700 Banco de A. Edwards, ADR 86,950
Total 151,075
</TABLE>
<TABLE>
<CAPTION>
FEDERATED LATIN AMERICAN GROWTH FUND
VALUE IN
SHARES U.S. DOLLARS
<S> <S> <C>
COMMON STOCKS -- CONTINUED
CHILE -- CONTINUED
ENERGY EQUIPMENT & SERVICES -- 1.5%
1,800 Chilectra S.A., ADR $ 99,000
MERCHANDISING -- 1.6%
4,000 Santa Isabel S.A., ADR 100,500
METALS - NON FERROUS -- 1.5%
1,900 Sociedad Quimica Y Minera De Chile, ADR 98,800
TELECOMMUNICATIONS -- 1.8%
1,200 Compania Telecomunicacion Chile, ADR 114,150
TOTAL CHILE 563,525
COLOMBIA -- 2.7%
BANKING -- 2.0%
3,100 Banco Ganadero S.A., ADR 76,725
3,300 Banco Industrial Colombiano, ADR 53,213
Total 129,938
MERCHANDISING -- 0.7%
3,800 Cadenalco-Gran Cad, ADR 47,025
TOTAL COLOMBIA 176,963
MEXICO -- 30.2%
BANKING -- 2.6%
250,000 (a)Grupo Financiero Bancomer, S.A. de C.V., Class B 100,799
8,300 (a)Grupo Financiero Bancomer, S.A. de C.V., Class B, ADR 66,865
Total 167,664
BEVERAGE & TOBACCO -- 6.4%
60,000 Fomento Economico Mexicano, S.A. de C.V., Class B 205,021
4,400 Pan American Beverage, Class A 205,700
Total 410,721
BUILDING MATERIALS & COMPONENTS -- 2.5%
22,600 Cemex S.A., Class B, ADR 163,144
</TABLE>
<TABLE>
<CAPTION>
FEDERATED LATIN AMERICAN GROWTH FUND
VALUE IN
SHARES U.S. DOLLARS
<S> <S> <C>
COMMON STOCKS -- CONTINUED
MEXICO -- CONTINUED
CONSTRUCTION & HOUSING -- 7.3%
54,000 (a)Corporacion GEO, S.A. de C.V., Class B $273,526
14,000 (a)Empresas ICA Sociedad Controladora S.A., ADR 201,250
Total 474,776
DATA PROCESSING & REPRODUCTION -- 1.5%
5,500 (a)Acer, Inc., ADR 99,000
FOOD & HOUSEHOLD PRODUCTS -- 5.4%
71,000 (a)Grupo Corvi S.A., Class UBL 59,415
230,000 (a)Grupo Industrial Maseca S.A. de CV, Class B 286,370
Total 345,785
MERCHANDISING -- 1.7%
79,000 (a)Cifra S.A. de CV, Class B 108,980
METALS - STEEL -- 1.5%
7,100 (a)Tubos de Acero de Mexico S.A., ADR 96,738
TELECOMMUNICATIONS -- 1.3%
9,000 (a)Grup Iusacell S.A., ADR 84,375
TOTAL MEXICO 1,951,183
PERU -- 2.3%
FINANCIAL SERVICES -- 0.8%
2,937 (a)Credicorp Ltd. 50,663
TELECOMMUNICATIONS -- 0.8%
2,600 (a)CPT Telefonica del Peru S.A., Class B, ADR 50,375
WHOLESALE & INTERNATIONAL TRADE -- 0.7%
41,701 Enrique Ferreyros S.A. 42,758
TOTAL PERU 143,796
</TABLE>
<TABLE>
<CAPTION>
FEDERATED LATIN AMERICAN GROWTH FUND
VALUE IN
SHARES U.S. DOLLARS
<S> <S> <C>
COMMON STOCKS -- CONTINUED
VENEZUELA -- 2.8%
MACHINERY & ENGINEERING -- 0.9%
18,000 Sider Venezolana, ADR $ 60,750
1,636 (a)Sider Venezolana, Class B, ADR 395
Total 61,145
METALS - STEEL -- 0.7%
10,000 (a)(b)Venprecar, ADR 42,500
TELECOMMUNICATIONS -- 1.2%
3,000 (a)Compania Anonima Nacional Telefonos de Venezuela, Class D, ADR 76,125
TOTAL VENEZUELA 179,770
TOTAL COMMON STOCKS (IDENTIFIED COST $3,910,139) 4,339,521
PREFERRED STOCKS -- 27.5%
BRAZIL -- 27.5%
BANKING -- 4.8%
29,481,000 Banco Bradesco S.A., Preference 215,470
234,000 Banco Itau S.A, Preference 91,742
Total 307,212
ENERGY SOURCES -- 2.8%
1,320,000 Petroleo Brasileiro S.A., Preference 181,452
MANUFACTURING -- 2.0%
16,000 Cofap-Cia Fab Peca Preference 130,881
MERCHANDISING -- 3.9%
5,106,000 Lojas Renner S.A., Preference 252,087
METALS - STEEL -- 2.6%
81,000 Sider Paulisto (Cos) 73,708
97,818,000 Usinas Siderurgicas de Minas Gerais, Preference 97,525
Total 171,233
</TABLE>
<TABLE>
<CAPTION>
FEDERATED LATIN AMERICAN GROWTH FUND
<S> <C>
SHARES OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
PREFERRED STOCKS -- CONTINUED
BRAZIL -- CONTINUED
TELECOMMUNICATIONS -- 3.6%
1,295,000 Telecomunicacoes de Sao Paulo S.A., Preference $229,414
UTILITIES - ELECTRICAL & GAS -- 7.8%
720,000 Centrais Eletricas Brasileiras, Preference, Series B 236,282
8,225,000 Companhia Energetica de Minas Gerais, Preference 265,149
Total 501,431
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,693,243) 1,773,710
(C) REPURCHASE AGREEMENT -- 2.2%
UNITED STATES -- 2.2%
$145,000 BT Securities Corporation, 5.72%, dated 11/29/1996, due 12/2/1996
(AT AMORTIZED COST) 145,000
TOTAL INVESTMENTS (IDENTIFIED COST $5,748,382)(D) $6,258,231
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1996, these securities
amounted to $42,500 which represents 0.7% of net assets.
(c) 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.
(d) The cost of investments for federal tax purposes amounts to $5,748,382.
The net unrealized appreciation of investments on a federal tax basis
amounts to $509,849 which is comprised of $637,037
appreciation and $127,188 depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($6,451,108) at November 30, 1996.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Total investments in securities, at value (identified and tax cost $5,748,382) $6,258,231
Cash 113,088
Income receivable 7,158
Receivable for investments sold 66,365
Receivable for shares sold 138,341
Total assets 6,583,183
LIABILITIES:
Payable for investments purchased $82,162
Payable for taxes withheld 393
Accrued expenses 49,520
Total liabilities 132,075
Net Assets for 558,705 shares outstanding $6,451,108
NET ASSETS CONSIST OF:
Paid in capital $5,687,301
Net unrealized appreciation of investments and translation of assets and liabilities in foreign 509,867
currency
Accumulated net realized gain on investments and foreign currency transactions 212,053
Undistributed net investment income 41,887
Total Net Assets $6,451,108
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($4,836,085/418,191 shares outstanding) $11.56
Offering Price Per Share (100/94.50 of $11.56)* $12.23
Redemption Proceeds Per Share $11.56
CLASS B SHARES:
Net Asset Value Per Share ($1,355,404/117,891 shares outstanding) $11.50
Offering Price Per Share $11.50
Redemption Proceeds Per Share (94.50/100 of $11.50)** $10.87
CLASS C SHARES:
Net Asset Value Per Share ($259,619/22,623 shares outstanding) $11.48
Offering Price Per Share $11.48
Redemption Proceeds Per Share (99.00/100 of $11.48)** $11.37
</TABLE>
* See "What Shares Cost" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1996(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $16,050) $132,053
Interest 9,459
Total income 141,512
EXPENSES:
Investment advisory fee $ 54,798
Administrative personnel and services fee 140,012
Custodian fees 34,003
Transfer and dividend disbursing agent fees and expenses 45,002
Legal fees 10,330
Portfolio accounting fees 64,048
Distribution services fee -- Class B Shares 3,120
Distribution services fee -- Class C Shares 889
Shareholder services fee -- Class A Shares 9,623
Shareholder services fee -- Class B Shares 1,040
Shareholder services fee -- Class C Shares 296
Share registration costs 12,385
Printing and postage 12,790
Insurance premiums 3,626
Miscellaneous 4,377
Total expenses $396,339
Waivers and reimbursements --
Waiver of investment advisory fee $(52,073)
Reimbursement of other operating expenses (253,897)
Total waivers and reimbursements (305,970)
Net expenses 90,369
Net investment income 51,143
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments and foreign currency transactions 202,797
Net change in unrealized appreciation of investments and translation of assets and liabilities in 509,867
foreign currency
Net realized and unrealized gain on investments and foreign 712,664
currency
Change in net assets resulting from operations $763,807
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 51,143
Net realized gain (loss) on investments and foreign currency
transactions ($212,053 net gain as computed for federal tax purposes) 202,797
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 509,867
Change in net assets resulting from operations 763,807
SHARE TRANSACTIONS --
Proceeds from sale of shares 13,501,459
Cost of shares redeemed (7,814,158)
Change in net assets resulting from share transactions 5,687,301
Change in net assets 6,451,108
NET ASSETS:
Beginning of period --
End of period (including undistributed net investment income of $41,887) $6,451,108
</TABLE>
* For the period from February 28, 1996 (date of initial public investment)
to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.12
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.44
Total from investment operations 1.56
NET ASSET VALUE, END OF PERIOD $11.56
TOTAL RETURN(B) 15.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.97%*
Net investment income 1.49%*
Expense waiver/reimbursement(c) 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $4,836
Average commission rate paid $0.0001
Portfolio turnover 38%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(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 LATIN AMERICAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.05)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.55
Total from investment operations 1.50
NET ASSET VALUE, END OF PERIOD $11.50
TOTAL RETURN(B) 15.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.72%*
Net operating loss (1.20%)*
Expense waiver/reimbursement(c) 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,355
Average commission rate paid $0.0001
Portfolio turnover 38%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.08)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.56
Total from investment operations 1.48
NET ASSET VALUE, END OF PERIOD $11.48
TOTAL RETURN(B) 14.80%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.72%*
Net operating loss (1.30%)*
Expense waiver/reimbursement(c) 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $260
Average commission rate paid $0.0001
Portfolio turnover 38%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public offering) to November 30, 1996.
(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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. 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 seven portfolios.
The financial statements included herein are only those of Federated Latin
American Growth 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
of the Fund is to provide long-term growth of capital.
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 on a national securities exchange or the
over-the-counter market. In the absence of recorded sales for equity
securities, they are recorded according to the mean between the last closing
bid and asked prices. Short-term foreign and domestic securities are valued
at the prices provided by an independent pricing service. However,
short-term foreign and domestic 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").
Dividend income and distributions to shareholders are recorded on the
ex-dividend date.
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.
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
ACCUMULATED NET INCOME/ACCUMULATED DISTRIBUTIONS IN
REALIZED GAIN/LOSS EXCESS OF NET INVESTMENT INCOME
$9,256 $(9,256)
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
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. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Fund's
securities against currency fluctuations. Risks may arise upon entering
these transactions from the potential inability of counter-parts 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, 1996, the Fund had outstanding foreign currency commitments
as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <S> <C> <C> <C>
12/2/1996 63,768 Brazilian Real $61,749 $61,731 $ 18
12/2/1996 38,602 Brazilian Real 37,380 37,369 11
12/2/1996 35,369 Peruvian Nouveau Sol 13,603 13,685 (82)
Total (53)
</TABLE>
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 and 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.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Directors. The Fund will not
incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the secondary
market or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee.
Additional information on the restricted security held at November 30, 1996
is as follows:
FUND SECURITY ACQUISITION DATE ACQUISITION COST
Venprecar, ADR 2/28/96 $39,050
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, 1996, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total 405,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 1,109,989 $11,836,843
Shares redeemed (691,798) (7,761,894)
Net change resulting from Class A Share transactions 418,191 $ 4,074,949
PERIOD ENDED
NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT
Shares sold 117,901 $ 1,357,302
Shares redeemed (10) (119)
Net change resulting from Class B Share transactions 117,891 $ 1,357,183
PERIOD ENDED
NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT
Shares sold 27,051 $ 307,314
Shares redeemed (4,428) (52,145)
Net change resulting from Class C Share transactions 22,623 $ 255,169
Net change resulting from share transactions 558,705 $5,687,301
</TABLE>
(a) For the period from February 28, 1996 (date of initial public
investment) to November 30, 1996.
(b) For the period from February 28, 1996 (date of initial public offering)
to November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.25% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its fee
and/or reimburse certain operating expenses of the Fund. The Adviser can
modify or terminate this voluntary waiver and/or reimbursement 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 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 Shares, Class B Shares, and
Class C Shares. The Plan provides that the Fund may incur distribution
expenses according to the following schedule annually, to compensate FSC.
The Fund does not currently make payments to the distributor or charge a fee
under the Distribution Plan for Class A Shares.
PERCENTAGE OF AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
Class A Shares 0.25%
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 ("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.
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.
ORGANIZATIONAL EXPENSES -- Organizational and/or start-up administrative
service expenses of $53,789 were borne initially by Adviser. The Fund has
agreed to reimburse the Adviser for the organizational and/or start-up
administrative expenses during the five year period following effective
date. For the period ended November 30, 1996, the Fund paid $3,287 pursuant
to this agreement.
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, 1996, were as follows:
PURCHASES $7,605,140
SALES $2,117,989
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.
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 Latin American Growth
Fund (a portfolio of World Investment Series, Inc.) as of November 30, 1996,
and the related statement of operations, the statement of changes in net
assets, and the 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, 1996, by correspondence with the
custodian and brokers. 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 Latin American Growth Fund of World Investment Series, Inc. at
November 30, 1996, and the results of its operations, the changes in its net
assets, and the financial highlights for the period then ended, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 17, 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
Gregor F. Meyer
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
J. Crilley Kelly
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.
Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 981487796
Cusip 981487788
Cusip 981487770
G01940-01 (1/97)
Federated International High Income Fund
ANNUAL REPORT
NOVEMBER 30, 1996
ESTABLISHED 1996
INCOME
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
I am pleased to present the first report to shareholders of Federated
International High Income Fund. This report contains information about the
fund from October 2, 1996, the date of inception, through November 30, 1996.
At the end of the reporting period, the fund's $6 million in assets were
invested across 20 government bonds in 20 countries and 14 international
corporate issues designed for high current income.
The report begins with a discussion by portfolio manager, Robert Kowit, Vice
President, Federated Global Research Corp. His discussion covers
international economic and market conditions and fund strategy. Following
his commentary are a complete list of the fund's international bond
investments and the financial statements.
The fund offers shareholders significant investment opportunities from a
select portfolio of carefully researched international bonds issued by
companies and governments outside the U.S.+ It is important to remember that
a good measure of this fund's performance is income over time. There will be
periods of fluctuation as interest rates in various countries rise or fall
in addition to foreign exchange risk and country risk. Currently, interest
rates are relatively attractive on the European continent.
Please take this opportunity to review this report and to read about the
fund's strategy. We will continue to keep you up-to-date on the details of
your income investment on a regular basis. Many shareholders reinvest their
dividends to compound their income and own more shares for future income.
Shareholders may add to their account at any time.
Thank you for your investment in Federated International High Income Fund
and for the confidence you have shown by investing a portion of your wealth
with us.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1997
+ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
Investment Review
[Graphic]
Robert Kowit
Vice President
Federated Global Research Corp.
Federated International High Income Fund began operation on October 2, 1996
with the objective of producing a high level of current income from a widely
diversified portfolio of international government and corporate bonds.*
The fund invests in bonds of developed countries such as Denmark, Australia,
and the United Kingdom, as well as emerging market debt in countries such as
Indonesia and China. Emerging market debt can be very volatile, but tends to
have a very low correlation with developed markets and is independent of the
U.S. bond market. The fund's top five international government holdings as
of November 30, 1996 are:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME COUNTRY PORTFOLIO
<C> <S> <C> <C>
1. Indonesian Bond Indonesia 4.0%
2. Republic of Turkey Bonds Turkey 3.8%
3. Ecuador Discount Brady Bonds Ecuador 3.8%
4. Mexican Cetes Mexico 3.7%
5. Poland Government Bond Poland 3.5%
</TABLE>
The fund follows a policy of intensive diversification across countries,
currencies, and instruments within each category. When most people speak
about emerging market debt, they are referring to Brady Bonds, which are the
single, most volatile foreign fixed-income asset. The fund tends to
underweight Brady assets and overweight Eurobonds and local currency issues.
Eurobonds are generally dollar-denominated debt of corporate and sovereign
issuers. Local currency debt generally consists of short-term deposits and
Treasury bills of high yielding markets such as Mexico, Poland, South
Africa, and Indonesia.
* Lower rated bonds involve a higher degree of risk than investment grade
bonds in return for higher yield potential.
Most of the corporate names in the portfolio are financially sound issuers
that are domiciled in countries with developing economies. They are usually
leaders in their industry and have credit profiles that would support
investment-grade ratings if they were domiciled in a developed market. The
fund's top five international corporate holdings as of November 30, 1996
are:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME COUNTRY PORTFOLIO
<C> <S> <C> <C>
1. Zhuhai Highway China 5.0%
2. Tubos de Aceros Mexico 4.1%
3. Telecom Argentina Argentina 4.0%
4. Telefonica Argentina Argentina 4.0%
5. Bankcomext Trust Mexico 3.9%
</TABLE>
Ultimately, Federated International High Income Fund gives income-oriented
shareholders the opportunity to pursue a steady income stream that can be
significantly higher than is available through U.S. fixed income
investments. Our intensive research process and three-tiered diversification
(across countries, currencies, and instruments) are the keys to seeking to
reduce risk and maximize opportunities in the dynamic international high
income marketplace. The Fund uses as its benchmark the JP Morgan Emerging
Markets Bond Index Plus.** The graphs on pages 5 through 7 show the Fund
underperforming its benchmark from October 2, 1996 through November 30,
1996. The benchmark, however, is highly concentrated in Brady Bonds,
particularly in Argentina, Brazil, Mexico, and Venezuela. As I mentioned
earlier, the Fund normally underweights Brady Bonds. Since Brady Bonds
performed strongly during the period in question, and the Fund had limited
exposure to Brady Bonds during this period, the Fund's performance did not
match that of its benchmark.
** JP Morgan Emerging Markets Bond Index Plus tracks total returns of
external currency denominated debt of instruments of the emerging markets:
Brady Bonds, Loans, Eurobonds, and U.S. Dollar denominated local market
instruments. This index is comprised of 14 emerging market countries. This
index is unmanaged, and investments may not 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 INTERNATIONAL EQUITY 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
Employ highly qualified, experienced managers in global investing. Employ
experts to select countries and companies outside the U.S. for long-term
growth potential.
Call your investment representative to buy shares of 7 international equity
funds and 2 international income funds from Federated Investors.
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.
International investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in auditing and
other financial standards.
FEDERATED INTERNATIONAL HIGH INCOME FUND (CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International High Income Fund (Class A Shares) (the "Fund") from
October 2, 1996 (start of performance) to November 30, 1996 compared to the
JP Morgan Emerging Markets Bond Index Plus (JPEMCOMP).+
`Graphic representation ``V'' 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPEMCOMP is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
JPEMCOMP has been adjusted to reflect reinvestment of dividends on
securities in the index. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND (CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International High Income Fund (Class B Shares) (the "Fund") from
October 2, 1996 (start of performance) to November 30, 1996 compared to the
JP Morgan Emerging Markets Bond Index Plus (JPEMCOMP).+
`Graphic representation ``W'' 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 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPEMCOMP is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
JPEMCOMP has been adjusted to reflect reinvestment of dividends on
securities in the index. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND (CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated International High Income Fund (Class C Shares) (the "Fund") from
October 2, 1996 (start of performance) to November 30, 1996 compared to the
JP Morgan Emerging Markets Bond Index Plus (JPEMCOMP).+
`Graphic representation ``X'' 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 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.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPEMCOMP is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. The
JPEMCOMP has been adjusted to reflect reinvestment of dividends on
securities in the index. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
CORPORATE BONDS -- 49.7%
ARGENTINA -- 10.8%
OIL & GAS -- 3.6%
200,000 Invergas SA, Note, 12.50%, 12/16/1999 $ 216,250
TELECOMMUNICATIONS & CELLULAR -- 7.2%
200,000 Telecom Argentina SA, Unsecd. Note, 12.00%, 11/15/2002 221,500
200,000 Telefonica de Argentina SA, Note, 11.875%, 11/1/2004 220,500
Total 442,000
TOTAL ARGENTINA 658,250
BRAZIL -- 6.9%
INDUSTRIAL PRODUCTS & EQUIPMENT -- 3.5%
200,000 Sophora Comercio, 11.50%, 11/10/1998 210,000
SOVEREIGN -- 3.4%
200,000 (c)Comtel Brasileir, Note, 10.75%, 9/26/2004 206,750
TOTAL BRAZIL 416,750
CANADA -- 3.0%
SOVEREIGN -- 3.0%
220,000 Rogers Cantel Mobile, Inc., Sr. Note, 10.50%, 6/1/2006 183,207
CHINA -- 4.6%
STATE/PROVINCIAL -- 4.6%
250,000 (c)Zhuhai Highway, Sub. Note, 11.50%, 7/1/2008 276,875
CZECH REPUBLIC -- 3.3%
SUPRANATIONAL -- 3.3%
5,500,000 International Bank Recon and Development, Note, 11.50%, 10/9/1997 203,237
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN VALUE
CURRENCY IN U.S.
PAR AMOUNT DOLLARS
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
INDONESIA -- 7.1%
FINANCE -- 3.6%
200,000 Polysindo International Finance Co BV, Company Guarantee, 11.375%,
6/15/2006 $ 215,500
FOREST PRODUCTS -- 3.5%
200,000 Asian Pulp & Paper, Company Guarantee, 11.75%, 10/1/2005 214,820
TOTAL INDONESIA 430,320
MEXICO -- 7.3%
BANKING -- 3.6%
200,000 Bancomext Trust, Bank Guarantee, 11.25%, 5/30/2006 216,688
STEEL -- 3.7%
200,000 Tubos de Acero de Mexico SA, Unsub., 13.75%, 12/8/1999 226,500
TOTAL MEXICO 443,188
UNITED KINGDOM -- 3.1%
INSURANCE -- 3.1%
110,000 Commercial Union PLC, Company Guarantee, 8.625%, 9/28/2005 191,178
VENEZUELA -- 3.6%
OIL & GAS -- 3.6%
200,000 Bariven SA, Company Guarantee, 10.625%, 3/17/2002 215,820
TOTAL CORPORATE BONDS (IDENTIFIED COST $2,945,765) 3,018,825
GOVERNMENT AGENCIES -- 31.8%
AUSTRALIA -- 2.9%
210,000 Queensland Treasury, Local Gov't. Guarantee, 8.00%, 5/14/2003 179,366
DENMARK -- 2.8%
1,050,000 Kingdom of Denmark, Bond, 7.00%, 11/10/2024 167,888
ECUADOR -- 3.4%
300,000 Ecuador Discount, 6.50%, 2/28/2025 209,811
GREECE -- 3.1%
50,000,000 Hellenic Republic, 9/30/1997 187,363
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR AMOUNT VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
GOVERNMENT AGENCIES -- CONTINUED
INDONESIA -- 3.6%
200,000 Indah Kiat International Finance, Company Guarantee, 12.50%,
6/15/2006 $ 220,500
MEXICO -- 3.4%
200,000 Mexican Cetes, 10/2/1997 206,265
POLAND -- 3.2%
600,000 Poland, Republic of, Bond, 16.00%, 10/12/1998 197,033
SOUTH AFRICA -- 3.0%
1,000,000 South Africa, Republic of, Bond, 12.50%, 12/21/2006 179,154
SWEDEN -- 2.9%
1,100,000 Swedish Government, Bond, 8.00%, 8/15/2007 173,986
TURKEY -- 3.5%
200,000 Turkey, Deb., 11.50%, 4/27/1999 209,721
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $1,922,373) 1,931,087
(A)REPURCHASE AGREEMENT -- 10.1%
$ 615,000 BT Securities Corporation, 5.72%, dated 11/29/1996, due 12/2/1996 615,000
TOTAL INVESTMENTS (IDENTIFIED COST $5,483,138)(B) $ 5,564,912
</TABLE>
(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 $5,483,138.
The net unrealized appreciation of investments on a federal tax basis
amounts to $81,774 which is comprised of $108,828 appreciation and $27,054
depreciation at November 30, 1996.
(c) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1996, these securities
amounted to $483,625 which represents 8.0% of net assets.
Note: The categories of investments are shown as a percentage of net assets
($6,078,810) at November 30, 1996.
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 HIGH INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $5,483,138) $ 5,564,912
Income receivable 138,653
Receivable for shares sold 747,424
Total assets 6,450,989
LIABILITIES:
Payable for shares redeemed $ 288,615
Income distribution payable 38,691
Payable to bank 16,327
Accrued expenses 28,546
Total liabilities 372,179
Net Assets for 600,679 shares outstanding $ 6,078,810
NET ASSETS CONSIST OF:
Paid in capital $ 6,003,907
Net unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 81,639
Accumulated distributions in excess of net investment income (6,736)
Total Net Assets $ 6,078,810
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($599,362 / 59,254 shares outstanding) $10.12
Offering Price Per Share (100/95.50 of $10.12)* $10.60
Redemption Proceeds Per Share (99.50/100 of $10.12)** $10.07
CLASS B SHARES:
Net Asset Value Per Share ($5,396,580 / 533,235 shares outstanding) $10.12
Offering Price Per Share $10.12
Redemption Proceeds Per Share (94.50/100 of $10.12)** $ 9.56
CLASS C SHARES:
Net Asset Value Per Share ($82,868 / 8,190 shares outstanding) $10.12
Offering Price Per Share $10.12
Redemption Proceeds Per Share (99.00/100 of $10.12)** $10.02
</TABLE>
* See "How to Purchase Shares" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1996(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 93,582
EXPENSES:
Investment advisory fee $ 7,908
Administrative personnel and services fee 30,328
Custodian fees 8,500
Transfer and dividend disbursing agent fees and expenses 15,600
Legal fees 1,560
Portfolio accounting fees 15,809
Distribution services fee -- Class B Shares 1,599
Distribution services fee -- Class C Shares 54
Shareholder services fee -- Class A Shares 1,775
Shareholder services fee -- Class B Shares 533
Shareholder services fee -- Class C Shares 18
Share registration costs 3,130
Miscellaneous 600
Total expenses 87,414
Waivers and reimbursements --
Waiver of investment advisory fee $ (7,908)
Reimbursement of other operating expenses (70,934)
Total waivers and reimbursements (78,842)
Net expenses 8,572
Net investment income 85,010
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain on investments and foreign currency transactions 227
Net change in unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 81,639
Net realized and unrealized gain on investments and foreign currency transactions 81,866
Change in net assets resulting from operations $ 166,876
</TABLE>
(a) For the period from October 2, 1996 (date of initial public investment)
to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <S>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 85,010
Net realized gain (loss) on investments and foreign currency transactions
($0 net gain, as computed for federal tax purposes) 227
Net change in unrealized appreciation (depreciation) of investments and
translation of assets and liabilities in foreign currency 81,639
Change in net assets resulting from operations 166,876
DISTRIBUTIONS TO SHAREHOLDERS --
Class A Shares (69,102)
Class B Shares (15,313)
Class C Shares (595)
Distributions in excess of net investment income
Class A Shares (6,963)
Class B Shares --
Class C Shares --
Change in net assets resulting from distributions to shareholders (91,973)
SHARE TRANSACTIONS -- Proceeds from sale of shares 13,882,835
Net asset value of shares issued to shareholders in payment of distributions declared 8,455
Cost of shares redeemed (7,887,383)
Change in net assets resulting from share transactions 6,003,907
Change in net assets 6,078,810
NET ASSETS:
Beginning of period --
End of period $ 6,078,810
(a) For the period from October 2, 1996 (date of initial public investment)
to November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.17(e)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.13
Total from investment operations 0.30
LESS DISTRIBUTIONS
Distributions from net investment income (0.17)
Distributions in excess of net investment income (0.01)(b)
Total distributions from net investment income (0.18)
NET ASSET VALUE, END OF PERIOD $ 10.12
TOTAL RETURN(C) 2.99%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.75%*
Net investment income 9.19%*
Expense waiver/reimbursement(d) 8.46%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 599
Average commission rate paid $0.0003
Portfolio turnover 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 2, 1996 (date of initial
public investment) to November 30, 1996.
(b) Distributions in excess of net investment income were a result of
certain book and tax timing differences. 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.
(e) Per share information presented is based upon the bi-monthly average
number of shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.18(b)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.11
Total from investment operations 0.29
LESS DISTRIBUTIONS
Distributions from net investment income (0.17)
NET ASSET VALUE, END OF PERIOD $ 10.12
TOTAL RETURN(C) 2.87%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.50%*
Net investment income 8.92%*
Expense waiver/reimbursement(d) 8.46%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 5,397
Average commission rate paid $0.0003
Portfolio turnover 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 2, 1996 (date of initial
public offering) to November 30, 1996.
(b) Per share information presented is based upon the bi-monthly average
number of shares outstanding.
(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 HIGH INCOME FUND
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.17(b)
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 0.12
Total from investment operations 0.29
LESS DISTRIBUTIONS
Distributions from net investment income (0.17)
NET ASSET VALUE, END OF PERIOD $ 10.12
TOTAL RETURN(C) 2.87%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.50%*
Net investment income 8.67%*
Expense waiver/reimbursement(d) 8.46%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $ 83
Average commission rate paid $0.0003
Portfolio turnover 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 2, 1996 (date of initial
public offering) to November 30, 1996.
(b) Per share information presented is based upon the bi-monthly average
number of shares outstanding.
(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 HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996
1. 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 seven portfolios.
The financial statements included herein are only those of Federated
International High Income 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 investment objective
of the Fund is to seek a high level of current income.
The Fund offers three classes of shares: Class A Shares, Class B Shares, and
Class C Shares.
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 -- U.S. government securities, listed corporate bonds,
(other fixed income and asset-backed securities), and 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").
Distributions to shareholders are recorded on the ex-dividend date.
Distributions in excess of net investment income were a result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
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.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED ACCUMULATED DISTRIBUTIONS
NET REALIZED IN EXCESS OF
GAIN/LOSS NET INVESTMENT INCOME
<C> <C>
$ (227) $ 227
</TABLE>
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 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. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Fund's
securities against currency fluctuations. Risks may arise upon entering
these transactions from the potential inability of counter-parts 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, 1996, 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.
RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no
market prices are available, at the fair value as determined by the Fund's
pricing committee.
Additional information on each restricted security held at November 30, 1996
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Comtel Brasileir, Note 10/02/1996 $ 205,000
Zhuhai Highway, Sub. Note 10/02/1996 265,625
</TABLE>
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, 1996, par value shares ($ 0.001 per share) authorized were
as follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 135,000,000
Class B Shares 135,000,000
Class C Shares 135,000,000
Total shares authorized 405,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 844,791 $ 8,447,943
Shares issued to shareholders in payment of distributions declared 104 1,048
Shares redeemed (785,641) (7,887,383)
Net change resulting from Class A Shares transactions 59,254 $ 561,608
</TABLE>
(a) Reflects operations from October 2, 1996 (date of initial public
investment) to November 30, 1996.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(B)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 532,539 $ 5,353,399
Shares issued to shareholders in payment of distributions declared 696 7,044
Shares redeemed -- --
Net change resulting from Class B Shares transactions 533,235 $ 5,360,443
</TABLE>
(b) Reflects operations from October 2, 1996 (date of initial public
offering) to November 30, 1996.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1996(B)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 8,154 $ 81,493
Shares issued to shareholders in payment of distributions declared 36 363
Shares redeemed -- --
Net change resulting from Class C Shares transactions 8,190 $ 81,856
Net change resulting from share transactions 600,679 $ 6,003,907
</TABLE>
(b) Reflects operations from October 2, 1996 (date of initial public
offering) to November 30, 1996.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.85% of the Fund's average daily net
assets.
The Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement 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 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 Shares, Class B Shares, and
Class C Shares. The Plan provides that the Fund may incur distribution
expenses according to the following schedule annually, to compensate FSC.
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
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.
For the year ended November 30, 1996 Class A Shares did not incur a
distribution services fee.
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.
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.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $34,676 were borne
initially by Adviser. The Fund has agreed to reimburse Adiviser for the
organizational expenses during the five-year period following effective
date. For the period ended November 30, 1996, the Fund paid $526 pursuant to
this agreement.
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, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $4,775,567
SALES $ 0
</TABLE>
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.
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 High
Income Fund (a portfolio of World Investment Series, Inc.) as of November
30, 1996 the related statement of operations, the statement of changes in
net assets, and the 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 the
securities owned as of November 30, 1996, by correspondence with the
custodian and brokers. 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 present
fairly, in all material respects, the financial position of Federated
International High Income Fund of World Investment Series, Inc. at November
30, 1996, and the results of its operations, the changes in its net assets,
and the financial highlights for the period then ended, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 17, 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
Gregor F. Meyer
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
J. Crilley Kelly
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.
Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 981487762
Cusip 981487754
Cusip 981487747
G01949-01 (1/97)
WORLD INVESTMENT SERIES, INC.
APPENDIX
A. The graphic representation here displayed, entitled "Initial
Investment of $3,000", consists of a boxed legend in the upper left
quadrant indicating the components of the corresponding mountain chart.
The lighter shaded portion represents Reinvested Income and the darker
shaded portion represents the Principal Value of $3,000 Investment (279
Shares). The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an initial investment of $3,000
in the Class A Shares of Federated World Utility Fund on 4/22/94 would have
a reinvested total worth of $3,877 on 11/30/96. The "x" axis reflects
annual computation periods from 4/22/94 to 11/30/96. The right margin of
the chart reflects the ending values of a hypothetical investment of $3,000
in the Fund measured in increments of $1,000 ranging from $0 to $4,000.
B. The graphic representation here displayed, entitled "Yearly
Investments of $1,000", consists of a boxed legend in the upper left
quadrant indicating the components of the corresponding mountain chart.
The lighter shaded portion represents Reinvested Income and the darker
shaded portion represents the Principal Value of annual $1,000 Investments
(totaling $3,000 by 11/30/96). The color-coded mountain chart is a visual
representation of the narrative text above it, which shows that if you had
started investing $1,000 annually in the Class A Shares of Federated World
Utility Fund on 4/22/94, you would have a reinvested total worth of
$3,582/282 Shares on 11/30/96. The "x" axis reflects annual computation
periods from 4/22/94 to 11/30/96. The right margin reflects the ending
values of a hypothetical annual investment of $1,000 in the Fund measured
in increments of $1,000 ranging from $0 to $4,000.
C. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated World Utility Fund (Class A Shares) (the "Fund") is
represented by a solid line. Standard & Poor's 500 Index ("S&P 500") is
represented by a dotted line. FT - Actuaries/S&P Global Utility Index
("FTGUI") is represented by a broken line. The Lipper Utility Funds
Average ("LPUFA") is represented by a line consisting of a dot followed by
two dashes. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 purchase in the Fund, S&P 500,
FTGUI, and LPUFA. The "y" axis reflects the cost of the investment. The
"x" axis reflects annual computation periods from the Fund's start of
business, April 22, 1994, through November 30, 1996. The right margin
reflects the ending value of the hypothetical investment in the Fund as
compared to S&P 500, FTGUI, and LPUFA; the ending values are $13,060,
$18,040, $12,282, and $13,277, respectively. There is also a boxed legend
in the bottom center which indicates the Average Annual Total Return for
the one-year period ended November 30, 1996, and beginning with the
inception date of the Fund (April 22, 1994); the Average Annual Total
Returns are 12.94% and 10.33%, respectively.
D. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated World Utility Fund (Class B Shares) (the "Fund") is
represented by a solid line. Standard & Poor's 500 Index ("S&P 500") is
represented by a dotted line. FT - Actuaries/S&P Global Utility Index
("FTGUI") is represented by a broken line. The Lipper Utility Funds
Average ("LPUFA") is represented by a line consisting of a dot followed by
two dashes. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 purchase in the Fund, S&P 500,
FTGUI, and LPUFA. The "y" axis reflects the cost of the investment. The
"x" axis reflects annual computation periods from the Fund's start of
business, July 27, 1995, through November 30, 1996. The right margin
reflects the ending value of the hypothetical investment in the Fund as
compared to S&P 500, FTGUI, and LPUFA; the ending values are $11,983,
$13,912, $11,494, and $12,255, respectively. There is also a boxed legend
in the bottom center which indicates the Average Annual Total Return for
the one-year period ended November 30, 1996, and beginning with the
inception date of the Fund (July 27, 1995); the Average Annual Total
Returns are 13.17% and 14.38%, respectively.
E. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated World Utility Fund (Class C Shares) (the "Fund") is
represented by a solid line. Standard & Poor's 500 Index ("S&P 500") is
represented by a dotted line. FT - Actuaries/S&P Global Utility Index
("FTGUI") is represented by a broken line. The Lipper Utility Funds
Average ("LPUFA") is represented by a line consisting of a dot followed by
two dashes. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 purchase in the Fund, S&P 500,
FTGUI, and LPUFA. The "y" axis reflects the cost of the investment. The
"x" axis reflects annual computation periods from the Fund's start of
business, July 27, 1995, through November 30, 1996. The right margin
reflects the ending value of the hypothetical investment in the Fund as
compared to S&P 500, FTGUI, and LPUFA; the ending values are $12,445,
$13,912, $11,494, and $12,255, respectively. There is also a boxed legend
in the bottom center which indicates the Average Annual Total Return for
the one-year period ended November 30, 1996, and beginning with the
inception date of the Fund (July 27, 1995); the Average Annual Total
Returns are 17.58% and 17.66%, respectively.
F. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated World Utility Fund (Class F Shares) (the "Fund") is
represented by a solid line. Standard & Poor's 500 Index ("S&P 500") is
represented by a dotted line. FT - Actuaries/S&P Global Utility Index
("FTGUI") is represented by a broken line. The Lipper Utility Funds
Average ("LPUFA") is represented by a line consisting of a dot followed by
two dashes. The line graph is a visual representation of a comparison of
change in value of a hypothetical $10,000 purchase in the Fund, S&P 500,
FTGUI, and LPUFA. The "y" axis reflects the cost of the investment. The
"x" axis reflects annual computation periods from the Fund's start of
business, April 22, 1994, through November 30, 1996. The right margin
reflects the ending value of the hypothetical investment in the Fund as
compared to S&P 500, FTGUI, and LPUFA; the ending values are $13,406,
$18,040, $12,282, and $13,277, respectively. There is also a boxed legend
in the bottom center which indicates the Average Annual Total Return for
the one-year period ended November 30, 1996, and beginning with the
inception date of the Fund (April 22, 1994); the Average Annual Total
Returns are 17.33% and 11.90%, respectively.
G. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated Asia Pacific Growth Fund (Class A Shares) (the "Fund") is
represented by a solid line. The Morgan Stanley Capital International Asia
Pacific Average ("MSEUCAP") is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and MSEUCAP. The "y" axis
reflects the cost of the investment. The "x" axis reflects the computation
period from the Fund's start of business, February 28, 1996, through
November 30, 1996. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to MSEUCAP; the ending
values are $9,686 and $9,679, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is (3.12)%.
H. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated Asia Pacific Growth Fund (Class B Shares) (the "Fund") is
represented by a solid line. The Morgan Stanley Capital International Asia
Pacific Average ("MSEUCAP") is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and MSEUCAP. The "y" axis
reflects the cost of the investment. The "x" axis reflects the computation
period from the Fund's start of business, February 28, 1996, through
November 30, 1996. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to MSEUCAP; the ending
values are $9,641 and $9,679, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is (3.60)%.
I. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated Asia Pacific Growth Fund (Class C Shares) (the "Fund") is
represented by a solid line. The Morgan Stanley Capital International Asia
Pacific Average ("MSEUCAP") is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and MSEUCAP. The "y" axis
reflects the cost of the investment. The "x" axis reflects the computation
period from the Fund's start of business, February 28, 1996, through
November 30, 1996. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to MSEUCAP; the ending
values are $10,100 and $9,679, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is 1.00%.
J. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. The Class A Shares of Federated Emerging Markets
Fund is represented by a solid line, whereas International Finance
Corporation Investable Composite Index is represented by a dotted line.
The line graph is a visual representation of a comparison of change in
value of a hypothetical investment of $10,000 in the Class A Shares of
Federated Emerging Markets Fund for the period from February 28, 1996
(start of performance) to November 30, 1996. The `y'' axis reflects the
cost of the investment. The `x'' axis reflects computation periods from
the ending value of the hypothetical investment in the Class A Shares of
Federated Emerging Markets Fund as compared to International Finance
Corporation Investable Composite Index; the ending values are $10,490 and
$10,132, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class A Shares
of the Fund: the total return figure for start of performance to November
30, 1996 cumulative total return is as follows: 4.91%. The performance
disclaimer and footnotes are listed directly under the graphic
presentation.
K. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. The Class B Shares of Federated Emerging Markets
Fund is represented by a solid line, whereas International Finance
Corporation Investable Composite Index is represented by a dotted line.
The line graph is a visual representation of a comparison of change in
value of a hypothetical investment of $10,000 in the Class B Shares of
Federated Emerging Markets Fund for the period from February 28, 1996
(start of performance) to November 30, 1996. The `y'' axis reflects the
cost of the investment. The `x'' axis reflects computation periods from
the ending value of the hypothetical investment in the Class B Shares of
Federated Emerging Markets Fund as compared to International Finance
Corporation Investable Composite Index; the ending values are $10,490 and
$10,132, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class B Shares
of the Fund: the total return figure for start of performance to November
30, 1996 cumulative total return is as follows: 4.90%. The performance
disclaimer and footnotes are listed directly under the graphic
presentation.
L. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. The Class C Shares of Federated Emerging Markets
Fund is represented by a solid line, whereas International Finance
Corporation Investable Composite Index is represented by a dotted line.
The line graph is a visual representation of a comparison of change in
value of a hypothetical investment of $10,000 in the Class C Shares of
Federated Emerging Markets Fund for the period from February 28, 1996
(start of performance) to November 30, 1996. The `y'' axis reflects the
cost of the investment. The `x'' axis reflects computation periods from
the ending value of the hypothetical investment in the Class C Shares of
Federated Emerging Markets Fund as compared to International Finance
Corporation Investable Composite Index; the ending values are $10,950 and
$10,132, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class C Shares
of the Fund: the total return figure for start of performance to November
30, 1996 cumulative total return is as follows: 9.50%. The performance
disclaimer and footnotes are listed directly under the graphic
presentation.
M. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated European Growth Fund (Class A Shares) (the "Fund") is
represented by a solid line. The Morgan Stanley Capital International
(Europe) Average ("MTDUE14") is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and MTDUE14. The "y" axis
reflects the cost of the investment. The "x" axis reflects the computation
period from the Fund's start of business, February 28, 1996, through
November 30, 1996. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to MTDUE14; the ending
values are $11,153 and $11,577, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is 11.53%.
N. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated European Growth Fund (Class B Shares) (the "Fund") is
represented by a solid line. The Morgan Stanley Capital International
(Europe) Average ("MTDUE14") is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and MTDUE14. The "y" axis
reflects the cost of the investment. The "x" axis reflects the computation
period from the Fund's start of business, February 28, 1996, through
November 30, 1996. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to MTDUE14; the ending
values are $11,190 and $11,577, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is 11.90%.
O. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated European Growth Fund (Class C Shares) (the "Fund") is
represented by a solid line. The Morgan Stanley Capital International
(Europe) Average ("MTDUE14") is represented by a dotted line. The line
graph is a visual representation of a comparison of change in value of a
hypothetical $10,000 purchase in the Fund and MTDUE14. The "y" axis
reflects the cost of the investment. The "x" axis reflects the computation
period from the Fund's start of business, February 28, 1996, through
November 30, 1996. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to MTDUE14; the ending
values are $11,630 and $11,577, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is 16.30%.
P. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. The Class A Shares of Federated International Small
Company Fund is represented by a solid line, whereas FT-Actuaries/S&P World
Medium-Small Capital Index (ex-U.S.) is represented by a dotted line. The
line graph is a visual representation of a comparison of change in value of
a hypothetical investment of $10,000 in the Class A Shares of Federated
International Small Company Fund and FT-Actuaries/S&P World Medium-Small
Capital Index (ex-U.S.) for the period from February 28, 1996 (start of
performance) to November 30, 1996. The `y'' axis reflects the cost of the
investment. The `x'' axis reflects computation periods from the ending
value of the hypothetical investment in the Class A Shares of the Federated
International Small Company Fund as compared to the FT-Actuaries/S&P World
Medium-Small Capital Index (ex-U.S.); the ending values are $11,586 and
$10,382, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class A Shares
of Federated International Small Company Fund: the total return figure for
start of performance to November 30, 1996 cumulative total return is as
follows: 15.88%. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
Q. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. The Class B Shares of Federated International Small
Company Fund is represented by a solid line, whereas FT-Actuaries/S&P World
Medium-Small Capital Index (ex-U.S.) is represented by a dotted line. The
line graph is a visual representation of a comparison of change in value of
a hypothetical investment of $10,000 in the Class B Shares of Federated
International Small Company Fund and FT-Actuaries/S&P World Medium-Small
Capital Index (ex-U.S.) for the period from February 28, 1996 (start of
performance) to November 30, 1996. The `y'' axis reflects the cost of the
investment. The `x'' axis reflects computation periods from the ending
value of the hypothetical investment in the Class B Shares of the Federated
International Small Company Fund as compared to the FT-Actuaries/S&P World
Medium-Small Capital Index (ex-U.S.); the ending values are $11,650 and
$10,382, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class B Shares
of Federated International Small Company Fund: the total return figure for
start of performance to November 30, 1996 cumulative total return is as
follows: 16.50%. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
R. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. The Class C Shares of Federated International Small
Company Fund is represented by a solid line, whereas FT-Actuaries/S&P World
Medium-Small Capital Index (ex-U.S.) is represented by a dotted line. The
line graph is a visual representation of a comparison of change in value of
a hypothetical investment of $10,000 in the Class C Shares of Federated
International Small Company Fund and FT-Actuaries/S&P World Medium-Small
Capital Index (ex-U.S.) for the period from February 28, 1996 (start of
performance) to November 30, 1996. The `y'' axis reflects the cost of the
investment. The `x'' axis reflects computation periods from the ending
value of the hypothetical investment in the Class C Shares of the Federated
International Small Company Fund as compared to the FT-Actuaries/S&P World
Medium-Small Capital Index (ex-U.S.); the ending values are $12,090 and
$10,382, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class C Shares
of Federated International Small Company Fund: the total return figure for
start of performance to November 30, 1996 cumulative total return is as
follows: 20.90%. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
S. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated Latin American Growth Fund (Class A Shares) (the "Fund")
is represented by a solid line. The Morgan Stanley Capital International
Latin American-Free Average ("MGEUEGFL") is represented by a broken line.
The line graph is a visual representation of a comparison of change in
value of a hypothetical $10,000 purchase in the Fund and MGEUEGFL. The "y"
axis reflects the cost of the investment. The "x" axis reflects the
computation period from the Fund's start of business, February 28, 1996,
through November 30, 1996. The right margin reflects the ending value of
the hypothetical investment in the Fund as compared to MGEUEGFL; the ending
values are $10,924 and $11,049, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is 9.26%.
T. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated Latin American Growth Fund (Class B Shares) (the "Fund")
is represented by a solid line. The Morgan Stanley Capital International
Latin American-Free Average ("MGEUEGFL") is represented by a broken line.
The line graph is a visual representation of a comparison of change in
value of a hypothetical $10,000 purchase in the Fund and MGEUEGFL. The "y"
axis reflects the cost of the investment. The "x" axis reflects the
computation period from the Fund's start of business, February 28, 1996,
through November 30, 1996. The right margin reflects the ending value of
the hypothetical investment in the Fund as compared to MGEUEGFL; the ending
values are $10,949 and $11,049, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is 9.50%.
U. The graphic representation here displayed consists of a boxed legend
in the bottom center indicating the components of the corresponding line
graph. Federated Latin American Growth Fund (Class C Shares) (the "Fund")
is represented by a solid line. The Morgan Stanley Capital International
Latin American-Free Average ("MGEUEGFL") is represented by a broken line.
The line graph is a visual representation of a comparison of change in
value of a hypothetical $10,000 purchase in the Fund and MGEUEGFL. The "y"
axis reflects the cost of the investment. The "x" axis reflects the
computation period from the Fund's start of business, February 28, 1996,
through November 30, 1996. The right margin reflects the ending value of
the hypothetical investment in the Fund as compared to MGEUEGFL; the ending
values are $11,380 and $11,049, respectively. There is also a boxed legend
in the bottom center which indicates the Total Return for the period ended
November 30, 1996, beginning with the inception of the Fund; the Cumulative
Total Return is 13.80%.
V. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the underneath the
graphic presentation. The Class A Shares of Federated International High
Income Fund is represented by a solid line, whereas JP Morgan Emerging
Markets Bond Index is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Class A Shares of Federated International High
Income Fund and JP Morgan Emerging Markets Bond Index for the period from
October 2, 1996 (start of performance) to November 30, 1996. The `y''
axis reflects the cost of the investment. The `x'' axis reflects
computation periods from the ending value of the hypothetical investment in
the Class A Shares of Federated International High Income Fund as compared
to JP Morgan Emerging Markets Bond Index; the ending values are $9,836 and
$10,494, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class A Shares
of Federated International High Income Fund: the total return figure for
start of performance to November 30, 1996 cumulative total return is as
follows: (1.63%). The performance disclaimer and footnotes are listed
directly under the graphic presentation.
W. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the underneath the
graphic presentation. The Class B Shares of Federated International High
Income Fund is represented by a solid line, whereas JP Morgan Emerging
Markets Bond Index is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Class B Shares of Federated International High
Income Fund and JP Morgan Emerging Markets Bond Index for the period from
October 2, 1996 (start of performance) to November 30, 1996. The `y''
axis reflects the cost of the investment. The `x'' axis reflects
computation periods from the ending value of the hypothetical investment in
the Class B Shares of Federated International High Income Fund as compared
to JP Morgan Emerging Markets Bond Index; the ending values are $9,732 and
$10,494, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class B Shares
of Federated International High Income Fund: the total return figure for
start of performance to November 30, 1996 cumulative total return is as
follows: (2.67%). The performance disclaimer and footnotes are listed
directly under the graphic presentation.
X. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the underneath the
graphic presentation. The Class C Shares of Federated International High
Income Fund is represented by a solid line, whereas JP Morgan Emerging
Markets Bond Index is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
investment of $10,000 in the Class C Shares of Federated International High
Income Fund and JP Morgan Emerging Markets Bond Index for the period from
October 2, 1996 (start of performance) to November 30, 1996. The `y''
axis reflects the cost of the investment. The `x'' axis reflects
computation periods from the ending value of the hypothetical investment in
the Class C Shares of Federated International High Income Fund as compared
to JP Morgan Emerging Markets Bond Index; the ending values are $10,186 and
$10,494, respectively. Beneath the list of components that correspond to
the line graph are the following total return data for the Class C Shares
of Federated International High Income Fund: the total return figure for
start of performance to November 30, 1996 cumulative total return is as
follows: 1.86%. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
