[LOGO OF FEDERATED INVESTOSR]
Federated World
Utility Fund
4th Semi-Annual Report
May 31, 1997
Established 1994
President's Message
Dear Fellow Shareholder:
Federated World Utility Fund was established in 1994, and I am pleased to
present the fourth Semi-Annual Report for the fund, which covers the six-month
reporting period from December 1, 1996 through May 31, 1997.
The fund continued its record of strong performance during the reporting period
and is one of the most competitive global utility funds in this country. This
fund provides shareholders income potential and opportunities for capital growth
by owning over 80 stocks in the electric, natural gas, water and
telecommunications industries in the U.S. and around the world.*
In this report you will find a discussion with the fund's portfolio manager
Michael J. Donnelly, 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 utility investments, and the fund's
financial statements.
As Michael's comments indicate, the environment for international utilities
continued to be highly favorable. Your fund recorded double-digit total return
performance and outperformed the overall global utilities market. In short, it
was another very strong period for the fund, as the following share class
performance shows.**
<TABLE>
<CAPTION>
Capital Total Return
NAV NAV NAV Income Gains Based on
12/1/96 5/31/97 Change Distributions Distributions NAV
------ ------ ------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares $12.69 $13.34 5% $0.24 $0.43 11.06%
Class B Shares $12.68 $13.31 5% $0.20 $0.43 10.51%
Class C Shares $12.67 $13.32 5% $0.20 $0.43 10.67%
Class F Shares $12.70 $13.33 5% $0.24 $0.43 10.89%
</TABLE>
We trust you are pleased with the continued positive performance of your
investment in Federated World Utility Fund. Thank you for joining the fund's
growing number of shareholders. Assets now exceed $34 million.
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
**Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the period based on offering price for Class
A, B, C, and F Shares were 4.94%, 4.70%, 9.59% and 8.69%, respectively.
Remember, adding to your account on a regular basis and reinvesting your
quarterly dividends in additional shares is a convenient, painless way to "pay
yourself first" and enjoy the benefit of compounding and potential future income
from the shares you buy today.+ We welcome your comments and suggestions.
Sincerely,
Richard B. Fisher
President
July 15, 1997
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
Investment Review
Michael J. Donnelly
Vice President
Federated Global
Research Corp.
Q
What is your analysis of the global utility market, which continued to reward
investors with good performance during the reporting period?
A
The international utility market continued to be dominated by forces of
privatization. The domestic utility market was influenced by mergers and
acquisitions. Furthermore, economic growth internationally helped propel several
utility stocks during the last six months.
Recently, privatized or soon to be privatized utility companies in China and
Brazil have been some of the best performers in 1997. With respect to Brazil,
the market is anticipating the value that companies will achieve once they
operate in the private sector. Furthermore, strong economic growth and relative
currency stability in Latin America in 1997 have created attractive investment
environments, and many utility companies have benefited from foreign investment
flows.
It is interesting to note that, in general, U.S. utilities are income-producing
stocks, while international utilities are considered growth stocks. This
combination of utility stocks has produced good investment results in capital
appreciation and generous quarterly income.
Q
How did Federated World Utility Fund perform over the six-month reporting
period?
A
The fund delivered a strong total return of 11.06% for Class A Shares, 10.51%
for Class B Shares, 10.67% for Class C Shares, and 10.89% for Class F Shares,
based on net asset value.* These returns were greater than the 8.99% total
return of the overall world utility market as measured by FT/S&P Global Utility
Index.**
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the period based on offering price for Class
A, B, C, and F shares were 4.94%, 4.70%, 9.59% and 8.69%, respectively.
**FT/S&P Global Utility Index is a market cap-weighted index of utility
securities from 24 countries, both developed and developing, with
approximately 174 companies. This index is unmanaged, and investments cannot
be made in an index.
Q
What strategies impacted fund performance during the reporting period?
A
In the last report, we discussed that an emphasis on investments in the cellular
communications industry was a key strategic initiative of the fund. This
strategy has significantly enhanced performance for the six months, in both a
direct and an indirect manner. Directly, the position in Grupo Iusacell, a
Mexican provider of cellular communications, has appreciated 129% year to date
and is the best performing telecommunications stock in Latin America for 1997
thus far. Indirectly, market internalization of potential intrinsic value for
cellular assets is helping to drive the share prices of Brazilian telecom
companies much higher. This has benefited fund performance, too.
Another important strategy that has been beneficial is our emphasis on choosing
companies that are undervalued with respect to their regional peers.
Specifically, investments in three regions of the globe_Europe, Latin America
and Asia_in the electric sector of the utility industry have contributed
substantially to fund performance. These previously undervalued securities
appreciated after the markets reassessed their fundamental business prospects.
Examples of these regional stocks are Lenenergo (Europe), Cia Forca Y Luz
Cataguazes (Latin America), and Huaneng Electric Power (Asia).
It is worth repeating that adherence to some basic strategies has provided the
fund with superior absolute returns over the short and long term.
Q
What were the fund's region weightings at the end of the reporting period?
A
As of May 31, 1997, weightings were approximately 44% in the United States, 20%
in Europe, 18% in Latin America and Canada, and 18% in Asia.
Q
Several events_including the rise in interest rates in the United States in
March, the crisis over European Monetary Union in May, and the threat by the
Japanese Prime Minister to have Japan sell its U.S. Treasury bonds_have caused
notable volatility in the markets in 1997. Has this volatility adversely
affected the global utilities, and what can shareholders expect going forward?
A
Interest rate increases tend to affect many stocks adversely, but U.S. utilities
were relative outperformers during March 1997, at a time when many strategists
thought the U. S. Federal Reserve Board would continue to raise rates throughout
1997.
While utility stocks will not likely escape market impacting events such as
periods of currency market turmoil or equity market volatility, it should be
noted that around the world, many utilities are still cheap relative to their
local markets and may be considered defensive in times of increased volatility.
In times of equity corrections, we must remember that, in the end, the lights
will still go on in Chile, telephones will still ring across Malaysia and water
will still flow through the taps in the U.K. We remain confident about the
continued growth of utility services in an expanding, increasingly prosperous
worldwide population.
Two Ways You May Seek to Invest for Success in
Federated World Utility Fund
If you had made an initial investment of $4,000 in the Class A Shares of
Federated World Utility Fund on 4/22/94, reinvested dividends and capital gains,
and didn't redeem any shares, your account would be worth $5,741 on 5/31/97. You
would have earned a 12.34%* average annual total return for the 3-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 and
you gain the benefit of compounding.
As of 6/30/97, the Class A SharesO average annual one-year and since inception
(4/22/94) total returns were 17.99% and 13.49%, respectively. Class B SharesO
average annual one-year and since inception (7/27/95) total returns were 18.09%
and 18.46%, respectively. Class C SharesO average annual one-year and since
inception (7/27/95) total returns were 22.85% and 20.65%, respectively. Class F
SharesO average annual one-year and since inception (4/22/94) total returns were
22.52% and 14.80%, 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 an investorOs 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 3 years (reinvesting all dividends and capital
gains) grew to $4,982.
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
didn't redeem any shares, you would have invested only $4,000, but your account
would have reached a total value of $4,982* by 5/31/97. You would have earned an
average annual total return of 14.03%.
A practical investment plan helps you pursue income through a diversified
portfolio primarily invested in U.S. utility securities and non-U.S. utility
securities. Through systematic investing, you buy shares on a regular basis and
reinvest all earnings. An investment plan works for you when you invest only
$1,000 annually. You can take it one step at a time. Put time, money, and
compounding to work!
"Graphic representation "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, and 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
Portfolio Update
- --------------------------------------------------------------------------------
Top Ten Holdings As Of 5/31/97
Company Country % of Assets
Grup Iusacell S.A., ADR, Series L Mexico 2.45%
Nippon Telegraph & Telephone Corp. Japan 2.34%
Empresa Nacional Electricidad SA, ADR Chile 2.34%
Vodafone Group PLC U.K. 2.04%
SBC Communications, Inc. USA 1.88%
Panenergy Corp. USA 1.88%
AT&T Corp. USA 1.87%
Central Costanera S.A., Class B Argentina 1.85%
National Power Co. PLC, ADR U.K. 1.74%
OY Nokia AB, ADR, Class A Finland 1.58%
Federated World Utility Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--83.6%
- -----------------------------------------------------------------------------------------------
BASIC INDUSTRY--0.8%
--------------------------------------------------------------------------------
4,100 Reynolds Metal Co. $ 278,288
-------------------------------------------------------------------------------- -------------
CELLULAR TELEPHONE--9.1%
--------------------------------------------------------------------------------
12,000 Advance Information Service PCL 85,540
--------------------------------------------------------------------------------
12,400 Airtouch Communications, Inc. 345,650
--------------------------------------------------------------------------------
51,400 (a)Grup Iusacell S.A., ADR 848,100
--------------------------------------------------------------------------------
8,300 OY Nokia AB, Class A, ADR 547,800
--------------------------------------------------------------------------------
500,000 Pilipino Telephone Corp. 194,313
--------------------------------------------------------------------------------
214,000 Smartone Telecommunications 421,178
--------------------------------------------------------------------------------
158,200 Vodafone Group PLC 703,916
-------------------------------------------------------------------------------- -------------
Total 3,146,497
-------------------------------------------------------------------------------- -------------
ENERGY MINERALS--3.2%
--------------------------------------------------------------------------------
3,600 Elf Aquitaine SA 359,713
--------------------------------------------------------------------------------
8,000 Repsol SA 334,809
--------------------------------------------------------------------------------
14,100 YPF Sociedad Anonima, ADR 423,000
-------------------------------------------------------------------------------- -------------
Total 1,117,522
-------------------------------------------------------------------------------- -------------
FINANCE--1.0%
--------------------------------------------------------------------------------
44,000 (b)Commonwealth Installment Receipt Trustee Ltd. 328,098
-------------------------------------------------------------------------------- -------------
HEALTH CARE--1.3%
--------------------------------------------------------------------------------
6,000 American Home Products Corp. 457,500
-------------------------------------------------------------------------------- -------------
MAJOR U.S. TELECOMMUNICATIONS--6.7%
--------------------------------------------------------------------------------
17,500 AT&T Corp. 645,313
--------------------------------------------------------------------------------
6,400 BellSouth Corp. 290,400
--------------------------------------------------------------------------------
9,300 GTE Corp. 410,363
--------------------------------------------------------------------------------
8,000 MCI Communications Corp. 307,000
--------------------------------------------------------------------------------
11,117 SBC Communications, Inc. 650,364
-------------------------------------------------------------------------------- -------------
Total 2,303,440
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated World Utility Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
NATURAL GAS DISTRIBUTION--1.8%
--------------------------------------------------------------------------------
11,500 Equitable Resources, Inc. $ 340,688
--------------------------------------------------------------------------------
9,000 Pacific Enterprises 294,750
-------------------------------------------------------------------------------- -------------
Total 635,438
-------------------------------------------------------------------------------- -------------
OIL/GAS TRANSMISSION--4.4%
--------------------------------------------------------------------------------
101,000 BG PLC 337,052
--------------------------------------------------------------------------------
101,000 (a)Centrica PLC 104,916
--------------------------------------------------------------------------------
4,000 Enron Corp. 163,000
--------------------------------------------------------------------------------
13,900 Panenergy Corp. 649,825
--------------------------------------------------------------------------------
4,500 Sonat, Inc. 258,750
-------------------------------------------------------------------------------- -------------
Total 1,513,543
-------------------------------------------------------------------------------- -------------
OTHER TELEPHONE/COMMUNICATIONS--1.2%
--------------------------------------------------------------------------------
11,000 Telephone and Data System, Inc. 426,938
-------------------------------------------------------------------------------- -------------
REAL ESTATE--2.2%
--------------------------------------------------------------------------------
500,000 Darling Park Trust 312,286
--------------------------------------------------------------------------------
11,600 Meditrust, REIT 427,750
-------------------------------------------------------------------------------- -------------
Total 740,036
-------------------------------------------------------------------------------- -------------
TEXTILES--0.0%
--------------------------------------------------------------------------------
260,000,000 (a)Texpar SA 3,400
-------------------------------------------------------------------------------- -------------
UTILITIES--51.9%
--------------------------------------------------------------------------------
58,000 Australian Gas Light Co. 345,906
--------------------------------------------------------------------------------
16,600 Boston Edison Co. 427,450
--------------------------------------------------------------------------------
175,000 Central Costanera S.A., Class B 639,069
--------------------------------------------------------------------------------
15,300 Chilgener S.A., ADR 420,750
--------------------------------------------------------------------------------
85,000 China Light and Power Co. Ltd. 425,631
--------------------------------------------------------------------------------
1,850,000 (a)Cia Saneamento Basico Estado 440,681
--------------------------------------------------------------------------------
10,700 Cinergy Corp. 374,500
--------------------------------------------------------------------------------
11,600 CMS Energy Corp. 390,050
--------------------------------------------------------------------------------
</TABLE>
Federated World Utility Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
UTILITIES--CONTINUED
--------------------------------------------------------------------------------
13,100 Compania Anonima Nacional Telefonos de Venezuela,
Class D, ADR $ 486,338
--------------------------------------------------------------------------------
17,800 DPL, Inc. 424,975
--------------------------------------------------------------------------------
12,600 DQE, Inc. 354,375
--------------------------------------------------------------------------------
36,000 Empresa Nacional de Electricidad SA, ADR 810,000
--------------------------------------------------------------------------------
3,900 Empresa Nacional de Electricidad SA, ADR 302,738
--------------------------------------------------------------------------------
7,300 FPL Group, Inc. 339,450
--------------------------------------------------------------------------------
119,000 Hong Kong Electric Holdings Ltd. 428,483
--------------------------------------------------------------------------------
22,900 Hyder PLC 303,997
--------------------------------------------------------------------------------
19,200 Illinova Corp. 420,000
--------------------------------------------------------------------------------
5,300 Kokusai Den (Kdd) 341,348
--------------------------------------------------------------------------------
24,500 Korea Electric Power Corp., ADR 444,063
--------------------------------------------------------------------------------
200,000 (a)Lenenergo, ADR 170,000
--------------------------------------------------------------------------------
4,500 (b)Mosenergo, ADR 169,875
--------------------------------------------------------------------------------
16,700 National Power Co. PLC, ADR 601,200
--------------------------------------------------------------------------------
85 Nippon Telegraph & Telephone Corp. 810,219
--------------------------------------------------------------------------------
9,000 NIPSCO Industries, Inc. 364,500
--------------------------------------------------------------------------------
5,600 Oest Elektrizitats, Class A 402,689
--------------------------------------------------------------------------------
21,500 Pacificorp 427,313
--------------------------------------------------------------------------------
10,000 Pinnacle West Capital Corp. 293,750
--------------------------------------------------------------------------------
7,700 Portland General Corp. 308,000
--------------------------------------------------------------------------------
46,000 PowerGen PLC 524,489
--------------------------------------------------------------------------------
11,000 PT Telekomunikasi Indonesia, Class CS, ADR 365,750
--------------------------------------------------------------------------------
5,000 Samchully Co. 374,133
--------------------------------------------------------------------------------
26,000 Severn Trent 331,752
--------------------------------------------------------------------------------
19,700 Southern Co. 418,625
--------------------------------------------------------------------------------
65,000 Southern Electric PLC 433,608
--------------------------------------------------------------------------------
18,877 Southern Electric PLC 126,608
--------------------------------------------------------------------------------
</TABLE>
Federated World Utility Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
UTILITIES--CONTINUED
--------------------------------------------------------------------------------
136,000 Stet Societa Finanziaria Telefonica SPA $ 533,742
--------------------------------------------------------------------------------
15,300 TECO Energy, Inc. 380,588
--------------------------------------------------------------------------------
3,200,000 Telecomunicacoes Brasileiras SA 416,972
--------------------------------------------------------------------------------
29,768 Telecomunicacoes de Minas Gerais, Rights 266
--------------------------------------------------------------------------------
10,900 Texas Utilities Co. 374,688
--------------------------------------------------------------------------------
700,000 (a)Thai Telphone & Telecom Public Co., Ltd. 320,774
--------------------------------------------------------------------------------
175,000 (a)Thai Telphone & Telecom Public Co., Ltd. 83,758
--------------------------------------------------------------------------------
37,500 Thames Water PLC 421,285
--------------------------------------------------------------------------------
22,200 Tokyo Electric Power Co. 423,220
--------------------------------------------------------------------------------
12,400 Unicom Corp. 282,100
--------------------------------------------------------------------------------
2,900 Veba AG 163,911
--------------------------------------------------------------------------------
17,000 Westcoast Energy, Inc. 308,125
-------------------------------------------------------------------------------- -------------
Total 17,951,744
-------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $24,417,047) 28,902,444
-------------------------------------------------------------------------------- -------------
CONVERTIBLE SECURITIES--12.6%
- -----------------------------------------------------------------------------------------------
BASIC INDUSTRY--1.7%
--------------------------------------------------------------------------------
22,200 Coeur d'Alene Mines Corp., Conv. Pfd., $1.49 369,075
--------------------------------------------------------------------------------
30,000,000 Kawasaki Steel Corp., Conv. Bond, 1.60%, 9/30/2004 230,828
-------------------------------------------------------------------------------- -------------
Total 599,903
-------------------------------------------------------------------------------- -------------
CELLULAR TELEPHONE--1.3%
--------------------------------------------------------------------------------
6,700 Airtouch Communications, Inc., Conv. Pfd., Series C, $2.13 324,950
--------------------------------------------------------------------------------
150,000 Pilipino Telephone Corp., Conv. Bond, 1.75%, 7/17/2006 144,656
-------------------------------------------------------------------------------- -------------
Total 469,606
-------------------------------------------------------------------------------- -------------
ENERGY MINERALS--0.9%
--------------------------------------------------------------------------------
5,000 (b)Tosco Corp., Conv. Pfd. 294,375
-------------------------------------------------------------------------------- -------------
FINANCE--2.5%
--------------------------------------------------------------------------------
20,000,000 Bank of Tokyo Cayman Finance Ltd., Conv. Bond, 4.25%, 3/31/2049 219,837
--------------------------------------------------------------------------------
3,500 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12 $ 271,250
--------------------------------------------------------------------------------
</TABLE>
Federated World Utility Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
CONVERTIBLE SECURITIES--CONTINUED
- -----------------------------------------------------------------------------------------------
FINANCE--CONTINUED
--------------------------------------------------------------------------------
6,000 Salomon, Inc., DECS, Series CSN, $3.48 364,500
-------------------------------------------------------------------------------- -------------
Total 855,587
-------------------------------------------------------------------------------- -------------
NATURAL GAS DISTRIBUTION--1.2%
--------------------------------------------------------------------------------
8,100 MCN Corp., PRIDES, $8.00 427,275
-------------------------------------------------------------------------------- -------------
UTILITIES--5.0%
--------------------------------------------------------------------------------
260,000,000 Cia Forca e Luz Cataguazes-Leopoldina, Preference 451,732
--------------------------------------------------------------------------------
8,000 (b)Nacional Financiera, SNC, PRIDES, $6.79 352,000
--------------------------------------------------------------------------------
8,200 Nortel Inversora SA 404,875
--------------------------------------------------------------------------------
3,400,000 Telecomunicacoes de Minas Gerais, Preference, Series B 517,376
-------------------------------------------------------------------------------- -------------
Total 1,725,983
-------------------------------------------------------------------------------- -------------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST $4,145,875) 4,372,729
-------------------------------------------------------------------------------- -------------
(C) REPURCHASE AGREEMENT--5.0%
- -----------------------------------------------------------------------------------------------
$ 1,730,000 BT Securities Corporation, 3.60%, dated 5/30/1997, due 6/2/1997
(AT AMORTIZED COST) 1,730,000
-------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $30,292,922)(D) $ 35,005,173
-------------------------------------------------------------------------------- -------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At May 31, 1997, these securities amounted
to $792,348 which represents 2.3% 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 $30,292,922. The
net unrealized appreciation of investments on a federal tax basis amounts to
$4,712,251 which is comprised of $5,726,403 appreciation and $1,014,152
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($34,583,145) at May 31, 1997.
Federated World Utility Fund
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
ADR--American Depositary 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
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $30,292,922) $35,005,173
- ------------------------------------------------------------------------------------------------------
Cash 462
- ------------------------------------------------------------------------------------------------------
Income receivable 102,990
- ------------------------------------------------------------------------------------------------------
Receivable for shares sold 290,569
- ------------------------------------------------------------------------------------------------------
Deferred expenses 10,770
- ------------------------------------------------------------------------------------------------------ ----------
Total assets 35,409,964
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for investments purchased $ 767,561
- -------------------------------------------------------------------------------------------
Payable for shares redeemed 52,899
- -------------------------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 2,310
- -------------------------------------------------------------------------------------------
Payable for taxes withheld 4,049
- ------------------------------------------------------------------------------------------- ---------
Total liabilities 826,819
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS for 2,594,681 shares outstanding $34,583,145
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid in capital $28,404,780
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 4,709,139
- ------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 1,343,336
- ------------------------------------------------------------------------------------------------------
Undistributed net investment income 125,890
- ------------------------------------------------------------------------------------------------------ ----------
Total Net Assets $34,583,145
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($15,987,703 / 1,198,872 shares outstanding) $13.34
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share (100/94.50 of $13.34)* $14.12
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share ** $13.34
- ------------------------------------------------------------------------------------------------------ ----------
CLASS B SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($8,206,655 / 616,589 shares outstanding) $13.31
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share* $13.31
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (94.50/100 of $13.31)** $12.58
- ------------------------------------------------------------------------------------------------------ ----------
CLASS C SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($1,072,021 / 80,512 shares outstanding) $13.32
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share* $13.32
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (99.00/100 of $13.32)** $13.19
- ------------------------------------------------------------------------------------------------------ ----------
CLASS F SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($9,316,766 / 698,708 shares outstanding) $13.33
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share (100/99.00 of $13.33)* $13.46
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (99.00/100 of $13.33)** $13.20
- ------------------------------------------------------------------------------------------------------ ----------
</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
- --------------------------------------------------------------------------------
Six Months Ended May 31, 1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $20,408) $ 484,242
- ------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $200) 57,392
- ------------------------------------------------------------------------------------------------------ ---------
Total income 541,634
- ------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------
Investment advisory fee $ 146,733
- -------------------------------------------------------------------------------------------
Administrative personnel and services fee 107,205
- -------------------------------------------------------------------------------------------
Custodian fees 21,423
- -------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 46,635
- -------------------------------------------------------------------------------------------
Directors'/Trustees' fees 2,236
- -------------------------------------------------------------------------------------------
Auditing fees 8,819
- -------------------------------------------------------------------------------------------
Legal fees 6,956
- -------------------------------------------------------------------------------------------
Portfolio accounting fees 48,135
- -------------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 20,951
- -------------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 4,917
- -------------------------------------------------------------------------------------------
Distribution services fee--Class F Shares 10,801
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 17,259
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 6,984
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 1,639
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class F Shares 10,801
- -------------------------------------------------------------------------------------------
Share registration costs 21,680
- -------------------------------------------------------------------------------------------
Printing and postage 16,280
- -------------------------------------------------------------------------------------------
Insurance premiums 2,203
- -------------------------------------------------------------------------------------------
Taxes 385
- -------------------------------------------------------------------------------------------
Miscellaneous 19,082
- ------------------------------------------------------------------------------------------- ---------
Total expenses 521,124
- -------------------------------------------------------------------------------------------
Waivers and reimbursements--
- --------------------------------------------------------------------------------
Waiver of investment advisory fee $(110,050)
- --------------------------------------------------------------------------------
Waiver of distribution services fee--Class F Shares (10,801)
- --------------------------------------------------------------------------------
Reimbursement of other operating expenses (180,150)
- -------------------------------------------------------------------------------- ---------
Total waivers and reimbursements (301,001)
- ------------------------------------------------------------------------------------------- ---------
Net expenses 220,123
- ------------------------------------------------------------------------------------------------------ ---------
Net investment income 321,511
- ------------------------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 1,342,089
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and liabilities in
foreign currency 1,468,637
- ------------------------------------------------------------------------------------------------------ ---------
Net realized and unrealized gain on investments and foreign currency 2,810,726
- ------------------------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $3,132,237
- ------------------------------------------------------------------------------------------------------ ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated World Utility Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------------
Net investment income $ 321,511 $ 806,966
- ----------------------------------------------------------------------------------
Net realized gain on investments and foreign currency
transactions ($1,342,089 and $1,104,981 net gains, respectively,
as computed for federal tax purposes) 1,342,089 1,134,559
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments
and translation of assets and liabilities in foreign currency 1,468,637 1,930,763
- ---------------------------------------------------------------------------------- ------------- ---------------
Change in net assets resulting from operations 3,132,237 3,872,288
- ---------------------------------------------------------------------------------- ------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------------------------
Class A Shares (247,715) (332,945)
- ----------------------------------------------------------------------------------
Class B Shares (71,975) (59,524)
- ----------------------------------------------------------------------------------
Class C Shares (17,947) (15,981)
- ----------------------------------------------------------------------------------
Class F Shares (160,502) (221,379)
- ----------------------------------------------------------------------------------
Distributions from net realized gains on investments
and foreign currency transactions
- ----------------------------------------------------------------------------------
Class A Shares (426,071) --
- ----------------------------------------------------------------------------------
Class B Shares (143,903) --
- ----------------------------------------------------------------------------------
Class C Shares (35,982) --
- ----------------------------------------------------------------------------------
Class F Shares (281,597) --
- ---------------------------------------------------------------------------------- ------------- ---------------
Change in net assets resulting from distributions to shareholders (1,385,692) (629,829)
- ---------------------------------------------------------------------------------- ------------- ---------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------------
Proceeds from sale of shares 9,044,194 9,401,101
- ----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 1,076,543 461,046
- ----------------------------------------------------------------------------------
Cost of shares redeemed (3,514,359) (3,219,504)
- ---------------------------------------------------------------------------------- ------------- ---------------
Change in net assets resulting from share transactions 6,606,378 6,642,643
- ---------------------------------------------------------------------------------- ------------- ---------------
Change in net assets 8,352,923 9,885,102
- ----------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------
Beginning of period 26,230,222 16,345,120
- ---------------------------------------------------------------------------------- ------------- ---------------
End of period (including undistributed net investment
income of $125,890 and $302,518, respectively) $34,583,145 $ 26,230,222
- ---------------------------------------------------------------------------------- ------------- ---------------
</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>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.69 $ 10.96 $ 9.67 $ 10.06
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.14 0.43 0.42 0.24
- -----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 1.18 1.67 1.27 (0.46)
- ----------------------------------------------------------------------- ------------- --------- --------- -----------
Total from investment operations 1.32 2.10 1.69 (0.22)
- ----------------------------------------------------------------------- ------------- --------- --------- -----------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Distributions from net investment income (0.24) (0.37) (0.40) (0.17)
- -----------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.43) -- -- --
- ----------------------------------------------------------------------- ------------- --------- --------- -----------
Total distributions (0.67) (0.37) (0.40) (0.17)
- ----------------------------------------------------------------------- ------------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 13.34 $ 12.69 $ 10.96 $ 9.67
- ----------------------------------------------------------------------- ------------- --------- --------- -----------
TOTAL RETURN (B) 11.06% 19.54% 17.94% (3.00%)
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 1.32%* 1.05% 0.25% 0.25%*
- -----------------------------------------------------------------------
Net investment income 2.36%* 3.87% 4.39% 5.10%*
- -----------------------------------------------------------------------
Expense waiver/reimbursement (c) 1.98%* 3.11% 4.78% 4.43%*
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $15,988 $12,671 $8,875 $4,948
- -----------------------------------------------------------------------
Average commission rate paid (d) $0.0030 $0.0001 -- --
- -----------------------------------------------------------------------
Portfolio turnover 32 % 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. This voluntary expense decrease is
reflected in both the expense and net investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.68 $ 10.95 $ 10.53
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------
Net investment income 0.12 0.35 0.11
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 1.14 1.67 0.41
- -------------------------------------------------------------------------------- ------------- --------- -----------
Total from investment operations 1.26 2.02 0.52
- -------------------------------------------------------------------------------- ------------- --------- -----------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions from net investment income (0.20) (0.29) (0.10)
- --------------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.43) -- --
- -------------------------------------------------------------------------------- ------------- --------- -----------
Total distributions (0.63) (0.29) (0.10)
- -------------------------------------------------------------------------------- ------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 13.31 $ 12.68 $ 10.95
- -------------------------------------------------------------------------------- ------------- --------- -----------
TOTAL RETURN (B) 10.51% 18.79% 5.00%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Expenses 2.08%* 1.80% 1.00%*
- --------------------------------------------------------------------------------
Net investment income 1.70%* 3.18% 2.99%*
- --------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 1.97%* 3.11% 4.78%*
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $8,207 $4,091 $1,068
- --------------------------------------------------------------------------------
Average commission rate paid (d) $0.0030 $0.0001 --
- --------------------------------------------------------------------------------
Portfolio turnover 32 % 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 periods 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. This voluntary
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.67 $ 10.95 $ 10.53
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------
Net investment income 0.12 0.33 0.15
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 1.16 1.68 0.37
- -------------------------------------------------------------------------------- ------------- --------- -----------
Total from investment operations 1.28 2.01 0.52
- -------------------------------------------------------------------------------- ------------- --------- -----------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions from net investment income (0.20) (0.29) (0.10)
- --------------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.43) -- --
- -------------------------------------------------------------------------------- ------------- --------- -----------
Total distributions (0.63) (0.29) (0.10)
- -------------------------------------------------------------------------------- ------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 13.32 $ 12.67 $ 10.95
- -------------------------------------------------------------------------------- ------------- --------- -----------
TOTAL RETURN (B) 10.67% 18.61% 4.92%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Expenses 2.07%* 1.80% 1.00%*
- --------------------------------------------------------------------------------
Net investment income 1.64%* 3.17% 3.03%*
- --------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 1.97%* 3.11% 4.77%*
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,072 $1,072 $374
- --------------------------------------------------------------------------------
Average commission rate paid (d) $0.0030 $0.0001 --
- --------------------------------------------------------------------------------
Portfolio turnover 32 % 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 periods 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. This voluntary
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.70 $ 10.96 $ 9.66 $ 10.04
- ----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------
Net investment income 0.15 0.43 0.43 0.21
- ----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 1.15 1.67 1.25 (0.43)
- ---------------------------------------------------------------------- ------------- --------- --------- -----------
Total from investment operations 1.30 2.10 1.68 (0.22)
- ---------------------------------------------------------------------- ------------- --------- --------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------
Distributions from net investment income (0.24) (0.36) (0.38) (0.16)
- ----------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.43) -- -- --
- ---------------------------------------------------------------------- ------------- --------- --------- -----------
Total distributions (0.67) (0.36) (0.38) (0.16)
- ---------------------------------------------------------------------- ------------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 13.33 $ 12.70 $ 10.96 $ 9.66
- ---------------------------------------------------------------------- ------------- --------- --------- -----------
TOTAL RETURN (B) 10.89% 19.55% 17.79% (3.07%)
- ----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------
Expenses 1.32%* 1.07% 0.50% 0.50%*
- ----------------------------------------------------------------------
Net investment income 2.33%* 3.87% 4.19% 4.59%*
- ----------------------------------------------------------------------
Expense waiver/reimbursement (c) 2.23%* 3.34% 4.78% 4.43%*
- ----------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------
Net assets, end of period (000 omitted) $9,317 $8,396 $6,028 $4,821
- ----------------------------------------------------------------------
Average commission rate paid (d) $0.0030 $0.0001 -- --
- ----------------------------------------------------------------------
Portfolio turnover 32 % 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 Class F 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. This voluntary expense decrease is
reflected in both the expense and net investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
Federated World Utility Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
(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 eight 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.
(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--Listed equity securities are valued at the last sale
price reported on a national securities exchange. 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.
Federated World Utility Fund
- --------------------------------------------------------------------------------
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 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 risk. The Fund may
enter into foreign currency exchange contracts as purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
crosshedge 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
currencyexchange 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 exchanged contract is offset into a closing
transaction or by 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.
Federated World Utility Fund
- --------------------------------------------------------------------------------
At May 31, 1997, the Fund had outstanding foreign exchange contracts as
follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
CONTRACTS PURCHASED DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
British Pound 6/2/97 143,174 $ 234,621 $ 234,212 $ 409
- ---------------------------
Thailand Baht 6/2/97 2,110,092 83,238 85,951 (2,713)
- --------------------------- ------------- ------------- -------
317,859 320,163 (2,304)
- --------------------------- ------------- ------------- -------
CONTRACTS SOLD
Deutsche Mark 6/2/97 4,029 2,364 2,357 $ (7)
- ---------------------------
Mexican Peso 6/2/97 45,054 5,696 5,697 1
- --------------------------- ------------- ------------- -------
8,060 8,054 (6)
- --------------------------- ------------- ------------- -------
NET UNREALIZED
DEPRECIATION ON FOREIGN
EXCHANGE CONTRACTS $ (2,310)
- --------------------------- -------
</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
Federated World Utility Fund
- --------------------------------------------------------------------------------
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 May 31, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Commonwealth Installment Receipt Trustee Ltd. 7/15/96 $ 211,626
Mosenergo 1/24/96-5/27/97 200,725
Nacional Financiera, SNC, PRIDES 12/22/94-4/22/96 273,805
Tosco Corp., Conv. Pfd. 12/13/96-12/18/96 250,388
</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 May 31, 1997, par value shares ($0.001 per share) authorized were as follows:
<TABLE>
<CAPTION>
POUND OF PAR VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
<S> <C>
Class A 135,000,000
- --------------------------------------------------------------------------------------
Class B 135,000,000
- --------------------------------------------------------------------------------------
Class C 135,000,000
- --------------------------------------------------------------------------------------
Class F 135,000,000
- -------------------------------------------------------------------------------------- ---------------
Total 540,000,000
- -------------------------------------------------------------------------------------- ---------------
</TABLE>
Federated World Utility Fund
- --------------------------------------------------------------------------------
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 257,995 $ 3,260,405 338,469 $ 3,933,948
- ------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 46,803 560,748 23,491 269,640
- ------------------------------------------------------------
Shares redeemed (104,136) (1,313,334) (173,419) (2,031,192)
- ------------------------------------------------------------ --------- ------------- --------- -------------
Net change resulting from
Class A Share transactions 200,662 $ 2,507,819 188,541 $ 2,172,396
- ------------------------------------------------------------ --------- ------------- --------- -------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 298,880 $ 3,791,356 249,058 $ 2,890,530
- ---------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 16,282 194,865 4,171 48,165
- ---------------------------------------------------------------
Shares redeemed (21,334) (268,131) (27,954) (330,601)
- --------------------------------------------------------------- --------- ------------ --------- ------------
Net change resulting from
Class B Share transactions 293,828 $ 3,718,090 225,275 $ 2,608,094
- --------------------------------------------------------------- --------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 57,787 $ 725,814 54,907 $ 642,653
- ----------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 1,824 21,846 368 4,254
- ----------------------------------------------------------------
Shares redeemed (63,680) (825,766) (4,827) (57,104)
- ---------------------------------------------------------------- --------- ----------- ----------- -----------
Net change resulting from
Class C Share transactions (4,069) $ (78,106) 50,448 $ 589,803
- ---------------------------------------------------------------- --------- ----------- ----------- -----------
</TABLE>
Federated World Utility Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 100,266 $ 1,266,619 167,886 $ 1,933,970
- --------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 24,981 299,084 12,102 138,987
- --------------------------------------------------------------
Shares redeemed (87,925) (1,107,128) (68,696) (800,607)
- -------------------------------------------------------------- --------- ------------- --------- ------------
Net change resulting from
Class F Share transactions 37,322 $ 458,575 111,292 $ 1,272,350
- -------------------------------------------------------------- --------- ------------- --------- ------------
Net change resulting from
Fund share transactions 527,743 $ 6,606,378 575,556 $ 6,642,643
- -------------------------------------------------------------- --------- ------------- --------- ------------
</TABLE>
(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 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 FSC.
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
<S> <C>
Class B Shares 0.75%
- ------------------------------------------------------------------------------------------
Class C Shares 0.75%
- ------------------------------------------------------------------------------------------
Class F Shares 0.25%
- ------------------------------------------------------------------------------------------
</TABLE>
Federated World Utility Fund
- --------------------------------------------------------------------------------
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 ("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.
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 $114,130 were borne initially by Administrator. The Fund has agreed
to reimburse Administrator for the organizational and/or start-up administrative
expenses during the five year period following effective date. For the period
ended May 31, 1997, the Fund paid $29,121 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 May 31, 1997, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 14,523,493
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 8,737,116
- --------------------------------------------------------------------------------------------------- -------------
</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.
At May 31, 1997, the diversification of countries was as follows:
Federated World Utility Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
Argentina 7.0%
Australia 2.8%
Austria 1.2%
Brazil 2.5%
Canada 0.9%
Chile 3.5%
Finland 1.6%
France 1.0%
Germany 0.5%
Hong Kong 3.6%
Indonesia 1.1%
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
Italy 1.5%
Japan 5.8%
Korea 2.5%
Mexico 3.5%
Philipines 1.0%
Russia 1.0%
Spain 1.9%
Thailand 1.4%
United Kingdom 10.9%
United States 49.3%
Venezuela 1.4%
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
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, and Secretary
John E. Murray, Jr. Karen M. Brownlee
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
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.
[LOGO OF FEDERATED INVESTORS]
Federated Securities Corp., Distributor
Cusip 981487101
Cusip 981487309
Cusip 981487408
Cusip 981487200
G00259-05 (7/97)
[LOGO OF RECYCLED PAPER]
[LOGO] FEDERATED INVESTORS
Federated
Asia Pacific
Growth Fund
Semi-Annual Report
May 31, 1997
Established 1996
President's Message
[PHOTO APPEARS HERE]
Dear Shareholder:
Federated Asia Pacific Growth Fund was created in February 1996, and I am
pleased to present the first Semi-Annual Report to shareholders of the fund.
This report contains interesting information about the fund from December 1,
1996 through May 31, 1997.
The report begins with a commentary by the fund's portfolio manager, Alexandre
de Bethmann, Vice President of Federated Global Research Corp., covering
international economic and market conditions and fund strategy. Following his
commentary is a complete list of the fund's investments and the financial
statements.
This international stock fund brings investors significant long-term
opportunities from an extremely well-researched portfolio of over 100
corporations in 12 Asian and Pacific Rim countries.* The stocks selected, in
many cases, are internationally recognized industry leaders whose median market
capitalization is over $2 billion.
While the overall Asian Pacific market was weak during the six-month reporting
period, the fund's strong security selection helped it record a positive return
that eclipsed the -3.14% of the market as measured by the Morgan Stanley Capital
International Combined Asia Pacific Index.** Price appreciation of the
securities in the fund's portfolio accounted for the fund's returns. Share class
performance highlights are as follows:+
<TABLE>
<CAPTION>
Total Return
NAV 12/1/96 NAV 5/31/97 Based on NAV
----------- ----------- ------------
<S> <C> <C> <C>
Class A Shares $10.25 $10.79 5.27%
Class B Shares $10.19 $10.69 4.91%
Class C Shares $10.20 $10.70 4.90%
</TABLE>
While the fund delivered positive performance in a negative market environment,
it is important to remember that the true measure of this fund's performance is
in years rather than months. There will inevitably also be periods of unfriendly
volatility.
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** The Morgan Stanley Capital International Combined Asia Pacific Index is an
unmanaged, market value-weighted average of the performance of securities listed
on the stock exchange of 13 countries in the Pacific Rim and Asian regions. This
index is unmanaged, and investments cannot be made in an index.
+ Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns for the period based on offering price for Class A, B, and C
Shares were (0.55%), (0.59%), and 3.92%, respectively.
In the current Asia Pacific investment environment, I recommend that you add to
your account on a regular basis to take advantage of price fluctuations and to
use the dollar-cost averaging method of investing.++ Simply stated, buy shares
regularly and invest the same dollar amount each time.
We will continue to keep you up-to-date on the details of your investment on a
regular basis. Thank you for the confidence you have shown by entrusting a
portion of your wealth to Federated Asia Pacific Growth Fund.
Sincerely,
/s/ Richard B. Fisher
Richard B. Fisher
President
July 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
[PHOTO APPEARS HERE]
Alexandre de Bethmann
Vice President
Federated Global
Research Corp.
Q How did the Asian Pacific markets fare during the six-month reporting period?
A The Asia Pacific markets as measured by the Morgan Stanley Capital
International Combined Asia Pacific Index,* declined by 3.14% for the period
between 12/1/96 through 5/31/97. The lackluster performance of the Japanese
market as well as the depreciation of the yen were responsible for more than
half of the decline of the index. The single most import factor in the southeast
Asia markets was the yen depreciation of 2.12%. With Japan representing 60% of
the Morgan Stanley Capital International Combined Asia Pacific Index, the impact
of the yen on the index was a depreciation of 1.30%.
Q In this environment, how did Federated Asia Pacific Growth Fund perform
compared to its benchmark?
A Federated Asia Pacific Growth Fund produced positive returns, considerably
outpacing the (3.14%) total return of the market as measured by the fund's
benchmark, the Morgan Stanley Capital International Combined Asia Pacific Index.
The six-month total return for Class A Shares was 5.27% based on net asset
value. The total returns for Class B Shares and Class C Shares based on net
asset value were 4.91% and 4.90%, respectively.**
Q What strategies accounted for the fund's outperformance?
A Stock selection in strong companies across 12 countries was the key
determinant of the fund's outperformance relative to the index. On a country
basis, our overweight position in Hong Kong also significantly contributed to
our outperforming the index.
* The Morgan Stanley Capital International Combined Asia Pacific Index 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. This
index is unmanaged, and investments cannot be made in an index.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns for the period based on offering price for Class A, B, and C
Shares were (0.55%), (0.59%), and 3.92%, respectively.
Q How were the fund's $8 million in assets allocated by country at the end of
the reporting period, and what were the fund's top ten holdings?
A As of May 31, 1997, the country allocations were:
<TABLE>
<CAPTION>
Country Allocation
----------------------- -----------
<S> <C>
Japan (developed) 51.59%
Hong Kong (developed) 17.24%
Singapore (developed) 4.42%
Malaysia (emerging) 4.19%
Australia (developed) 4.11%
Korea (emerging) 3.82%
Indonesia (emerging) 3.16%
New Zealand (developed) 2.47%
Philippines (emerging) 1.36%
Thailand (emerging) 0.37%
Pakistan (emerging) 0.35%
</TABLE>
The fund's top 10 holdings were:
<TABLE>
<CAPTION>
Percentage
of
Security Name Country Net Assets Industry
- ------------------------------ ------- ---------- ------------------
<S> <C> <C> <C>
Canare Electric Co. Ltd Japan 3.32% Electronic
Components,
Instruments
Nippon Tele. & Tele. Corp. Japan 2.96% Telecommunications
Japan Associated Finance Japan 2.90% Financial Services
Mitsubishi Trust & Bk Tokyo Japan 2.85% Banking
Sumitomo Realty & Dev. Japan 2.83% Real Estate
Matsushita Kotobuki Elect. Japan 2.67% Electrical &
Electronics
Mitsubishi Estate Co. Ltd Japan 2.54% Real Estate
Sumitomo Bank Ltd., Osaka Japan 2.40% Banking
Circle K. Japan Co. Ltd. Japan 2.38% Miscellaneous
Materials &
Commod.
Taiyo Yuden Co. Japan 2.38% Electronic
Components,
Instruments
Total percentage of net assets 24.83%
</TABLE>
Q Does the fund invest in developed and emerging markets?
A Yes. Developed countries in the Pacific Rim include Japan, Australia, and New
Zealand. There are over 10 emerging market countries, i.e., Malaysia, Indonesia,
Philippines, and Thailand, to name a few.
Q As we approach mid-year, what is your outlook for the Asia Pacific markets,
particularly Japan and Hong Kong, which make up more than half of the fund's
portfolio?
A We have a more optimistic outlook for the Asian markets in the second half,
and we expect the Asian markets to rebound. A number of physiological factors
currently overshadowing the markets are expected to be resolved and could lead
to improved investor confidence that would fuel a new upward leg in the Asian
markets. The yen at 125 is not sustainable; we expect the currency to strengthen
and should stabilize in the neighborhood of 110 to 115. The concerns over
Thailand's financial system and the impending devaluation will be resolved in
the coming months. Finally, the concerns of the handover of Hong Kong to the
motherland will be behind us. Once these investor concerns are digested in the
markets, we expect to deliver attractive returns to our investors in the Asian
markets.
Federated Asia Pacific Growth Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- --------- ------------------------------------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--93.1%
- ------------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES--0.3%
-------------------------------------------------------------------------------------
218 Samsung Electronics Co. $ 21,463
-------------------------------------------------------------------------------------
218 (a)Samsung Electronics Co., Rights 167
------------------------------------------------------------------------------------- ------------
Total 21,630
------------------------------------------------------------------------------------- ------------
AUTOMOBILE--3.0%
-------------------------------------------------------------------------------------
4,000 Cycle & Carriage Ltd. 40,551
-------------------------------------------------------------------------------------
255 (a)Dongah Tire Ind 16,304
-------------------------------------------------------------------------------------
5,000 Honda Motor Co. Ltd. 146,844
-------------------------------------------------------------------------------------
16,000 Singapore Technologies Automotive Ltd. 40,048
------------------------------------------------------------------------------------- ------------
Total 243,747
------------------------------------------------------------------------------------- ------------
BANKING--13.8%
-------------------------------------------------------------------------------------
1,500 Bangkok Bank Public Co., Ltd. 13,442
-------------------------------------------------------------------------------------
20,000 (a)(b)Faysal Bank 13,383
-------------------------------------------------------------------------------------
3,600 HSBC Holdings PLC 109,182
-------------------------------------------------------------------------------------
6,795 Kookmin Bank 122,905
-------------------------------------------------------------------------------------
55,000 Lippo Bank 55,396
-------------------------------------------------------------------------------------
16,000 Mitsubishi Trust & Banking Corp., Tokyo 229,455
-------------------------------------------------------------------------------------
4,000 Oversea-Chinese Banking Corp. Ltd. 49,780
-------------------------------------------------------------------------------------
40,000 PT Modernbank 34,944
-------------------------------------------------------------------------------------
2,200 Philippine Commercial International Bank 21,479
-------------------------------------------------------------------------------------
2,660 Shinhan Bank 34,444
-------------------------------------------------------------------------------------
14,000 Sumitomo Bank Ltd., Osaka 193,559
-------------------------------------------------------------------------------------
20,000 (a)Sumitomo Trust & Banking 176,900
-------------------------------------------------------------------------------------
10,000 Westpac Banking Corp. Ltd. 54,307
------------------------------------------------------------------------------------- ------------
Total 1,109,176
------------------------------------------------------------------------------------- ------------
</TABLE>
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- --------- ------------------------------------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
BEVERAGE & TOBACCO--0.3%
-------------------------------------------------------------------------------------
200 Lotte Chilsung Beverage Co. $ 21,312
------------------------------------------------------------------------------------- ------------
BROADCASTING & PUBLISHING--1.1%
-------------------------------------------------------------------------------------
11,000 (a)News Corp., Ltd. 48,846
-------------------------------------------------------------------------------------
2,000 Singapore Press Holdings Ltd. 39,852
------------------------------------------------------------------------------------- ------------
Total 88,698
------------------------------------------------------------------------------------- ------------
ELECTRICAL & ELECTRONICS--8.2%
-------------------------------------------------------------------------------------
400 Canon Copyer Sales Co 4,156
-------------------------------------------------------------------------------------
2,000 Mabuchi Motor Co. 113,697
-------------------------------------------------------------------------------------
6,000 Matsushita Kotobuk Electric 215,371
-------------------------------------------------------------------------------------
18,000 (a)Minolta Co. 119,176
-------------------------------------------------------------------------------------
710 (a)Sindo Ricoh Co. 40,936
-------------------------------------------------------------------------------------
2,000 Sony Corp. 168,484
------------------------------------------------------------------------------------- ------------
Total 661,820
------------------------------------------------------------------------------------- ------------
ELECTRONIC COMPONENTS, INSTRUMENTS--10.6%
-------------------------------------------------------------------------------------
8,000 Canare Electric Co. Ltd. 267,926
-------------------------------------------------------------------------------------
3,300 Hana Microelectronics Co., Ltd. 16,668
-------------------------------------------------------------------------------------
14,000 Hitachi Ltd. 149,077
-------------------------------------------------------------------------------------
7,000 Hitachi Maxell 162,301
-------------------------------------------------------------------------------------
15,000 Malaysian Pacific Industries 65,666
-------------------------------------------------------------------------------------
10,000 Malaysian Pacific Industries, Rights 895
-------------------------------------------------------------------------------------
12,000 Taiyo Yuden Co 191,670
------------------------------------------------------------------------------------- ------------
Total 854,203
------------------------------------------------------------------------------------- ------------
ENERGY--OIL & GAS--0.7%
-------------------------------------------------------------------------------------
23,000 Oil Search Ltd. 57,688
------------------------------------------------------------------------------------- ------------
</TABLE>
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- --------- ------------------------------------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
ENERGY SOURCES--1.9%
-------------------------------------------------------------------------------------
195,000 (a)Belle Corp. $ 51,754
-------------------------------------------------------------------------------------
630 (a)(b)Hub Power Co., GDR 14,711
-------------------------------------------------------------------------------------
10,000 Woodside Petroleum Ltd. 84,431
------------------------------------------------------------------------------------- ------------
Total 150,896
------------------------------------------------------------------------------------- ------------
FINANCIAL SERVICES--3.8%
-------------------------------------------------------------------------------------
3,000 Japan Associated Finance 233,405
-------------------------------------------------------------------------------------
16,500 (a)PT Putra Surya Multidana 19,671
-------------------------------------------------------------------------------------
34,666 Public Bank Bhd 54,357
------------------------------------------------------------------------------------- ------------
Total 307,433
------------------------------------------------------------------------------------- ------------
FOOD & HOUSEHOLD PRODUCTS--1.3%
-------------------------------------------------------------------------------------
10,000 (a)Coles Myer Limited 46,660
-------------------------------------------------------------------------------------
15,000 (a)(b)Want Want Holdings 54,300
------------------------------------------------------------------------------------- ------------
Total 100,960
------------------------------------------------------------------------------------- ------------
HEALTH & PERSONAL CARE--2.0%
-------------------------------------------------------------------------------------
5,000 Sankyo Co. Ltd. 158,437
------------------------------------------------------------------------------------- ------------
LEISURE & TOURISM--1.7%
-------------------------------------------------------------------------------------
4,800 (b)People Co., Ltd. 140,146
------------------------------------------------------------------------------------- ------------
MACHINERY & ENGINEERING--1.5%
-------------------------------------------------------------------------------------
5,000 Nissei ASB Machine Co. 62,258
-------------------------------------------------------------------------------------
12,000 UMW Holdings Bhd 61,607
------------------------------------------------------------------------------------- ------------
Total 123,865
------------------------------------------------------------------------------------- ------------
MERCHANDISING--3.8%
-------------------------------------------------------------------------------------
124,000 China EB-IHD Holdings Ltd. 190,437
-------------------------------------------------------------------------------------
2,000 Ito-Yokado Co., Ltd. 114,040
-------------------------------------------------------------------------------------
120 Iuchi Seiedo Co. Ltd. 3,710
------------------------------------------------------------------------------------- ------------
Total 308,187
------------------------------------------------------------------------------------- ------------
</TABLE>
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- --------- ------------------------------------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
METALS--STEEL--0.5%
-------------------------------------------------------------------------------------
35,000 (a)Queensland Metals Corp. NL $ 38,922
------------------------------------------------------------------------------------- ------------
MISCELLANEOUS MATERIALS & COMMODITIES--4.0%
-------------------------------------------------------------------------------------
93,000 Berjaya Group Bhd 122,880
-------------------------------------------------------------------------------------
3,600 Circle K Japan Co. Ltd. 191,979
-------------------------------------------------------------------------------------
400 Sanyo Pax Co., Ltd. 7,042
------------------------------------------------------------------------------------- ------------
Total 321,901
------------------------------------------------------------------------------------- ------------
MULTI-INDUSTRY--4.6%
-------------------------------------------------------------------------------------
8,000 (a)Beijing Enterprises 46,667
-------------------------------------------------------------------------------------
23,000 Citic Pacific Ltd. 131,496
-------------------------------------------------------------------------------------
121,000 (a)Guiness Peat Group PLC 69,262
-------------------------------------------------------------------------------------
10,000 Hutchison Whampoa 83,242
-------------------------------------------------------------------------------------
13,000 Wing Tai Holdings, Ltd. 38,719
------------------------------------------------------------------------------------- ------------
Total 369,386
------------------------------------------------------------------------------------- ------------
PHARMACEUTICALS--0.5%
-------------------------------------------------------------------------------------
51,000 PT Danko Laboratories 42,981
------------------------------------------------------------------------------------- ------------
REAL ESTATE--17.0%
-------------------------------------------------------------------------------------
14,000 (a)(b)Cheung Kong 143,189
-------------------------------------------------------------------------------------
44,000 (b)China Resources Enterprises Ltd. 154,456
-------------------------------------------------------------------------------------
10,000 City Developments Ltd. 92,987
-------------------------------------------------------------------------------------
64,050 (a)(b)Filinvest Land, Inc. 14,571
-------------------------------------------------------------------------------------
43,000 Great Eagle Holding Co. 152,055
-------------------------------------------------------------------------------------
15,000 (a)Mitsubishi Estate Co. Ltd. 204,809
-------------------------------------------------------------------------------------
18,000 (a)New World Development Co. Ltd. 114,293
-------------------------------------------------------------------------------------
100,000 Sino Land Co. 116,797
-------------------------------------------------------------------------------------
29,000 Sumitomo Reality & Dev. 227,833
-------------------------------------------------------------------------------------
30,000 Tokyu Land Corp 125,204
-------------------------------------------------------------------------------------
</TABLE>
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- --------- ------------------------------------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
REAL ESTATE--CONTINUED
-------------------------------------------------------------------------------------
205,000 (a)Universal Rightfield Property $ 21,763
------------------------------------------------------------------------------------- ------------
Total 1,367,957
------------------------------------------------------------------------------------- ------------
RECREATION, OTHER CONSUMER GOODS--1.9%
-------------------------------------------------------------------------------------
2,000 Nintendo Corp. Ltd. 156,290
------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS--4.8%
-------------------------------------------------------------------------------------
4,000 Hong Kong Telecommunications Ltd., ADR 89,112
-------------------------------------------------------------------------------------
25 Nippon Telegraph & Telephone Corp. 238,300
-------------------------------------------------------------------------------------
16,000 PT Indosat 47,688
-------------------------------------------------------------------------------------
1,493 (a)SK Telecom Co. Ltd., ADR 13,810
------------------------------------------------------------------------------------- ------------
Total 388,910
------------------------------------------------------------------------------------- ------------
TEXTILES & APPAREL--0.4%
-------------------------------------------------------------------------------------
48,000 PT Great River Industries 29,106
------------------------------------------------------------------------------------- ------------
TRANSPORTATION--1.9%
-------------------------------------------------------------------------------------
70,000 (a)Mitsui Osk Lines 156,290
------------------------------------------------------------------------------------- ------------
TRANSPORTATION--AIRLINES--2.0%
-------------------------------------------------------------------------------------
44,000 Air New Zealand Ltd., Class B 130,179
-------------------------------------------------------------------------------------
14,000 Malaysian Airline System 32,316
------------------------------------------------------------------------------------- ------------
Total 162,495
------------------------------------------------------------------------------------- ------------
TRANSPORTATION--ROAD & RAIL--0.3%
-------------------------------------------------------------------------------------
22,667 PT Steady Safe 24,927
------------------------------------------------------------------------------------- ------------
TRANSPORTATION--SHIPPING--0.7%
-------------------------------------------------------------------------------------
198,000 (a)Pacific Ports Co. Ltd. 58,773
------------------------------------------------------------------------------------- ------------
UTILITIES--ELECTRICAL & GAS--0.5%
-------------------------------------------------------------------------------------
1,190 Korea Electric Power Corp. 36,708
------------------------------------------------------------------------------------- ------------
TOTAL COMMON STOCKS (IDENTIFIED COST $6,512,313) 7,502,844
------------------------------------------------------------------------------------- ------------
</TABLE>
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------------------------------------------------------------------------------- ------------
<C> <S> <C>
(C) REPURCHASE AGREEMENT--5.6%
- ------------------------------------------------------------------------------------------------
455,000 BT Securities Corporation, 5.56%, dated 5/30/1997, due 6/2/1997
(at amortized cost) $ 455,000
------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $6,967,313)(D) $ 7,957,844
------------------------------------------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At May 31, 1997, these securities amounted to
$534,756 which represents 6.6% 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 $6,967,313. The
net unrealized appreciation of investments on a federal tax basis amounts to
$990,531 which is comprised of $1,154,440 appreciation and $163,909
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($8,059,696) at May 31, 1997.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
GDR--Global Depository 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
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $6,967,313) $7,957,844
- -------------------------------------------------------------------------------------------------------
Cash 23,483
- -------------------------------------------------------------------------------------------------------
Income receivable 15,605
- -------------------------------------------------------------------------------------------------------
Receivable for investments sold 47,840
- -------------------------------------------------------------------------------------------------------
Receivable for shares sold 113,774
- -------------------------------------------------------------------------------------------------------
Deferred expenses 13,090
- ------------------------------------------------------------------------------------------------------- ---------
Total assets 8,171,636
- -------------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------
Payable for investments purchased $ 110,002
- --------------------------------------------------------------------------------------------
Payable for taxes withheld 1,707
- --------------------------------------------------------------------------------------------
Net payable for foreign exchange contracts 231
- -------------------------------------------------------------------------------------------- ---------
Total liabilities 111,940
- ------------------------------------------------------------------------------------------------------- ---------
NET ASSETS for 750,329 shares outstanding $8,059,696
- ------------------------------------------------------------------------------------------------------- ---------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------------
Paid in capital $7,541,038
- -------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 992,296
- -------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (443,366)
- -------------------------------------------------------------------------------------------------------
Net investment loss (30,272)
- ------------------------------------------------------------------------------------------------------- ---------
Total Net Assets $8,059,696
- ------------------------------------------------------------------------------------------------------- ---------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------------
CLASS A SHARES:
- -------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($3,943,941 / 365,460 shares outstanding) $10.79
- ------------------------------------------------------------------------------------------------------- ---------
Offering Price Per Share (100/94.50 of $10.79)* $11.42
- ------------------------------------------------------------------------------------------------------- ---------
Redemption Proceeds Per Share $10.79
- ------------------------------------------------------------------------------------------------------- ---------
CLASS B SHARES:
- -------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($3,619,095 / 338,455 shares outstanding) $10.69
- ------------------------------------------------------------------------------------------------------- ---------
Offering Price Per Share $10.69
- ------------------------------------------------------------------------------------------------------- ---------
Redemption Proceeds Per Share (94.50/100 of $10.69)** $10.10
- ------------------------------------------------------------------------------------------------------- ---------
CLASS C SHARES:
- -------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($496,660 / 46,414 shares outstanding) $10.70
- ------------------------------------------------------------------------------------------------------- ---------
Offering Price Per Share $10.70
- ------------------------------------------------------------------------------------------------------- ---------
Redemption Proceeds Per Share (99.00/100 of $10.70)** $10.59
- ------------------------------------------------------------------------------------------------------- ---------
</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
- --------------------------------------------------------------------------------
Six Months Ended May 31, 1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $4,632) $ 34,170
- ------------------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $34) 11,272
- ------------------------------------------------------------------------------------------------------ ---------
Total income 45,442
- ------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------
Investment advisory fee $ 38,028
- -------------------------------------------------------------------------------------------
Administrative personnel and services fee 92,247
- -------------------------------------------------------------------------------------------
Custodian fees 17,546
- -------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 35,348
- -------------------------------------------------------------------------------------------
Directors'/Trustees' fees 400
- -------------------------------------------------------------------------------------------
Auditing fees 8,382
- -------------------------------------------------------------------------------------------
Legal fees 1,979
- -------------------------------------------------------------------------------------------
Portfolio accounting fees 40,250
- -------------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 10,059
- -------------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 1,717
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 4,717
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 3,353
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 572
- -------------------------------------------------------------------------------------------
Share registration costs 12,644
- -------------------------------------------------------------------------------------------
Printing and postage 10,370
- -------------------------------------------------------------------------------------------
Insurance premiums 1,912
- -------------------------------------------------------------------------------------------
Taxes 450
- -------------------------------------------------------------------------------------------
Miscellaneous 3,650
- ------------------------------------------------------------------------------------------- ---------
Total expenses 283,624
- -------------------------------------------------------------------------------------------
Waivers and reimbursements--
- --------------------------------------------------------------------------------
Waiver of investment advisory fee $ (38,028)
- --------------------------------------------------------------------------------
Reimbursement of other operating expenses (172,069)
- -------------------------------------------------------------------------------- ---------
Total waivers and reimbursements (210,097)
- ------------------------------------------------------------------------------------------- ---------
Net expenses 73,527
- ------------------------------------------------------------------------------------------------------ ---------
Net operating loss (28,085)
- ------------------------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ------------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency transactions (net of foreign taxes withheld of
$285) (440,227)
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 864,206
- ------------------------------------------------------------------------------------------------------ ---------
Net realized and unrealized gain on investments and foreign currency 423,979
- ------------------------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $ 395,894
- ------------------------------------------------------------------------------------------------------ ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Asia Pacific Growth Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
(UNAUDITED) ENDED
MAY 31, NOVEMBER 30,
1997 1996 (A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------
Net operating loss $ (28,085) $ (9,521)
- ------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency transactions
($440,227 net loss and $3,404 net gain, respectively,
as computed for federal tax purposes) (440,227) (18,571)
- ------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 864,206 128,090
- ------------------------------------------------------------------------------ -------------- -----------------
Change in net assets resulting from operations 395,894 99,998
- ------------------------------------------------------------------------------ -------------- -----------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------------------------
Proceeds from sale of shares 4,807,101 14,841,199
- ------------------------------------------------------------------------------
Cost of shares redeemed (4,405,375) (7,679,121)
- ------------------------------------------------------------------------------ -------------- -----------------
Change in net assets resulting from share transactions 401,726 7,162,078
- ------------------------------------------------------------------------------ -------------- -----------------
Change in net assets 797,620 7,262,076
- ------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------
Beginning of period 7,262,076 --
- ------------------------------------------------------------------------------ -------------- -----------------
End of period $ 8,059,696 $ 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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
MAY 31, NOVEMBER 30,
1997 1996 (A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.25 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net operating loss (0.03) 0.00
- ------------------------------------------------------------------------------
Net realized and unrealized gain
on investments and foreign currency 0.57 0.25
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 0.54 0.25
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.79 $ 10.25
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 5.27% 2.50%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 1.79%* 1.85%*
- ------------------------------------------------------------------------------
Net operating loss (0.56)%* --
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 6.06%* 7.02%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,944 $4,593
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0026 $0.0039
- ------------------------------------------------------------------------------
Portfolio turnover 98% 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
(UNAUDITED) ENDED
MAY 31, NOVEMBER 30,
1997 1996 (A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.19 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net operating loss (0.04) (0.03)
- ------------------------------------------------------------------------------
Net realized and unrealized gain
on investments and foreign currency 0.54 0.22
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 0.50 0.19
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.69 $ 10.19
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 4.91% 1.90%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 2.53%* 2.60%*
- ------------------------------------------------------------------------------
Net operating loss (1.14%)* (0.86%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 6.10%* 7.02%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,619 $2,273
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0026 $0.0039
- ------------------------------------------------------------------------------
Portfolio turnover 98% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
(UNAUDITED) ENDED
MAY 31, NOVEMBER 30,
1997 1996 (A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.20 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net operating loss (0.06) (0.05)
- ------------------------------------------------------------------------------
Net realized and unrealized gain
on investments and foreign currency 0.56 0.25
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 0.50 0.20
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.70 $ 10.20
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 4.90% 2.00%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 2.54%* 2.60%*
- ------------------------------------------------------------------------------
Net operating loss (1.13%)* (0.90%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 6.13%* 7.02%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $497 $397
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0026 $0.0039
- ------------------------------------------------------------------------------
Portfolio turnover 98% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
Federated Asia Pacific Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
May 31, 1997
(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 eight 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--Listed equity securities are valued at the last sale
price reported on a national securities exchange. 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 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.
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
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. Certain dividends from foreign securities may be recorded after the
ex-dividend date based upon when information becomes available to the Fund
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 risk. The Fund may
enter into foreign currency exchange contracts as 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 exchanged contract is offset into a closing
transaction or by delivery or receipt of the currency. Risk may arise upon
entering these contracts from the potential inability of counterparties to
meet the terms of their commitments and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
At May 31, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS TO EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C>
Contracts sold:
06/02/97 14,154 Hong Kong Dollar $ 1,827 $ 1,827 $ --
06/02/97 40,798,248 Indonesian Rupiah 16,700 16,772 (72)
06/04/97 82,042,380 Indonesian Rupiah 33,569 33,728 (159)
06/03/97 513 New Zealand Dollar 354 354 --
06/02/97 799 Singapore Dollar 559 559 --
------
Net Unrealized Depreciation on Foreign Exchange Contracts $ (231)
------
</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
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
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 May 31, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATES ACQUISITION COST
<S> <C> <C>
Cheung Kong 5/27/96-1/7/97 $ 122,469
China Resources Enterprises Ltd. 12/4/96-12/5/96 73,630
Faysal Bank 10/24/96 11,390
Filinvest Land, Inc. 2/27/96 19,407
Hub Power Co., GDR 5/3/96-10/24/96 13,771
People Co., Ltd. 9/2/96-9/26/96 148,718
Want Want Holdings 4/11/97 51,050
</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 May 31, 1997, par value shares ($0.001 per share) authorized were as follows:
<TABLE>
<CAPTION>
POUND OF PAR VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
<S> <C>
Class A 135,000,000
- --------------------------------------------------------------------------------------
Class B 135,000,000
- --------------------------------------------------------------------------------------
Class C 135,000,000
- -------------------------------------------------------------------------------------- ---------------
Total 405,000,000
- -------------------------------------------------------------------------------------- ---------------
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 166,197 $ 1,657,416 1,121,851 $ 11,556,721
- -----------------------------------------------------------
Shares redeemed (248,817) (2,471,888) (673,771) (7,122,242)
- ----------------------------------------------------------- --------- ------------ ---------- -------------
Net change resulting from
Class A Share transactions (82,620) $ (814,472) 448,080 $ 4,434,479
- ----------------------------------------------------------- --------- ------------ ---------- -------------
</TABLE>
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 242,076 $ 2,405,017 251,041 $ 2,607,100
- ------------------------------------------------------------
Shares redeemed (126,542) (1,266,708) (28,120) (287,998)
- ------------------------------------------------------------ --------- ------------ --------- ------------
Net change resulting from
Class B Share transactions 115,534 $ 1,138,309 222,921 $ 2,319,102
- ------------------------------------------------------------ --------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 74,296 $ 744,668 64,647 $ 677,378
- -------------------------------------------------------------
Shares redeemed (66,820) (666,779) (25,709) (268,881)
- ------------------------------------------------------------- --------- ------------ --------- ------------
Net change resulting from
Class C Share transactions 7,476 $ 77,889 38,938 $ 408,497
- ------------------------------------------------------------- --------- ------------ --------- ------------
Net change resulting from
share transactions 40,390 $ 401,726 709,939 $ 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 Corporation's Class A, Class B and Class C Shares.
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
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 NET
SHARE CLASS NAME 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
May 31, 1997, and has no present intention of paying or accruing a 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 May 31, 1997, the Fund paid $2,948 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 May 31, 1997, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
<S> <C>
PURCHASES $ 6,440,149
- ---------------------------------------------------------------------------------------------------- ------------
SALES $ 7,029,464
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
Federated Asia Pacific Growth Fund
- --------------------------------------------------------------------------------
(6) CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At May 31, 1997, the diversification of countries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE
OF NET
COUNTRY ASSETS
<S> <C>
Australia 4.1%
Hong Kong 17.2
Indonesia 3.1
Japan 51.6
Korea, Republic of 3.8
Malaysia 4.2
New Zealand 2.5
Pakistan 0.3
Philippines 1.4
Singapore 4.5
Thailand 0.4
</TABLE>
<TABLE>
<CAPTION>
Directors Officers
- --------------------------------------------------------------------------------
<S> <C>
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, and Secretary
John E. Murray, Jr. Karen M. Brownlee
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
</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 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.
[LOGO] FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 981487507
Cusip 981487606
Cusip 981487705
G01934-02 (7/97) [LOGO OF RECYCLED PAPER]
[LOGO] FEDERATED INVESTORS
Federated
Emerging
Markets
Fund
Semi-Annual Report
May 31, 1997
Established 1996
President's Message
Dear Fellow Shareholder:
Federated Emerging Markets Fund was created in February 1996, and I am pleased
to present the first Semi-Annual Report to shareholders. Since its inception,
the fund has performed very well for its shareholders, and share value has
continued to increase. This report contains interesting information about the
fund from December 1, 1996 through May 31, 1997.
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.* The countries are found in Africa, Latin
America, most of Asia and parts of Europe. Currently, the fund's holdings
represent 31 countries and approximately 300 corporations. The fund's assets
total $62 million as of May 31, 1997.
During the six-month reporting period, the fund delivered very strong total
return performance that far eclipsed that of its benchmark, the International
Finance Corporation Investable Composite Index.** The fund's broadly diversified
selection across many stock issues, with holdings averaging less than 1% of the
fund's total assets, helped the fund share value increase substantially.***
<TABLE>
<CAPTION>
NAV NAV NAV Total Return
12/1/96 5/31/97 Change Based on NAV
------- ------- ------- --------------
<S> <C> <C> <C> <C>
Class A Shares $11.10 $13.35 20% 20.27%
Class B Shares $11.04 $13.22 20% 19.75%
Class C Shares $11.05 $13.24 19% 19.82%
</TABLE>
* 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.
** International Finance Corporation Investable Composite Index is an
investable, market capitalization-weighted index of over 1,000 securities in
26 emerging market countries. This index is unmanaged, and investments
cannot be made in an index.
*** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so
that an investor's shares, when redeemed, may be worth more or less than
their original cost. Total returns for the period based on offering price
for Class A, B, and C Shares were 13.62%, 14.22%, and 18.82%, respectively.
This emerging markets fund has provided shareholders with strong returns since
it began operation on February 28, 1996, and it is important to remember that
the true measure of performance is clearly in years rather than months. There
will inevitably be periods of negative short-term fluctuation, as well as
positive returns.
In this investment environment, 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.+
Thank you for your confidence in Federated Emerging Markets Fund. 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 entrusted a portion of your wealth
with the fund.
Sincerely,
[LOGO]
Richard B. Fisher
President
July 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
[PHOTO]
Jolanta Wysocka
Vice President
Federated Global
Research Corp.
What is your analysis of the developing markets during the reporting period?
Emerging markets continued to deliver strong performance during the six-month
reporting period ending May 31, 1997. Strength came mainly from European, Latin
American, and African countries, while many of the Asian markets continued to
underperform. Leading the list of winners was Greece with a 54% return, followed
closely by Brazil with a 49% gain. Hungary was up 43%, and Turkey rose more than
39%. On the downside, Thailand continued to be weak posting a loss of more than
40%. The Czech Republic, Philippines, and Malaysia also recorded double-digit
losses. These are U.S. dollar returns in International Finance Corporation
investable indices.
How did Federated Emerging Markets Fund perform during the period compared to
its benchmark and the universe of emerging markets funds?
The fund has provided very strong total returns over the six-month reporting
period, outperforming both the benchmark index and the average emerging markets
fund. Total returns for the fund based on net asset value were: Class A Shares,
20.27%; Class B Shares, 19.75%; and Class C Shares 19.82%.* By comparison, the
fund's benchmark, the International Finance Corporation Investable Composite
Index,** was up 9.54% during the same period of time.
* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the period based on offering price for Class
A, B, and C Shares were 13.62%, 14.22%, and 18.82%, respectively.
** International Finance Corporation Investable Composite Index is an
investable, market capitalization-weighted index of over 1,000 securities in
26 emerging market countries. This index is unmanaged, and investments cannot
be made in an index.
Can you give shareholders some insight into your approach to selecting and
weighting countries during the period?
The fund's investment philosophy is to broadly diversify its holdings, both in
terms of the number of countries (+30) as well as the number of companies
(+300). Country selection and allocation played key roles in the fund's record
of outperforming the benchmark. Our emphasis on smaller markets with attractive
valuations resulted in relatively high weightings in Greece, Turkey, Hungary,
Peru, Russia and Mauritius. Egypt and Lebanon were added to the portfolio during
that time and made a substantial contribution to performance. During the past
six months, we shied away from Asian markets and substantially underweighted
Malaysia and Thailand.
What were the net asset country allocations as of May 31, 1997?
The net assets were well diversified across the following countries:
<TABLE>
<CAPTION>
Country % Net Assets
- --------------- -------------
<S> <C>
Brazil 5.4%
Russia 4.9%
Portugal 4.7%
Mauritius 4.4%
Egypt 4.2%
Greece 4.0%
Peru 4.0%
Argentina 3.8%
Indonesia 3.8%
Korea 3.6%
Hungary 3.4%
Mexico 3.1%
Poland 3.0%
Turkey 2.8%
India 2.8%
<CAPTION>
Country % Net Assets
- --------------- -------------
<S> <C>
Lebanon 2.6%
Philippines 2.3%
Czech Republic 2.0%
Chile 1.9%
Thailand 1.6%
Malaysia 1.1%
Croatia 1.0%
China 1.0%
Hong Kong 0.7%
Pakistan 0.6%
Israel 0.5%
Botswana 0.3%
Uruguay 0.2%
Colombia 0.2%
Taiwan 0.1%
</TABLE>
What were the fund's top ten holdings?
The top 10 holdings as of May 31, 1997 were:
<TABLE>
<CAPTION>
Name Country % of Assets Industry
- ----------------------------------- ------------------ -------------
<S> <C> <C> <C>
Nizhny Novgordo Svyazinform, RDC Russia 1.93% Telecom
Egypt Gas Egypt 1.24% Utilities-
Electric/Gas
Banque Audi, GDR, 144A Lebanon 1.00% Banking
Banque Libanaise Pour Le comm,
GDR, Class B, 144A Lebanon 0.92% Banking
Red October Russia 0.83% Food &
Household
Products
Zagrebacka Banka, GDR Croatia 0.78% Banking
Solidere, DGR, 144A Lebanon 0.73% Real Estate
Lukoil Oil Co., ADR Russia 0.66% EnergyNOil &
Gas
ColepNCia Portuguesa De Emba Portugal 0.65% Food &
Household
Products
PT Bank International Indonesia, Indonesia 0.65% Banking
Foreign Shares
- ------------------------------------------------------------------------------------
Total % of portfolio assets 9.39%
</TABLE>
As we finish the first half of 1997, what developments may influence the
emerging market performance through the year?
We continue to be bullish on emerging markets as an asset class. Federated
Emerging Markets Fund offers its shareholders a broadly diversified portfolio
invested in over 30 countries and over 300 companies around the world. Emerging
stock markets tend to be extremely volatile, and we do not expect that to change
in the future. In fact, volatility in individual countries/companies creates the
opportunity to increase positions at attractive valuation levels. For the
remainder of 1997, we intend to continue to favor Eastern European markets,
including Russia, and we are beginning to focus more on African/Middle eastern
countries. Specifically, we are also looking to add more exposure in the
sub-Saharan region.
Federated Emerging Markets Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--69.8%
- -----------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES--0.8%
--------------------------------------------------------------------------------
9,995 (a)Best $ 180,803
--------------------------------------------------------------------------------
3,422 (a)Samsung Electronics Co. 336,903
--------------------------------------------------------------------------------
2 (a)(b)Samsung Electronics Co., GDR 116
--------------------------------------------------------------------------------
2 Samsung Electronics Co., Rights 1,367
--------------------------------------------------------------------------------
3,422 Samsung Electronics Co., Rights 2,624
-------------------------------------------------------------------------------- -------------
Total 521,813
-------------------------------------------------------------------------------- -------------
AUTOMOBILE--1.4%
--------------------------------------------------------------------------------
1,100 (b)Bajaj Auto, GDR 38,500
--------------------------------------------------------------------------------
2,600 (b)Bajaj Auto Ltd., GDR 91,000
--------------------------------------------------------------------------------
11,700 (a)(b)Mahindra and Mahindra, GDR 152,100
--------------------------------------------------------------------------------
230,000 Otosan Otomobil Sanayii AS 127,067
--------------------------------------------------------------------------------
238,000 PT GT Petrochem Industries 100,288
--------------------------------------------------------------------------------
71,000 PT United Tractors 223,289
--------------------------------------------------------------------------------
2,800 Salvador Caetano Industrias Metalurgicas e Veiculos de
Transporte S.A. 69,595
--------------------------------------------------------------------------------
8,200 (b)Tata Engineering & Locomotive Co. Ltd., GDR 103,320
-------------------------------------------------------------------------------- -------------
Total 905,159
-------------------------------------------------------------------------------- -------------
BANKING--11.4%
--------------------------------------------------------------------------------
2,366 (a)Alpha Credit Bank 174,595
--------------------------------------------------------------------------------
591 Alpha Credit Bank 43,612
--------------------------------------------------------------------------------
591 Alpha Credit Bank 43,612
--------------------------------------------------------------------------------
4,700 Banco Comercial S.A., GDR 141,000
--------------------------------------------------------------------------------
2,714 Banco Commercial Portugues, Class R 47,424
--------------------------------------------------------------------------------
8,800 Banco Espirito Santo e Comercial de Lisboa 182,104
--------------------------------------------------------------------------------
6,900 Banco Frances del Rio de la Plata S.A., ADR 226,838
--------------------------------------------------------------------------------
3,400 Banco Industrial Colombiano, ADR 59,925
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
BANKING--CONTINUED
--------------------------------------------------------------------------------
1,500 Banco Totta & Acores Nationalisiert, Class B $ 21,373
--------------------------------------------------------------------------------
4,700 Bank Rozwoju Eksportu S.A. 114,337
--------------------------------------------------------------------------------
1,440 Bank Slaski S.A. 112,279
--------------------------------------------------------------------------------
25,000 (a)Banque Audi, GDR 618,750
--------------------------------------------------------------------------------
30,000 (a)(b)Banque Libanaise Pour Le Comm, Class B, GDR 570,000
--------------------------------------------------------------------------------
9,100 (a)Bansud S.A., Class B 142,941
--------------------------------------------------------------------------------
3,800 (a)Bco De Santiago, ADR 93,575
--------------------------------------------------------------------------------
10 Budapest Bank RT 107,054
--------------------------------------------------------------------------------
14,400 COMMERCE ASSET 4,585
--------------------------------------------------------------------------------
9,000 COMMERCE ASSET HLD Warrant 0
--------------------------------------------------------------------------------
72,000 (a)Commerce Asset Holdings Bhd 209,177
--------------------------------------------------------------------------------
15,000 Commercial Bank of Korea 78,575
--------------------------------------------------------------------------------
15,000 (a)Commercial International Bank Egypt 296,398
--------------------------------------------------------------------------------
754,000 (a)Demirbank T.A.S. 12,816
--------------------------------------------------------------------------------
7,946,000 (a)Demirbank T.A.S. 135,066
--------------------------------------------------------------------------------
74,900 (a)Grupo Financiero Banamex Accivel, Class B 162,130
--------------------------------------------------------------------------------
1,767 (a)Grupo Financiero Banamex Accivel, Class L 3,503
--------------------------------------------------------------------------------
350 Inter-Europa Bank Rt 82,967
--------------------------------------------------------------------------------
3,800 Korea Technology Banking Co. 95,906
--------------------------------------------------------------------------------
14,500 Kwang Ju Bank 79,047
--------------------------------------------------------------------------------
1,125 (a)MISR International Bank 202,120
--------------------------------------------------------------------------------
18,000 Malayan Banking Berhad 189,836
--------------------------------------------------------------------------------
84,000 (a)Mauritius Commercial Bank 364,144
--------------------------------------------------------------------------------
4,750 Metro Bank and Trust Co. 107,156
--------------------------------------------------------------------------------
2,300 National Bank of Greece 312,495
--------------------------------------------------------------------------------
4,500 OTP Bank RT 107,655
--------------------------------------------------------------------------------
105,000 PT Bank Dagang Nasional $ 113,309
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
BANKING--CONTINUED
--------------------------------------------------------------------------------
489,242 PT Bank International Indonesia 402,254
--------------------------------------------------------------------------------
43,492 PT Bank International Indonesia, Warrants 16,092
--------------------------------------------------------------------------------
106,800 PT Bank Tiara Asia 129,521
--------------------------------------------------------------------------------
3,025 (a)Philippine National Bank 19,956
--------------------------------------------------------------------------------
32,000 Seoul Bank 133,528
--------------------------------------------------------------------------------
5,790 Shinhan Bank 74,974
--------------------------------------------------------------------------------
400 (a)Societe Generale (Egypt) 110,983
--------------------------------------------------------------------------------
538,500 (a)State Bank Mauritius 303,343
--------------------------------------------------------------------------------
35,000 Thai Military Bank 43,126
--------------------------------------------------------------------------------
19,000 Wbk (Wielkopolski) B 105,480
--------------------------------------------------------------------------------
13,000 (a)(b)Zagrebacka Banka, GDR 482,625
-------------------------------------------------------------------------------- -------------
Total 7,078,186
-------------------------------------------------------------------------------- -------------
BEVERAGE & TOBACCO--3.3%
--------------------------------------------------------------------------------
5,500,000 Anadolu Biracilik 126,605
--------------------------------------------------------------------------------
5,600 Compania Cervecerias Unidas SA, ADR 133,000
--------------------------------------------------------------------------------
2,600 Embotelladora Andina S.A., Class A, ADR 55,250
--------------------------------------------------------------------------------
2,600 Embotelladora Andina S.A., Class B, ADR 55,575
--------------------------------------------------------------------------------
1,060,000 Erciyas Biracilik Ve Malt Sanayii 77,330
--------------------------------------------------------------------------------
45,500 Fomento Economico Mexicano, SA de C.V., Class B 241,623
--------------------------------------------------------------------------------
3,900 Hellenic Bottling Co., S.A. 147,111
--------------------------------------------------------------------------------
13,000 (a)(b)ITC Ltd., GDR 211,250
--------------------------------------------------------------------------------
211,300 (a)Jose R Lindley E Hijos SA 262,391
--------------------------------------------------------------------------------
30,000 (a)Mauritius Breweries Ltd. 213,079
--------------------------------------------------------------------------------
7,500 Nobleza Piccardo S.A.I.C. y F. 39,995
--------------------------------------------------------------------------------
21,000 PT Hanjaya Mandala Sampoerna 84,820
--------------------------------------------------------------------------------
23,500 (a)Prazske Pivovary A.S. $ 141,254
--------------------------------------------------------------------------------
14,000 Quilmes Industrial SA, ADR 162,750
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
BEVERAGE & TOBACCO--CONTINUED
--------------------------------------------------------------------------------
5,000 Zwack Unicum RT 109,102
-------------------------------------------------------------------------------- -------------
Total 2,061,135
-------------------------------------------------------------------------------- -------------
BROADCASTING & PUBLISHING--0.5%
--------------------------------------------------------------------------------
9,300 Grupo Televisa SA 133,227
--------------------------------------------------------------------------------
4,700 Investec-Consultoria Internacional 159,610
-------------------------------------------------------------------------------- -------------
Total 292,837
-------------------------------------------------------------------------------- -------------
BUILDING MATERIALS & COMPONENTS--3.5%
--------------------------------------------------------------------------------
22,900 Apasco SA de CV 149,694
--------------------------------------------------------------------------------
1,600,000 Borusan 72,528
--------------------------------------------------------------------------------
4,000 Cementos Diamante S.A., GDR 53,610
--------------------------------------------------------------------------------
127,584 Cementos Lima S.A. 253,684
--------------------------------------------------------------------------------
164,198 Cementos Norte Pacasmayo 283,366
--------------------------------------------------------------------------------
10,000 (a)Helwan For Cement 207,393
--------------------------------------------------------------------------------
6,000 (a)Hyundai Engineering & Construction Co. 139,316
--------------------------------------------------------------------------------
3,250 (a)Imparsa Industria E Participacoes 27,597
--------------------------------------------------------------------------------
23,000 (a)Inzenyrske Prumyslove Stavby 151,883
--------------------------------------------------------------------------------
196,000 Keramika Indonesia Associates 141,007
--------------------------------------------------------------------------------
40,000 PT Semen Gresik 95,375
--------------------------------------------------------------------------------
20,000 (a)Sanitary Wares Manufacturing Corp. 834
--------------------------------------------------------------------------------
5,200 Siam Cement Co., Ltd 113,532
--------------------------------------------------------------------------------
14,000 Siam City Cement 54,175
--------------------------------------------------------------------------------
9,000 (a)(b)Suez Cement Co., GDR 165,150
--------------------------------------------------------------------------------
2,800 Titan Cement Co. 279,016
-------------------------------------------------------------------------------- -------------
Total 2,188,160
-------------------------------------------------------------------------------- -------------
CHEMICALS--1.2%
--------------------------------------------------------------------------------
1,190 Aksa Akrilik Kimya Sanayii AS $ 95
--------------------------------------------------------------------------------
4,200 BorsodChem RT 153,699
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
CHEMICALS--CONTINUED
--------------------------------------------------------------------------------
1,200 CIN-Corparacao Industrial do Norte SA 66,936
--------------------------------------------------------------------------------
5,800 Debica S.A. 137,479
--------------------------------------------------------------------------------
3,300,000 Hektas Ticaret AS 112,190
--------------------------------------------------------------------------------
4,700 Pannonplast RT 230,912
--------------------------------------------------------------------------------
6,700 Polifarb-Cieszyn SA 37,822
--------------------------------------------------------------------------------
2,000 (a)Reliance Industries Ltd., GDR 39,000
--------------------------------------------------------------------------------
246 (a)Tuntex Distinct Corp., GDR 2,017
-------------------------------------------------------------------------------- -------------
Total 780,150
-------------------------------------------------------------------------------- -------------
CONSTRUCTION & HOUSING--1.5%
--------------------------------------------------------------------------------
85,000 (a)Empire East Land Holdings, Inc. 10,796
--------------------------------------------------------------------------------
5,880 Gujarat Ambuja, GDR 54,243
--------------------------------------------------------------------------------
7,600 (a)(b)Gujarat Ambuja, GDR 70,110
--------------------------------------------------------------------------------
700 (a)Misr Elgedida for Housing & Reconstruction 81,571
--------------------------------------------------------------------------------
1,060 (a)Nasr City For Housing & Reco 146,196
--------------------------------------------------------------------------------
45,000 (a)New World Infrastructure 140,253
--------------------------------------------------------------------------------
18,800 Proodeftiki SA 125,306
--------------------------------------------------------------------------------
20,000 (a)Somague-Sociedade Gestora de Participacoes 212,139
--------------------------------------------------------------------------------
6,000 Somague-Sociedade Gestora de Participacoes 63,642
-------------------------------------------------------------------------------- -------------
Total 904,256
-------------------------------------------------------------------------------- -------------
DATA PROCESSING & REPRODUCTION--0.9%
--------------------------------------------------------------------------------
6,600 (a)ComputerLand Poland SA 185,260
--------------------------------------------------------------------------------
17,000 (a)Formula Systems (1985) Ltd. 302,021
--------------------------------------------------------------------------------
660 (a)PVT 50,030
-------------------------------------------------------------------------------- -------------
Total 537,311
-------------------------------------------------------------------------------- -------------
ELECTRICAL & ELECTRONICS--1.1%
--------------------------------------------------------------------------------
2,400,000 EEI Corp. $ 105,554
--------------------------------------------------------------------------------
10,000 Korea Data Systems 357,824
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
ELECTRICAL & ELECTRONICS--CONTINUED
--------------------------------------------------------------------------------
500,000 Vestel Elektronik Sanayi Ve Ticaret AS 191,238
-------------------------------------------------------------------------------- -------------
Total 654,616
-------------------------------------------------------------------------------- -------------
ELECTRONIC COMPONENTS, INSTRUMENTS--1.1%
--------------------------------------------------------------------------------
38,400 Hana Microelectronics Co., Ltd. 193,955
--------------------------------------------------------------------------------
5,300 (a)Samsung Display Devices 276,165
--------------------------------------------------------------------------------
147,200 Shanghai Diesel Engine Co. Ltd., Class B 55,936
--------------------------------------------------------------------------------
800,000 Solid Group, Inc. 150,142
-------------------------------------------------------------------------------- -------------
Total 676,198
-------------------------------------------------------------------------------- -------------
ENERGY--OIL & GAS--1.6%
--------------------------------------------------------------------------------
3,200 (a)Chemopetrol AS 121,383
--------------------------------------------------------------------------------
6,800 Lukoil Oil Co., ADR 409,700
--------------------------------------------------------------------------------
370,000 (a)Mauritius Oil Refineries Ltd. 210,237
--------------------------------------------------------------------------------
2,500 (a)Tatneft, ADR 208,931
--------------------------------------------------------------------------------
1,000,000 Turcas Petrolculuk 54,538
-------------------------------------------------------------------------------- -------------
Total 1,004,789
-------------------------------------------------------------------------------- -------------
ENERGY EQUIPMENT & SERVICES--0.4%
--------------------------------------------------------------------------------
7,000 (a)(b)Bombay Suburban Electric Supply, GDR 175,000
--------------------------------------------------------------------------------
8,000 Transportadora de Gas de Sur S.A., Class B, ADR 101,000
-------------------------------------------------------------------------------- -------------
Total 276,000
-------------------------------------------------------------------------------- -------------
ENERGY SOURCES--2.0%
--------------------------------------------------------------------------------
750,000 (a)Belle Corp. 199,052
--------------------------------------------------------------------------------
15,200 (a)Hub Power Co., GDR 354,920
--------------------------------------------------------------------------------
5,000 MOL Magyar Olaj-es Gazipari RT 94,082
--------------------------------------------------------------------------------
6,400 YPF Sociedad Anonima 191,456
--------------------------------------------------------------------------------
3,500 YPF Sociedad Anonima, ADR $ 105,000
--------------------------------------------------------------------------------
12,600 Yukong Ltd. 282,670
-------------------------------------------------------------------------------- -------------
Total 1,227,180
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
ENGINEERING--CONTINUED
--------------------------------------------------------------------------------
ENGINEERING--0.6%
--------------------------------------------------------------------------------
18,400 Ergas 109,163
--------------------------------------------------------------------------------
13,300 (a)Exbud SA 144,768
--------------------------------------------------------------------------------
42,000 Mostostal Export S.A. 140,162
-------------------------------------------------------------------------------- -------------
Total 394,093
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--1.8%
--------------------------------------------------------------------------------
106,000 Bank Inicjatyw Gospodarczych 133,893
--------------------------------------------------------------------------------
7,200 (a)Credicorp Ltd. 162,900
--------------------------------------------------------------------------------
5,000,000 Demir Yat Ort 44,265
--------------------------------------------------------------------------------
24,800 (a)Euronet Services, Inc., ADR 272,800
--------------------------------------------------------------------------------
13,500 (a)Fincorp Investment Co. Ltd. 46,289
--------------------------------------------------------------------------------
390 Grupo Financiero Inbursa, S.A. de C.V., Class B 1,354
--------------------------------------------------------------------------------
60,400 Industrial Finance Corporation of Thailand 113,173
--------------------------------------------------------------------------------
9,000 Rashid Hussain Bhd 57,667
--------------------------------------------------------------------------------
10,000 (a)(b)State Bank of India, GDR 256,250
-------------------------------------------------------------------------------- -------------
Total 1,088,591
-------------------------------------------------------------------------------- -------------
FOOD & HOUSEHOLD PRODUCTS--3.2%
--------------------------------------------------------------------------------
29,000 (a)Colep-Cia Portuguesa De Emba 402,312
--------------------------------------------------------------------------------
7,200 (a)Egyptian Starch & Gl 86,025
--------------------------------------------------------------------------------
2,133 Estabelecimentos Jeronimo Martins & Filho SGPS, S.A. 144,748
--------------------------------------------------------------------------------
110,000 Grupo Industrial Maseca SA de CV, Class B 108,484
--------------------------------------------------------------------------------
173,968 (a)Happy World Foods LTD 127,824
--------------------------------------------------------------------------------
240,000 (a)International Container Terminal Services, Inc. 129,668
--------------------------------------------------------------------------------
40,000 RIO PESCA $ 295,906
--------------------------------------------------------------------------------
25,000 (a)(b)Red October, RDC 512,500
--------------------------------------------------------------------------------
113,900 (a)Sefalana 157,609
-------------------------------------------------------------------------------- -------------
Total 1,965,076
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
FOOD PROCESSING--CONTINUED
--------------------------------------------------------------------------------
FOOD PROCESSING--1.7%
--------------------------------------------------------------------------------
4,900 Agros Holding S.A. 131,429
--------------------------------------------------------------------------------
282,698 (a)D'Onofrino SA 129,391
--------------------------------------------------------------------------------
7,300 Goody's S.A. 182,995
--------------------------------------------------------------------------------
110,000 (a)Mon Tresor & Mon Desert Ltd. 213,373
--------------------------------------------------------------------------------
2,400 (a)North Cairo Mills Co 114,346
--------------------------------------------------------------------------------
3,200 Pick Szeged Rt 218,478
--------------------------------------------------------------------------------
4,000 (a)Southern Cairo Mills 77,883
-------------------------------------------------------------------------------- -------------
Total 1,067,895
-------------------------------------------------------------------------------- -------------
FOOD & TOBACCO--0.2%
--------------------------------------------------------------------------------
5,800 (a)Eastern Co. 132,779
-------------------------------------------------------------------------------- -------------
FOREST PRODUCTS & PAPER--0.5%
--------------------------------------------------------------------------------
80,000 (a)Celulosa Argentina S.A. 32,416
--------------------------------------------------------------------------------
1,871,250 Kartonsan Karton Sanayi Ve Ticaret AS 106,031
--------------------------------------------------------------------------------
195,000 PT Barito Pacific Timber 176,362
-------------------------------------------------------------------------------- -------------
Total 314,809
-------------------------------------------------------------------------------- -------------
HEALTH & PERSONAL CARE--0.5%
--------------------------------------------------------------------------------
39,000 Kimberly-Clark de Mexico 135,112
--------------------------------------------------------------------------------
9,879 (a)(b)Pliva D.D., GDR 153,125
-------------------------------------------------------------------------------- -------------
Total 288,237
-------------------------------------------------------------------------------- -------------
HOUSEHOLD APPLIANCES--0.1%
--------------------------------------------------------------------------------
124,800 Shanghai Shangling Electric Appliances Co. Ltd., Class B 37,939
-------------------------------------------------------------------------------- -------------
INDUSTRIAL COMPONENTS--0.5%
--------------------------------------------------------------------------------
294,000 Brisa Bridgestone Sabanci, Class Y $ 104,119
--------------------------------------------------------------------------------
3,100 (a)Fabryka Kotlow Rafako SA 15,373
--------------------------------------------------------------------------------
40,000 (a)Rogers and Company Ltd. 192,995
-------------------------------------------------------------------------------- -------------
Total 312,487
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
INSURANCE--CONTINUED
--------------------------------------------------------------------------------
INSURANCE--1.1%
--------------------------------------------------------------------------------
130,000 (a)British American Insurance Co. 53,808
--------------------------------------------------------------------------------
7,000 Compania de Seguros Tranquilidade 148,861
--------------------------------------------------------------------------------
22,000 (a)Mundial Confianca 290,960
--------------------------------------------------------------------------------
74,394 (a)Swan Insurance Co., Ltd. 176,738
-------------------------------------------------------------------------------- -------------
Total 670,367
-------------------------------------------------------------------------------- -------------
LEISURE & TOURISM--1.9%
--------------------------------------------------------------------------------
7,800 Danubius Hotels Rt 238,578
--------------------------------------------------------------------------------
9,000 EIH Ltd., GDR 141,750
--------------------------------------------------------------------------------
39,000 (a)Grand Baie Hotel 90,169
--------------------------------------------------------------------------------
130,103 (a)New Mauritius Hotels LTD 231,337
--------------------------------------------------------------------------------
145,500 (a)Sun Resorts Ltd. 347,803
--------------------------------------------------------------------------------
63,598 (a)United Docks Ltd. 116,822
-------------------------------------------------------------------------------- -------------
Total 1,166,459
-------------------------------------------------------------------------------- -------------
MACHINERY & ENGINEERING--1.0%
--------------------------------------------------------------------------------
14,000 Efacec-Emp Fabril 120,497
--------------------------------------------------------------------------------
12,100 (a)(b)Larsen & Toubro Ltd., GDR 160,023
--------------------------------------------------------------------------------
15,400 Stalexport SA 158,981
--------------------------------------------------------------------------------
22,000 United Engineers Ltd. 177,737
-------------------------------------------------------------------------------- -------------
Total 617,238
-------------------------------------------------------------------------------- -------------
MANUFACTURING--0.5%
--------------------------------------------------------------------------------
3,900 (a)Ceska Zbrojovka A.S. 220,766
--------------------------------------------------------------------------------
2,900 Zalakeramia Rt $ 111,828
-------------------------------------------------------------------------------- -------------
Total 332,594
-------------------------------------------------------------------------------- -------------
MERCHANDISING--0.3%
--------------------------------------------------------------------------------
3,000 Santa Isabel S.A., ADR 87,375
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- -------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
MERCHANDISING--CONTINUED
--------------------------------------------------------------------------------
500,000 Uki Uluslararasi Konfeksiyon Imalat Ve Ticaret 95,619
-------------------------------------------------------------------------------- -------------
Total 182,994
-------------------------------------------------------------------------------- -------------
METALS 1/2NON FERROUS--3.2%
--------------------------------------------------------------------------------
3,500 Aluminum of Greece S.A. 248,022
--------------------------------------------------------------------------------
29,532 Cia de Minas Buenaventura SA 271,444
--------------------------------------------------------------------------------
12,000 Compania de Minas Buenaventura S.A., Class C 130,557
--------------------------------------------------------------------------------
52,000 Grupo Mexico S.A., Class B 187,381
--------------------------------------------------------------------------------
7,950 Hindalco Industries Ltd., GDR 262,350
--------------------------------------------------------------------------------
41,500 Industrias Penoles S.A. 196,769
--------------------------------------------------------------------------------
5,000 Madeco SA, ADR 128,125
--------------------------------------------------------------------------------
39,287 Minsur S.A. 170,973
--------------------------------------------------------------------------------
2,700 Sociedad Quimica Y Minera De Chile, ADR 175,500
--------------------------------------------------------------------------------
40,000 Southern Peru Ltd. 187,582
-------------------------------------------------------------------------------- -------------
Total 1,958,703
-------------------------------------------------------------------------------- -------------
METALS--STEEL--1.5%
--------------------------------------------------------------------------------
126,000 (a)Acindar Industria Argentina de Aceros SA 298,139
--------------------------------------------------------------------------------
45,000 Norilsk Nickel, RDC 303,525
--------------------------------------------------------------------------------
45,000 (a)Siderar S.A., Class A 197,199
--------------------------------------------------------------------------------
9,800 Usinas Siderurgicas de Minas Gerais SA, ADR 107,800
-------------------------------------------------------------------------------- -------------
Total 906,663
-------------------------------------------------------------------------------- -------------
MINING--0.2%
--------------------------------------------------------------------------------
9,000 (a)Banpu Public Company Ltd. 126,110
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
MISCELLANEOUS MATERIALS & COMMODITIES--0.8%
--------------------------------------------------------------------------------
190,000 (a)Fotex Rt. $ 145,288
--------------------------------------------------------------------------------
6,080 Hellas Can Packaging Manufacturers, S.A. 111,331
--------------------------------------------------------------------------------
108,000 PT Bimantara Citra 184,255
--------------------------------------------------------------------------------
148,000 Sinocan Holdings Ltd. 58,734
-------------------------------------------------------------------------------- -------------
Total 499,608
-------------------------------------------------------------------------------- -------------
MULTI-INDUSTRY--2.4%
--------------------------------------------------------------------------------
29,126 Alfa, S.A. de C.V., Class A 172,348
--------------------------------------------------------------------------------
10,000 (a)Beijing Enterprises 58,334
--------------------------------------------------------------------------------
29,213 Compania Naviera Perez Companc SA, Class B 223,591
--------------------------------------------------------------------------------
5,250,000 (a)Dogan Sirketler Grubu Holding AS 113,411
--------------------------------------------------------------------------------
20,000 First Philippine Holdings Corp., Class B 32,986
--------------------------------------------------------------------------------
12,500 Grupo Carso SA de CV 70,963
--------------------------------------------------------------------------------
5,600 Grupo Carso SA de CV, ADR 63,672
--------------------------------------------------------------------------------
1,600,000 (a)House Of Investment 169,858
--------------------------------------------------------------------------------
168,000 Koc Yatirim Ve Sanayi Mamulleri Pazarlama S.A. 40,457
--------------------------------------------------------------------------------
101,028 Ledesma Agricola S.A. 116,240
--------------------------------------------------------------------------------
55,000 Renong Berhad 78,800
--------------------------------------------------------------------------------
4,000 (a)Skoda Koncern Plzen A.S. 120,646
--------------------------------------------------------------------------------
6,500 Sonae Investimentos Sociedade Gestora de Participacoes
Sociais, S.A. 243,618
-------------------------------------------------------------------------------- -------------
Total 1,504,924
-------------------------------------------------------------------------------- -------------
PHARMACEUTICALS--1.6%
--------------------------------------------------------------------------------
4,000 (a)Egypt International Pharmaceuticals 237,189
--------------------------------------------------------------------------------
2,700 Gedeon Richter RT 224,158
--------------------------------------------------------------------------------
8,300 (a)Jelfa SA 160,497
--------------------------------------------------------------------------------
6,400 Laboratorio Chile, ADR 164,000
--------------------------------------------------------------------------------
72,000 PT Darya Varia Laboratoria $ 93,237
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
PHARMACEUTICALS--CONTINUED
--------------------------------------------------------------------------------
50,000 PT Tempo Scan Pacific 106,886
-------------------------------------------------------------------------------- -------------
Total 985,967
-------------------------------------------------------------------------------- -------------
REAL ESTATE--1.7%
--------------------------------------------------------------------------------
70,000 Amoy Properties Ltd. 79,499
--------------------------------------------------------------------------------
41,250 Ayala Land, Inc., Class B 32,844
--------------------------------------------------------------------------------
1,700,000 Guoco Holdings (Philippines) 203,033
--------------------------------------------------------------------------------
3,149 Mundicenter Sociedade Imobil 38,971
--------------------------------------------------------------------------------
18,000 Mundicenter Sociedade Imobil 222,763
--------------------------------------------------------------------------------
172,000 (a)Robinson's Land Corp., Class B 22,172
--------------------------------------------------------------------------------
30,000 (a)(b)Solidere, GDR 450,000
-------------------------------------------------------------------------------- -------------
Total 1,049,282
-------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--7.7%
--------------------------------------------------------------------------------
1,500 Advanced Information Service PCL 10,387
--------------------------------------------------------------------------------
2,400 (a)Asia Satellite Telecommunications Holdings Ltd., ADR 66,300
--------------------------------------------------------------------------------
11,200 (a)Carso Global Telecom, Class A-1 39,934
--------------------------------------------------------------------------------
8,170 (b)Hellenic Telecommunications Organization 203,457
--------------------------------------------------------------------------------
14,000 (a)Multicanal Participacoes SA, ADR 163,625
--------------------------------------------------------------------------------
240,000 Nizhny Novgordo Svyazinform, RDC 1,200,000
--------------------------------------------------------------------------------
1,500 PT Indosat, ADR 44,813
--------------------------------------------------------------------------------
74,000 PT Telekomunikasi Indonesia 124,728
--------------------------------------------------------------------------------
5,000 Philippine Long Distance Telephone Co. 147,867
--------------------------------------------------------------------------------
5,400 Portugal Telecom S.A. 206,979
--------------------------------------------------------------------------------
60,000 (a)Rostelecom , RDC 228,000
--------------------------------------------------------------------------------
122 SK Telecom Co. Ltd. 75,106
--------------------------------------------------------------------------------
3,000 (a)SPT Telekom A.S. 276,338
--------------------------------------------------------------------------------
85,000 (a)Tele 2000 S.A.-La Nueva Com de Telefonos $ 129,150
--------------------------------------------------------------------------------
3,200 (a)(b)Telecel-Comunicacoes Pessoai 245,549
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--CONTINUED
--------------------------------------------------------------------------------
17,000 Telecom Argentina S.A. 90,655
--------------------------------------------------------------------------------
89,000 (a)Telecomasia Corp. Pub Ltd 112,383
--------------------------------------------------------------------------------
2,520 Telecomunicacoes Brasileiras SA, ADR 346,185
--------------------------------------------------------------------------------
7,843 Telecomunicacoes de Sao Paulo SA, Rights 264
--------------------------------------------------------------------------------
130,874 Telefonica Del Peru CPT, Class B 334,857
--------------------------------------------------------------------------------
75,000 Telefonica de Argentina S.A., Class B 270,135
--------------------------------------------------------------------------------
5,300 Telefonos de Mexico, Class L, ADR 235,188
--------------------------------------------------------------------------------
20,000 Telex-Chile S.A., ADR 107,500
--------------------------------------------------------------------------------
25,800 (a)United Communication Industry Public Co., Ltd. 118,754
-------------------------------------------------------------------------------- -------------
Total 4,778,154
-------------------------------------------------------------------------------- -------------
TEXTILES & APPAREL--0.5%
--------------------------------------------------------------------------------
2,152,500 Ak-Al Tekstil Sanayii AS 99,097
--------------------------------------------------------------------------------
1,776,000 Aksu Iplik Dokuma Ve Boya Apre Fabrikalari T.A.S. 55,976
--------------------------------------------------------------------------------
1,480,000 Aksu Iplik Dokuma Ve Boya Apre Fabrikalari T.A.S., Rights 10,850
--------------------------------------------------------------------------------
360,000 Kordsa 117,293
-------------------------------------------------------------------------------- -------------
Total 283,216
-------------------------------------------------------------------------------- -------------
TOBACCO--0.2%
--------------------------------------------------------------------------------
31,000 PT Gudang Garam 133,813
-------------------------------------------------------------------------------- -------------
TRANSPORTATION--AIRLINES--0.4%
--------------------------------------------------------------------------------
32,885 (a)Air Mauritius Ltd. 64,272
--------------------------------------------------------------------------------
55,000 (a)Thai Airways International Ltd. 87,373
--------------------------------------------------------------------------------
300,000 (a)Turk Hava Yollari A.O. 71,183
-------------------------------------------------------------------------------- -------------
Total 222,828
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
TRANSPORTATION--ROAD & RAIL--1.0%
--------------------------------------------------------------------------------
1,950 Guangshen Railway Co. Ltd., Class H, ADR $ 46,800
--------------------------------------------------------------------------------
20,000 Korea Kumho Petro 145,822
--------------------------------------------------------------------------------
172,000 PT Citra Marga Nusaphala Persada 171,470
--------------------------------------------------------------------------------
39,000 Shanghai Dazhong Taxi Co., Class B 65,520
--------------------------------------------------------------------------------
544,000 (a)(b)Shenzhen Expressway Co. Ltd. 182,538
-------------------------------------------------------------------------------- -------------
Total 612,150
-------------------------------------------------------------------------------- -------------
TRANSPORTATION--SHIPPING--0.5%
--------------------------------------------------------------------------------
18,500 Attica Enterprises S.A. 165,989
--------------------------------------------------------------------------------
3,700 (a)Attica Enterprises S.A. 33,198
--------------------------------------------------------------------------------
416,000 (a)Pacific Ports Co. Ltd. 123,482
-------------------------------------------------------------------------------- -------------
Total 322,669
-------------------------------------------------------------------------------- -------------
UTILITIES 1/2ELECTRICAL & GAS--3.1%
--------------------------------------------------------------------------------
4,700 (a)CEZ A.S. 130,066
--------------------------------------------------------------------------------
350,000 (a)Centrais Eletricas Brasileiras SA 165,110
--------------------------------------------------------------------------------
46,000 Central Costanera S.A., Class B 167,984
--------------------------------------------------------------------------------
100 (a)Egypt Gas 767,030
--------------------------------------------------------------------------------
4,500 Enersis S.A., ADR 156,375
--------------------------------------------------------------------------------
4,200 (a)Huaneng Power International Inc., Class N, ADR 100,800
--------------------------------------------------------------------------------
4,700 Korea Electric Power Corp. 144,980
--------------------------------------------------------------------------------
21,346 Manila Electric Co., Class B 119,780
--------------------------------------------------------------------------------
5,000 (b)Mosenergo, ADR 188,750
-------------------------------------------------------------------------------- -------------
Total 1,940,875
-------------------------------------------------------------------------------- -------------
WHOLESALE & INTERNATIONAL TRADE--0.4%
--------------------------------------------------------------------------------
13,900 Elektrim Spolka Akcyina S.A. 123,987
--------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
WHOLESALE & INTERNATIONAL TRADE--CONTINUED
--------------------------------------------------------------------------------
128,260 Enrique Ferreyros S.A. $ 151,573
-------------------------------------------------------------------------------- -------------
Total 275,560
-------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $38,915,759) 43,279,870
-------------------------------------------------------------------------------- -------------
PREFERRED STOCKS--4.1%
- -----------------------------------------------------------------------------------------------
APPLIANCES & HOUSEHOLD DURABLES--0.2%
--------------------------------------------------------------------------------
540,000 Brasmotor SA, Preference 121,065
-------------------------------------------------------------------------------- -------------
AUTOMOBILE--0.3%
--------------------------------------------------------------------------------
15,500 (a)COFAP-Cia Fabricadora de Pecas, Preference 159,271
-------------------------------------------------------------------------------- -------------
BANKING--0.6%
--------------------------------------------------------------------------------
21,950,000 Banco Bradesco SA, Preference 175,095
--------------------------------------------------------------------------------
330,000 Banco Itau SA, Preference 169,547
-------------------------------------------------------------------------------- -------------
Total 344,642
-------------------------------------------------------------------------------- -------------
ENERGY SOURCES--0.5%
--------------------------------------------------------------------------------
1,185,000 Petroleo Brasileiro SA, Preference 283,381
-------------------------------------------------------------------------------- -------------
MERCHANDISING--0.3%
--------------------------------------------------------------------------------
2,700,000 Lojas Renner SA, Preference 156,373
-------------------------------------------------------------------------------- -------------
METALS--STEEL--0.0%
--------------------------------------------------------------------------------
27,000,000 Usinas Siderurgicas de Minas Gerais SA, Preference 29,241
-------------------------------------------------------------------------------- -------------
MINING--0.3%
--------------------------------------------------------------------------------
10,100 Companhia Vale Do Rio Doce, Preference 223,134
-------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--0.6%
--------------------------------------------------------------------------------
254,000 (a)Cia Riograndense De Telecomunicacoes, Pfd. 344,282
--------------------------------------------------------------------------------
180,000 Telecomunicacoes de Sao Paulo SA, Preference 61,709
-------------------------------------------------------------------------------- -------------
Total 405,991
-------------------------------------------------------------------------------- -------------
TEXTILES & APPAREL--0.0%
--------------------------------------------------------------------------------
49,000,000 (a)Texpar SA, Preference 637
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR VALUE IN
PRINCIPAL U.S.
AMOUNT DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
UTILITIES--ELECTRICAL & GAS--1.3%
--------------------------------------------------------------------------------
100,000 Centrais Eletricas Brasileiras SA, Preference, Series B $ 49,229
--------------------------------------------------------------------------------
112,600,000 Cia Forca e Luz Cataguazes-Leopoldina, Preference 195,586
--------------------------------------------------------------------------------
4,900,000 Companhia Energetica de Minas Gerais, Preference 219,288
--------------------------------------------------------------------------------
1,470,000 (a)Eletropaulo-Electricidade de Sao Paulo SA, Preference, Class B 345,451
-------------------------------------------------------------------------------- -------------
Total 809,554
-------------------------------------------------------------------------------- -------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,797,232) 2,533,289
-------------------------------------------------------------------------------- -------------
(C) REPURCHASE AGREEMENTS--23.3%
- -----------------------------------------------------------------------------------------------
$ 4,490,000 BT Securities Corporation, 5.56%, dated 5/30/1997, due 6/2/1997 4,490,000
--------------------------------------------------------------------------------
10,000,000 Greenwich Capital Markets, Inc., 5.55%, dated 5/30/1997, due
6/2/1997 10,000,000
-------------------------------------------------------------------------------- -------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) 14,490,000
-------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $55,202,991) (D) $ 60,303,159
-------------------------------------------------------------------------------- -------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At May 31, 1997, these securities amounted
to $4,411,363 which represents 7.1% of net assets.
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $55,202,991. The
net unrealized appreciation of investments on a federal tax basis amounts to
$5,100,168 which is comprised of $8,400,186 appreciation and $3,300,018
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($62,034,215) at May 31, 1997.
The following acronyms are used throughout this portfolio:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
RDC--Russian Depositary Receipt
(See Notes which are an integral part of the Financial Statements)
Federated Emerging Markets Fund
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
ASSETS:
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $55,202,991) $60,303,159
- ------------------------------------------------------------------------------------------------------
Cash 29,140
- ------------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (identified cost $671,869) 639,515
- ------------------------------------------------------------------------------------------------------
Income receivable 135,197
- ------------------------------------------------------------------------------------------------------
Receivable for investments sold 798,944
- ------------------------------------------------------------------------------------------------------
Receivable for shares sold 620,077
- ------------------------------------------------------------------------------------------------------ ----------
Total assets 62,526,032
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for investments purchased $ 422,492
- -------------------------------------------------------------------------------------------
Payable for shares redeemed 25,398
- -------------------------------------------------------------------------------------------
Payable for taxes withheld 5,965
- -------------------------------------------------------------------------------------------
Payable for foreign currency exchanged contracts purchased 434
- -------------------------------------------------------------------------------------------
Accrued expenses 37,528
- ------------------------------------------------------------------------------------------- ---------
Total liabilities 491,817
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS for 4,660,719 shares outstanding $62,034,215
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid in capital $56,269,628
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 5,077,354
- ------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 532,129
- ------------------------------------------------------------------------------------------------------
Undistributed net investment income 155,104
- ------------------------------------------------------------------------------------------------------ ----------
Total Net Assets $62,034,215
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($42,862,532 / 3,211,028 shares outstanding) $13.35
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share (100/94.50 of $13.35)* $14.13
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share $13.35
- ------------------------------------------------------------------------------------------------------ ----------
CLASS B SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($15,897,023 / 1,202,356 shares outstanding) $13.22
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share $13.22
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (94.50/100 of $13.22)** $12.49
- ------------------------------------------------------------------------------------------------------ ----------
CLASS C SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($3,274,660 / 247,335 shares outstanding) $13.24
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share $13.24
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (99.00/100 of $13.24)** $13.11
- ------------------------------------------------------------------------------------------------------ ----------
</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
- --------------------------------------------------------------------------------
Six Months Ended May 31, 1997 (unaudited)
<TABLE>
INVESTMENT INCOME:
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $20,255) $ 444,153
- ------------------------------------------------------------------------------------------------------
Interest 178,435
- ------------------------------------------------------------------------------------------------------ ---------
Total income 622,588
- ------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------
Investment advisory fee $ 267,251
- -------------------------------------------------------------------------------------------
Administrative personnel and services fee 92,247
- -------------------------------------------------------------------------------------------
Custodian fees 69,391
- -------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 51,774
- -------------------------------------------------------------------------------------------
Directors'/Trustees' fees 868
- -------------------------------------------------------------------------------------------
Auditing fees 8,290
- -------------------------------------------------------------------------------------------
Legal fees 2,890
- -------------------------------------------------------------------------------------------
Portfolio accounting fees 40,839
- -------------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 33,625
- -------------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 7,725
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 39,667
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 11,208
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 2,575
- -------------------------------------------------------------------------------------------
Share registration costs 27,156
- -------------------------------------------------------------------------------------------
Printing and postage 12,728
- -------------------------------------------------------------------------------------------
Insurance premiums 2,004
- -------------------------------------------------------------------------------------------
Taxes 2,780
- -------------------------------------------------------------------------------------------
Miscellaneous 6,000
- ------------------------------------------------------------------------------------------- ---------
Total expenses 679,018
- -------------------------------------------------------------------------------------------
Waivers and reimbursements--
- --------------------------------------------------------------------------------
Waiver of investment advisory fee $(215,172)
- --------------------------------------------------------------------------------
Reimbursement of other operating expenses (368)
- -------------------------------------------------------------------------------- ---------
Total waivers and reimbursements (215,540)
- ------------------------------------------------------------------------------------------- ---------
Net expenses 463,478
- ------------------------------------------------------------------------------------------------------ ---------
Net investment income 159,110
- ------------------------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 855,195
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and liabilities
in foreign currency 4,408,173
- ------------------------------------------------------------------------------------------------------ ---------
Net realized and unrealized gain on investments and foreign currency 5,263,368
- ------------------------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $5,422,478
- ------------------------------------------------------------------------------------------------------ ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Emerging Markets Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------
Net investment income $ 159,110 $ 16,654
- -------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions ($855,195 and $(310,725), respectively, as
computed for federal tax purposes) 855,195 (343,726)
- -------------------------------------------------------------
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 4,408,173 669,181
- ------------------------------------------------------------- ----------------------- --------------------------
Change in net assets resulting from operations 5,422,478 342,109
- ------------------------------------------------------------- ----------------------- --------------------------
SHARE TRANSACTIONS--
- -------------------------------------------------------------
Proceeds from sale of shares 51,125,279 29,998,514
- -------------------------------------------------------------
Net asset value of shares issued in connection with the
acquisition of the Blanchard Worldwide Emerging Markets Funds -- 6,732,148
- -------------------------------------------------------------
Cost of shares redeemed (16,434,362) (15,151,951)
- ------------------------------------------------------------- ----------------------- --------------------------
Change in net assets resulting from share transactions 34,690,917 21,578,711
- ------------------------------------------------------------- ----------------------- --------------------------
Change in net assets 40,113,395 21,920,820
- -------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------
Beginning of period 21,920,820 --
- ------------------------------------------------------------- ----------------------- --------------------------
End of period (including undistributed net investment income
of $155,104 and $0, respectively) $ 62,034,215 $ 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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.10 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.04 0.02
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 2.21 1.08
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 2.25 1.10
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.35 $ 11.10
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 20.27% 11.00%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 1.97%* 1.97%*
- ------------------------------------------------------------------------------
Net investment income 0.86%* 0.31%*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 1.02%* 3.34%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $42,863 $17,327
- ------------------------------------------------------------------------------
Average commission rate paid $0.0030 $0.0029
- ------------------------------------------------------------------------------
Portfolio turnover 13% 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.04 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.04 (0.02)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 2.14 1.06
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 2.18 1.04
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.22 $ 11.04
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 19.75% 10.40%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 2.73%* 2.72%*
- ------------------------------------------------------------------------------
Net investment income 0.42%* (0.71%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.98%* 3.34%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $15,897 $3,747
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0030 $0.0029
- ------------------------------------------------------------------------------
Portfolio turnover 13% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.05 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.03 (0.02)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 2.16 1.07
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 2.19 1.05
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.24 $ 11.05
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 19.82% 10.50%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 2.72%* 2.72%*
- ------------------------------------------------------------------------------
Net investment income 0.34%* (0.77%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.96%* 3.34%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,275 $847
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0030 $0.0029
- ------------------------------------------------------------------------------
Portfolio turnover 13% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
Federated Emerging Markets Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
(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 eight 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 3 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.
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
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.
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 last fiscal year-end date, 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
exchange contracts as a way of managing foreign exchange risk. The Fund may
enter into foreign currency exchange contracts as purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
crosshedge 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
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
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. 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 May 31, 1997, the Fund had outstanding foreign currency contracts 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>
06/03/97 3,894,375 $ 119,551 $ 119,613 $ 62
Czechoslovakia Koruna
06/09/97 5,744,583 33,702 33,206 $ (496)
Portuguese Escudo
------
Net Unrealized Depreciation on Foreign Exchange Contracts $ (434)
------
</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
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
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 May 31, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Shenzhen Expressway Co. Ltd. 03/07/97 $ 156,135
Telecel-Comunicacoes Pessoai 12/09/96-02/06/97 231,817
Bajaj Auto Ltd., GDR 08/20/96 89,700
Bajaj Auto 02/27/96 30,938
Banque Libanaise Pour Le Comm, Class B, GDR 04/25/97-05/09/97 529,000
Gujarat Ambuja, GDR 08/20/96 69,350
ITC Ltd., GDR 08/20/96-02/27/96 122,625
Larsen & Toubro Ltd., GDR 08/20/96-01/27/97 174,763
Pliva D.D., GDR 03/30/96-10/24/96 113,036
Samsung Electronics Co., GDR 02/02/95 106
State Bank of India, GDR 10/30/96 141,500
Suez Cement Co., GDR 11/25/96 132,750
Tata Engineering & Locomotive Co. Ltd., GDR 02/28/96-08/20/96 123,550
Zagrebacka Banka, GDR 10/24/96 255,125
Hellenic Telecommunications Organization 4/4/96 138,866
Bombay Suburban Electric Supply 8/20/96 123,375
Monsenergo, ADR 3/12/96 177,687
Red October , RDC 05/19/97-05/20/97 487,500
Solidere, GDR 04/25/97-04/28/97 418,000
Mahindra and Mahindra, GDR 2/27/96-1/27/97 131,075
</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 May 31, 1997, par value shares ($0.001 per share) authorized were as follows:
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF PAR
VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
<S> <C>
Class A 165,000,000
- -------------------------------------------------------------------------------------------
Class B 135,000,000
- -------------------------------------------------------------------------------------------
Class C 135,000,000
- ------------------------------------------------------------------------------------------- ---------------------
Total 435,000,000
- ------------------------------------------------------------------------------------------- ---------------------
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,707,111 $ 35,081,115 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 (1,057,123) (13,707,852) (1,348,212) (14,945,833)
- ------------------------------------------------------ ----------- -------------- ----------- --------------
Net change resulting from Class A share
transactions 1,649,988 $ 21,373,263 1,561,040 $ 17,078,762
- ------------------------------------------------------ ----------- -------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 938,942 $ 12,096,172 348,457 $ 3,768,962
- ----------------------------------------------------
Shares redeemed (76,099) (983,053) (8,944) (97,907)
- ---------------------------------------------------- --------- ------------- --------- -------------
Net change resulting from Class B share
transactions 862,843 $ 11,113,119 339,513 $ 3,671,055
- ---------------------------------------------------- --------- ------------- --------- -------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 306,152 $ 3,947,992 86,670 $ 937,105
- ---------------------------------------------------------
Shares redeemed (135,465) (1,743,457) (10,022) (108,211)
- --------------------------------------------------------- ---------- ------------- ---------- -------------
Net change resulting from Class C share
transactions 170,687 2,204,535 76,648 828,894
- --------------------------------------------------------- ---------- ------------- ---------- -------------
Net change resulting from share
transactions 2,683,518 $ 34,690,917 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 NET
SHARE CLASS NAME ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
- ------------------------------------------------------------------------------------------
Class B Shares 0.75%
- ------------------------------------------------------------------------------------------
Class C Shares 0.75%
- ------------------------------------------------------------------------------------------
</TABLE>
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
Class A Shares did not incur a distribution services fee for the period ended
May 31, 1997, 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 May 31, 1997, the Fund paid $2,978 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 May 31, 1997, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C>
PURCHASES $ 18,576,937
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 5,481,398
- --------------------------------------------------------------------------------------------------- -------------
</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.
At May 31, 1997, the diversification of countries was as follows:
Federated Emerging Markets Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% OF % OF
COUNTRY NET ASSETS COUNTRY NET ASSETS
<S> <C> <C> <C>
Argentina 3.8% Lebanon 2.6%
Botswana 0.3% Malaysia 1.1%
Brazil 5.4% Mauritius 4.4%
Chile 1.9% Mexico 3.1%
China 1.0% Pakistan 0.6%
Colombia 0.2% Peru 4.0%
Croatia 1.0% Philippines 2.3%
Czech Republic 2.0% Poland 3.0%
Egypt 4.2% Portugal 4.7%
Greece 4.0% Russia 4.9%
Hong Kong 0.7% Taiwan, Province of China 0.1%
Hungary 3.4% Thailand 1.6%
India 2.8% Turkey 2.8%
Indonesia 3.8% Uruguay 0.2%
Israel 0.5% United States 23.4%
Korea 3.6%
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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, and Secretary
John E. Murray, Jr. Karen M. Brownlee
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other governmental agency.
Investment in mutual funds involves risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
[LOGO] FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 981487804
Cusip 981487887
Cusip 981487879
G01967-02 (7/97)
[RECYCLED LOGO]
[LOGO OF FEDERATED INVESTORS]
Federated
European
Growth Fund
Semi-Annual Report
May 31, 1997
Established 1996
President's Message
Dear Fellow Shareholder:
Federated European Growth Fund was created in February 1996, and this is the
first Semi-Annual Report to shareholders. Since its inception, the fund has
performed well for its shareholders, and share value has continued to increase.
This report contains interesting information about the fund from December 1,
1996 through May 31, 1997.
The report begins with a commentary by portfoliomanager Frank Semack, Vice
President, Federated Global Research Corp. His discussion covers international
economic and market conditions and fund strategy. Following his commentary is a
complete list of the fund's common
stock investments and financial statements.
This fund offers shareholders verysignificant long-term investment opportunities
from a select portfolio of 126major corporations in 15 European countries in
both developed and emergingmarkets.*
During the six-month reporting period, the European stock marketperformed well,
and the fund continued its record of positive performancethrough share price
increase, income distributions, and capital gains.** Itappears we started the
fund at the right time, and our investment selections have worked.
<TABLE>
<CAPTION>
Total
Return
NAV NAV NAV Capital Based
12/1/96 5/31/97 Change Income Gains on NAV
------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares $11.80 $12.34 4.57% $0.09 $0.37 8.81%
Class B Shares $11.74 $12.24 4.26% $0.07 $0.37 8.29%
Class C Shares $11.73 $12.22 4.18% $0.08 $0.37 8.30%
</TABLE>
The fund displays broad diversification across 126 stock issues, with holdings
averaging less than 1% of the fund's total assets in any one stock.
Approximately 50% of the fund's assets are in 3 countries_U.K., France and
Germany.
While the fund has provided shareholders with strong returns since it began
operation on February 28, 1996, it is important to remember that the true
measure of this fund's performance is clearly in years rather than months. There
will inevitably be periods of short-term fluctuation, of negative as well as
positive returns.
*Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
**Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the period based on offering price for Class
A, B, and C Shares were 2.80%, 2.54%, and 7.24%, respectively.
As with any mutual fund, I recommend that you add to your investment account on
a regular basis to take advantage of price fluctuations and to use the
dollar-cost averaging method of investing.+
Thank you for your confidence in Federated European Growth Fund. We will
continue to keep you up-to-date on the details of your investment on a regular
basis through the highest level of service possible.
Sincerely,
Richard B. Fisher
President
July 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
Frank Semack
Vice President
Federated Global
Research Corp.
Q
What is your appraisal of the European equity market activity over the six-month
reporting period ended May 31, 1997?
A
European equity markets got off to a strong start in the fund's reporting
period, and, in local currency terms, pretty much kept up the pace throughout.
The strength of the dollar cut local currency returns of around 20% by nearly a
half, though, so that dollar-adjusted gains for the period roughly tracked those
of the Standard & Poor's 500 Index.*
In addition to what was a normal seasonal boost to markets around the calendar
year-end, investors' readiness to commit fresh money to international equities
was reinforced by the realization that the interest rate environment would
continue to be favorable. Continental European interest rates, largely set with
reference to the Bundesbank's, were clearly not going to be a threat to
international equity valuations; and the decisions by both the U.S. Federal
Reserve Board and the Bank of England to leave their respective key interest
rates unchanged were simply the icing on the cake at the time.
In the U.K., there were numerous signs of an improving economic environment, and
even continental Europe showed some evidence of strength. There was one crucial
difference, though. Since October 1996, sterling had gained strongly against the
European currencies (and less strongly against the dollar) with the result that
U.K. stocks with meaningful overseas exposure, particularly direct exporters,
were aggressively unloaded by investors. By contrast, overseas exposure and
export sensitivity were a boon to many continental stocks. This was reflected in
a strong showing by many cyclical stocks in continental Europe, unlike the U.K.,
where a lot of the momentum was in oil stocks and financial issues.
The outlook for interest rates was, nevertheless, not altogether clear-cut. In
the U.K., the Conservative government steadfastly refused to raise rates in the
run-up to the May 1, 1997 general election despite a widespread consensus in the
financial community that it should_and perhaps would_do so. In Europe,
unemployment rates continued to climb despite tentative signs of recovery, and
the idea of Europe's convergence towards a single currency began to lose
credibility. There was evidence in some of the peripheral markets, such as Spain
and Italy that, if they do not qualify for admission into the European Monetary
Union in the first round in 1999, they may be subject to widening interest rate
spreads relative to Germany. That would adversely affect international equity
valuations to some extent. This, of course, does not accord with the perception
that Europe needs, above all, low interest rates.
* Standard & Poor's 500 Index is an index of common stocks in industry,
transportation, and financial and public utility companies. This index is
unmanaged, and investments cannot be made in an index.
Having said that, you have to remember that the greater part of Europe's
unemployment problems are really a sign of the continent trying to restore its
competitiveness through corporate restructuring, and therefore, not necessarily
amenable to a macroeconomic solution by means of lower interest rates and/or
looser fiscal policies.
On the whole, the markets continued to focus on a combination of restructuring
and interest-rate themes and remained generally on a bullish tack regardless of
political shifts such as the Labour victory in the U.K., the upset victory of
the French socialists in early parliamentary elections, and German Chancellor
Kohl's growing political problems as Germany struggled to meet the Maastricht
budget criteria.
Q
How did Federated European Growth Fund perform versus the market?
A
As measured by the Morgan Stanley Capital International (Europe) Index,* the
European equity markets achieved a total return of 10.92% during the period.
Federated European Growth Fund's performance was competitive, but did not quite
match that of the market. The fund delivered a six-month total return of 8.81%
for Class A Shares, 8.29% for Class B Shares, and 8.30% for Class C Shares based
on net asset value.**
* The Morgan Stanley Capital International (Europe) Index 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. This index is
unmanaged, and investments cannot be made in an index.
**Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns based on offering price for Class A, B, and C
Shares were 2.80%, 2.54%, and 7.24%, respectively.
Q
What were your strategies in terms of country weightings during the reporting
period?
A
To the extent that we deliberately targeted shifts in individual country
allocations, we took profits in a number of our holdings in Eastern Europe,
specifically in Russia and Croatia, and also eliminated exposure to the Czech
Republic on the grounds of deteriorating fundamentals there. We also liquidated
our holdings in Norway after a generally good run, as valuations began to look
stretched.
Q
How were the net assets allocated among countries as of May 31, 1997, and what
were the top ten holdings?
A
The net assets were diversified across the following countries:
<TABLE>
<CAPTION>
Country % of Net Assets
- ---------------- ---------------
<S> <C>
United Kingdom 32.4%
Germany 13.1%
Switzerland 11.8%
France 12.0%
Spain 7.0%
Netherlands 5.8%
Sweden 5.3%
U.S.A. 4.5%
Denmark 2.1%
Italy 1.9%
Ireland 0.8%
Austria 0.4%
Belgium 0.2%
Russia 0.2%
</TABLE>
The top 10 holdings as of May 31, 1997 were:
<TABLE>
<CAPTION>
Market
% of Capitalization
Security Name Country Assets (billions)
- ----------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
Union Bank of Switzerland Switzerland 1.56% $23.3
Zurich Switzerland 1.55% $16.7
Versicherungsgesellschaft
Holderbank Financiere Switzerland 1.52% $ 4.5
Glaris AG, Class B
Dresdner Bank AG Germany 1.47% $16.4
Bayer AG Germany 1.45% $28.1
Daimler Benz AG Germany 1.44% $39.7
Mannesmann AG Germany 1.43% $14.9
Novartis AG (Reg) Switzerland 1.42% $84.5
Nestle SA Switzerland 1.40% $48.9
Deutsche Lufthansa AG Germany 1.31% $ 6.1
- -------------------------------------------------------------------
Total % of Portfolio Assets 13.1%
</TABLE>
Q
Now that we are at mid-year, what issues are you watching that may affect the
European markets through 1997?
A
Six months ago, I commented on the fact that regardless of whether or not one
thought the U.S. market was overvalued, Europe was quite attractive as standard
market valuation criteria. This included criteria such as price/earnings ratios
and dividend yeilds which imputed much better growth prospects to the U.S. for
anywhere between 11 and 50 years, i.e., well beyond what markets actually
discount in real life. Going through the same exercise now, that gap has shrunk
to somewhere between 5 and 12 years. In other words, European price/earnings
ratios are still lower and dividend yields are higher, but the differential has
narrowed considerably given Europe's strong local currency performance.
There also appears to be increasing political backlash against Maastricht and
the EMU project_not entirely surprising given the economic strains involved in
meeting criteria that, strictly speaking, only Luxembourg does. The questions
that investors will keep on asking in the foreseeable future will, therefore,
revolve around:
. The EMU_will it go ahead as planned?
. The Euro_will it be a weak currency? and
. The implications of the French socialists' election victory_will it wreck the
chances of a thorough corporate and labor market overhaul in Europe?
My answer to the last question is ONo.O I believe that the reforms will continue
in France, as well as elsewhere, though possibly at a slower pace and with a
somewhat different tone being adopted in public. Whether EMU does come into
being is much more open to doubt than before; however, my guess (and it really
is no more than that) is that it probably will. The euro may be relatively weak,
which is in reality what Europe needs, provided it does tackle the problem of
economic rigidities.
To get from here to there, however, is unlikely to be all smooth sailing, and we
would expect some significant corrections along the way. As long as the
long-term outlook remains positive both in the U.S. and in Europe (low inflation
and moderate growth being the key variables), such corrections should be used as
buying opportunities.
Federated European Growth Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
COMMON STOCKS--92.0%
- --------------------------------------------------------------------------------------------------
AEROSPACE & MILITARY TECHNOLOGY--1.9%
-----------------------------------------------------------------------------------
7,024 British Aerospace $ 142,826
-----------------------------------------------------------------------------------
10,000 Cobham 106,985
----------------------------------------------------------------------------------- -------------
Total 249,811
----------------------------------------------------------------------------------- -------------
APPLIANCES & HOUSEHOLD DURABLES--0.5%
-----------------------------------------------------------------------------------
1,100 Electrolux AB, Class B 65,564
----------------------------------------------------------------------------------- -------------
AUTOMOBILE--1.4%
-----------------------------------------------------------------------------------
2,500 Daimler Benz AG 192,353
----------------------------------------------------------------------------------- -------------
BANKING--12.5%
-----------------------------------------------------------------------------------
4,472 ABN-Amro Holdings Nv 82,578
-----------------------------------------------------------------------------------
5,000 ABN-Amro Holdings Nv, ADR 93,125
-----------------------------------------------------------------------------------
1,800 Banco Bilbao Vizcaya SA 127,504
-----------------------------------------------------------------------------------
5,078 Barclays PLC 98,769
-----------------------------------------------------------------------------------
4,500 Commerzbank AG, Frankfurt 132,175
-----------------------------------------------------------------------------------
1,190 Compagnie Financiere de Paribas, Class A 76,598
-----------------------------------------------------------------------------------
700 Credit Commercial De France 169,085
-----------------------------------------------------------------------------------
945 Credit Suisse Group 118,592
-----------------------------------------------------------------------------------
820 Den Danske Bank 77,930
-----------------------------------------------------------------------------------
5,610 Dresdner Bank Ag, Frankfurt 196,289
-----------------------------------------------------------------------------------
8,305 Lloyds TSB Group PLC 83,519
-----------------------------------------------------------------------------------
8,200 Skand Enskilda BKN, Class A 84,632
-----------------------------------------------------------------------------------
1,300 Sydbank AS 61,911
-----------------------------------------------------------------------------------
190 UBS--Union Bank of Switzerland 208,190
-----------------------------------------------------------------------------------
1,035 Unidanmark, Class A 54,061
----------------------------------------------------------------------------------- -------------
Total 1,664,958
----------------------------------------------------------------------------------- -------------
</TABLE>
Federated European Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
BEVERAGE & TOBACCO--1.8%
-----------------------------------------------------------------------------------
6,850 Bass PLC $ 89,253
-----------------------------------------------------------------------------------
600 LVMH (Moet-Hennessy) 145,257
----------------------------------------------------------------------------------- -------------
Total 234,510
----------------------------------------------------------------------------------- -------------
BROADCASTING & PUBLISHING--4.8%
-----------------------------------------------------------------------------------
3,800 Carlton Communications PLC 32,760
-----------------------------------------------------------------------------------
1,600 Marieberg Tidnings AB, Class A 40,252
-----------------------------------------------------------------------------------
28,700 Mirror Group PLC 102,819
-----------------------------------------------------------------------------------
10,600 Pearson 124,849
-----------------------------------------------------------------------------------
11,500 Reed International PLC 113,062
-----------------------------------------------------------------------------------
5,450 VNU--Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 123,033
-----------------------------------------------------------------------------------
917 Wolters Kluwer NV 110,231
----------------------------------------------------------------------------------- -------------
Total 647,006
----------------------------------------------------------------------------------- -------------
BUILDING MATERIALS & COMPONENTS--1.9%
-----------------------------------------------------------------------------------
231 Holderbank Financiere Glaris AG, Class B 202,557
-----------------------------------------------------------------------------------
30,000 Rugby Group PLC 57,909
----------------------------------------------------------------------------------- -------------
Total 260,466
----------------------------------------------------------------------------------- -------------
BUSINESS & PUBLIC SERVICES--2.0%
-----------------------------------------------------------------------------------
4,000 Aguas De Barcelona 161,594
-----------------------------------------------------------------------------------
340 Financiere Sogeparc SA 45,925
-----------------------------------------------------------------------------------
16,000 Salvesen Christian 62,555
----------------------------------------------------------------------------------- -------------
Total 270,074
----------------------------------------------------------------------------------- -------------
CHEMICALS--4.3%
-----------------------------------------------------------------------------------
400 Akzo Nobel NV 53,202
-----------------------------------------------------------------------------------
5,000 Bayer AG 193,815
-----------------------------------------------------------------------------------
7,755 Boc Group PLC 130,286
-----------------------------------------------------------------------------------
5,500 Imperial Chemical Industries, PLC 73,327
-----------------------------------------------------------------------------------
</TABLE>
Federated European Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
CHEMICALS--CONTINUED
-----------------------------------------------------------------------------------
3,550 Skw Trostberg AG $ 117,357
----------------------------------------------------------------------------------- -------------
Total 567,987
----------------------------------------------------------------------------------- -------------
CONSTRUCTION & HOUSING--0.6%
-----------------------------------------------------------------------------------
4,000 Berkeley Group PLC 45,869
-----------------------------------------------------------------------------------
1,721 Boskalis Westminster 36,166
----------------------------------------------------------------------------------- -------------
Total 82,035
----------------------------------------------------------------------------------- -------------
ELECTRICAL & ELECTRONICS--2.0%
-----------------------------------------------------------------------------------
13,000 General Electric Co. PLC 74,219
-----------------------------------------------------------------------------------
600 Azkoyen SA 75,498
-----------------------------------------------------------------------------------
2,300 Schneider SA 110,447
----------------------------------------------------------------------------------- -------------
Total 260,164
----------------------------------------------------------------------------------- -------------
ENERGY--OIL & GAS--6.5%
-----------------------------------------------------------------------------------
7,950 Burmah Castrol 137,854
-----------------------------------------------------------------------------------
18,200 Eni SPA 90,761
-----------------------------------------------------------------------------------
25,000 Lasmo 100,196
-----------------------------------------------------------------------------------
470 (b)Lukoil Oil Co., ADR 28,318
-----------------------------------------------------------------------------------
11,706 British Petroleum Co. PLC 139,791
-----------------------------------------------------------------------------------
1,260 Elf Aquitaine SA 125,900
-----------------------------------------------------------------------------------
3,100 Repsol SA 129,739
-----------------------------------------------------------------------------------
1,358 Total SA-B 124,169
----------------------------------------------------------------------------------- -------------
Total 876,728
----------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.7%
-----------------------------------------------------------------------------------
1,900 ING Groep, N.V. 83,906
----------------------------------------------------------------------------------- -------------
FOOD & HOUSEHOLD PRODUCTS--5.8%
-----------------------------------------------------------------------------------
17,649 Cadbury Schweppes PLC 158,214
-----------------------------------------------------------------------------------
8,306 Grand Metropolitan PLC 77,177
-----------------------------------------------------------------------------------
825 Danone $ 124,151
-----------------------------------------------------------------------------------
</TABLE>
Federated European Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS--CONTINUED
-----------------------------------------------------------------------------------
150 Nestle SA 186,388
-----------------------------------------------------------------------------------
6,064 Reckitt & Colman PLC 85,509
-----------------------------------------------------------------------------------
4,250 Associated British Foods PLC 39,351
-----------------------------------------------------------------------------------
4,848 Bols Wessanen 92,295
----------------------------------------------------------------------------------- -------------
Total 763,085
----------------------------------------------------------------------------------- -------------
FOREST PRODUCTS & PAPER--1.6%
-----------------------------------------------------------------------------------
20,500 David S. Smith (Holdings) PLC 74,448
-----------------------------------------------------------------------------------
2,200 MO OCH Domsjoe AB, Class B 68,118
-----------------------------------------------------------------------------------
6,850 Munksjo AB 66,280
----------------------------------------------------------------------------------- -------------
Total 208,846
----------------------------------------------------------------------------------- -------------
HEALTH & PERSONAL CARE--9.2%
-----------------------------------------------------------------------------------
2,600 (a)Elan Corp. PLC, ADR 105,950
-----------------------------------------------------------------------------------
500 Gedeon Richter Ltd., GDR 91,300
-----------------------------------------------------------------------------------
6,536 Glaxo Wellcome PLC 130,656
-----------------------------------------------------------------------------------
140 Novartis AG 189,777
-----------------------------------------------------------------------------------
820 Novo-Nordisk, Class B 87,804
-----------------------------------------------------------------------------------
1,090 Rhone-Poulenc Rorer, Inc. 82,023
-----------------------------------------------------------------------------------
13 Roche Holding AG 115,462
-----------------------------------------------------------------------------------
820 Schwarz Pharma AG 60,933
-----------------------------------------------------------------------------------
7,676 Smithkline Beecham Corp. 131,972
-----------------------------------------------------------------------------------
1,000 Synthelabo 116,891
-----------------------------------------------------------------------------------
3,800 Zeneca Group 115,436
----------------------------------------------------------------------------------- -------------
Total 1,228,204
----------------------------------------------------------------------------------- -------------
INDUSTRIAL COMPONENTS--2.5%
-----------------------------------------------------------------------------------
8,400 Delta 44,247
-----------------------------------------------------------------------------------
8,466 GKN PLC $ 146,524
-----------------------------------------------------------------------------------
2,600 SKF Ab, Class B 60,042
-----------------------------------------------------------------------------------
</TABLE>
Federated European Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
INDUSTRIAL COMPONENTS--CONTINUED
-----------------------------------------------------------------------------------
2,700 Sommer Allibert 86,032
----------------------------------------------------------------------------------- -------------
Total 336,845
----------------------------------------------------------------------------------- -------------
INSURANCE--5.8%
-----------------------------------------------------------------------------------
2,020 AXA 120,859
-----------------------------------------------------------------------------------
6,500 Gen Accident 95,804
-----------------------------------------------------------------------------------
9,607 Guardian Royal Ex 44,004
-----------------------------------------------------------------------------------
3,100 Scor SA 125,082
-----------------------------------------------------------------------------------
19,518 Sedgwick Group PLC 39,911
-----------------------------------------------------------------------------------
3,460 Skandia Forsakrings AB 122,086
-----------------------------------------------------------------------------------
1,500 Trygg-Hansa Ab, Class B 27,480
-----------------------------------------------------------------------------------
561 Zurich Versicherungsgesellschaft 205,959
----------------------------------------------------------------------------------- -------------
Total 781,185
----------------------------------------------------------------------------------- -------------
LEISURE & TOURISM--2.8%
-----------------------------------------------------------------------------------
12,300 Compass Group 137,226
-----------------------------------------------------------------------------------
8,800 Granada Group PLC 124,953
-----------------------------------------------------------------------------------
13,190 Ladbroke Group PLC 49,627
-----------------------------------------------------------------------------------
9,600 Rank Group PLC 67,528
----------------------------------------------------------------------------------- -------------
Total 379,334
----------------------------------------------------------------------------------- -------------
MACHINERY & ENGINEERING--7.2%
-----------------------------------------------------------------------------------
67 ABB AG 91,862
-----------------------------------------------------------------------------------
70 Gea AG 28,670
-----------------------------------------------------------------------------------
470 Mannesmann SA 190,849
-----------------------------------------------------------------------------------
8,730 Siebe PLC 137,384
-----------------------------------------------------------------------------------
465 Thyssen AG 105,564
-----------------------------------------------------------------------------------
514 Zardoya-Otis SA $ 64,357
-----------------------------------------------------------------------------------
34,065 Cookson Group 130,956
-----------------------------------------------------------------------------------
17,200 FKI PLC 50,083
-----------------------------------------------------------------------------------
</TABLE>
Federated European Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING--CONTINUED
-----------------------------------------------------------------------------------
500 Sulzer AG 102,245
-----------------------------------------------------------------------------------
465 Vae Eisenbahnsyst 47,185
----------------------------------------------------------------------------------- -------------
Total 949,155
----------------------------------------------------------------------------------- -------------
MERCHANDISING--3.8%
-----------------------------------------------------------------------------------
8,000 Boots Co. PLC 92,655
-----------------------------------------------------------------------------------
640 Delhaize-Le Lion 31,828
-----------------------------------------------------------------------------------
16,200 Dixons Group 123,494
-----------------------------------------------------------------------------------
1,780 Etablissements Economiques du Casino Guichard-Perrachon 80,175
-----------------------------------------------------------------------------------
8,450 Great Universal Stores PLC 89,158
-----------------------------------------------------------------------------------
191 (a)La Rinascente S.P.A., Warrants 72
-----------------------------------------------------------------------------------
8,200 Marks & Spencer PLC 68,177
-----------------------------------------------------------------------------------
4,000 Smith, W.H. Group PLC 27,613
----------------------------------------------------------------------------------- -------------
Total 513,172
----------------------------------------------------------------------------------- -------------
MISCELLANEOUS MATERIALS & COMMODITIES--1.8%
-----------------------------------------------------------------------------------
620 Compagnie de St. Gobain 85,571
-----------------------------------------------------------------------------------
500 Granges AB 6,847
-----------------------------------------------------------------------------------
8,085 Morgan Crucible Co. PLC 60,442
-----------------------------------------------------------------------------------
2,140 Vidrala SA 90,006
----------------------------------------------------------------------------------- -------------
Total 242,866
----------------------------------------------------------------------------------- -------------
MULTI-INDUSTRY--1.2%
-----------------------------------------------------------------------------------
639 Hunter Douglas N.V. 56,338
-----------------------------------------------------------------------------------
367 Oerlikon-Buhrle Holding AG 42,494
-----------------------------------------------------------------------------------
12,903 Tomkins PLC $ 56,040
----------------------------------------------------------------------------------- -------------
Total 154,872
----------------------------------------------------------------------------------- -------------
RECREATION, OTHER CONSUMER GOODS--0.8%
-----------------------------------------------------------------------------------
5,600 EMI Group PLC 107,365
----------------------------------------------------------------------------------- -------------
</TABLE>
Federated European Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--3.6%
-----------------------------------------------------------------------------------
9,000 British Telecommunication PLC 65,222
-----------------------------------------------------------------------------------
12,900 Stet Societa Finanziaria Telefonica SPA 65,092
-----------------------------------------------------------------------------------
19,710 Telecom Italia Mobile SpA 57,811
-----------------------------------------------------------------------------------
4,500 Telefonaktiebolaget LM Ericsson 157,911
-----------------------------------------------------------------------------------
4,700 Telefonica de Espana 135,577
----------------------------------------------------------------------------------- -------------
Total 481,613
----------------------------------------------------------------------------------- -------------
TRANSPORTATION--AIRLINES--2.5%
-----------------------------------------------------------------------------------
11,000 Deutsche Lufthansa AG 175,127
-----------------------------------------------------------------------------------
1,850 KLM Nv 53,407
-----------------------------------------------------------------------------------
100 (a)Swissair AG 101,807
----------------------------------------------------------------------------------- -------------
Total 330,341
----------------------------------------------------------------------------------- -------------
TRANSPORTATION--ROAD & RAIL--0.2%
-----------------------------------------------------------------------------------
4,800 Cowie Group PLC 27,954
----------------------------------------------------------------------------------- -------------
UTILITIES--ELECTRICAL & GAS--2.3%
-----------------------------------------------------------------------------------
9,000 Edison S.P.A. 42,651
-----------------------------------------------------------------------------------
1,695 Empresa Nac De Electridad 129,447
-----------------------------------------------------------------------------------
2,260 Veba AG 127,737
----------------------------------------------------------------------------------- -------------
Total 299,835
----------------------------------------------------------------------------------- -------------
WHOLESALE & INTERNATIONAL TRADE--0.0%
-----------------------------------------------------------------------------------
160 Inchcape PLC 754
----------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $11,462,420) 12,260,988
----------------------------------------------------------------------------------- -------------
</TABLE>
Federated European Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR VALUE IN
PRINCIPAL U.S.
AMOUNT DOLLARS
<C> <S> <C>
- ------------- ----------------------------------------------------------------------------------- -------------
PREFERRED STOCKS--1.0%
- --------------------------------------------------------------------------------------------------
MACHINERY & ENGINEERING--1.0%
-----------------------------------------------------------------------------------
335 Gea AG, Vorzugsaktien (IDENTIFIED COST $116,533) $ 135,222
----------------------------------------------------------------------------------- -------------
(C) REPURCHASE AGREEMENT--4.5%
- --------------------------------------------------------------------------------------------------
$ 605,000 BT Securities Corporation, 5.56%, dated 5/30/1997, due 6/2/1997
(AT AMORTIZED COST) 605,000
----------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $12,183,953)(D) $ 13,001,210
----------------------------------------------------------------------------------- -------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At May 31, 1997 these securities amounted to
$28,318 which represents 0.2% 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 $12,183,953. The
net unrealized appreciation of investments on a federal tax basis amounts to
$817,257 which is comprised of $990,443 appreciation and $173,186
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($13,325,993) at May 31, 1997.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
GDR--Global Depository Receipt
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
Federated European Growth Fund
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $12,183,953) $13,001,210
- ------------------------------------------------------------------------------------------------------
Cash 4,566
- ------------------------------------------------------------------------------------------------------
Income receivable 44,439
- ------------------------------------------------------------------------------------------------------
Receivable for investments sold 380,886
- ------------------------------------------------------------------------------------------------------
Receivable for shares sold 109,861
- ------------------------------------------------------------------------------------------------------ ----------
Total assets 13,540,962
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for investments purchased $ 139,691
- -------------------------------------------------------------------------------------------
Payable for shares redeemed 70,508
- -------------------------------------------------------------------------------------------
Payable for taxes withheld 4,770
- ------------------------------------------------------------------------------------------- ---------
Total liabilities 214,969
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS for 1,082,738 shares outstanding $13,325,993
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid in capital $12,194,816
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 812,857
- ------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 245,623
- ------------------------------------------------------------------------------------------------------
Undistributed net investment income 72,697
- ------------------------------------------------------------------------------------------------------ ----------
Total Net Assets $13,325,993
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($9,211,308 / 746,502 shares outstanding) $12.34
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share (100/94.50 of $12.34)* $13.06
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share $12.34
- ------------------------------------------------------------------------------------------------------ ----------
CLASS B SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($3,633,962 / 296,906 shares outstanding) $12.24
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share $12.24
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (94.50/100 of $12.24)** $11.57
- ------------------------------------------------------------------------------------------------------ ----------
CLASS C SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($480,723 / 39,330 shares outstanding) $12.22
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share $12.22
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (99.00/100 of $12.22)** $12.10
- ------------------------------------------------------------------------------------------------------ ----------
</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 European Growth Fund
Statement of Operations
- --------------------------------------------------------------------------------
Six Months Ended May 31, 1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $20,600) $ 132,002
- --------------------------------------------------------------------------------------------------------
Interest 29,662
- -------------------------------------------------------------------------------------------------------- ---------
Total income 161,664
- --------------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------
Investment advisory fee $ 45,153
- ---------------------------------------------------------------------------------------------
Administrative personnel and services fee 92,247
- ---------------------------------------------------------------------------------------------
Custodian fees 25,500
- ---------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 37,445
- ---------------------------------------------------------------------------------------------
Directors'/Trustees' fees 400
- ---------------------------------------------------------------------------------------------
Auditing fees 8,844
- ---------------------------------------------------------------------------------------------
Legal fees 2,014
- ---------------------------------------------------------------------------------------------
Portfolio accounting fees 40,381
- ---------------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 8,411
- ---------------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 1,151
- ---------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 8,101
- ---------------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 2,804
- ---------------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 384
- ---------------------------------------------------------------------------------------------
Share registration costs 12,551
- ---------------------------------------------------------------------------------------------
Printing and postage 18,149
- ---------------------------------------------------------------------------------------------
Insurance premiums 1,840
- ---------------------------------------------------------------------------------------------
Taxes 650
- ---------------------------------------------------------------------------------------------
Miscellaneous 4,589
- --------------------------------------------------------------------------------------------- ---------
Total expenses 310,614
- ---------------------------------------------------------------------------------------------
Waivers and reimbursements--
- ----------------------------------------------------------------------------------
Waiver of investment advisory fee $ (45,153)
- ----------------------------------------------------------------------------------
Reimbursement of other operating expenses (176,684)
- ---------------------------------------------------------------------------------- ---------
Total waivers and reimbursements (221,837)
- --------------------------------------------------------------------------------------------- ---------
Net expenses 88,777
- -------------------------------------------------------------------------------------------------------- ---------
Net investment income 72,887
- -------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 246,081
- --------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 441,941
- -------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain on investments and foreign currency 688,022
- -------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 760,909
- -------------------------------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated European Growth Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
(UNAUDITED) NOVEMBER 30,
MAY 31, 1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------
Net investment income $ 72,887 $ 37,815
- --------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions ($246,081 and
$178,546, respectively, as computed for federal tax
purposes) 246,081 183,114
- --------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of
assets and liabilities in foreign currency 441,941 370,916
- -------------------------------------------------------------------------- --------------------- ---------------
Change in net assets resulting from operations 760,909 591,845
- -------------------------------------------------------------------------- --------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------------------
Class A Shares (33,183) --
- --------------------------------------------------------------------------
Class B Shares (8,052) --
- --------------------------------------------------------------------------
Class C Shares (1,338) --
- --------------------------------------------------------------------------
Distributions from net realized gains on investments and foreign currency
transactions
- --------------------------------------------------------------------------
Class A Shares (131,318) --
- --------------------------------------------------------------------------
Class B Shares (41,600) --
- --------------------------------------------------------------------------
Class C Shares (6,086) --
- -------------------------------------------------------------------------- --------------------- ---------------
Change in net assets resulting from distributions to shareholders (221,577) --
- -------------------------------------------------------------------------- --------------------- ---------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------
Proceeds from sale of shares 10,507,046 8,968,714
- --------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 176,299 --
- --------------------------------------------------------------------------
Cost of shares redeemed (2,606,280) (4,850,963)
- -------------------------------------------------------------------------- --------------------- ---------------
Change in net assets resulting from share transactions 8,077,065 4,117,751
- -------------------------------------------------------------------------- --------------------- ---------------
Change in net assets 8,616,397 4,709,596
- --------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------
Beginning of period 4,709,596 --
- -------------------------------------------------------------------------- --------------------- ---------------
End of period (including undistributed net investment income of $72,697
and $42,383, respectively) $ 13,325,993 $ 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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.80 $ 10.00
- ----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------
Net investment income 0.11** 0.14
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 0.89 1.66
- ---------------------------------------------------------------------------------- ------------- -------
Total from investment operations 1.00 11.80
- ---------------------------------------------------------------------------------- ------------- -------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------
Distributions from net investment income (0.09) --
- ----------------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.37) --
- ---------------------------------------------------------------------------------- ------------- -------
Total distributions (0.46) --
- ---------------------------------------------------------------------------------- ------------- -------
NET ASSET VALUE, END OF PERIOD $ 12.34 $ 11.80
- ---------------------------------------------------------------------------------- ------------- -------
TOTAL RETURN (B) 8.81% 18.00%
- ----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------
Expenses 1.75%* 1.75%*
- ----------------------------------------------------------------------------------
Net investment income 1.84%* 1.60%*
- ----------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 4.91%* 11.10%*
- ----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,211 $ 3,318
- ----------------------------------------------------------------------------------
Average commission rate paid (d) $0.0461 $0.0223
- ----------------------------------------------------------------------------------
Portfolio turnover 48 % 58 %
- ----------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Per share information presented is based upon the monthly average number of
shares outstanding.
(a) Reflects operations for the period from 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.74 $ 10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------
Net investment income 0.06** 0.01
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 0.88 1.73
- ---------------------------------------------------------------------------------- ------------- -------
Total from investment operations 0.94 1.74
- ---------------------------------------------------------------------------------- ------------- -------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------
Distributions from net investment income (0.07) --
- ----------------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.37) --
- ---------------------------------------------------------------------------------- ------------- -------
Total distributions (0.44) --
- ---------------------------------------------------------------------------------- ------------- -------
NET ASSET VALUE, END OF PERIOD $ 12.24 $ 11.74
- ---------------------------------------------------------------------------------- ------------- -------
TOTAL RETURN (B) 8.29% 17.40%
- ----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------
Expenses 2.50%* 2.50%*
- ----------------------------------------------------------------------------------
Net investment income 1.04%* 0.08%*
- ----------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 4.88%* 11.10%*
- ----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 3,634 $ 1,215
- ----------------------------------------------------------------------------------
Average commission rate paid (d) $0.0461 $0.0223
- ----------------------------------------------------------------------------------
Portfolio turnover 48 % 58 %
- ----------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
** Per share information presented is based upon the monthly average number of
shares outstanding.
(a) Reflects operations for the period from 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.73 $ 10.00
- ----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------
Net investment income 0.09 0.01
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 0.85 1.72
- ---------------------------------------------------------------------------------- ------------- -------
Total from investment operations 0.94 1.73
- ---------------------------------------------------------------------------------- ------------- -------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------
Distributions from net investment income (0.08) --
- ----------------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.37) --
- ---------------------------------------------------------------------------------- ------------- -------
Total distributions (0.45) --
- ---------------------------------------------------------------------------------- ------------- -------
NET ASSET VALUE, END OF PERIOD $ 12.22 $ 11.73
- ---------------------------------------------------------------------------------- ------------- -------
TOTAL RETURN (B) 8.30% 17.30%
- ----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------
Expenses 2.50%* 2.50%*
- ----------------------------------------------------------------------------------
Net investment income 1.98%* 0.09%*
- ----------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 4.99%* 11.06%*
- ----------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $481 $176
- ----------------------------------------------------------------------------------
Average commission rate paid (d) $0.0461 $0.0223
- ----------------------------------------------------------------------------------
Portfolio turnover 48 % 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
Federated European Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
(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 eight 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 3 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--Listed equity securities are valued at the last sale
price reported on a national securities exchange. Short-term securities are
valued at the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less at
the time of purchase may be valued at amortized cost, which approximates
fair market value. With respect to valuation of foreign securities, trading
in foreign cities may be completed at times which vary from the closing of
the New York Stock Exchange. Therefore, foreign securities are valued at
the latest closing price on the exchange on which they are traded prior to
the closing of the New York Stock Exchange. Foreign securities quoted in
foreign currencies are translated into U.S. Dollars at the foreign exchange
rate in effect at noon, eastern time, on the day the value of the foreign
security is determined.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the
"Directors"). Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
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 risk. The Fund may
enter into foreign currency exchange contracts as purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
crosshedge 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 exchanged contract is offset into a closing
transaction or by 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 May 31, 1997, the Fund had outstanding foreign currency contracts as set
forth below:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
CONTRACTS SOLD DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Belgian Franc 06/02/97 17,280 $ 491 $ 489 $ (2)
- ---------------------------
Pound Sterling 06/02/97 1,090 1,783 1,783 --
- ---------------------------
Netherlands Guilder 06/02/97 867 452 451 $ (1)
- --------------------------- ---
Net Unrealized
Depreciation on Foreign
Exchange Contracts $ (3)
- ---------------------------
</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 May 31, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Lukoil Oil Co., ADR 10/10/96 $20,210
</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 May 31, 1997, par value shares ($0.001 per share) authorized were as follows:
<TABLE>
<CAPTION>
POUND OF PAR VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
<S> <C>
Class A 135,000,000
- --------------------------------------------------------------------------------------
Class B 135,000,000
- --------------------------------------------------------------------------------------
Class C 135,000,000
- -------------------------------------------------------------------------------------- ---------------
Total 405,000,000
- -------------------------------------------------------------------------------------- ---------------
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(A)
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 575,264 $ 6,845,100 731,810 $ 7,658,479
- -----------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 10,569 121,752 -- --
- -----------------------------------------------------------
Shares redeemed (120,492) (1,456,952) (450,649) (4,847,403)
- ----------------------------------------------------------- --------- ------------- --------- -------------
Net change resulting from
Class A Share transactions 465,341 $ 5,509,900 281,161 $ 2,811,076
- ----------------------------------------------------------- --------- ------------- --------- -------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 227,942 $ 2,696,946 103,835 $ 1,140,538
- ------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 4,112 47,162 -- --
- ------------------------------------------------------------
Shares redeemed (38,673) (462,292) (310) (3,560)
- ------------------------------------------------------------ --------- ------------ --------- ------------
Net change resulting from
Class B Share transactions 193,381 $ 2,281,816 103,525 $ 1,136,978
- ------------------------------------------------------------ --------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 81,822 $ 965,000 15,002 $ 169,697
- ------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 644 7,385 -- --
- ------------------------------------------------------------
Shares redeemed (58,138) (687,036) -- --
- ------------------------------------------------------------ --------- ------------ --------- ------------
Net change resulting from
Class C Share transactions 24,328 $ 285,349 15,002 $ 169,697
- ------------------------------------------------------------ --------- ------------ --------- ------------
Net change resulting from
Share transactions 683,050 8,077,065 399,688 $ 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.
<TABLE>
<CAPTION>
% OF AVG. DAILY NET
SHARE CLASS NAME 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
May 31, 1997, 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 May 31, 1997, the Fund paid $4,044 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
Purchase and sales of investments, excluding short-term securities, for the
period ended May 31, 1997, were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
<S> <C>
PURCHASES $ 11,173,983
- ----------------------------------------------------------------- -------------
SALES $ 3,836,497
- ----------------------------------------------------------------- -------------
</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.
At May 31, 1997, the diversification of countries was as follows:
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
Austria 0.4%
Belgium 0.2%
Denmark 2.1%
France 12.0%
Germany 13.1%
Ireland 0.8%
Italy 1.9%
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
Netherlands 5.8%
Russia 0.2%
Spain 7.0%
Sweden 5.3%
Switzerland 11.8%
United Kingdom 32.4%
United States 4.5%
</TABLE>
<TABLE>
<CAPTION>
Directors Officers
- --------------------------------------------------------------------------------
<S> <C>
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, and Secretary
John E. Murray, Jr. Karen M. Brownlee
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
</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 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.
[LOGO FEDERATED INVESTORS]
Federated Securities Corp., Distributor
Cusip 981487861
Cusip 981487853
Cusip 981487846
G01979-02 (7/97)
[LOGO OF RECYCLED PAPER]
[LOGO] FEDERATED INVESTORS
Federated
International
Small Company
Fund
Semi-Annual Report
May 31, 1997
Established 1996
President's Message
Dear Fellow Shareholder:
Federated International Small Company Fund was created in February 1996, and I
am pleased to present the first Semi-Annual Report to shareholders. This report
contains interesting information about the fund from December 1, 1996 through
May 31, 1997.
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-cap international stocks. This
$111-million fund is invested in 190 small-cap stocks in nearly 40 countries
across 3 continents. This broad diversification is a hallmark of successful
international investing.*
During the six-month reporting period, the fund delivered double-digit total
return performance that far eclipsed that of its benchmark. The fund's positions
in select Greek and China holdings and its broad diversification across many
stock issues helped the fund share value increase substantially.**
<TABLE>
<CAPTION>
NAV Total Return
NAV 12/1/96 NAV 5/31/97 % Change Based on NAV
------------ ------------ --------- --------------
<S> <C> <C> <C> <C>
Class A Shares $12.26 $14.13 15.25% 15.25%
Class B Shares $12.20 $13.99 14.67% 14.67%
Class C Shares $12.19 $13.98 14.68% 14.68%
</TABLE>
This international small company fund has provided shareholders with strong
returns since it began operation on February 28, 1996, and it is important to
remember that the true measure of this fund's performance is clearly in years
rather than months. There will inevitably be periods of negative short-term
fluctuation, as well as the positive returns we have experienced since the
fund's inception.
* 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.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns based on offering price for Class A, B, and C
Shares were 8.94%, 9.18%, and 13.70%, respectively.
In this investment environment, I recommend that you add to your account on a
regular basis to take advantage of price fluctuations and to use the dollar-cost
averaging method of investing.+
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 entrusted a
portion of your wealth with the fund.
Sincerely,
Richard B. Fisher
President
July 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
[PHOTO]
Tracy Stouffer
Vice President
Federated Global
Research Corp.
What is your review of the international small-cap stock market during the
six-month reporting period?
International small company stocks, as a group, have lagged the performance of
the large-cap stocks, returning 1.32% as measured by the FT/S&P-Actuaries World,
ex-U.S., Medium-Small Cap Index* versus 4.04% return for the Morgan Stanley
Capital International Europe, Australia and Far East Index.* However, we have
continually argued that it is a stock picker's market, and that by focusing on
niche players with strong growth prospects, small-cap stocks will yield handsome
returns.
In this favorable environment, how well did Federated International Small
Company Fund perform compared to the market overall?
The fund far outpaced the 1.32% total return of the FT/S&P-Actuaries World,
ex-U.S., Medium-Small Cap Index. Total returns based on net asset value were
15.25% for Class A Shares, 14.67% for Class B Shares, and 14.68% for Class C
Shares.**
What strategies accounted for such a high level of outperformance?
Two areas in particular provided very strong returns to the portfolio. Our
investments in the Greek market including stocks such as Titan Cement, Attica
Enterprises and Hellenic Cables, as well as investments in China-related
red-chip companies such as China Everbright and China Merchants Hai Hong.
* FT/S&P-Actuaries World, ex-U.S., Medium-Small Cap Index is a total return,
market cap-weighted index of 1,092 companies from 25 countries. Morgan
Stanley Capital International Europe, Australia and Far East Index is a
market capitalization-weighted foreign index, which is widely used to measure
the performance of European, Australian, New Zealand, and Far East stock
markets. These indices are unmanaged, and investments cannot be made in an
index.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns based on offering price for Class A, B, and C
Shares were 8.94%, 9.18%, and 13.70%, respectively.
What countries were represented in the portfolio as of May 31, 1997?
The portfolio was well-diversified across the following 38 countries. The issues
selected in the fund have a market capital of $712 million on average. The
percent of the fund's total portfolio assets in each holding averages less than
2.13%.
<TABLE>
<CAPTION>
Country % of portfolio
- --------------- ---------------
<S> <C>
Japan 16.19
U.K. 8.39
Greece 6.48
Hong Kong 5.95
Netherlands 5.77
Brazil 5.05
Spain 4.50
Australia 4.00
Norway 3.82
Germany 3.57
France 3.33
Portugal 2.91
Israel 2.87
Singapore 2.56
Argentina 2.48
Sweden 2.26
Mexico 1.89
Finland 1.88
Denmark 1.61
<CAPTION>
Country % of portfolio
- --------------- --------------
<S> <C>
Italy 1.52
South Africa 1.31
Switzerland 1.30
Ireland 1.30
Croatia 1.18
Mauritius 0.89
Canada 0.78
Egypt 0.72
Chile 0.63
Belgium 0.58
Poland 0.56
Botswana 0.52
Malaysia 0.50
China 0.42
Indonesia 0.40
Slovakia 0.30
United States 0.30
Hungary 0.27
Zimbabwe 0.25
</TABLE>
What are the fund's top ten holdings?
The top ten holdings were:
<TABLE>
<CAPTION>
Name Country % of Portfolio Industry
- --------------------- ----------- -------------- ----------------------
<S> <C> <C> <C>
China EB-IHD
Holdings Ltd. Hong Kong 2.06% Merchandising
Fuji Machine
Manufacturing Co. Japan 1.39% Machinery
& Engineering
Simac Techniek Netherlands 1.28% Electrical &
Electronics
Tele Pizza SA Spain 1.26% Food Processing
China Everbright
Technology Ltd. Hong Kong 1.24% Electronic Components/
Instrumentation
Zagrebacka Banka
GDR Hungary 1.14% Banking
Biocompatibles
International PLC Great Britain 1.14% Health & Personal Care
Creative Technology
Ltd. Singapore 1.14% Electronic Components/
Instrumentation
Fast Retailing Co. Ltd. Japan 1.12% Textiles & Apparel
Cultus Petroleum NL Australia 1.09% Energy-Oil & Gas
</TABLE>
As we approach mid year, with one U.S. Federal Reserve Board rate hike behind us
that has caused volatility in the international small company markets, what is
your outlook?
I believe that we will continue to see volatility in the small-cap market going
forward as various stock markets adjust to changes in governments-as in France
and the U.K.-or anticipated changes later this year in Argentina and Mexico. In
many cases, this volatility and uncertainty could create buying opportunities in
the near term as fundamentals remain strong.
Federated International Small Company Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--94.7%
- ---------------------------------------------------------------------------------------------
AEROSPACE & MILITARY TECHNOLOGY--0.8%
------------------------------------------------------------------------------
15,200 (a)Doncasters PLC, ADR $ 338,200
------------------------------------------------------------------------------
31,000 Fag Kugelfischer Georg Schaefer Kommanditgesellschaft auf Aktien 571,353
------------------------------------------------------------------------------ --------------
Total 909,553
------------------------------------------------------------------------------ --------------
APPLIANCES & HOUSEHOLD DURABLES--1.3%
------------------------------------------------------------------------------
15,000 (a)Best 271,341
------------------------------------------------------------------------------
30,000 Beter Bed Holding NV 609,164
------------------------------------------------------------------------------
6,400 Otsuka Kagu Ltd. 533,104
------------------------------------------------------------------------------ --------------
Total 1,413,609
------------------------------------------------------------------------------ --------------
AUTOMOBILE--2.5%
------------------------------------------------------------------------------
257,000 (a)Consorcio Grupo Dina SA de CV 168,972
------------------------------------------------------------------------------
12,000 Finelist Group PLC 67,528
------------------------------------------------------------------------------
27,500 Pininfarina SPA 424,400
------------------------------------------------------------------------------
403,000 Singapore Technologies Automotive Ltd. 1,008,697
------------------------------------------------------------------------------
285,000 (a)Super Group Ltd. 510,352
------------------------------------------------------------------------------
119,000 Unisia Jecs Corp. 553,869
------------------------------------------------------------------------------ --------------
Total 2,733,818
------------------------------------------------------------------------------ --------------
BANKING--2.9%
------------------------------------------------------------------------------
600,000 Anglo Irish Bank Corp. PLC 765,581
------------------------------------------------------------------------------
175,000 Banco Del Suquia SA 595,298
------------------------------------------------------------------------------
8,700 (a)Social Security Bank Ltd. 5,613
------------------------------------------------------------------------------
11,600 (a)(b)Sydbank AS 552,440
------------------------------------------------------------------------------
35,400 (b)Zagrebacka Banka, GDR 1,314,225
------------------------------------------------------------------------------ --------------
Total 3,233,157
------------------------------------------------------------------------------ --------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
BEVERAGE & TOBACCO--0.7%
------------------------------------------------------------------------------
10,000 (a)(b) Al--Ahram Beverages Co., GDR $ 171,750
------------------------------------------------------------------------------
15,694 Cinba 24,181
------------------------------------------------------------------------------
90,391 (a)J. Boag & Sons Ltd. 50,259
------------------------------------------------------------------------------
522,100 (a)Sechaba 582,602
------------------------------------------------------------------------------ --------------
Total 828,792
------------------------------------------------------------------------------ --------------
BROADCASTING & PUBLISHING--2.7%
------------------------------------------------------------------------------
53,600 Elanders AB, Class B 643,100
------------------------------------------------------------------------------
30,000 (a)Grupo Radio Centro SA--SP, ADR 315,000
------------------------------------------------------------------------------
31,300 (a)Investec-Consultoria Internacional 1,062,934
------------------------------------------------------------------------------
11,000 Nippon Broadcasting System 1,003,442
------------------------------------------------------------------------------ --------------
Total 3,024,476
------------------------------------------------------------------------------ --------------
BUILDING MATERIALS & COMPONENTS--2.5%
------------------------------------------------------------------------------
1 (a)Cementos Norte Pacasmayo 2
------------------------------------------------------------------------------
20,000 (a)Corcemar S.A. 113,057
------------------------------------------------------------------------------
248,866 (a)International de Ceramica SA de CV 405,599
------------------------------------------------------------------------------
6,150 (a)Izolacja SA 353,889
------------------------------------------------------------------------------
13,500 Rasmussen & Schiotz Holding AS, Class B 647,074
------------------------------------------------------------------------------
10,000 Titan Cement Co. 996,484
------------------------------------------------------------------------------
8,950 (a)Torah Cement 227,070
------------------------------------------------------------------------------ --------------
Total 2,743,175
------------------------------------------------------------------------------ --------------
BUSINESS & PUBLIC SERVICES--3.2%
------------------------------------------------------------------------------
8,000 Bellsystem 24, Inc. 1,112,924
------------------------------------------------------------------------------
22,000 Boewe Systec AG 795,506
------------------------------------------------------------------------------
24,000 Content Beheer NV 978,726
------------------------------------------------------------------------------
25,000 (a)Lernout and Hauspie Speech Products N.V. 650,000
------------------------------------------------------------------------------ --------------
Total 3,537,156
------------------------------------------------------------------------------ --------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
CHEMICALS--1.2%
------------------------------------------------------------------------------
275,000 Atanor S. A. $ 475,988
------------------------------------------------------------------------------
47,800 (a)Dead Sea Bromine 322,450
------------------------------------------------------------------------------
98,074 (a)Dead Sea Works Ltd. 338,595
------------------------------------------------------------------------------
7,300 (a)Paints & Chemical Industry 245,530
------------------------------------------------------------------------------ --------------
Total 1,382,563
------------------------------------------------------------------------------ --------------
CONSTRUCTION & HOUSING--2.6%
------------------------------------------------------------------------------
33,000 Aktor 489,453
------------------------------------------------------------------------------
58,500 Hellenic Technodomiki 641,645
------------------------------------------------------------------------------
36,500 Hellenic Technodomiki, Rights 213,204
------------------------------------------------------------------------------
2,800 Hollandsche Beton 643,745
------------------------------------------------------------------------------
10,500 (a)Somague-Sociedade Gestora de Participacoes 111,373
------------------------------------------------------------------------------
35,000 (a)Somague-Sociedade Gestora de Participacoes 371,243
------------------------------------------------------------------------------
237,000 (a)Starckjohann OY, Class B 430,340
------------------------------------------------------------------------------ --------------
Total 2,901,003
------------------------------------------------------------------------------ --------------
DATA PROCESSING & REPRODUCTION--12.2%
------------------------------------------------------------------------------
28,600 (a)CMG PLC 584,645
------------------------------------------------------------------------------
7,600 Cegedim S.A. 746,234
------------------------------------------------------------------------------
177,091 (a)Datacraft Ltd. 302,893
------------------------------------------------------------------------------
76,000 (a)DOCdata NV 1,008,062
------------------------------------------------------------------------------
28,000 Diamond Computer Service Co. 471,275
------------------------------------------------------------------------------
20,000 (a)DSP Group, Inc. 283,125
------------------------------------------------------------------------------
3,000 Electronique D2 SA 413,016
------------------------------------------------------------------------------
58,400 (a)Formula Systems (1985) Ltd. 1,037,530
------------------------------------------------------------------------------
17,000 I-O Data Device, Inc. 583,942
------------------------------------------------------------------------------
8,450 ICOM Informatique SA 585,176
------------------------------------------------------------------------------
40,000 (a)IONA Technologies PLC, ADR 690,000
------------------------------------------------------------------------------
26,000 (a)Imagineer Co. Ltd. $ 801,546
------------------------------------------------------------------------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
DATA PROCESSING & REPRODUCTION--CONTINUED
------------------------------------------------------------------------------
29,000 (a)Intentia International AB 346,075
------------------------------------------------------------------------------
80,200 JBA Holdings PLC 1,252,920
------------------------------------------------------------------------------
22,000 Meitec Corp. 579,991
------------------------------------------------------------------------------
45,000 (a)Memco Software, LTD 804,375
------------------------------------------------------------------------------
21,800 Merkantildata Asa 431,471
------------------------------------------------------------------------------
17,071 Misys PLC 382,583
------------------------------------------------------------------------------
22,800 Nidec Corp. 1,182,585
------------------------------------------------------------------------------
35,500 (a)Norman Data Defense 473,400
------------------------------------------------------------------------------
164,000 (a)Superoffice ASA 656,092
------------------------------------------------------------------------------ --------------
Total 13,616,936
------------------------------------------------------------------------------ --------------
ELECTRICAL & ELECTRONICS--3.6%
------------------------------------------------------------------------------
20,000 (a)Altech Co. Ltd. 465,436
------------------------------------------------------------------------------
17,250 (a)Cofidur 558,610
------------------------------------------------------------------------------
7,500 Fujimi, Inc. 442,530
------------------------------------------------------------------------------
12,100 Intracom S.A. 588,471
------------------------------------------------------------------------------
9,000 Micronics Japan Co. Ltd. 503,134
------------------------------------------------------------------------------
18,080 Simac Techniek 1,471,792
------------------------------------------------------------------------------ --------------
Total 4,029,973
------------------------------------------------------------------------------ --------------
ELECTRONIC COMPONENTS, INSTRUMENTS--9.6%
------------------------------------------------------------------------------
14,150 Aspoyhtyma OY 659,507
------------------------------------------------------------------------------
3,600 Azkoyen SA 452,988
------------------------------------------------------------------------------
6,100 Azkoyen SA, Rights 179,759
------------------------------------------------------------------------------
5,700,000 (a)China Everbright Technology Ltd. 1,427,115
------------------------------------------------------------------------------
75,000 (a)Creative Technology Ltd. 1,312,500
------------------------------------------------------------------------------
36,800 (a)Eidos PLC 505,676
------------------------------------------------------------------------------
26,800 (a)Eidos PLC, ADR $ 371,850
------------------------------------------------------------------------------
29,200 Geomatec Co. Ltd. 669,506
------------------------------------------------------------------------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS, INSTRUMENTS--CONTINUED
------------------------------------------------------------------------------
251 (a)Kudelski SA 762,002
------------------------------------------------------------------------------
125,000 Malaysian Pacific Industries 547,220
------------------------------------------------------------------------------
83,333 Malaysian Pacific Industries, Rights 7,462
------------------------------------------------------------------------------
25,000 (a)Orbotech, Ltd. 696,875
------------------------------------------------------------------------------
833 (a)Pricer AB, Class B 30,413
------------------------------------------------------------------------------
35,000 (a)Rofin-Sinar Technologies, Inc. 542,500
------------------------------------------------------------------------------
69,000 Sanshin Electronics Co. 1,262,087
------------------------------------------------------------------------------
45,100 Union Tool 1,231,584
------------------------------------------------------------------------------ --------------
Total 10,659,044
------------------------------------------------------------------------------ --------------
ENERGY 1/2OIL & GAS--2.2%
------------------------------------------------------------------------------
422,000 (a)Cultus Petroleum NL 1,253,561
------------------------------------------------------------------------------
237,000 (a)SOCO International PLC 926,599
------------------------------------------------------------------------------
19,666 (a)Saevik Supply ASA 224,983
------------------------------------------------------------------------------ --------------
Total 2,405,143
------------------------------------------------------------------------------ --------------
FINANCIAL SERVICES--2.0%
------------------------------------------------------------------------------
242,000 (a)Corp. Fin Reunida 975,968
------------------------------------------------------------------------------
52,000 DBS Management PLC 808,114
------------------------------------------------------------------------------
379,000 (a)PT Putra Surya Multidana 451,840
------------------------------------------------------------------------------
18,150 (a)Tyndall Australia Ltd. 26,957
------------------------------------------------------------------------------ --------------
Total 2,262,879
------------------------------------------------------------------------------ --------------
FOOD & HOUSEHOLD PRODUCTS--4.6%
------------------------------------------------------------------------------
30,300 (a)Bompreco Supermercados Do Nordeste 396,263
------------------------------------------------------------------------------
15,500 Chipita International 527,054
------------------------------------------------------------------------------
88,000 (a)Colep--Cia Portuguesa De Emba 1,220,809
------------------------------------------------------------------------------
6,880 (a)Eastern Co. $ 157,503
------------------------------------------------------------------------------
1,247,000 Herdez 559,722
------------------------------------------------------------------------------
1,350,000 (a)Interfresh 274,899
------------------------------------------------------------------------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS--CONTINUED
------------------------------------------------------------------------------
7,500 (a)Puleva Union Industrial Agro-Ganadera SA 258,889
------------------------------------------------------------------------------
32,000 Ralse Co. Ltd. 489,137
------------------------------------------------------------------------------
37,000 (a)Supermercados Unimarc SA, ADR 698,375
------------------------------------------------------------------------------
148,000 (a)(b)Want Want Holdings 535,760
------------------------------------------------------------------------------ --------------
Total 5,118,411
------------------------------------------------------------------------------ --------------
FOOD PROCESSING--3.4%
------------------------------------------------------------------------------
37,000 Goody's S.A. 927,507
------------------------------------------------------------------------------
4,440 LDC SA 759,658
------------------------------------------------------------------------------
400,000 Ng Fung Hong Ltd. 642,705
------------------------------------------------------------------------------
27,400 (a)Tele Pizza SA 1,453,777
------------------------------------------------------------------------------ --------------
Total 3,783,647
------------------------------------------------------------------------------ --------------
FOREST PRODUCTS & PAPER--0.7%
------------------------------------------------------------------------------
17,516 (a)Miquel Y Costas 781,532
------------------------------------------------------------------------------ --------------
HEALTH & PERSONAL CARE--3.3%
------------------------------------------------------------------------------
72,250 Athens Medic Center 859,930
------------------------------------------------------------------------------
61,500 (a)Biocompatibles International PLC 1,312,899
------------------------------------------------------------------------------
84,500 Celltech PLC 490,716
------------------------------------------------------------------------------
19,700 (a)Medical Invest Svenska AB, Class B 757,380
------------------------------------------------------------------------------
181,000 (a)Quimica Estrella SA 231,796
------------------------------------------------------------------------------ --------------
Total 3,652,721
------------------------------------------------------------------------------ --------------
HOUSEHOLD APPLIANCES--1.0%
------------------------------------------------------------------------------
82,000 Ellerine Holdings Ltd. 528,618
------------------------------------------------------------------------------
60,000 (a)K & M Moebel AG $ 642,443
------------------------------------------------------------------------------ --------------
Total 1,171,061
------------------------------------------------------------------------------ --------------
INDUSTRIAL COMPONENTS--0.6%
------------------------------------------------------------------------------
364,000 (b)China Merchants Hai Hong Holdings 662,373
------------------------------------------------------------------------------ --------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
LEISURE & TOURISM--1.9%
------------------------------------------------------------------------------
30,600 Airtours PLC 549,128
------------------------------------------------------------------------------
286,000 (a)New Mauritius Hotels LTD 508,538
------------------------------------------------------------------------------
204,000 (a)Sun Resorts Ltd. 487,641
------------------------------------------------------------------------------
365,000 (a)Waterfall Holdings PLC 537,379
------------------------------------------------------------------------------ --------------
Total 2,082,686
------------------------------------------------------------------------------ --------------
MACHINERY & ENGINEERING--2.7%
------------------------------------------------------------------------------
47,000 Fuji Machine Manufacturing Co. 1,598,283
------------------------------------------------------------------------------
19,000 Nedcon Groep NV 791,625
------------------------------------------------------------------------------
46,000 Santasalo--JOT Group 580,661
------------------------------------------------------------------------------ --------------
Total 2,970,569
------------------------------------------------------------------------------ --------------
MANUFACTURING--3.6%
------------------------------------------------------------------------------
19,000 Disco Corp. 626,535
------------------------------------------------------------------------------
32,400 Ind. Natuzzi Ads (Usd), ADR 818,100
------------------------------------------------------------------------------
9,650 Nordtank Energy Group AS 592,998
------------------------------------------------------------------------------
18,200 PLM AB 331,071
------------------------------------------------------------------------------
1,950 (a)Swisslog Holding AG 688,365
------------------------------------------------------------------------------
28,700 Tomra Systems ASA 656,668
------------------------------------------------------------------------------
7,700 (a)Zalakeramia Rt 296,922
------------------------------------------------------------------------------ --------------
Total 4,010,659
------------------------------------------------------------------------------ --------------
MERCHANDISING--4.5%
------------------------------------------------------------------------------
1,542,000 China EB-IHD Holdings Ltd. 2,368,174
------------------------------------------------------------------------------
58,310 Importadora y Exportadora $ 810,914
------------------------------------------------------------------------------
9,500 (a)Marc Orian SA 658,054
------------------------------------------------------------------------------
36,900 Ministop Co. Ltd. 1,172,435
------------------------------------------------------------------------------ --------------
Total 5,009,577
------------------------------------------------------------------------------ --------------
METALS--STEEL--1.0%
------------------------------------------------------------------------------
218,000 (a)Acindar Industria Argentina de Aceros SA 515,828
------------------------------------------------------------------------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
METALS--CONTINUED
------------------------------------------------------------------------------
37,500 (a)Tubos de Acero de Mexico SA, ADR 656,250
------------------------------------------------------------------------------ --------------
Total 1,172,078
------------------------------------------------------------------------------ --------------
MINING--0.9%
------------------------------------------------------------------------------
70,000 (a)(b) Minefinders Corp. Ltd. 222,914
------------------------------------------------------------------------------
719,000 (a)Western Metals Ltd. 733,841
------------------------------------------------------------------------------ --------------
Total 956,755
------------------------------------------------------------------------------ --------------
MISCELLANEOUS MATERIALS & COMMODITIES--0.4%
------------------------------------------------------------------------------
15,800 Martela OY, Class A 429,573
------------------------------------------------------------------------------ --------------
MULTI-INDUSTRY--0.8%
------------------------------------------------------------------------------
16,000 (a)Beijing Enterprises 93,334
------------------------------------------------------------------------------
1,200,000 China Everbright International Ltd. 329,095
------------------------------------------------------------------------------
66,400 Primedia Ltd., Class N 422,106
------------------------------------------------------------------------------ --------------
Total 844,535
------------------------------------------------------------------------------ --------------
PHARMACEUTICALS--1.3%
------------------------------------------------------------------------------
37,000 Kawasumi Laboratories 495,663
------------------------------------------------------------------------------
28,700 (a)QLT Phototherapeutics 643,917
------------------------------------------------------------------------------
2,488 (a)Slovakofarna AS 330,524
------------------------------------------------------------------------------ --------------
Total 1,470,104
------------------------------------------------------------------------------ --------------
REAL ESTATE--2.5%
------------------------------------------------------------------------------
60,000 (a)Castellum AB 418,000
------------------------------------------------------------------------------
428,389 China Vanke Co. Ltd., Class B $ 468,831
------------------------------------------------------------------------------
2,000 (a)Fairyoung Holdings Ltd. 865
------------------------------------------------------------------------------
2,500 Groothandelsgebouwen NV 353,706
------------------------------------------------------------------------------
1,000,000 Hongkong China Ltd. 690,456
------------------------------------------------------------------------------
125,000 Mitie Group PLC 378,292
------------------------------------------------------------------------------
3,866 (a)Mundicenter Sociedade Imobil 47,845
------------------------------------------------------------------------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
REAL ESTATE--CONTINUED
------------------------------------------------------------------------------
34,600 Mundicenter Sociedade Imobil 428,200
------------------------------------------------------------------------------ --------------
Total 2,786,195
------------------------------------------------------------------------------ --------------
TELECOMMUNICATIONS--2.2%
------------------------------------------------------------------------------
135,000 Filtronic Comtek PLC 845,820
------------------------------------------------------------------------------
34,800 Hellenic Cables S.A. 637,223
------------------------------------------------------------------------------
13,100 Hikari Tsushin, Inc. 995,577
------------------------------------------------------------------------------ --------------
Total 2,478,620
------------------------------------------------------------------------------ --------------
TEXTILES & APPAREL--2.1%
------------------------------------------------------------------------------
67,000 Blacks Leisure Group PLC 595,689
------------------------------------------------------------------------------
39,800 Fast Retailing Co. Ltd. 1,288,501
------------------------------------------------------------------------------
80,500 (a)Simint SPA 456,077
------------------------------------------------------------------------------ --------------
Total 2,340,267
------------------------------------------------------------------------------ --------------
TRANSPORTATION 1/2AIRLINES--0.0%
------------------------------------------------------------------------------
1,900 (a)Ryanair Holdings PLC, ADR 47,263
------------------------------------------------------------------------------ --------------
TRANSPORTATION 1/2ROAD & RAIL--0.8%
------------------------------------------------------------------------------
1,210 Sixt AG 930,987
------------------------------------------------------------------------------ --------------
TRANSPORTATION 1/2SHIPPING--2.3%
------------------------------------------------------------------------------
127,400 Attica Enterprises S.A. 1,143,082
------------------------------------------------------------------------------
23,480 (a)Attica Enterprises S.A. 210,672
------------------------------------------------------------------------------
46,000 (a)Det Sandenfields-Norske Dampskibsselskab, Class A 518,332
------------------------------------------------------------------------------
1,436,000 (a)Pacific Ports Co. Ltd. $ 426,249
------------------------------------------------------------------------------
24,700 (a)Seateam Technology 299,573
------------------------------------------------------------------------------ --------------
Total 2,597,908
------------------------------------------------------------------------------ --------------
UTILITIES 1/2ELECTRICAL & GAS--3.3%
------------------------------------------------------------------------------
19,000,000 (a)Centrais Elet Matogros 53,238
------------------------------------------------------------------------------
7,000,000 (a)Companhia de Electricidade do Estado da Bahia 588,504
------------------------------------------------------------------------------
296,000 Novus Petroleum Ltd. 1,088,948
------------------------------------------------------------------------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
UTILITIES 1/2ELECTRICAL & GAS--CONTINUED
------------------------------------------------------------------------------
1,050,000 (a)Petroz NL 1,007,692
------------------------------------------------------------------------------
41,300 Smedvig ASA, Class B 1,002,934
------------------------------------------------------------------------------ --------------
Total 3,741,316
------------------------------------------------------------------------------ --------------
WHOLESALE & INTERNATIONAL TRADE--0.8%
------------------------------------------------------------------------------
26,200 (a)Adolfo Dominguez 920,697
------------------------------------------------------------------------------
1 (a)Enrique Ferreyros S.A. 1
------------------------------------------------------------------------------ --------------
Total 920,698
------------------------------------------------------------------------------ --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $96,462,510) 105,640,812
------------------------------------------------------------------------------ --------------
PREFERRED STOCKS--4.4%
- ---------------------------------------------------------------------------------------------
AUTOMOBILE--0.3%
------------------------------------------------------------------------------
4,700,000 Freios Varga SA, Preference 263,863
------------------------------------------------------------------------------
13,000,000 Organizacao Sistemas Aplica SA, Preference 60,710
------------------------------------------------------------------------------ --------------
Total 324,573
------------------------------------------------------------------------------ --------------
BEVERAGE & TOBACCO--0.2%
------------------------------------------------------------------------------
2,740,000 Industria de Bebidas Antarctica da Paraiba SA, Preference 268,753
------------------------------------------------------------------------------ --------------
CHEMICALS--0.3%
------------------------------------------------------------------------------
100,000,000 Trikem SA, Preference 363,300
------------------------------------------------------------------------------ --------------
ELECTRONIC COMPONENTS, INSTRUMENTS--0.7%
------------------------------------------------------------------------------
510,500,000 Inepar SA, Preference 772,387
------------------------------------------------------------------------------ --------------
FINANCIAL SERVICES--0.4%
------------------------------------------------------------------------------
2,106 Marschollek, Lautenschlaeger und Partner AG, Pfd. $ 505,213
------------------------------------------------------------------------------ --------------
METALS 1/2STEEL--0.7%
------------------------------------------------------------------------------
22,400,000 Siderurgica Riograndense SA, Preference 732,368
------------------------------------------------------------------------------ --------------
TELECOMMUNICATIONS--0.8%
------------------------------------------------------------------------------
496,000 Cia Riograndense De Telecomunicacoes, Pfd. 672,299
------------------------------------------------------------------------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR VALUE IN
PRINCIPAL U.S.
AMOUNT DOLLARS
- ------------- ------------------------------------------------------------------------------ --------------
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
- ---------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--CONTINUED
------------------------------------------------------------------------------
3,400,000 Ericsson Telecomunicacoes SA 190,563
------------------------------------------------------------------------------ --------------
Total 862,862
------------------------------------------------------------------------------ --------------
TEXTILES & APPAREL--0.0%
------------------------------------------------------------------------------
115,000,000 Texpar SA, Preference 1,495
------------------------------------------------------------------------------ --------------
UTILITIES 1/2ELECTRICAL & GAS--1.0%
------------------------------------------------------------------------------
30,000,000 (a)Centrais Electric, Preference 369,900
------------------------------------------------------------------------------
102,000,000 (a)Companhia Energetica do Ceara-Coelce, Preference, Series A 457,266
------------------------------------------------------------------------------
50,300,000 Empresa Energetica de Mato Grosso do Sul SA, Preference 272,525
------------------------------------------------------------------------------ --------------
Total 1,099,691
------------------------------------------------------------------------------ --------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $3,492,433) 4,930,642
------------------------------------------------------------------------------ --------------
(C)REPURCHASE AGREEMENT--4.1%
- ---------------------------------------------------------------------------------------------
$ 4,535,000 BT Securities Corporation, 5.56%, dated 5/30/1997, due 6/2/1997
(AT AMORTIZED COST) 4,535,000
------------------------------------------------------------------------------ --------------
TOTAL INVESTMENTS (IDENTIFIED COST $104,489,943)(D) $ 115,106,454
------------------------------------------------------------------------------ --------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At May 31, 1997, these securities amounted
to $3,459,462 which represents 3.1% 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 $104,489,943.
The net unrealized appreciation of investments on a federal tax basis
amounts to $10,616,511 which is comprised of $13,026,942 appreciation and
$2,410,431 depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($111,599,068) at May 31, 1997.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
GDR--Global Depository 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
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
ASSETS:
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Total investments in securities, at value (identified and tax cost $104,489,943) $115,106,454
- ---------------------------------------------------------------------------------------------------
Cash 761,348
- ---------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (at identified cost $10,390) 10,308
- ---------------------------------------------------------------------------------------------------
Income receivable 169,424
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 2,799,738
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 2,647,703
- --------------------------------------------------------------------------------------------------- -----------
Total assets 121,494,975
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------
Payable for investments purchased $9,771,236
- ----------------------------------------------------------------------------------------
Payable for shares redeemed 17,867
- ----------------------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased and sold 5,826
- ----------------------------------------------------------------------------------------
Payable for taxes withheld 10,521
- ----------------------------------------------------------------------------------------
Accrued expenses 90,457
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 9,895,907
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 7,948,153 shares outstanding $111,599,068
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $99,930,366
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 10,603,421
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 1,350,746
- ---------------------------------------------------------------------------------------------------
Accumulated net investment operating loss (285,465)
- --------------------------------------------------------------------------------------------------- -----------
Total Net Assets $111,599,068
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($40,888,180 / 2,894,388 shares outstanding) $14.13
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/94.50 of $14.13)* $14.95
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.5/100 of $14.13)** $14.06
- --------------------------------------------------------------------------------------------------- -----------
CLASS B SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($58,815,599 / 4,203,070 shares outstanding) $13.99
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $13.99
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (94.50/100 of $13.99)** $13.22
- --------------------------------------------------------------------------------------------------- -----------
CLASS C SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($11,895,289 / 850,695 shares outstanding) $13.98
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $13.98
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99/100 of $13.98)** $13.84
- --------------------------------------------------------------------------------------------------- -----------
</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
- --------------------------------------------------------------------------------
Six Months Ended May 31, 1997 (unaudited)
<TABLE>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividends (net of foreign taxes withheld of $40,786) $ 468,533
- -----------------------------------------------------------------------------------------------------
Interest 76,890
- ----------------------------------------------------------------------------------------------------- ---------
Total income 545,423
- -----------------------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------------
Investment advisory fee $ 429,129
- ------------------------------------------------------------------------------------------
Administrative personnel and services fee 92,247
- ------------------------------------------------------------------------------------------
Custodian fees 132,348
- ------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 78,123
- ------------------------------------------------------------------------------------------
Directors'/Trustees' fees 500
- ------------------------------------------------------------------------------------------
Auditing fees 8,072
- ------------------------------------------------------------------------------------------
Legal fees 1,635
- ------------------------------------------------------------------------------------------
Portfolio accounting fees 42,003
- ------------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 129,416
- ------------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 23,656
- ------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 34,802
- ------------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 43,139
- ------------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 7,885
- ------------------------------------------------------------------------------------------
Share registration costs 41,316
- ------------------------------------------------------------------------------------------
Printing and postage 13,777
- ------------------------------------------------------------------------------------------
Insurance premiums 2,124
- ------------------------------------------------------------------------------------------
Taxes 4,450
- ------------------------------------------------------------------------------------------
Miscellaneous 4,126
- ------------------------------------------------------------------------------------------ ---------
Total expenses 1,088,748
- ------------------------------------------------------------------------------------------
Waiver of investment advisory fee (257,860)
- ------------------------------------------------------------------------------------------ ---------
Net expenses 830,888
- ----------------------------------------------------------------------------------------------------- ---------
Net investment operating loss (285,465)
- ----------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments (net of foreign taxes withheld of $404) 1,350,746
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 7,886,105
- ----------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain on investments 9,236,851
- ----------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $8,951,386
- ----------------------------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated International Small Company Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------------
Net investment operating loss $ (285,465) $ (97,243)
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments ($1,350,746 gain and $30,327 loss,
respectively, as computed for federal tax purposes) 1,350,746 (92,852)
- -------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation 7,886,105 2,717,316
- ------------------------------------------------------------------------------- -------------- -----------------
Change in net assets resulting from operations 8,951,386 2,527,221
- ------------------------------------------------------------------------------- -------------- -----------------
SHARE TRANSACTIONS--
- -------------------------------------------------------------------------------
Proceeds from sale of shares 77,141,119 44,965,507
- -------------------------------------------------------------------------------
Cost of shares redeemed (10,653,063) (11,333,102)
- ------------------------------------------------------------------------------- -------------- -----------------
Change in net assets resulting from share transactions 66,488,056 33,632,405
- ------------------------------------------------------------------------------- -------------- -----------------
Change in net assets 75,439,442 36,159,626
- -------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------
Beginning of period 36,159,626 --
- ------------------------------------------------------------------------------- -------------- -----------------
End of period $ 111,599,068 $ 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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.26 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment operating loss (0.04) (0.02)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.91 2.28
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 1.87 2.26
- ------------------------------------------------------------------------------ ------- -------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 14.13 $ 12.26
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 15.25% 22.60%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 1.97%* 1.97%*
- ------------------------------------------------------------------------------
Net investment operating loss (0.44%)* (0.48%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.75%* 3.38%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $40,888 $16,339
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0007 $0.0006
- ------------------------------------------------------------------------------
Portfolio turnover 135% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.20 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment operating loss (0.07)(e) (0.04)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.86 2.24
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 1.79 2.20
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.99 $ 12.20
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 14.67% 22.00%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 2.73%* 2.72%*
- ------------------------------------------------------------------------------
Net investment operating loss (1.11%)* (1.61%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.75%* 3.38%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $58,816 $16,671
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0007 $0.0006
- ------------------------------------------------------------------------------
Portfolio turnover 135% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) Per share information is based on average shares outstanding.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 12.19 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment operating loss (0.06)(e) (0.05)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.85 2.24
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 1.79 2.19
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 13.98 $ 12.19
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 14.68% 21.90%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 2.73%* 2.72%*
- ------------------------------------------------------------------------------
Net investment operating loss (1.08%)* (1.58%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.75%* 3.38%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $11,895 $3,040
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0007 $0.0006
- ------------------------------------------------------------------------------
Portfolio turnover 135% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(e) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
Federated International Small Company Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
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 eight 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--Listed equity securities are valued at the last sale
price reported on a national securities exchange. 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.
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.
Federated International Small Company 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
exchange contracts as a way of managing foreign exchange risk. The Fund may
enter into foreign currency exchange contracts as purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
crosshedge 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 exchanged contract is offset into a closing
transaction or by 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 May 31, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
IN UNREALIZED
SETTLEMENT CONTRACTS TO EXCHANGE CONTRACTS APPRECIATION
CONTRACTS PURCHASED DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Australian Dollar 6/2/97 694,545 $ 532,647 $ 529,016 $ (3,631)
- ------------------------
Spanish Peseta 6/2/97 19,658,997 136,996 135,992 (1,004)
- ------------------------
Hong Kong Dollar 6/2/97 231,772 29,925 29,912 (13)
- ------------------------
Portuguese Escudo 6/9/97 16,275,000 95,483 94,075 (1,408)
- ------------------------
CONTRACTS SOLD
- ------------------------
French Franc 6/2/97 1,410,390 244,859 244,240 619
- ------------------------
Indonesian Rupiah 6/3/97-6/4/97 232,203,499 95,049 95,459 (410)
- ------------------------
Norwegian Krone 6/2/97 14,280 2,020 2,004 16
- ------------------------
Portuguese Escudo 6/9/97 635,250 3,678 3,673 5
- ------------------------ --------
Net unrealized
depreciation on
foreign exchange
contracts $ (5,826)
- ------------------------ --------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
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 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 each restricted security held at May 31, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATES ACQUISITION COST
<S> <C> <C>
Sydbank AS 3/18/1997 562,499
Zagrebacka Banka, GDR 7/23/1996-4/24/1997 1,011,113
Al--Ahram Beverages Co, GDR 2/12/1997 155,000
Want Want Holdings 4/10/1997-4/14/1997 489,683
China Merchants Hai Hong Holdings 4/24/1997-5/13/1997 378,021
Minefinders Corp. Ltd. special warrants 3/11/1997 256,110
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions
Federated International Small Company Fund
- --------------------------------------------------------------------------------
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 May 31, 1997, par value shares ($0.001 per share) authorized were as follows:
<TABLE>
<CAPTION>
NUMBER OF
PAR VALUE
CAPITAL STOCK
CLASS NAME 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>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,162,421 $ 28,904,308 2,313,613 $ 25,684,395
- --------------------------------------------------------
Shares redeemed (605,473) (7,964,228) (976,173) (10,868,944)
- -------------------------------------------------------- ---------- ------------- ---------- --------------
Net change resulting from
Class A share transactions 1,556,948 $ 20,940,080 1,337,440 $ 14,815,451
- -------------------------------------------------------- ---------- ------------- ---------- --------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,962,223 $ 39,255,295 1,398,394 $ 16,261,633
- --------------------------------------------------------
Shares redeemed (130,025) (1,726,207) (27,522) (323,940)
- -------------------------------------------------------- ---------- ------------- ---------- -------------
Net change resulting from
Class B share transactions 2,832,198 $ 37,529,088 1,370,872 $ 15,937,693
- -------------------------------------------------------- ---------- ------------- ---------- -------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 674,194 $ 8,981,516 261,457 $ 3,019,479
- --------------------------------------------------------
Shares redeemed (72,820) (962,628) (12,136) (140,218)
- -------------------------------------------------------- ---------- ------------- ---------- -------------
Net change resulting from
Class C share transactions 601,374 $ 8,018,888 249,321 $ 2,879,261
- -------------------------------------------------------- ---------- ------------- ---------- -------------
Net change resulting from
share transactions 4,990,520 $ 66,488,056 2,957,633 $ 33,632,405
- -------------------------------------------------------- ---------- ------------- ---------- -------------
</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. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors 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 Federated Securities Corp.
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
- --------------------------------------------------------------------------------------------
Class B Shares 0.75%
- --------------------------------------------------------------------------------------------
Class C Shares 0.75%
- --------------------------------------------------------------------------------------------
</TABLE>
Federated International Small Company Fund
- --------------------------------------------------------------------------------
Class A Shares did not incur a Distribution services fee for the six months
ended May 31, 1997, 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--Federated Services Company 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 $48,027 were borne initially
by Adviser. The Fund has agreed to reimburse Adviser for the organizational
expenses during the five year period following effective date. For the six
months ended May 31, 1997, the Fund paid $5,870 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 six
months ended May 31, 1997, were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
<S> <C>
PURCHASES $ 151,225,229
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 91,386,279
- -------------------------------------------------------------------------------------------------- --------------
</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.
Federated International Small Company Fund
- --------------------------------------------------------------------------------
At May 31, 1997, the diversification of countries was as follows:
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
Argentina 2.3%
Australia 4.0%
Belgium 0.6%
Botswana 0.5%
Brazil 4.8%
Canada 0.8%
Chile 0.6%
China 0.4%
Croatia 1.2%
Denmark 1.6%
Egypt 0.7%
Finland 1.9%
France 3.3%
Federal Republic of Germany 3.6%
Ghana 0.0%
Greece 6.5%
Hong Kong 6.0%
Hungary 0.3%
Indonesia 0.4%
Ireland 1.3%
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
Israel 2.9%
Italy 1.7%
Japan 16.2%
Malaysia 0.5%
Mauritius 0.9%
Mexico 1.9%
Netherlands 5.8%
Norway 3.8%
Peru 0.0%
Poland 0.5%
Portugal 2.9%
Singapore 2.6%
Slovak Republic 0.3%
South Africa 1.4%
Spain 4.5%
Sweden 2.3%
Switzerland 1.3%
United Kingdom 8.3%
Zimbabwe 0.2%
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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, and Secretary
John E. Murray, Jr. Karen M. Brownlee
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other governmental agency.
Investment in mutual funds involves risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
[LOGO] FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 981487838
Cusip 981487820
Cusip 981487812
G01968-02 (7/97)
[LOGO OF RECYCLED PAPER]
[LOGO] FEDERATED INVESTORS
Federated
Latin American
Growth Fund
Semi-Annual Report
May 31, 1997
Established 1996
President's Message
Dear Shareholder:
Federated Latin American Growth Fund was established in February 1996, and I am
pleased to present the first Semi-Annual Report to shareholders of the fund.
This report highlights the fund during the six-month reporting period of
December 1, 1996 through May 31, 1997.
The report begins with a commentary by the fund's portfolio manager, Alexandre
de Bethmann, Vice President of Federal 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.
This Latin American stock fund brings to shareholders significant long-term
opportunities from an extremely well-researched portfolio of approximately 60
stocks in 7 Latin American countries, whose median market capitalization is over
$2 billion.*
The six-month reporting period was a truly outstanding one for the fund, as the
Latin American market overall delivered a total return of more than 30%Nthe
highest return of any region in the world. Thanks to price appreciation of the
securities in the fund's portfolio, the fund's share classes all achieved a
total return of more than 31%. Share class performance highlights are as
follows:**
<TABLE>
<CAPTION>
Capital
NAV NAV NAV Income Gains Total Return
12/1/96 5/31/97 Change Distribution Distribution Based on NAV
------- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Class A Shares $11.56 $14.63 27% $0.08 $0.41 31.95%
Class B Shares $11.50 $14.53 26% $0.05 $0.41 31.39%
Class C Shares $11.48 $14.55 27% $0.02 $0.41 31.54%
</TABLE>
With such strong short-term performance, it is important to remember that the
true measure of this fund's performance is in years rather than months. There
will inevitably also be periods of unfriendly volatility.
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns based on offering price for Class A, B, and C Shares for the
report period (12/1/96-5/31/97) were 24.72%, 25.69%, and 30.54%, respectively.
The 1-year total returns (5/31/96-5/31/97) based on offering price for Class A,
B, and C Shares were 27.53%, 28.12%, and 32.98%, respectively. The annualized
since inception total returns (2/28/96-5/31/97) based on offering price for
Class A, B, and C Shares were 33.83%, 35.34%, and 38.87%, respectively.
Regardless of the investment climate, adding to your account on a regular basis
and reinvesting your annual dividends in additional shares is a convenient way
to "pay yourself first" and enjoy the benefit of compounding.+
We trust you are satisfied with your investment in Federated Latin American
Growth Fund. We will continue to keep you up-to-date on the details of your
investment on a regular basis.
Sincerely,
/s/ Richard B. Fisher
Richard B. Fisher
President
July 15, 1997
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
Investment Review
[PHOTO APPEARS HERE]
Alexandre de Bethmann
Vice President
Federated Global
Research Corp.
Q What are your comments on the extraordinary performance of the Latin American
market, which has been delivering the highest dollar return of any world region?
A Latin America, with a 35.5% return for the period, continued to provide
investors with the highest dollar return. Latin America continued to outperform
Europe, which was up 11.1%, and Asia, which was down 3.1%. The contributing
factor to this performance was the acceleration and the economic growth of the
region. On the other hand, the European economies have experienced flat growth,
and Asia's growth has been revised downward.
Q In this extremely positive environment, how well did Federated Latin American
Growth Fund perform compared to the emerging markets overall and the universe of
Latin American growth funds?
A In the six-month reporting period, the fund delivered a total return based on
net asset value of 31.95% for Class A Shares, 31.39% for Class B Shares, and
31.54%, for Class C Shares.* All share classes were competitive with the Morgan
Stanley Capital International Latin-America Free Index's total return of
33.50%.** Emerging markets' six-month total returns centered around 15%,
according to the Morgan Stanley Capital International Emerging Markets Free
Index.**
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns based on offering price for Class A, B, and C Shares for the
report period (12/1/96-5/31/97) were 24.72%, 25.69%, and 30.54%, respectively.
The 1-year total returns (5/31/96- 5/31/97) based on offering price for Class A,
B, and C Shares were 27.53%, 28.12%, and 32.98%, respectively. The annualized
since inception total returns (2/28/96-5/31/97) based on offering price for
Class A, B, and C Shares were 33.83%, 35.34%, and 38.87%, respectively.
** Morgan Stanley Capital International Latin American-Free Index is a market
value-weighted average of the performance of securities listed on the stock
exchanges of 7 countries in the Latin American region. Morgan Stanley Capital
International Emerging Markets Free Index is a market capitalization-weighted
foreign securities index, which is used to measure the performance of emerging
markets in Europe, Asia, Latin America, and the Middle East/Africa. These
indices are unmanaged, and investments cannot be made in an index.
Q What were your strategies in terms of country weightings during the reporting
period?
A Our country weights have been, and should continue to be, close to the index
weights. There are only 7 countries in which we invest. Brazil and Mexico have a
larger number of issues and larger corporations for investment selection, so
that 60%-65% of the fund's assets were placed in these two countries. Their
stocks provide some liquidity to the sellers. We believe that, at this time in
the economic cycle, we can add a high level of value to shareholders through
superior stock selection within all 7 countries.
Q What countries were represented in the portfolio as of May 31, 1997?]
A The portfolio was diversified across the following countries:
Country % of Net Assets
--------- ---------------
Brazil 44.7%
Mexico 22.9%
Argentina 11.1%
Chile 8.8%
Venezuela 2.5%
Colombia 1.7%
Peru 1.2%
Q What were the fund's top ten holdings?
A As of May 31, 1997, the top ten holdings were as follows:
<TABLE>
<CAPTION>
Name Country % of Assets Industry
- ------------------------------------- --------- ----------- --------------------------
<S> <C> <C> <C>
Petroleo Brasileiro SA, Preference Brazil 5.54% Energy Sources
Telecomunicacoes Brasileiras SA Brazil 5.36% Telecommunications
Formento Economico Mexicano, Mexico 2.82% Beverages & SA de
C.V., Class B Tobacco
Telecomunicacones Brasileras, Brazil 2.77% Telecommunications
Preference
Telecomunicacoes de Sao Paulo SA, Brazil 2.62% Telecommunications
Preference
Telefonica De Argentina ADR Argentina 2.55% Telecommunications
Telefonos de Mexico, Class L. ADR Mexico 2.41% Telecommunications
Grupo Carso SA de CV Mexico 2.28% Multi-Industry
Companhia Energetica de Minas Gerais, Brazil 2.22% Utilities - Electric & Gas
Preference
Companhia Energetica do Brazil 2.21% Utilities - Electric & Gas
Ceara-Coelce Preference Ser. A
Total % of portfolio assets 30.78%
</TABLE>
Q As we approach mid-year, do you foresee the Latin American bull market
continuing?
A We continue to believe that Latin America, for the remainder of 1997, will be
the best performing region in the world. The very positive macroeconomics data
is expected to feed through to bottom-line corporate growth. Additionally, the
impact of further positive news on the privatization in countries' utilities and
telecommunication industries may occur. Progress to further local stock
ownership may be accomplished due to increased participation of local pension
funds. Latin American economies should enable their markets to continue to
provide excellent investment opportunities.
Federated Latin American Growth Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--60.2%
- -----------------------------------------------------------------------------------------------
BANKING--8.2%
--------------------------------------------------------------------------------
3,800 Banco BHIF, ADR $ 79,325
--------------------------------------------------------------------------------
5,290 Banco Frances del Rio de la Plata S.A., ADR 173,909
--------------------------------------------------------------------------------
3,100 Banco Ganadero SA, ADR 118,575
--------------------------------------------------------------------------------
2,600 Banco Ganadero SA, Class C, ADR 79,300
--------------------------------------------------------------------------------
3,300 Banco Industrial Colombiano, ADR 58,163
--------------------------------------------------------------------------------
10,500 Banco Santander, Class A, ADR 171,938
--------------------------------------------------------------------------------
4,700 Banco de A. Edwards, ADR 98,113
--------------------------------------------------------------------------------
138,000 (a)Grupo Financiero Banamex Accivel, Class B 298,718
--------------------------------------------------------------------------------
815,000 (a)Grupo Financiero Bancomer, S.A. de C.V., Class B 306,050
-------------------------------------------------------------------------------- -------------
Total 1,384,091
-------------------------------------------------------------------------------- -------------
BEVERAGE & TOBACCO--6.0%
--------------------------------------------------------------------------------
6,600 Compania Cervecerias Unidas SA, ADR 156,750
--------------------------------------------------------------------------------
90,000 Fomento Economico Mexicano, SA de C.V., Class B 477,936
--------------------------------------------------------------------------------
8,800 Pan American Beverage, Class A 255,200
--------------------------------------------------------------------------------
11,500 Quilmes Industrial SA, ADR 133,688
-------------------------------------------------------------------------------- -------------
Total 1,023,574
-------------------------------------------------------------------------------- -------------
BROADCASTING & PUBLISHING--1.1%
--------------------------------------------------------------------------------
18,000 (a)TV Filme, Inc. 182,250
-------------------------------------------------------------------------------- -------------
CONSTRUCTION & HOUSING--1.2%
--------------------------------------------------------------------------------
14,000 Empresas ICA Sociedad Controladora S.A., ADR 203,000
-------------------------------------------------------------------------------- -------------
ENERGY EQUIPMENT & SERVICES--1.6%
--------------------------------------------------------------------------------
10,100 (b)Chilectra S.A., ADR 273,096
-------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--0.5%
--------------------------------------------------------------------------------
3,524 Credicorp Ltd. 79,731
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
FOOD & HOUSEHOLD PRODUCTS--0.9%
--------------------------------------------------------------------------------
8,000 (a)Supermercados Unimarc SA, ADR $ 151,000
-------------------------------------------------------------------------------- -------------
MERCHANDISING--2.4%
--------------------------------------------------------------------------------
3,952 Cadenalco-Gran Cad, ADR 41,496
--------------------------------------------------------------------------------
23,483 Cifra SA de CV, Class A 40,143
--------------------------------------------------------------------------------
192,000 Cifra SA de CV, Class B 329,184
-------------------------------------------------------------------------------- -------------
Total 410,823
-------------------------------------------------------------------------------- -------------
METALS--NON FERROUS--0.7%
--------------------------------------------------------------------------------
1,900 Sociedad Quimica Y Minera De Chile, ADR 123,500
-------------------------------------------------------------------------------- -------------
METALS--STEEL--5.5%
--------------------------------------------------------------------------------
109,000 (a)Acindar Industria Argentina de Aceros SA 257,914
--------------------------------------------------------------------------------
113,000 Siderca S.A., Class A 271,336
--------------------------------------------------------------------------------
20,100 (a)Tubos de Acero de Mexico SA, ADR 351,750
--------------------------------------------------------------------------------
10,000 (a)(b)Venprecar, ADR 43,750
-------------------------------------------------------------------------------- -------------
Total 924,750
-------------------------------------------------------------------------------- -------------
MINING--0.0%
--------------------------------------------------------------------------------
5,800 (a)Companhia Vale Do Rio Doce, Class B 0
-------------------------------------------------------------------------------- -------------
MISCELLANEOUS MATERIALS & COMMODITIES--1.8%
--------------------------------------------------------------------------------
103,000 Vitro SA 298,230
-------------------------------------------------------------------------------- -------------
MULTI-INDUSTRY--5.5%
--------------------------------------------------------------------------------
62,000 Alfa, S.A. de C.V., Class A 366,873
--------------------------------------------------------------------------------
22,304 Compania Naviera Perez Companc SA, Class B 170,711
--------------------------------------------------------------------------------
68,000 Grupo Carso SA de CV 386,041
-------------------------------------------------------------------------------- -------------
Total 923,625
-------------------------------------------------------------------------------- -------------
REAL ESTATE--0.9%
--------------------------------------------------------------------------------
3,700 IRSA Inversiones y Representaciones S.A., GDR 144,763
-------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--15.0%
--------------------------------------------------------------------------------
2,600 CPT Telefonica del Peru S.A., Class B, ADR $ 65,975
--------------------------------------------------------------------------------
</TABLE>
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
TELECOMMUNICATIONS--CONTINUED
--------------------------------------------------------------------------------
3,000 (a)Compania Anonima Nacional Telefonos de Venezuela, Class D, ADR 111,375
--------------------------------------------------------------------------------
5,100 Compania Telecomunicacion Chile, ADR 174,675
--------------------------------------------------------------------------------
9,000 (a)Grup Iusacell S.A., ADR 148,500
--------------------------------------------------------------------------------
5,500 Telecom Argentina S.A., ADR 293,563
--------------------------------------------------------------------------------
6,964,000 Telecomunicacoes Brasileiras SA 907,434
--------------------------------------------------------------------------------
56,433 Telecomunicacoes de Sao Paulo SA, Rights 1,898
--------------------------------------------------------------------------------
11,900 Telefonica de Argentina S.A., ADR 431,375
--------------------------------------------------------------------------------
9,200 Telefonos de Mexico, Class L, ADR 408,250
-------------------------------------------------------------------------------- -------------
Total 2,543,045
-------------------------------------------------------------------------------- -------------
UNASSIGNED--1.8%
--------------------------------------------------------------------------------
9,000 (a)Unibanco Uniao de Bancos Brasileiros SA, ADR 310,500
-------------------------------------------------------------------------------- -------------
UTILITIES--ELECTRICAL & GAS--6.8%
--------------------------------------------------------------------------------
4,000,000 Companhia de Electricidade do Estado da Bahia 336,291
--------------------------------------------------------------------------------
226,720 Electricid Caracas 257,633
--------------------------------------------------------------------------------
7,800 Enersis S.A., ADR 271,050
--------------------------------------------------------------------------------
890,000 Light Participacoes SA 292,632
-------------------------------------------------------------------------------- -------------
Total 1,157,606
-------------------------------------------------------------------------------- -------------
WHOLESALE & INTERNATIONAL TRADE--0.3%
--------------------------------------------------------------------------------
41,701 Enrique Ferreyros S.A. 49,281
-------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $8,431,453) 10,182,865
-------------------------------------------------------------------------------- -------------
PREFERRED STOCKS--32.6%
- -----------------------------------------------------------------------------------------------
AUTOMOBILE--1.9%
--------------------------------------------------------------------------------
32,000 (a)COFAP-Cia Fabricadora de Pecas, Preference 328,818
-------------------------------------------------------------------------------- -------------
BANKING--1.8%
--------------------------------------------------------------------------------
594,000 Banco Itau SA, Preference 305,184
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
U.S.
SHARES DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------
CHEMICALS--1.1%
--------------------------------------------------------------------------------
51,000,000 Trikem SA, Preference $ 185,325
-------------------------------------------------------------------------------- -------------
ENERGY SOURCES--5.5%
--------------------------------------------------------------------------------
3,920,000 Petroleo Brasileiro SA, Preference 937,431
-------------------------------------------------------------------------------- -------------
FOREST PRODUCTS & PAPER--1.6%
--------------------------------------------------------------------------------
9,900,000 Votorantim Celulose e Papel SA, Preference 269,117
-------------------------------------------------------------------------------- -------------
MINING--1.8%
--------------------------------------------------------------------------------
13,800 Companhia Vale Do Rio Doce, Preference 304,876
-------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS--8.2%
--------------------------------------------------------------------------------
263,100 (a)Cia Riograndense De Telecomunicacoes, Pfd. 356,617
--------------------------------------------------------------------------------
2,100,000 Ericsson Telecomunicacoes SA 117,702
--------------------------------------------------------------------------------
3,400,000 Telecomunicacoes Brasileiras SA, Preference 469,108
--------------------------------------------------------------------------------
1,295,000 Telecomunicacoes de Sao Paulo SA, Preference 443,965
-------------------------------------------------------------------------------- -------------
Total 1,387,392
-------------------------------------------------------------------------------- -------------
UTILITIES--ELECTRICAL & GAS--10.7%
--------------------------------------------------------------------------------
18,000,000 Centrais Electric, Preference 221,952
--------------------------------------------------------------------------------
720,000 Centrais Eletricas Brasileiras SA, Preference, Series B 354,450
--------------------------------------------------------------------------------
114,200,000 Cia Forca e Luz Cataguazes-Leopoldina, Preference 198,423
--------------------------------------------------------------------------------
8,225,000 (a)Companhia Energetica de Minas Gerais, Preference 376,483
--------------------------------------------------------------------------------
83,387,000 (a)Companhia Energetica do Ceara-Coelce, Preference, Series A 373,898
--------------------------------------------------------------------------------
1,200,000 Eletropaulo-Electricidade de Sao Paulo SA, Preference, Class B 285,847
-------------------------------------------------------------------------------- -------------
Total 1,811,053
-------------------------------------------------------------------------------- -------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $4,567,764) 5,529,196
-------------------------------------------------------------------------------- -------------
</TABLE>
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE IN
PRINCIPAL U.S.
AMOUNT DOLLARS
- ------------- -------------------------------------------------------------------------------- -------------
<C> <S> <C>
(C) REPURCHASE AGREEMENT--4.9%
- -----------------------------------------------------------------------------------------------
$ 825,000 BT Securities Corporation, 5.56%, dated 5/30/1997, due 6/2/1997
(AT AMORTIZED COST) $ 825,000
-------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $13,824,217)(D) $ 16,537,061
-------------------------------------------------------------------------------- -------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At May 31, 1997, these securities amounted to
$316,896 which represents 1.9% 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 $13,824,217. The
net unrealized appreciation of investments on a federal tax basis amounts to
$2,712,844 which is comprised of $2,884,016 appreciation and $171,172
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($16,924,315) at May 31, 1997.
The following acronyms are used throughout this portfolio:
ADR--American Depositary Receipt
GDR--Global Depositary Receipt
(See Notes which are an integral part of the Financial Statements)
Federated Latin American Growth Fund
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified and tax cost $13,824,217) $16,537,061
- ------------------------------------------------------------------------------------------------------
Cash 5,454
- ------------------------------------------------------------------------------------------------------
Income receivable 83,138
- ------------------------------------------------------------------------------------------------------
Receivable for investments sold 612
- ------------------------------------------------------------------------------------------------------
Receivable for shares sold 455,243
- ------------------------------------------------------------------------------------------------------ ----------
Total assets 17,081,508
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for investments purchased $ 117,187
- -------------------------------------------------------------------------------------------
Payable for shares redeemed 26,881
- -------------------------------------------------------------------------------------------
Payable for taxes withheld 329
- -------------------------------------------------------------------------------------------
Accrued expenses 12,796
- ------------------------------------------------------------------------------------------- ---------
Total liabilities 157,193
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS for 1,159,487 shares outstanding $16,924,315
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid in capital $13,770,061
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 2,712,218
- ------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 371,037
- ------------------------------------------------------------------------------------------------------
Undistributed net investment income 70,999
- ------------------------------------------------------------------------------------------------------ ----------
Total Net Assets $16,924,315
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($10,744,287 / 734,282 shares outstanding) $14.63
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share (100/94.50 of $14.63)* $15.48
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share $14.63
- ------------------------------------------------------------------------------------------------------ ----------
CLASS B SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($4,985,749 / 343,119 shares outstanding) $14.53
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share $14.53
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (94.50/100 of $14.53)** $13.73
- ------------------------------------------------------------------------------------------------------ ----------
CLASS C SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($1,194,279 / 82,086 shares outstanding) $14.55
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share $14.55
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (99.00/100 of $14.55)** $14.40
- ------------------------------------------------------------------------------------------------------ ----------
</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
- --------------------------------------------------------------------------------
Six Months Ended May 31, 1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $7,270) $ 160,096
- ------------------------------------------------------------------------------------------------------
Interest 17,451
- ------------------------------------------------------------------------------------------------------ ---------
Total income 177,547
- ------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------
Investment advisory fee $ 63,225
- -------------------------------------------------------------------------------------------
Administrative personnel and services fee 92,247
- -------------------------------------------------------------------------------------------
Custodian fees 21,775
- -------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 37,464
- -------------------------------------------------------------------------------------------
Directors'/Trustees' fees 4,311
- -------------------------------------------------------------------------------------------
Auditing fees 8,841
- -------------------------------------------------------------------------------------------
Legal fees 5,955
- -------------------------------------------------------------------------------------------
Portfolio accounting fees 42,486
- -------------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 9,792
- -------------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 2,172
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 8,657
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 3,264
- -------------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 724
- -------------------------------------------------------------------------------------------
Share registration costs 12,296
- -------------------------------------------------------------------------------------------
Printing and postage 10,361
- -------------------------------------------------------------------------------------------
Insurance premiums 1,808
- -------------------------------------------------------------------------------------------
Taxes 224
- -------------------------------------------------------------------------------------------
Miscellaneous 5,804
- ------------------------------------------------------------------------------------------- ---------
Total expenses 331,406
- -------------------------------------------------------------------------------------------
Waivers and reimbursements--
- --------------------------------------------------------------------------------
Waiver of investment advisory fee $ (63,225)
- --------------------------------------------------------------------------------
Reimbursement of other operating expenses (156,573)
- -------------------------------------------------------------------------------- ---------
Total waivers and reimbursements (219,798)
- ------------------------------------------------------------------------------------------- ---------
Net expenses 111,608
- ------------------------------------------------------------------------------------------------------ ---------
Net investment income 65,939
- ------------------------------------------------------------------------------------------------------ ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ------------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 371,046
- ------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments and translation of assets and
liabilities in foreign currency 2,202,351
- ------------------------------------------------------------------------------------------------------ ---------
Net realized and unrealized gain on investments and foreign currency 2,573,397
- ------------------------------------------------------------------------------------------------------ ---------
Change in net assets resulting from operations $2,639,336
- ------------------------------------------------------------------------------------------------------ ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Latin American Growth Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
(UNAUDITED) NOVEMBER 30,
MAY 31, 1997 1996*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 65,939 $ 51,143
- ---------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions ($371,046 and
$212,053 net gains, respectively, as computed for federal tax
purposes) 371,046 202,797
- ---------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments and
translation of assets and liabilities in foreign currency 2,202,351 509,867
- --------------------------------------------------------------------------- -------------------- ---------------
Change in net assets resulting from operations 2,639,336 763,807
- --------------------------------------------------------------------------- -------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------------------------
Class A Shares (30,515) --
- ---------------------------------------------------------------------------
Class B Shares (5,869) --
- ---------------------------------------------------------------------------
Class C Shares (443) --
- ---------------------------------------------------------------------------
Distributions from net realized gains on investments
and foreign currency transactions
- ---------------------------------------------------------------------------
Class A Shares (154,460) --
- ---------------------------------------------------------------------------
Class B Shares (50,158) --
- ---------------------------------------------------------------------------
Class C Shares (7,444) --
- --------------------------------------------------------------------------- -------------------- ---------------
Change in net assets resulting from distributions to shareholders (248,889) --
- --------------------------------------------------------------------------- -------------------- ---------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------------
Proceeds from sale of shares 11,471,217 13,501,459
- ---------------------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 159,519 --
- ---------------------------------------------------------------------------
Cost of shares redeemed (3,547,976) (7,814,158)
- --------------------------------------------------------------------------- -------------------- ---------------
Change in net assets resulting from share transactions 8,082,760 5,687,301
- --------------------------------------------------------------------------- -------------------- ---------------
Change in net assets 10,473,207 6,451,108
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 6,451,108 --
- --------------------------------------------------------------------------- -------------------- ---------------
End of period (including undistributed net investment
income of $70,999 and $41,887, respectively) $ 16,924,315 $ 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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.56 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income 0.06 0.12
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 3.50 1.44
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 3.56 1.56
- ------------------------------------------------------------------------------ ------- -------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Distributions from net investment income (0.08) --
- ------------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.41) --
- ------------------------------------------------------------------------------ ------- -------
Total distributions (0.49) --
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 14.63 $ 11.56
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 31.95% 15.60%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 1.97%* 1.97%*
- ------------------------------------------------------------------------------
Net investment income 1.48%* 1.49%*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 4.42%* 6.96%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $10,744 $4,836
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0022 $0.0001
- ------------------------------------------------------------------------------
Portfolio turnover 40% 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.50 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income/(operating loss) 0.10 (0.05)
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 3.39 1.55
- ------------------------------------------------------------------------------ ------- -----------------
Total from investment operations 3.49 1.50
- ------------------------------------------------------------------------------ ------- -----------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Distributions from net investment income (0.05) --
- ------------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.41) --
- ------------------------------------------------------------------------------ ------- -----------------
Total distributions (0.46) --
- ------------------------------------------------------------------------------ ------- -----------------
NET ASSET VALUE, END OF PERIOD $ 14.53 $ 11.50
- ------------------------------------------------------------------------------ ------- -----------------
TOTAL RETURN (B) 31.39% 15.00%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 2.73%* 2.72%*
- ------------------------------------------------------------------------------
Net investment income 0.86%* (1.20%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 4.25%* 6.96%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,986 $1,355
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0022 $ 0.0001
- ------------------------------------------------------------------------------
Portfolio turnover 40% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) PERIOD ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.48 $ 10.00
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------
Net investment income/(operating loss) 0.12 (0.08)
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and foreign currency 3.38 1.56
- ------------------------------------------------------------------------------ ------- -------
Total from investment operations 3.50 1.48
- ------------------------------------------------------------------------------ ------- -------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------------
Distributions from net investment income (0.02) --
- ------------------------------------------------------------------------------
Distributions from net realized gain on investments
and foreign currency transactions (0.41) --
- ------------------------------------------------------------------------------ ------- -------
Total distributions (0.43) --
- ------------------------------------------------------------------------------ ------- -------
NET ASSET VALUE, END OF PERIOD $ 14.55 $ 11.48
- ------------------------------------------------------------------------------ ------- -------
TOTAL RETURN (B) 31.54% 14.80%
- ------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------------
Expenses 2.73%* 2.72%*
- ------------------------------------------------------------------------------
Net investment income 1.21%* (1.30%)*
- ------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.91%* 6.96%*
- ------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,194 $260
- ------------------------------------------------------------------------------
Average commission rate paid (d) $0.0022 $0.0001
- ------------------------------------------------------------------------------
Portfolio turnover 40% 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
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
Federated Latin American Growth Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
(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 eight 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--Listed equity securities are valued at the last sale
price reported on a national securities exchange. 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.
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
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.
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 risk. The Fund may
enter into foreign currency exchange contracts as purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
crosshedge 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 exchanged contract is offset into a closing
transaction or by 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 May 31, 1997, the Fund had no outstanding Foreign Exchange Contracts.
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
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
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 May 31, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Chilectra S.A., ADR 5/8/97 $ 139,300
Venprecar, ADR 2/28/96 $ 39,050
</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.
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
(3) CAPITAL STOCK
At May 31, 1997, par value shares ($0.001 per share) authorized were as follows:
<TABLE>
<CAPTION>
NUMBER OF PAR
VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
<S> <C>
Class A 135,000,000
- -------------------------------------------------------------------------------------------
Class B 135,000,000
- -------------------------------------------------------------------------------------------
Class C 135,000,000
- ------------------------------------------------------------------------------------------- ---------------------
Total 405,000,000
- ------------------------------------------------------------------------------------------- ---------------------
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 518,500 $ 6,914,397 1,109,989 $ 11,836,843
- ----------------------------------------------------------
Shares issued to shareholders in payment
of distributions declared 9,396 107,956 -- --
- ----------------------------------------------------------
Shares redeemed (211,805) (2,726,678) (691,798) (7,761,894)
- ---------------------------------------------------------- --------- ------------- ---------- -------------
Net change resulting from
Class A Share transactions 316,091 $ 4,295,675 418,191 $ 4,074,949
- ---------------------------------------------------------- --------- ------------- ---------- -------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 254,099 $ 3,384,649 117,901 $ 1,357,302
- -------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 3,855 44,100 -- --
- -------------------------------------------------------------
Shares redeemed (32,726) (433,452) (10) (119)
- ------------------------------------------------------------- --------- ------------ --------- ------------
Net change resulting from
Class B Share transactions 225,228 $ 2,995,297 117,891 $ 1,357,183
- ------------------------------------------------------------- --------- ------------ --------- ------------
</TABLE>
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 87,974 $ 1,172,171 27,051 $ 307,314
- -------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 652 7,463 -- --
- -------------------------------------------------------------
Shares redeemed (29,163) (387,846) (4,428) (52,145)
- ------------------------------------------------------------- --------- ------------ --------- ------------
Net change resulting from
Class C Share transactions 59,463 $ 791,788 22,623 $ 255,169
- ------------------------------------------------------------- --------- ------------ --------- ------------
Net change resulting from
share transactions 600,782 $ 8,082,760 558,705 $ 5,687,301
- ------------------------------------------------------------- --------- ------------ --------- ------------
</TABLE>
(a) For the period from February 28, 1996 (date of intial public investment) to
November 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 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.
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
AVERAGE DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
- ------------------------------------------------------------------------------------------
Class B Shares 0.75%
- ------------------------------------------------------------------------------------------
Class C Shares 0.75%
- ------------------------------------------------------------------------------------------
</TABLE>
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 and/or start-up administrative service
expenses of $53,789 were borne initially by the 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 May 31, 1997, the Fund paid $6,873 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 May 31, 1997, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C>
PURCHASES $ 10,973,831
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 3,875,141
- --------------------------------------------------------------------------------------------------- -------------
</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
Federated Latin American Growth Fund
- --------------------------------------------------------------------------------
region may have an adverse effect on the ability of domiciled issuers to meet
their obligations. Additionally, political or economic developments may have an
effect on the liquidity and volatility of portfolio securities and currency
holdings.
At May 31, 1997, the diversification of countries was as follows:
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
Argentina 11.1%
- ---------------------------------------------------------------------------------------------
Brazil 44.7%
- ---------------------------------------------------------------------------------------------
Chile 8.8%
- ---------------------------------------------------------------------------------------------
Colombia 1.7%
- ---------------------------------------------------------------------------------------------
Mexico 22.9%
- ---------------------------------------------------------------------------------------------
Peru 1.2%
- ---------------------------------------------------------------------------------------------
Venezuela 2.5%
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Directors Officers
- --------------------------------------------------------------------------------
<S> <C>
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, and Secretary
John E. Murray, Jr. Karen M. Brownlee
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the Federal Deposit Insurance
Corporation, the Federal Reserve Board, or any other governmental agency.
Investment in mutual funds involves risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
[LOGO] FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 981487796
Cusip 981487788
Cusip 981487770
G01940-02 (7/97) [LOGO OF RECYCLED PAPER]
[LOGO] FEDERATED INVESTORS
Federated
International High
Income Fund
Semi-Annual Report
May 31, 1997
Established 1996
President's Message
Dear Fellow Shareholder:
I am pleased to present the first Semi-Annual Report to shareholders of
Federated International High Income Fund. This report contains information about
the fund from December 1, 1996 through May 31, 1997.
This report begins with a discussion with the fund's co-portfolio managers,
Robert Kowit, Vice President, Federated Global Research Corp. and Michael Casey,
Ph.D., Assistant Vice President, Federated Global Research Corp. Their
discussion covers international economic and market conditions and fund
strategy. Following their commentary are a complete list of the fund's
international bond investments and the financial statements.
The fund offers shareholders significant income opportunities from a select
portfolio of carefully-researched international bonds issued by companies and
governments outside the U.S.* At the end of the reporting period, the fund's $29
million in assets were invested in 33 government bonds and 38 international
corporate issues across 30 countries. While the fund experienced a minimal
decrease in share price, its portfolio paid a strong level of income. Share
class performance highlights are as follows:**
<TABLE>
<CAPTION>
Total
Return
NAV NAV NAV Income Based on
12/1/96 5/31/97 % ChangeDistributions NAV
------- ------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Class A Shares $10.12 $10.03 -0.9% $0.52 4.34%
Class B Shares $10.12 $10.03 -0.9% $0.48 3.96%
Class C Shares $10.12 $10.03 -0.9% $0.48 3.96%
</TABLE>
If you are not already doing so, I invite you to join many shareholders who
reinvest their dividends and add to their accounts on a systematic basis to
compound their shares and own more shares for future income.+
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,
Richard B. Fisher
President
July 15, 1997
* Foreign investing involves special risks including currency risk, increased
volatility of foreign securities, and differences in auditing and other
financial standards. Lower rated bonds involve a higher degree of risk than
investment grade bonds in return for higher yield potential.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the period based on offering price for Class
A, B, and C Shares were (0.38%), (1.69%), and 2.93%, respectively.
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
Investment Review
[PHOTO]
Robert Kowit
Vice President
Federated Global
Research Corp.
[PHOTO]
Mike Casey
Assistant Vice President
Federated Global
Research Corp.
What are your comments on the developed and emerging bond markets during the
reporting period?
So far, 1997 has been a poor year for developed markets and a good year for
emerging markets. Developed markets as defined by the J.P. Morgan Non-Dollar
Bond Index* were down 4.49% to the end of May 1997. Although the individual bond
markets did well, their performance was erased by the dollar which appreciated
between 5-10% against most currencies over the period.
Emerging markets did quite well. As defined by the J.P. Morgan Emerging Market
Bond Index,* the market improved by 7.79% to the end of May 1997. As high yield
spreads compressed in the U.S. markets, yield-oriented investors continued to
"cross over" into emerging market debt and helped fuel the performance.
In this environment, how did Federated International High Income Fund perform
for shareholders over the six-month reporting period ended May 31, 1997?
The fund's returns were: Class A Shares, 4.34%; Class B Shares, 3.96%; and Class
C Shares, 3.96% based on net asset value.** These returns considerably
outperformed the developed markets but underperformed the emerging markets. The
fund also outperformed the 1.63% return of the U.S. bond market, as measured by
the J.P. Morgan U.S. Bond Index.*
It is important to note that the fund is not an emerging market bond fund, but
an income fund that derives any excess return from emerging market bonds. We
usually keep a portfolio allocation of about 30% developed markets and 70%
emerging markets to take advantage of the low correlation between the two asset
classes.
* The J.P. Morgan Non-Dollar Bond Index is a total return, trade-weighted index
of over 360 government and high-grade bonds in 12 developed countries. The
J.P. Morgan Emerging Market Bond Index is an unmanaged index that tracks the
total returns of external currency denominated debt instruments of 14
emerging markets countries. The J.P. Morgan U.S. Bond Index is a local
currency total return index based on the gross price of bonds in the index.
These indices are unmanaged, and investments cannot be made in an index.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total returns for the period based on offering price for Class
A, B, and C Shares were (0.38%), (1.69%), and 2.93%, respectively.
The fund underperformed the emerging market index for the period because
approximately 60% of the index is made up of Brady Bonds. These bonds generally
feature long duration, high volatility, and current yields that are 300-400
basis points lower than those available in the Eurobond and local currency
markets.
Income is a primary consideration for shareholders. What level of income did the
fund provide during the reporting period?
While the fund's total return was impacted by a slight decrease in net asset
value, the fund paid a healthy income stream totaling $0.52 per share for Class
A Shares, $0.48 for Class B Shares, and $0.48 per share for Class C Shares.
What were the top five government and corporate holdings as of May 31, 1997?
The fund's top 5 international government holdings were:
<TABLE>
<CAPTION>
Country % of Portfolio
-------------- --------------
<S> <C>
1. Russia 4.19
2. Greece 3.68
3. South Africa 3.16
4. Pakistan 2.89
5. Romania 2.70
</TABLE>
The fund's top 5 international corporate holdings were:
<TABLE>
<CAPTION>
Name Country % of Portfolio
- --------------------------------------- --------- --------------
<S> <C> <C>
1. Bancomext Trust Mexico 2.14
2. Bridas Corp. Argentina 2.12
3. Commercial Union PLC U.K. 2.03
4. Philippine Long Distance Telephone Co. Philippines 1.97
5. Altos Hornos Mexico 1.86
</TABLE>
Federated International High Income Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR U.S.
AMOUNT DOLLARS
- --------------- --------------------------------------------------------------------------------- -------------
<C> <S> <C>
COMMERCIAL PAPER--3.8%
- --------------------------------------------------------------------------------------------------
PAPER PRODUCTS--2.8%
---------------------------------------------------------------------------------
1,000,000,000 A.P.P. International Finance Company, 13.80% accrual, 7/23/1997 $ 403,203
---------------------------------------------------------------------------------
1,000,000,000 APP International, 14.68% accrual, 9/17/1997 392,929
--------------------------------------------------------------------------------- -------------
Total 796,132
--------------------------------------------------------------------------------- -------------
UTILITIES--1.0%
---------------------------------------------------------------------------------
1,500,000 Eskom CP 01/19/1998 303,962
--------------------------------------------------------------------------------- -------------
TOTAL COMMERCIAL PAPER (IDENTIFIED COST $1,119,361) 1,100,094
--------------------------------------------------------------------------------- -------------
CORPORATE BONDS--50.5%
- --------------------------------------------------------------------------------------------------
BANKING--3.8%
---------------------------------------------------------------------------------
550,000 Bancomext Trust, Bank Guarantee, 11.25%, 5/30/2006 606,375
---------------------------------------------------------------------------------
92,600,000 ING, Note, 21.60%, 7/9/1997 505,270
--------------------------------------------------------------------------------- -------------
Total 1,111,645
--------------------------------------------------------------------------------- -------------
BEVERAGE & TOBACCO--1.8%
---------------------------------------------------------------------------------
500,000 Empresas La Moderna, 11.375%, 1/25/1999 526,250
--------------------------------------------------------------------------------- -------------
CONGLOMERATES--3.8%
---------------------------------------------------------------------------------
8,000,000 General Electric Capital Corp., Note, 11.625%, 10/29/1997 217,279
---------------------------------------------------------------------------------
500,000 Mechala Group Jamaica, Note, 12.75%, 12/30/1999 522,500
---------------------------------------------------------------------------------
350,000 Mechala Group Jamaica, Series REGs, 12.00%, 2/15/2002 357,875
--------------------------------------------------------------------------------- -------------
Total 1,097,654
--------------------------------------------------------------------------------- -------------
CONTAINER & GLASS PRODUCTS--1.8%
---------------------------------------------------------------------------------
500,000 Vicap SA, Sr. Note, 11.375%, 5/15/2007 519,375
--------------------------------------------------------------------------------- -------------
FINANCE--0.8%
---------------------------------------------------------------------------------
200,000 Polysindo Intl Fin Co BV, Company Guarantee, 11.375%, 6/15/2006 218,500
--------------------------------------------------------------------------------- -------------
FINANCIAL INTERMEDIARIES--2.1%
---------------------------------------------------------------------------------
560,000 Brierley Investments Ltd., Bond, 9.00%, 3/15/2002 388,331
---------------------------------------------------------------------------------
</TABLE>
Federated International High Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR U.S.
AMOUNT DOLLARS
- --------------- --------------------------------------------------------------------------------- -------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
FINANCIAL INTERMEDIARIES--CONTINUED
---------------------------------------------------------------------------------
1,494,000 Nykredit, Mtg. Bond, 8.00%, 10/1/2029 $ 234,108
--------------------------------------------------------------------------------- -------------
Total 622,439
--------------------------------------------------------------------------------- -------------
FOREST PRODUCTS--3.6%
---------------------------------------------------------------------------------
200,000 Asian Pulp & Paper, Company Guarantee, 11.75%, 10/1/2005 215,760
---------------------------------------------------------------------------------
600,000 Avenor, Inc., Deb., 10.85%, 11/30/2014 509,242
---------------------------------------------------------------------------------
300,000 Klabin Fabricadora Papel, Company Guarantee, Series REGS, 11.00%, 8/12/2004 311,250
--------------------------------------------------------------------------------- -------------
Total 1,036,252
--------------------------------------------------------------------------------- -------------
INDUSTRIAL PRODUCTS & EQUIPMENT--3.4%
---------------------------------------------------------------------------------
500,000 Comp Nav Perez Companc, Series REGS, 9.00%, 1/30/2004 513,750
---------------------------------------------------------------------------------
450,000 Sophora Comercio, 11.50%, 11/10/1998 469,125
--------------------------------------------------------------------------------- -------------
Total 982,875
--------------------------------------------------------------------------------- -------------
INSURANCE--2.0%
---------------------------------------------------------------------------------
335,000 Commercial Union PLC, Company Guarantee, 8.625%, 9/28/2005 575,216
--------------------------------------------------------------------------------- -------------
OIL & GAS--7.0%
---------------------------------------------------------------------------------
250,000 Bariven SA, Company Guarantee, 10.625%, 3/17/2002 275,000
---------------------------------------------------------------------------------
482,634 Centragas, 10.65%, 12/1/2010 518,832
---------------------------------------------------------------------------------
250,000 Copene, Sr. Unsub., 9.50%, 10/19/2001 250,000
---------------------------------------------------------------------------------
450,000 Invergas SA, Note, 12.50%, 12/16/1999 496,125
---------------------------------------------------------------------------------
450,000 MetroGas S.A., Sr. Note, 12.00%, 8/15/2000 497,250
--------------------------------------------------------------------------------- -------------
Total 2,037,207
--------------------------------------------------------------------------------- -------------
PAPER PRODUCTS--1.7%
---------------------------------------------------------------------------------
450,000 Indah Kiat Intl. Finance, Company Guarantee, 12.50%, 6/15/2006 502,875
--------------------------------------------------------------------------------- -------------
STEEL--2.6%
---------------------------------------------------------------------------------
500,000 (a)Altos Hornos De Mexico, 11.875%, 4/30/2004 529,375
---------------------------------------------------------------------------------
</TABLE>
Federated International High Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR U.S.
AMOUNT DOLLARS
- --------------- --------------------------------------------------------------------------------- -------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- --------------------------------------------------------------------------------------------------
STEEL--CONTINUED
---------------------------------------------------------------------------------
200,000 Tubos de Acero de Mexico SA, Unsub., 13.75%, 12/8/1999 $ 225,500
--------------------------------------------------------------------------------- -------------
Total 754,875
--------------------------------------------------------------------------------- -------------
SURFACE TRANSPORTATION--2.1%
---------------------------------------------------------------------------------
1,500,000 Transnet Ltd., Foreign Gov't. Guarantee, Series T016, 11.50%,
2/15/1999 318,224
---------------------------------------------------------------------------------
250,000 (a)Zhuhai Highway, Sub. Note, 11.50%, 7/1/2008 284,688
--------------------------------------------------------------------------------- -------------
Total 602,912
--------------------------------------------------------------------------------- -------------
TELECOMMUNICATIONS & CELLULAR--7.5%
---------------------------------------------------------------------------------
250,000 CANTV Finance Limited, Company Guarantee, 9.25%, 2/1/2004 253,750
---------------------------------------------------------------------------------
200,000 (a)Comtel Brasileir, Note, 10.75%, 9/26/2004 213,750
---------------------------------------------------------------------------------
300,000 Comtel Brasileir, Note, Series REGS, 10.75%, 9/26/2004 319,500
---------------------------------------------------------------------------------
500,000 Philippine Long Distance Telephone Co., Deb., 10.625%, 6/2/2004 559,910
---------------------------------------------------------------------------------
470,000 Rogers Cantel Mobile, Inc., Sr. Note, 10.50%, 6/1/2006 385,504
---------------------------------------------------------------------------------
200,000 Telecom Argentina S.A., Unsecd. Note, 12.00%, 11/15/2002 231,500
---------------------------------------------------------------------------------
200,000 Telefonica de Argentina S.A., Note, 11.875%, 11/1/2004 237,000
--------------------------------------------------------------------------------- -------------
Total 2,200,914
--------------------------------------------------------------------------------- -------------
UTILITIES--6.5%
---------------------------------------------------------------------------------
350,000 AES China Generating Co., Note, 10.125%, 12/15/2006 373,625
---------------------------------------------------------------------------------
550,000 Bridas Corp, Sr. Note, 12.50%, 11/15/1999 602,250
---------------------------------------------------------------------------------
500,000 Cent Elet Brasil Elebra, Series REGS, 10.00%, 7/6/2004 522,813
---------------------------------------------------------------------------------
500,000 National Power Co. PLC, 8.00%, 2/21/2007 378,456
--------------------------------------------------------------------------------- -------------
Total 1,877,144
--------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $14,560,742) 14,666,133
--------------------------------------------------------------------------------- -------------
GOVERNMENTS AGENCIES--40.5%
- --------------------------------------------------------------------------------------------------
450,000 Australian Government, Bond, 7.50%, 9/15/2009 342,149
---------------------------------------------------------------------------------
22,000,000 Central Bank of Kenya, 21.40% accrual, 6/9/1997 $ 409,377
---------------------------------------------------------------------------------
</TABLE>
Federated International High Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR U.S.
AMOUNT DOLLARS
- --------------- --------------------------------------------------------------------------------- -------------
<C> <S> <C>
GOVERNMENTS AGENCIES--CONTINUED
- --------------------------------------------------------------------------------------------------
550,000 Ecuador Discount, 6.50%, 2/28/2025 381,288
---------------------------------------------------------------------------------
1,050,000 Egypt, Bond, 10.02% accrual, 8/19/1997 303,362
---------------------------------------------------------------------------------
1,000,000 Flirb-Non-US Global Bear, 7/28/2012 517,500
---------------------------------------------------------------------------------
50,000,000 Hellenic Republic, 13.00% accrual, 9/30/1997 177,104
---------------------------------------------------------------------------------
75,000,000 Hellenic Republic, Bond, 12.60%, 12/31/2003 285,377
---------------------------------------------------------------------------------
50,000,000 Hellenic Republic, Bond, 13.40%, 11/26/2003 190,617
---------------------------------------------------------------------------------
100,000,000 Hellenic Republic, Bond, 13.50%, 12/27/2002 391,489
---------------------------------------------------------------------------------
45,000,000 Hungary, Bond, 24.00%, 3/21/1998 251,942
---------------------------------------------------------------------------------
7,500,000 International Finance Corp., Note, 11.75%, 8/15/1999 179,897
---------------------------------------------------------------------------------
800,000 Islamic Republic of Pakistan, Deb., 11.50%, 12/22/1999 819,000
---------------------------------------------------------------------------------
750,000,000 Italy (Republic of), Deb., 10.50%, 4/1/2005 518,797
---------------------------------------------------------------------------------
1,050,000 Kingdom of Denmark, Bond, 7.00%, 11/10/2024 154,162
---------------------------------------------------------------------------------
200,000 Mexican Cetes, 27.00% accrual, 10/2/1997 235,805
---------------------------------------------------------------------------------
1,200,000 Ministry Finance Russia, Unsub., 9.25%, 11/27/2001 1,190,250
---------------------------------------------------------------------------------
750,000 National Bank of Romania, 9.75%, 6/25/1999 766,170
---------------------------------------------------------------------------------
450,000 Panama, Bond, 7.875%, 2/13/2002 445,923
---------------------------------------------------------------------------------
400,000 Petroleo Brasileiro SA, 10.0875%, 6/8/1998 413,000
---------------------------------------------------------------------------------
1,000,000 Poland Gov't Bond, 12.00%, 6/12/2002 247,170
---------------------------------------------------------------------------------
500,000 Poland Gov't Bond, Bond, 15.00%, 6/12/1999 141,128
---------------------------------------------------------------------------------
600,000 Poland, Republic of, Bond, 16.00%, 10/12/1998 175,679
---------------------------------------------------------------------------------
210,000 Queensland Treasury, Local Gov't. Guarantee, 8.00%, 5/14/2003 165,450
---------------------------------------------------------------------------------
242,500 Republic of Argentina, Deb., 6.625%, 3/31/2005 225,646
---------------------------------------------------------------------------------
500,000,000 SBI, Bank Note, 13.80% accrual, 11/27/1997 192,175
---------------------------------------------------------------------------------
1,000,000 South Africa, Republic of, 12.00%, 2/28/2005 194,712
---------------------------------------------------------------------------------
1,000,000 South Africa (Republic of) Bond, 12.50%, 12/21/2006 195,964
---------------------------------------------------------------------------------
1,100,000 Swedish Government, Bond, 8.00%, 8/15/2007 $ 151,534
---------------------------------------------------------------------------------
2,600,000 Trans Caledon Tunnel Authority, 13.00%, 9/15/2010 507,557
---------------------------------------------------------------------------------
</TABLE>
Federated International High Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOREIGN
CURRENCY
PAR
AMOUNT OR VALUE IN
PRINCIPAL U.S.
AMOUNT DOLLARS
- --------------- --------------------------------------------------------------------------------- -------------
<C> <S> <C>
GOVERNMENTS AGENCIES--CONTINUED
- --------------------------------------------------------------------------------------------------
500,000 Trinidad and Tobago, Unsub., 11.75%, 10/3/2004 597,500
---------------------------------------------------------------------------------
400,000 Turkey, 10.00%, 5/23/2002 409,000
---------------------------------------------------------------------------------
200,000 United Mexican States, 7.625%, 8/6/2001 201,550
---------------------------------------------------------------------------------
500,000 Venezuala Par, Foreign Gov't. Guarantee, 6.75%, 3/31/2020 378,125
--------------------------------------------------------------------------------- -------------
TOTAL GOVERNMENTS AGENCIES (IDENTIFIED COST $11,809,701) 11,756,399
--------------------------------------------------------------------------------- -------------
(B) REPURCHASE AGREEMENTS--3.0%
- --------------------------------------------------------------------------------------------------
$ 865,000 BT Securities Corporation, 5.56%, dated 5/30/1997, due 6/2/1997 865,000
--------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $28,354,804)(C) $ 28,387,626
--------------------------------------------------------------------------------- -------------
</TABLE>
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At May 31, 1997, these securities amounted
to $1,027,813 which represents 3.5% of net assets.
(b) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $28,354,804.
The net unrealized appreciation of investments on a federal tax basis
amounts to $32,822 which is comprised of $405,986 appreciation and $373,164
depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($29,023,834) at May 31, 1997.
The following acronym is used throughout this portfolio:
CP--Commercial Paper
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
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
<TABLE>
ASSETS:
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total investments in securities, at value (identified and tax cost $28,354,804) $28,387,626
- ------------------------------------------------------------------------------------------------------
Cash 13,745
- ------------------------------------------------------------------------------------------------------
Income receivable 858,701
- ------------------------------------------------------------------------------------------------------
Receivable for shares sold 790,561
- ------------------------------------------------------------------------------------------------------ ----------
Total assets 30,050,633
- ------------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for investments purchased $ 758,020
- -------------------------------------------------------------------------------------------
Payable for shares redeemed 62,900
- -------------------------------------------------------------------------------------------
Income distribution payable 205,879
- ------------------------------------------------------------------------------------------- ---------
Total liabilities 1,026,799
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS for 2,894,781 shares outstanding $29,023,834
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid in capital $29,062,000
- ------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign
currency 24,888
- ------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency transactions (20,191)
- ------------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (42,863)
- ------------------------------------------------------------------------------------------------------ ----------
Total Net Assets $29,023,834
- ------------------------------------------------------------------------------------------------------ ----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($3,206,630 / 319,827 shares outstanding) $10.03
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share (100/95.50 of $10.03)* $10.50
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (99.50/100 of $10.03)** $9.98
- ------------------------------------------------------------------------------------------------------ ----------
CLASS B SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($24,511,164 / 2,444,709 shares outstanding) $10.03
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share $10.03
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (94.50/100 of $10.03)** $9.48
- ------------------------------------------------------------------------------------------------------ ----------
CLASS C SHARES:
- ------------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($1,306,040 / 130,245 shares outstanding) $10.03
- ------------------------------------------------------------------------------------------------------ ----------
Offering Price Per Share $10.03
- ------------------------------------------------------------------------------------------------------ ----------
Redemption Proceeds Per Share (99/100 of $10.03)** $9.93
- ------------------------------------------------------------------------------------------------------ ----------
</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
- --------------------------------------------------------------------------------
Six Months Ended May 31, 1997 (unaudited)
<TABLE>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest (net of foreign taxes withheld of $352) $ 901,006
- -------------------------------------------------------------------------------------------------------- ---------
EXPENSES:
- ---------------------------------------------------------------------------------------------
Investment advisory fee $ 73,147
- ---------------------------------------------------------------------------------------------
Administrative personnel and services fee 92,247
- ---------------------------------------------------------------------------------------------
Custodian fees 22,930
- ---------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 46,885
- ---------------------------------------------------------------------------------------------
Directors'/Trustees' fees 250
- ---------------------------------------------------------------------------------------------
Auditing fees 8,292
- ---------------------------------------------------------------------------------------------
Legal fees 1,000
- ---------------------------------------------------------------------------------------------
Portfolio accounting fees 38,796
- ---------------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 55,274
- ---------------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 1,965
- ---------------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 2,434
- ---------------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 18,425
- ---------------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 655
- ---------------------------------------------------------------------------------------------
Share registration costs 17,595
- ---------------------------------------------------------------------------------------------
Printing and postage 10,924
- ---------------------------------------------------------------------------------------------
Insurance premiums 1,910
- ---------------------------------------------------------------------------------------------
Taxes 839
- ---------------------------------------------------------------------------------------------
Miscellaneous 2,454
- --------------------------------------------------------------------------------------------- ---------
Total expenses 396,022
- ---------------------------------------------------------------------------------------------
Waivers and reimbursements--
- ----------------------------------------------------------------------------------
Waiver of investment advisory fee $ (73,147)
- ----------------------------------------------------------------------------------
Reimbursement of other operating expenses by adviser (200,716)
- ---------------------------------------------------------------------------------- ---------
Total waivers and reimbursements (273,863)
- --------------------------------------------------------------------------------------------- ---------
Net expenses 122,159
- -------------------------------------------------------------------------------------------------------- ---------
Net investment income 778,847
- -------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- --------------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency transactions (20,191)
- --------------------------------------------------------------------------------------------------------
Net change in unrealized depreciation of investments and translation of assets and liabilities in
foreign currency (56,751)
- -------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized loss on investments and foreign currency (76,942)
- -------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 701,905
- -------------------------------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated International High Income Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
(UNAUDITED) NOVEMBER 30,
MAY 31, 1997 1996(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------
Net investment income $ 778,847 $ 85,010
- --------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency transactions
($20,191 net loss and $0 net gain, respectively, as computed for federal
tax purposes) (20,191) 227
- --------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments and
translation of assets and liabilities in foreign currency (56,751) 81,639
- -------------------------------------------------------------------------- --------------------- ---------------
Change in net assets resulting from operations 701,905 166,876
- -------------------------------------------------------------------------- --------------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------------------
Class A Shares (99,387) (69,102)
- --------------------------------------------------------------------------
Class B Shares (691,703) (15,313)
- --------------------------------------------------------------------------
Class C Shares (23,884) (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 (814,974) (91,973)
- -------------------------------------------------------------------------- --------------------- ---------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------
Proceeds from sale of shares 23,796,369 13,882,835
- --------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 227,155 8,455
- --------------------------------------------------------------------------
Cost of shares redeemed (965,431) (7,887,383)
- -------------------------------------------------------------------------- --------------------- ---------------
Change in net assets resulting from share transactions 23,058,093 6,003,907
- -------------------------------------------------------------------------- --------------------- ---------------
Change in net assets 22,945,024 6,078,810
- --------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------
Beginning of period 6,078,810 --
- -------------------------------------------------------------------------- --------------------- ---------------
End of period $ 29,023,834 $ 6,078,810
- -------------------------------------------------------------------------- --------------------- ---------------
</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
Financial Highlights--Class A Shares
- --------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.49(g) 0.17(e)
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency (0.06) 0.13
- ------------------------------------------------------------------------------- ------- -------
Total from investment operations 0.43 0.30
- ------------------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Distributions from net investment income (0.52) (0.17)
- -------------------------------------------------------------------------------
Distributions in excess of net investment income -- (0.01)(b)
- ------------------------------------------------------------------------------- ------- -------
Total distributions from net investment income (0.52) (0.18)
- ------------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.03 $ 10.12
- ------------------------------------------------------------------------------- ------- -------
TOTAL RETURN (C) 4.34% 2.99%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 0.75%* 0.75%*
- -------------------------------------------------------------------------------
Net investment income 9.70%* 9.19%*
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 3.18%* 8.46%*
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $3,207 $599
- -------------------------------------------------------------------------------
Average commission rate paid (f) $0.0000 $0.0003
- -------------------------------------------------------------------------------
Portfolio turnover 42% 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 is based on the bi-monthly average number of shares
outstanding.
(f) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(g) Per share information is based on the 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 each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.46 0.18(e)
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency (0.07) 0.11
- ------------------------------------------------------------------------------- ------- -------
Total from investment operations 0.39 0.29
- ------------------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Distributions from net investment income (0.48) (0.17)
- ------------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.03 $ 10.12
- ------------------------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 3.96% 2.87%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 1.50%* 1.50%
- -------------------------------------------------------------------------------
Net investment income 8.96%* 8.92%
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.18%* 8.46%
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $24,511 $5,379
- -------------------------------------------------------------------------------
Average commission rate paid (d) $0.00 $0.0003
- -------------------------------------------------------------------------------
Portfolio turnover 42% 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) 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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 C Shares
- --------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1997 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.12 $ 10.00
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.48 0.17(e)
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency (0.09) 0.12
- ------------------------------------------------------------------------------- ------- -------
Total from investment operations 0.39 0.29
- ------------------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Distributions from net investment income (0.48) 0.17
- ------------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.03 $ 10.12
- ------------------------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 3.96% 2.87%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 1.50%* 1.50%*
- -------------------------------------------------------------------------------
Net investment income 9.07%* 8.67%*
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.18%* 8.46%*
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,306 $83
- -------------------------------------------------------------------------------
Average commission rate paid (d) $0.0000 $0.0003
- -------------------------------------------------------------------------------
Portfolio turnover 42% 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) 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.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(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
Notes to Financial Statements
- --------------------------------------------------------------------------------
May 31, 1997 (unaudited)
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 eight 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
Federated International High Income Fund
- --------------------------------------------------------------------------------
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.
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.
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
exchange contracts as a way of managing foreign exchange risk. The Fund may
enter into foreign currency exchange contracts as purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
crosshedge 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 exchanged contract is offset into a closing
transaction or by 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 May 31, 1997, the Fund had no outstanding foreign currency committments.
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
Federated International High Income Fund
- --------------------------------------------------------------------------------
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 May 31, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Altos Hornos De Mexico 4/30/1997 $ 498,040
Zhuhai Highway, Sub. Note 10/02/1996 205,000
Comtel Brasileira LTD 10/02/1996 205,000
</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.
Federated International High Income Fund
- --------------------------------------------------------------------------------
3. CAPITAL STOCK
At May 31, 1997, par value shares ($0.001 per share) authorized were as follows:
<TABLE>
<CAPTION>
NUMBER OF
PAR VALUE
CAPITAL STOCK
CLASS NAME 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>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 273,980 $ 2,757,227 844,791 $ 8,447,943
- -------------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 3,195 32,033 104 1,048
- -------------------------------------------------------------
Shares redeemed (16,602) (165,347) (785,641) (7,887,383)
- ------------------------------------------------------------- --------- ------------ --------- ------------
Net change resulting from
Class A Shares transactions 260,573 $ 2,623,913 59,254 $ 561,608
- ------------------------------------------------------------- --------- ------------ --------- ------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,960,873 $ 19,705,363 532,539 $ 5,353,399
- ----------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 18,654 187,045 696 7,044
- ----------------------------------------------------------
Shares redeemed (68,053) (681,712) -- --
- ---------------------------------------------------------- ---------- ------------- --------- ------------
Net change resulting from
Class B Shares transactions 1,911,474 $ 19,210,696 533,235 $ 5,360,443
- ---------------------------------------------------------- ---------- ------------- --------- ------------
</TABLE>
Federated International High Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1997 NOVEMBER 30, 1996(B)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 133,030 $ 1,333,779 8,154 $ 81,493
- ----------------------------------------------------------
Shares issued to shareholders in
payment of distributions declared 807 8,077 36 363
- ----------------------------------------------------------
Shares redeemed (11,782) (118,372) -- --
- ---------------------------------------------------------- ---------- ------------- --------- ------------
Net change resulting from
Class C Shares transactions 122,055 $ 1,223,484 8,190 $ 81,856
- ---------------------------------------------------------- ---------- ------------- --------- ------------
Net change resulting from
share transactions 2,294,102 23,058,093 600,679 $ 6,003,907
- ---------------------------------------------------------- ---------- ------------- --------- ------------
</TABLE>
(a) Reflects operations from October 2, 1996 (date of initial public investment)
to November 30, 1996.
(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.
Federated International High Income Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE DAILY NET
SHARE CLASS NAME 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 six months ended May 31, 1997 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 $48,027 were borne initially
by Adviser. The Fund has agreed to reimburse Adviser for the organizational
expenses during the five year period following effective date. For the period
ended May 31, 1997, 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 May 31, 1997, were as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
<S> <C>
PURCHASES $ 29,369,533
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 6,842,596
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
Federated International High Income Fund
- --------------------------------------------------------------------------------
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At May 31, 1997, the diversification of countries was as follows:
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS COUNTRY % OF NET ASSETS
<S> <C> <C> <C>
Argentina 9.7% Mexico 9.8%
Australia 1.8% New Zealand 1.3%
Brazil 8.6% Pakistan 2.8%
Bulgaria 1.8% Panama 1.5%
Canada 3.1% Philippines 1.9%
China 2.3% Poland 2.0%
Columbia 1.8% Romania 2.6%
Denmark 1.3% Russia 4.1%
Ecuador 1.3% Slovak Republic 1.3%
Egypt 1.0% South Africa 5.2%
Greece 3.6% Sweden 0.5%
Hungary 2.7% Trinidad And Tobago 2.1%
Indonesia 6.7% Turkey 1.4%
Italy 1.8% United Kingdom 3.3%
Jamaica 3.0% Venezuela 3.1%
Kenya 1.4%
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
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, and Secretary
John E. Murray, Jr. Karen M. Brownlee
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
</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 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.
[LOGO] FEDERATED INVESTORS
Federated Securities Corp., Distributor
Cusip 981487762
Cusip 981487754
Cusip 981487747
G01949-02 (7/97)
[RECYCLED LOGO]
A. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an initial investment of $4,000 in the
Class A Shares of Federated World Utility Fund on April 22, 1994 would have
grown to $5,741 on May 31, 1997. The "x" axis reflects computation periods from
April 22, 1994 to May 31, 1997; the "y" axis reflects the cost of the
investment; and the right margin reflects a total investment range from $0 to
$6,000. The chart further indicates the ending market value attributable to
principal, as well as the ending market value attributable to capital gains and
reinvested dividends. The performance disclaimer and footnotes appear directly
under the graphic presentation. Above the graphic presentation are the following
total return data for Federated World Utility Fund: average annual one-year (as
of June 30, 1997) and since inception total returns for Class A Shares, Class B
Shares, Class C Shares, and Class F Shares were 17.99% and 13.49%; 18.09% and
18.46%; 22.85% and 20.65%; and 22.52% and 14.80%, respectively.
B. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an initial investment of $1,000 in the
Class A Shares of Federated World Utility Fund on April 22, 1994 would have
grown to $4,982 by May 31, 1997. The "x" axis reflects the cost of the
investment, the "y" axis reflects computation periods from April 22, 1994 to May
31, 1997, and the right margin reflects a total investment range from $0 to
$6,000. The chart further indicates the ending market value attributable to
principal, as well as the ending market value attributable to capital gains and
reinvested dividends.
