[Graphic]
Federated Investors
Federated Asia Pacific Growth Fund
3rd Annual Report
November 30, 1998
ESTABLISHED 1996
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
Federated Asia Pacific Growth Fund was created in 1996, and I am
pleased to present its third Annual Report. This report covers the
12-month reporting period from December 1, 1997 through November 30,
1998. It begins with an interview with the fund's portfolio manager,
Alexandre de Bethmann, Vice President of Federated Global Investment
Management Corp. (formerly, Federated Global Research Corp.).
Following his discussion, which covers international economic and
market conditions and fund strategy, are two additional items of
shareholder interest. First is a complete listing of the fund's
investments, and second is the publication of the fund's financial
statements.
During the reporting period, Asia Pacific stocks continued to reflect
the region's economic and political difficulties. However, as
Alexandre notes, signs indicate that a long-term recovery may be
underway. This report will give you an insight into market
opportunities and the markets in which we have invested for the long-
term.
Federated Asia Pacific Growth Fund is a relatively new fund that was
introduced in 1996, shortly before a period of severe volatility. With
international investing in particular, there will inevitably be
periods of volatility. The key to long-term success is investing
through the positive as well as the negative periods. On average--and
this is shown through the historical performance of many financial
markets--the positive periods significantly outweigh the negative
periods.
This international stock fund provides investors with significant
long-term opportunities from a well-researched portfolio of
approximately 62 corporations in 10 Asian and Pacific Rim countries.*
The stocks selected, in many cases, are issued by internationally
recognized industry leaders whose average market capitalization is
over $2 billion. They are fundamentally strong companies that are
positioned to be stronger than ever when the crisis ends.
* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
For the past fiscal year, as Alexandre explains, the fund's
conservative posture was not rewarded by this troubled marketplace.
Individual share class total return performance for the 12-month
period follows.**
TOTAL NET ASSET
RETURN VALUE CHANGE
Class A Shares (18.05%) $7.81 to $6.40 = (18%)
Class B Shares (18.63%) $7.73 to $6.29 = (19%)
Class C Shares (18.48%) $7.74 to $6.31 = (18%)
Thank you for your continued patience during what has been a trying
time for investors in the Asia Pacific region. Please be assured that
the experienced professionals at Federated Global Investment
Management Corp. remain thoroughly focused on the region on a day-to-
day basis--and on making the prudent decisions that can ultimately
reward your patience.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
** Performance quoted is based on net asset value, represents past
performance, and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the 12-month reporting period, based on the offering price
(i.e., less any applicable sales charge), for Class A, B, and C Shares
were (22.52%), (23.10%), and (19.29%), respectively.
INVESTMENT REVIEW
[Graphic]
Alexandre de Bethmann
Vice President
Federated Global
Investment
Management Corp.
[Graphic]
OBVIOUSLY, THE FUND'S FISCAL YEAR CONTINUED TO BE A DIFFICULT PERIOD
FOR THE ASIA PACIFIC REGION--ALTHOUGH THE MARKET AND THE FUND DID RECORD
POSITIVE RETURNS DURING THE SECOND HALF OF THE PERIOD. WHAT IS YOUR
REVIEW OF THE ASIA PACIFIC MARKET DURING THE 12-MONTH REPORTING PERIOD?
This past year will be remembered by the volatility in the financial
markets. In the first quarter of 1998, the successful rollover of
Korea's short-term debt led the markets in Korea, Thailand, Malaysia,
and the Philippines to rebound strongly. Then economic contraction,
corporate earnings disappointments, and the riots in Indonesia, caused
another cachet of competitive devaluation and losses in the stock
markets. In the third quarter of 1998, markets suffered a major blow
following the Russian currency devaluation, before they recovered at
the end of the reporting period.
[Graphic]
IN THIS ENVIRONMENT, HOW DID FEDERATED ASIA PACIFIC GROWTH FUND PERFORM
COMPARED TO ITS BENCHMARK FOR THE 12-MONTH REPORTING PERIOD ENDED
NOVEMBER 30, 1998?
For the fiscal year ended November 30, 1998, the total return for Class
A Shares was (18.05%), based on net asset value.* The total returns for
Class B and C Shares, based on net asset value, were (18.63%) and
(18.48%), respectively.* Because of our ultra-conservative posture,
the fund's returns were not consistent with the (6.53%) total return of
the market as measured by the fund's benchmark, the Morgan Stanley
Capital International Asia Pacific Index,** or with the (12.47%)
average total return of 48 Pacific region funds tracked by Lipper
Analytical Services, Inc.+
* 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 12-month reporting period,
based on offering price (i.e., less any applicable sales charge), for
Class A, B, and C Shares were (22.52%), (23.10%), and (19.29%),
respectively.
** The Morgan Stanley Capital International Asia Pacific Index is an
unmanaged, market value-weighted average of the performance of
securities listed on the stock exchange of 15 countries in the Pacific
and Asian regions. Investments cannot be made in an index.
+ Lipper figures represent the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated. Lipper returns do not
reflect sales charges.
[Graphic]
WHY DID THE FUND'S CONSERVATIVE POSTURE AFFECT ITS PERFORMANCE DURING
THE 12-MONTH REPORTING PERIOD?
As we discussed in the fund's semi-annual report, Federated Asia
Pacific Growth Fund was structured to, as much as possible, reduce
risk by avoiding the highest risk areas and focusing on higher quality
stocks that were better positioned to weather difficult times.
Unfortunately, during the reporting period, the market did not reward
our ultra-conservative posture.
We stayed with our conservative, long-term approach. For example, we
stayed away from the high-risk banks and real estate stocks in Korea
and Indonesia, as some of these companies are technically bankrupt.
However, amid market enthusiasm during the fourth quarter, these
stocks staged a strong rally in recent months, to the extent of being
excessive in our opinion. Though our stance hurt the fund's
performance, we felt it was not right to put our shareholders' capital
at risk.
[Graphic]
IN THIS DIFFICULT MARKET, WHAT IS YOUR CURRENT STRATEGY?
Overall, our strategy will continue to be conservative. Our focus will
be on oversold, large-cap industrial stocks that are better positioned
to weather rough times. The volatile nature of the markets has created
opportunities to buy these blue-chip stocks at bargain prices. Our
theme of investments focuses on globally competitive companies that
are beneficiaries of currency devaluation.
Finally, through rigorous balance sheet analysis, we will continue to
identify and avoid companies in weak financial positions. Current
stockholders of these companies face the threat of dilution because
these companies will have to issue equity to recapitalize their balance
sheets.
[Graphic]
CAN YOU GIVE US A FEW EXAMPLES OF HOLDINGS THAT TYPIFY YOUR FOCUS ON
STRONG EXPORTERS AND UNDERVALUED BLUE-CHIP COMPANIES?
One of our purchases was NATSTEEL ELECTRONICS LTD. (1.26% of net
assets) which is listed on the Singapore stock exchange. It is one of
the largest electronics contract manufacturers in the world, with
manufacturing bases in Asia and other emerging countries and exports to
developed economies. Natsteel is a beneficiary of the currency
devaluation in Asia.
Another purchase was DEVELOPMENT BANK OF SINGAPORE, LTD. (DBS) (1.09%
of net assets). It is one of the largest banks in Singapore with large
reserves to cushion the economic downturn. It is definitely a survivor
of the economic crisis and has gained market share during the crisis.
DBS was bought at a significant discount to book value. Both stocks
have done very well for the fund.
[Graphic]
WHAT COUNTRIES WERE REPRESENTED IN THE FUND'S PORTFOLIO AS OF
NOVEMBER 30, 1998, AND WHAT WERE THE FUND'S TOP 10 HOLDINGS?
PERCENTAGE OF
COUNTRY NET ASSETS
Japan (developed) 64.3%
Hong Kong (developed) 9.3%
Singapore (developed) 8.0%
Australia (developed) 6.1%
Korea, Republic of (emerging) 3.3%
India (emerging) 3.2%
Thailand (emerging) 2.5%
Indonesia (emerging) 2.0%
New Zealand (developed) 1.0%
Philippines (emerging) 0.4%
PERCENTAGE OF
NAME COUNTRY NET ASSETS INDUSTRY
Toshiba Corp. Japan 4.29% Electrical & Electronics
Kao Corp. Japan 3.75% Health & Personal Care
Takefuji Corp. Japan 3.19% Financial Services
Konami Co. Japan 3.09% Business & Public Services
Orix Corp. Japan 2.95% Financial Services
Honda Motor Co. Ltd. Japan 2.91% Automobile
Olympus Optical Co. Japan 2.86% Electronic Components, Instruments
INES Corp. Japan 2.74% Data Processing & Reproduction
Nidec Corp. Japan 2.61% Data Processing & Reproduction
Terumo Corp. Japan 2.60% Health & Personal Care
TOTAL 30.99%
[Graphic]
ARE EVENTS UNFOLDING THAT MAY POINT TO SOME SIGNS OF ECONOMIC PROGRESS--
IF NOT A RECOVERY--IN ASIA?
Yes. We have seen many unfolding events that point in the direction of
economic recovery. Interest rates have lowered by 500% or more, in many
Asian countries. As a result of the lower interest rates in the U.S.,
currencies in Asia have strengthened, lowering the debt burden of
countries and corporations. Current account balances are improving in
most Asian countries, and corporate restructuring is taking place
across the board. Though recession will continue into next year, in the
long run, the Asian economies are on their way to recovery.
[Graphic]
THE PAST YEAR HAS SERIOUSLY TESTED THE RESOLVE OF INVESTORS IN THE ASIA
PACIFIC REGION. OBVIOUSLY THIS REGION--AND FEDERATED ASIA PACIFIC
GROWTH FUND--IS A LONG-TERM INVESTMENT. AS A PORTFOLIO MANAGER WHO IS SO
INTIMATELY INVOLVED WITH THIS REGION, WHAT ARE YOUR THOUGHTS ON HOW
CURRENT INVESTORS SHOULD PERCEIVE THE CURRENT SITUATION AND FUTURE
PROSPECTS?
Investors' general perception of Asia is bleak. But the best time to
invest is when perception is bleak. If you invest when everything is
rosy, you run the risk of investing at the peak of the markets.
Examples are Hong Kong in 1993, Latin America in 1994, and Russia in
1998. The markets were hot and everyone was advised to invest in them.
But that was precisely the time when the market peaked. If you had been
a contrarian, you would have been rewarded handsomely.
WHERE IN THE WORLD SHOULD YOU INVEST?
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FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic]
FEDERATED EMERGING MARKETS FUND
[Graphic]
FEDERATED EUROPEAN GROWTH FUND
[Graphic]
FEDERATED GLOBAL EQUITY INCOME FUND
[Graphic]
FEDERATED GLOBAL FINANCIAL SERVICES FUND
[Graphic]
FEDERATED INTERNATIONAL EQUITY FUND
[Graphic]
FEDERATED INTERNATIONAL GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic]
FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic]
FEDERATED WORLD UTILITY FUND
Federated employs highly qualified, experienced managers in global
investing to select countries and companies outside the U.S. for
long-term growth potential.
Call your investment representative to buy shares of 10 international
equity funds and 2 international income funds from Federated
Securities Corp.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL
1-800-341-7400 TO ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU
INVEST.
Foreign investing involves special risks including
currency risks, increased volatility of foreign
securities, and differences in auditing and other financial
standards.
FEDERATED ASIA PACIFIC GROWTH FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of
$10,000* in the Federated Asia Pacific Growth Fund (Class A
Shares) (the "Fund") from February 28, 1996 (start of performance) to
November 30, 1998, compared to the Morgan Stanley Capital
International Asia Pacific Index (MSCI-AP).+
[Graphic representation omitted. See Appendix A1.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund
after deducting the maximum sales charge of 5.50% ($10,000
investment minus $550 sales charge = $9,450). The Fund's
performance assumes the reinvestment of all dividends and
distributions. The MSCI-AP has not been adjusted to reflect
reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The MSCI-AP is a market value-weighted average of the performance of
securities listed on the stock exchanges of 15 countries in the Pacific
and Asian regions. The MSCI-AP is not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This index is
unmanaged.
FEDERATED ASIA PACIFIC GROWTH FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated Asia Pacific Growth Fund (Class B Shares)
(the "Fund") from February 28, 1996 (start of performance) to
November 30, 1998, compared to the Morgan Stanley Capital
International Asia Pacific Index (MSCI-AP).+
[Graphic representation omitted. See Appendix A2.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a contingent deferred sales charge of 4.00% on
any redemption less than three years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The MSCI-AP has not been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The MSCI-AP is a market value-weighted average of the performance of
securities listed on the stock exchanges of 15 countries in the Pacific
and Asian regions. The MSCI-AP is not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This index is
unmanaged.
FEDERATED ASIA PACIFIC GROWTH FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED ASIA PACIFIC GROWTH FUND (CLASS
C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated Asia Pacific Growth Fund (Class C Shares)
(the "Fund") from February 28, 1996 (start of performance) to
November 30, 1998, compared to the Morgan Stanley Capital
International Asia Pacific Index (MSCI-AP).+
[Graphic representation omitted. See Appendix A3.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The MSCI-AP has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-AP is a market value-weighted average of the performance of
securities listed on the stock exchanges of 15 countries in the Pacific
and Asian regions. The MSCI-AP is not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This index is
unmanaged.
FEDERATED ASIA PACIFIC GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--100.1%
APPLIANCES & HOUSEHOLD DURABLES--4.2%
37,000 Fisher & Paykel $ 115,876
10,000 Kyushu Matsushita Electric 108,036
2,100 Samsung Electronics Co. 112,247
29,000 VTech Holdings Ltd. 125,468
Total 461,627
AUTOMOBILE--2.9%
9,000 Honda Motor Co. Ltd. 322,890
BANKING--8.1%
17,000 Australia & New Zealand Banking Group Ltd., Melbourne 112,267
72,800 Bangkok Bank Public Co., Ltd. 133,097
16,000 Development Bank of Singapore, Ltd. 121,249
500,000 FPB Bank Holding Co. Ltd. 122,046
62,000 HDFC Bank Ltd. 74,697
79,200 ICICI Ltd. 79,516
33,000 Overseas Union Bank Ltd. 133,040
18,000 Westpac Banking Corp. Ltd., Sydney 120,115
Total 896,027
BEVERAGE & TOBACCO--2.5%
66,000 Beijing Enterprises 101,007
17,000 Kirin Brewery Co., Ltd. 176,347
Total 277,354
BROADCASTING & PUBLISHING--1.1%
11,000 Singapore Press Holdings Ltd. 116,702
BUSINESS & PUBLIC SERVICES--5.4%
5,700 Brambles Industries Ltd. 139,704
2,100 Infosys Technologies Ltd. 115,160
12,400 Konami Co. 343,214
Total 598,078
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
CONSTRUCTION & HOUSING--1.7%
18,000 Daiwa House Industry Co. Ltd. $ 190,666
DATA PROCESSING & REPRODUCTION--8.8%
16,000 Fujitsu Ltd. 184,675
35,000 INES Corp. 303,977
8,600 Meitec Corp. 202,435
2,600 Nidec Corp. 290,179
Total 981,266
ELECTRICAL & ELECTRONICS--6.3%
5,000 Matsushita Communication 217,938
85,000 Toshiba Corp. 476,055
Total 693,993
ELECTRONIC COMPONENTS, INSTRUMENTS--8.9%
7,700 (a)Creative Technology Ltd. 141,443
245,000 Flextech Holdings Ltd. 118,081
7,000 Murata Manufacturing Co. Ltd. 273,864
65,000 Natsteel Electronics Ltd. 140,285
29,000 Olympus Optical Co. 317,305
Total 990,978
FINANCIAL SERVICES--11.1%
220,000 G.K. Goh Holdings Ltd. 121,370
22,000 Kokusai Securities Co. Ltd. 185,536
25,000 Nomura Securities Co. Ltd. 242,898
4,600 Orix Corp. 328,198
5,200 Takefuji Corp. 354,545
Total 1,232,547
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
FOOD & HOUSEHOLD PRODUCTS--4.8%
455,000 PT Indofood Sukses Makmur $ 225,202
35,000 Thai Union Frozen Products Public Co. 142,521
14,000 Yamazaki Baking Co. 168,409
Total 536,132
HEALTH & PERSONAL CARE--11.1%
17,000 Banyu Pharmaceutical Co. 275,560
30,000 Chugai Pharmaceutical Co. 255,925
22,000 Kao Corp. 416,071
13,000 Terumo Corp. 288,596
Total 1,236,152
INDUSTRIAL COMPONENTS--2.0%
13,000 Hosiden Corp. 225,284
INSURANCE--3.5%
28,375 QBE Insurance Group 122,310
45,000 Sumitomo Marine & Fire 268,466
Total 390,776
MACHINERY & ENGINEERING--1.2%
20,000 Hanjin Heavy Industries 128,732
MERCHANDISING--2.5%
10,000 Uny Co. 167,208
30,000 Woolworth's Ltd. 105,563
Total 272,771
MULTI-INDUSTRY--0.4%
292,000 (a)Benpres Holdings Corp. 42,985
REAL ESTATE--3.2%
68,000 China Resources Enterprises Ltd. 99,677
30,000 Henderson Land Development Co. Ltd. 153,429
15,000 Sun Hung Kai Properties 107,516
Total 360,622
<CAPTION>
SHARES OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
RECREATION, OTHER CONSUMER GOODS--1.6%
4,000 Sony Music Entertainment, Inc. $ 175,974
TELECOMMUNICATIONS--4.0%
40,440 (a)Cable & Wireless Optus Ltd. 75,723
65,100 (a)China Telecommunications 129,897
21,300 Mahanagar Telephone Nigam Ltd. 87,916
4 (a)NTT Mobile Communication Network, Inc. 152,597
Total 446,133
TRANSPORTATION - SHIPPING--0.8%
202,000 Cosco Pacific Ltd. 91,308
UTILITIES - ELECTRICAL & GAS--4.0%
14,000 Cheung Kong 100,801
5,300 Seoul City Gas Co. Ltd. 125,482
9,600 Tokyo Electric Power Co. 218,963
Total 445,246
TOTAL COMMON STOCKS (IDENTIFIED COST $9,753,964) 11,114,243
(B)REPURCHASE AGREEMENT--1.4%
$ 155,000 Westdeutsche Landesbank Girozentrale, 5.35%, dated 11/30/1998,
due 12/1/1998 (AT AMORTIZED COST) 155,000
TOTAL INVESTMENTS (IDENTIFIED COST $9,908,964)(C) $ 11,269,243
</TABLE>
(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $10,029,098.
The net unrealized appreciation of investments on a federal tax basis
amounts to $1,240,145 which is comprised of $1,425,257 appreciation and
$185,112 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($11,107,463) at November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost
$9,908,964 and tax cost $10,029,098) $ 11,269,243
Cash 763
Income receivable 39,865
Receivable for investments sold 503,269
Receivable for shares sold 9,127
Net receivable for foreign currency exchange contracts 2,559
Deferred organizational costs 27,156
Total assets 11,851,982
LIABILITIES:
Payable for investments purchased $ 508,141
Payable for shares redeemed 191,906
Payable for taxes withheld 12,560
Accrued expenses 31,912
Total liabilities 744,519
NET ASSETS for 1,747,267 shares outstanding $ 11,107,463
NET ASSETS CONSIST OF:
Paid in capital $ 16,589,852
Net unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 1,362,823
Accumulated net realized loss on investments and foreign
currency transactions (6,732,243)
Accumulated net operating loss (112,969)
Total net assets $ 11,107,463
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER
SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($6,344,823 / 990,904 shares
outstanding) $6.40
Offering Price Per Share (100/94.50 of $6.40)* $6.77
Redemption Proceeds Per Share $6.40
CLASS B SHARES:
Net Asset Value Per Share ($4,154,290 / 660,013 shares
outstanding) $6.29
Offering Price Per Share $6.29
Redemption Proceeds Per Share (94.50/100 of $6.29)* $5.94
CLASS C SHARES:
Net Asset Value Per Share ($608,350 / 96,350 shares
outstanding) $6.31
Offering Price Per Share $6.31
Redemption Proceeds Per Share (99.00/100 of $6.31)* $6.25
</TABLE>
* See "What Do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $11,192) $ 123,645
Interest 40,204
Total income 163,849
EXPENSES:
Investment advisory fee $ 122,689
Administrative personnel and services fee 185,000
Custodian fees 36,595
Transfer and dividend disbursing agent fees and expenses 75,186
Directors' fees 1,174
Auditing fees 21,692
Legal fees 2,370
Portfolio accounting fees 81,982
Distribution services fee--Class B Shares 27,590
Distribution services fee--Class C Shares 3,981
Shareholder services fee--Class A Shares 17,360
Shareholder services fee--Class B Shares 9,197
Shareholder services fee--Class C Shares 1,327
Share registration costs 27,828
Printing and postage 25,613
Insurance premiums 3,500
Taxes 1,050
Miscellaneous 15,624
Total expenses 659,758
Waivers and reimbursements--
Waiver of investment advisory fee $ (122,689)
Reimbursement of other operating expenses (298,667)
Total waivers and reimbursements (421,356)
Net expenses 238,402
Net operating loss (74,553)
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments and foreign currency
transactions (net of foreign taxes withheld of $8,587) (5,092,522)
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 2,916,524
Net realized and unrealized loss on investments and
foreign currency transactions (2,175,998)
Change in net assets resulting from operations $ (2,250,551)
</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>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C>
1998 1997
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net operating loss $ (74,553) $ (76,161)
Net realized loss on investments and foreign currency
transactions ($(4,986,850) and $(1,738,228), respectively,
as computed for federal tax purposes) (5,092,522) (1,806,239)
Net change in unrealized appreciation/(depreciation) of
investments and translation of assets and liabilities in
foreign currency 2,916,524 (1,681,791)
Change in net assets resulting from operations (2,250,551) (3,564,191)
SHARE TRANSACTIONS--
Proceeds from sale of shares 21,406,107 21,112,630
Cost of shares redeemed (19,462,204) (13,396,404)
Change in net assets resulting from share transactions 1,943,903 7,716,226
Change in net assets (306,648) 4,152,035
NET ASSETS:
Beginning of period 11,414,111 7,262,076
End of period $ 11,107,463 $ 11,414,111
</TABLE>
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.81 $10.25 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.05) (0.03) 0.00
Net realized and unrealized gain/(loss) on investments and
foreign currency transactions (1.36) (2.41) 0.25
Total from investment operations (1.41) (2.44) 0.25
NET ASSET VALUE, END OF PERIOD $ 6.40 $ 7.81 $10.25
TOTAL RETURN(B) (18.05%) (23.80%) 2.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.85% 1.85% 1.85%*
Net operating loss (0.35%) (0.53%) --
Expense waiver/reimbursement(c) 3.78% 4.77% 7.02%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $6,345 $7,297 $4,593
Portfolio turnover 347% 193% 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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS-CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.73 $10.19 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.07) (0.08) (0.03)
Net realized and unrealized gain/(loss) on investments and
foreign currency transactions (1.37) (2.38) 0.22
Total from investment operations (1.44) (2.46) 0.19
NET ASSET VALUE, END OF PERIOD $ 6.29 $ 7.73 $10.19
TOTAL RETURN(B) (18.63%) (24.14%) 1.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60% 2.60% 2.60%*
Net operating loss (1.10%) (1.25%) (0.86%)*
Expense waiver/reimbursement(c) 3.78% 4.77% 7.02%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $4,154 $3,606 $2,273
Portfolio turnover 347% 193% 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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
FINANCIAL HIGHLIGHTS-CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.74 $10.20 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.08) (0.12) (0.05)
Net realized and unrealized gain/(loss) on investments and
foreign currency transactions (1.35) (2.34) 0.25
Total from investment operations (1.43) (2.46) 0.20
NET ASSET VALUE, END OF PERIOD $ 6.31 $ 7.74 $10.20
TOTAL RETURN(B) (18.48%) (24.12%) 2.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60% 2.60% 2.60% *
Net operating loss (1.10%) (1.22%) (0.90%)*
Expense waiver/reimbursement(c) 3.78% 4.77% 7.02% *
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $608 $511 $397
Portfolio turnover 347% 193% 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
operating loss ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED ASIA PACIFIC GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
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 investment objective of the fund is to
provide long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS--Foreign and domestic equity securities are
valued at the last sale price reported on a national securities
exchange or over-the-counter market. In the absence of recorded sales
for equity securities, they are valued according to the mean between
the last closing bid and asked prices. Short-term foreign and domestic
securities are valued at the prices provided by an independent pricing
service. However, short-term foreign and domestic securities with
remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions. The following
reclassifications have been made to the financial statements.
INCREASE/(DECREASE)
ACCUMULATED DISTRIBUTIONS
ACCUMULATED NET IN EXCESS OF
PAID-IN CAPITAL REALIZED LOSS NET INVESTMENT INCOME
$(72,744) $102,866 $(30,122)
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
At November 30, 1998, the Fund, for federal tax purposes, had a
capital loss carryforward of $6,725,078, which will reduce the Fund's
taxable income arising from future net realized gain on investments,
if any, to the extent permitted by the Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be
necessary to relieve the Fund of any liability for federal tax.
Pursuant to the Code, such capital loss carryforward will expire as
follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2005 $1,738,228
2006 4,986,850
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchase contracts are used to acquire exposure
to foreign currencies; whereas, contracts to sell are used to hedge the
Fund's securities against currency fluctuations. Risks may arise upon
entering these transactions from the potential inability of
counterparts to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates.
The foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded
for financial statement purpose as unrealized until the settlement
date.
At November 30, 1998, the Fund had outstanding foreign currency
commitments as set forth below:
<TABLE>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C>
Contract Purchased:
12/2/98 793,675 Singapore Dollar $481,891 $481,161 $ (730)
Contract Sold:
12/1/98 62,002,727 Japanese Yen $506,558 $503,269 $ 3,289
Net Unrealized Appreciation on Foreign Exchange Contracts $ 2,559
</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.
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
NUMBER OF SHARES
OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 50,000,000
TOTAL 250,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,537,695 $ 9,480,938 1,402,382 $ 13,816,205
Shares redeemed (1,481,346) (8,972,254) (915,907) (8,814,153)
Net change resulting from Class A Share transactions 56,349 $ 508,684 486,475 $ 5,002,052
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,179,297 $ 7,632,317 543,977 $ 5,461,674
Shares redeemed (985,742) (6,370,208) (300,440) (3,019,014)
Net change resulting from Class B Share transactions 193,555 $ 1,262,109 243,537 $ 2,442,660
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 681,864 $ 4,292,852 181,031 $ 1,834,751
Shares redeemed (651,541) (4,119,742) (153,942) (1,563,237)
Net change resulting from Class C Share transactions 30,323 $ 173,110 27,089 $ 271,514
Net change resulting from share transactions 280,227 $ 1,943,903 757,101 $ 7,716,226
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.10% 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, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A
Shares, Class B Shares, and Class C Shares. The Plan provides that the
Fund may incur distribution expenses according to the following
schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the year
ended November 30, 1998, 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 Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
for the period. The fee paid to FSSC is used to finance certain
services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ,
through its subsidiary, FSSC, serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $48,248 were
borne initially by the Adviser. The Fund has reimbursed the Adviser for
these expenses. These expenses have been deferred and are being
amortized over the five-year period following the Fund's effective
date. For the year ended November 30, 1998, the Fund expensed $12,515
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 year ended November 30, 1998, were as follows:
PURCHASES $38,125,466
SALES $35,922,837
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or
economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
At November 30, 1998, the diversification of countries for the Fund was
as follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Australia 6.1%
Hong Kong 9.3%
India 3.2%
Indonesia 2.0%
Japan 64.3%
Korea, Republic of 3.3%
New Zealand 1.0%
Philippines 0.4%
Singapore 8.0%
Thailand 2.5%
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
Administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8.SUBSEQUENT EVENT
On January 7, 1999, the Adviser, Federated Global Research Corp.,
changed its name to Federated Global Investment Management Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Asia Pacific
Growth Fund (a portfolio of World Investment Series, Inc.) as of
November 30, 1998, and the related statements of operations for the
year then ended, the statement of changes in net assets for each of the
two years in the period then ended, and the financial highlights for
each of the periods presented therein. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated Asia Pacific Growth Fund of World
Investment Series, Inc. at November 30, 1998, and the results of its
operations for the year then ended, changes in its net assets for each
of the two years in the period then ended, and the financial highlights
for each of the periods presented therein, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487507
Cusip 981487606
Cusip 981487705
G01934-01 (1/99)
[Graphic]
[Graphic]
Federated Investors
Federated Emerging Markets Fund
3rd Annual Report
November 30, 1998
ESTABLISHED 1996
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated Emerging Markets Fund was created in 1996, and this is its
third Annual Report. The fund provides access to equity investments in
20-30 emerging markets. This report covers the 12-month reporting
period from December 1, 1997 through November 30, 1998. It begins with
an interesting, in-depth interview with the fund's portfolio manager,
Jolanta Wysocka, Vice President of Federated Global Investment
Management Corp. (formerly, Federated Global Research Corp.).
Following her discussion of emerging market economic and market
conditions, and the fund's investment strategy, are two additional
items of shareholder interest. First is a complete listing of the
fund's investments, and second is the publication of the fund's
financial statements.
I urge all shareholders to read Jolanta's evaluation of the emerging
markets' investment environment. Jolanta has over 12 years of
experience investing money around the world. She has a stated
investment philosophy and has kept to her disciplines during 1998, a
most difficult year for the emerging markets. In 1998, there was no
safe haven and no place to hide from the severe volatility. I believe
you will find her comments informative.
However, as Jolanta notes, the current environment presents many
investment opportunities. Securities in many emerging market
industries such as banking, insurance and utilities are priced well
below bargain pricing. This report will give you an insight into market
opportunities and the markets in which we have invested for the long
term.
Federated Emerging Markets Fund is a relatively new fund that was
introduced in 1996, shortly before a period of severe volatility.
History has shown that with international investing, there will
inevitably be periods of volatility. The key to long-term success is
investing through up and down markets. On average-and this is shown
through the historical performance of many financial markets-the
rising price periods significantly outweigh the declining price
periods.
The fund offers shareholders significant long-term investment
opportunities from a select portfolio of many large- and small-company
stocks issued by international companies.* These companies are found in
Africa, Latin America, most of Asia and parts of Europe. As of
November 30, 1998, the fund's $44 million in assets were diversified
across more than 190 holdings representing 26 countries, with the
average individual holding representing just 0.50% of the fund's total
assets. Individual share class total return performance for the 12-
month period follows.**
TOTAL RETURN NET ASSET VALUE CHANGE
Class A Shares (28.02%) $11.64 to $8.40 = (28%)
Class B Shares (28.56%) $11.50 to $8.23 = (28%)
Class C Shares (28.62%) $11.50 to $8.23 = (28%)
Thank you for your continued patience during what has been a trying
time for investors in the emerging markets. Please be assured that the
experienced professionals at Federated Global Investment Management
Corp. remain thoroughly focused on the fund's holdings on a day-to-day
basis-and on making the prudent decisions that can ultimately reward
your patience.
I do not know of any way to predict the future of the emerging markets'
stocks, however, I do believe that there are value and investment
opportunities. If you could, I would recommend that you add to your
account.+
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
** Performance quoted is based on net asset value, represents past
performance and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the 12-month reporting period, based on offering price
(i.e., less any applicable sales charge), for Class A, B, and C Shares
were (31.98%), (32.49%), and (29.33%), respectively.
+ Systematic investing does not ensure a profit against loss in declining
markets.
INVESTMENT REVIEW
[Graphic]
Jolanta Wysocka
Vice President
Federated Global Investment Management Corp.
[Graphic]
THE EARLY MONTHS OF 1998 SHOWED A FAVORABLE ENVIRONMENT FOR EMERGING
MARKETS. THEN, THESE FAVORABLE CONDITIONS SWIFTLY DETERIORATED. CAN
YOU TELL US WHY?
1998 will be remembered as one of the most challenging years for the
global financial markets in recent memory. Emerging markets, once the
darlings of investors, became both the cause and the casualty of the
turmoil. After sharp declines in 1997, the year started on a positive
note as markets recovered from deeply oversold levels. At the beginning
of 1998, investors cautiously returned to Asia, encouraged by the
implementation of the International Monetary Fund ("IMF") sponsored
reforms in Korea and Thailand. Confidence picked up and money returned
to Latin America, which, until July, received record inflows of
capital. Those inflows allowed for a marginal expansion of economic
activity in Mexico and Argentina. Equity markets continued to rally as
investors ignored the reality and consequences of deep recession on
Asia, and the severe fiscal and balance of a payment crisis developing
in Russia.
The fragile emerging market recovery was abruptly extinguished during
the third quarter of 1998. The weakness of the Japanese Yen ignited
concerns over the stability of the Hong Kong dollar and Chinese
Renmimbi. Emerging Asian stock markets sold off sharply on renewed
concerns over regional currency stability, with the downside moves
amplified by low liquidity and growing risk aversion. Emerging market
equities were sold off, and the money fled to the safest harbor-in many
cases, U.S. Treasuries.
Despite the IMF's efforts, that were moderate at best, the Russian
financial markets collapsed. Russia simply repudiated its debt
obligations, i.e., the Russian government contracted with leading
international underwriters to sell their bonds, and then refused to pay
the interest as agreed upon. This repudiation triggered a run on the
Brazilian Real and further deepened the Asian crisis. The contagion
affected all markets, leading to an unprecedented degree of risk
aversion and credit tightening. Credit spreads widened to record
levels, and counterparty risk concerns, combined with massive capital
outflows, brought the international financial system to the brink of
implosion.
During the fourth quarter of 1998, aggressive and coordinated easings
of monetary policy were implemented to alleviate the risk of a global
credit crunch.
[Graphic]
BEFORE WE TALK ABOUT FUND SHARE PERFORMANCE, I.E., SHARE VALUE
DECLINE, CAN YOU PLEASE TELL US ABOUT THE EMERGING MARKET UNIVERSE?
Emerging market funds have been available to investors for over 10
years, and currently there are many mutual funds and, of course,
hundreds of private accounts. The emerging market funds' assets
currently total over $10 billion.* 1998 was a difficult market
environment and all funds and separate accounts suffered losses during
that year.
Federated Emerging Markets Fund's returns were consistent with the
(25.32%) average total return of the 152 emerging market mutual funds
tracked by Lipper Analytical Services, Inc.** For the current fiscal
year, the fund's performance reflected the negative emerging market
environment, as represented by the International Finance Corporation
Investable Composite Index+ return of (19.84%). For the fiscal year
ended November 30, 1998, the fund's total returns, based on net asset
value, for Class A, B, and C Shares were (28.02%), (28.56%), and
(28.62%), respectively.++
* Source: Lipper Analytical Services, Inc.
** Lipper figures represent the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc.
as falling into the category indicated. Lipper returns do not take sales
charges into account.
+ The International Finance Corporation Investable Composite Index/Price
Only is an investable, unmanaged market capitalization-weighted, price-
only index of over 1,000 securities in 26 emerging market countries.
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 12-month reporting period,
based on offering price (i.e., less any applicable sales charge), for
Class A, B, and C Shares were (31.98%), (32.49%), and (29.33%),
respectively.
[Graphic]
IN 1998, OUR BROADLY DIVERSIFIED PORTFOLIO MADE STOCK INVESTMENTS IN 26
COUNTRIES. DIVERSIFICATION HELPED, BUT DID NOT TOTALLY PROTECT THE
DECLINE IN SHARE VALUE. WHAT COUNTRIES AND HOLDINGS EXERTED THE GREATEST
INFLUENCE ON THE FUND'S PERFORMANCE DURING THE 12-MONTH REPORTING
PERIOD?
I would like all shareholders to understand that the key to the fund's
performance, more than any singular country or investment, has been our
contrarian philosophy and process. In this process, rather than
following the crowd and running the risk of investing at peak prices,
we focus on holdings that are attractively priced. This helped reduce
the volatility inherent in emerging markets.
The focus on asset allocation and broad diversification also cannot be
overstressed. 1998 has been a year characterized by unusually high
volatility and low liquidity. In such an environment, where economic
reality was often shaped by capital flows, i.e., investor sentiment,
the foundation for conventional financial analysis became unstable.
Risk forecasting as opposed to return forecasting became the key to
generating performance in 1998.
With regard to the specific markets, Greece and Korea contributed
positively to the fund's performance in 1998. Relative underweighted
positions in the Latin American and Asian markets served to cushion
volatility. The African and Middle Eastern markets proved to be
somewhat of a safe haven during the crisis, and the fund's relatively
high allocation to that region served to minimize volatility as well.
Following our contrarian philosophy, let's look at the fund's
underweighted position in Malaysia. Our maximum allocation to Malaysia
during the third quarter of 1998 was 1.60%, and a zero allocation has
been maintained since August 12, 1998. This compared with an
International Finance Corporation Investable Composite Index weighting
in Malaysia of nearly 5.00%. Our assessment of country risk caused us
to liquidate all Malaysian holdings prior to the September 1, 1998
implementation of foreign exchange controls, which we view as a
desperate measure designed to stabilize the country's currency. After
that date, the Malaysian market rallied 38.3% in U.S. dollar terms,
positively affecting the Index's performance. However, emerging market
investors in Malaysia cannot realize these gains because the new
controls effectively freeze capital movement out of the country.
Therefore, we believe it is in our investors' best long-term interest
not to participate in this market at the present time.
[Graphic]
WHAT WERE THE FUND'S COUNTRY ALLOCATIONS AS OF NOVEMBER 30, 1998?
The portfolio was well diversified across the following 26 countries:
PERCENTAGE PERCENTAGE
OF NET OF NET
COUNTRY ASSET COUNTRY ASSETS
Brazil 9.5% Kenya 3.8%
Turkey 9.0% Lebanon 3.2%
Egypt 8.3% Mauritius 3.2%
Korea, Republic of 7.1% Peru 2.8%
Greece 6.8% Hungary 2.6%
Mexico 6.8% South Africa 1.7%
Ghana 6.7% Chile 1.3%
Argentina 5.6% Russia 1.0%
India 5.5% Zimbabwe 0.4%
Poland 5.0% Malawi 0.3%
China 4.8% Pakistan 0.3%
Thailand 4.3% Ivory Coast 0.2%
Philippines 4.0% Czech Republic 0.1%
[Graphic]
WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF NOVEMBER 30, 1998?
PERCENTAGE
OF NET
NAME COUNTRY ASSETS INDUSTRY
Social Security
Bank Ltd. Ghana 4.94% Banking
SK Telecom Co.,
Ltd., ADR Korea 1.84% Telecommunications
Banque Audi,
Class B, GDR Lebanon 1.79% Banking
Telecom
Argentina
SA, ADR Argentina 1.74% Telecommunications
Petroleo
Brasileiro SA,
Preference Brazil 1.59% Energy Sources
Egypt Gas Egypt 1.53% Utilities -
Electrical & Gas
Telefonica
de Argentina
SA, ADR Argentina 1.44% Telecommunications
Solidere, GDR Lebanon 1.42% Real Estate
Hyundai Heavy
Industries Co. Korea 1.41% Machinery &
Engineering
Sabanci Holding Turkey 1.40% Multi-Industry
TOTAL 19.10%
[Graphic]
AS WE REACH THE END OF A VOLATILE 1998, WHAT ARE YOUR EXPECTATIONS FOR
1999, AND WHERE DO YOU SEE OPPORTUNITIES?
Select Asian markets may continue to benefit from strengthening
currencies and lower interest rates. Investors must not overlook the
fact, however, that debt and corporate restructuring remains a primary
concern across much of the region. Investors in Latin America will
continue to wait for positive signs in Brazil. With the IMF aid package
agreement secured, attention will focus on budget issues. Similarly,
in Mexico, investors will await positive developments on the banking
sector bailout package. The Eastern European/Middle Eastern/
African markets continue to provide excellent opportunities for the
long term, and eventual entrance into the European Monetary Union for
many of these countries, such as Greece, may provide additional impetus
for performance. In Turkey, investors will anticipate positive
political news ahead of the country's national elections in April.
For the long term, we continue to remain positive on the emerging
market class as a whole, with specific strengths coming from Eastern
Europe and Africa. For the short term, we expect more volatility with
the possibility of further declines in a number of markets. As
contrarians, we will take advantage of the volatility to position the
fund into attractively priced assets.
FEDERATED EMERGING MARKETS FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000*
in the Federated Emerging Markets Fund (Class A Shares) (the
"Fund") from February 28, 1996 (start of performance) to November
30, 1998, compared to the International Finance Corporation
Investable Composite Index (IFCIC).+
[Graphic representation omitted. Please see Appendix A4.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK
AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the
Fund after deducting the maximum sales charge of 5.50% ($10,000
investment minus $550 sales charge = $9,450). The Fund's
performance assumes the reinvestment of all dividends
and distributions. The IFCIC has been adjusted to reflect
reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The IFCIC is not adjusted to reflect sales charges, expenses,
or other fees that the Securities and Exchange Commission requires
to be reflected in the Fund's performance. This index is unmanaged.
FEDERATED EMERGING MARKETS FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000*
in the Federated Emerging Markets Fund (Class B Shares) (the
"Fund") from February 28, 1996 (start of performance) to November
30, 1998, compared to the International Finance Corporation
Investable Composite Index (IFCIC).+
[Graphic representation omitted. Please see Appendix A5.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK
AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The
ending value of the Fund reflects a contingent deferred sales charge
of 4.00% on any redemption less than three years from the purchase date.
The maximum contingent deferred sales charge is 5.50% on any redemption
less than one year from the purchase date. The Fund's performance assumes
the reinvestment of all dividends and distributions. The IFCIC has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The IFCIC is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
FEDERATED EMERGING MARKETS FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED EMERGING MARKETS FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated Emerging Markets Fund (Class C Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1998,
compared to the International Finance Corporation Investable Composite
Index (IFCIC).+
[Graphic representation omitted. Please see Appendix A6.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The IFCIC has been
adjusted to reflect reinvestment of dividends on securities in the
index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The IFCIC is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
FEDERATED EMERGING MARKETS FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-98.0%
APPLIANCES & HOUSEHOLD DURABLES-3.8%
440,000 Guangdong Kelon Elec Holding, Class H $ 383,572
32,000 L.G. Electronics, Inc. 317,175
840,000 Protea Furnishers Ltd. 346,757
8,600 Samsung Electronics Co. 459,679
2 (a) (b)Samsung Electronics Co., GDR 65
2,067,000 Vestel Elektronik Sanayi Ve Ticaret AS 200,739
Total 1,707,987
BANKING-18.7%
18,340,000 Akbank T.A.S. 374,335
2,700 Alpha Credit Bank 256,041
8,800 Banco Frances del Rio de la Plata SA, ADR 212,850
3,800 Banco Santiago, ADR 57,950
4,440 Bank Slaski SA 206,526
630,000 Bank of Ayudhya Ltd. 200,693
60,000 Bank of Baroda 71,019
30,500 (a) (b)Banque Audi, Class B, GDR 800,625
243,200 Big Bank Gdanski SA 258,371
17,500,000 Demirbank T.A.S. 108,021
74,900 Grupo Financiero Banamex Accivel, Class B 88,479
1,767 Grupo Financiero Banamex Accivel, Class L 1,981
1,100,000 Grupo Financiero Bancomer, SA de CV, Class B 198,218
390 Grupo Financiero Inbursa, SA de CV 726
98,000 HDFC Bank Ltd. 118,070
183,800 ICICI Ltd. 184,534
674,000 Industrial Finance Corp. of Thailand 294,058
243 Kookmin Bank 1,141
300 Korea Exchange Bank 975
51,000 Kredyt Bank PBI SA 161,080
62,800 (a) Mauritius Commercial Bank 271,116
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
BANKING-CONTINUED
3,300 National Bank of Greece $ 589,832
6,000 National Societe Generale Bank 103,963
4,500 OTP Bank RT 192,439
2,698,076 (a) Social Security Bank Ltd. 2,210,126
2,900 (a) Societe Generale Banq en Cote Ivoire 76,611
277,500 State Bank Mauritius 199,294
30,640,625 Turkiye Garanti Bankasi AS 625,401
12,000 (a) Unibanco Uniao de Bancos Brasileiros SA, ADR 250,500
19,344,000 Yapi ve Kredi Bankasi AS 235,622
Total 8,350,597
BEVERAGE & TOBACCO-5.1%
105,000 Beijing Enterprises 160,693
368,752 Cervecer Backus & Johnston, Class T 154,606
4,600 Compania Cervecerias Unidas SA, ADR 98,900
5,800 (a) Eastern Co. 121,810
2,600 Embotelladora Andina SA, Class A, ADR 39,650
1,400 Embotelladora Andina SA, Class B, ADR 19,775
80,000 Fomento Economico Mexicano, SA de CV 187,406
14,480 (a) Guiness Ghana Ltd. 4,868
6,000 Hellenic Bottling Co., SA 160,157
52,200 (a) Mauritius Breweries Ltd. 196,922
7,500 Nobleza Piccardo S.A.I.C. y F. 27,754
11,800 Pan American Beverage, Class A 272,138
11,800 Quilmes Industrial SA, ADR 111,363
293,672 Sasini Tea & Coffee Ltd. 314,387
24,000 South African Breweries, Ltd. 405,990
Total 2,276,419
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
BROADCASTING & PUBLISHING-1.2%
8,000 Grupo Televisa SA, GDR $ 203,500
29,440,000 (a) Medya Holding 123,571
30,000 (a) TV Azteca SA de CV, ADR 225,000
Total 552,071
BUILDING MATERIALS & COMPONENTS-1.2%
16,950,000 Akcansa Cimento AS 312,484
75,000 Cemex SA, Class B 219,241
Total 531,725
BUSINESS & PUBLIC SERVICES-3.3%
765,334 Companhia de Saneamento Basico do Estado de Sao Paulo 84,124
19,150 (a) ComputerLand Poland SA 225,990
539,280 (a) Home Finance Co. Ltd. 172,111
6,600 Infosys Technologies Ltd. 361,930
27,400 Pentafour 313,060
24,900 Satyam Computer Services 307,157
Total 1,464,372
CHEMICALS-2.2%
5,540 Egypt International Pharmaceuticals 284,787
8,800 Egyptian Financial & Industrial 148,627
4,700 Pannonplast RT 129,789
140,004 Polifarb-Cieszyn SA 184,917
6,300 Sociedad Quimica Y Minera De Chile, ADR 242,550
Total 990,670
CONGLOMERATE-0.4%
340,000 Grupo Elektra 178,356
CONSTRUCTION & HOUSING-4.2%
68,571 (a) Arabian International Construction 455,395
51,000 (a) Corporacion GEO, SA de CV, Class B 144,489
8,901,000 (a) DMCI Holdings 447,309
26,000 Exbud SA 194,099
13,399 Hydrobudowa Slaska 86,563
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
CONSTRUCTION & HOUSING-CONTINUED
148,700 Italian-Thai Development $ 298,636
66,120 Proodeftiki SA 153,271
358,000 Sino Thai Engineering & Construction 81,318
Total 1,861,080
ELECTRICAL & ELECTRONICS-1.2%
19,000 Bharat Heavy Electricals Ltd. 104,504
26,700 DSQ Software Ltd. 142,843
5,600 Intracom SA 287,159
Total 534,506
ELECTRONIC COMPONENTS, INSTRUMENTS-1.8%
25,000 Aptech Ltd. 219,146
2,400 Dae Duck Electronics Co. 192,616
5,236,429 (a) ECONET Wireless Holdings 126,858
3,000 Samsung Display Devices 109,069
11,000 Software Solutions 145,961
Total 793,650
ENERGY SOURCES-3.5%
80,000 AO Tatneft, ADR 200,000
11,250 Lukoil Holding Co., ADR 224,591
15,000 MOL Magyar Olaj-es Gazipari RT 349,051
5,600 (a) Pakistan State Oil 8,721
6,000 (a) Russia Petroleum 6,300
5,000,000 (a) Tupras Turkiye Petrol Rafinerileri AS 226,330
18,600 YPF Sociedad Anonima, ADR 548,700
Total 1,563,693
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
FINANCIAL SERVICES-2.2%
1,820,000 Alarko Holding $ 251,646
18,600 (a) (b)EFG-Hermes, GDR 190,650
2,295,000 Securities One 565,803
Total 1,008,099
FOOD & HOUSEHOLD PRODUCTS-3.4%
13,333 Chipita International 401,086
100 Egyptian Starch & Gl 1,160
185,000 Grupo Industrial Maseca SA de CV, Class B 165,572
32,100 (a) International Foods Co. (Hostess) 492,650
270,000 Ng Fung Hong Ltd. 240,604
691,950 Pesquera Austral SA 225,888
Total 1,526,960
GOLD MINES-0.8%
42,238 Ashanti Goldfields Co., GDR 366,943
HEALTH & PERSONAL CARE-2.2%
17,000 Athens Medic Center 345,708
2,250 Galena AS 29,609
39,000 Kimberly-Clark de Mexico 106,587
27,200 Pacific Corp. 340,546
10,150 Suheung Capsule 179,213
Total 1,001,663
INDUSTRIAL COMPONENTS-0.5%
11,000 Debica SA 164,238
3,800 Madeco SA, ADR 42,275
Total 206,513
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
INSURANCE-1.0%
8,200,000 Aksigorta $ 242,955
11,000 (a) Enterprise Insurance Co. Ltd. 11,412
116,394 Swan Insurance Co., Ltd. 201,934
Total 456,301
LEISURE & TOURISM-1.8%
16,871 Danubius Hotels Rt. 341,549
123,636 Orascom Hotel Holdings 399,471
63,598 (a) United Docks Ltd. 78,263
Total 819,283
MACHINERY & ENGINEERING-2.4%
912,000 First Tractor Co. Ltd., Class H 267,958
30,530 Hyundai Heavy Industries Co. 632,162
13,000 Industrial Engineering Enterprise 190,008
Total 1,090,128
MERCHANDISING-1.8%
15,000 Companhia Brasileira de Distribuicao Grp, ADR 300,938
280,000 Migros Turk 276,534
70,000 Organizacion Soriana SA de CV, Class B 204,625
1,800 Santa Isabel SA, ADR 15,413
Total 797,510
METALS-NON FERROUS-2.5%
221,942 (a) Aluworks Ghana Ltd. 236,109
41,532 Compania de Minas Buenaventura SA, Class B 260,530
33,000 Freeport-McMoRan Copper & Gold, Inc., Class B 431,063
100 Hindalco Industries Ltd. 1,175
50,656 Minsur SA 84,305
40,000 Southern Peru Ltd. 121,619
Total 1,134,801
METALS-STEEL-0.3%
38,500 Siderar SA, Class A 114,746
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
MINING-0.9%
483,461 Athi River Mining Ltd. $ 50,553
9,360 Silver & Baryte Ores Mining 338,606
Total 389,159
MISCELLANEOUS MATERIALS & COMMODITIES-0.6%
666,000 National Aluminium Co. Ltd. 265,117
MULTI-INDUSTRY-6.1%
61,126 Alfa, SA de CV, Class A 154,513
1,145,000 Ayala Corp. 363,261
23,500,000 Dogan Sirketler Grubu Holding AS 193,409
19,089 Elektrim Spolka Akcyina SA 160,594
1,487,000 Firestone East Africa Ltd. 444,249
9,500 Grupo Carso SA de CV 29,482
5,600 Grupo Carso SA de CV, ADR 35,470
21,830 (a) (b)Press Corp., GDR 147,353
45,557 Rogers and Company Ltd. 273,875
35,880,000 Sabanci Holding 626,034
133,000 Shanghai Industrial Holdings Ltd. 270,535
900,000 Trans Zambezi Industries Ltd. 45,000
Total 2,743,775
PHARMACEUTICALS-0.8%
7,727,000 Eczacibasi Ilac 206,047
21,900 Jelfa SA 150,915
Total 356,962
REAL ESTATE-4.7%
1,000,000 Ayala Land, Inc. 310,914
3,734,000 (a) Belle Corp. 241,668
6,000,000 C & P Homes, Inc. 188,832
306,000 China Resources Enterprises Ltd. 448,547
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
REAL ESTATE-CONTINUED
387,000 Land & House Co., Ltd. $ 286,766
61,000 (a) (b)Solidere, GDR 637,450
Total 2,114,177
TELECOMMUNICATIONS-10.5%
44,500 (a) Egyptian Mobile Phone Network 265,210
9,000 Hellenic Telecommunication Organization SA 224,431
49,500 Mahanagar Telephone Nigam Ltd. 204,312
25,100 Matav RT 138,740
2,560 (a) (b)Panafon SA 45,856
9,000 Philippine Long Distance Telephone Co. 235,279
80,000 SK Telecom Co. Ltd., ADR 825,000
110,065 (a) Tele 2000 SA- La Nueva Com de Telefonos 70,453
25,500 Telecom Argentina SA, ADR 777,750
19,900 Telefonica de Argentina SA, ADR 644,263
13,000 Telefonos de Mexico, Class L, ADR 605,313
37,000 (a) Telekomunikacja Polska SA 168,918
17,000,000 (a) Telesp Participacoes SA 477,059
Total 4,682,584
TEXTILES & APPAREL-0.9%
18,100 Oriental Weavers 388,105
TRANSPORTATION-AIRLINES-1.5%
151,049 Air Mauritius Ltd. 192,582
4,079,000 Kenya Airways Ltd. 494,219
Total 686,801
TRANSPORTATION-SHIPPING-0.6%
29,000 Attica Enterprises SA 248,016
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
UTILITIES - ELECTRICAL & GAS-4.9%
1,160,000 (a) Beijing Datang Power $ 374,532
573,289 Edegel SA, Class B 152,290
9,200 (a) Egypt Gas 684,441
70,500 Electricity Generating PLC 187,479
3,700 Enersis SA, ADR 86,488
15,200 Hub Power Co., GDR 102,600
225,000 Kenya Power & Lighting Co. Ltd. 410,788
6,550 Korea Electric Power Corp. 126,164
30 (a) Sui Sthn Gas Pipe 5
8,000 Transportadora de Gas de Sur SA, Class B, ADR 80,000
Total 2,204,787
WHOLESALE & INTERNATIONAL TRADE-1.0%
52,900 Agros Holding SA 197,459
180,080 Enrique Ferreyros SA 176,939
15,400 Stalexport SA 80,919
Total 455,317
TOTAL COMMON STOCKS (IDENTIFIED COST $43,499,684) 43,862,873
PREFERRED STOCKS-7.0%
BANKING-0.6%
40,000,000 Banco Bradesco SA, Preference 289,783
ENERGY SOURCES-1.6%
5,000,000 Petroleo Brasileiro SA, Preference 711,966
TELECOMMUNICATIONS-2.4%
5,061,871 Telecomunicacoes Do Rio Janiero SA, Preference 183,355
3,500,000 Telecomunicacoes de Sao Paulo SA, Preference 594,554
27,000,000 (a) Telesp Celular Participacoes SA 278,791
Total 1,056,700
</TABLE>
FEDERATED EMERGING MARKETS FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
PREFERRED STOCKS-CONTINUED
TEXTILES & APPAREL-0.0%
49,000,000 (a) Texpar SA, Preference $ 408
UTILITIES - ELECTRICAL & GAS-2.4%
19,200,000 (a) Centrais Eletricas Brasileiras SA, Preference, Series B 543,592
14,000,000 Companhia Energetica de Minas Gerais, Preference 354,401
2,610,000 Companhia Paulista de Forca e Luz, Pfd. 195,603
Total 1,093,596
TOTAL PREFERRED STOCKS (IDENTIFIED COST $3,485,033) 3,152,453
CORPORATE BONDS-0.0%
METALS - STEEL-0.0%
$ 10,100 Companhia Vale Do Rio Doce, Conv. Deb., 12/31/1999
(IDENTIFIED COST $79) 84
TOTAL INVESTMENTS (IDENTIFIED COST $46,984,796)(C) $ 47,015,410
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1998, these securities
amounted to $1,821,999 which represents 4.1% of net assets.
(c) The cost of investments for federal tax purposes amounts to $48,087,985.
The net unrealized depreciation of investments on a federal tax basis
amounts to $1,072,575 which is comprised of $5,424,780 appreciation and
$6,497,355 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($44,758,237) at November 30, 1998.
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 EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $46,984,796 and
tax cost $48,087,985) $ 47,015,410
Cash denominated in foreign currencies (identified cost $339,070) 337,504
Income receivable 59,380
Receivable for investments sold 117,036
Receivable for shares sold 157,996
Deferred organizational costs 27,438
Total assets 47,714,764
LIABILITIES:
Payable for investments purchased $ 160,276
Payable for shares redeemed 298,403
Net payable for foreign currency exchange contracts 136
Payable to Bank 2,278,487
Payable for taxes withheld 130,901
Accrued expenses 88,324
Total liabilities 2,956,527
NET ASSETS for 5,360,746 shares outstanding $ 44,758,237
NET ASSETS CONSIST OF:
Paid in capital $ 70,135,523
Net unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 28,704
Accumulated net realized loss on investments and foreign currency transactions (25,401,984)
Accumulated net operating loss (4,006)
Total net assets $ 44,758,237
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($32,002,171 / 3,810,103 shares outstanding) $8.40
Offering Price Per Share (100/94.50 of $8.40)* $8.89
Redemption Proceeds Per Share $8.40
CLASS B SHARES:
Net Asset Value Per Share ($10,883,808 / 1,323,154 shares outstanding) $8.23
Offering Price Per Share $8.23
Redemption Proceeds Per Share (94.50/100 of $8.23)* $7.78
CLASS C SHARES:
Net Asset Value Per Share ($1,872,258 / 227,489 shares outstanding) $8.23
Offering Price Per Share $8.23
Redemption Proceeds Per Share (99.00/100 of $8.23)* $8.15
</TABLE>
* See "What Do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $110,743) $ 1,704,070
Interest 54,311
Total income 1,758,381
EXPENSES:
Investment advisory fee $ 758,455
Administrative personnel and services fee 185,000
Custodian fees 263,434
Transfer and dividend disbursing agent fees and expenses 156,834
Directors'/Trustees' fees 1,403
Auditing fees 21,692
Legal fees 3,113
Portfolio accounting fees 83,662
Distribution services fee-Class B Shares 119,917
Distribution services fee-Class C Shares 22,321
Shareholder services fee-Class A Shares 104,279
Shareholder services fee-Class B Shares 39,972
Shareholder services fee-Class C Shares 7,440
Share registration costs 30,328
Printing and postage 47,750
Insurance premiums 4,000
Taxes 5,625
Miscellaneous 14,682
Total expenses 1,869,907
Waivers and reimbursements-
Waiver of investment advisory fee $ (115,548)
Reimbursement of other operating expenses (35,503)
Total waivers and reimbursements (151,051)
Net expenses 1,718,856
Net investment income 39,525
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Net realized loss on investments and foreign currency transactions
(net of foreign taxes withheld $369,196) (22,632,585)
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 3,529,082
Net realized and unrealized loss on investments and foreign currency transactions (19,103,503)
Change in net assets resulting from operations $ (19,063,978)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS-
Net investment income/(net operating loss) $ 39,525 $ (66,935)
Net realized loss on investments and foreign currency
transactions ($(20,651,562) and $(206,412), respectively, as
computed for federal tax purposes) (22,632,585) (2,055,377)
Net change in unrealized appreciation/(depreciation) of
investments and translation of assets and liabilities in
foreign currency 3,529,082 (4,169,559)
Change in net assets resulting from operations (19,063,978) (6,291,871)
SHARE TRANSACTIONS-
Proceeds from sale of shares 36,333,951 102,012,438
Cost of shares redeemed (44,913,771) (45,239,352)
Change in net assets resulting from share transactions (8,579,820) 56,773,086
Change in net assets (27,643,798) 50,481,215
NET ASSETS:
Beginning of period 72,402,035 21,920,820
End of period $ 44,758,237 $ 72,402,035
</TABLE>
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.64 $11.10 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.01 0.02
Net realized and unrealized gain/(loss) on investments and
foreign currency (3.27) 0.53(d) 1.08
Total from investment operations (3.24) 0.54 1.10
NET ASSET VALUE, END OF PERIOD $ 8.40 $11.64 $11.10
TOTAL RETURN(B) (28.02%) 4.86% 11.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.59% 2.14% 1.97% *
Net investment income 0.30% 0.13% 0.31% *
Expense waiver/reimbursement(c) 0.25% 0.65% 3.34% *
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $32,002 $48,525 $17,327
Portfolio turnover 163% 102% 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) The amount shown in this caption for a share outstanding does not
correspond with the aggregate net realized and unrealized gain (loss) on
investments and foreign currency for the period ended due to the timing
of sales and repurchases of Fund shares in relation to fluctuating
market values of the investments of the Fund.
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.50 $11.04 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.08) (0.04) (0.02)
Net realized and unrealized gain/(loss) on investments and
foreign currency (3.19) 0.50(d) 1.06
Total from investment operations (3.27) 0.46 1.04
NET ASSET VALUE, END OF PERIOD $ 8.23 $11.50 $11.04
TOTAL RETURN(B) (28.56%) 4.17% 10.40%
RATIOS TO AVERAGE NET ASSETS
Expenses 3.34% 2.89% 2.72%*
Net operating loss (0.45%) (0.69%) (0.71%)*
Expense waiver/reimbursement(c) 0.25% 0.65% 3.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $10,884 $19,951 $3,747
Portfolio turnover 163% 102% 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
operating loss ratios shown above.
(d) The amount shown in this caption for a share outstanding does not
correspond with the aggregate net realized and unrealized gain (loss) on
investments and foreign currency for the period ended due to the timing
of sales and repurchases of Fund shares in relation to fluctuating
market values of the investments of the Fund.
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.50 $11.05 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.09) (0.04) (0.02)
Net realized and unrealized gain/(loss) on investments and
foreign currency (3.18) 0.49(d) 1.07
Total from investment operations (3.27) 0.45 1.05
NET ASSET VALUE, END OF PERIOD $ 8.23 $11.50 $11.05
TOTAL RETURN(B) (28.62%) 4.07% 10.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 3.34% 2.89% 2.72%*
Net operating loss (0.45%) (0.65%) (0.77% )*
Expense waiver/reimbursement(c) 0.25% 0.65% 3.34%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,872 $3,943 $847
Portfolio turnover 163% 102% 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
operating loss ratios shown above.
(d) The amount shown in this caption for a share outstanding does not
correspond with the aggregate net realized and unrealized gain (loss) on
investments and foreign currency for the period ended due to the timing
of sales and repurchases of Fund shares in relation to fluctuating
market values of the investments of the Fund.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
portfolios. The financial statements included herein are only those of
Federated Emerging Markets Fund (the "Fund"), a diversified portfolio.
The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Class A Shares, Class B
Shares, and Class C Shares. The investment objective of the Fund is to
provide long-term growth of capital.
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 according
to the last sale price reported in the market in which they are
primarily traded. If no sale on a recognized exchange is reported or if
the security is traded over-the-counter, the foreign securities are
valued at the mean between the last closing bid and asked prices.
Investment in other mutual funds are valued at net asset value. Short-
term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining
maturity of sixty days or less at the time of purchase may be valued at
amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS-It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions and net
operating losses. The following reclassifications have been made to
the financial statements.
INCREASE/(DECREASE)
PAID IN ACCUMULATED NET UNDISTRIBUTED NET
CAPITAL REALIZED LOSS INVESTMENT INCOME
$1,245,520 $(1,205,995) $(39,525)
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES-It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
At November 30, 1998, the Fund, for federal tax purposes, had a capital
loss carryforward of $24,298,795, which will reduce the Fund's taxable
income arising from future net realized gain on investments, if any, to
the extent permitted by the Code, and thus will reduce the amount of the
distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax. Pursuant to the
Code, such capital loss carryforward will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2003 $ 3,130,096(a)
2004 310,725
2005 206,412
2006 20,651,562
(a) Capital loss carryforward is attributable to the acquisition of the
assets of The Blanchard Worldwide Emerging Market Fund and is limited to
$391,262 that can be used in future periods to offset income arising
from net realized gains.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS-The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire
exposure to foreign currencies; whereas, contracts to sell are used to
hedge the Fund's securities against currency fluctuations. Risks may
arise upon entering these transactions from the potential inability of
counterparts to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates.
The foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded
for financial statement purpose as unrealized until the settlement
date.
At November 30, 1998, the Fund had outstanding foreign currency
commitments as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
<S> <C> <C> <C> <C>
CONTRACT PURCHASED:
12/1/98 13,056,000 Greek Drachma $45,730 $45,855 $ 125
12/3/98 1,500,000,000 Turkish Lira 5,085 4,938 (147)
CONTRACT SOLD:
12/2/98 405,900 Czech Koruna $13,196 $13,310 $(114)
Net Unrealized Depreciation on Foreign Exchange Contracts $(136)
</TABLE>
FOREIGN CURRENCY TRANSLATION-The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES-Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for
resale, at the issuer's expense either upon demand by the Fund or in
connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may
be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at
November 30, 1998, is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Banque Audi, Class B, GDR 04/28/1997 - 06/25/1997 $731,800
Samsung Electronics Co., GDR 02/02/1995 106
Press Corp., GDR 07/14/1998 249,954
Solidere, GDR 04/25/1997 - 06/25/1997 901,750
Panafon SA 11/20/1998 46,354
EFG-Hermes, GDR 07/28/1998 218,550
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses, and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
NUMBER OF PAR
VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 100,000,000
Total 300,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,094,151 $ 32,142,225 5,469,055 $ 72,534,377
Shares redeemed (3,449,888) (35,473,078) (2,864,255) (37,739,280)
Net change resulting from
Class A Share transactions (355,737) $ (3,330,853) 2,604,800 $ 34,795,097
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 306,994 $ 3,184,513 1,737,682 $ 22,920,945
Shares redeemed (717,998) (7,271,596) (343,037) (4,467,783)
Net change resulting from
Class B Share transactions (411,004) $ (4,087,083) 1,394,645 $ 18,453,162
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 94,488 $ 1,007,213 498,984 $ 6,557,116
Shares redeemed (210,000) (2,169,097) (232,631) (3,032,289)
Net change resulting from
Class C Share transactions (115,512) $ (1,161,884) 266,353 $ 3,524,827
Net change resulting from
share transactions (882,253) $ (8,579,820) 4,265,798 $ 56,773,086
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.25% 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, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A, Class
B, and Class C Shares. The Plan provides that the Fund may incur
distribution expenses according to the following schedule annually, to
compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the year
ended November 30, 1998, 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 Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
for the period. The fee paid to FSSC is used to finance certain
services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-FServ,
through its subsidiary, FSSC, serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC, is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES-Organizational expenses of $48,748 were
borne initially by the Adviser. The Fund has reimbursed the Adviser for
these expenses. These expenses have been deferred and are being
amortized over the five-year period following the Fund's effective
date. For the year ended November 30, 1998, the Fund expensed $12,644
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 year ended November 30, 1998, were as follows:
PURCHASES $ 97,890,241
SALES $100,603,030
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or
economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
At November 30, 1998, the diversification of countries was as follows:
PERCENTAGE OF PERCENTAGE OF
COUNTRY NET ASSETS COUNTRY NET ASSETS
Argentina 5.6% Lebanon 3.2%
Brazil 9.5% Malawi 0.3%
Chile 1.3% Mauritius 3.2%
China 4.8% Mexico 6.8%
Czech Republic 0.1% Pakistan 0.3%
Egypt 8.3% Peru 2.8%
Ghana 6.7% Philippines 4.0%
Greece 6.8% Poland 5.0%
Hungary 2.6% Russia 1.0%
India 5.5% South Africa 1.7%
Ivory Coast 0.2% Thailand 4.3%
Kenya 3.8% Turkey 9.0%
Korea, Republic of 7.1% Zimbabwe 0.4%
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
Administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8. SUBSEQUENT EVENT
On January 7, 1999, the Fund's Adviser, Federated Global Research
Corp., changed its name to Federated Global Investment Management
Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Emerging Markets
Fund (a portfolio of World Investment Series, Inc.) as of November 30,
1998, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated Emerging Markets Fund of World
Investment Series, Inc., at November 30, 1998, and the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights for each of the periods presented therein, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic] Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487804
Cusip 981487887
Cusip 981487879
G01967-01 (1/99)
[Graphic]
[Graphic]
Federated Investors
[Graphic]
Federated European Growth Fund
3rd Annual Report
November 30, 1998
Established 1996
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated European Growth Fund was created in 1996, and I am pleased to
present its third Annual Report. This report covers the 12-month
reporting period from December 1, 1997 through November 30, 1998.
It begins with an interview with the fund's portfolio manager, Frank
Semack, Vice President of Federated Global Investment Management Corp.
(formerly, Federated Global Research Corp.). Following his discussion
covering international economic and market conditions and fund strategy
are three additional items of shareholder interest. First is a series of
graphs showing the fund's investment performance. Second is a complete
listing of the fund's common stock investments, and third is the
publication of the fund's financial statements.
The fund offers shareholders very significant long-term growth
opportunities from a select portfolio of stocks issued by major
European companies.* Although significant volatility impacted the
European markets throughout the reporting period, it was a strong year
overall for European stocks. The fund's returns were highly positive
and ahead of the average European equity fund. At the end of the
reporting period, the fund's $62 million portfolio was broadly
diversified across 97 stocks, with the average holding representing
approximately 1% of the fund's total assets. Individual share class
total return performance for the 12-month period, including realized
gains, follows.**
<TABLE>
<CAPTION>
TOTAL CAPITAL NET ASSET
RETURN GAINS VALUE INCREASE
<S> <C> <C> <C>
Class A Shares 22.13% $0.415 $13.33 to $15.79 = 18%
Class B Shares 21.14% $0.415 $13.18 to $15.48 = 17%
Class C Shares 21.03% $0.415 $13.15 to $15.43 = 17%
</TABLE>
* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
** Performance quoted is based on net asset value, represents past
performance, and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the 12-month reporting period, based on the offering price
(i.e., less any applicable sales charge), for Class A, B, and
C Shares were 15.38%, 15.64%, and 20.03%, respectively.
Thank you for entrusting a portion of your wealth to this diversified
approach to the dynamic European market. Remember, reinvesting your
dividends is a convenient way to build your account and help your money
grow through the benefit of compounding.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
INVESTMENT REVIEW
[Graphic]
Frank Semack
Vice President
Federated Global Investment Management Corp.
[Graphic]
HOW WOULD YOU CHARACTERIZE THE DEVELOPMENTS IN THE EUROPEAN MARKETS OVER
THE LAST YEAR?
"Volatility" is the key word. Strong performance in the European
markets during the early part of the year gave way to a moderate
correction in the spring. The markets then rebounded to record highs in
July 1998 before suffering a massive 29% sell-off lasting through
early October 1998, which took prices below their 1997 levels. In the
process, daily fluctuations in market prices rose from 1% to well over
3% on many occasions-with considerably wider intra-day trading ranges.
Finally, a string of interest rate reductions across the globe,
triggered by a surprise cut in the Federal Funds Target Rate by the
Federal Reserve Board, led to a substantial recovery in October and
November of 1998 that reversed over one-half of the preceding period's
losses.
[Graphic]
WHAT, IN YOUR VIEW, WERE THE MOST SIGNIFICANT DEVELOPMENTS DURING 1998?
Several themes come to mind, not all of them purely European:
1. Falling interest rates, particularly in the peripheral countries of
Spain, Italy, Portugal, and Ireland. Over the course of the year,
interest rates fell in Ireland from 6.75% to 3.00%, in Portugal from
5.30% to 3.00%, in Spain from 4.75% to 3.00%, and in Italy from 5.50%
to 3.50%. The United Kingdom also cut rates, from 7.50%, but short-term
rates remain relatively high versus the rest of Europe.
2. The de facto formation in May 1998, by 11 of the 15 European Union
member countries, of European monetary union ("EMU"). The official
start of EMU in 1999 with a common currency, the euro, and a Europe-
wide central bank will take place against the background of a common
short-term interest rate level set at 3.00%, as a result of the last
round of coordinated interest rate cuts in Europe in early
December 1998.
3. Relatively good trends in the economies of France and Spain and, to
a lesser extent, Germany, but distinct slowdowns in the United Kingdom
and Italy.
4. The summer sell-off, triggered by the emerging markets crisis. Given
that Asia and Latin America are facing economic hardship, there will
clearly be some impact on foreign companies doing business there. Signs
of this became more visible as companies began to issue profit warnings
on the back of the Asian slowdown, and economists followed with lower
gross domestic product ("GDP") estimates for 1999.
5. The continued restructuring in the following industries in Europe
and around the globe: banking and insurance (Deutsche Bank/Bankers
Trust, Commercial Union/General Accident); pharmaceuticals (Hoechst/
Rhone Poulenc, Sanofi/Synthelabo, Zeneca/Astra); oil (British
Petroleum/Amoco, Total/Petrofina, British Borneo/Hardy); and
industrials (Siebe/BTR, Daimler/Chrysler, Viag/Alusuisse-Lonza). This
is not an exhaustive list and does not include the many alliances and
joint ventures that were entered into over the past year.
[Graphic]
WHAT ARE YOUR GDP AND EARNINGS EXPECTATIONS FOR 1999?
As far as GDP is concerned, we would expect Europe-wide growth to be
around 2.00% rather than the 2.70% that appeared to be in prospect
earlier. Within this total, the Eurozone should do better than the
United Kingdom (2.50% versus 0.50%). We also expect that France and
Spain will continue to have the best growth rates. Earnings growth will
likely run somewhere in the mid-single digits, with continental Europe
again doing better than the United Kingdom.
A point worth stressing is that the United Kingdom now has the
most scope for further interest rate cuts in the industrialized world.
After an increase in rates in June 1998, the Bank of England began
cutting rates in October 1998.
[Graphic]
HOW DID FEDERATED EUROPEAN GROWTH FUND PERFORM OVER THE 12-MONTH REPORTING
PERIOD?
For the fiscal year ended November 30, 1998, the fund's Class A, B, and
C Shares produced total returns of 22.13%, 21.14%, and 21.03%,
respectively, based on net asset value.* These returns built on the
solid performance of the previous year and were ahead of the 20.73%
average total return of the 95 European region funds tracked by Lipper
Analytical Services, Inc.** The overall return of the European market,
as measured by the Morgan Stanley Capital International (Europe) Index
("MSCI-EUROPE"), was 27.65%.+
[Graphic]
HOW DID THE FUND'S SECTOR WEIGHTINGS CHANGE DURING THE REPORTING PERIOD?
The most significant change was in the banking sector. In anticipation
of the effects of capital market volatility and increased loan/loss
provisions, we shifted out of financials that had emerging markets
exposure and into domestically oriented banks. Similarly, the idea in
our non-financial holdings was to place more emphasis than usual on
reasonable valuations, good earnings visibility, and decent unit
volume growth. Also, we expect that the ongoing secular trend toward
large-scale restructuring will afford numerous investment
opportunities throughout Europe.
* 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 12-month reporting period,
based on the offering price (i.e., less any applicable sales charge), for
Class A, B, and C Shares were 15.38%, 15.64%, and 20.03%, respectively.
** Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated. Lipper returns do not
reflect sales charges.
+ The MSCI-EUROPE is an unmanaged, market value-weighted average of over
500 securities listed on the stock exchanges of 15 countries in the
European region. Investments cannot be made in an index.
Consequently, we increased our weightings in selected media,
pharmaceuticals, telecommunications, and services stocks. As of
November 30, 1998, the fund's sector weightings were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
SECTOR NET ASSETS SECTOR NET ASSETS
<S> <C> <C> <C>
Insurance 19.3% Chemicals 2.3%
Banking 16.6% Electrical & 1.9%
Electronics
Telecommunications 8.6% Real Estate 1.8%
Business & 7.8% Machinery &
Public Services Engineering 1.3%
Health & 7.6% Automobile 1.0%
Personal Care
Energy Sources 6.1% Financial Services 1.0%
Broadcasting & 4.9% Metals-
Publishing Non-Ferrous 1.0%
Food & 3.7% Multi-Industry 1.0%
Household Products
Leisure & 3.4% Recreation,
Tourism Other Consumer Goods 1.0%
Construction & 3.2% Beverage & 0.9%
Housing Tobacco
Aerospace & 2.8% Utilities-
Military Electrical & Gas 0.9%
Technology
Merchandising 2.7% Wholesale &
International Trade 0.8%
</TABLE>
[Graphic]
WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF NOVEMBER 30, 1998, AND HOW WAS
THE PORTFOLIO ALLOCATED AMONG COUNTRIES?
In terms of country exposure within the fund's portfolio, the United
Kingdom accounted for 27.2%, Switzerland was at 6.6%, and Sweden,
Norway, and Greece, combined, represented 4.3%. The weighting of the
Eurozone countries in the portfolio was 64.0%, led by France
(holding 22.2%) and Italy (holding 17.1%).
The fund's top 10 holdings on November 30, 1998, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE
OF MARKET
NET CAPITALIZATION
COMPANY SECTOR COUNTRY ASSETS ($ BILLIONS)
<S> <C> <C> <C> <C>
Mannesmann Telecommunications Germany 2.49% $42.1
Banca Intesa Banking Italy 2.38% $ 8.5
Baloise Holdings Ltd. Insurance Switzerland 1.93% $ 5.5
AXA Insurance France 1.91% $44.2
Telecom Italia Telecommunications Italy 1.89% $42.7
Mondadori Broadcasting & Publishing Italy 1.86% $ 1.6
Autogrill Leisure & Tourism Italy 1.78% $ 1.9
Wolters Kluwer Broadcasting & Publishing Netherlands 1.76% $13.1
Zeneca Group Health & United
Personal Care Kingdom 1.73% $39.5
Nestle Food & Household Switzerland 1.70% $82.0
Products
TOTAL 19.43%
</TABLE>
[Graphic]
WHAT WERE SOME OF THE FUND'S RECENT STOCK PURCHASES?
Our recent purchases included the following:
CREDIT COMMERCIAL DE FRANCE (1.06% of net assets)- Credit Commercial de
France is a mid-size French bank with an above-average quality balance
sheet and a strong niche position in French commercial banking.
TELECOM ITALIA (1.89% of net assets)-Telecom Italia is Italy's leading
telecommunications provider with a strong mobile telephone presence
via its subsidiary Telecom Italia Mobile. Recent management changes
have provided greater corporate clarity of focus.
ALLIED ZURICH (0.95% of net assets)-Allied Zurich is a global financial
services player with significant U.S. and European businesses. It has
a dual listing (United Kingdom and Switzerland), with the United
Kingdom stock selling at a significant discount.
[Graphic]
YOU HAVE ALREADY TOUCHED UPON THE FUND'S OUTLOOK FOR 1999. DO YOU EXPECT TO
MAKE ANY SIGNIFICANT CHANGES IN YOUR STRATEGIES GOING FORWARD?
The introduction of the euro will have profound consequences not only
on the way we run our fund, but also on the way continental European
portfolio managers run their funds. As investors in Europe shift their
focus from country to sector, we expect to see the largest and most
liquid companies in each sector benefit from simplified comparisons on
a euro basis. The United Kingdom is the only large economy in Europe
not to participate in EMU at this stage. The U.K. market represents
approximately one-third of Europe's total market capitalization, so
two-thirds will now be looked at on a sector, rather than country,
basis. In practice, the trend toward sector-based decision-making
processes will encompass most of the large capitalization stocks in the
United Kingdom. Our focus and reporting will, therefore, shift even
more in this direction.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED EUROPEAN GROWTH FUND
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $3,000 IN THE CLASS A SHARES OF
FEDERATED EUROPEAN GROWTH FUND ON 3/1/96, REINVESTED YOUR DIVIDENDS AND CAPITAL
GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH $4,791
ON 11/30/98. YOU WOULD HAVE EARNED AN 18.56%* AVERAGE ANNUAL TOTAL RETURN FOR
THE INVESTMENT LIFE SPAN.
One key to investing wisely is to reinvest all distributions in fund
shares. This increases the number of shares on which you can earn future
dividends, and you gain the benefit of compounding.
As of 12/31/98, the Class A Shares' annualized 1-year and since
inception (2/28/96) total returns were 14.96% and 19.17%, respectively.
Class B Shares' annualized 1-year and since inception (2/28/96) total
returns were 15.24% and 19.62%, respectively. Class C Shares' annualized
1-year and since inception (2/28/96) total returns were
19.47% and 20.50%, respectively.**
[Graphic representation omitted. See Appendix A7.]
* Total returns represent the change in the value of an investment after
reinvesting all income and capital gains, and take into account the
5.50% sales charge applicable to an initial investment in Class A
Shares.
Data quoted represents past performance and does not guarantee future
results. Investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
** The total returns stated take into account the 5.50% sales charge for
Class A Shares, the 5.50% contingent deferred sales charge for Class B
Shares, and the 1.00% contingent deferred sales charge for Class C
Shares.
FEDERATED EUROPEAN GROWTH FUND
ONE STEP AT A TIME:
$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH YEAR
FOR TWO YEARS (REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $3,890.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A
Shares of Federated European Growth Fund on 3/1/96,
reinvested your dividends and capital gains and did not redeem
any shares, you would have invested only $3,000, but your
account would have reached a total value of $3,890* by
11/30/98. You would have earned an average annual total return of
7.90%.
A practical investment plan helps you pursue long-term
capital growth through a diversified portfolio primarily
invested in equity securities of European companies. 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 omitted. See Appendix A8.]
* This chart assumes that the subsequent annual investments are made on the
last day of each anniversary month. No method of investing can guarantee
a profit or protect against loss in down markets. However, by investing
regularly over time and buying shares at various prices, investors can
purchase more shares at lower prices. All accumulated shares have the
ability to pay income to the investor.
Because such a plan involves continuous investment, regardless
of changing price levels, the investor should consider whether
or not to continue purchases through periods of low price
levels.
FEDERATED EUROPEAN GROWTH FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated European Growth Fund (Class A Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1998, compared
to the Morgan Stanley Capital International (Europe) Index (MSCI-
EUROPE).+
[Graphic representation omitted. See Appendix A9.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 5.50% ($10,000 investment minus
$550 sales charge = $9,450). The Fund's performance assumes the
reinvestment of all dividends and distributions. The MSCI-EUROPE has
been adjusted to reflect reinvestment of dividends on securities in the
index.
** Total return quoted reflects all applicable sales charges.
+ The MSCI-EUROPE is a market value-weighted average of the performance of
over 500 securities listed on the stock exchanges of 15 countries in the
European region. The MSCI-EUROPE is not adjusted to reflect sales
charges, expenses, or other fees that the Securities and Exchange
Commission requires to be reflected in the Fund's performance. This index
is unmanaged.
FEDERATED EUROPEAN GROWTH FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated European Growth Fund (Class B Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1998, compared
to the Morgan Stanley Capital International (Europe) Index (MSCI-
EUROPE).+
[Graphic representation omitted. See Appendix A10.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a contingent deferred sales charge of 4.00% on
any redemption less than three years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions.The MSCI-EUROPE has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-EUROPE is a market value-weighted average of the performance of
over 500 securities listed on the stock exchanges of 15 countries in the
European region. The MSCI-EUROPE is not adjusted to reflect sales
charges, expenses, or other fees that the Securities and Exchange
Commission requires to be reflected in the Fund's performance. This index
is unmanaged.
FEDERATED EUROPEAN GROWTH FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED EUROPEAN GROWTH FUND (CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated European Growth Fund (Class C Shares) (the "Fund") from
February 28, 1996 (start of performance) to November 30, 1998, compared
to the Morgan Stanley Capital International (Europe) Index (MSCI-
EUROPE).+
[Graphic representation omitted. See Appendix A11.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOURINVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The MSCI-EUROPE has
been adjusted to reflect reinvestment of dividends on securities in the
index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-EUROPE is a market value-weighted average of the performance of
over 500 securities listed on the stock exchanges of 15 countries in the
European region. The MSCI-EUROPE is not adjusted to reflect sales
charges, expenses, or other fees that the Securities and Exchange
Commission requires to be reflected in the Fund's performance. This index
is unmanaged.
FEDERATED EUROPEAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-101.6%
AEROSPACE & MILITARY TECHNOLOGY-2.8%
88,228 British Aerospace PLC $ 758,199
26,000 Thomson-CSF 977,993
Total 1,736,192
AUTOMOBILE-1.0%
4,000 PSA Peugeot Citroen 632,778
BANKING-16.6%
28,000 Abbey National PLC 568,070
31,200 Argentaria SA 726,235
260,000 Banca Intesa SPA 1,451,109
200,000 Banca Nazionale del Lavoro 561,988
5,800 (a) Banca Popolare di Verona 538,652
11,040 Banco Pastor SA 688,327
22,000 Bank of Ireland 456,661
40,700 Barclays PLC 923,073
12,040 Banco Popular Espanol SA 884,129
19,000 BHF-Bank AG 744,791
7,500 Credit Commercial de France 645,170
41,601 Lloyds TSB Group PLC 578,113
72,000 MeritaNordbanken Oyj 418,726
160,000 Unicredito Italiano SPA 909,183
Total 10,094,227
BEVERAGE & TOBACCO-0.9%
16,000 (a) Baron de Ley SA 554,208
BROADCASTING & PUBLISHING-4.9%
90,000 Arnoldo Mondadori Editore SPA 1,130,525
100,000 Reed International PLC 786,787
5,626 Wolters Kluwer NV 1,072,221
Total 2,989,533
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-CONTINUED
BUSINESS & PUBLIC SERVICES- 7.8%
2,700 Atos SA $ 578,992
3,900 Cap Gemini SA 570,344
61,000 Capita Group PLC 573,513
24,100 CMG PLC 597,071
3,300 Havas Advertising SA 571,346
84,500 Misys PLC 595,146
770,000 (a) Seat Pagine Gialle SPA 676,601
1,200 SAP AG 543,252
Total 4,706,265
CHEMICALS-2.3%
87,500 Croda International PLC 357,930
62,500 Imperial Chemical Industries, PLC 581,431
15,000 (a) (b)JOT Automation Group Oyj 433,265
Total 1,372,626
CONSTRUCTION & HOUSING-3.2%
3,200 Bouygues SA 596,217
7,500 Eiffage 613,004
12,400 Fomento de Construcciones y Contratas SA 739,619
Total 1,948,840
ELECTRICAL & ELECTRONICS-1.9%
62,720 General Electric Co. PLC 512,612
23,100 Telefonaktiebolaget LM Ericsson, Class B 641,509
Total 1,154,121
ENERGY SOURCES-6.1%
38,000 British Petroleum Co. PLC 593,257
170,000 British-Borneo Oil & Gas PLC 420,609
5,000 Elf Aquitaine SA 623,110
118,200 ENI SPA 732,879
175,000 Lasmo PLC 403,393
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-CONTINUED
ENERGY SOURCES-CONTINUED
43,000 Saga Petroleum ASA, Class A $ 465,175
3,758 Total SA, Class B 465,688
Total 3,704,111
FINANCIAL SERVICES-1.0%
76,000 Amvescap PLC 618,642
FOOD & HOUSEHOLD PRODUCTS-3.7%
10,000 Benckiser NV, Class B 590,834
2,055 Groupe Danone 599,610
500 Nestle SA 1,038,459
Total 2,228,903
HEALTH & PERSONAL CARE-7.6%
53,000 Gambro AB, Class A 648,009
23,311 Glaxo Wellcome PLC 737,092
12,500 Hoechst AG 536,414
550 Novartis AG 1,032,013
50,370 Smithkline Beecham Corp. 618,136
25,300 Zeneca Group PLC 1,051,623
Total 4,623,287
INDUSTRIAL COMPONENTS-0.0%
4,400 (a) Valeo SA, Warrants 20,495
INSURANCE-19.3%
9,020 AXA 1,165,313
7,000 ASR Verzekeringsgroep NV 569,135
6,800 Aegon NV 727,448
40,600 (a) Allied Zurich AG 579,270
25,000 Assicurazioni Generali 933,175
16,000 Assurances Generales de France 947,761
1,260 Baloise Holdings 1,173,100
37,000 CGU PLC 586,495
72,958 Guardian Royal Exchange PLC 397,124
200,000 Istituto Nazionale delle Assicurazioni 527,459
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-CONTINUED
INSURANCE-CONTINUED
1,100 Muenchener Rueckversicherungs-Gesellschaft
AG $ 505,762
55,700 (b) Norwich Union PLC 390,466
12,000 Pohjola Group Insurance Corp., Class B 560,628
60,000 Prudential Corp. PLC 874,868
12,000 Sampo Insurance Co. PLC, Class A 411,748
12,000 Scor 766,716
54,300 Societa Assicuratrice Industriale 609,350
Total 11,725,818
LEISURE & TOURISM-3.4%
2,650 Accor SA 582,244
140,000 Autogrill SPA 1,086,828
70,000 Greenalls Group PLC 415,084
Total 2,084,156
MACHINERY & ENGINEERING-1.3%
28,000 Tomra Systems ASA 817,095
MERCHANDISING-2.7%
1,900 Guyenne et Gascogne SA 824,896
133,700 Sears PLC 478,553
100,000 Selfridges PLC 362,879
Total 1,666,328
METALS - NON FERROUS-1.0%
470 Alusuisse Lonza Group AG 592,423
MULTI-INDUSTRY-1.0%
2,600 Vivendi 587,710
REAL ESTATE-1.8%
80,000 Prima Inmobiliaria SA 731,555
3,240 Simco SA 287,028
200,000 (a) Unione Inmobiliare SPA 100,015
Total 1,118,598
</TABLE>
FEDERATED EUROPEAN GROWTH FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<S> <C> <C>
COMMON STOCKS-CONTINUED
RECREATION, OTHER CONSUMER GOODS-1.0%
9,400 Societe BIC SA $ 586,550
TELECOMMUNICATIONS-8.6%
3,000 Alcatel 396,541
68,100 (a) Cable & Wireless Communications PLC 606,568
35,000 (a) COLT Telecom Group PLC 457,227
1 Hellenic Telecommunication Organization SA 25
16,501 KPN NV 711,789
14,000 Mannesmann AG 1,514,339
3,290 (a) (b)Panafon SA 58,932
11,180 (a) Sonera Group Oyj 160,380
600 (a) Swisscom AG 201,962
141,900 Telecom Italia SPA 1,149,309
Total 5,257,072
UTILITIES - ELECTRICAL & GAS-0.9%
22,000 Endesa SA 573,814
WHOLESALE & INTERNATIONAL TRADE-0.8%
5,600 Rexel SA 502,004
TOTAL COMMON STOCKS (IDENTIFIED COST
$56,833,955) 61,895,796
(C)REPURCHASE AGREEMENT-0.2%
$105,000 Westdeutsche Landesbank
Girozentrale, 5.35%, dated 11/30/1998,
due 12/1/1998 (AT AMORTIZED COST) 105,000
TOTAL (IDENTIFIED COST $56,938,955)(D) $ 62,000,796
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1998, these securities
amounted to $882,663 which represents 1.4% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $56,957,150.
The net unrealized appreciation of investments on a federal tax basis
amounts to $5,043,646 which is comprised of $6,929,437 appreciation and
$1,885,791 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($60,921,650) at November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at value
(identified cost $56,938,955 and tax cost
$56,957,150) $ 62,000,796
Cash 514
Cash denominated in foreign
currencies (identified cost
$7,971) 7,914
Income receivable 106,290
Receivable for investments
sold 1,443,296
Receivable for shares sold 583,659
Deferred organizational costs 24,102
Total assets 64,166,571
LIABILITIES:
Payable for investments
purchased $ 2,162,610
Payable for shares redeemed 1,006,280
Net payable for foreign
currency exchange contracts 318
Payable for taxes withheld 4,959
Accrued expenses 70,754
Total liabilities 3,244,921
NET ASSETS for 3,884,002
shares outstanding $ 60,921,650
Net Assets Consist of:
Paid in capital $ 53,621,246
Net unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currency transactions 5,061,815
Accumulated net realized gain
on investments and foreign
currency transactions 2,238,589
Total Net Assets $ 60,921,650
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($40,542,955 /
2,567,263 shares outstanding) $15.79
Offering Price Per Share (100/
94.50 of $15.79)* $16.71
Redemption Proceeds Per Share $15.79
CLASS B SHARES:
Net Asset Value Per Share ($17,952,299 /
1,159,450 shares outstanding) $15.48
Offering Price Per Share $15.48
Redemption Proceeds Per Share
(94.50/100 of $15.48)* $14.63
CLASS C SHARES:
Net Asset Value Per Share
($2,426,396 / 157,289 shares
outstanding) $15.43
Offering Price Per Share $15.43
Redemption Proceeds Per Share
(99.00/100 of $15.43)* $15.28
</TABLE>
* See "What do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $105,686) $ 778,606
Interest 142,440
Total income 921,046
EXPENSES:
Investment advisory fee $ 441,392
Administrative personnel and
services fee 185,000
Custodian fees 70,789
Transfer and dividend disbursing agent fees and
expenses 89,692
Directors' fees 1,532
Auditing fees 21,692
Legal fees 3,123
Portfolio accounting fees 82,701
Distribution services fee-
Class B Shares 86,339
Distribution services fee-
Class C Shares 12,377
Shareholder services fee-Class
A Shares 77,432
Shareholder services fee-Class
B Shares 28,780
Shareholder services fee-Class
C Shares 4,126
Share registration costs 41,353
Printing and postage 26,540
Insurance premiums 3,301
Taxes 1,350
Miscellaneous 16,919
Total expenses 1,194,438
Waivers and reimbursements-
Waiver of investment
advisory fee $ (203,004)
Reimbursement of other
operating expenses (78,624)
Total waivers and
reimbursements (281,628)
Net expenses 912,810
Net investment income 8,236
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on
investments and foreign
currency transactions 2,230,667
Net change in unrealized appreciation of
investments and translation of assets and
liabilities in foreign currency 3,436,370
Net realized and unrealized gain on investments
and foreign currency transactions 5,667,037
Change in net assets
resulting from operations $ 5,675,273
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS-
Net investment income $ 8,236 $ 40,335
Net realized gain on
investments and foreign
currency transactions
($2,436,500 and $775,804,
respectively, as computed for
federal tax purposes) 2,230,667 706,296
Net change in unrealized
appreciation of investments
and translation of assets and
liabilities in foreign
currency 3,436,370 1,254,529
Change in net assets
resulting from operations 5,675,273 2,001,160
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 (537,759) (131,318)
Class B Shares (185,127) (41,600)
Class C Shares (23,411) (6,086)
Change in net assets
resulting from
distributions to
shareholders (746,297) (221,577)
SHARE TRANSACTIONS-
Proceeds from sale of shares 99,816,917 39,304,669
Net asset value of shares
issued to shareholders in
payment of distributions
declared 675,579 176,299
Cost of shares redeemed (68,056,951) (22,413,018)
Change in net assets
resulting from share
transactions 32,435,545 17,067,950
Change in net assets 37,364,521 18,847,533
NET ASSETS:
Beginning of period 23,557,129 4,709,596
End of period $ 60,921,650 $ 23,557,129
</TABLE>
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.33 $11.80 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.04 0.06 (d) 0.14
Net realized and unrealized
gain on investments and
foreign currency 2.84 1.93 1.66
Total from investment
operations 2.88 1.99 1.80
LESS DISTRIBUTIONS
Distributions from net
investment income - (0.09) -
Distributions from net
realized gain on investments
and foreign currency
transactions (0.42) (0.37) -
Total distributions (0.42) (0.46) -
NET ASSET VALUE, END OF PERIOD $15.79 $13.33 $11.80
TOTAL RETURN(B) 22.13% 17.54% 18.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.85% 1.91% 1.75% *
Net investment income 0.24% 0.50% 1.60% *
Expense waiver/
reimbursement(c) 0.63% 2.79% 11.10% *
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $40,543 $17,008 $3,318
Portfolio turnover 175% 119% 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Per share information is based on average shares outstanding.
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.18 $11.74 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(net
operating loss) (0.00)(d) (0.03) (e) 0.01
Net realized and unrealized
gain on investments and
foreign currency 2.72 1.91 1.73
Total from investment
operations 2.72 1.88 1.74
LESS DISTRIBUTIONS
Distributions from net
investment income - (0.07) -
Distributions from net
realized gain on investments
and foreign currency
transactions (0.42) (0.37) -
Total distributions (0.42) (0.44) -
NET ASSET VALUE, END OF PERIOD $15.48 $13.18 $11.74
TOTAL RETURN(B) 21.14% 16.61% 17.40%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60% 2.66% 2.50% *
Net investment income/(net
operating loss) (0.51% ) (0.25% ) 0.08% *
Expense waiver/
reimbursement(c) 0.63% 2.79% 11.10% *
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $17,952 $5,781 $1,215
Portfolio turnover 175% 119% 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income/(net operating loss) ratios shown above.
(d) Per share amount does not round to $(0.01).
(e) Per share information is based on average shares outstanding.
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $13.15 $11.73 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income/(net
operating loss) (0.00) (d) (0.03) (e) 0.01
Net realized and unrealized
gain on investments and
foreign currency 2.70 1.90 1.72
Total from investment
operations 2.70 1.87 1.73
LESS DISTRIBUTIONS
Distributions from net
investment income - (0.08) -
Distributions from net
realized gain on investments
and foreign currency
transactions (0.42) (0.37) -
Total distributions (0.42) (0.45) -
NET ASSET VALUE, END OF PERIOD $15.43 $13.15 $11.73
TOTAL RETURN(B) 21.03% 16.55% 17.30%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.60% 2.66% 2.50% *
Net investment income/(net
operating loss) (0.51) % (0.23) % 0.09% *
Expense waiver/
reimbursement(c) 0.63% 2.79% 11.06% *
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $2,426 $768 $176
Portfolio turnover 175% 119% 58%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income/(net operating loss) ratios shown above.
(d) Per share amount does not round to $(0.01).
(e) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EUROPEAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
portfolios. The financial statements included herein are only those of
Federated European Growth Fund (the "Fund"), a diversified portfolio.
The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Class A Shares, Class B
Shares, and Class C Shares. The investment objective of the Fund is to
provide long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS-Foreign and domestic equity securities, are
valued at the last sale price reported on a national securities
exchange or over-the-counter market. In the absence of recorded sales
for equity securities, they are valued according to the mean between
the last closing bid and asked prices. Short-term foreign and domestic
securities are valued at the prices provided by an independent pricing
service. However, short-term foreign and domestic securities with
remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS-It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions. The following
reclassifications have been made to the financial statements.
INCREASE/(DECREASE)
ACCUMULATED DISTRIBUTIONS
ACCUMULATED NET IN EXCESS OF
REALIZED GAIN NET INVESTMENT INCOME
$(21,127) $21,127
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES-It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition
of certain investments in passive foreign investment companies.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when- issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
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 exchange
contracts as a way of managing foreign exchange rate risk. The Fund may
enter into these contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date as a hedge or cross-
hedge against either specific transactions or portfolio positions. The
objective of the Fund's foreign currency hedging transactions is to
reduce the risk that the U.S. dollar value of the Fund's foreign
currency-denominated securities will decline in value due to changes
in foreign currency exchange rates. All foreign currency exchange
contracts are "marked-to-market" daily at applicable translation rates
resulting in unrealized gains or losses. Realized gains or losses are
recorded at the time the foreign currency exchange contract is offset
into a closing transaction or by delivery or receipt of the currency.
Risks may arise upon entering into these contracts from the potential
inability of the counterparties to meet the terms of their contracts
and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.
At November 30, 1998, the Fund had outstanding foreign currency
commitments as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C>
Contracts Purchased:
12/1/98 104,744 Pound Sterling $174,189 $172,770 ($1,419)
12/1/98 16,779,000 Greek Drachma 58,771 58,932 161
Contract Sold:
12/2/98 458,541 Pound Sterling $757,280 $756,340 $ 940
Net unrealized
depreciation
on Foreign
Exchange Contracts $ (318)
</TABLE>
FOREIGN CURRENCY TRANSLATION-The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income, and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES-Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for
resale, at the issuer's expense either upon demand by the Fund or in
connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may
be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at
November 30, 1998 is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
JOT Automation Group Oyj 09/09/1998 $256,986
Norwich Union PLC 10/20/1998 403,298
Panafon SA 11/20/1998 59,572
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 100,000,000
Total 300,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,402,428 $ 52,837,745 2,044,836 $ 26,359,674
Shares issued to shareholders
in payment of distributions
declared 35,977 481,005 10,569 121,753
Shares redeemed (2,147,001) (33,498,819) (1,060,707) (14,036,778)
Net change resulting from
Class A Share transactions 1,291,404 $ 19,819,931 994,698 $ 12,444,649
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,811,616 $ 27,679,163 658,177 $ 8,379,795
Shares issued to shareholders
in payment of distributions
declared 13,211 174,502 4,112 47,162
Shares redeemed (1,104,050) (16,670,573) (327,141) (4,302,291)
Net change resulting from
Class B Share transactions 720,777 $ 11,183,092 335,148 $ 4,124,666
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,284,262 $ 19,300,009 357,054 $ 4,565,199
Shares issued to shareholders
in payment of distributions
declared 1,523 20,072 643 7,385
Shares redeemed (1,186,882) (17,887,559) (314,313) (4,073,949)
Net change resulting from
Class C Share transactions 98,903 $ 1,432,522 43,384 $ 498,635
Net change resulting from
share transactions 2,111,084 $ 32,435,545 1,373,230 $ 17,067,950
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.00% of the Fund's
average daily net assets. 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, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A Shares,
Class B Shares, and Class C Shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule
annually, to compensate FSC.
PERCENTAGE OF
AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the year
ended November 30, 1998, 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 Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
for the period. The fee paid to FSSC is used to finance certain
services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-FServ,
through its subsidiary, FSSC, serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES-Organizational expenses of $42,822 were
borne initially by the Adviser. The Fund has reimbursed the Adviser for
these expenses. These expenses have been deferred and are being
amortized over the five-year period following the Fund's effective
date. For the year ended November 30, 1998, the Fund paid $11,107
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 year ended November 30, 1998, were as follows:
PURCHASES $105,122,828
SALES $ 73,773,790
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or
economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
At November 30, 1998, the diversification of countries was as follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Finland 3.3%
France 22.2%
Germany 6.3%
Greece 0.1%
Ireland 0.8%
Italy 17.1%
Netherlands 6.0%
Norway 2.1%
Spain 8.0%
Sweden 2.1%
Switzerland 6.6%
United Kingdom 27.2%
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
Administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8.SUBSEQUENT EVENT
On January 7, 1999, the Adviser, Federated Global Research Corp.,
changed its name to Federated Global Investment Management Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated European Growth
Fund (a portfolio of World Investment Series, Inc.) as of November 30,
1998, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated European Growth Fund of World
Investment Series, Inc. at November 30, 1998, and the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights for each of the periods presented therein, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp.
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487861
Cusip 981487853
Cusip 981487846
G01979-01 (1/99)
[Graphic]
[Graphic]
Federated Investors
Federated
Global Equity Income Fund
1st Annual Report
November 30, 1998
ESTABLISHED 1998
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated Global Equity Income Fund was created in 1998, and I am
pleased to present its first Annual Report. This report covers the
period from October 27, 1998, the date of inception, through
November 30, 1998. It begins with an interview with the fund's
portfolio manager, Richard J. Lazarchic, Vice President of Federated
Global Investment Management Corp. (formerly, Federated Global
Research Corp.). Following his discussion covering the fund's
objective and strategy and market conditions, are two additional items
of shareholder interest. First is a complete listing of the fund's
investments, and second is the publication of the fund's financial
statements.
The fund is managed for long-term growth of capital, and offers
shareholders significant opportunities for capital appreciation and
high income by investing in good income-producing stocks from around
the world.* Income is an extremely important-and often unnoticed-
component of stock returns. Over the past 20 years, dividend income has
accounted for more than half of the total returns produced by
U.S. stocks, as measured by the Standard & Poor's ("S&P") 500 Index.**
Dividend-paying stocks also tend to offer a greater measure of
stability than stocks that do not pay dividends because they are issued
by more established companies. Dividends can help cushion declines in
share price during periods of stock market volatility. Many
established, growing companies-U.S. and international alike-are
currently paying dividends that exceed the rate of inflation.
Of course, when it comes to performance, it is important to remember
that the true measure of this fund's performance will be clearly in
years rather than months. There will be periods of short-term
fluctuation and 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.
** The S&P 500 Index is an unmanaged index comprised of stocks in industry,
transportation, financial and public utility companies. Investments
cannot be made in an index.
For the period from October 27, 1998 (date of initial public
investment) to November 30, 1998, the fund's Class A Shares produced a
cumulative total return of 5.50%.***
We will continue to keep you up-to-date on the details of your
investment on a regular basis. You may add to your investment account
at any time and thus increase the number of shares you own for future
income. I recommend that you add to your account on a regular basis to
take advantage of price fluctuations and dollar-cost averaging.+
Thank you for your investment in Federated Global Equity Income Fund
and for the confidence you have placed in our firm.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
*** Performance quoted is based on net asset value, represents past
performance and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The total
return for the reporting period, based on offering price (i.e., less any
applicable sales charge), for Class A Shares was (0.28%).
+ Systematic investing does not ensure a profit or protect against loss in
declining markets. Because dollar-cost-averaging involves continuous
investment regardless of fluctuating price levels, investors should
consider their financial ability to continue purchases during periods of
low price levels.
INVESTMENT REVIEW
[Graphic]
Richard J. Lazarchic, CFA
Vice President
Federated Global
Investment
Management Corp.
[Graphic]
WHAT DOES FEDERATED GLOBAL EQUITY INCOME FUND OFFER TO INVESTORS?
This new fund gives investors very broad opportunities for capital
appreciation and high income by investing in 60-80 mainly income-
producing stocks around the world. We seek companies whose financial
results tend to be more stable than average, and which can offer the
potential for above-average dividend yield along with capital
appreciation as they continue to grow.
[Graphic]
INCOME IS A KEY OBJECTIVE OF THE FUND. HOW SIGNIFICANT A ROLE CAN
INCOME PLAY IN AN EQUITY FUND?
While rises and declines in stock prices tend to make all the
headlines, income has historically counted for more than half of all
stock gains. Over the past 20 years, dividend income has accounted for
59% of the total returns provided by U.S. stocks, as measured by the
S&P 500 Index.
Companies that emphasize paying regular dividends tend to be more
established than those that do not, and dividends can help cushion
stock market declines. Many established, growing companies-both in the
U.S. and abroad-are currently paying dividends that exceed the rate of
inflation.*
[Graphic]
WHEN INVESTORS THINK OF EQUITY INCOME, THEY INVARIABLY THINK OF
U.S. HOLDINGS. WHAT ARE THE ADVANTAGES OF A GLOBAL APPROACH?
Historically, U.S. and foreign stocks have not risen and fallen in lock
step. That is why investing in both can help reduce a portfolio's
volatility. More specifically, emerging markets, newer economies,
favorable government policies and entrepreneurial aggressiveness have
fueled the growth of non-U.S. markets and repositioned investment
opportunities. Many of the equity markets outside of the
U.S. currently offer more attractive dividend yields.
* Source: S&P 500 Index, U.S. Bureau of Labor Statistics
[Graphic]
HOW DO YOU MANAGE RISK WHILE SELECTING STOCKS FOR THE FUND?
Diversification is always an important risk-reducing tool. Other than
the U.S., the fund will not typically invest more than 40% of its
assets in any one country. Assets are always invested in at least three
countries, however, we can select international investments from a
universe of 45 countries.
As with all of Federated's funds, we use strict "buy and sell"
disciplines, and a bottom-up investment approach in which the
selection of individual stocks drives the fund's performance, rather
than focusing on a particular sector, industry, country or region.
Federated Global Equity Income Fund invests in a broad range of
holdings in terms of both capitalizations and lines of business. This
type of diversification can also lower the fund's volatility. Firms may
be virtually any size, because a firm considered small in the U.S. may
be relatively large in a country such as Ecuador. The ability to invest
in both developed and emerging markets may also allow for more balance,
as these markets have moved in different directions in the past.
The stock selection process begins with a screen of the stock universe
for value relative to a stock's historical ability to pay a steady
dividend. We further narrow this universe by using secondary
determinants such as earnings estimates revisions and price momentum.
Finally, we use fundamental research to determine the companies'
ability to continue to pay high dividends.
[Graphic]
WHAT IS THE FUND'S PRIMARY BENCHMARK, AND HOW HAS IT PERFORMED?
The fund's benchmark is the Morgan Stanley Capital International World
Equity Index ("MSCI-WE"),** which has produced strong one-year, three-
year, five-year and ten-year total returns of 17.83%, 14.66%, 14.74%,
and 10.27%, respectively, as of November 30, 1998. In its first month
of operation, the fund's Class A Shares achieved a total return of
5.50%.+
[Graphic]
WHAT WERE THE FUND'S TOP TEN HOLDINGS AS OF NOVEMBER 30, 1998, AND HOW
WERE THE ASSETS ALLOCATED AMONG DIFFERENT COUNTRIES?
<TABLE>
<CAPTION>
NAME COUNTRY INDUSTRY PERCENTAGE OF
NET ASSETS
<S> <C> <C> <C>
General Electric Co. U.S. Multi-Industry 4.08%
Lucent Telecommunications 3.19%
Technologies, Inc. U.S. Equipment
Microsoft Corp. U.S. Business & Public 2.91%
Services
MCI Worldcom, Inc. U.S. Telecommunications 2.82%
International U.S. Data Processing 2.62%
Business & Reproduction
Machines Corp.
Citigroup, Inc. U.S. Financial Services 2.58%
Ameritech Corp. U.S. Telecommunications 2.55%
GTE Corp. U.S. Telecommunications 2.53%
Peco Energy Co. U.S. Utilities-Electrical 2.45%
& Gas
Cisco Systems, Inc. U.S. Telecommunications 2.32%
Equipment
TOTAL 28.05%
</TABLE>
** The MSCI-WE is an unmanaged index that reflects the stock markets of 22
countries, including the United States, Europe, Canada, Australia, New
Zealand, and the Far East comprising approximately 1,482 securities with
values expressed in U.S. dollars. 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
an investor's shares, when redeemed, may be worth more or less than
their original cost. The total return for the reporting period, based on
offering price, (i.e., less any applicable sales charge), for Class
A Shares was (0.28%).
As the top ten holdings indicate, the majority of the fund's assets
were allocated to U.S. companies. The following shows how all of the
fund's assets were allocated:
<TABLE>
<CAPTION>
COUNTRY PERCENTAGE OF
NET ASSETS
<S> <C>
United States 70.8%
United Kingdom 6.8%
Spain 4.0%
France 3.3%
Italy 2.5%
Switzerland 1.9%
Canada 1.7%
Sweden 1.5%
Germany 1.4%
Ireland 1.2%
Greece 0.1%
</TABLE>
[Graphic]
WHAT WERE SOME OF THE FUND'S RECENT PURCHASES?
Our recent purchases included the following:
FRONTIER CORPORATION (1.28% of net assets)-Frontier has expanded from
an independent local telecommunications provider in upstate New York
to become the nation's 11th largest long-distance carrier. It boasts a
growing presence in the competitive local exchange carrier, enterprise
data, and internet markets.
TELECOM ITALIA (1.72% of net assets)-Telecom Italia is the main
telecommunications company in Italy. Telecom Italia controls the
separately listed Italian cellular operator Telecom Italia Mobile and
competes with Omnitel Pronto Italia, which is controlled by
Mannesmann/Olivetti.
DIEBOLD, INC. (1.82% of net assets)-Diebold is a leading U.S. supplier
of ATM machines, and is also a major vendor and servicer of electronics
and physical security systems. After a tough selling environment in the
first half of 1998, the company has recently seen orders for its
products increase in every geographic region and its backlog of orders
grow by 13%. Furthermore, the aggressive cost-cutting that accompanied
this rebound in sales growth decreased operating expenses by 9%.
Diebold maintains a strong balance sheet-no debt and $58 million in
cash-and has a history of increasing its dividend payments.
[Graphic]
ULTIMATELY, HOW DOES FEDERATED GLOBAL EQUITY INCOME FUND FIT INTO AN
INVESTOR'S PORTFOLIO?
This fund can be an ideal choice for investors looking for income
potential and capital appreciation-not only in the U.S. but also
overseas. It is a relatively conservative way to add international
equity exposure to a portfolio.
[Graphic]
WHAT IS YOUR OUTLOOK FOR EQUITY INCOME STOCKS GOING INTO 1999?
We maintain a positive outlook for equity income stocks in 1999.
Dividend-paying companies generally have both more mature businesses
and more stable cash flows than their high-growth, high-risk brethren.
Their inherent financial stability helps to insulate them from
tumultuous events in the global economy.
WHERE IN THE WORLD SHOULD
YOU INVEST?
[Graphic] FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic] FEDERATED EMERGING MARKETS FUND
[Graphic] FEDERATED EUROPEAN GROWTH FUND
[Graphic] FEDERATED GLOBAL EQUITY INCOME FUND
[Graphic] FEDERATED GLOBAL FINANCIAL SERVICES FUND
[Graphic] FEDERATED INTERNATIONAL EQUITY FUND
[Graphic] FEDERATED INTERNATIONAL GROWTH FUND
[Graphic] FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic] FEDERATED INTERNATIONAL INCOME FUND
[Graphic] FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic] FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic] FEDERATED WORLD UTILITY FUND
Federated employs highly qualified, experienced managers in global
investing to select countries and companies outside the U.S. for
long-term growth potential.
Call your investment representative to buy shares of 10 international
equity funds and 2 international income funds from Federated
Securities Corp.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL
1-800-341-7400 TO ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU
INVEST.
Foreign investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in
auditing and other financial standards.
FEDERATED GLOBAL EQUITY INCOME FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED GLOBAL EQUITY INCOME FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated Global Equity Income Fund (Class A Shares) (the "Fund")
from October 27, 1998 (start of performance), to November 30, 1998,
compared to the Morgan Stanley Capital International World Equity
Index (MSCI-WE)+.
[Graphic representation omitted. Please see Appendix A12]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 5.50% ($10,000 investment minus
$550 sales charge = $9,450). The Fund's performance assumes the
reinvestment of all dividends and distributions. The MSCI-WE has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The MSCI-WE is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. The index is unmanaged.
FEDERATED GLOBAL EQUITY INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-95.4%
BANKING-8.3%
15,000 Allied Irish Banks PLC $ 231,973
4,600 BankAmerica Corp. 299,862
3,000 First Virginia Banks, Inc. 134,625
5,200 Fleet Financial Group, Inc. 216,775
4,200 Mellon Bank Corp. 264,338
5,500 SouthTrust Corp. 202,125
5,000 Summit Bancorp 209,063
Total 1,558,761
BUSINESS & PUBLIC SERVICES-2.9%
4,500 (a)Microsoft Corp. 549,000
CELLULAR TELEPHONE-0.8%
24,000 Telecom Italia Mobile SPA 157,166
DATA PROCESSING & REPRODUCTION-2.6%
3,000 International Business Machines Corp. 495,000
ELECTRICAL & ELECTRONICS-1.8%
10,000 Diebold, Inc. 343,750
ELECTRIC UTILITY-1.1%
5,000 DQE, Inc. 205,312
ELECTRONIC COMPONENTS, INSTRUMENTS-2.0%
3,500 Intel Corp. 376,687
FINANCIAL SERVICES-3.5%
9,700 Citigroup, Inc 486,819
7,000 United Asset Management Corp. 177,188
Total 664,007
HEALTH & PERSONAL CARE-5.9%
6,200 American Home Products Corp. 330,150
3,500 Bristol-Myers Squibb Co. 428,969
190 Novartis 356,514
Total 1,115,633
</TABLE>
FEDERATED GLOBAL EQUITY INCOME FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-CONTINUED
INSURANCE-4.6%
750 Allianz AG $ 269,902
3,000 American International Group, Inc. 282,000
2,500 Axa 322,980
Total 874,882
MERCHANDISING-1.1%
4,000 Home Depot, Inc. 199,000
MULTI-INDUSTRY-5.6%
8,500 General Electric Co. 769,250
1,500 Suez Lyonnaise des Eaux 296,087
Total 1,065,337
NATURAL GAS DISTRIBUTION-3.8%
8,500 Coastal Corp. 296,437
4,200 Consolidated Natural Gas Co. 228,112
4,500 K N Energy, Inc. 196,875
Total 721,424
RAILROADS-1.9%
12,900 Railtrack Group PLC 353,851
REAL ESTATE-1.4%
3,800 Boston Properties, Inc. 119,937
4,000 Spieker Properties, Inc. 144,500
Total 264,437
TELECOMMUNICATIONS-27.3%
8,800 Ameritech Corp. 476,300
9,000 BCE, Inc. 320,062
5,800 Bell Atlantic Corp. 322,625
5,000 BellSouth Corp. 436,250
10,000 British Telecommunications PLC 136,987
1,000 British Telecommunications PLC, ADR 138,250
19,500 (a)COLT Telecom Group PLC 254,741
8,000 Frontier Corp. 241,000
7,700 GTE Corp. 477,400
</TABLE>
FEDERATED GLOBAL EQUITY INCOME FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-CONTINUED
TELECOMMUNICATIONS-CONTINUED
9,000 (a)MCI Worldcom, Inc. $ 531,000
1,030 (b)Panafon Hellenic Telecom SA 18,450
7,000 SBC Communications, Inc. 335,563
40,000 Telecom Italia SPA 323,977
8,200 Telefonica SA 385,147
5,000 U.S. West, Inc. 311,250
28,000 Vodafone Group PLC 413,352
Total 5,122,354
TELECOMMUNICATIONS EQUIPMENT-7.0%
5,800 (a)Cisco Systems, Inc. 437,175
7,000 Lucent Technologies, Inc. 602,438
10,000 Telefonaktiebolaget LM Ericsson 277,710
Total 1,317,323
UTILITIES - ELECTRICAL & GAS-13.8%
5,700 CMS Energy Corp. 277,875
14,000 Endesa SA 365,154
6,000 GPU, Inc. 262,875
5,700 P G & E Corp. 176,344
11,500 Peco Energy Co. 461,438
9,000 Pinnacle West Capital Corp. 410,063
7,700 Texas Utilities Co. 343,131
8,000 Unicom Corp. 301,500
Total 2,598,380
TOTAL COMMON STOCKS
(IDENTIFIED COST $17,023,119) 17,982,304
</TABLE>
FEDERATED GLOBAL EQUITY INCOME FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
REPURCHASE AGREEMENT(C)-5.1%
$ 970,000 Westdeutsche Landesbank
Girozentrale, 5.35%,
dated 11/30/1998, due 12/1/1998
(AT AMORTIZED COST) $ 970,000
TOTAL INVESTMENTS
(IDENTIFIED COST $17,993,119)(D) $ 18,952,304
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1998, this security
amounted to $18,450 which represents 0.1% 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 $17,993,119.
The net unrealized appreciation of investments on a federal tax basis
amounts to $959,185 which is comprised of $994,929 appreciation and
$35,744 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($18,858,511) at November 30, 1998.
The following acronym is used throughout this portfolio:
ADR -American Depositary Receipt
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL EQUITY INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$17,993,119) $ 18,952,304
Cash 3,230
Net receivable for foreign
currency exchange contracts 50
Income receivable 12,059
Total assets 18,967,643
LIABILITIES:
Payable for investments
purchased $ 18,450
Payable for taxes withheld 271
Accrued expenses 90,411
Total liabilities 109,132
NET ASSETS for 1,786,951
shares outstanding $ 18,858,511
NET ASSETS CONSIST OF:
Paid in capital $ 17,869,515
Net unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currency 959,431
Accumulated net realized gain
on investments and foreign
currency transactions 10,176
Undistributed net investment
income 19,389
Total net assets $ 18,858,511
NET ASSET VALUE, OFFERING
PRICE, AND REDEMPTION PROCEEDS
PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share
($18,858,300 / 1,786,931
shares outstanding) $10.55
Offering Price Per Share
(100/94.50 of $10.55)* $11.16
Redemption Proceeds Per Share $10.55
CLASS B SHARES:
Net Asset Value Per Share
($105.50 / 10 shares
outstanding)** $10.55
Offering Price Per Share $10.55
Redemption Proceeds Per Share
(94.50/100 of $10.55)* $9.97
CLASS C SHARES:
Net Asset Value Per Share
($105.50 / 10 shares
outstanding)** $10.55
Offering Price Per Share $10.55
Redemption Proceeds Per Share
(99.00/100 of $10.55)* $10.44
</TABLE>
* See "What Do Shares Cost?" in the Prospectus.
** Income and expenses have been accrued on initial share capital.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL EQUITY INCOME FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1998(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $271) $ 13,263
Interest 29,129
Total income 42,392
EXPENSES:
Investment advisory fee $ 14,621
Administrative personnel and
services fee 15,205
Custodian fees 3,500
Transfer and dividend
disbursing agent fees and
expenses 6,740
Directors'/Trustees' fees 500
Auditing fees 14,000
Legal fees 500
Portfolio accounting fees 6,525
Distribution services fee-
Class A Shares 4,342
Shareholder services fee-Class
A Shares 4,342
Share registration costs 15,400
Printing and postage 10,000
Taxes 1,380
Miscellaneous 8,300
Total expenses 105,355
Waivers and reimbursements-
Waiver of investment
advisory fee $(14,621)
Reimbursement of other
operating expenses (56,000)
Total waivers and reimbursements (70,621)
Net expenses 34,734
Net investment income 7,658
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN
CURRENCY:
Net realized gain on
investments and foreign
currency transactions 21,907
Net change in unrealized
appreciation of investments
and translation of assets and
liabilities in foreign
currency 959,431
Net realized and unrealized
gain on investments and
foreign currency 981,338
Change in net assets
resulting from operations $ 988,996
</TABLE>
(a) Reflects operations for the period from October 27, 1998 (date of
initial public investment) to November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL EQUITY INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1998(A)
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS-
Net investment income $ 7,658
Net realized gain on investments and foreign
currency transactions ($10,176 as computed
for federal tax purposes) 21,907
Net change in unrealized appreciation of
investments and translation of assets and
liabilities in foreign currency 959,431
Change in net assets resulting from
operations 988,996
SHARE TRANSACTIONS-
Proceeds from sale of shares 17,871,433
Cost of shares redeemed (2,218)
Change in net assets resulting from share
transactions 17,869,215
Change in net assets 18,858,211
NET ASSETS:
Beginning of period 300
End of period (including undistributed net
investment income of $19,389) $ 18,858,511
</TABLE>
(a) Reflects operations for the period from October 27, 1998 (date of
initial public investment) to November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL EQUITY INCOME FUND
FINANCIAL HIGHLIGHTS-CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.01
Net realized and unrealized gain on
investments and foreign currency 0.54
Total from investment operations 0.55
NET ASSET VALUE, END OF PERIOD $10.55
TOTAL RETURN(B) 5.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.00%*
Net investment income 0.44%*
Expense waiver/reimbursement(c) 4.07%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $18,858
Portfolio turnover 3%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 27, 1998 (start of
performance) to November 30, 1998.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and
net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL EQUITY INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
portfolios. The financial statements included herein are only those of
Federated Global Equity 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 Fund offers three classes of shares: Class A Shares, Class B
Shares, and Class C Shares. The Fund's objective is to provide capital
appreciation and above-average income. As of November 30, 1998, Class B
and Class C Shares have not been sold to the public.
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.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are due to differing
treatments for foreign currency transactions. The following
reclassifications have been made to the financial statements.
INCREASE/(DECREASE)
ACCUMULATED NET UNDISTRIBUTED NET
REALIZED GAIN INVESTMENT INCOME
$(11,731) $11,731
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES-It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS-The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire
exposure to foreign currencies; whereas, contracts to sell are used to
hedge the Fund's securities against currency fluctuations. Risks may
arise upon entering these transactions from the potential inability of
counterparts to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates.
The foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded
for financial statement purpose as unrealized until the
settlement date.
At November 30, 1998, the Fund had an outstanding foreign currency
commitment as set forth below:
<TABLE>
<CAPTION>
CONTRACT TO IN EXCHANGE CONTRACT AT UNREALIZED
SETTLEMENT DATE RECEIVE FOR VALUE APPRECIATION
<S> <C> <C> <C> <C>
Contract Purchased:
12/1/1998 5,253,000 Greek Drachma $18,399 $18,449 $50
</TABLE>
FOREIGN CURRENCY TRANSLATION-The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES-Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for
resale, at the issuer's expense either upon demand by the Fund or in
connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may
be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at November 30,
1998, is as follows:
SECURITY AQUISITION DATE AQUISTION COST
Panafon Hellenic Telecom SA 11/20/1998 $18,650
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
NUMBER OF PAR
VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 100,000,000
TOTAL 300,000,000
INITIAL SHARE CAPITAL
CLASS NAME SHARES AMOUNT
Class A Shares 10 $100
Class B Shares 10 100
Class C Shares 10 100
TOTAL 30 $300
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1998(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 1,787,143 $ 17,871,433
Shares redeemed (222) (2,218)
Net change resulting from
Class A Share transactions 1,786,921 $ 17,869,215
</TABLE>
(a) For the period from October 27, 1998 (date of initial public investment)
to November 30, 1998.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.00% of the Fund's
average daily net assets. 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, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A, Class
B, and Class C Shares. The Plan provides that the Fund may incur
distribution expenses according to the following schedule annually, to
compensate FSC.
PERCENTAGE OF
AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
SHAREHOLDER SERVICES FEE-Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
shares for the period. The fee paid to FSSC 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, FSSC serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
GENERAL-Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended November 30, 1998, were as follows:
PURCHASES $17,464,260
SALES $ 451,317
6. CONCENTRATION OF CREDIT RISK
Although the Fund maintains a diversified investment portfolio, the
political or economic developments within a particular country or
region may have an adverse effect on the ability of domiciled issuers
to meet their obligations. Additionally, political or economic
developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1998, the diversification of countries was as follows:
COUNTRY PERCENTAGE OF
NET ASSETS
Canada 1.7%
France 3.3%
Germany 1.4%
Greece 0.1%
Ireland 1.2%
Italy 2.5%
Spain 4.0%
Sweden 1.5%
Switzerland 1.9%
United Kingdom 6.9%
United States 70.8%
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8. SUBSEQUENT EVENT
On January 7, 1999, the Fund's Adviser, Federated Global Research
Corp., changed its name to Federated Global Investment Management
Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Global Equity
Income Fund (a portfolio of World Investment Series, Inc.) as of
November 30, 1998, and the related statement of operations, statement
of changes in net assets and financial highlights for the period from
October 27, 1998 (commencement of operations) to November 30, 1998.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated Global Equity Income Fund of World
Investment Series, Inc. at November 30, 1998, and the results of its
operations, the changes in its net assets and financial highlights for
the period from October 27, 1998 (commencement of operations) to
November 30, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus, which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487697
Cusip 981487689
Cusip 981487671
G02336-04 (1/99)
[Graphic]
[Graphic]
Federated Investors
Federated Global
Financial Services Fund
1st Annual Report
November 30, 1998
ESTABLISHED 1998
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated Global Financial Services Fund was created in 1998, and I am
pleased to present its first Annual Report. This report covers the
period from September 30, 1998, the fund's date of inception through
November 30, 1998. It begins with an interview with the fund's
portfolio manager, Marc Halperin, Vice President of Federated Global
Investment Management Corp. (formerly, Federated Global Research
Corp.). Following his discussion, which covers the fund's objective
and strategy, and market conditions, are two additional items of
shareholder interest. First is a complete listing of the fund's
investments, and second is the publication of the fund's financial
statements.
This fund offers investors the opportunity for capital appreciation
and dividend growth by investing in financial services companies-
including banks, insurance companies, brokerage firms and asset
management companies-across as many as five different financial
environments including the U.S., Asia, Europe, Latin America, and
Eastern Europe. The fund may be ideal for investors seeking some
international exposure but not willing to take the risks associated
with investing exclusively outside of the U.S.*
Federated Global Financial Services Fund offers investors a unique
opportunity within the mutual fund universe. It is one of only a few
funds to invest in the global financial services sector. We feel that
this is the right time for such a fund because the financial services
sector is evolving and experiencing rapid growth-and the majority of
financial services are actually based outside of the U.S.
The fund's performance was highly positive over its first two months of
operation. Of course, when it comes to performance, it is important to
remember that the true measure of this fund's performance is clearly in
years rather than months. There will be periods of short-term
fluctuation and 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.
Individual share class total return performance for the period, since
the fund's inception date of September 30, 1998, follows.**
TOTAL RETURN NET ASSET VALUE INCREASE
Class A Shares 19.90% $10.00 to $11.99 = 19.90%
Class B Shares 19.80% $10.00 to $11.98 = 19.80%
Class C Shares 19.80% $10.00 to $11.98 = 19.80%
Please take this opportunity to examine the fund's investment review.
We will continue to keep you up-to-date on the details of your
investment on a regular basis. You may add to your investment account
at any time and thus increase the number of shares you own for future
income. I recommend that you add to your account on a regular basis to
take advantage of price fluctuations and dollar-cost averaging.***
Thank you for your investment in Federated Global Financial Services
Fund and for the confidence you have placed in our firm.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
** Performance quoted is based on net asset value, represents past
performance and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the reporting period, based on offering price (i.e., less
any applicable sales charge), for Class A, B, and C Shares were 13.33%,
14.30%, and 18.80%, respectively.
*** Systematic investing does not ensure a profit or protect against losses
in declining markets. Because dollar-cost averaging involves continuous
investment regardless of fluctuating price levels, investors should
consider their financial ability to continue purchases during periods of
low price levels.
INVESTMENT REVIEW
[Graphic]
Marc Halperin
Vice President
Federated Global
Investment Management Corp.
[Graphic]
FEDERATED GLOBAL FINANCIAL SERVICES FUND IS ONE OF THE FIRST MUTUAL
FUNDS TO GIVE INVESTORS ACCESS TO GLOBAL FINANCIAL SERVICES
SECURITIES. WHAT DOES THIS SECTOR OFFER TO INVESTORS?
The financial services sector is evolving rapidly worldwide, and
wherever there is change, there is opportunity. Today's financial
markets offer an unprecedented opportunity for well-positioned banks,
brokerages, insurance firms, and related businesses around the world.
Federated's experienced money managers can invest in companies that
are uniquely well-positioned in changing markets. For example, as the
new European Union currency takes shape as of January 1, 1999, 11
currencies and interest rates will become one currency, the euro, and
one interest rate. Hence, banking and related financial institutions
may provide significant growth opportunities for the fund.
[Graphic]
WHAT IS THE GROWTH POTENTIAL OF THE GLOBAL FINANCIAL
SERVICES MARKETPLACE?
The net revenue of the global investment and asset
management industry-a large segment of the financial services sector-
is expected to rise from 1996's $277 billion to $900 billion by
2010.+
[Graphic]
WHY GO BEYOND THE U.S. TO PARTICIPATE IN FINANCIAL
SERVICES OPPORTUNITIES?
The main reason is that the majority of financial services are based
outside of the U.S. Today, financial services firms are worth $4.17
trillion worldwide in terms of market capitalization, and of that
total, 59% or nearly $2.5 trillion, lies beyond our borders.++
+ Source: Economist Intelligence Unit, USA Today, August 12, 1998.
++ Source: Goldman Sachs, August 1998.
[Graphic]
IN WHAT REGIONS DOES THE FUND INVEST?
The fund offers a rare opportunity for significant capital
appreciation from five radically different financial environments
around the world-U.S., Europe, Latin America, Eastern Europe, and
Asia. Because the fund invests in U.S. and foreign stocks, it can be
ideal for investors who want some international exposure but are not
willing to take on all the risks of investing exclusively outside of
the U.S.
[Graphic]
WOULD THIS FUND BE CONSIDERED A SECTOR FUND?
Yes. Federated Global Financial Services Fund invests solely in the
financial services sector which includes securities issued by banks,
insurance companies, brokerage firms and asset management companies.
[Graphic]
HOW HAS THE GLOBAL FINANCIAL SERVICES SECTOR PERFORMED IN THE PAST?
The fund's benchmark is the Morgan Stanley Capital International All
Country World Finance Index.* Its average annual total return for the
three-year period ended November 30, 1998 was 11.13%. Its average
annual total returns for the calendar years ended December 31, 1997,
1996, and 1995 were 15.46%, 5.80%, and 16.97%, respectively.
* The Morgan Stanley Capital International All Country World Finance Index
is a medium-cap to large-cap unmanaged index comprising the banking,
financial services, insurance and real estate industries. It is
diversified across 46 countries and more than 400 companies. All values
are expressed in U.S. dollars. Investments cannot be made in an index.
[Graphic]
THIS FUND IS UNDERSTANDABLY A LONG-TERM INVESTMENT, BUT HOW HAS IT
PERFORMED SINCE ITS INCEPTION DATE OF SEPTEMBER 30, 1998 THROUGH
NOVEMBER 30, 1998?
The fund has produced a very strong total return in its first two
months of operation. The total returns, based on net asset value, for
Class A, B, and C Shares were 19.90%, 19.80%, and 19.80%,
respectively.** We launched the fund at the time when financial
services securities were depreciating in value. This enabled us to
purchase strong securities at a relatively cheap price; shareholders
now enjoy the benefits of appreciating prices.
[Graphic]
HOW ARE THE FUND'S HOLDINGS SELECTED?
We first look at the larger geographic regions to determine where we
want to be. Then we move to country specifics-the political situation
and the economic environment. Having narrowed our choices down, we
select companies in those areas that meet the fund's criteria. As with
all Federated funds, we use strict buying and selling disciplines to
help control risk. For example, we look for companies with a strong
balance sheet and no exposure to emerging markets or derivatives.
Ultimately, the investment approach is bottom-up, with holdings
chosen primarily for their individual merits and circumstances,
rather than according to a specific country or regional weighting
formula. The fund is well-diversified, with 72 holdings as of
November 30, 1998.
** Performance quoted represents past performance and is not indicative
of future results. Investment return and principal value will
fluctuate, so an investor's shares, when redeemed, may be worth more
or less than their original cost. Total returns for the reporting
period, based on offering price (i.e., less any applicable sales
charge), for Class A, B, and C Shares were 13.33%, 14.30%, and
18.80%, respectively.
[Graphic]
WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF NOVEMBER 30, 1998 AND
WHAT WERE SOME OF YOUR RECENT PURCHASES?
PERCENTAGE OF
NAME COUNTRY INDUSTRY NET ASSETS
Colonial Ltd. Australia Financial Services 4.07%
Allianz AG Germany Insurance 3.11%
Axa France Insurance 2.98%
HSBC Holdings PLC Hong Kong Banking 2.58%
Citigroup, Inc. United States Insurance 2.49%
Zurich Allied AG Switzerland Insurance 2.25%
Merita Nordbanken Oyj Finland Banking 2.20%
AEGON N.V. Netherlands Insurance 2.19%
National Westminster
Bank, PLC London United Kingdom Banking 2.16%
Chase Manhattan Corp. United States Banking 2.00%
TOTAL 26.03%
The overall portfolio is overweighted in Europe as we expect this
region to experience the most growth over the coming year. In fact, our
European focus has and will continue to provide the fund with the
opportunity to take advantage of merger and acquisition activity in the
European region. Our European holdings include the
following companies:
AEGON N.V. (2.19% of net assets) is the largest insurance company in
the Netherlands.
AXA (2.98% of net assets) is the largest life insurance company in
France that also owns Alliance Capital and Equitable Life in the U.S.
NATIONAL WESTMINSTER BANK, PLC, LONDON (2.16% of net assets) is one of
the largest banks in the United Kingdom.
ZURICH ALLIED AG (2.25% of net assets) is a large Swiss bank that owns
several U.S. financial services companies including Scudder Kemper
Investments Inc. and Farmers Group.
[Graphic]
WHAT DOES THE GLOBAL FINANCIAL MARKETPLACE LOOK LIKE TODAY?
Five key forces are driving this sector's worldwide growth. The world's
aging population is demanding more financial services and products;
mergers and acquisitions are increasing the value of financial
services companies; technology is raising operating efficiency and
opportunities for revenue; deregulation is creating more favorable
business environments; and the consolidation of fragmented
markets is creating a more efficient global marketplace.
In addition, each region is at a distinctly different phase of the
business cycle. The U.S. is a mature, relatively stable, market
benefiting from numerous consolidations and is one of the top
performing regions over the last five years. ASIA, in contrast, is in
turmoil, but may offer opportunities to take advantage of the economic
unrest. Europe presents a vastly different picture. The European Union
convergence has been creating unprecedented opportunities-both in
"Euro-bubble" countries like Ireland, Italy, Spain, and Portugal,
where interest rates have been dropping, and in core countries like
France and Germany. LATIN AMERICA is overshadowed by the Asian crisis
affecting emerging markets worldwide, but many of its institutions
have strong earnings that may lead the first wave of a turnaround.
EASTERN EUROPE has been in the shadow of the Russian market's recent
poor performance, but seems likely to surge on positive news of
International Monetary Fund loans and promised reforms.
[Graphic]
FINALLY, HOW DOES THIS FUND FIT INTO AN INVESTOR'S PORTFOLIO?
As a specialized fund, it lets investors focus on an industry that may
perform well when others are lagging. In times of turmoil, it may be
especially advantageous to own a global fund because its diversification
can offer a degree of protection.***
As a niche fund, it could be a prudent investment addition to an
investor's portfolio. Its broad, global exposure and disciplined
management style can help control the inherent risks of international
securities and the portfolio's dependence on a single sector. Of
course, as with any sector fund, investors should anticipate some
volatility.
*** Foreign investing involves special risks not present in
U.S. investments due to factors such as increased volatility, currency
fluctuation, and differences in auditing and other financial
standards. Also, because this fund invests in a concentrated industry
group, it may be more susceptible to any single
economic, political, or regulatory event.
FEDERATED GLOBAL FINANCIAL SERVICES FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED
GLOBAL FINANCIAL SERVICES FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of
$10,000* in the Federated Global Financial Services Fund
(Class A Shares) (the "Fund") from September 30, 1998
(start of performance) to November 30, 1998 compared to
the Morgan Stanley Capital International All Country
World Finance Index (MSCI-WFI).+
[Graphic representation omitted. Please see Appendix A13]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund
after deducting the maximum sales charge of 5.50% ($10,000
investment minus $550 sales charge = $9,450). The Fund's
performance assumes the reinvestment of all dividends and
distributions. The MSCI-WFI has been adjusted to reflect
reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The MSCI-WFI is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
FEDERATED GLOBAL FINANCIAL SERVICES FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED
GLOBAL FINANCIAL SERVICES FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated Global Financial Services Fund (Class B Shares)
(the "Fund") from September 30, 1998 (start of performance) to
November 30, 1998 compared to the Morgan Stanley Capital International
All Country World Finance Index (MSCI-WFI).+
[Graphic representation omitted. Please see Appendix A14]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a contingent deferred sales charge of 5.50% on
any redemption less than one year from the purchase date. The Fund's
performance assumes the reinvestment of all dividends and
distributions. The MSCI-WFI has been adjusted to reflect reinvestment
of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-WFI is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
FEDERATED GLOBAL FINANCIAL SERVICES FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED
GLOBAL FINANCIAL SERVICES FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated Global Financial Services Fund (Class C Shares)
(the "Fund") from September 30, 1998 (start of performance) to
November 30, 1998 compared to the Morgan Stanley Capital International
All Country World Finance Index (MSCI-WFI)+.
[Graphic representation omitted. Please see Appendix A15]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value reflects a 1.00% contingent deferred sales charge on any redemption
less than one year from the purchase date. The Fund's performance assumes
the reinvestment of all dividends and distributions. The MSCI-WFI has
been adjusted to reflect reinvestment of dividends on securities in the
index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-WFI is not adjusted to reflect sales charges, expenses, or
other fees that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
FEDERATED GLOBAL FINANCIAL SERVICES FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-95.8%
BANKING-34.3%
6,700 Allied Irish Banks PLC $ 103,615
4,800 Argentaria S.A. 111,728
4,700 Australia & New Zealand Banking Group Ltd., Melbourne 31,039
4,300 Banca Nazionale del Lavoro 12,083
2,100 Banca Popolare Di Brescia 48,757
5,784 (a)Banco Bilbao Vizcaya S.A. 91,358
950 Banco Pastor S.A. 59,231
2,800 Bank of Ireland 58,121
1,230 Banque Nationale de Paris 94,047
1,210 HypoVereinsbank 104,706
2,100 Commonwealth Bank of Australia 28,964
690 Credit Commerical De France 59,356
440 Den Danske Bank Group 56,629
790 Dexia France 118,447
6,400 HSBC Holdings PLC 164,071
3,448 Istituto Bancario San Paolo di Torino 56,552
8,000 Lloyds TSB Group PLC 111,173
6,400 Macquarie Bank Ltd. 59,316
24,000 MeritaNordbanken Oyj 139,575
4,100 National Australia Bank, Ltd., Melbourne 61,366
7,500 National Westminster Bank, PLC, London 136,822
560 Societe Generale, Paris 88,195
11,300 Standard Chartered PLC 120,034
15,800 Unicredito Italiano SPA 89,782
1,380 Unidanmark A/S 112,557
9,000 Westpac Banking Corp. Ltd. 60,058
Total 2,177,582
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-CONTINUED
BANKS (MAJOR REGIONAL)-9.9%
2,100 Bank One Corp. $ 107,756
2,000 BankBoston Corp. 83,250
2,800 Fleet Financial Group, Inc. 116,725
3,100 KeyCorp 95,131
2,000 PNC Bank Corp. 103,125
1,400 Republic New York Corp. 65,450
1,400 Summit Bancorp 58,538
Total 629,975
BANKS (MONEY CENTER)-5.7%
1,700 BankAmerica Corp. 110,819
2,000 Chase Manhattan Corp. 126,875
2,000 First Union Corp. 121,500
Total 359,194
BANKS (REGIONAL)-0.8%
1,200 First American Corp. 51,975
CONSUMER FINANCE-0.9%
1,400 Household International, Inc. 54,775
FINANCIAL (DIVERSIFIED)-8.4%
1,200 American Express Co. 120,075
600 American General Corp. 42,262
700 Associates First Capital Corp., Class A 54,512
1,000 CIT Group, Inc., Class A 28,062
1,000 Equity Office Properties Trust 25,125
1,700 Federal National Mortgage Association 123,675
600 MBIA, Inc. 38,850
1,400 Morgan Stanley Dean Witter Co. 97,650
Total 530,211
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-CONTINUED
FINANCIAL SERVICES-6.0%
18 Julius Baer Holding Ltd. $ 58,397
75,000 Colonial Ltd. 258,110
1,100 ING Groep, N.V. 62,979
Total 379,486
INSURANCE-15.2%
1,300 AEGON N.V. 139,071
2,000 (a)AMP Ltd. 25,912
6,400 Alleanza Assicurazioni 87,632
548 Allianz AG 197,208
1,465 Axa 189,266
3,500 Prudential Corp. PLC 51,034
5,800 Royal & Sun Alliance Insurance Group PLC 48,408
5,900 Skandia Forsakrings AB 83,737
200 Zurich Allied AG 142,806
Total 965,074
INSURANCE (LIFE/HEALTH)-0.6%
1,000 Torchmark Corp. 38,000
INSURANCE (MULTI-LINE)-7.0%
1,300 American International Group, Inc. 122,200
1,000 CIGNA Corp. 77,812
3,150 Citigroup, Inc. 158,091
1,600 Hartford Financial Services Group, Inc. 88,300
Total 446,403
INSURANCE - PROPERTY - CASUALTY-3.6%
2,200 Allstate Corp. 89,650
1,000 Chubb Corp. 70,062
800 SAFECO Corp. 34,350
1,000 St. Paul Companies, Inc. 35,250
Total 229,312
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS-CONTINUED
INVESTMENT BANKING/BROKERAGE- 0.5%
800 Bear Stearns Cos., Inc. $ 33,600
LEISURE & TOURISM-0.8%
1,500 (b)Scandic Hotels AB 52,347
REAL ESTATE-0.9%
8,086 Sun Hung Kai Properties Ltd. 57,958
SAVINGS & LOAN COMPANIES-1.2%
1,900 Washington Mutual, Inc. 73,625
TOTAL COMMON STOCKS (IDENTIFIED COST $5,093,090) 6,079,517
REPURCHASE AGREEMENT(C)-5.7%
$ 360,000 Westdeutsche Landesbank Girozentrale, 5.350%, dated
11/30/1998, due 12/1/1998 (AT AMORTIZED COST) 360,000
TOTAL INVESTMENTS (IDENTIFIED COST $5,453,090)(D) $ 6,439,517
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1998, this security
amounted to $52,347 which represents 0.8% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $5,453,090.
The net unrealized appreciation of investments on a federal tax basis
amounts to $986,427 which is comprised of $993,573 appreciation and
$7,146 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($6,348,072) at November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL FINANCIAL SERVICES FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value
(identified and tax cost $5,453,090) $ 6,439,517
Income receivable 5,976
Net receivable for foreign currency exchange
contracts purchased 41
Receivable for shares sold 421,385
Total assets 6,866,919
LIABILITIES:
Payable for investments purchased $ 12,032
Payable for shares redeemed 337,354
Payable to Bank 91,389
Payable for taxes withheld 50
Payable for share registration costs 10,500
Payable for printing and postage expenses 10,000
Payable for transfer and dividend disbursing
agent fees and expenses 16,579
Payable for auditing fees 14,000
Payable for portfolio accounting fees 8,550
Accrued expenses 18,393
Total liabilities 518,847
NET ASSETS for 529,753 shares outstanding $ 6,348,072
NET ASSETS CONSIST OF:
Paid in capital $ 5,315,458
Net unrealized appreciation of investments and
translation of assets and liabilities in
foreign currency 986,460
Accumulated net realized gain on investments
and foreign currency transactions 46,154
Total net assets $ 6,348,072
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($4,094,184 / 341,609
shares outstanding) $11.99
Offering Price Per Share (100/94.50 of $11.99)* $12.69
Redemption Proceeds Per Share $11.99
CLASS B SHARES:
Net Asset Value Per Share ($1,910,700 / 159,494
shares outstanding) $11.98
Offering Price Per Share $11.98
Redemption Proceeds Per Share (94.50/100 of $11.98)* $11.32
CLASS C SHARES:
Net Asset Value Per Share ($343,188 / 28,650
shares outstanding) $11.98
Offering Price Per Share $11.98
Redemption Proceeds Per Share (99.00/100 of $11.98)* $11.86
</TABLE>
* See "What do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL FINANCIAL SERVICES FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1998(A)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $50) $ 12,596
Interest 10,832
Total income 23,428
EXPENSES:
Investment advisory fee $ 9,535
Administrative personnel and services fee 30,918
Custodian fees 6,760
Transfer and dividend disbursing agent fees
and expenses 16,720
Directors'/Trustees' fees 1,000
Auditing fees 14,000
Legal fees 1,500
Portfolio accounting fees 14,562
Distribution services fee-Class B Shares 933
Distribution services fee-Class C Shares 196
Shareholder services fee-Class A Shares 2,007
Shareholder services fee-Class B Shares 311
Shareholder services fee-Class C Shares 65
Share registration costs 10,500
Printing and postage 10,000
Insurance premiums 3,800
Taxes 2,400
Miscellaneous 800
Total expenses 126,007
Waivers and reimbursements-
Waiver of investment advisory fee $ (9,535)
Reimbursement of other operating expenses (100,046)
Total waivers and reimbursements (109,581)
Net expenses 16,426
Net investment income 7,002
REALIZED AND UNREALIZED GAIN ON
INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments and foreign currency transactions 39,152
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 986,460
Net realized and unrealized gain on investments and foreign currency 1,025,612
Change in net assets resulting from operations $ 1,032,614
</TABLE>
(a) Reflects operations for the period from September 30, 1998 (date of
initial public investment) to November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL FINANCIAL SERVICES FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1998(A)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS-
Net investment income $ 7,002
Net realized gain on investments and foreign
currency transactions ($46,202 as computed for
federal tax purposes) 39,152
Net change in unrealized appreciation of
investments and translation of assets and
liabilities in foreign currency 986,460
Change in net assets resulting from operations 1,032,614
SHARE TRANSACTIONS-
Proceeds from sale of shares 7,814,821
Cost of shares redeemed (2,500,188)
Change in net assets resulting from
share transactions 5,314,633
Change in net assets 6,347,247
NET ASSETS:
Beginning of period 825
End of period $ 6,348,072
</TABLE>
(a) Reflects operations for the period from September 30,
1998 (date of initial public investment) to November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL FINANCIAL SERVICES FUND
FINANCIAL HIGHLIGHTS-CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01(d)
Net realized and unrealized gain on
investments and foreign currency 1.98
Total from investment operations 1.99
NET ASSET VALUE, END OF PERIOD $11.99
TOTAL RETURN(B) 19.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.60%*
Net investment income 0.85%*
Expense waiver/reimbursement(c) 11.49%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $4,094
Portfolio turnover 12%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 30, 1998 (date of
initial public investment) to November 30, 1998.
(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) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL FINANCIAL SERVICES FUND
FINANCIAL HIGHLIGHTS-CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.00(d)
Net realized and unrealized gain on
investments and foreign currency 1.98
Total from investment operations 1.98
NET ASSET VALUE, END OF PERIOD $11.98
TOTAL RETURN(B) 19.80%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.35%*
Net investment income 0.10%*
Expense waiver/reimbursement(c) 11.49%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,911
Portfolio turnover 12%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 30, 1998 (date of
initial public investment) to November 30, 1998.
(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) Per share amount does not round to $0.01. Per share information is based
on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL FINANCIAL SERVICES FUND
FINANCIAL HIGHLIGHTS-CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30,
1998(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.00(d)
Net realized and unrealized gain on
investments and foreign currency 1.98
Total from investment operations 1.98
NET ASSET VALUE, END OF PERIOD $11.98
TOTAL RETURN(B) 19.80%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.35%*
Net investment income 0.10%*
Expense waiver/reimbursement(c) 11.49%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $343
Portfolio turnover 12%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 30, 1998 (date of
initial public investment) to November 30, 1998.
(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) Per share amount does not round to $0.01. Per share information is
based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GLOBAL FINANCIAL SERVICES FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
portfolios. The financial statements included herein are only those of
Federated Global Financial Services 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions. The following
reclassifications have been made to the financial statements.
INCREASE/(DECREASE)
ACCUMULATED NET UNDISTRIBUTED NET
REALIZED GAIN INVESTMENT INCOME
$7,002 $(7,002)
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES-It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS-The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire
exposure to foreign currencies; whereas, contracts to sell are used to
hedge the Fund's securities against currency fluctuations. Risks may
arise upon entering these transactions from the potential inability of
counterparts to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates.
The foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded
for financial statement purpose as unrealized until the
settlement date.
At November 30, 1998, the Fund had an outstanding foreign currency
commitment as set forth below:
<TABLE>
<CAPTION>
SETTLEMENT CONTRACT TO IN EXCHANGE CONTRACT UNREALIZED
DATE RECEIVE FOR AT VALUE APPRECIATION
<S> <C> <C> <C> <C>
CONTRACT PURCHASED:
12/1/1998 20,210,000 Italian Lira $11,991 $12,032 $41
</TABLE>
FOREIGN CURRENCY TRANSLATION-The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES-Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for
resale, at the issuer's expense either upon demand by the Fund or in
connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may
be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
SECURITY AQUISITION DATE AQUISTION COST
Scandic Hotels AB 11/5/199 $47,957
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
CLASS NAME NUMBER OF PAR VALUE
CAPITAL STOCK AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 100,000,000
TOTAL 300,000,000
INITIAL
SHARE CAPITAL
CLASS NAME SHARES AMOUNT
Class A Shares 32.5 $325
Class B Shares 25.0 250
Class C Shares 25.0 250
TOTAL 82.5 $825
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1998(A)
CLASS A SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 562,999.5 $ 5,709,657
Shares redeemed (221,423.0) (2,470,458)
Net change resulting from
Class A Share transactions 341,576.5 $ 3,239,199
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1998(A)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 159,648 $ 1,768,406
Shares redeemed (179) (2,008)
Net change resulting from
Class B Share transactions 159,469 $ 1,766,398
</TABLE>
(a) For the period from September 30, 1998 (date of initial public
investment) to November 30, 1998.
<TABLE>
<CAPTION>
PERIOD ENDED
NOVEMBER 30, 1998(A)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 30,948 $ 336,758
Shares redeemed (2,323) (27,722)
Net change resulting from
Class C Share transactions 28,625 $ 309,036
Net change resulting from
share transactions 529,670 .5 $ 5,314,633
</TABLE>
(a) For the period from September 30, 1998 (date of initial public
investment) to November 30, 1998.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.00% of the Fund's
average daily net assets. 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.
Under the terms of a sub-advisory agreement between the Adviser and
Federated Advisers (the "Sub-Adviser"), the Sub-Adviser receives an
allocable portion of the Fund's advisory fee. Such allocation is based
on the amount of U.S. securities which the Sub-Adviser manages for the
Fund. The fee is paid by the Adviser and is not an incremental Fund
expense.
ADMINISTRATIVE FEE-Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with
administrative personnel and services. The fee paid to FServ is based
on the level of average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A, Class
B, and Class C Shares. The Plan provides that the Fund may incur
distribution expenses according to the following schedule annually, to
compensate FSC.
PERCENTAGE OF
AVERAGE DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the period
ended November 30, 1998, 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 Federared Shareholder Services Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
shares for the period. The fee paid to FSSC 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, FSSC serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
GENERAL-Certain of the Officers and Directors of the Corporation are
Officers and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended November 30, 1998, were as follows:
PURCHASES $ 56,698,472
SALES $ 652,204
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or
economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
At November 30, 1998, the diversification of countries was as follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Australia 8.3%
Denmark 2.7%
Finland 2.2%
France 8.7%
Germany 4.7%
Hong Kong 3.5%
Ireland 2.5%
Italy 4.6%
Netherlands 3.2%
Spain 4.1%
Sweden 2.1%
Switzerland 3.2%
United Kingdom 7.4%
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8. SUBSEQUENT EVENT
On January 7, 1999, the Fund's Adviser, Federated Global Research
Corp., changed its name to Federated Global Investment
Management Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Global Financial
Services Fund (a portfolio of World Investment Series, Inc.) as of
November 30, 1998, and the related statement of operations, statement
of changes in net assets and financial highlights for the period from
September 30, 1998 (commencement of operations) to November 30, 1998.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated Global Financial Services Fund of
World Investment Series, Inc. at November 30, 1998, and the results of
its operations, the changes in its net assets and financial highlights
for the period from September 30, 1998 (commencement of operations) to
November 30, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487663
Cusip 981487655
Cusip 981487648
G02455-03 (1/99)
[Graphic]
[Graphic] Federated Investors
Federated International Growth Fund
2nd Annual Report
November 30, 1998
ESTABLISHED 1997
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated International Growth Fund was created in 1997, and I am
pleased to present its second Annual Report. This report covers the 12-
month reporting period from December 1, 1997 through November 30,
1998. It begins with an interview with Drew Collins, Senior Vice
President of Federated Global Investment Management Corp. (formerly,
Federated Global Research Corp.). Following his discussion, which
presents his outlook on international economic and market conditions,
and the fund's strategy, are two additional items of shareholder
interest. First is a complete listing of the fund's equity investments,
and second is the publication of the fund's financial statements.
This fund is a "fund of funds" that offers shareholders significant
long-term growth opportunities by investing in as many as five
different international stock mutual funds managed by Federated Global
Investment Management Corp. This approach provides an extremely high
level of diversification, far beyond what a single regional
international fund can achieve. This $29 million fund gives investors
one-investment access to a world of regions, industries, companies
(both large-cap and small-cap), and markets (both developed and
emerging). The fund's management performs all the research and
quantitative work needed to allocate the fund's assets in the various
international arenas.
After positive performance in the first half of the fiscal year, the
fund was impacted by negative market developments in the Asia Pacific
and Latin American regions, and emerging markets around the world. As a
result, for the 12-month reporting period ended November 30, 1998, the
fund's performance was negative. The fund's assets have subsequently
been shifted away from the more troubled areas to take advantage of
strong opportunities in small companies in Europe and around the world.
Individual share class total return performance for the 12-month
period, including income distributions, follows.*
NET ASSET
TOTAL RETURN INCOME VALUE CHANGE
Class A Shares (3.37%) $0.058 $8.73 to $8.38 = (4%)
Class B Shares (4.14%) $0.041 $8.71 to $8.31 = (5%)
Class C Shares (3.99%) $0.044 $8.72 to $8.33 = (4%)
* Performance quoted is based on net asset value, represents past
performance, and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the 12-month reporting period, based on the offering price
(i.e., less any applicable sales charge), for Class A, B, and C Shares
were (8.70%), (9.39%), and (4.94%), respectively.
Please remember that Federated International Growth Fund is a
relatively new fund that was introduced in 1997 as volatility entered
many international markets. With international investing in
particular, there will inevitably be periods of volatility.+ The key
to long-term success is investing through the positive as well as
negative periods. On average-and this is shown through the historical
performance of many financial markets-the positive periods
significantly outweigh the negative periods.
We will continue to keep you up-to-date on the details of your
investment on a regular basis. You may add to your investment account
at any time and thus increase the number of shares you own for future
income. I recommend that you add to your account on a regular basis to
take advantage of price fluctuations and dollar-cost averaging.++
Thank you for your investment in Federated's "fund of funds" and for
the confidence you have placed in our firm.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
+ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in
auditing and other financial standards.
++ Systematic investing and dollar-cost averaging do not ensure profits or
protect against losses in declining markets. Since dollar-cost averaging
involves continuous investing regardless of fluctuating price levels,
investors should consider whether to continue to invest in periods of
low price levels.
INVESTMENT REVIEW
[Graphic]
Drew Collins
Senior Vice President
Federated Global Investment Management Corp.
[Graphic]
WHAT IS YOUR ANALYSIS OF THE FUND'S FISCAL YEAR, WHICH SAW VOLATILE
PERFORMANCE IN EUROPE, CONTINUED WEAKNESS IN THE ASIA PACIFIC MARKETS, AND
WEAKNESS ACROSS THE LATIN AMERICAN MARKETS?
The economic climate in Western Europe was robust during the first half
of the fiscal year, and the equity markets were extremely buoyant
relative to their international peers. Financial, automotive and
telecommunications stocks lead the bull charge in Europe. During the
third quarter of 1998, the international equity markets corrected
sharply as fears of a banking crisis and general economic slowdown
squashed investor confidence. The banking industry was
disproportionately affected by eruptions in Russia, Asia and the U.S.,
as well as by growing concerns over Latin America. Most notably, the
Russian government defaulted on its debt, and the U.S. government had
to step in to rescue a highly leveraged hedge fund. Expensive stocks,
(i.e. those with high price-to-earnings ratios) which were sold off
most severely in the third quarter, rebounded with equal vigor in the
fourth quarter of 1998. The key to this reversal was a swift response
by central bankers who cut interest rates across the board. In November
1998 alone, 15 countries cut their interest rates, re-inspiring
investors and stimulating their demand for equities. At the conclusion
of this volatile year, the markets were comfortably ahead of where they
started.
[Graphic]
HOW DID FEDERATED INTERNATIONAL GROWTH FUND PERFORM DURING THE REPORTING
PERIOD COMPARED TO THE OVERALL INTERNATIONAL EQUITY MARKET?
For the fiscal year ended November 30, 1998, the fund's Class A, B, and
C Shares produced total returns, based on net asset value, of (3.37%),
(4.14%), and (3.99%), respectively.* These returns considerably lagged
the 16.78% total return of the Morgan Stanley Capital International
Europe, Australia, and Far East Index (the "MSCI-EAFE Index") for the
same reporting period.**
* 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 12-month reporting period,
based on the offering price (i.e., less any applicable sales charge), for
Class A, B and C Shares were (8.70%), (9.39%), and (4.94%), respectively.
** The MSCI-EAFE Index is a market capitalization-weighted foreign
securities index widely used to measure the performance of European,
Australian, New Zealand, and Far Eastern stock markets. This index is
unmanaged and investments cannot be made in an index.
[Graphic]
WHAT ACCOUNTED FOR THE FUND'S UNDER-PERFORMANCE VERSUS THE MSCI-EAFE INDEX,
AND HAVE YOU CHANGED THE FUND'S ALLOCATIONS AS A RESULT?
The source of under-performance was clearly the fund's position in
three "trouble regions" during the first half of the year-Asia Pacific,
Latin America, and the emerging markets. Consequently, we eliminated
exposure to the Federated Emerging Markets Fund and reduced exposure to
Federated Latin America Growth Fund and Federated Asia Pacific Growth
Fund.
We recently shifted the asset mix to take advantage of the strength in
Western Europe, via Federated European Growth Fund, and the continued
strong performance of Federated International Small Company Fund.
These two funds now represent nearly 85% of the fund's portfolio.
[Graphic]
HOW WERE THE FUND'S ASSETS DIVERSIFIED AMONG THE FIVE DIFFERENT
FEDERATED-MANAGED INTERNATIONAL MUTUAL FUNDS AT THE END OF THE REPORTING PERIOD?
As of November 30, 1998, the assets of Federated International Growth
Fund were allocated as follows:
PERCENTAGE OF
FUND NAME NET ASSETS
Federated European Growth Fund 49.10%
Federated International Small
Company Fund 35.89%
Federated Asia Pacific Growth Fund 10.40%
Federated Latin American Growth Fund 1.71%
The top two holdings per individual fund as of November 30, 1998, were
as follows:
PERCENTAGE OF
FUND NAME COUNTRY NET ASSETS
Federated Asia Pacific Toshiba Corp. Japan 4.23%
Growth Fund Kao Corp. Japan 3.75%
Federated European Mannesmann AG Germany 2.49%
Growth Fund Banca Intesa SPA Italy 2.38%
Federated International Ideal Group SA Greece 1.81%
Small Company Fund Kamps AG Germany 1.61%
Federated Latin American Banco do Estado de
Growth Fund Sao Paulo, Preference Brazil 5.77%
Petroleo Brasileiro
SA, Preference Brazil 4.82%
[Graphic]
AS WE LEAVE A DIFFICULT 1998, WHAT IS YOUR OUTLOOK FOR THE
INTERNATIONAL MARKETPLACE FOR THE COMING YEAR?
We are clearly more bullish than at the end of the third quarter of
1998, when markets were falling precipitously, due principally to
swift and substantial interest rate cuts worldwide. The rate cuts are
lowering financing costs for companies, which is particularly
important for smaller companies.
However, with the backdrop of slowing corporate earnings in 1999,
concerns surrounding the Year 2000 (Y2K) problem, and political
uncertainty in the U.S., we are erring on the side of caution.
We still feel that Europe offers the most potential in 1999. As far as
gross domestic product is concerned, we would expect Europe-wide
growth to be around 2%, rather than the earlier forecast of 2.7%.
Within this total, the European Monetary Union region should do better
than the United Kingdom; estimates call for 2.50% versus only around
0.50% in the United Kingdom. France and Spain will probably continue to
have among the best growth rates. Earnings growth is probably going to
run somewhere in the mid-single digits, with continental Europe again
probably doing better than the United Kingdom. The new competitive
landscape in "Euroland," with borderless countries, will force large-
cap companies to improve productivity and pricing. International
small-cap stocks could benefit because it is easier for smaller and
nimbler companies to adapt to changes, and because these smaller
companies, with their efficiencies and distributions, could become
takeover targets of the larger companies. In the end, lower borrowing
costs with enhanced productivity are expected to lead to an increase in
earnings for small-cap stocks.
While we will focus our attention on Europe, Japan is always on our
minds, and any signs of a turnaround will trigger an immediate response
in the region. We remain relatively bearish on Latin American markets
and the emerging markets in Eastern Europe.
WHERE IN THE WORLD SHOULD YOU INVEST?
[Graphic] FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic] FEDERATED EMERGING MARKETS FUND
[Graphic] FEDERATED EUROPEAN GROWTH FUND
[Graphic] FEDERATED GLOBAL EQUITY INCOME FUND
[Graphic] FEDERATED GLOBAL FINANCIAL SERVICES FUND
[Graphic] FEDERATED INTERNATIONAL EQUITY FUND
[Graphic] FEDERATED INTERNATIONAL GROWTH FUND
[Graphic] FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic] FEDERATED INTERNATIONAL INCOME FUND
[Graphic] FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic] FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic] FEDERATED WORLD UTILITY FUND
Federated employs highly qualified, experienced managers in global
investing to select countries and companies outside the U.S. for
long-term growth potential.
Call your investment representative to buy shares of 10 international
equity funds and 2 international income funds from Federated
Securities Corp.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL
1-800-341-7400 TO ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU
INVEST.
Foreign investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
FEDERATED INTERNATIONAL GROWTH FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL GROWTH FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of
$10,000* in the Federated International Growth Fund
(Class A Shares) (the "Fund") from July 1, 1997 (start of
performance) to November 30, 1998, compared to the Morgan
Stanley Capital International All Country World EX U.S. Index
(MSCI-ACW) and the Morgan Stanley Capital International Europe
Australia Far East Index (MSCI-EAFE).+
[Graphic representation omitted. See Appendix A16.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund
after deducting the maximum sales charge of 5.50% ($10,000
investment minus $550 sales charge = $9,450). The Fund's
performance assumes the reinvestment of all dividends and
distributions. The MSCI-ACW and the MSCI-EAFE have been adjusted to
reflect reinvestment of dividends on securities in the indices.
** Total return quoted reflects all applicable sales charges.
+ The MSCI-ACW and the MSCI-EAFE are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. These indices are
unmanaged.
FEDERATED INTERNATIONAL GROWTH FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL GROWTH FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated International Growth Fund (Class B Shares) (the "Fund")
from July 1, 1997 (start of performance) to November 30, 1998, compared
to the Morgan Stanley Capital International All Country World EX U.S.
Index (MSCI-ACW) and the Morgan Stanley Capital International Europe
Australia Far East Index (MSCI-EAFE).+
[Graphic representation omitted. See Appendix A17.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a contingent deferred sales charge of 4.75% on
any redemption less than two years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The MSCI-ACW and the
MSCI-EAFE have been adjusted to reflect reinvestment of dividends on
securities in the indices.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-ACW and the MSCI-EAFE are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. These indices are
unmanaged.
FEDERATED INTERNATIONAL GROWTH FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL GROWTH FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated International Growth Fund (Class C Shares) (the "Fund")
from July 1, 1997 (start of performance) to November 30, 1998, compared
to the Morgan Stanley Capital International All Country World EX U.S.
Index (MSCI-ACW) and the Morgan Stanley Capital International Europe
Australia Far East Index (MSCI-EAFE).+
[Graphic representation omitted. See Appendix A18.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY
BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS
OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption
less than one year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The MSCI-
ACW and the SCI-EAFE have been adjusted to reflect reinvestment of
dividends on securities in the indices.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-ACW and the MSCI-EAFE are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. These indices are
unmanaged.
FEDERATED INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
MUTUAL FUND SHARES-97.1%
468,285 Federated Asia Pacific Growth Fund, Class A $ 2,997,023
895,679 Federated European Growth Fund, Class A 14,142,766
588,807 Federated International Small Company Fund, Class A 10,339,453
54,267 Federated Latin American Growth Fund, Class A 493,834
TOTAL MUTUAL FUND SHARES (IDENTIFIED COST $26,829,036) 27,973,076
(a)REPURCHASE AGREEMENT-2.6%
$ 755,000 Westdeutsche Landesbank Girozentrale, 5.35%, dated 11/30/
1998, due 12/1/1998 (AT AMORTIZED COST) 755,000
TOTAL INVESTMENTS (IDENTIFIED COST $27,584,036)(b) $ 28,728,076
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to $28,090,200.
The net unrealized appreciation of investments on a federal tax basis
amounts to $637,876 which is comprised of $1,365,857 appreciation and
$727,981 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($28,806,163) at November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL GROWTH FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in underlying funds, at value (identified cost
$27,584,036 and tax cost $28,090,200) $ 28,728,076
Cash 62,893
Income receivable 112
Receivable for shares sold 52,196
Deferred organizational costs 33,403
Total assets 28,876,680
LIABILITIES:
Payable for shares redeemed $ 41,360
Payable for insurance premiums 2,980
Payable for portfolio accounting fees 6,305
Payable for transfer and dividend disbursing agent fees and
expenses 8,073
Payable for distribution services fee 5,691
Payable for share registration costs 3,829
Accrued expenses 2,279
Total liabilities 70,517
NET ASSETS for 3,445,364 shares outstanding $ 28,806,163
NET ASSETS CONSIST OF:
Paid in capital $ 32,544,106
Net unrealized appreciation of investments 1,144,040
Accumulated net realized loss on investments (4,881,983)
Total Net Assets $ 28,806,163
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($19,440,117 / 2,319,029 shares outstanding) $8.38
Offering Price Per Share (100/94.50 of $8.38)* $8.87
Redemption Proceeds Per Share $8.38
CLASS B SHARES:
Net Asset Value Per Share ($8,212,310 / 987,890 shares outstanding) $8.31
Offering Price Per Share $8.31
Redemption Proceeds Per Share (94.50/100 of $8.31)* $7.85
CLASS C SHARES:
Net Asset Value Per Share ($1,153,736 / 138,445 shares outstanding) $8.33
Offering Price Per Share $8.33
Redemption Proceeds Per Share (99.00/100 of $8.33)* $8.25
</TABLE>
* See "What Do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 118,722
Interest 26,167
Total income 144,889
EXPENSES:
Administrative personnel and services fee $ 185,000
Custodian fees 4,309
Transfer and dividend disbursing agent fees and expenses 77,209
Directors' fees 1,000
Auditing fees 15,192
Legal fees 1,960
Portfolio accounting fees 77,438
Distribution services fee-Class B Shares 57,148
Distribution services fee-Class C Shares 8,174
Shareholder services fee-Class A Shares 40,448
Shareholder services fee-Class B Shares 19,050
Shareholder services fee-Class C Shares 2,724
Share registration costs 32,332
Printing and postage 19,811
Insurance premiums 3,200
Taxes 825
Miscellaneous 12,040
Total expenses 557,860
Waivers and reimbursements-
Waiver of shareholder services fee-Class A Shares $ (40,448)
Waiver of shareholder services fee-Class B Shares (19,050)
Waiver of shareholder services fee-Class C Shares (2,724)
Reimbursement of other operating expenses (411,798)
Total waivers and reimbursements (474,020)
Net expenses 83,840
Net investment income 61,049
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (4,808,525)
Net change in unrealized appreciation of investments 3,171,935
Net realized and unrealized loss on investments (1,636,590)
Change in net assets resulting from operations $ (1,575,541)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL GROWTH FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1998 1997(a)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS-
Net investment income/(net operating loss) $ 61,049 $ (9,221)
Net realized loss on investments ($(4,375,819) and $0,
respectively, as computed for federal tax purposes) (4,808,525) (73,458)
Net change in unrealized appreciation/(depreciation) on
investments 3,171,935 (2,027,895)
Change in net assets resulting from operations (1,575,541) (2,110,574)
DISTRIBUTIONS TO SHAREHOLDERS-
Distributions from net investment income
Class A Shares (74,360) -
Class B Shares (26,124) -
Class C Shares (4,552) -
Change in net assets resulting from distributions
to shareholders (105,036) -
SHARE TRANSACTIONS-
Proceeds from sale of shares 24,330,884 19,590,876
Net asset value of shares issued to shareholders in payment
of distributions declared 77,461 -
Cost of shares redeemed (10,199,585) (1,202,322)
Change in net assets resulting from share transactions 14,208,760 18,388,554
Change in net assets 12,528,183 16,277,980
NET ASSETS:
Beginning of period 16,277,980 -
End of period $ 28,806,163 $ 16,277,980
</TABLE>
(a) For the period from July 1, 1997 (date of initial public investment) to
November 30, 1997.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS-CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.73 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(net operating loss) 0.04(d) (0.01)
Net realized and unrealized loss on investments (0.33) (1.26)
Total from investment operations (0.29) (1.27)
LESS DISTRIBUTIONS
Distributions from net investment income (0.06) -
NET ASSET VALUE, END OF PERIOD $ 8.38 $ 8.73
TOTAL RETURN(b) (3.37%) (12.70%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.08% 0.07%*
Net investment income/(net operating loss) 0.51% (0.01%)*
Expense waiver/reimbursement(c) 1.92% 4.32%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $19,440 $10,562
Portfolio turnover 31% 3%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 1, 1997 (date of initial
public investment) to November 30, 1997.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income/(net operating loss) ratios shown above.
(d) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS-CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.71 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.02)(d) (0.01)
Net realized and unrealized loss on investments (0.34) (1.28)
Total from investment operations (0.36) (1.29)
LESS DISTRIBUTIONS
Distributions from net investment income (0.04) -
NET ASSET VALUE, END OF PERIOD $ 8.31 $ 8.71
TOTAL RETURN(b) (4.14%) (12.90%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.83% 0.82%*
Net operating loss (0.24%) (0.77%)*
Expense waiver/reimbursement(c) 1.92% 2.78%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $8,212 $5,036
Portfolio turnover 31% 3%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 1, 1997 (date of initial
public investment) to November 30, 1997.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL GROWTH FUND
FINANCIAL HIGHLIGHTS-CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1998 1997(a)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.72 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.02)(d) (0.01)
Net realized and unrealized loss on investments (0.33) (1.27)
Total from investment operations (0.35) (1.28)
LESS DISTRIBUTIONS
Distributions from net investment income (0.04) -
NET ASSET VALUE, END OF PERIOD $ 8.33 $ 8.72
TOTAL RETURN(b) (3.99%) (12.80%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.83% 0.82%*
Net operating loss (0.24%) (0.77%)*
Expense waiver/reimbursement(c) 1.92% 2.69%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,154 $680
Portfolio turnover 31% 3%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 1, 1997 (date of initial
public investment) to November 30, 1997.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
portfolios. The financial statements included herein are only those of
Federated International Growth Fund (the "Fund"). The financial
statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held. The Fund offers
three classes of shares: Class A Shares, Class B Shares, and Class C
Shares. The investment objective of the Fund is to provide long-term
growth of capital.
The Fund pursues its investment objective by investing in shares of
other open-end management investment companies for which affiliates of
Federated Investors, Inc. serve as investment adviser, transfer and
dividend disbursement agent, portfolio accountant, and principal
underwriter (the "Federated Funds," herein referred to as the
"underlying funds") that invest primarily in foreign equity
securities. The underlying funds in which the Fund will invest include,
but are not limited to, Federated Asia Pacific Growth Fund, Federated
Emerging Markets Fund, Federated European Growth Fund, Federated
International Small Company Fund and Federated Latin American Growth
Fund.
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-Investments in other open-end regulated
investment companies are valued at net asset value. Short-term
securities are valued at the prices provided by an independent pricing
service. However, short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized
cost, which approximates fair market value.
REPURCHASE AGREEMENTS-It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions. The following
reclassifications have been made to the financial statements.
INCREASE/(DECREASE)
ACCUMULATED
DISTRIBUTIONS IN EXCESS
PAID-IN CAPITAL OF NET INVESTMENT INCOME
($43,987) $43,987
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES-It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
At November 30, 1998, the Fund, for federal tax purposes, had a capital
loss carryforward of $4,375,819, which will reduce the Fund's taxable
income arising from future net realized gains 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 in 2006.
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.
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
NUMBER OF PAR
VALUE CAPITAL
CLASS NAME STOCK AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 100,000,000
Total 300,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997(a)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,050,819 $ 18,284,432 1,322,127 $ 12,959,645
Shares issued to shareholders in payment of
distributions declared 5,647 48,958 - -
Shares redeemed (947,847) (8,348,289) (111,717) (1,020,921)
Net change resulting from
Class A Share transactions 1,108,619 $ 9,985,101 1,210,410 $ 11,938,724
(a) For the period from July 1, 1997 (date of initial public offering)
to November 30, 1997.
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997(b)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 583,808 $ 5,216,521 594,767 $ 5,850,398
Shares issued to shareholders in payment of
distributions declared 2,839 24,563 - -
Shares redeemed (176,735) (1,554,919) (16,789) (156,418)
Net change resulting from
Class B Share transactions 409,912 $ 3,686,165 577,978 $ 5,693,980
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997(a)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 93,113 $ 829,931 80,472 $ 780,833
Shares issued to shareholders in payment of
distributions declared 454 3,940 - -
Shares redeemed (33,030) (296,377) (2,564) (24,983)
Net change resulting from
Class C Share transactions 60,537 $ 537,494 77,908 $ 755,850
Net change resulting from
share transactions 1,579,068 $ 14,208,760 1,866,296 $ 18,388,554
</TABLE>
(a) For the period from July 1, 1997 (date of initial public offering)
to November 30, 1997.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE-Federated Global Investment Management Corp. is the
Fund's investment adviser (the "Adviser"). The Advisory fee is
contingent upon the grant of certain exemptive relief from the SEC. If
the Fund were paying or accruing the advisory fee, the Fund would be
able to pay up to 1.25% of its average daily net assets which are
invested in individual stocks, bonds or money market investments, and
not on those assets invested in shares of the underlying funds. If an
asset allocation fee were to be charged to the Fund, it could range up
to an annual fee of 0.20% of the average daily net assets invested in
the underlying funds. The Fund did not pay or accrue the asset
allocation fee during the period.
ADMINISTRATIVE FEE-Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with
administrative personnel and services. The fee paid to FServ is based
on the level of average aggregate daily net assets of all funds advised
by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A, Class
B, and Class C Shares. The Plan provides that the Fund may incur
distribution expenses according to the following schedule annually, to
compensate FSC.
PERCENTAGE OF
AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
The distributor may voluntarily choose to waive any portion of its fee.
The distributor can modify or terminate this voluntary waiver at any
time at its sole discretion. The Class A Shares did not pay or accrue
the 12b-1 fee during the fiscal year ended November 30, 1998, 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 Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
shares for the period. The fee paid to FSSC is used to finance certain
services for shareholders and to maintain shareholder accounts. FSSC
may voluntarily choose to waive any portion of its fee. FSSC can modify
or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-FServ,
through its subsidiary, FSSC, serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES-Organizational expenses of $42,732 were
borne initially by Adviser. The Fund has reimbursed the Adviser for
these expenses. These expenses have been deferred and are being
amortized over the five-year period following the Fund's effective
date. For the year ended November 30, 1998, the Fund expensed $9,329
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, for the year
ended November 30, 1998, were as follows:
PURCHASES $21,088,586
SALES $ 7,505,557
6. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
Administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
7. SUBSEQUENT EVENT
On January 7, 1999, the Adviser, Federated Global Research Corp.,
changed its name to Federated Global Investment Management Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated International
Growth Fund (a portfolio of World Investment Series, Inc.) as of
November 30, 1998, and the related statement of operations for the year
then ended, the statement of changes in net assets and financial
highlights for the year then ended and for the period from July 1, 1997
(commencement of operations) to November 30, 1997. These financial
statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated International Growth Fund of World
Investment Series, Inc. at November 30, 1998, and the results of its
operations for the year then ended, the changes in its net assets and
financial highlights for the year then ended and for the period from
July 1, 1997 (commencement of operations) to November 30, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487739
Cusip 981487721
Cusip 981487713
G02270-01 (1/99)
[Graphic]
[Graphic]
Federated Investors
[Graphic]
Federated International High Income Fund
3rd Annual Report
November 30, 1998
ESTABLISHED 1996
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated International High Income Fund was created in 1996, and
I am pleased to present its third Annual Report. This report covers
the 12-month reporting period from December 1, 1997 through
November 30, 1998. It begins with an interview with Robert M. Kowit,
Vice President, who co-manages the fund with Micheal W. Casey,
Vice President, both of Federated Global Investment Management Corp.
(formerly, Federated Global Research Corp.). Following their
discussion, covering international economic and market conditions and
fund strategy, are two additional items of shareholder interest. First
is a complete listing of the fund's international bond investments, and
second is the publication of the fund's financial statements.
The fund offers shareholders significant income opportunities from a
select portfolio of carefully researched international bonds issued by
companies and governments outside of the U.S.-primarily in the
emerging markets.* At the end of the reporting period, the fund's more
than $89 million in assets were invested in 65 government bonds and 49
international corporate issues across 37 countries.
A strong income stream helped temper a decline in the fund's net asset
value, which was caused by price declines in many troubled emerging
market countries. While negative, the fund's returns were considerably
better than the average emerging markets bond fund and the J. P. Morgan
Emerging Market Bond Index.** Individual share class total return
performance for the 12-month reporting period, including income
distributions, follows.***
TOTAL NET ASSET
RETURN INCOME VALUE CHANGE
Class A Shares (5.95%) $0.962 $9.50 to $7.99 = (16%)
Class B Shares (6.67%) $0.897 $9.50 to $7.99 = (16%)
Class C Shares (6.67%) $0.897 $9.50 to $7.99 = (16%)
* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
** 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. Investments cannot be made
in an index.
*** Performance quoted is based on net asset value, represents past
performance and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the 12-month reporting period, based on offering price
(i.e., less any applicable sales charge), for Class A, B, and C Shares
were (10.20%), (11.30%), and (7.51%), respectively.
If you are not already doing so, I invite you to join the many
shareholders who reinvest their monthly dividends and add to their
accounts on a regular 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 in the fund.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
INVESTMENT REVIEW
[Graphic]
Robert M. Kowit
Vice President
Federated Global Investment Management Corp.
[Graphic]
Micheal W. Casey
Vice President
Federated Global Investment Management Corp.
[Graphic]
WHAT IS YOUR REVIEW OF THE 12-MONTH REPORTING PERIOD, WHICH WAS A SOUND
YEAR FOR THE DEVELOPED BOND MARKETS AND A VERY DIFFICULT YEAR FOR THE
EMERGING MARKETS?
After the Asian crisis of 1997, the emerging bond markets recovered
very well at the start of 1998. It was not until August of 1998, when
Russia defaulted on its domestic debt, that the damage was done.
Hedge funds and proprietary trading desks that had purchased Russian
treasury bills with borrowed money were forced to sell other assets to
meet margin calls. Dealers were afraid to carry any positions, which
caused prices to rapidly spiral downward. Investors feared that
countries like Brazil would have difficulty rolling over short-term
debt and began aggressively selling Latin American assets.
All of this resulted in one of the worst periods in the history of
emerging market debt. The yield spread of the emerging market index was
approximately 400 basis points early in the year, widening to
1700 basis point in October 1998, and ending the year at approximately
1100 basis points.
[Graphic]
IN THIS ENVIRONMENT, HOW DID FEDERATED INTERNATIONAL HIGH INCOME FUND
PERFORM FOR SHAREHOLDERS OVER THE 12-MONTH REPORTING PERIOD ENDED
NOVEMBER 30, 1998?
For the fiscal year ended November 30, 1998, the total returns, based
on net asset value, for Class A, B, and C Shares were (5.95%), (6.67%),
and (6.67%), respectively.* Although negative, these returns were
considerably better than the (15.31%) total return of the fund's peer
group, the Lipper Emerging Market Debt Funds Average.** The fund's
returns were also better than the (9.13%) return of emerging market
bonds as measured by the J. P. Morgan Emerging Market Bond 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 12-month reporting period,
based on offering price (i.e., less any applicable sales charge), for
Class A, B, and C Shares were (10.20%), (11.30%), and (7.51%),
respectively.
** Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated. Lipper figures do not take sales
charges into account.
[Graphic]
WHILE THE FUND'S TOTAL RETURN HAS BEEN IMPACTED BY A SHARE PRICE THAT
REFLECTS DECLINING PRICES IN THE EMERGING MARKETPLACE, THE FUND
CONTINUED TO PAY A HIGH LEVEL OF INCOME. WHAT WERE THE FUND'S INCOME
DISTRIBUTIONS DURING THE 12-MONTH REPORTING PERIOD ENDED NOVEMBER 30, 1998?
The fund paid a very healthy income stream over the reporting period
totaling $0.962 per share for Class A Shares, $0.897 per share for
Class B Shares, and $0.897 per share for Class C Shares.
[Graphic]
THE FUND MAINTAINS A GENERAL ALLOCATION OF 20%-30% IN THE DEVELOPED
MARKETS AND 70%-80% IN EMERGING MARKETS. WHAT ADJUSTMENTS HAVE YOU MADE
TO THE FUND'S ALLOCATION AND WHY?
Before the Russian crisis, the fund's allocations to developed markets
were increased from approximately 20% to just over 30%. This shift
helped the relative performance of the fund, as developed market bonds
performed very well during the crisis, moving up in value as investors
sought high-quality securities as a safe haven. As emerging markets
began to stabilize, the fund's developed market allocation was reduced
to just over 20%.
[Graphic]
WHAT WERE THE FUND'S TOP FIVE INTERNATIONAL GOVERNMENT AND CORPORATE
HOLDINGS AS OF NOVEMBER 30, 1998?
The fund's top five international government holdings were:
PERCENTAGE OF
COUNTRY/COUPON/MATURITY NET ASSETS
Bulgaria, (emerging), 6.69%, due 7/28/2011 2.72%
Ecuador, (emerging), 11.25%, due 4/25/2002 2.31%
Argentina, (emerging), 11.38%, due 1/30/2017 2.27%
Mexico, (emerging), zero coupon,
due 8/5/1999 2.26%
Colombia, (emerging), 8.63%, due 4/1/2008 2.20%
TOTAL 11.76%
The fund's top five international corporate holdings were:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME/COUPON/MATURITY COUNTRY NET ASSETS
<S> <C> <C>
Clearnet Communications Inc., zero coupon, due 8/13/2007 Canada (developed) 1.85%
Companhia Vale DoRio Doce, 10.00%, due 4/2/2004 Brazil (emerging) 1.79%
AES China Generating Co., 10.125%,
due 12/15/2006 China (emerging) 1.60%
Philippine Long Distance Telephone Co., 10.625%, due
6/2/2004 Philippines (emerging) 1.49%
Grupo Industrial Durango SA de CV, 12.625%, due 8/1/2003 Mexico (emerging) 1.33%
Total 8.06%
</TABLE>
[Graphic]
AS WE BEGIN A NEW YEAR, TO WHAT EXTENT WOULD MUCH-NEEDED REFORMS IMPACT
THE DIRECTION OF THE EMERGING BOND MARKET IN 1999?
Reforms in Asia that began in 1997 have yet to fully take hold, but
some countries such as Korea have made excellent progress. Yield
spreads on Korean bonds, which were as wide as 1000 basis points, are
now back to pre-crisis levels of just over 300 basis points.
Latin America will focus on Brazil and its efforts to walk the fine
line of following International Monetary Fund mandated reforms and the
political pressures of an economy in recession.
Central and Eastern Europe, with the exception of Russia, should remain
on course and continue to provide positive surprises. Russia will
require several years to work out a full debt restructuring package.
The impact should net out to a slightly positive market environment.
There is still enough risk premium in the market to adequately
compensate investors. At the same time, the amount of leveraged, or
"hot," money in the markets has been reduced by an order of magnitude.
Any shocks to the markets will probably be met with a much less drastic
market sell off than was experienced in 1998.
[Graphic]
FEDERATED INTERNATIONAL HIGH INCOME FUND GIVES INCOME-ORIENTED
INVESTORS A WAY TO COMPLEMENT THEIR HIGH-YIELD DOMESTIC BOND HOLDINGS
WITH HIGH-YIELD INTERNATIONAL BONDS. WHILE THE FUND HAS CONTINUED TO
PRODUCE A HIGH LEVEL OF MONTHLY INCOME, DO THE MARKET'S DEPRESSED PRICE
LEVELS PRESENT OPPORTUNITIES FOR LONG-TERM PRICE APPRECIATION?
We believe so. Emerging markets have a reasonable risk premium, and
investors are being well compensated for their exposure. More
importantly, the fund has shown that its discipline of aggressive
diversification, and the allocation of a portion of its assets to
developed markets, successfully moderates volatility during extreme
market shocks.
WHERE IN THE WORLD SHOULD
YOU INVEST?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic]
FEDERATED EMERGING MARKETS FUND
[Graphic]
FEDERATED EUROPEAN GROWTH FUND
[Graphic]
FEDERATED GLOBAL EQUITY INCOME FUND
[Graphic]
FEDERATED GLOBAL FINANICAL SERVICES FUND
[Graphic]
FEDERATED INTERNATIONAL GROWTH FUND
[Graphic]
FEDERATED INTERNATIONAL EQUITY FUND
[Graphic]
FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL INCOME FUND
[Graphic]
FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic]
FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic]
FEDERATED WORLD UTILITY FUND
Federated employs highly qualified, experienced managers in global
investing to select countries and companies outside the U.S. for long-
term growth potential.
Call your investment representative to buy shares of 10 international
equity funds and 2 international income funds from Federated
Securities Corp.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL
1-800-341-7400 TO ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU
INVEST.
Foreign investing involves special risks including
currency risks, increased volatility of foreign
securities, and differences in auditing and other financial
standards.
FEDERATED INTERNATIONAL HIGH INCOME FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of
$10,000* in the Federated International High Income Fund
(Class A Shares) (the "Fund") from October 2, 1996 (start of
performance) to November 30, 1998 compared to the J.P.
Morgan Emerging Markets Bond Index Plus (JPM-EMB).+
[Graphic representation omitted. Please see Appendix A19 .]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund
after deducting the maximum sales charge of 4.50% ($10,000
investment minus $450 sales charge = $ 9,550). The Fund's
performance assumes the reinvestment of all dividends and
distributions. The JPM-EMB has been adjusted to reflect
reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The JPM-EMB is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated International High Income Fund (Class B Shares) (the
"Fund") from October 2, 1996 (start of performance) to November 30,
1998 compared to the J.P. Morgan Emerging Markets Bond Index Plus (JPM-
EMB).+
[Graphic representation omitted. Please see Appendix A20 .]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a contingent deferred sales charge of 4.00% on
any redemption less than three years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The JPM-EMB has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPM-EMB is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL HIGH INCOME FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated International High Income Fund (Class C Shares) (the
"Fund") from October 2, 1996 (start of performance) to November 30,
1998 compared to the J.P. Morgan Emerging Markets Bond Index Plus (JPM-
EMB).+
[Graphic representation omitted. Please see Appendix A21.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The JPM-EMB has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The JPM-EMB is not adjusted to reflect sales charges, expenses, or other
fees that the Securities and Exchange Commission requires to be reflected
in the Fund's performance. The index is unmanaged.
FEDERATED INTERNATIONAL HIGH INCOME FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
CORPORATE BONDS-38.4%
BEVERAGE & TOBACCO-1.2%
750,000 (b) Remy Cointreau SA, Series 144A, 10.00%, 7/30/2005 $ 772,664
300,000 Remy Cointreau SA, Sr. Note, Series REGS, 10.00%, 7/30/2005 309,066
Total 1,081,730
BUILDING & DEVELOPMENT-1.2%
500,000 Cemex SA, Bond, 12.75%, 7/15/2006 563,750
600,000 Corporacion GEO, SA de CV, Note, 10.00%, 5/23/2002 519,000
Total 1,082,750
CONGLOMERATE-1.0%
1,000,000,000 Dharmala Intiutama, 25.00%, 2/5/1999 13,468
1,000,000,000 (a) (b) Dharmala Intiutama, Promissory Note, 2/24/1999 13,468
350,000 Mechala Group Jamaica, Company Guarantee, Series REGs, 12.00%,
2/15/2002 246,750
1,000,000 Mechala Group Jamaica, Note, Series B, 12.75%, 12/30/1999 705,000
Total 978,686
CONSUMER PRODUCTS-1.3%
1,500,000 (b) Mastellone Hermanos SA, Bond, 11.75%, 4/1/2008 1,215,000
CONTAINER & GLASS PRODUCTS-0.8%
750,000 Vicap SA, Sr. Note, 11.375%, 5/15/2007 680,625
FINANCIAL INTERMEDIARIES-3.4%
550,000 Bancomext Trust, Bank Guarantee, 11.25%, 5/28/2006 581,075
1,260,000 Brierley Investments Ltd., Bond, 9.00%, 3/15/2002 691,560
1,600,000 Depfa-Bank, 5.75%, 3/4/2009 1,041,045
750,000 Korea Development Bank, Bond, 7.375%, 9/17/2004 669,375
288,000 Nykredit, Mtg. Bond, 8.00%, 10/1/2029 45,842
1,098,333,333 Polysindo International Finance Co. BV, 3/16/2000 14,792
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
CORPORATE BONDS-CONTINUED
FINANCIAL INTERMEDIARIES-CONTINUED
100,555,556 Polysindo International Finance Co. BV, 3/23/1999 $ 1,354
101,111,111 Polysindo International Finance Co. BV, 9/23/1999 1,362
Total 3,046,405
FOREST PRODUCTS-3.7%
1,000,000 Advance Agro Public Co., Unsub., 13.00%, 11/15/2007 820,000
1,300,000 Grupo Industrial Durango SA de CV, 12.625%, 8/1/2003 1,189,500
800,000 Indah Kiat Intl. Finance, Company Guarantee, 11.875%, 6/15/2002 598,000
950,000 Indah Kiat Intl. Finance, Company Guarantee, 12.50%, 6/15/2006 731,500
Total 3,339,000
INDUSTRIAL PRODUCTS & EQUIPMENT-4.7%
1,500,000 (b) CIA International Telecommunications, Note, 10.375%, 8/1/2004 1,125,158
750,000 (b) Imasac, SA, 11.00%, 5/2/2005 528,750
1,000,000 OPP Petroquimica, 11.50%, 2/23/2004 940,000
500,000 (b) TM Group Holdings, Sr. Note, 11.00%, 5/15/2008 512,500
1,750,000 (b) Texon International PLC, Sr. Note, Series 144A, 10.00%, 2/1/2008 887,147
500,000 Texon International PLC, Sr. Note, Series REG S, 10.00%, 2/1/2008 253,470
Total 4,247,025
MACHINERY & EQUIPMENT-1.2%
1,750,000 (b) Sirona Dental System, 9.125%, 7/15/2008 1,047,039
METALS & MINING-2.3%
1,650,000 Companhia Vale Do Rio Doce, Note, 10.00%, 4/2/2004 1,600,500
500,000 Grupo Minero Mexico, 9.25%, 4/1/2028 442,500
Total 2,043,000
OIL & GAS-1.6%
450,000 Invergas SA, Note, 12.50%, 12/16/1999 450,000
450,000 MetroGas SA, Sr. Note, 12.00%, 8/15/2000 468,000
500,000 (b) Petroleos Mexicanos, Series 144A, 9.375%, 12/2/2008 500,000
Total 1,418,000
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
CORPORATE BONDS-CONTINUED
STEEL-0.8%
700,000 Tubos de Acero de Mexico SA, Unsub., 13.75%, 12/8/1999 $ 715,400
SURFACE TRANSPORTATION-2.0%
800,000 Air Canada, 7.25%, 10/1/2007 519,121
450,000,000 Societe Nationale Des Chemins, Sr. Unsub., 9.20%, 6/22/2006 275,666
2,600,000 Trans Caledon Tunnel Authority, Foreign Gov't. Guarantee,
13.00%, 9/15/2010 372,456
1,100,000 (b) Zhuhai Highway, Sub. Note, 11.50%, 7/1/2008 594,000
Total 1,761,243
TELECOMMUNICATIONS & CELLULAR-8.4%
500,000 CANTV Finance Ltd., Company Guarantee, 9.25%, 2/1/2004 352,500
4,100,000 Clearnet Communications Inc., Sr. Disc. Note, 8/13/2007 1,660,708
500,000 (b) Globo Communicacoes Part, 10.625%, 12/5/2008 370,000
1,000,000 Globo Communicacoes Part, Sr. Note, 10.625%, 12/5/2008 740,000
185,000 Grupo Televisa SA, Sr. Disc. Note, 0/13.25%, 5/15/2008 141,988
3,200,000 Microcell Telecommunications, Sr. Disc. Note, 0/11.125%,
10/15/2007 1,180,715
500,000 Netia Holdings, Company Guarantee, 10.25%, 11/1/2007 380,000
1,300,000 Philippine Long Distance Telephone Co., Deb., 10.625%, 6/2/2004 1,339,000
1,000,000 Tricom SA, Sr. Note, 11.375%, 9/1/2004 835,000
750,000 (b) TV Bandeirantes, Note, 12.875%, 5/15/2006 427,500
Total 7,427,411
UTILITIES-4.8%
2,150,000 AES China Generating Co., Note, 10.125%, 12/15/2006 1,429,750
800,000 Bridas Corp., Sr. Note, 12.50%, 11/15/1999 829,000
500,000 (b) Cathay International Ltd., 13.00%, 4/15/2008 175,000
1,000,000 (b) CIA Saneamento Basico, Bond, 10.00%, 7/28/2005 795,000
400,000 (b) Monterrey Power SA de CV, Sec. Fac. Bond, Series 144A,
9.625%, 11/15/2009 322,000
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
CORPORATE BONDS-CONTINUED
UTILITIES-CONTINUED
500,000 National Power Co. PLC, 8.00%, 2/21/2007 $ 355,112
500,000 National Power Corp., Foreign Gov't. Guarantee, 8.40%,
12/15/2016 420,000
Total 4,325,862
TOTAL CORPORATE BONDS (IDENTIFIED COST $41,897,655) 34,409,176
SOVEREIGN GOVERNMENTS-56.9%
2,000,000 Argentina Global, Bond, 11.375%, 1/30/2017 2,030,000
1,500,000 Brazil, Foreign Gov't. Guarantee, 6.125%, 4/15/2024 971,250
3,350,000 Bulgaria, Deb., 6.6875%, 7/28/2011 2,437,125
1,750,000,000 Buoni Poliennali Del Tes, Bond, 10.50%, 9/1/2005 1,434,693
2,250,000 Colombia, Republic of, Unsub., 8.625%, 4/1/2008 1,968,750
35,000,000 Czech Republic, Bond, 14.85%, 2/6/2003 1,383,014
300,000 Denmark, Unsub., 11.625%, 1/23/2000 522,164
3,000,000 Egypt Treasury Bill, 12/10/1998 878,985
350,000,000 European Bank for Reconstruction and Development, Bond,
10.00%, 5/2/2002 269,663
200,000 European Investment Bank, Bond, 12.00%, 2/15/2000 351,646
100,000,000 Government of Hungary, 16.50%, 7/24/1999 452,026
75,000,000 Hellenic Republic, Bond, 12.70%, 12/31/2003 264,997
130,000,000 Hellenic Republic, Bond, 13.10%, 10/23/2003 463,666
50,000,000 Hellenic Republic, Bond, 12.40%, 11/26/2003 177,104
100,000,000 Hellenic Republic, Bond, 13.30%, 12/27/2002 358,422
50,000,000 Hellenic Republic, Bond, 8.80%, 6/19/2007 187,649
225,000,000 Hellenic Republic, Bond, 9.80%, 3/21/2000 782,348
172,500,000 Hungary, Bond, 14.00%, 12/12/2002 760,309
100,000,000 Hungary, Bond, 14.00%, 6/24/2002 441,563
100,000,000 Hungary, Bond, 16.50%, 4/12/1999 452,800
7,500,000 International Finance Corp., Note, 11.75%, 8/15/1999 192,676
1,000,000 Islamic Republic of Pakistan, Bond, 9.70%, 5/30/2000 450,000
1,000,000 Islamic Republic of Pakistan, Deb., 11.50%, 12/22/1999 480,000
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
<C> <S> <C>
SOVEREIGN GOVERNMENTS-CONTINUED
1,300,000,000 Italy (Republic of), Deb., 10.50%, 4/1/2005 $ 1,051,686
750,000 Jamaica, Note, 10.875%, 6/10/2005 645,000
2,000,000 Kazakhstan, Note, 8.375%, 10/2/2002 1,630,000
2,630,000 Kingdom of Denmark, Bond, 7.00%, 11/10/2024 513,358
1,500,000 Lesotho, Bond, 12.50%, 4/15/2002 236,090
5,000,000 Mexican Cetes, 1/14/1999 480,529
7,000,000 Mexican Cetes, 2/11/1999 653,118
5,000,000 Mexican Cetes, 5/6/1999 434,978
25,000,000 Mexican Cetes, 8/5/1999 2,026,429
500,000 New South Wales Treasury, Local Gov't. Guarantee, 12.60%,
5/1/2006 454,806
700,000 Netherlands Government, Bond, 8.25%, 2/15/2007 471,047
1,000,000 Netherlands Government, Bond, 8.50%, 6/1/2006 673,185
5,000,000 Norwegian Government, Bond, 9.50%, 10/31/2002 761,269
750,000 Panama, 8.25%, 4/22/2008 716,250
500,000 Panama, Bond, 8.875%, 9/30/2027 472,500
400,000 Philippines, 8.875%, 4/15/2008 392,252
4,250,000 Poland Govt. Bond, 15.00%, 10/12/1999 1,226,402
1,000,000 Poland Govt. Bond, 12.00%, 6/12/2002 287,991
4,000,000 Poland Govt .Bond, 12.00%, 6/12/2003 1,169,765
1,500,000 Poland, Republic of, Bond, 12.00%, 2/12/2002 431,986
1,000,000 Republic of Argentina, Global Bond Deb., 9.75%, 9/19/2027 905,000
1,000,000 Republic of Brazil, 10.125%, 5/15/2027 758,440
1,300,000 Republic of Brazil, Bond, 9.375%, 4/7/2008 1,066,000
2,350,000 Republic of Ecuador, 11.25%, 4/25/2002 2,068,000
1,750,000 Republic of Korea, 8.875%, 4/15/2008 1,753,063
3,500,000 Republic of South Africa, 13.50%, 9/15/2015 530,280
2,000,000 Republic of South Africa, Bond, 12.50%, 1/15/2002 319,079
2,000,000 Russia, 10.00%, 6/26/2007 562,500
1,750,000 (b) Russian Federation, 10.00%, 6/26/2007 485,625
</TABLE>
FEDERATED INTERNATIONAL HIGH INCOME FUND
<TABLE>
<CAPTION>
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
OR PRINCIPAL
VALUE
<C> <S> <C>
SOVEREIGN GOVERNMENTS-CONTINUED
2,000,000 (b) Russian Federation, 9.375%, 3/31/2005 $ 453,300
6,000,000 Swedish Government, Deb., 9.00%, 4/20/2009 1,017,737
5,250,000 Telkom SA Ltd., 10.00%, 3/31/2008 633,860
200,000 Turkey, 10.00%, 5/23/2002 192,900
1,300,000 Turkey, 10.00%, 9/19/2007 1,215,500
650,000 Turkey, Bond, 9.875%, 2/23/2005 611,000
600,000 Turkey, Deb., 11.50%, 4/27/1999 601,500
1,500,000 United Mexican States, 11.375%, 9/15/2016 1,587,480
1,000,000 United Mexican States, 8.625%, 3/12/2008 956,250
500,000 United Mexican States, Bond, 9.875%, 1/15/2007 505,000
2,800,000 Venezuela, Bond, 9.25%, 9/15/2027 1,561,000
1,000,000 (b) Venezuela, Sr. Unsub., 9.125%, 6/18/2007 732,500
TOTAL SOVEREIGN GOVERNMENTS (IDENTIFIED COST
$58,365,867) 50,955,505
(C)REPURCHASE AGREEMENT-1.2%
$ 1,095,000 Westdeutsche Landesbank Girozentrale, 5.35%, dated 11/30/1998,
due 12/1/1998 (AT AMORTIZED COST) 1,095,000
TOTAL INVESTMENTS (IDENTIFIED COST $101,358,522(D) $ 86,459,681
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1998, these securities
amounted to $10,956,651 which represents 12.2% 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
$101,372,272. The net unrealized depreciation of investments on a
federal tax basis amounts to $14,912,591 which is comprised of
$1,236,296 appreciation and $16,148,887 depreciation at November 30,
1998.
Note: The categories of investments are shown as a percentage of net assets
($89,616,536) at November 30, 1998.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $101,358,522 and tax
cost $101,372,272) $ 86,459,681
Cash 4,279
Cash denominated in foreign currencies (identified cost
$885,992) 886,076
Income receivable 3,001,774
Receivable for investments sold 1,062,218
Receivable for shares sold 533,404
Deferred organizational costs 31,251
Total assets 91,978,683
LIABILITIES:
Payable for investments purchased $ 1,500,000
Payable for shares redeemed 180,738
Income distribution payable 553,425
Payable for taxes withheld 17,047
Accrued expenses 110,937
Total liabilities 2,362,147
NET ASSETS for 11,212,599 shares outstanding $ 89,616,536
NET ASSETS CONSIST OF:
Paid in capital $ 107,861,938
Net unrealized depreciation of investments and translation of assets and
liabilities in foreign currency (14,884,107)
Accumulated net realized loss on investments and foreign
currency transactions (2,556,640)
Accumulated distributions in excess of net investment income (804,655)
Total Net Assets $ 89,616,536
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER
SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($11,052,263 / 1,382,758 shares
outstanding) $7.99
Offering Price Per Share (100/95.50 of $7.99)* $8.37
Redemption Proceeds Per Share $7.99
CLASS B SHARES:
Net Asset Value Per Share ($70,458,153 / 8,815,595 shares
outstanding) $7.99
Offering Price Per Share $7.99
Redemption Proceeds Per Share (94.50/100 of $7.99)* $7.55
CLASS C SHARES:
Net Asset Value Per Share ($8,106,120 / 1,014,246 shares
outstanding) $7.99
Offering Price Per Share $7.99
Redemption Proceeds Per Share (99.00/100 of $7.99)* $7.91
</TABLE>
* See "What Do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of foreign taxes withheld of $27,173) $ 9,803,327
EXPENSES:
Investment advisory fee $ 698,226
Administrative personnel and services fee 185,000
Custodian fees 66,455
Transfer and dividend disbursing agent fees and expenses 112,195
Directors'/Trustees' fees 1,415
Auditing fees 18,254
Legal fees 10,398
Portfolio accounting fees 86,890
Distribution services fee-Class B Shares 480,528
Distribution services fee-Class C Shares 62,731
Shareholder services fee-Class A Shares 24,274
Shareholder services fee-Class B Shares 160,176
Shareholder services fee-Class C Shares 20,911
Share registration costs 39,539
Printing and postage 41,283
Insurance premiums 4,015
Taxes 2,700
Miscellaneous 16,820
Total expenses 2,031,810
Waivers and reimbursements-
Waiver of investment advisory fee $ (698,226)
Reimbursement of other operating expenses (114,024)
Total waivers and reimbursements (812,250)
Net expenses 1,219,560
Net investment income 8,583,767
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized loss on investments and foreign currency transactions (Net
of foreign taxes withheld $16,200) (3,462,957)
Net change in unrealized depreciation of investments and translation of
assets and liabilities in foreign currency (11,762,681)
Net realized and unrealized loss on investments and foreign currency (15,225,638)
Change in net assets resulting from operations $ (6,641,871)
</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>
YEAR ENDED
NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS-
Net investment income $ 8,583,767 $ 3,157,444
Net realized loss on investments and foreign currency
transactions ($(2,542,891) and $401,272, respectively, as
computed for federal tax purposes) (3,462,957) (127,533)
Net change in unrealized depreciation of investments and
translation of assets and liabilities in foreign currency (11,762,681) (3,203,065)
Change in net assets resulting from operations (6,641,871) (173,154)
DISTRIBUTIONS TO SHAREHOLDERS-
Distributions from net investment income
Class A Shares (1,068,975) (371,540)
Class B Shares (6,559,668) (2,435,667)
Class C Shares (854,790) (217,775)
Distributions from net realized gains on investments and
foreign currency transactions
Class A Shares (2,557) -
Class B Shares (14,211) -
Class C Shares (1,879) -
Change in net assets resulting from distributions to
shareholders (8,502,080) (3,024,982)
SHARE TRANSACTIONS-
Proceeds from sale of shares 59,262,958 65,492,534
Net asset value of shares issued to shareholders in payment
of distributions declared 2,695,479 1,066,512
Cost of shares redeemed (22,236,754) (4,400,916)
Change in net assets resulting from share transactions 39,721,683 62,158,130
Change in net assets 24,577,732 58,959,994
NET ASSETS:
Beginning of period 65,038,804 6,078,810
End of period $ 89,616,536 $ 65,038,804
</TABLE>
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.50 $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.94 1.18 0.17 (b)
Net realized and unrealized gain/(loss) on investments (1.49) (0.78) 0.13
Total from investment operations (0.55) 0.40 0.30
LESS DISTRIBUTIONS
Distributions from net investment income (0.96) (1.02) (0.17)
Distributions in excess of net investment income - - (0.01) (e)
Distributions from net realized gain on investments and
foreign currency transactions (0.00)(f) - -
Total distributions (0.96) (1.02) (0.18)
NET ASSET VALUE, END OF PERIOD $ 7.99 $ 9.50 $10.12
TOTAL RETURN(C) (5.95%) 4.02% 2.99%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.82% 0.75% 0.75% *
Net investment income 11.07% 10.54% 9.19% *
Expense waiver/reimbursement(d) 0.99% 2.03% 8.46% *
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $11,052 $9,073 $599
Portfolio turnover 128% 93% 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 2, 1996 (date of initial
public offering) to November 30, 1996.
(b) Per share information is based on the average number of shares
outstanding.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) 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.
(f) Per share amount does not round to $(0.01).
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.50 $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.89 0.96 0.18 (b)
Net realized and unrealized gain/(loss) on investments (1.50) (0.63 ) 0.11
Total from investment operations (0.61) 0.33 0.29
LESS DISTRIBUTIONS
Distributions from net investment income (0.90) (0.95 ) (0.17)
Distributions from net realized gain on investments and
foreign currency transactions (0.00) (e) - -
Total distributions (0.90) (0.95 ) (0.17)
NET ASSET VALUE, END OF PERIOD $ 7.99 $ 9.50 $10.12
TOTAL RETURN(C) (6.67% ) 3.24 % 2.87%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.57% 1.50 % 1.50% *
Net investment income 10.37% 9.73 % 8.92% *
Expense waiver/reimbursement(d) 0.99% 2.03 % 8.46% *
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $70,458 $49,929 $5,397
Portfolio turnover 128% 93 % 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 2, 1996 (date of initial
public offering) to November 30, 1996.
(b) Per share information presented is based upon the average number of
shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Per share amount does not round to $(0.01).
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.50 $10.12 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.85 0.98 0.17 (b)
Net realized and unrealized gain/(loss) on investments (1.46) (0.65) 0.12
Total from investment operations (0.61) 0.33 0.29
LESS DISTRIBUTIONS
Distributions from net investment income (0.90) (0.95) (0.17)
Distributions from net realized gain on investments and
foreign currency transactions (0.00) (e) - -
Total distributions (0.90) (0.95) (0.17)
NET ASSET VALUE, END OF PERIOD $ 7.99 $ 9.50 $10.12
TOTAL RETURN(C) (6.67% ) 3.24% 2.87%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.57% 1.50% 1.50% *
Net investment income 10.35% 10.04% 8.67% *
Expense waiver/reimbursement(d) 0.99% 2.03% 8.46% *
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $8,106 $6,037 $83
Portfolio turnover 128% 93% 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) Per share information presented is based upon the average number of
shares outstanding.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and
net investment income ratios shown above.
(e) Per share amount does not round to $(0.01).
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL HIGH INCOME FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
portfolios. The financial statements included herein are only those of
Federated International High Income Fund (the "Fund"), a diversified
portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to seek a high level of
current income.
The Fund offers three classes of shares: Class A Shares, Class B
Shares, and Class C Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS-U.S. government securities, listed corporate
bonds, (other fixed income and asset-backed securities), and unlisted
securities and private placement securities are generally valued at
the mean of the latest bid and asked price as furnished by an
independent pricing service. Short-term securities are valued at the
prices provided by an independent pricing service. However, short-term
securities with remaining maturities of sixty days or less at the time
of purchase may be valued at amortized cost, which approximates fair
market value. With respect to valuation of foreign securities, trading
in foreign cities may be completed at times which vary from the closing
of the New York Stock Exchange. Therefore, foreign securities are
valued at the latest closing price on the exchange on which they are
traded prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S.
Dollars at the foreign exchange rate in effect at noon, eastern time,
on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS-It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions. The following
reclassifications have been made to the financial statements.
INCREASE/ (DECREASE)
ACCUMULATED DISTRIBUTIONS
ACCUMULATED NET IN EXCESS OF
REALIZED LOSS NET INVESTMENT INCOME PAID-IN CAPITAL
$523,692 $(501,910) $(21,782)
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES-It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
At November 30, 1998, the Fund, for federal tax purposes, had a capital
loss carryforward of $2,542,891, which will reduce the Fund's taxable
income arising from future net realized gains 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 in 2006.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS-The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire
exposure to foreign currencies; whereas, contracts to sell are used to
hedge the Fund's securities against currency fluctuations. Risks may
arise upon entering these transactions from the potential inability of
counterparts to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates.
The foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded
for financial statement purpose as unrealized until the settlement
date. At November 30, 1998, the Fund had no outstanding foreign
currency commitments.
FOREIGN CURRENCY TRANSLATION-The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the
rate of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that
such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by
the custodian bank. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates
on investments from the fluctuations arising from changes in market
prices of securities held. Such fluctuations are included with the net
realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES-Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for
resale, at the issuer's expense either upon demand by the Fund or in
connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may
be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at November
30, 1998 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Cathay International Ltd., 13.00% 4/3/1998 $ 505,000
CIA International Telecommunications,
Note, 10.375% 3/19/1998-3/20/1998 1,377,776
CIA Saneamento Basico, Bond, 10.00% 7/23/1997-10/14/1997 1,007,500
Dharmala Intiutama, Promissory Note 7/22/1997-2/3/1998 374,471
Globo Communicacoes Part, 10.625% 3/12/1998 498,250
Imasac, SA, 11.00% 4/24/1998-8/27/1998 741,060
Mastellone Hermanos, SA, Bond, 11.75% 9/9/1998-9/28/1998 71,806
Monterrey Power SA de CV, Sec. Fac. Bond, Series 144A, 9.625% 10/1/1998 274,325
Petroleos Mexicanos, Series 144A, 9.375% 11/19/1998 500,000
Remy Cointreau SA, Series 144A, 10.00% 7/23/1998 832,954
Russian Federation, 9.375%, 3/24/1998 1,091,236
Russian Federation, 10.00% 6/19/1997-5/19/1998 1,748,820
Sirona Dental System, 9.125% 6/29/1998 964,623
Texon International PLC, Sr. Note, Series 144A, 10.00% 6/25/1998 988,125
TM Group Holdings, Sr. Note, 11.00% 5/7/1998 500,000
TV Bandeirantes, Note, 12.875% 5/8/1998 745,403
Venezuela, Sr. Unsub., 9.125% 6/10/1997-2/17/1998 1,009,800
Zhuhai Highway, Sub Note, 11.50% 10/1/1996-3/18/1998 1,168,776
</TABLE>
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($ 0.001 per share) authorized
were as follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 100,000,000
TOTAL 300,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 936,322 $ 7,944,196 947,873 $ 9,368,221
Shares issued to shareholders in
payment of distributions declared 45,021 382,483 16,193 159,561
Shares redeemed (553,678) (4,809,928) (68,227) (673,400)
Net change resulting from Class A
Share transactions 427,665 $ 3,516,751 895,839 $ 8,854,382
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 4,969,213 $ 44,146,311 4,965,419 $ 49,422,176
Shares issued to shareholders in
payment of distributions declared 224,076 1,913,388 80,852 796,727
Shares redeemed (1,634,221) (13,647,738) (322,979) (3,166,390)
Net change resulting from Class B
Share transactions 3,559,068 $ 32,411,961 4,723,292 $ 47,052,513
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 787,334 $ 7,172,451 673,112 $ 6,702,138
Shares issued to shareholders in
payment of distributions declared 46,643 399,608 11,256 110,223
Shares redeemed (455,208) (3,779,088) (57,081) (561,126)
Net change resulting from Class C
Share transactions 378,769 $ 3,792,971 627,287 $ 6,251,235
Net change resulting from share
transactions 4,365,502 $ 39,721,683 6,246,418 $ 62,158,130
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 0.85% 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, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A Shares,
Class B Shares, and Class C Shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule
annually, to compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
The distributor may voluntarily choose to waive any portion of its fee.
The distributor can modify or terminate this voluntary waiver at any
time at its sole discretion. For the year ended November 30, 1998,
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 Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
shares for the period. The fee paid to FSSC 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, 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 start-up administrative
service expenses of $48,027 were borne initially by the Adviser. The
Fund has reimbursed the Adviser for these expenses. These expenses have
been deferred and are being amortized over the five-year period
following the Fund's effective date. For the year ended November 30,
1998, the Fund expensed $11,249 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 year ended November 30, 1998, were as follows:
PURCHASES $138,576,975
SALES $ 99,974,586
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or
economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
At November 30, 1998, the diversification of countries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
COUNTRY NET ASSETS COUNTRY NET ASSETS
<S> <C> <C> <C>
Argentina 8.43% Kazakhstan 1.82%
Australia 0.51% Korea 3.00%
Brazil 8.56% Mexico 13.72%
Bulgaria 2.72% Netherlands 1.28%
Canada 3.75% New Zealand 0.77%
China 2.45% Norway 0.85%
Colombia 2.20% Pakistan 1.04%
Czech Republic 1.54% Panama 1.33%
Denmark 1.21% Philippines 2.40%
Dominican Republic 0.93% Poland 3.90%
Ecuador 2.31% Russia 1.68%
Egypt 0.98% Slovakia 0.22%
France 1.51% South Africa 2.33%
Germany 2.33% Sweden 1.14%
Greece 2.49% Thailand 0.92%
Hungary 2.35% Turkey 2.92%
Indonesia 1.52% United Kingdom 2.63%
Italy 2.77% Venezuela 2.95%
Jamaica 1.78%
</TABLE>
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8. SUBSEQUENT EVENT
On January 7, 1999, the Fund's Adviser, Federated Global Research
Corp., changed its name to Federated Global Investment Management
Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated International
High Income Fund (a portfolio of World Investment Series, Inc.) as of
November 30, 1998, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each
of the periods presented therein. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated International High Income Fund of
World Investment Series, Inc. at November 30, 1998, and the results of
its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial
highlights for each of the periods presented therein, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp.
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487762
Cusip 981487754
Cusip 981487747
G01949-01 (1/99)
[Graphic]
[Graphic]
Federated Investors
[Graphic]
Federated International Small Company Fund
3rd Annual Report
November 30, 1998
ESTABLISHED 1996
[Graphic]
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
Federated International Small Company Fund was created in 1996, and I
am pleased to present its third Annual Report. This report covers the
12-month reporting period from December 1, 1997 through November 30,
1998. It begins with an interview with the fund's portfolio manager,
Tracy Stouffer, Vice President of Federated Global Investment
Management Corp. (formerly, Federated Global Research Corp.).
Following her discussion, which covers international economic and
market conditions and fund strategy, are three additional items of
shareholder interest. First is a series of graphs showing the fund's
investment performance. Second is a complete listing of the fund's
investments, and third is the publication of the fund's financial
statements.
This fund is managed to bring shareholders significant long-term
opportunities from a well-researched portfolio of small-cap
international stocks.* At the end of the reporting period, this $385
million fund was invested in more than 200 small-cap stocks in 35
countries across five continents.
Broad diversification and outstanding stock selection continue to be hallmarks
of the fund. During the 12-month reporting period, the fund again delivered
double-digit total return performance. The fund significantly outperformed the
8.76% return of the 57 small-company international funds tracked by Lipper
Analytical Services, Inc.+ Individual share class total return performance for
the 12-month reporting period follows.++
TOTAL NET ASSET
RETURN VALUE INCREASE
Class A Shares 23.23% $14.25 to $17.56 = 23%
Class B Shares 22.25% $14.07 to $17.20 = 22%
Class C Shares 22.26% $14.06 to $17.19 = 22%
* 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.
+ Lipper figures represent the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc.
as falling into the category indicated. Lipper figures do not take sales
charges into account.
++ Performance quoted is based on net asset value, represents past
performance and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the 12-month reporting period, based on offering price
(i.e., less any applicable sales charge), for Class A, B, and C Shares
were 16.45%, 16.75%, and 21.26%, respectively.
While this fund has provided shareholders with very strong returns
since it began operation on February 28, 1996, I want to remind you
that the true measure of the fund's performance is clearly in years
rather than months. There will inevitably be periods of negative short-
term fluctuation, as well as the highly positive returns we have
experienced since the fund's inception.
Thank you for participating in Federated International Small Company
Fund. We hope you are pleased with the fund's continued strong
performance. We will keep you up-to-date on the details of your
investment on a regular basis.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
INVESTMENT REVIEW
[Graphic]
Tracy Stouffer
Vice President
Federated Global
Investment
Management Corp.
[Graphic]
WHAT IS YOUR REVIEW OF THE FUND'S FISCAL YEAR, IN WHICH INTERNATIONAL
SMALL-CAP STOCKS EXPERIENCED A HIGH DEGREE OF VOLATILITY AND PRODUCED
MIXED RETURNS?
As measured by the broader small-cap indices, the past 12 months were
another difficult year for small-cap companies in the U.S. and abroad.
However, the fund was able to benefit from the many themes neglected by
the international small-cap indices, namely outsourcing and personal
consumption. Clearly, the fund was able to identify and participate in
local investment opportunities that the broader market indices missed.
Early movements into Asia also contributed to the fund's positive
performance as the region's small companies slowly recovered to
outpace the region's larger cap companies, particularly in Japan and
New Zealand, as measured by the Morgan Stanley Capital International
("MSCI") country indices.
[Graphic]
ONCE AGAIN, FEDERATED INTERNATIONAL SMALL COMPANY FUND DELIVERED
OUTSTANDING RELATIVE PERFORMANCE. BY HOW MUCH DID THE FUND'S RETURNS
SURPASS THOSE OF THE INTERNATIONAL SMALL-CAP STOCK MARKET AND THE
AVERAGE INTERNATIONAL SMALL-CAP FUND?
For the fiscal year ended November 30, 1998, the fund's total returns,
based on net asset value, were 23.23%, 22.25%, and 22.26% for Class A,
B, and C Shares, respectively.* These returns were three times higher
than the 7.68% return of the small-cap international market, as
represented by the FT-Actuaries/S&P World, ex-U.S., Medium-Small Cap
Index.** For the same period, the MSCI Small Cap, World ex-U.S. Index
returned (1.73%).***
* 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 12-month reporting period,
based on offering price (i.e., less any applicable sales charge), for
Class A, B, and C Shares were 16.45%, 16.75%, and 21.26%, respectively.
** The FT-Actuaries/S&P World, ex-U.S., Medium-Small Cap Index is a total
return, market cap-weighted, unmanaged index of more than 1,000
companies from 25 countries that represents the performance of the
small-cap international marketplace. Investments cannot be made in an
index.
*** The MSCI Small Cap World ex-U.S.Index is an unmanaged index of
companies in 23 developed markets with U.S. dollar
market capitalizations of $200-$800 million. Investments cannot be made
in an index.
[Graphic]
WHAT PORTFOLIO HOLDINGS MADE THE GREATEST IMPACT ON THE FUND'S
PERFORMANCE?
Stocks with themes related to outsourcing and personal consumption
contributed the most to the fund's performance. CREYF'S (0.95% of net
assets), a Belgium personnel temporary employment agency, returned
321% during this review period. In the 10 months to October, temporary
employees worked 5.7% more hours than the same period a year earlier.
E.M. TV (1.02% of net assets), a German merchandiser and children's
television production distributor, gained over 3,900%. Finally, REAL
SOFTWARE (0.84% of net assets), a Belgian software company, rose 467%.
The company is benefiting from its acquisition strategy of buying
controlling stakes in other software and service companies on the
condition that they profit in the same year. The company has made nine
acquisitions this year.
[Graphic]
CAN YOU HIGHLIGHT THREE ADDITIONS TO THE PORTFOLIO DURING THE REPORTING
PERIOD?
With a stock price gain of over 3,900%, it is certainly worthwhile to
discuss the story of E.M. TV (1.02% of net assets). This company
promotes and distributes television programs throughout Germany and
other international markets, and it also licenses and merchandises its
own programming. It is continuing its expansion into sporting events
like the World Wrestling Federation matches, boxing matches, and
soccer matches, among others. What is particularly interesting is that
this company has gone from obtaining distribution rights for Sesame
Street, the Flintstones, and the Teenage Mutant Ninja Turtles from the
U.S. to co-producing cartoons and distributing them to the U.S. We see
tremendous opportunities here.
NESTOR HEALTHCARE GROUP PLC (0.26% of net assets) is a United Kingdom
health care and specialist worker placement agency and is the leading
provider of temporary health care professionals. The United Kingdom's
nursing profession is currently understaffed as a result of a decrease
in new entrants, and the government has begun new health care
initiatives which include additional funding for health care
expertise. The company also operates the largest traveling nurses
network in the U.S., Cross Country Staffing.
Another interesting story is SINGULUS TECHNOLOGIES AG (0.53% of net
assets). Singulus is a German manufacturer of various production
equipment and machinery used to layer and coat compact discs ("CD") and
digital video discs ("DVD"). Singulus is the world's leading producer
of CD replication equipment and has an 80% world market share in DVD
equipment. DVD is the next technology in home entertainment which
should challenge CDs and videotapes.
[Graphic]
WHAT STRATEGIES ACCOUNT FOR YOUR ABILITY TO INSULATE THE FUND AGAINST
MUCH OF THE TURMOIL OF THE INTERNATIONAL MARKETPLACE?
Through a concerted effort of identifying individual stocks and
evaluating economic conditions, the fund has been able to sidestep many
of the turbulent shock waves experienced in the markets. By reading the
writing on the wall, the fund essentially avoided many of the financial
institutions that were exposed to Russia and Latin America.
Additionally, our early movements into Asia also contributed to the
fund's performance. Furthermore, our avoidance of oil-related stocks
insulated the fund from the oil industry's oversupply which is
responsible for many stocks' poor performance.
In summary, the avoidance of some sectors is what has largely protected
the fund's returns rather than the selection of sectors for
investments.
[Graphic]
WHERE WERE THE FUND'S ASSETS INVESTED AS OF NOVEMBER 30, 1998, AND WHAT
WERE THE FUND'S TOP 10 HOLDINGS?
The portfolio was well-diversified across the following 35 countries.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
COUNTRY NET ASSETS COUNTRY NET ASSETS
<S> <C> <S> <C>
Germany 9.18% Austria 1.67%
Japan 6.68% Switzerland 1.53%
Finland 6.46% Denmark 1.35%
France 6.35% South Africa 1.19%
Sweden 5.93% Canada 1.17%
United Kingdom 5.93% Norway 0.96%
Ireland 5.72% Philippines 0.96%
Belgium 5.12% Poland 0.63%
Spain 4.82% Israel 0.61%
Netherlands 4.76% Egypt 0.51%
Greece 4.39% Chile 0.45%
Singapore 3.23% China 0.25%
Mexico 3.15% Korea 0.24%
Italy 3.13% Peru 0.17%
Portugal 2.87% Argentina 0.07%
Brazil 2.34% Thailand 0.02%
Hong Kong 1.96% India 0.00%*
Indonesia 1.74%
</TABLE>
* Amount represents less than 0.01%.
As of November 30, 1998, the fund's top 10 holdings were:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME COUNTRY NET ASSETS INDUSTRY
<S> <S> <C> <S>
Ideal Group SA Greece 1.81% Electrical & Electronics
Kamps AG Germany 1.61% Food & Household Products
Don Quijote Co., Ltd. Japan 1.53% Food & Household Products
JOT Automation Group Oyj Finland 1.48% Electrical & Electronics
Esat Telecom Group PLC, ADR Ireland 1.31% Telecommunications
Bure Investment Aktiebolaget Sweden 1.27% Financial Services
Matalan United Kingdom 1.25% Retail
Tieto Corp. Finland 1.22% Business & Public Services
TelePizza SA Spain 1.19% Food & Household Products
FI Group PLC United Kingdom 1.16% Business & Public Services
TOTAL 13.83%
</TABLE>
[Graphic]
WHAT IS YOUR OUTLOOK FOR INTERNATIONAL SMALL-CAP STOCKS IN 1999 AS WE
LEAVE WHAT HAS BEEN A VOLATILE YET POSITIVE YEAR FOR THE MARKET? DO YOU
EXPECT THAT EUROPE WILL REMAIN THE REGION OF CHOICE? ARE THE
VALUATIONS OF ASIAN PACIFIC COMPANIES BEGINNING TO LOOK COMPELLING
VERSUS THEIR FUNDAMENTALS?
Europe should continue to benefit from the convergence of interest
rates as those initial non-participating countries begin to structure
their economies for eventual participation in the Euro. We have seen
over 66 interest rate cuts around the world since September 1998, which
have given each of the stock markets a shot in the arm. The interest
rate cuts lower financing costs for companies which is particularly
important for smaller companies. The new competitive landscape in
"Euroland," with borderless countries, will force large-cap companies
to improve productivity and pricing. International small-cap stocks
could benefit because it is easier for smaller and nimbler companies to
adapt to changes. In addition, these smaller companies, with their
efficiencies and distributions, could become takeover targets of the
larger companies. In the end, lower borrowing costs, with enhanced
productivity, are expected to lead to an increase in earnings for
small-cap stocks.
The Asian Pacific region seems to be on the road to recovery, although
it will be a long and bumpy road. We feel that certain steps have
finally been taken to correct the economic environment which positions
this region again as an area of opportunity and growth. While some
overcapacity does exist in some countries, investment opportunities
are waiting to be discovered in other parts of Asia. The region has
largely been known as the manufacturing site for many personal
computers ("PC") and has suffered as a result of the downturn in the PC
industry. There are, however, projections that PC demand is
recovering, and 1999 is expected to put the PC industry back on its
growth track. According to International Data Corp. ("IDC"), total
1998 worldwide PC volume is now projected at 89.2 million on growth of
11.1%. For 1999, IDC now estimates worldwide PC market growth at 12.8%
on unit volume of 100.6 million. Clearly, things are changing-and for
the better.
Despite talk of a global economic slowdown, we have yet to meet a
small-cap company that has admitted or forecasted for such an economic
event.
WHERE IN THE WORLD SHOULD
YOU INVEST?
[Graphic]FEDERATED ASIA PACIFIC GROWTH FUND
[Graphic]FEDERATED EMERGING MARKETS FUND
[Graphic]FEDERATED EUROPEAN GROWTH FUND
[Graphic]FEDERATED GLOBAL EQUITY INCOME FUND
[Graphic]FEDERATED GLOBAL FINANCIAL SERVICES FUND
[Graphic]FEDERATED INTERNATIONAL EQUITY FUND
[Graphic]FEDERATED INTERNATIONAL GROWTH FUND
[Graphic]FEDERATED INTERNATIONAL HIGH INCOME FUND
[Graphic]FEDERATED INTERNATIONAL INCOME FUND
[Graphic]FEDERATED INTERNATIONAL SMALL COMPANY FUND
[Graphic]FEDERATED LATIN AMERICAN GROWTH FUND
[Graphic]FEDERATED WORLD UTILITY FUND
Federated employs highly qualified, experienced managers in global
investing to select countries and companies outside the U.S. for
long-term growth potential.
Call your investment representative to buy shares of 10 international
equity funds and 2 international income funds from Federated
Securities Corp.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL
1-800-341-7400 TO ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU
INVEST.
Foreign investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in
auditing and other financial standards.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED INTERNATIONAL SMALL COMPANY FUND
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $3,000 IN THE CLASS A SHARES
OF FEDERATED INTERNATIONAL SMALL COMPANY FUND ON 3/1/96, AND DID NOT
REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN WORTH $4,989 ON 11/30/
98. YOU WOULD HAVE EARNED A 20.32%* AVERAGE ANNUAL TOTAL RETURN.
One key to investing wisely is to reinvest all distributions
in fund shares. This increases the number of shares
on which you can earn future dividends, and you gain the
benefit of compounding.
As of 12/31/98, the Class A Shares' average annual 1-year
and since inception (2/28/96) total returns were 20.74% and
21.59%, respectively. Class B Shares' average annual one-
year and since inception (2/28/96) total returns were
21.32% and 22.13%, respectively. Class C Shares
average annual 1-year and since inception (2/28/96)
total returns were 25.84% and 23.07%, respectively.**
[Graphic representation omitted. Please see Appendix A22]
* Total return represents the change in the value of an
investment after reinvesting all income and capital gains, and
takes into account the 5.50% sales charge applicable to an
initial investment in Class A Shares.
Data quoted represents past performance and does not
guarantee future results. Investment return and principal
value will fluctuate, so an investor's shares, when redeemed,
may be worth more or less than their original cost.
** The total returns stated takes into account the 5.50% sales
charge for Class A Shares, the 5.50% contingent deferred
sales charge for Class B Shares and the 1.00% contingent deferred sales
charge for Class C Shares.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
ONE STEP AT A TIME:
$1,000 INITIAL INVESTMENT AND SUBSEQUENT INVESTMENTS OF $1,000 EACH
YEAR FOR TWO YEARS GREW TO $3,926.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of
Federated International Small Company Fund on 3/1/96, and did not
redeem any shares, you would have invested only $3,000 but your account
would have reached a total value of $3,926* by 11/30/98. You would have
earned an average annual total return of 16.11%.
A practical investment plan helps you pursue long-term capital growth
through a diversified portfolio primarily invested in small
capitalization equity securities of non-U.S. issuers. Through systematic
investing, you buy shares on a regular basis and reinvest all earnings.
An investment plan works for you when you invest only $1,000 annually.
You can take it one step at a time. Put time, money, and compounding to
work.
[Graphic representation omitted. Please see Appendix A23]
* This chart assumes that the subsequent annual investments are made on the
last day of each anniversary month. No method of investing can guarantee
a profit or protect against loss in down markets. However, by investing
regularly over time and buying shares at various prices, investors can
purchase more shares at lower prices. All accumulated shares have the
ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of
changing price levels, the investor should consider whether or not to
continue purchases through periods of low price levels.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY
FUND (CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
Federated International Small Company Fund (Class A Shares) (the
"Fund") from February 28, 1996 (start of performance) to November 30,
1998 compared to the FT-Actuaries/S&P World Medium-Small Cap Index
(ex-U.S.) (FTMSC) and the Morgan Stanley Capital International Small
Cap World Index ex-U.S. (MSCI-SCW).+
[Graphic representation omitted. Please see Appendix A24]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 5.50% ($10,000 investment minus
$550 sales charge = $9,450). The Fund's performance assumes the
reinvestment of all dividends and distributions. The FTMSC has been
adjusted to reflect reinvestment of dividends on securities in the index.
The MSCI-SCW has not been adjusted to reflect reinvestment of dividends
on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The FTMSC and the MSCI-SCW are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. The indices
are unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY
FUND (CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
Federated International Small Company Fund (Class B Shares) (the
"Fund") from February 28, 1996 (start of performance) to November 30,
1998 compared to the FT-Actuaries/S&P World Medium-Small Cap Index
(ex-U.S.) (FTMSC) and the Morgan Stanley Capital International Small
Cap World ex-U.S. Index (MSCI-SCW).+
[Graphic representation omitted. Please see Appendix A25]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a 4.00% contingent deferred sales charge on
any redemption less than three years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The FTMSC has been
adjusted to reflect reinvestment of dividends on securities in
the index. The MSCI-SCW has not been adjusted to reflect reinvestment of
dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The FTMSC and the MSCI-SCW are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. The indices
are unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED INTERNATIONAL SMALL COMPANY
FUND (CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000*
in Federated International Small Company Fund (Class C Shares) (the
"Fund") from February 28, 1996 (start of performance) to November 30,
1998 compared to the FT-Actuaries/S&P World Medium-Small Cap Index
(FTMSC) and the Morgan Stanley Capital International Small Cap World
Index ex-U.S. (MSCI-SCW).+
[Graphic representation omitted. Please see Appendix A26]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than 1 year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The FTMSC has been
adjusted to reflect reinvestment of dividends on securities in the index.
The MSCI-SCW has not been adjusted to reflect reinvestment of dividends
on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The FTMSC and the MSCI-SCW are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. The indices
are unmanaged.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-90.1
AEROSPACE & DEFENSE-0.0%
2,000 Jamco Corp. $ 20,292
APPLIANCES & HOUSEHOLD DURABLES-1.2%
74,230 Beter Bed Holding NV 2,612,051
23,974 IPSO Industrial Laundry Group 1,849,899
Total 4,461,950
AUTOMOBILE-2.9%
116,050 Athlon Groep NV 3,173,467
890,000 Inchcape Motors Ltd. 1,235,587
2,752 Montupet 111,256
110,600 Nokian Renkaat 3,752,060
88,500 Pininfarina SPA 1,996,815
520,300 (a)Super Group Ltd. 959,668
Total 11,228,853
BANKING-3.0%
980,000 Anglo Irish Bank Corp. PLC 2,494,683
170,000 (a)Aspis Housing Bank 2,360,249
120,000 Banca Di Legnano 752,969
191,570 Banco Del Suquia SA 279,731
235,000 Banco di Chiavari e della
Riviera Ligure 829,618
34,000 Banco de A. Edwards, ADR 412,250
190,000 Dah Sing Financial Group 472,362
7,300 HDFC Bank Ltd. 8,795
710,000 Hong Leong Finance Ltd. 1,140,649
34,000 Kempen & Co. NV 1,900,395
237,645 (a)Pierwszy Polsko-Amerykanski Bank 1,146,346
Total 11,798,047
BEVERAGE & TOBACCO-2.3%
60,250 (a)Baron de Ley 2,086,941
36,500 Hartwall Oyj BP 813,706
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
BEVERAGE & TOBACCO-CONTINUED
270,000 Mercian Corp. $ 1,174,675
1,030,000 PT Gudang Garam, Tbk 1,331,717
3,280,000 PT Hanjaya Mandala Sampoerna, Tbk 2,164,579
180,000 Rothmans Industries Ltd. 1,025,765
10,500 Vina Concha Y Toro SA, ADR 295,313
Total 8,892,696
BROADCASTING & PUBLISHING-2.5%
3,500 (a)Computec Media AG 189,808
7,486 E.M. TV 3,927,342
378,500 Gruppo Editoriale L Espresso 3,154,636
7,300 (a)Kinowelt Medien AG 1,222,082
142,600 (a)TV Azteca SA de CV, ADR 1,069,500
Total 9,563,368
BUILDING MATERIALS & COMPONENTS-0.2%
44,661 Cementos Lima SA 657,516
BUSINESS & PUBLIC SERVICES-8.2%
153,000 Capita Group PLC 1,438,485
9,266 CREYF'S 3,650,685
9,190 (a)CREYF'S, Rights 35,456
111,840 Delta Informatics 2,356,842
105,000 Diagonal PLC 1,602,028
28,000 Falck 2,216,641
886,000 FI Group PLC 4,486,535
22,800 (a)Kipling Holding AB 296,977
121,000 Konami Co. 3,349,107
1,040,000 (a)New World Infrastructure, Ltd. 1,558,052
263,600 Semcon AB 2,461,735
24,800 Softbank SA 548,302
130,000 Tieto Corp. 4,712,610
109,100 Unique International NV 2,766,647
Total 31,480,102
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
CONSTRUCTION & HOUSING-0.9%
401,000 (a)Consorcio Hogar SA de CV, Series B $ 238,456
344,000 (a)Corporacion GEO, SA de CV, Class B 974,592
5,295 Finpro 30,437
175,000 Jarvis PLC 1,896,454
67,200 (a)Stavdal Maskinutleie ASA 341,048
Total 3,480,987
DATA PROCESSING & REPRODUCTION-2.9%
66,300 DataTec Ltd. 731,393
25,000 (a)(b)Gretag Imaging Group 2,273,867
22,560 (a)Hoeft & Wessel AG 2,167,633
12,840 (a)Ion Beam Applications 2,752,137
241,300 (a)Modern Times Group, Class B 3,098,532
Total 11,023,562
ELECTRICAL & ELECTRONICS-5.9%
20,000 (a)Algol 279,804
72,636 Amper SA 1,715,890
12,200,000 IDT International Ltd. 1,796,203
684,870 (a)Ideal Group SA 6,963,679
220,000 (a)Independent Energy Holdings PLC, ADR 2,145,000
197,200 (a)(b)JOT Automation Group Oyj 5,695,997
46,350 (a)TDS Informationstechnologie AG 4,070,942
Total 22,667,515
ELECTRONIC COMPONENTS, INSTRUMENTS-13.0%
30,000 (a)ARM Holdings PLC, ADR 1,620,000
11,800 (a)Brokat Infosystems AG 1,105,957
100,000 (a)Celestica, Inc. 2,031,250
1,179,000 Datacraft Asia Ltd. 1,933,560
14,337 Decan 2,772,042
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
ELECTRONIC COMPONENTS, INSTRUMENTS-CONTINUED
62,800 (a)Flextronics International Ltd. $ 4,176,200
100,000 (a)Fundtech Ltd. 1,700,000
41,570 (a)GFI Informatique 4,471,778
50,000 ICT Automatisering 1,066,639
9,000 (a)IT Network, Inc. 62,052
158,000 (a)Industrial & Financial Systems 1,650,283
27,635 Integrata Training AG 1,922,208
219,600 (a)Know It AB 3,993,709
909 (a)Kudelski SA 2,604,025
72,000 London Bridge Software Holdings PLC 1,407,310
25,900 (a)Muehlbauer Holding AG & Co. 2,106,870
225,000 Natsteel Electronics Ltd. 485,602
146,500 (a)Olicom A/S 778,281
800 Phonak Holding AG 991,191
54,916 Real Software 3,240,878
7,639 Sartorius AG 1,823,688
19,350 (a)Singulus Technologies AG 2,041,705
915,900 Teljoy Holdings Ltd. 756,178
23,071 (a)Titus Interactive 2,015,448
59,600 Tokyo Seimitsu Co. Ltd. 1,973,766
35,000 (a)Unit 4 955,269
115,750 (a)Zergo Holdings PLC 460,126
Total 50,146,015
ENERGY EQUIPMENT & SERVICES-0.1%
2,900 Coflexip SA 211,949
ENERGY SOURCES-0.5%
51,100 Banpu Public Co. Ltd. 96,255
40,000 (a)Vetsas Wind Systems 1,924,143
Total 2,020,398
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
FINANCIAL SERVICES-3.9%
135,000 AOT NV $ 1,588,194
352,800 Bure Investment Aktiebolaget 4,898,796
114,500 (a)(b)EFG-Hermes, GDR 1,173,625
2,100,000 Fishers International PLC 1,151,728
3,020,000 (a)Grupo Financiero Banorte SA de CV, Class B 2,116,328
600 ICICI Banking Corp. 342
2,000,000 JCG Holdings Ltd. 710,319
7,500 Mycal Card Inc. 182,630
3,780,000 Shum Yip Investment Ltd. 898,256
70,000 Spring Group PLC 169,728
675,700 (a)Theta Group Ltd. 2,112,768
Total 15,002,714
FOOD & HOUSEHOLD PRODUCTS-9.6%
35,000 (a)Airspray NV 1,004,680
92,826 (a)DO & CO Restaurants & Catering AG 4,130,094
65,800 Don Quijote Co., Ltd. 5,875,000
800,000 Greencore Group PLC 3,515,520
57,000 Hokuto Corp. 1,198,295
43,100 Ibersol SGPS SA 4,334,404
107,055 (a)Kamps AG 6,184,320
42,474 Leon De Bruxelles 3,150,536
2,185,000 PT Daya Guna Samudera 1,250,673
4,000,000 PT Indofood Sukses Makmur 1,979,798
531,400 (a)TelePizza SA 4,564,849
Total 37,188,169
HEALTH & PERSONAL CARE-2.2%
37,000 Fancl Corp. 2,237,419
38,000 (a)ICON PLC, ADR 1,078,250
150,000 Nestor Healthcare Group PLC 993,381
9,894,000 (a)Sa Sa International Holdings 958,349
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
HEALTH & PERSONAL CARE-CONTINUED
135,316 Sarantis SA $ 1,725,194
400,000 (a)SkyePharma PLC 547,617
18,337 Transgene 941,152
Total 8,481,362
INDUSTRIAL COMPONENTS-1.4%
178,000 Hosiden Corp. 3,084,659
22,892 Semperit AG Holdings 2,301,764
Total 5,386,423
INSURANCE-1.1%
101,550 Compania de Seguros Tranquilidade 3,312,714
116,000 (a)Kingsway Financial Services 875,041
Total 4,187,755
LEISURE & TOURISM-3.7%
275,000 Autogrill SPA 2,134,842
66,000 Endemol Entertainment Holding BV 2,122,297
15,750 Grand Hotel Krasnapolsky NV 1,152,911
2,800 (a)Infogrames Entertainment, Warrants 20,105
54,238 (a)Kinepolis 4,417,659
91,960 (a)(b)Scandic Hotels AB 3,209,221
30,000 Sol Melia SA 1,188,777
Total 14,245,812
MACHINERY & ENGINEERING-1.0%
64,170 Azkoyen SA 2,244,950
230,000 Interpump Group SPA 1,054,323
16,400 KCI Konecranes 699,428
125 PT Komatsu Indonesia 8
Total 3,998,709
MERCHANDISING-2.2%
3,854,000 Controladora Comercial Mexicana SA de CV 2,507,859
80,000 Cortefiel SA 2,078,282
68,800 (a)Distribucion y Servicio D&S SA, ADR 954,600
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
MERCHANDISING-CONTINUED
5,000 (a)Edel Music AG $ 677,886
2,187,000 Grupo Elektra 1,147,250
1,951,000 (a)Jollibee Foods Corp., Warrants 953,217
6,700 Santa Isabel SA, ADR 57,369
Total 8,376,463
MISCELLANEOUS MATEIRALS & COMMODITIES-1.8%
83,870 Maillis 1,679,050
24,389 (a)Serp Recyclage SA 3,322,343
2,690 Silver & Baryte Ores Mining 97,313
65,000 Viscofan Envoltura 1,981,295
Total 7,080,001
MULTI-INDUSTRY-2.5%
10,244 Altran Technologies SA 2,378,599
200,000 Corp. Fin Reunida 2,680,984
465,000 Dee CC PLC 3,950,566
180,000 Grupo Industrial Saltillo SA de CV, Class B 479,327
Total 9,489,476
REAL ESTATE-2.5%
87,000 (a)Able Inc. 2,040,828
4,960,000 Ayala Land, Inc. 1,542,132
810,000 DBS Land Ltd. 1,153,986
780,000 Hysan Development Co. Ltd. 1,138,318
1,732,500 (a)Kiinteistosijoitus OY Citycon 2,518,901
1,460,000 MCL Land Ltd. 1,274,568
Total 9,668,733
RECREATION, OTHER CONSUMER GOODS-2.1%
131,100 Cinram International, Inc. 1,578,016
1,610,000 (a)Corporacion Interamericana de
Entretenimiento SA, Class B 3,626,489
87,470 Folli-Follie 1,278,011
1,957 (a)Folli-Follie, Rights 28,593
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
RECREATION, OTHER CONSUMER GOODS-CONTINUED
65,000 Roland Corp. $ 1,572,240
Total 8,083,349
RETAIL-1.3%
950,000 Matalan 4,818,453
TELECOMMUNICATIONS-6.9%
90,000 (a)Colt Telecom Group PLC 1,175,727
134,000 (a)Egyptian Mobile Phone Network 798,609
146,000 (a)Esat Telecom Group PLC, ADR 5,037,000
53,000 Helsingin Puhelin Oyj 2,825,434
607,509 (a)ITG Group PLC 3,126,412
34,000 Moshi Moshi Hotline Inc. 1,327,435
33,223 (a)Omnicom SA 3,527,155
21,350 (a)(b)Panafon SA 382,428
8,448,000 (a)Pilipino Telephone Corp. 1,200,731
394,600 (a)Tampere Telephone PLC 3,939,498
350,000 (a)Tandberg Television 3,342,237
Total 26,682,666
TEXTILES & APPAREL-2.4%
5,000 Carli Gry International AS 263,607
77,540 Delta-Galil Industries Ltd. 664,949
90,000 Lindex AB 3,240,354
206,763 (a)Simint SPA 1,723,282
55,380 Sioen Industries NV 2,326,558
7,814 Van De Velde NV 1,143,371
Total 9,362,121
TRANSPORTATION - ROAD & RAIL-0.0%
23,000 Autostrada Torino-Milano SPA 117,071
UTILITIES - ELECTRICAL & GAS-0.3%
2,600,000 (a)Huaneng Power International Inc. 990,572
WHOLESALE & INTERNATIONAL TRADE-1.6%
125,000 (a)Central European Distribution Corp. 746,094
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
WHOLESALE & INTERNATIONAL TRADE-CONTINUED
90,000 Grafton Group $ 1,661,083
14,900 Ryohin Keikaku Co. Ltd. 1,693,182
16,580 Societe Manutan 1,165,717
35,000 Youngone Corp. 908,708
Total 6,174,784
TOTAL COMMON STOCKS
(IDENTIFIED COST $293,912,832) 346,987,883
PREFERRED STOCKS-5.2%
CONSTRUCTION & HOUSING-0.1%
179,000 Construtora Sultepa SA, Preference 593,238
MERCHANDISING-1.0%
81,200 Fielmann AG, Pfd. 3,661,646
MULTI-INDUSTRY-0.9%
288,100 Lusomundo Sociedade Gestora de
Participacoes Sociais SA, Pfd. 3,345,282
TELECOMMUNICATIONS-1.5%
105,500,000 (a)Tele Norte Leste Partici 1,783,370
307,700,000 (a)Tele Sudeste Celular Par 1,665,459
1,597,200,000 (a)Telemig Celular Participacoes SA 2,553,605
Total 6,002,434
TEXTILES & APPAREL-0.0%
115,000,000 (a)Texpar SA, Preference 958
TRANSPORTATION - ROAD & RAIL-1.1%
23,950 Sixt AG, Pfd. 4,207,080
UTILITIES - ELECTRICAL & GAS-0.6%
2,721,000 Centrais Electricas de Santa
Catarina SA-Celesc, Preference, Series B 1,722,008
16,460,000 Companhia de Gas de Sao Paulo 740,010
Total 2,462,018
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $15,626,983) 20,272,656
</TABLE>
FEDERATED INTERNATIONAL SMALL COMPANY FUND
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
CORPORATE BONDS-0.2%
ELECTRONIC COMPONENTS, INSTRUMENTS-0.1%
$ 503 Real Software, 5.00%, 5/7/2023 $ 296,846
FOOD & HOUSEHOLD PRODUCTS-0.1%
4,342 Leon De Bruxelles, Bond, 2.00%, 7/1/2003 335,808
TOTAL CORPORATE BONDS
(IDENTIFIED COST $540,110) 632,654
TOTAL INVESTMENTS
(IDENTIFIED COST $310,079,925)(C) $ 367,893,193
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1998, these securities
amounted to $12,735,138 which represents 3.3% of net assets.
(c) The cost of investments for federal tax purposes amounts to
$316,097,310. The net unrealized appreciation of investments on a
federal tax basis amounts to $51,795,883 which is comprised of
$64,125,512 appreciation and $12,329,629 depreciation at November 30,
1998.
Note: The categories of investments are shown as a percentage of net assets
($385,152,775) at November 30, 1998.
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 INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities,
at value (identified cost
$310,079,925 and tax cost
$316,097,310) $ 367,893,193
Cash 4,462
Cash denominated in foreign
currency (identified cost
$186,626) 186,563
Income receivable 325,488
Receivable for investments
sold 29,166,583
Receivable for shares sold 1,160,008
Deferred organizational costs 27,032
Total assets 398,763,329
LIABILITIES:
Payable for investments
purchased $ 9,303,988
Payable for shares redeemed 4,056,487
Net payable for foreign
currency exchange contracts 21,680
Payable for taxes withheld 23,408
Accrued expenses 204,991
Total liabilities 13,610,554
NET ASSETS for 22,216,938
shares outstanding $ 385,152,775
NET ASSETS CONSIST OF:
Paid in capital $ 327,015,921
Net unrealized appreciation of
investments and translation of
assets and liabilities in
foreign currency 57,805,522
Accumulated net realized gain
on investments and foreign
currency transactions 368,818
Accumulated net operating loss (37,486)
Total net assets $ 385,152,775
NET ASSET VALUE, OFFERING
PRICE, AND REDEMPTION PROCEEDS
PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share
($147,490,075 / 8,398,474
shares outstanding) $17.56
Offering Price Per Share
(100/ 94.50 of $17.56)* $18.58
Redemption Proceeds Per Share $17.56
CLASS B SHARES:
Net Asset Value Per Share
($189,965,288 / 11,044,233
shares outstanding) $17.20
Offering Price Per Share $17.20
Redemption Proceeds Per Share
(94.50/100 of $17.20)* $16.25
CLASS C SHARES:
Net Asset Value Per Share
($47,697,412 / 2,774,231
shares outstanding) $17.19
Offering Price Per Share $17.19
Redemption Proceeds Per Share
(99.00/100 of $17.19)* $17.02
</TABLE>
* See "What Do Shares Cost?" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $383,852) $ 2,962,237
Interest 518,642
Total income 3,480,879
EXPENSES:
Investment advisory fee $ 4,436,654
Administrative personnel and
services fee 267,666
Custodian fees 655,552
Transfer and dividend
disbursing agent fees and
expenses 319,479
Directors'/Trustees' fees 2,731
Auditing fees 21,691
Legal fees 4,465
Portfolio accounting fees 125,717
Distribution services fee-
Class B Shares 1,265,236
Distribution services fee-
Class C Shares 319,179
Shareholder services fee-Class
A Shares 359,193
Shareholder services fee-Class
B Shares 421,745
Shareholder services fee-Class
C Shares 106,393
Share registration costs 91,696
Printing and postage 90,324
Taxes 11,625
Miscellaneous 20,294
Total expenses 8,519,640
Net operating loss (5,038,761)
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on
investments and foreign
currency transactions (net of
foreign taxes withheld of
$93,318) 8,268,645
Net change in unrealized
appreciation of investments
and translation of assets and
liabilities in foreign
currency 46,830,198
Net realized and unrealized
gain on investments and
foreign currency
transactions 55,098,843
Change in net assets
resulting from operations $ 50,060,082
</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>
YEAR ENDED
NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS:
OPERATIONS-
Net operating loss $ (5,038,761) $ (2,060,106)
Net realized gain/(loss) on
investments and foreign
currency transactions
($17,745,082 and $2,291,612,
respectively, as computed for
federal tax purposes) 8,268,645 (4,892,895)
Net change in unrealized
appreciation of investments
and translation of assets and
liabilities in foreign
currency 46,830,198 8,258,008
Change in net assets
resulting from operations 50,060,082 1,305,007
SHARE TRANSACTIONS-
Proceeds from sale of shares 343,889,639 238,766,808
Cost of shares redeemed (248,855,119) (36,173,268)
Change in net assets
resulting from share
transactions 95,034,520 202,593,540
Change in net assets 145,094,602 203,898,547
NET ASSETS:
Beginning of period 240,058,173 36,159,626
End of period $ 385,152,775 $ 240,058,173
</TABLE>
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.25 $12.26 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.17)(d) (0.11) (0.02)
Net realized and unrealized gain on investments and
foreign currency transactions 3.48 2.10 2.28
Total from investment operations 3.31 1.99 2.26
NET ASSET VALUE, END OF PERIOD $17.56 $14.25 $12.26
TOTAL RETURN(B) 23.23% 16.23% 22.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.95% 2.12% 1.97% *
Net operating loss (0.97% ) (1.08% ) (0.48% )*
Expense waiver/reimbursement(c) - 0.21% 3.38% *
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $147,490 $91,707 $16,399
Portfolio turnover 380% 286% 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) 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 B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $14.07 $12.20 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.29)(d) (0.12) (0.04)
Net realized and unrealized gain on investments and
foreign currency transactions 3.42 1.99 2.24
Total from investment operations 3.13 1.87 2.20
NET ASSET VALUE, END OF PERIOD $17.20 $14.07 $12.20
TOTAL RETURN(B) 22.25% 15.33% 22.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.70% 2.87% 2.72% *
Net operating loss (1.72% ) (1.81% ) (1.61% )*
Expense waiver/reimbursement(c) - 0.17% 3.38% *
SUPPLEMENTAL DATA
Net assets, end of period(000 omitted) $189,965 $120,939 $16,721
Portfolio turnover 380% 286% 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) 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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $14.06 $12.19 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net operating loss (0.29)(d) (0.12) (0.05)
Net realized and unrealized gain on investments and
foreign currency transactions 3.42 1.99 2.24
Total from investment operations 3.13 1.87 2.19
NET ASSET VALUE, END OF PERIOD $17.19 $14.06 $12.19
TOTAL RETURN(B) 22.26% 15.34% 21.90%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.70% 2.87% 2.72%*
Net operating loss (1.72%) (1.85%) (1.58%)*
Expense waiver/reimbursement(c) - 0.17% 3.38% *
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $47,697 $27,412 $3,040
Portfolio turnover 380% 286% 174%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 28, 1996 (date of
initial public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
operating loss ratios shown above.
(d) 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
NOVEMBER 30, 1998
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 ten
portfolios. The financial statements included herein are only those of
Federated International Small Company Fund (the "Fund"), a diversified
portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Class A Shares, Class B
Shares, and Class C Shares. The investment objective of the Fund is to
provide long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS-Foreign equity securities are valued at the
last sale price reported in the market in which they are primarily
traded. If no sale on the recognized exchange is reported or the
security is traded over-the-counter, the foreign securities are valued
at the mean between the last closing bid and asked prices. Short-term
securities are valued at the prices provided by an independent pricing
service. However, short-term foreign and domestic securities with
remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS-It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions and net
operating losses. The following reclassifications have been made to
the financial statements.
INCREASE/(DECREASE)
ACCUMULATED DISTRIBUTIONS IN
ACCUMULATED NET EXCESS OF NET
PAID-IN CAPITAL REALIZED GAIN INVESTMENT INCOME
$(1,445) $(4,999,830) $5,001,275
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES-It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS-The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS-The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire
exposure to foreign currencies; whereas, contracts to sell are used to
hedge the Fund's securities against currency fluctuations. Risks may
arise upon entering these transactions from the potential inability of
counterparts to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates.
The foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until the settlement
date.
At November 30, 1998, the Fund had outstanding foreign currency
commitments as set forth below:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS AT APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE FOR VALUE (DEPRECIATION)
CONTRACTS PURCHASED:
<C> <S> <C> <C> <C>
12/1/1998 108,885,000 Greek Drachma $ 381,383 $ 382,428 $ 1,045
12/11/1998 29,361,000 Greek Drachma 102,214 103,122 908
12/1/1998 463,450 Peruvian Noveau Sol 148,900 148,328 (572)
12/1/1998 69,407,423 Swedish Krona 8,537,198 8,528,806 (8,392)
12/2/1998 812,489 Singapore Dollar 493,315 492,567 (748)
<CAPTION>
CONTRACTS SOLD:
<C> <S> <C> <C> <C>
12/4/1998 597,584 Australian Dollar $ 383,948 $ 375,492 $ 8,456
12/1/1998 37,347 Canadian Dollar 24,267 24,498 (231)
12/1/1998 113,003 Deutsche Mark 65,929 66,612 (683)
12/1/1998 61,377 Pound Sterling 102,070 101,238 832
12/2/1998 12,275 Pound Sterling 20,291 20,248 43
12/3/1998 242,510 Pound Sterling 400,626 400,007 619
12/1/1998 323,044,106 Greek Drachma 1,122,655 1,134,603 (11,948)
12/2/1998 59,092,171 Italian Lira 34,966 35,179 (213)
12/1/1998 2,745,205 Norwegian Krone 361,687 366,638 (4,951)
12/1/1998 22,343,532 Thailand Baht 616,884 618,934 (2,050)
12/1/1998 3,719,797 South African Rand 649,632 653,427 (3,795)
Net Unrealized Depreciation on Foreign Exchange Contracts $(21,680)
</TABLE>
FOREIGN CURRENCY TRANSLATION-The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES-Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for
resale, at the issuer's expense either upon demand by the Fund or in
connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may
be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at
November 30, 1998 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
EFG-Hermes, GDR 7/29/1998-9/2/1998 $1,345,763
Gretag Imaging Group 11/3/1998-11/5/1998 2,411,669
JOT Automation Group Oyj 9/9/1998-10/26/1998 3,754,222
Panafon SA 11/20/1998 386,583
Scandic Hotels AB 10/16/1998-10/22/1998 2,568,017
</TABLE>
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 100,000,000
Total 300,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 12,150,368 $ 213,991,576 6,748,444 $ 98,446,634
Shares redeemed (10,185,264) (179,653,387) (1,652,514) (23,754,721)
Net change resulting from
Class A Share transactions 1,965,104 $ 34,338,189 5,095,930 $ 74,691,913
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 5,336,407 $ 95,444,129 7,830,646 $ 112,172,634
Shares redeemed (2,890,107) (49,477,133) (603,585) (8,739,869)
Net change resulting from
Class B Share transactions 2,446,300 $ 45,966,996 7,227,061 $ 103,432,765
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,987,879 $ 34,453,934 1,957,983 $ 28,147,540
Shares redeemed (1,163,723) (19,724,599) (257,229) (3,678,678)
Net change resulting from
Class C Share transactions 824,156 $ 14,729,335 1,700,754 $ 24,468,862
Net change resulting from
share transactions 5,235,560 $ 95,034,520 14,023,745 $ 202,593,540
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.25% 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, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A Shares,
Class B Shares, and Class C Shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule
annually, to compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the year
ended November 30, 1998, 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 Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
for the period. The fee paid to FSSC is used to finance certain
services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-FServ,
through its subsidiary, FSSC serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES-Organizational expenses of $47,932 were
borne initially by the Adviser. The Fund has reimbursed the Adviser for
these expenses. These expenses have been deferred and are being
amortized over the five-year period following the Fund's effective
date. For the year ended November 30, 1998, the Fund expensed $12,457
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 year ended November 30, 1998, were as follows:
PURCHASES $1,365,496,093
SALES $1,296,189,295
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or
economic developments within a particular country or region may have an
adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have
an effect on the liquidity and volatility of portfolio securities and
currency holdings.
At November 30, 1998, the diversification of countries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
COUNTRY OF NET ASSETS COUNTRY OF NET ASSETS
<S> <C> <S> <C>
Argentina 0.07% Italy 3.13%
Austria 1.67% Japan 6.68%
Belgium 5.12% Korea 0.24%
Brazil 2.34% Mexico 3.15%
Canada 1.17% Netherlands 4.76%
Chile 0.45% Norway 0.96%
China 0.25% Peru 0.17%
Denmark 1.35% Philippines 0.96%
Egypt 0.51% Poland 0.63%
Finland 6.46% Portugal 2.87%
France 6.35% Singapore 3.23%
Germany 9.18% South Africa 1.19%
Greece 4.39% Spain 4.82%
Hong Kong 1.96% Sweden 5.93%
India 0.00%* Switzerland 1.53%
Indonesia 1.74% Thailand 0.02%
Ireland 5.72% United Kingdom 5.93%
Israel 0.61%
</TABLE>
* Amount represents less than 0.01%
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8. SUBSEQUENT EVENT
On January 7, 1999, the Fund's Adviser, Federated Global Research
Corp., changed its name to Federated Global Investment Management
Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Federated International
Small Company Fund (a portfolio of World Investment Series, Inc.) as of
November 30, 1998, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended, and financial highlights for each of
the periods presented therein. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated International Small Company Fund of
World Investment Series, Inc. at November 30, 1998, and the results of
its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial
highlights for the periods presented therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus, which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487838
Cusip 981487820
Cusip 981487812
G01968-01 (1/99)
[Graphic]
Federated Investors
[Graphic]
Federated Latin American Growth Fund
3rd Annual Report
November 30, 1998
ESTABLISHED 1996
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
Federated Latin American Growth Fund was created in 1996, and I
am pleased to present its third Annual Report. This report covers the
12-month reporting period from December 1, 1997 through November 30,
1998. It begins with an interview with the fund's portfolio manager,
Alexandre de Bethmann, Vice President of Federated Global Investment
Management Corp. (formerly, Federated Global Research Corp.).
Following his discussion, which covers international economic and
market conditions and fund strategy, are two additional items of
shareholder interest. First is a complete listing of the fund's
investments, and second is the publication of the fund's financial
statements.
During the reporting period, Latin American stocks continued to
reflect the Asian "contagion." As a result, the fund's share prices
declined, not so much due to the portfolio suffering poor earnings, but
to Latin American countries being emerging markets. These markets have
suffered from the perception that the risk of investing in this region
has increased.
However, as Alexandre notes, an often overlooked bright spot is that
Latin America has continued its trend of controlled inflation,
deregulation, and austere economic policy. This report will give you an
insight into opportunities available, as well as the markets in which
we have invested for the long term.
Federated Latin American Growth Fund is a relatively new fund that was
introduced in 1996, shortly before a period of severe volatility. With
international investing in particular, there will inevitably be
periods of volatility. The key to long-term success is investing
through the positive as well as negative periods. On average--and this
is shown through the historical performance of many financial markets--
the positive periods significantly outweigh the negative periods.
This international stock fund provides investors significant long-term
opportunities from a well-researched portfolio of approximately 40
corporations in five Latin American countries.* The stocks selected,
in many cases, are issued by internationally recognized industry
leaders whose average market capitalization is over $2 billion. They
are fundamentally strong companies that are positioned to rebound
strongly once confidence returns to the region.
* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing
and other financial standards.
For the fiscal year ended November 30, 1998, the fund's total returns
and share values were considerably impacted by the perceived risk
associated with emerging markets. Individual share class total return
performance for the 12-month period follows.**
TOTAL NET ASSET
RETURN VALUE CHANGE
Class A Shares (32.04%) $13.39 to $9.10=(32%)
Class B Shares (32.63%) $13.24 to $8.92=(33%)
Class C Shares (32.55%) $13.27 to $8.95=(33%)
Thank you for your continued patience during what has been a trying
time for investors in the Latin American region. Please be assured that
the experienced professionals at Federated Global Investment
Management Corp. remain thoroughly focused on the region on a day-to-
day basis--and on making the prudent decisions that can ultimately
reward your patience.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
** Performance quoted is based on net asset value, represents past
performance and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the 12-month reporting period, based on the offering price
(i.e., less any applicable sales charge), for Class A, B, and C Shares
were (35.78%), (36.33%), and (33.23%), respectively.
INVESTMENT REVIEW
Alexandre de Bethmann
Vice President
Federated Global Investment Management Corp.
[Graphic]
WHAT IS YOUR REVIEW OF THE LATIN AMERICAN REGION FOR THE PAST YEAR,
WHICH, AFTER ALMOST TWO YEARS OF STRONG RETURNS, RECORDED NEGATIVE
RETURNS?
In our view, the number one factor for the underperformance of the
Latin American markets was the overall negative sentiment toward
emerging markets. We are living in an environment in which markets do
not work on fundamentals. Instead, they reflect worries about macro-
economic factors in Asia and Russia, which spread concerns throughout
the emerging markets universe. External pressures on Latin America
have also come in the form of weak commodity prices and a sudden
suspension of access to international capital markets.
There are specific factors that have affected each of the Latin
American economies. In Mexico, for example, the fall in oil prices
caused three budget cuts in 1998. In Brazil, the implementation of
substantial fiscal reforms remained a major concern. When these
individual factors are put into the context of non-improving emerging
markets, negative investor sentiment and weak commodity prices, they
become more relevant and cause significant fund outflows for the
region.
The bright spot -- one that needs to be highlighted -- is that Latin
America has continued its trend of controlled inflation, deregulation,
and austere economic policy.
[Graphic]
IN THIS VERY DIFFICULT ENVIRONMENT, HOW DID FEDERATED LATIN AMERICAN
GROWTH FUND PERFORM, COMPARED TO THE OVERALL LATIN AMERICAN MARKET, FOR
THE 12-MONTH REPORTING PERIOD ENDED NOVEMBER 30, 1998?
For the fiscal year ended November 30, 1998, the fund delivered total
returns, based on net asset value, of (32.04%), (32.63%), and (32.55%)
for Class A, B, and C Shares, respectively.* For the same period, the
total return of the Morgan Stanley Capital International Latin
American-Free Index was (28.03%)** and the total return of the Lipper
Latin American Funds Average was (29.55%).***
[Graphic]
WHAT ACCOUNTED FOR THE FUND'S UNDERPERFORMANCE?
We focused on higher-quality, liquid stocks, which we felt would fare
better during periods of extreme market volatility. Unfortunately,
during the reporting period, the market did not reward a conservative,
bottom-up approach.
Our strategy is to remain focused on the fundamentals of the companies
in this region and maintain a portfolio that minimizes the risk to
shareholders' capital.
* 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 12-month reporting period,
based on offering price (i.e., less any applicable sales charge), for
Class A, B, and C Shares were (35.78%), (36.33%), and (33.23%),
respectively.
** The Morgan Stanley Capital International Latin American-Free Index is an
unmanaged, market value-weighted average of the performance of
securities listed on the stock exchanges of seven countries in the Latin
American region. Investments cannot be made in an index.
*** Lipper figures represent the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc.
as falling into the respective categories indicated. Lipper returns do
not reflect sales charges.
[Graphic]
WHAT CHANGES TO COUNTRY ALLOCATIONS WERE MADE DURING THE 12-MONTH
REPORTING PERIOD ENDED NOVEMBER 30, 1998?
We reduced our exposure in Brazil, which remains our largest weighting,
and switched some assets to Mexico, where we see stronger fundamentals.
As of the end of the reporting period, the country allocations were as
follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Brazil 37.3%
Mexico 33.8%
Argentina 10.1%
Chile 8.1%
Peru 3.5%
[Graphic]
WHAT IS YOUR COUNTRY-BY-COUNTRY ANALYSIS OF THE FUND'S PORTFOLIO AS OF
NOVEMBER 30, 1998?
BRAZIL: Part of the confidence in domestic fundamentals, reinforced by
the privatization of the TELEBRAS system in July 1998, was more than
offset by the turbulence abroad, particularly the financial crisis in
Russia. This is illustrated by the 40.2% drop in the Bovespa in August
1998 alone. However, more recent positive catalysts for the market
have been the reelection of President Cardoso, the approval of a
$41.5 billion international support package, and the slow reduction in
interest rates. Implementation of substantial fiscal reforms, together
with the loss of reserves, remain concerns.
MEXICO: Consumption and construction remain strong in Mexico. However,
the Peso continues to be under pressure due to global events,
particularly the continued decline in oil prices. Although Mexico has
relatively small fiscal and current account imbalances (-1.50% and -
3.30% of Gross Domestic Product ("GDP") respectively), GDP growth will
slow moderately due to higher interest rates and higher inflation.
Nonetheless, the country's sound regional fundamentals and floating
rate currency regime should allow the economy to recover from the
current contagion.
ARGENTINA: While economic growth is still strong, deceleration of the
7.3% GDP growth seen in the first half of 1998 is expected.
Nonetheless, inflation remains low and interest rates are declining.
Focus in the coming year will be on the presidential election.
CHILE: The restructuring of Russian debt and concerns over currency
devaluations negatively impacted this market. The Central Bank has
decreased interest rates from 14% to 8.5% in an effort to stimulate
growth. However, we do not foresee a quick recovery of this particular
market, due to Chile's exposure to Asia and dependence on copper
prices, which have not yet recovered.
PERU: Peru has been significantly impacted by the Asian crisis through
the deterioration in its external accounts. The current account
deficit remains high, at 7% of GDP, and will restrict authorities'
ability to maneuver. While the end of El Nino should support a renewed
interest in this market, the government may cut spending to control the
external accounts, thereby hurting economic growth.
[Graphic]
WHAT WERE THE FUND'S TOP TEN HOLDINGS AS OF NOVEMBER 30, 1998?
PERCENTAGE
OF NET
COMPANY COUNTRY ASSETS INDUSTRY
Banco do Estado de
Sao Paulo, Preference Brazil 5.77% Banking
Petroleo Brasileiro SA,
Preference Brazil 4.82% Energy Sources
Companhia Energetica
de Minas Gerais, Preference Brazil 4.54% Utilities-
Electric & Gas
Cifra SA de CV, Class V Mexico 4.26% Merchandising
Grupo Televisa SA, GDR Mexico 3.57% Broadcasting &
Publishing
Grupo Industrial
Maseca SA de CV, Class B Mexico 3.41% Food & Household
Products
Gas Natural Ban SA Argentina 3.41% Energy Sources
Chilectra SA, ADR Chile 3.39% Energy Equipment &
Services
Telesp Participacoes SA Brazil 3.32% Telecommunications
Telefonos de Mexico Class L, ADR Mexico 3.11% Telecommunications
TOTAL 39.60%
[Graphic]
WHAT IS YOUR SECURITY SELECTION STRATEGY IN THE CURRENT ENVIRONMENT,
AND WHAT WERE SOME OF THE FUND'S MOST RECENT PURCHASES THAT EXEMPLIFY
THIS STRATEGY?
We are maintaining our strategy of looking for low-valued companies
with the highest upside potential among their peers, locally and
regionally. The following are two examples of companies with high
growth potential:
We purchased TELESP PARTICIPACOES SA (3.32% of net assets), a Brazilian
company that owns the fixed line telecommunications operator in the
State of Sao Paulo. We expect Telesp to outperform based on the
following:
* tremendous growth given the level of untapped demand;
* expertise of the new owner Telefonica de Espana;
* improved efficiencies and cost savings from restructuring;
* limited competition and liquidity.
In Mexico, we bought GRUPO MODELO SA DE CV, CLASS C (1.46% of net
assets), the largest Mexican brewery. Modelo has remained the most
profitable of the major Latin American brewers.
[Graphic]
AS WE REACH THE END OF A DIFFICULT YEAR, WHAT DO YOU FORESEE FOR THE
LATIN AMERICAN REGION IN 1999, AND WHERE ARE THE BUYING OPPORTUNITIES?
In the current global context, the Latin American markets will continue
to be under strong pressure and regional growth is expected to decline.
However, the region holds the strongest fundamentals among emerging
markets and should experience the strongest rebound once confidence
returns. In Brazil, given the reelection of President Cardoso and the
availability of the $41.5 billion international support package, the
focus will remain on the implementation of rigorous fiscal budget cuts.
Continued reduction of interest rates and successful fiscal adjustment
in Brazil, together with the resolution of Fobaproa, the Mexican bank
bailout fund, should provide positive catalysts for the region and
result in a recovery of international investor confidence.
While there are many buying opportunities due to the recent market
turmoil, we expect high volatility to characterize the markets in the
short term. For this reason, the portfolio is focused on attractively
valued, liquid securities that are likely to see the strongest rebound
once confidence returns to the region. Moreover, the securities have
high earnings visibility, clean balance sheets, little dollar-
denominated debt, and strong management capabilities.
FEDERATED LATIN AMERICAN GROWTH FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND
(CLASS A SHARES)
The graph below illustrates the hypothetical investment of
$10,000* in the Federated Latin American Growth Fund (Class A
Shares) (the "Fund") from February 28, 1996 (start of
performance) to November 30, 1998 compared to the Morgan
Stanley Capital International Latin American-Free Index (MSCI-LAF).+
[Graphic representation omitted. See Appendix A27.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund
after deducting the maximum sales charge of 5.50% ($10,000
investment minus $550 sales charge = $9,450). The Fund's
performance assumes the reinvestment of all dividends and
distributions. The MSCI-LAF has been adjusted to reflect
reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges.
+ The MSCI-LAF is a market value-weighted average of the
performance of securities listed on the stock exchanges of seven
countries in the Latin-American region. The MSCI-LAF is not
adjusted to reflect sales charges, expenses, or other fees
that the Securities and Exchange Commission requires to be
reflected in the Fund's performance. This index is unmanaged.
FEDERATED LATIN AMERICAN GROWTH FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND
(CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated Latin American Growth Fund (Class B Shares) (the "Fund")
from February 28, 1996 (start of performance) to November 30, 1998
compared to the Morgan Stanley Capital International Latin American-
Free Index (MSCI-LAF).+
[Graphic representation omitted. See Appendix A28.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a contingent deferred sales charge of 4.00% on
any redemption less than three years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The fund's performance assumes the
reinvestment of all dividends and distributions. The MSCI-LAF has been
adjusted to reflect reinvestment of dividends on securities in the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-LAF is a market value-weighted average of the performance of
securities listed on the stock exchanges of seven countries in the Latin-
American region. The MSCI-LAF is not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This index is
unmanaged.
FEDERATED LATIN AMERICAN GROWTH FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED LATIN AMERICAN GROWTH FUND
(CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated Latin American Growth Fund (Class C Shares) (the "Fund")
from February 28, 1996 (start of performance) to November 30, 1998
compared to the Morgan Stanley Capital International Latin American-
Free Average Index (MSCI-LAF).+
[Graphic representation omitted. See Appendix A29.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The MSCI-LAF has been
adjusted to reflect reinvestment of dividends on securities in
the index.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The MSCI-LAF is a market value-weighted average of the performance of
securities listed on the stock exchanges of seven countries in the Latin
American region. The MSCI-LAF is not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. This index is
unmanaged.
FEDERATED LATIN AMERICAN GROWTH FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--68.8%
BANKING--3.3%
17,000 Banco Santander SA, Class A, ADR $ 216,750
950,000 Grupo Financiero Bancomer, SA de CV, Class B 171,188
Total 387,938
BEVERAGE & TOBACCO--5.0%
130,000 Fomento Economico Mexicano, SA de CV 304,535
87,200 Grupo Modelo SA de CV, Class C 172,846
4,000 Vina Concha Y Toro, ADR 112,500
Total 589,881
BROADCASTING & PUBLISHING--4.8%
16,600 Grupo Televisa SA, GDR 422,263
20,000 (a)TV Azteca SA de CV, ADR 150,000
Total 572,263
BUILDING MATERIALS & COMPONENTS--4.3%
12,599 Cementos Lima SA 185,487
108,500 Cemex SA, Class B 317,169
Total 502,656
CONGLOMERATE--3.3%
340,000 Grupo Elektra 178,356
40,000 Perez Companc SA, Class B 208,029
Total 386,385
CONSTRUCTION & HOUSING--1.4%
60,000 (a)Corporacion Geo, SA de CV, Class B 169,987
ENERGY EQUIPMENT & SERVICES--3.4%
17,900 (b)Chilectra SA, ADR 400,881
ENERGY SOURCES--5.6%
240,000 (a)Gas Natural Ban SA 403,256
8,800 YPF Sociedad Anonima, ADR 259,600
Total 662,856
FOOD & HOUSEHOLD PRODUCTS--3.4%
451,000 Grupo Industrial Maseca SA de CV, Class B 403,638
VALUE IN
</TABLE>
FEDERATED LATIN AMERICAN GROWTH FUND
<TABLE>
<CAPTION>
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
FOREST PRODUCTS & PAPER--1.3%
14,300 Aracruz Cellulose, ADR $ 154,619
HEALTH & PERSONAL CARE--1.5%
63,000 Kimberly-Clark de Mexico 172,179
MERCHANDISING--6.3%
408,000 (a)Cifra SA de CV, Class V 503,210
83,000 Organizacion Soriana SA de CV, Class B 242,627
Total 745,837
METALS - NON FERROUS--3.9%
37,000 Compania de Minas Buenaventura SA, Class B 232,101
6,000 Sociedad Quimica Y Minera De Chile, ADR 231,000
Total 463,101
RECREATION, OTHER CONSUMER GOODS--1.9%
100,000 (a)Corporacion Interamericana de Entretenimiento SA 225,248
RETAIL--1.8%
10,650 Companhia Brasileira de Distribuicao Grp, ADR 213,666
TELECOMMUNICATIONS--12.9%
23,000 (a)Grupo Iusacell SA, ADR 189,750
8,400 (a)Tele Norte Leste Participacoes SA, ADR 142,800
4,000 (a)Tele Sudeste Celular Participacoes SA, ADR 108,000
10,000 Telefonica de Argentina SA, ADR 323,750
7,900 Telefonos de Mexico, Class L, ADR 367,844
14,000,000 (a)Telesp Participacoes SA 392,872
Total 1,525,016
UTILITIES - ELECTRICAL & GAS--4.7%
2,040,000 Companhia de Saneamento Basico do Estado de Sao Paulo 224,232
34,000 Companhia Paranaense de Energia-Copel, ADR 331,500
Total 555,732
TOTAL COMMON STOCKS (IDENTIFIED COST $7,948,985) 8,131,883
PREFERRED STOCKS--24.1%
BANKING--5.8%
14,100,000 Banco do Estado de Sao Paulo, Preference 682,163
</TABLE>
FEDERATED LATIN AMERICAN GROWTH FUND
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
ENERGY SOURCES--4.8%
4,000,000 Petroleo Brasileiro SA, Preference $ 569,573
METALS - STEEL--2.9%
18,000,000 Gerdau SA, Preference 176,867
62,800 Usinas Siderurgicas de Minas Gerais SA, Preference 170,479
Total 347,346
TELECOMMUNICATIONS--3.0%
37,519 Telecomunicacoes Do Rio Janiero SA, Preference 1,359
2,047,390 Telecomunicacoes de Sao Paulo SA, Preference 347,795
Total 349,154
UTILITIES - ELECTRICAL & GAS--7.6%
12,700,000 (a)Centrais Eletricas Brasileiras SA, Preference, Series B 359,564
21,212,307 Companhia Energetica de Minas Gerais, Preference 536,976
Total 896,540
TOTAL PREFERRED STOCKS (IDENTIFIED COST $3,022,852) 2,844,776
CORPORATE BONDS--0.0%
MINING--0.0%
$ 5,800 Companhia Vale Do Rio Doce, Conv. Deb., 12/31/1999 (IDENTIFIED COST $58) 48
(C)REPURCHASE AGREEMENT--4.4%
520,000 Westdeutsche Landesbank Girozentrale, 5.35%, dated
11/30/1998, due 12/1/1998 (AT AMORTIZED COST) 520,000
TOTAL INVESTMENTS (IDENTIFIED COST $11,491,895)(D) $ 11,496,707
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1998, these securities
amounted to $400,881 which represents 3.4% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $12,030,435.
The net unrealized depreciation of investments on a federal tax basis
amounts to $533,728 which is comprised of $614,247 appreciation and
$1,147,975 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($11,826,192) at November 30, 1998.
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
NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost
$11,491,895 and tax cost $12,030,435) $ 11,496,707
Cash 4,204
Income receivable 72,430
Receivable for investments sold 465,769
Receivable for shares sold 96,530
Deferred organizational costs 29,865
Total assets 12,165,505
LIABILITIES:
Payable for investments purchased $ 229,739
Payable for shares redeemed 74,797
Payable for taxes withheld 5,739
Payable for transfer and dividend disbursing agent fees and
expenses 8,608
Payable for portfolio accounting fees 6,652
Accrued expenses 13,778
Total liabilities 339,313
NET ASSETS for 1,311,348 shares outstanding $ 11,826,192
NET ASSETS CONSIST OF:
Paid in capital $ 20,070,424
Net unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 2,652
Accumulated net realized loss on investments and foreign
currency transactions (8,327,109)
Undistributed net investment income 80,225
Total net assets $ 11,826,192
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER
SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($6,399,827 / 703,248 shares
outstanding) $9.10
Offering Price Per Share (100/94.50 of $9.10)* $9.63
Redemption Proceeds Per Share $9.10
CLASS B SHARES:
Net Asset Value Per Share ($4,703,713 / 527,359 shares
outstanding) $8.92
Offering Price Per Share $8.92
Redemption Proceeds Per Share (94.50/100 of $8.92)* $8.43
CLASS C SHARES:
Net Asset Value Per Share ($722,652 / 80,741 shares
outstanding) $8.95
Offering Price Per Share $8.95
Redemption Proceeds Per Share (99.00/100 of $8.95)* $8.86
</TABLE>
* See "What Do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $40,263) $ 638,166
Interest 37,987
Total income 676,153
EXPENSES:
Investment advisory fee $ 234,964
Administrative personnel and services fee 185,000
Custodian fees 51,212
Transfer and dividend disbursing agent fees and expenses 80,055
Directors' fees 1,167
Auditing fees 21,692
Legal fees 2,831
Portfolio accounting fees 82,580
Distribution services fee--Class B Shares 50,647
Distribution services fee--Class C Shares 8,442
Shareholder services fee--Class A Shares 27,297
Shareholder services fee--Class B Shares 16,883
Shareholder services fee--Class C Shares 2,814
Share registration costs 29,992
Printing and postage 29,673
Insurance premiums 3,465
Taxes 1,875
Miscellaneous 19,037
Total expenses 849,626
Waivers and reimbursements--
Waiver of investment advisory fee $ (234,964)
Reimbursement of other operating expenses 178,798)
Total waivers and reimbursements (413,762)
Net expenses 435,864
Net investment income 240,289
REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized loss on investments and foreign currency
transactions (7,074,994)
Net change in unrealized depreciation of investments and
translation of assets and liabilities in foreign currency (672,967)
Net realized and unrealized loss on investments and
foreign currency transactions (7,747,961)
Change in net assets resulting from operations $ (7,507,672)
</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>
YEAR ENDED
NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income/(net operating loss) $ 240,289 $ (132,382)
Net realized loss on investments and foreign currency
transactions $(6,479,097) and $(1,309,472), respectively, as
computed for federal tax purposes) (7,074,994) (1,474,894)
Net change in unrealized appreciation/(depreciation) of
investments and translation of assets and liabilities in
foreign currency (672,967) 165,752
Change in net assets resulting from operations (7,507,672) (1,441,524)
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares -- (30,514)
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 -- (248,888)
SHARE TRANSACTIONS--
Proceeds from sale of shares 14,496,314 41,385,804
Net asset value of shares issued to shareholders in payment
of distributions declared -- 159,519
Cost of shares redeemed (20,604,271) (20,864,198)
Change in net assets resulting from share transactions (6,107,957) 20,681,125
Change in net assets (13,615,629) 18,990,713
NET ASSETS:
Beginning of period 25,441,821 6,451,108
End of period (including undistributed net investment income
of $80,225 and $0, respectively) $ 11,826,192 $25,441,821
</TABLE>
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(a)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.39 11.56 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(Net operating loss) 0.19(e) (0.06) 0.12
Net realized and unrealized gain/(loss) on
investments and foreign currency transactions (4.48) 2.38(d) 1.44
Total from investment operations (4.29) 2.32 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 $ 9.10 $13.39 $11.56
TOTAL RETURN(b) (32.04%) 20.76% 15.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.00% 2.17% 1.97%*
Net investment income/(Net operating loss) 1.59% (0.32%) 1.49%*
Expense waiver/reimbursement(c) 2.20% 1.91% 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $6,400 $14,847 $4,836
Portfolio turnover 201% 79% 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/(net operating loss) ratios shown above.
(d) The amount shown in this caption for a share outstanding does not
correspond with the aggregate net realized and unrealized gain (loss) on
investments and foreign currency for the period ended due to the timing
of sales and repurchases of Fund shares in relation to fluctuating
market values of the investments of the Fund.
(e) Per share information is based on average shares outstanding.
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(a)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.24 $11.50 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(Net operating loss) 0.09(e) (0.04) (0.05)
Net realized and unrealized gain/(loss) on
investments and foreign currency transactions (4.41) 2.24(d) 1.55
Total from investment operations (4.32) 2.20 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 $ 8.92 $13.24 $ 11.50
TOTAL RETURN(b) (32.63%) 19.72% 15.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.75% 2.93% 2.72%*
Net investment income/(Net operating loss) 0.84% (1.29%) (1.20%)*
Expense waiver/reimbursement(c) 2.20% 1.90% 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $4,704 $8,814 $1,355
Portfolio turnover 201% 79% 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/(net operating loss) ratios shown above.
(d) The amount shown in this caption for a share outstanding does not
correspond with the aggregate net realized and unrealized gain (loss) on
investments and foreign currency for the period ended due to the timing
of sales and repurchases of Fund shares in relation to fluctuating
market values of the investments of the Fund.
(e) Per share information is based on average shares outstanding.
(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>
YEAR ENDED NOVEMBER 30,
1998 1997 1996(a)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.27 $11.48 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income/(Net operating loss) 0.09(e) (0.04) (0.08)
Net realized and unrealized gain/(loss) on
investments and foreign currency transactions (4.41) 2.27(d) 1.56
Total from investment operations (4.32) 2.23 1.48
LESS DISTRIBUTIONS
Distributions from net investment income -- (0.03) --
Distributions from net realized gain on
investments and foreign currency transactions -- (0.41) --
Total distributions -- (0.44) --
NET ASSET VALUE, END OF PERIOD $ 8.95 $13.27 $11.48
TOTAL RETURN(b) (32.55%) 19.97% 14.80%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.75% 2.93% 2.72%*
Net investment income/(Net operating loss) 0.84% (1.23%) (1.30%)*
Expense waiver/reimbursement(c) 2.20% 1.90% 6.96%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $723 $1,781 $260
Portfolio turnover 201% 79% 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/(net operating loss) ratios shown above.
(d) The amount shown in this caption for a share outstanding does not
correspond with the aggregate net realized and unrealized gain (loss) on
investments and foreign currency for the period ended due to the timing
of sales and repurchases of Fund shares in relation to fluctuating
market values of the investments of the Fund.
(e) Per share information is based on average shares outstanding.
(See Notes which are an integral part of the Financial Statements)
FEDERATED LATIN AMERICAN GROWTH FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
portfolios. The financial statements included herein are only those of
Federated Latin American Growth Fund (the "Fund"), a diversified
portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held. The Fund offers three classes of shares: Class A Shares, Class B
Shares, and Class C Shares. The investment objective of the Fund is to
provide long-term growth of capital.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS--Foreign equity securities are valued at the
last sales price reported on a national securities exchange or the
over-the-counter market. In the absence of recorded sales for equity
securities, they are recorded according to the mean between the last
closing bid and asked prices. Fixed-income securities are valued at the
latest bid prices as furnished by an independent pricing service.
Short-term foreign and domestic securities are valued at the prices
provided by an independent pricing service. However, short-term
foreign and domestic securities with remaining maturities of sixty
days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Dividend income and distributions to shareholders are
recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to
differing treatments for foreign currency transactions and net
operating losses. The following reclassifications have been made to
the financial statements.
INCREASE/(DECREASE)
UNDISTRIBUTED
ACCUMULATED NET NET INVESTMENT
REALIZED LOSS INCOME
$160,064 $(160,064)
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions
of the Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its income.
Accordingly, no provisions for federal tax are necessary. However,
federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies.
Withholding taxes on foreign interest and dividends have been provided
for in accordance with the Fund's understanding of the applicable
country's tax rules and rates.
At November 30, 1998, the Fund, for federal tax purposes, had a capital
loss carryforward of $7,788,569 which will reduce the Fund's taxable
income arising from future net realized gain on investments, if any, to
the extent permitted by the Code, and thus will reduce the amount of
the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax. Pursuant to the
Code, such capital loss carryforward will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT
2005 $1,309,472
2006 6,479,097
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage
in when-issued or delayed delivery transactions. The Fund records
when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-
issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
FOREIGN EXCHANGE CONTRACTS--The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire
exposure to foreign currencies; whereas, contracts to sell are used to
hedge the Fund's securities against currency fluctuations. Risks may
arise upon entering these transactions from the potential inability of
counterparts to meet the terms of their commitments and from
unanticipated movements in security prices or foreign exchange rates.
The foreign currency transactions are adjusted by the daily exchange
rate of the underlying currency and any gains or losses are recorded
for financial statement purpose as unrealized until the settlement date.
FOREIGN CURRENCY TRANSLATION--The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, and income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES--Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for
resale, at the issuer's expense either upon demand by the Fund or in
connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may
be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at November
30, 1998 is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Chilectra SA, ADR 2/28/1996 - 7/10/1997 $472,929
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 50,000,000
Total 250,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 996,001 $ 10,742,935 1,717,360 $ 25,725,399
Shares issued to shareholders in payment
of distributions declared -- -- 9,396 107,956
Shares redeemed (1,401,334) (14,621,996) (1,036,366) (15,394,130)
Net change resulting from Class A Share transactions (405,333) $ (3,879,061) 690,390 $ 10,439,225
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 298,474 $ 3,058,028 793,687 $ 11,941,024
Shares issued to shareholders in payment
of distributions declared -- -- 3,855 44,100
Shares redeemed (436,856) (4,645,411) (249,692) (3,519,328)
Net change resulting from Class B Share transactions (138,382) $ (1,587,383) 547,850 $ 8,465,796
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 58,373 $ 695,351 246,035 $ 3,719,381
Shares issued to shareholders in payment
of distributions declared -- -- 652 7,463
Shares redeemed (111,802) (1,336,864) (135,140) (1,950,740)
Net change resulting from Class C Share transactions (53,429) $ (641,513) 111,547 $ 1,776,104
Net change resulting from share transactions (597,144) $ (6,107,957) 1,349,787 $ 20,681,125
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.25% 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, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Fund will compensate Federated Securities Corp. ("FSC"),
the principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class A Shares,
Class B Shares, and Class C Shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule
annually, to compensate FSC.
PERCENTAGE OF
AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
Class A Shares did not incur a distribution services fee for the year
ended November 30, 1998, 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 Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
shares for the period. The fee paid to FSSC 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, 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 start-up administrative
service expenses of $53,789 were borne initially by the Adviser. The
Fund has reimbursed the Adviser for these expenses. These expenses have
been deferred and are being amortized over the five-year period
following the Fund's effective date. For the year ended November 30,
1998, the Fund expensed $13,764 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 year ended November 30, 1998, were as follows:
PURCHASES $35,574,215
SALES $41,184,893
6. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund
maintains a diversified investment portfolio, the political or economic
developments within a particular country or region may have an adverse
effect on the ability of domiciled issuers to meet their obligations.
Additionally, political or economic developments may have an effect on
the liquidity and volatility of portfolio securities and currency holdings.
At November 30, 1998, the diversification of countries was as follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Argentina 10.1%
Brazil 37.3%
Chile 8.1%
Mexico 33.8%
Peru 3.5%
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
Administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8. SUBSEQUENT EVENT
On January 7, 1999, the adviser, Federated Global Research Corp.,
changed its name to Federated Global Investment Management Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Latin American
Growth Fund (a portfolio of World Investment Series, Inc.) as of
November 30, 1998, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each
of the periods presented therein. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated Latin American Growth Fund of World
Investment Series, Inc. at November 30, 1998, and the results of its
operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the financial
highlights for each of the periods presented therein, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487796
Cusip 981487788
Cusip 981487770
G01940-01 (1/99)
[Graphic]
[Graphic]
Federated Investors
[Graphic]
Federated World Utility Fund
5th Annual Report
November 30, 1998
ESTABLISHED 1994
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
Federated World Utility Fund was created in 1994, and I am pleased to
present its fifth Annual Report. This report covers the 12-month
reporting period from December 1, 1997 through November 30, 1998. It
begins with an interview with the fund's portfolio manager, Richard
Lazarchic, Vice President of Federated Global Investment Management
Corp. (formerly, Federated Global Research Corp.). Following his
discussion are three additional items of shareholder interest. First
is a series of graphs showing the fund's long-term investment
performance. Second is a complete listing of the fund's global
investments, and third is the publication of the fund's financial
statements.
This fund provides shareholders with opportunities for income and
capital growth through a diversified portfolio of stocks and
convertible securities in the electric, natural gas, water, and
telecommunications sectors in the U.S. and around the world.*
Consistent with the extremely favorable environment for utilities
worldwide, the fund has had another very good year in 1998, as it
recorded double-digit total return performance that was greater than
that of the average utility fund. Individual share class total return
performance for the 12-month period, including income distributions
and realized gains, follows.**
TOTAL CAPITAL NET ASSET
RETURN INCOME GAINS VALUE INCREASE
Class A Shares 20.42% $0.260 $0.442 $14.16 to $16.24 = 15%
Class B Shares 19.53% $0.150 $0.442 $14.12 to $16.19 = 15%
Class C Shares 19.50% $0.150 $0.442 $14.14 to $16.21 = 15%
Class F Shares 20.42% $0.260 $0.442 $14.16 to $16.24 = 15%
We trust you are pleased with the continued positive performance of
your investment in Federated World Utility Fund. The fund's
$65.8 million in assets are currently focused on the U.S. for
defensive purposes. The environment for utilities remains favorable,
but foreign markets may be volatile.
* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in
auditing and other financial standards.
** Performance quoted is based on net asset value, represents past
performance, and is not indicative of future results. Investment return
and principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Total
returns for the 12-month reporting period, based on offering price (i.e.,
less any applicable sales charge), for Class A, B, C, and F Shares were
13.83%, 14.03%, 18.50%, and 18.25%, respectively.
Thank you for joining the growing number of shareholders who have
entrusted this global utility fund with a portion of their wealth.
Remember, adding to your investment account and reinvesting your
quarterly dividends in additional shares is a convenient, painless way
to "pay yourself first" and enjoy the benefit of compounding and future
income from the shares you buy today.+
We welcome your comments and suggestions.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1999
+ Systematic investing does not ensure a profit or protect against loss in
declining markets.
INVESTMENT REVIEW
[Graphic]
Richard Lazarchic
Vice President
Federated Global Investment
Management Corp.
[Graphic]
WHAT ARE YOUR COMMENTS ON GLOBAL UTILITY STOCKS DURING THE FUND'S
FISCAL YEAR?
Global utilities, one of the best performing sectors during 1997,
continued their strong performance through the fund's 1998 fiscal
year. The fund's benchmark, the FT Actuaries/S&P Global Utility
Index, posted a total return of 31.92% for the 12-month reporting
period ended November 30, 1998.*
This performance was led by the Index's large weighting in global
telecommunications stocks. These stocks, led by the regional U.S. Bell
telephone companies, have reasonable price to growth characteristics
and large capitalizations and are generally used as defensive
surrogates by growth portfolio managers.
[Graphic]
IN THIS FAVORABLE ENVIRONMENT, HOW DID FEDERATED WORLD UTILITY FUND
PERFORM OVER THE 12-MONTH REPORTING PERIOD?
For the fiscal year ended November 30, 1998, the fund delivered strong
total returns of 20.42%, 19.53%, 19.50%, and 20.42%, based on net asset
value, for Class A, B, C, and F Shares, respectively.** These returns
were greater than the 18.17% average total return of the 101 utility
funds tracked by Lipper Analytical Services, Inc. for the same period.+
* FT Actuaries/S&P Global Utility Index is an unmanaged, market cap-
weighted index of utility securities from 24 countries, both developed
and emerging markets, with approximately 174 companies. 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 12-month reporting period,
based on offering price (i.e., less any applicable sales charge), for
Class A, B, C, and F Shares were 13.83%, 14.03%, 18.50%, and 18.25%,
respectively.
+ Lipper figures represent the average of the total returns reported by all
of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated. These figures do not take sales
charges into account.
Like most utility funds, Federated World Utility Fund underperfomed
its benchmark index because the Index does not factor in the qualities
of an actively managed mutual fund-such as cash investments or
transaction fees-which make the Index harder to beat in a strong
market.
During the fiscal year, there were two very strong periods of down
performance by the world indices that required the fund to take a
defensive posture. Even though the fund had virtually no exposure to
emerging markets, it did on occasion hold stocks that had subsidiary
exposure there, or were perceived to have exposure.
[Graphic]
WHAT WERE SOME OF THE FUND'S RECENT UTILITY PURCHASES?
Our recent purchases included the following:
MCI WORLDCOM, INC.-United States-(4.49% of assets): MCI Worldcom
provides facilities-based and fully integrated local, long-distance,
international, and Internet services. The company also provides end-
to-end high-capacity connectivity to more than 35,000 buildings
worldwide. MCI Worldcom operates in more than 65 countries including
the Americas, Europe, and the Asia Pacific regions.
GTE CORP.-United States-(4.24% of net assets): GTE is a
telecommunications company that provides local telephone and
wireless services in 29 states and long-distance service and Internet
access in all 50 states. GTE provides government and defense
communications systems and equipment, aircraft passenger
telecommunications, and telecommunications-based information
services. Bell Atlantic has offered to acquire, which is still
pending, GTE in July 1998.
SUEZ LYONNAISE DES EAUX-France-(3.30% of net assets): Suez Lyonnaise
des Eaux is an industrial and financial group active in water supply
and treatment, electricity, waste management, and telecommunications.
In addition, the company has diversified investments in civil
engineering, construction, financial services, real estate, and
industrial sectors. Suez Lyonnaise des Eaux is a large restructuring
story focused on cost cutting, divesting non-core businesses, and
growing core operation through acquisitions.
ENDESA SA-Spain-(1.70% of net assets): Endesa produces, transmits,
distributes, and supplies electricity to other major utilities
throughout Spain. Endesa generates its electricity through coal-fired,
nuclear, hydro-electric, and fuel/gas plants. The company also has
interests in coal mining companies and in other Latin American
utilities.
[Graphic]
WHAT WERE THE FUND'S TOP 10 HOLDINGS AS OF NOVEMBER 30, 1998?
PERCENTAGE
OF NET
NAME INDUSTRY COUNTRY ASSETS
MCI Worldcom, Inc. Telecommunications United States 4.49%
GTE Corp. Telecommunications United States 4.24%
Bell Atlantic Corp. Telecommunications United States 4.23%
Ameritech Corp. Telecommunications United States 3.70%
BellSouth Corp. Telecommunications United States 3.32%
AT&T Corp. Telecommunications United States 3.32%
Suez Lyonnaise des Eaux Multi-Industry France 3.30%
Peco Energy Corp. Electric Utilities United States 3.05%
SBC Communi-cations, Inc. Telecommunications United States 2.92%
Vodafone Group PLC Cellular Telephone United Kingdom 2.58%
TOTAL 35.15%
[Graphic]
AT THE END OF THE REPORTING PERIOD, THE FUND'S UTILITY HOLDINGS WERE
FOCUSED MORE HEAVILY ON THE U.S. WHAT IS YOUR CURRENT STRATEGY FOR THE
FUND'S REGIONAL WEIGHTINGS?
As of November 30, 1998, the fund's regional weightings were as
follows:
PERCENTAGE
REGION OF NET ASSETS
United States 68.1%
Europe 26.8%
Canada 3.3%
Other 0.6%
We will continue to favor domestic utilities. We have decreased a
number of the fund's positions in global telecommunications stocks
(especially cellular stocks), and put the money to work in the domestic
electric utility industry. We did this to become more defensive and
also to take some profits in cellular stocks, which had performed very
well during the year. We continue to avoid the emerging markets of
Southeast Asia, Latin America, and Eastern Europe. We would rather
invest in the regional U.S. domestic Bell Telephone companies and
other telecommunications related stocks for growth, and in electric
utilities for yield and value.
[Graphic]
AS WE ENTER A NEW YEAR, WHAT IS YOUR ASSESSMENT OF THE WORLD UTILITY
MARKETPLACE?
Over the past few quarters we believed that at least two of the
following events had to happen for the world markets to perform
positively:
1. A consolidated effort by the Secretary of the Treasury, Robert Rubin
and the G-7 countries* to financially support the emerging markets;
2. Continued help by the Federal Reserve Board in lowering interest
rates in the United States; and
3. A positive effort by the Japanese to get their economy going again
and to bail out their real estate industry.
The first two occurred, and at least part of the third has happened.
Additionally, we experienced a positive stock market move - even more
than expected on the rebound.
We feel that 1999 will again be volatile with a strong start giving way
to earnings worries in the first half of the year with a more normal
second half. The fund will continue to seek out market leaders at
present because we do not feel that anything has changed. For the fund,
this means a mix of telecommunications securities selected for their
growth opportunities and defensive electric securities.
* The G-7 countries are Canada, France, Germany, Italy, Japan, United
Kingdom and the United States.
[Graphic]
WHERE IN THE WORLD SHOULD YOU INVEST?
[Graphic]
FEDERATED ASIA PACIFIC GROWTH FUND
FEDERATED EMERGING MARKETS FUND
FEDERATED EUROPEAN GROWTH FUND
FEDERATED GLOBAL EQUITY INCOME FUND
FEDERATED GLOBAL FINANCIAL SERVICES FUND
FEDERATED INTERNATIONAL EQUITY FUND
FEDERATED INTERNATIONAL GROWTH FUND
FEDERATED INTERNATIONAL HIGH INCOME FUND
FEDERATED INTERNATIONAL INCOME FUND
FEDERATED INTERNATIONAL SMALL COMPANY FUND
FEDERATED LATIN AMERICAN GROWTH FUND
FEDERATED WORLD UTILITY FUND
Federated employs highly qualified, experienced managers in global investing
to select countries and companies outside the U.S. for long-term growth
potential.
Call your investment representative to buy shares of 10 international
equity funds and 2 international income funds from Federated Securities
Corp.
FOR MORE COMPLETE INFORMATION ABOUT ANY OF THESE FUNDS, CALL 1-800-341-7400
TO ASK FOR A PROSPECTUS AND READ IT CAREFULLY BEFORE YOU INVEST.
International investing involves special risks including currency risks,
increased volatility of foreign securities, and differences in
auditing and other financial standards.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED WORLD UTILITY FUND
INITIAL INVESTMENT:
IF YOU MADE AN INITIAL INVESTMENT OF $5,000 IN THE CLASS A SHARES OF
FEDERATED WORLD UTILITY FUND ON 4/30/94, REINVESTED YOUR DIVIDENDS AND
CAPITAL GAINS, AND DID NOT REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE
BEEN WORTH $9,257 ON 11/30/98. YOU WOULD HAVE EARNED A 14.38%* AVERAGE
ANNUAL TOTAL RETURN FOR THE INVESTMENT LIFE SPAN.
One key to investing wisely is to reinvest all distributions in fund
shares. This increases the number of shares on which you can earn
future dividends, and you gain the benefit of compounding.
As of 12/31/98, the Class A Shares' average annual 1-year and since
inception (4/22/94) total returns were 16.91% and 15.55%,
respectively. Class B Shares' average annual 1-year and since
inception (7/27/95) total returns were 17.29% and 19.47%, respectively.
Class C Shares' average annual 1-year and since inception (7/27/95)
total returns were 21.77% and 20.00%, respectively. Class F Shares'
average annual 1-year and since inception (4/22/94) total returns were
21.49% and 16.64%, respectively.**
[Graphic representation omitted. Please see Appendix A30.]
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the
5.50% sales charge applicable to an initial investment in Class A Shares.
Data quoted represents past performance and does not guarantee future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
** The total return stated takes into account the 5.50% sales charge for
Class A Shares, the 5.50% contingent deferred sales charge for Class B
Shares, the 1.00% contingent deferred sales charge for Class C Shares, and
the 1.00% sales charge and 1.00% contingent deferred sales charge
for Class F Shares.
FEDERATED WORLD UTILITY FUND
ONE STEP AT A TIME:
$1,000 initial investment and subsequent investments of $1,000 each year
for four years (reinvesting all dividends and capital gains) grew to $7,405.
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 4/30/94, reinvested your dividends and
capital gains, and did not redeem any shares, you would have invested
only $5,000, but your account would have reached a total value of $7,405*
by 11/30/98. You would have earned an average annual total return of
15.49%.
A practical investment plan helps you pursue long-term performance from
domestic and international 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 omitted. Please see Appendix A31.]
* This chart assumes that the subsequent annual investments are made on the
last day of the anniversary month. No method of investing can guarantee a
profit or protect against loss in down markets. However, by investing
regularly over time and buying shares at various prices, investors can
purchase more shares at lower prices. All accumulated shares have the
ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of
changing price levels, the investor should consider whether or not to
continue purchases through periods of low price levels.
FEDERATED WORLD UTILITY FUND
CLASS A SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED
WORLD UTILITY FUND (CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated World Utility Fund (Class A Shares) (the "Fund") from
April 22, 1994 (start of performance) to November 30, 1998, compared
to the Standard and Poor's 500 Index (S&P 500),+ FT Actuaries/S&P
Global Utility Index (FTGU),+ and the Lipper Utility Funds Average (LUFA).++
[Graphic representation omitted. Please see Appendix A32.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 4.50% ($10,000 investment minus
$450 sales charge = $9,550) that was in effect prior to October 1, 1994.
As of October 1, 1994, the maximum sales charge was 5.50%. The Fund's
performance assumes the reinvestment of all dividends and distributions.
The S&P 500, FTGU, and LUFA have been adjusted to reflect reinvestment of
dividends on securities in the indices and average.
** Total return quoted reflects the maximum sales charge of 5.50%.
+ The S&P 500 and the FTGU are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. The indices
are unmanaged.
++ The LUFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated, and is not adjusted to reflect any
sales charges. However, these total returns are reported net of expenses
or other fees that the Securities and Exchange Commission requires to
be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND
CLASS B SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED
WORLD UTILITY FUND (CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated World Utility Fund (Class B Shares) (the "Fund") from
July 27, 1995 (start of performance) to November 30, 1998, compared to
the Standard and Poor's 500 Index (S&P 500),+ FT Actuaries/S&P Global
Utility Index (FTGU),+ and the Lipper Utility Funds Average (LUFA).++
[Graphic representation omitted. Please see Appendix A33.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The ending
value of the Fund reflects a 3.00% contingent deferred sales charge on
any redemption less than four years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption less than one
year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The S&P 500, FTGU, and
LUFA have been adjusted to reflect reinvestment of dividends on
securities in the indices and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGU are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. The indices
are unmanaged.
++ The LUFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated, and is not adjusted to reflect any
sales charges. However, these total returns are reported net of expenses
or other fees that the Securities and Exchange Commission requires to
be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND
CLASS C SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED
WORLD UTILITY FUND (CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated World Utility Fund (Class C Shares) (the "Fund") from
July 27, 1995 (start of performance) to November 30, 1998, compared to
the Standard and Poor's 500 Index (S&P 500),+ FT Actuaries/S&P Global
Utility Index (FTGU),+ and the Lipper Utility Funds Average (LUFA).++
[Graphic representation omitted. Please see Appendix A34.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less
than one year from the purchase date. The Fund's performance assumes the
reinvestment of all dividends and distributions. The S&P 500, FTGU, and
LUFA have been adjusted to reflect reinvestment of dividends on
securities in the indices and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGU are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. The indices
are unmanaged.
++ The LUFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated, and is not adjusted to reflect any
sales charges. However, these total returns are reported net of expenses
or other fees that the Securities and Exchange Commission requires to
be reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND
CLASS F SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED
WORLD UTILITY FUND (CLASS F SHARES)
The graph below illustrates the hypothetical investment of $10,000* in
the Federated World Utility Fund (Class F Shares) (the "Fund") from
April 22, 1994 (start of performance) to November 30, 1998, compared
to the Standard and Poor's 500 Index (S&P 500),+ FT Actuaries/S&P
Global Utility Index (FTGU),+ and the Lipper Utility Funds Average (LUFA).++
[Graphic representation omitted. Please see Appendix A35.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE
NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 1.00% ($10,000 investment minus
$100 sales charge = $9,900). A 1.00% contingent deferred sales charge
would be applied on any redemption less than four years from the purchase
date. The Fund's performance assumes the reinvestment of all dividends
and distributions. The S&P 500, FTGU, and LUFA have been adjusted to
reflect reinvestment of dividends on securities in the indices and
average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The S&P 500 and the FTGU are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance. The indices
are unmanaged.
++ The LUFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the category indicated, and is not adjusted to reflect any
sales charges. However, these total returns are reported net of expenses
or other fees that the Securities and Exchange Commission requires to be
reflected in a fund's performance.
FEDERATED WORLD UTILITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES VALUE IN
U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-96.1%
CELLULAR TELEPHONE-6.9%
16,000 (a)Airtouch Communications, Inc. $ 915,000
25,000 (a)NEXTEL Communications, Inc., Class A 537,500
3,600 (a)(b)Panafon SA 64,484
200,000 Telecom Italia Mobile SPA 1,309,719
114,846 Vodafone Group PLC 1,695,422
Total 4,522,125
ELECTRIC UTILITIES: CENTRAL-5.0%
24,000 CMS Energy Corp. 1,170,000
30,000 NIPSCO Industries, Inc. 879,375
20,000 Northwestern Corp. 472,500
20,000 Unicom Corp. 753,750
Total 3,275,625
ELECTRIC UTILITIES: EAST-8.5%
16,000 Consolidated Edison Co. 813,000
18,000 DQE, Inc. 739,125
27,000 GPU, Inc. 1,182,938
50,000 Peco Energy Co. 2,006,250
22,000 Public Service Enterprises Group, Inc. 858,000
Total 5,599,313
ELECTRIC UTILITIES: SOUTH-3.9%
14,000 Duke Energy Corp. 875,875
17,000 Southern Co. 501,500
27,000 Texas Utilities Co. 1,203,188
Total 2,580,563
ELECTRIC UTILITIES: WEST-4.8%
27,000 P G & E Corp. 835,313
28,000 Pinnacle West Capital Corp. 1,275,750
40,000 (a)UniSource Energy Corp. 597,500
25,000 Washington Water Power Co. 457,813
Total 3,166,376
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
SHARES VALUE IN
U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
ENERGY MINERALS-1.4%
17,000 USX Marathon Group, Inc. $ 482,375
14,100 YPF Sociedad Anonima, ADR 415,950
Total 898,325
FINANCE-1.6%
21,000 Citigroup, Inc. 1,053,938
MAJOR U.S. TELECOMMUNICATIONS-28.5%
35,000 AT&T Corp. 2,180,938
45,000 Ameritech Corp. 2,435,625
50,000 Bell Atlantic Corp. 2,781,250
25,000 BellSouth Corp. 2,181,250
45,000 GTE Corp. 2,790,000
50,000 (a)MCI Worldcom, Inc. 2,950,000
40,000 SBC Communications, Inc. 1,917,500
24,000 U.S. West, Inc. 1,494,000
Total 18,730,563
MULTI-INDUSTRY-3.3%
11,000 Suez Lyonnaise des Eaux 2,171,307
NATURAL GAS DISTRIBUTION-2.9%
15,000 Consolidated Natural Gas Co. 814,688
10,100 K N Energy, Inc. 441,875
33,000 Questar Corp. 633,188
Total 1,889,751
NON-U.S. UTILITIES-4.6%
135,000 British Energy PLC 1,440,711
13,000 Endesa SA 339,072
30,000 Endesa SA, ADR 780,000
25,000 Westcoast Energy, Inc. 500,000
Total 3,059,783
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
SHARES VALUE IN
U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-CONTINUED
OIL/GAS TRANSMISSION-3.4%
70,000 BG PLC $ 479,742
23,000 Coastal Corp. 802,125
28,000 El Paso Energy Corp. 955,500
Total 2,237,367
RAILROADS-1.3%
32,000 Railtrack Group PLC 877,771
TECHNOLOGY-4.3%
8,000 Alcatel 1,057,442
12,000 Lucent Technologies, Inc. 1,032,750
12,000 Motorola, Inc. 744,000
Total 2,834,192
TELECOMMUNICATIONS-15.7%
28,000 BCE, Inc. 999,604
120,000 British Telecommunications PLC 1,643,841
1,500 British Telecommunications PLC, ADR 207,375
55,000 (a)COLT Telecom Group PLC 718,500
40,000 Frontier Corp. 1,205,000
15,000 Portugal Telecom SA 651,338
165,000 Telecom Italia SPA (Common shares) 1,336,404
200,000 Telecom Italia SPA 1,248,991
35,000 Telefonica SA 1,643,921
30,000 TELUS Corp. 651,361
Total 10,306,335
TOTAL COMMON STOCKS (IDENTIFIED COST $52,010,459) 63,203,334
</TABLE>
FEDERATED WORLD UTILITY FUND
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
PREFERRED STOCKS-0.8%
CELLULAR TELEPHONE-0.8%
6,700 Airtouch Communications, Inc., Conv. Pfd., Series C, $2.13 $ 550,238
FOREST PRODUCTS & PAPER-0.0%
260,000,000 (a)Texpar SA, Preference 2,165
TOTAL PREFERRED STOCKS (IDENTIFIED COST $325,986) 552,403
(C)REPURCHASE AGREEMENT-1.9%
$ 1,235,000 Westdeutsche Landesbank Girozentrale, 5.35%, dated 11/30/1998,
due 12/1/1998 (AT AMORTIZED COST) 1,235,000
TOTAL INVESTMENTS IDENTIFIED COST $53,571,445)(D) $ 64,990,737
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At November 30, 1998, these securities
amounted to $64,484 which represents 0.10% 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 investments in the repurchase agreements is through
participation in a joint account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $53,869,307.
The net unrealized appreciation of investments on a federal tax basis
amounts to $11,121,430 which is comprised of $11,968,274 appreciation
and $846,844 depreciation at November 30, 1998.
Note: The categories of investments are shown as a percentage of net assets
($65,756,693) at November 30, 1998.
The following acronym is used throughout this portfolio:
ADR -American Depositary Receipt
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value
(identified cost $53,571,445 and tax cost $53,869,307) $ 64,990,737
Cash 4,275
Income receivable 145,174
Receivable for investments sold 522,815
Receivable for shares sold 222,115
Net receivable for foreign currency exchange contracts 176
Deferred organizational costs 12,320
Deferred expenses 10,770
Total assets 65,908,382
LIABILITIES:
Payable for investments purchased $ 64,484
Payable for shares redeemed 14,610
Payable for taxes withheld 7,561
Payable for portfolio accounting fees 7,603
Payable for transfer and disbursing agent fees and
expenses 15,513
Payable for distribution services fee 15,745
Payable for shareholder services fee 13,275
Payable for custodian fees 5,401
Accrued expenses 7,497
Total liabilities 151,689
NET ASSETS for 4,053,494 shares outstanding $65,756,693
NET ASSETS CONSIST OF:
Paid in capital $49,423,537
Net unrealized appreciation of investments and
translation of assets and liabilities in
foreign currency 11,424,331
Accumulated net realized gain on investments and
foreign currency transactions 4,904,174
Undistributed net investment income 4,651
Total net assets $ 65,756,693
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION
PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($28,021,505 / 1,725,456
shares outstanding) $16.24
Offering Price Per Share (100/94.50 of $16.24)* $17.19
Redemption Proceeds Per Share $16.24
CLASS B SHARES:
Net Asset Value Per Share ($22,793,302 / 1,407,458
shares outstanding) $16.19
Offering Price Per Share $16.19
Redemption Proceeds Per Share (94.50/100 of $16.19)* $15.30
CLASS C SHARES:
Net Asset Value Per Share ($3,275,870 / 202,044
shares outstanding) $16.21
Offering Price Per Share $16.21
Redemption Proceeds Per Share (99.00/100 of $16.21)* $16.05
CLASS F SHARES:
Net Asset Value Per Share ($11,666,016 / 718,536
shares outstanding) $16.24
Offering Price Per Share (100/99.00 of $16.24)* $16.40
Redemption Proceeds Per Share (99.00/100 of $16.24)* $16.08
</TABLE>
* See "What Do Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $104,991) $ 1,700,855
Interest 197,283
Total income 1,898,138
EXPENSES:
Investment advisory fee $ 587,621
Administrative personnel and services fee 215,000
Custodian fees 33,970
Transfer and dividend disbursing agent fees
and expenses 119,033
Directors'/Trustees' fees 1,273
Auditing fees 23,192
Legal fees 2,845
Portfolio accounting fees 94,974
Distribution services fee- Class B Shares 148,193
Distribution services fee- Class C Shares 19,433
Distribution services fee- Class F Shares 29,512
Shareholder services fee-Class A Shares 61,520
Shareholder services fee-Class B Shares 49,398
Shareholder services fee-Class C Shares 6,477
Shareholder services fee-Class F Shares 29,512
Share registration costs 44,530
Printing and postage 50,508
Insurance premiums 4,004
Taxes 3,525
Miscellaneous 38,166
Total expenses 1,562,686
Waivers and reimbursements-
Waiver of investment advisory fee $ (409,202)
Waiver of distribution services fee-Class F Shares (29,512)
Reimbursement of other operating expenses (64,973)
Total waivers and reimbursements (503,687)
Net expenses 1,058,999
Net investment income 839,139
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain on investments and foreign currency
transactions (net of foreign taxes withheld of $1,998) 4,756,296
Net change in unrealized appreciation of investments and
translation of assets and liabilities in foreign currency 4,575,698
Net realized and unrealized gain on
investments and foreign currency 9,331,994
Change in net assets resulting from operations $ 10,171,133
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS-
Net investment income $ 839,139 $ 697,383
Net realized gain on investments
and foreign currency transactions
($5,269,145 and $1,527,842, respectively,
as computed for federal tax purposes) 4,756,296 1,504,300
Net change in unrealized appreciation
of investments and translation of
assets and liabilities in foreign currency 4,575,698 3,608,131
Change in net assets resulting from operations 10,171,133 5,809,814
DISTRIBUTIONS TO SHAREHOLDERS-
Distributions from net investment income
Class A Shares (406,244) (428,963)
Class B Shares (185,403) (147,794)
Class C Shares (24,143) (27,610)
Class F Shares (199,273) (262,050)
Distributions from net realized gains on
investments and foreign currency transactions
Class A Shares (636,415) (426,071)
Class B Shares (482,016) (143,903)
Class C Shares (60,899) (35,982)
Class F Shares (331,248) (281,597)
Change in net assets resulting from
distributions to shareholders (2,325,641) (1,753,970)
SHARE TRANSACTIONS-
Proceeds from sale of shares 20,601,669 23,195,731
Net asset value of shares issued to
shareholders in payment of
distributions declared 1,993,595 1,375,546
Cost of shares redeemed (12,856,840) (6,684,566)
Change in net assets resulting from
share transactions 9,738,424 17,886,711
Change in net assets 17,583,916 21,942,555
NET ASSETS:
Beginning of period 48,172,777 26,230,222
End of period (including undistributed net
investment income of $4,651 and $109,775,
respectively) $ 65,756,693 $ 48,172,777
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS-CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $14.16 $12.69 $10.96 $ 9.67 $10.06
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.23 0.28 0.43 0.42 0.24
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.55 2.00 1.67 1.27 (0.46)
Total from investment
operations 2.78 2.28 2.10 1.69 (0.22)
LESS DISTRIBUTIONS
Distributions from net
investment income (0.26) (0.38) (0.37) (0.40) (0.17)
Distributions from net
realized gain on investments
and foreign currency
transactions (0.44) (0.43) - - -
Total distributions (0.70) (0.81) (0.37) (0.40) (0.17)
NET ASSET VALUE, END OF PERIOD $16.24 $14.16 $12.69 $10.96 $ 9.67
TOTAL RETURN(B) 20.42% 19.08% 19.54% 17.94% (3.00% )
RATIOS TO AVERAGE NET ASSETS
Expenses 1.52% 1.40% 1.05% 0.25% 0.25% *
Net investment income 1.71% 2.16% 3.87% 4.39% 5.10% *
Expense waiver/
reimbursement(c) 0.81% 1.49% 3.11% 4.78% 4.43% *
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $28,022 $20,394 $12,671 $8,875 $4,948
Portfolio turnover 139% 52% 50% 46% 7%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 22, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start
of business, March 17, 1994, to April 21, 1994, Class A had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the periods ended November 30, 1995 and 1994, the adviser waived all
of its investment advisory fee, 1.00% and 1.00%, respectively, and
reimbursed other operating expenses, 0.34% and 0.86%, respectively, to
comply with certain state expense limitations. The remainder of the
reimbursement was voluntary. This expense decrease is reflected in both
the expenses and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS-CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $14.12 $12.68 $10.95 $10.53
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.12 0.21 0.35 0.11
Net realized and unrealized
gain on investments and
foreign currency 2.54 1.95 1.67 0.41
Total from investment
operations 2.66 2.16 2.02 0.52
LESS DISTRIBUTIONS
Distributions from net
investment income (0.15) (0.29) (0.29) (0.10)
Distributions from net
realized gain on investments
and foreign currency
transactions (0.44) (0.43) - -
Total distributions (0.59) (0.72) (0.29) (0.10)
NET ASSET VALUE, END OF PERIOD $16.19 $14.12 $12.68 $10.95
TOTAL RETURN(B) 19.53% 18.04% 18.79% 5.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.27% 2.15% 1.80% 1.00% *
Net investment income 0.96% 1.36% 3.18% 2.99% *
Expense waiver/
reimbursement(c) 0.81% 1.49% 3.11% 4.78% *
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $22,793 $15,177 $4,091 $1,068
Portfolio turnover 139% 52% 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. The remainder
of the reimbursement was voluntary. This expense decrease is reflected
in both the expenses and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS-CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.14 $12.67 $10.95 $10.53
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.12 0.19 0.33 0.15
Net realized and unrealized
gain on investments and
foreign currency 2.54 2.00 1.68 0.37
Total from investment
operations 2.66 2.19 2.01 0.52
LESS DISTRIBUTIONS
Distributions from net
investment income (0.15) (0.29) (0.29) (0.10)
Distributions from net
realized gain on investments
and foreign currency
transactions (0.44) (0.43) - -
Total distributions (0.59) (0.72) (0.29) (0.10)
NET ASSET VALUE, END OF PERIOD $16.21 $14.14 $12.67 $10.95
TOTAL RETURN(B) 19.50% 18.24% 18.61% 4.92%
RATIOS TO AVERAGE NET ASSETS
Expenses 2.27% 2.15% 1.80% 1.00%*
Net investment income 0.96% 1.39% 3.17% 3.03%*
Expense waiver/
reimbursement(c) 0.81% 1.49% 3.11% 4.77%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $3,276 $1,923 $1,072 $374
Portfolio turnover 139% 52% 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. The remainder
of the reimbursement was voluntary. This expense decrease is reflected
in both the expenses and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
FINANCIAL HIGHLIGHTS-CLASS F SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $14.16 $12.70 $10.96 $ 9.66 $10.04
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.24 0.29 0.43 0.43 0.21
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.54 1.98 1.67 1.25 (0.43)
Total from investment
operations 2.78 2.27 2.10 1.68 (0.22)
LESS DISTRIBUTIONS
Distributions from net
investment income (0.26) (0.38) (0.36) (0.38) (0.16)
Distributions from net
realized gain on investments
and foreign currency
transactions (0.44) (0.43) - - -
Total distributions (0.70) (0.81) (0.36) (0.38) (0.16)
NET ASSET VALUE, END OF PERIOD $16.24 $14.16 $12.70 $10.96 $ 9.66
TOTAL RETURN(B) 20.42% 18.99% 19.55% 17.79% (3.07%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.52% 1.40% 1.07% 0.50% 0.50%*
Net investment income 1.71% 2.17% 3.87% 4.19% 4.59%*
Expense waiver/
reimbursement(c) 1.06% 1.74% 3.34% 4.78% 4.43%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $11,666 $10,679 $8,396 $6,028 $4,821
Portfolio turnover 139% 52% 50% 46% 7%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 22, 1994 (date of initial
public investment) to November 30, 1994. For the period from the start
of business, March 28, 1994, to April 21, 1994, Class F had no public
investment.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) For the periods ended November 30, 1995 and 1994, the adviser waived all
of its investment advisory fee, 1.00% and 1.00%, respectively, and
reimbursed other operating expenses, 0.34% and 0.86%, respectively, to
comply with certain state expense limitations. The remainder of the
reimbursement was voluntary. This expense decrease is reflected in both
the expenses and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED WORLD UTILITY FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998
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 ten
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-Market values of the Fund's foreign and
domestic equity securities are determined according to the last
reported sale price on a recognized securities exchange, if available.
If unavailable, or if the securities trade over-the-counter, the
securities are generally valued according to the mean between the last
closing bid and asked prices. Short-term foreign and domestic
securities are valued at the prices provided by an independent pricing
service. However, short-term foreign and domestic securities with
remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS-It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under
repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Fund's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Directors (the "Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS-Interest income
and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code"). Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles. These differences are
primarily due to differing treatments for foreign currency
transactions. The following reclassifications have been made to the
financial statements.
INCREASE/(DECREASE)
ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT
GAIN INCOME
$129,200 $(129,200)
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.
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 these contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge
or cross hedge against either specific transactions or portfolio
positions. The objective of the Fund's foreign currency hedging
transactions is to reduce the risk that the U.S. dollar value of the
Fund's foreign currency denominated securities will decline in value
due to changes in foreign currency exchange rates. All foreign currency
contracts are "marked to market" daily at the applicable translation
rates resulting in unrealized gains and losses. Realized gains or
losses are recorded at the time the foreign currency exchange contracts
is offset by entering into a closing transaction or by the delivery or
receipt of the currency. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the
terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar.
At November 30, 1998, the Fund had outstanding foreign currency
commitments as set forth below:
<TABLE>
<CAPTION>
CONTRACTS TO IN EXCHANGE FOR CONTRACTS UNREALIZED
SETTLEMENT DATE DELIVER/RECEIVE FOR AT VALUE APPRECIATION
<S> <C> <C> <C> <C>
Contract Purchased:
12/1/1998 18,360,000 Greek Drachma $64,308 $64,484 $176
</TABLE>
FOREIGN CURRENCY TRANSLATION-The accounting records of the Fund
are maintained in U.S. dollars. All assets and liabilities denominated
in foreign currencies ("FC") are translated into U.S. dollars based on
the rate of exchange of such currencies against U.S. dollars on the
date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the
respective date that such transactions are recorded. Differences
between income and expense amounts recorded and collected or paid are
adjusted when reported by the custodian bank. The Fund does not isolate
that portion of the results of operations resulting from changes in
foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales
of portfolio securities, sales and maturities of short-term
securities, sales of FCs, currency gains or losses realized between the
trade and settlement dates on securities transactions, the difference
between the amounts of dividends, interest, and foreign withholding
taxes recorded on the Fund's books, and the U.S. dollar equivalent of
the amounts actually received or paid. Net unrealized foreign exchange
gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end,
resulting from changes in the exchange rate.
RESTRICTED SECURITIES-Restricted securities are securities that may
only be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer
of restricted securities has agreed to register such securities for
resale, at the issuer's expense either upon demand by the Fund or in
connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. Such restricted securities may
be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The
Fund's restricted securities are valued at the price provided by
dealers in the secondary market or, if no market prices are available,
at the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at
November 30, 1998 is as follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Panafon SA 11/20/1998 $65,185
USE OF ESTIMATES-The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts of
assets, liabilities, expenses and revenues reported in the financial
statements. Actual results could differ from those estimated.
OTHER-Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At November 30, 1998, par value shares ($0.001 per share) authorized
were as follows:
NUMBER OF
PAR VALUE
CAPITAL STOCK
CLASS NAME AUTHORIZED
Class A Shares 100,000,000
Class B Shares 100,000,000
Class C Shares 100,000,000
Class F Shares 100,000,000
Total 400,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 674,271 $ 10,358,556 581,128 $ 7,762,055
Shares issued to shareholders
in payment of distributions
declared 63,845 908,693 57,861 713,508
Shares redeemed (452,824) (7,011,945) (197,035) (2,611,952)
Net change resulting from
Class A Share transactions 285,292 $ 4,255,304 441,954 $ 5,863,611
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 482,173 $ 7,384,627 805,836 $ 10,848,367
Shares issued to shareholders
in payment of distributions
declared 42,810 602,399 21,079 261,160
Shares redeemed (192,078) (2,972,663) (75,123) (1,012,880)
Net change resulting from
Class B Share transactions 332,905 $ 5,014,363 751,792 $ 10,096,647
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 83,159 $ 1,286,705 124,345 $ 1,651,834
Shares issued to shareholders
in payment of distributions
declared 5,453 76,836 2,360 29,266
Shares redeemed (22,587) (335,483) (75,267) (987,566)
Net change resulting from
Class C Share transactions 66,025 $ 1,028,058 51,438 $ 693,534
<CAPTION>
YEAR ENDED NOVEMBER 30,
1998 1997
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 103,149 $ 1,571,781 219,510 $ 2,933,475
Shares issued to shareholders
in payment of distributions
declared 28,598 405,667 30,233 371,612
Shares redeemed (167,605) (2,536,749) (156,735) (2,072,168)
Net change resulting from
Class F Share transactions (35,858) $ (559,301) 93,008 $ 1,232,919
Net change resulting from
share transactions 648,364 $ 9,738,424 1,338,192 $ 17,886,711
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE-Federated Global Investment Management
Corp., the Fund's investment adviser (the "Adviser"), receives for its
services an annual investment advisory fee equal to 1.00% of the Fund's
average daily net assets. 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, Inc. for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000
per each additional class of shares.
DISTRIBUTION SERVICES FEE-The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Fund will compensate Federated Securities Corp. ("FSC"), the
principal distributor, from the net assets of the Fund to finance
activities intended to result in the sale of the Fund's Class B 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.
PERCENTAGE OF
AVERAGE DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
Class B Shares 0.75%
Class C Shares 0.75%
Class F Shares 0.25%
The distributor may voluntarily choose to waive any portion of its fee.
The distributor can modify or terminate this voluntary waiver at any
time at its sole discretion.
SHAREHOLDER SERVICES FEE-Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services Company ("FSSC"), the
Fund will pay FSSC up to 0.25% of average daily net assets of the Fund
for the period. The fee paid to FSSC is used to finance certain
services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES-FServ
through its subsidiary, FSSC, serves as transfer and dividend
disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES-Organizational expenses of $75,061 and
start-up administrative expenses of $39,069 were borne initially by
the Adviser. The Fund has reimbursed the Adviser for these expenses.
These have been deferred and are being amortized over the five-year
period following the Fund's effective date. For the year ended
November 30, 1998, the Fund expensed $34,068 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 year ended November 30, 1998, were as follows:
PURCHASES $85,232,499
SALES $76,390,445
6. CONCENTRATION OF CREDIT RISK
Although the Fund maintains a diversified investment portfolio, the
political or economic developments within a particular country or
region may have an ad-verse effect on the ability of domiciled issuers
to meet their obligations. Additionally, political or economic
developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1998, the diversification of countries was as follows:
PERCENTAGE OF
COUNTRY NET ASSETS
Argentina 0.6%
Brazil 0.0%*
Canada 3.3%
France 4.9%
Greece 0.1%
Italy 5.9%
Portugal 1.0%
Spain 4.2%
United Kingdom 10.7%
United States 68.1%
* Amount is less than 0.01%
7. YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers
do not properly process and calculate date-related information and
data from and after January 1, 2000. The Fund's Adviser and
administrator are taking measures that they believe are reasonably
designed to address the Year 2000 issue with respect to computer
systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service
providers. At this time, however, there can be no assurance that these
steps will be sufficient to avoid any adverse impact to the Fund.
8. SUBSEQUENT EVENT
On January 7, 1999, the Fund's Adviser, Federated Global Research
Corp., changed its name to Federated Global Investment Management Corp.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Directors and Shareholders of
WORLD INVESTMENT SERIES, INC.:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated World Utility
Fund (a portfolio of World Investment Series, Inc.) as of November 30,
1998, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the periods
presented therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of November 30, 1998, by
correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Federated World Utility Fund of World Investment
Series, Inc. at November 30, 1998, and the results of its operations
for the year then ended, the changes in its net assets for each of the
two years in the period then ended, and the financial highlights for
each of the periods presented therein, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 20, 1999
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Drew J. Collins
Vice President
Richard J. Thomas
Treasurer
Karen M. Brownlee
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors
only when preceded or accompanied by the fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses, and other information.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 981487309
Cusip 981487408
Cusip 981487101
Cusip 981487200
G00259-06 (1/99)
[Graphic]
WORLD INVESTMENT SERIES, INC.
APPENDIX
FEDERATED ASIA PACIFIC GROWTH FUND
A1. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated Asia Pacific Growth Fund (the "Fund"), based on a 5.50%
sales charge, are represented by a solid line. The Morgan Stanley Capital
International Asia Pacific Index (the "MSCI-AP") is represented by a dotted
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class A Shares of the Fund and
the MSCI-AP. The "x" axis reflects computation periods from 2/28/1996 to
11/30/1998. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class A
Shares, based on a 5.50% sales charge, as compared to the MSCI-AP. The ending
values were $6,049 and $6,620, respectively. The legend in the bottom quadrant
of the graphic presentation indicates the Fund's Class A Shares Average Annual
Total Returns for the one-year period ended 11/30/1998 and from the Fund's start
of performance (2/28/1996) to 11/30/1998. The total returns were (22.52%) and
(16.66%), respectively.
A2. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated Asia Pacific Growth Fund (the "Fund"), based on a 4.00%
contingent deferred sales charge, are represented by a solid line. The Morgan
Stanley Capital International Asia Pacific Index (the "MSCI-AP") is represented
by a dotted line. The line graph is a visual representation of a comparison of
change in value of a $10,000 hypothetical investment in the Class B Shares of
the Fund and the MSCI-AP. The "x" axis reflects computation periods from
2/28/1996 to 11/30/1998. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class B Shares, based on a 4.00% contingent deferred sales charge, as
compared to the MSCI-AP. The ending values were $6,039 and $6,620, respectively.
The legend in the bottom quadrant of the graphic presentation indicates the
Fund's Class B Shares Average Annual Total Returns for the one-year period ended
11/30/1998 and from the Fund's start of performance (2/28/1996) to 11/30/1998.
The total returns were (23.10%) and (16.71%), respectively.
A3. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated Asia Pacific Growth Fund (the "Fund"), based on a 1.00%
contingent deferred sales charge, are represented by a solid line. The Morgan
Stanley Capital International Asia Pacific Index (the "MSCI-AP") is represented
by a dotted line. The line graph is a visual representation of a comparison of
change in value of a $10,000 hypothetical investment in the Class C Shares of
the Fund and the MSCI-AP. The "x" axis reflects computation periods from
2/28/1996 to 11/30/1998. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class C Shares, based on a 1.00% contingent deferred sales charge, as
compared to the MSCI-AP. The ending values were $6,309 and $6,620, respectively.
The legend in the bottom quadrant of the graphic presentation indicates the
Fund's Class C Shares Average Annual Total Returns for the one-year period ended
11/30/1998 and from the Fund's start of performance (2/28/1996) to 11/30/1998.
The total returns were (19.29%) and (15.37%), respectively.
<PAGE>
FEDERATED EMERGING MARKETS FUND
A4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated Emerging Markets Fund (the "Fund") are represented by a
solid line. The International Finance Corporation Investable Composite Index(the
"IFCIC") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class A Shares of the Fund, and the IFCIC. The "x" axis
reflects computation periods from 2/28/96 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class A Shares as compared to the IFCIC.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class A Shares as compared to the IFCIC. The ending values were $7,938,
and $6,857, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class A Shares Average Annual Total Returns
for the one-year period ended 11/30/98 and from the start of performance of the
Fund's Class A Shares (2/28/96) to 11/30/98. The total returns were (31.98%),
and (8.03%), respectively.
A5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated Emerging Markets Fund (the "Fund") are represented by a
solid line. The International Finance Corporation Investable Composite Index
(the "IFCIC") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class B Shares of the Fund, and the IFCIC. The "x" axis
reflects computation periods from 2/28/96 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class B Shares as compared to the IFCIC.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class B Shares as compared to the IFCIC. The ending values were $7,901,
and $6,857, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class B Shares Average Annual Total Returns
for the one-year period ended 11/30/98 and from the start of performance of the
Fund's Class B Shares (2/28/96) to 11/30/98. The total returns were (32.49%),
and (8.19%), respectively.
A6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated Emerging Markets Fund (the "Fund") are represented by a
solid line. The International Finance Corporation Investable Composite Index
(the "IFCIC") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class C Shares of the Fund, and the IFCIC. The "x" axis
reflects computation periods from 2/28/96 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class C Shares as compared to the IFCIC.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class C Shares as compared to the IFCIC. The ending values were $8,230,
and $6,857, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class C Shares Average Annual Total Returns
for the one-year period ended 11/30/98 and from the start of performance of the
Fund's Class C Shares (2/28/96) to 11/30/98. The total returns were (29.33%),
and (6.82%), respectively.
FEDERATED EUROPEAN GROWTH FUND
A7. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 3/1/1996
to 11/30/1998. The "y" axis is measured in increments of $2,000, ranging from $0
to $6,000, and indicates that the ending value of a hypothetical initial
investment of $3,000 in the Class A Shares of Federated European Growth Fund,
assuming the reinvestment of dividends and capital gains, would have grown to
$4,791 on 11/30/1998.
A8. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding mountain
chart. The color-coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 3/1/1996
to 11/30/1998. The "y" axis is measured in increments of $1,000, ranging from $0
to $5,000, and indicates that the ending value of hypothetical yearly
investments of $1,000 in the Class A Shares of Federated European Growth Fund,
assuming the reinvestment of dividends and capital gains, would have grown to
$3,890 on 11/30/1998.
A9. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated European Growth Fund (the "Fund"), based on a 5.50% sales
charge, are represented by a solid line. The Morgan Stanley Capital
International (Europe) Index (the "MSCI-EUROPE") is represented by a dashed
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class A Shares of the Fund and
the MSCI-EUROPE. The "x" axis reflects computation periods from 2/28/1996 to
11/30/1998. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class A
Shares, based on a 5.50% sales charge, as compared to the MSCI-EUROPE. The
ending values were $16,007 and $17,992, respectively. The legend in the bottom
quadrant of the graphic presentation indicates the Fund's Class A Shares Average
Annual Total Returns for the one-year period ended 11/30/1998 and from the
Fund's start of performance (2/28/1996) to 11/30/1998. The total returns were
15.38% and 18.62%, respectively.
A10. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated European Growth Fund (the "Fund"), based on a 4.00%
contingent deferred sales charge, are represented by a solid line. The Morgan
Stanley Capital International (Europe) Index (the "MSCI-EUROPE") is represented
by a dashed line. The line graph is a visual representation of a comparison of
change in value of a $10,000 hypothetical investment in the Class B Shares of
the Fund and the MSCI-EUROPE. The "x" axis reflects computation periods from
2/28/1996 to 11/30/1998. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class B Shares, based on a 4.00% contingent deferred sales charge, as
compared to the MSCI-EUROPE. The ending values were $16,184 and $17,992,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Fund's Class B Shares Average Annual Total Returns for the
one-year period ended 11/30/1998 and from the Fund's start of performance
(2/28/1996) to 11/30/1998. The total returns were 15.64% and 19.09%,
respectively.
A11. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated European Growth Fund (the "Fund"), based on a 1.00%
contingent deferred sales charge, are represented by a solid line. The Morgan
Stanley Capital International (Europe) Index (the "MSCI-EUROPE") is represented
by a dashed line. The line graph is a visual representation of a comparison of
change in value of a $10,000 hypothetical investment in the Class C Shares of
the Fund and the MSCI-EUROPE. The "x" axis reflects computation periods from
2/28/1996 to 11/30/1998. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class C Shares, based on a 1.00% contingent deferred sales charge, as
compared to the MSCI-EUROPE. The ending values were $16,546 and $17,992,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Fund's Class C Shares Average Annual Total Returns for the
one-year period ended 11/30/1998 and from the Fund's start of performance
(2/28/1996) to 11/30/1998. The total returns were 20.03% and 20.05%,
respectively.
FEDERATED GLOBAL EQUITY INCOME FUND
A12. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of the Federated Global Equity Income Fund (the "Fund") are represented
by a solid line. The MSCI World Equity Index (the "MSCI") is represented by a
broken line. The line graph is a visual representation of a comparison of change
in value of a $10,000 hypothetical investment in the Class A Shares of the Fund,
and the MSCI. The "x" axis reflects computation periods from 10/27/98 to
11/30/98. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class A
Shares as compared to the MSCI. The right margin reflects the ending value of
the hypothetical investment in the Fund's Class A Shares as compared to the
MSCI. The ending values were $9,970, and $10,731, respectively. The legend in
the bottom quadrant of the graphic presentation indicates the Fund's Class A
Shares total return from the inception date of the Fund's Class A Shares
(10/27/98) to 11/30/98. The total return was (0.28)%.
FEDERATED GLOBAL FINANCIAL SERVICES FUND
A13. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of the Federated Global Financial Services Fund (the "Fund") are
represented by a solid line. The MSCI All Country World Finance Index (the
"MSCI") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class A Shares of the Fund, and the MSCI. The "x" axis
reflects computation periods from 9/30/98 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class A Shares as compared to the MSCI.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class A Shares as compared to the MSCI. The ending values were $11,331,
and $12,369, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class A Shares total return from the inception
date of the Fund's Class A Shares (9/30/98) to 11/30/98. The total return was
13.38%.
A14. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of the Federated Global Financial Services Fund (the "Fund") are
represented by a solid line. The MSCI All Country World Finance Index (the
"MSCI") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class B Shares of the Fund, and the MSCI. The "x" axis
reflects computation periods from 9/30/98 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class B Shares as compared to the MSCI.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class B Shares as compared to the MSCI. The ending values were $11,430,
and $12,369, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class B Shares total return from the inception
date of the Fund's Class B Shares (9/30/98) to 11/30/98. The total return was
14.30%.
A15. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the Federated Global Financial Services Fund (the "Fund") are
represented by a solid line. The MSCI All Country World Finance Index (the
"MSCI") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class C Shares of the Fund, and the MSCI. The "x" axis
reflects computation periods from 9/30/98 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class C Shares as compared to the MSCI.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class C Shares as compared to the MSCI. The ending values were $11,880,
and $12,369, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class C Shares total return from the inception
date of the Fund's Class C Shares (9/30/98) to 11/30/98. The total return was
18.80%.
FEDERATED INTERNATIONAL GROWTH FUND
A16. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated International Growth Fund (the "Fund"), based on a 5.50%
sales charge, are represented by a solid line. The Morgan Stanley Capital
International All Country World EX U.S. Index (the "MSCI-ACW") is represented by
a dotted line, and the Morgan Stanley Capital International Europe Australia Far
East Index (the "MSCI-EAFE") is represented by a dashed line. The line graph is
a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class A Shares of the Fund, the MSCI-ACW, and the
MSCI-EAFE. The "x" axis reflects computation periods from 7/1/1997 to
11/30/1998. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class A
Shares, based on a 5.50% sales charge, as compared to the MSCI-ACW, and the
MSCI-EAFE. The ending values were $7,972, $9,835, and $10,529, respectively. The
legend in the bottom quadrant of the graphic presentation indicates the Fund's
Class A Shares Average Annual Total Returns for the one-year period ended
11/30/1998 and from the Fund's start of performance (7/1/1997) to 11/30/1998.
The total returns were (8.70%) and (20.26%), respectively.
A17. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated International Growth Fund (the "Fund"), based on a 4.75%
contingent deferred sales charge, are represented by a solid line. The Morgan
Stanley Capital International All Country World EX U.S. Index (the "MSCI-ACW")
is represented by a dotted line, and the Morgan Stanley Capital International
Europe Australia Far East Index (the "MSCI-EAFE") is represented by a dashed
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class B Shares of the Fund,
the MSCI-ACW, and the MSCI-EAFE. The "x" axis reflects computation periods from
7/1/1997 to 11/30/1998. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class B Shares, based on a 4.75% contingent deferred sales charge, as
compared to the MSCI-ACW, and the MSCI-EAFE. The ending values were $7,953,
$9,835, and $10,529, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the Fund's Class B Shares Average Annual Total
Returns for the one-year period ended 11/30/1998 and from the Fund's start of
performance (7/1/1997) to 11/30/1998. The total returns were (9.39%) and
(20.45%), respectively.
A18. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated International Growth Fund (the "Fund"), based on a 1.00%
contingent deferred sales charge, are represented by a solid line. The Morgan
Stanley Capital International All Country World EX U.S. Index (the "MSCI-ACW")
is represented by a dotted line, and the Morgan Stanley Capital International
Europe Australia Far East Index (the "MSCI-EAFE") is represented by a dashed
line. The line graph is a visual representation of a comparison of change in
value of a $10,000 hypothetical investment in the Class C Shares of the Fund,
the MSCI-ACW, and the MSCI-EAFE. The "x" axis reflects computation periods from
7/1/1997 to 11/30/1998. The "y" axis reflects the cost of the investment. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class C Shares, based on a 1.00% contingent deferred sales charge, as
compared to the MSCI-ACW, and the MSCI-EAFE. The ending values were $8,372,
$9,835, and $10,529, respectively. The legend in the bottom quadrant of the
graphic presentation indicates the Fund's Class C Shares Average Annual Total
Returns for the one-year period ended 11/30/1998 and from the Fund's start of
performance (7/1/1997) to 11/30/1998. The total returns were (4.94%) and
(16.28%), respectively.
FEDERATED INTERNATIONAL HIGH INCOME FUND
A19. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of the Federated International High Income Fund (the "Fund") are
represented by a solid line. The J.P. Morgan Emerging Markets Bond Index Plus
(the "JPM-EMB") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class A Shares of the Fund, and the JPM-EMB. The "x" axis
reflects computation periods from 10/2/96 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class A Shares as compared to the JPM-EMB.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class A Shares as compared to the JPM-EMB. The ending values were $9,622,
and $10,544, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class A Shares Average Annual Total Returns
for the one-year, and start of performance (10/2/96) to 11/30/98. The total
returns were (10.20%) and (1.76%), respectively.
A20. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of the Federated International High Income Fund (the "Fund") are
represented by a solid line. The J.P. Morgan Emerging Markets Bond Index Plus
(the "JPM-EMB") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class B Shares of the Fund, and the JPM-EMB. The "x" axis
reflects computation periods from 10/2/96 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class B Shares as compared to the JPM-EMB.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class A Shares as compared to the JPM-EMB. The ending values were $9,516,
and $10,544, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class B Shares Average Annual Total Returns
for the one-year, and start of performance (10/2/96) to 11/30/98. The total
returns were (11.30%) and (1.90%), respectively.
A21. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the Federated International High Income Fund (the "Fund") are
represented by a solid line. The J.P. Morgan Emerging Markets Bond Index Plus
(the "JPM-EMB") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class C Shares of the Fund, and the JPM-EMB. The "x" axis
reflects computation periods from 10/2/96 to 11/30/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class C Shares as compared to the JPM-EMB.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class C Shares as compared to the JPM-EMB. The ending values were $9,912,
and $10,544, respectively. The legend in the bottom quadrant of the graphic
presentation indicates the Fund's Class C Shares Average Annual Total Returns
for the one-year, and start of performance (10/2/96) to 11/30/98. The total
returns were (7.51%) and (0.41%), respectively.
FEDERATED INTERNATIONAL SMALL COMPANY FUND
A22. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 3/1/96
to 11/30/98. The "y" axis is measured in increments of $1,000 ranging from $0 to
$6,000 and indicates that the ending value of hypothetical initial investment of
$3,000 in the fund's Class A Shares, assuming the reinvestment of capital gains
and dividends, would have grown to $4,989 on 11/30/98.
A23. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 3/1/96
to 11/30/98. The "y" axis is measured in increments of $15,000 ranging from $0
to $4,500 and indicates that the ending value of hypothetical yearly investments
of $1,000 in the fund's Class A Shares, assuming the reinvestment of capital
gains and dividends, would have grown to $3,926 on 11/30/98.
A24. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of the Federated International Small Company Fund (the "Fund") are
represented by a solid line. The FT-Actuaries/S&P World Medium-Small Cap Index
(the "FTMSC") is represented by a dotted line and the MSCI Small Cap World Index
ex-U.S. (the "MSCI") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class A Shares of the Fund, the FTMSC and the MSCI. The "x"
axis reflects computation periods from 2/28/96 to 11/30/98. The "y" axis
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the Fund's Class A Shares as compared to the
FTMSC and the MSCI. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class A Shares as compared to the FTMSC
and the MSCI. The ending values were $16,594, $10,147, and $7,947, respectively.
The legend in the bottom quadrant of the graphic presentation indicates the
Fund's Class A Shares total return from the start of performance of the Fund's
Class A Shares (2/28/96) to 11/30/98. The total returns were 16.45% and 20.18%.
A25. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of the Federated International Small Company Fund (the "Fund") are
represented by a solid line. The FT-Actuaries/S&P World Medium-Small Cap Index
(the "FTMSC") is represented by a dotted line and the MSCI Small Cap World Index
ex-U.S. (the "MSCI") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class B Shares of the Fund, the FTMSC and the MSCI. The "x"
axis reflects computation periods from 2/28/96 to 11/30/98. The "y" axis
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the Fund's Class B Shares as compared to the
FTMSC and the MSCI. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class B Shares as compared to the FTMSC
and the MSCI. The ending values were $16,801, $10,147, and $7,947, respectively.
The legend in the bottom quadrant of the graphic presentation indicates the
Fund's Class B Shares total return from the start of performance of the Fund's
Class B Shares (2/28/96) to 11/30/98. The total returns were 16.75% and 20.71%.
A26. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the Federated International Small Company Fund (the "Fund") are
represented by a solid line. The FT-Actuaries/S&P World Medium-Small Cap Index
(the "FTMSC") is represented by a dotted line and the MSCI Small Cap World Index
ex-U.S. (the "MSCI") is represented by a broken line. The line graph is a visual
representation of a comparison of change in value of a $10,000 hypothetical
investment in the Class C Shares of the Fund, the FTMSC and the MSCI. The "x"
axis reflects computation periods from 2/28/96 to 11/30/98. The "y" axis
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the Fund's Class C Shares as compared to the
FTMSC and the MSCI. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class C Shares as compared to the FTMSC
and the MSCI. The ending values were $17,190, $10,147, and $7,947, respectively.
The legend in the bottom quadrant of the graphic presentation indicates the
Fund's Class C Shares total return from the start of performance of the Fund's
Class C Shares (2/28/96) to 11/30/98. The total returns were 21.26% and 21.72%.
FEDERATED LATIN AMERICAN GROWTH FUND
A27. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated Latin American Growth Fund (the "Fund"), based on a 5.50%
sales charge, are represented by a solid line. The Morgan Stanley Capital
International Latin American-Free Index (the "MSCI-LAF") is represented by a
dotted line. The line graph is a visual representation of a comparison of change
in value of a $10,000 hypothetical investment in the Class A Shares of the Fund
and the MSCI-LAF. The "x" axis reflects computation periods from 2/28/1996 to
11/30/1998. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class A
Shares, based on a 5.50% sales charge, as compared to the MSCI-LAF. The ending
values were $8,965 and $10,105, respectively. The legend in the bottom quadrant
of the graphic presentation indicates the Fund's Class A Shares Average Annual
Total Returns for the one-year period ended 11/30/1998 and from the Fund's start
of performance (2/28/1996) to 11/30/1998. The total returns were (35.78%) and
(3.88%), respectively.
A28. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated Latin American Growth Fund (the "Fund"), based on a 4.00%
contingent deferred sales charge, are represented by a solid line. The Morgan
Stanley Capital International Latin American-Free Index (the "MSCI-LAF") is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
B Shares of the Fund and the MSCI-LAF. The "x" axis reflects computation periods
from 2/28/1996 to 11/30/1998. The "y" axis reflects the cost of the investment.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class B Shares, based on a 4.00% contingent deferred sales charge, as
compared to the MSCI-LAF. The ending values were $8,904 and $10,105,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Fund's Class B Shares Average Annual Total Returns for the
one-year period ended 11/30/1998 and from the Fund's start of performance
(2/28/1996) to 11/30/1998. The total returns were (36.33%) and (4.07%),
respectively.
A29. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated Latin American Growth Fund (the "Fund"), based on a 1.00%
contingent deferred sales charge, are represented by a solid line. The Morgan
Stanley Capital International Latin American-Free Index (the "MSCI-LAF") is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
C Shares of the Fund and the MSCI-LAF. The "x" axis reflects computation periods
from 2/28/1996 to 11/30/1998. The "y" axis reflects the cost of the investment.
The right margin reflects the ending value of the hypothetical investment in the
Fund's Class C Shares, based on a 1.00% contingent deferred sales charge, as
compared to the MSCI-LAF. The ending values were $9,290 and $10,105,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Fund's Class C Shares Average Annual Total Returns for the
one-year period ended 11/30/1998 and from the Fund's start of performance
(2/28/1996) to 11/30/1998. The total returns were (33.23%) and (2.64%),
respectively.
FEDERATED WORLD UTILITY FUND
A30. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 4/30/94
to 11/30/98. The "y" axis is measured in increments of $2,750 ranging from $0 to
$11,000 and indicates that the ending value of hypothetical initial investment
of $5,000 in the fund's Class A Shares, assuming the reinvestment of capital
gains and dividends, would have grown to $9,257 on 11/30/98.
A31. The graphic presentation here displayed consists of a boxed legend in
the upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 4/30/94
to 11/30/98. The "y" axis is measured in increments of $1,500 ranging from $0 to
$9,000 and indicates that the ending value of hypothetical yearly investments of
$1,000 in the fund's Class A Shares, assuming the reinvestment of capital gains
and dividends, would have grown to $7,405 on 11/30/98.
A32. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated World Utility Fund, (the "Fund") based are represented by a
solid line. The Standard & Poor's 500 Index (the "S&P 500") is represented by a
dotted line, the FT Actuaries S&P Global Utility Index (the "FTGU") is
represented by a dashed line, and the Lipper Utility Funds Average (the "LUFA")
is represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
A Shares of the Fund, the S&P 500, the FTGU and the LUFA. The "x" axis reflects
computation periods from 4/22/94 to 11/30/98. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the Fund's Class A Shares, based on a 4.50% sales charge, as
compared to the S&P 500, the FTGU and the LUFA. The ending values were $18,728,
$28,670, $20,032 and $18,882, respectively. The legend in the bottom quadrant of
the graphic presentation indicates the Fund's Class A Shares Average Annual
Total Returns for the one-year period ended 11/30/98 and from the start of
performance of the Fund's Class A Shares (4/22/94) to 11/30/98. The total
returns were 13.83% and 14.32%, respectively.
A33. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated World Utility Fund, (the "Fund") based are represented by a
solid line. The Standard & Poor's 500 Index (the "S&P 500") is represented by a
dotted line, the FT Actuaries S&P Global Utility Index (the "FTGU") is
represented by a dashed line, and the Lipper Utility Funds Average (the "LUFA")
is represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
B Shares of the Fund, the S&P 500, the FTGU and the LUFA. The "x" axis reflects
computation periods from 7/25/95 to 11/30/98. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the Fund's Class B Shares, based on a 3.00% contingent deferred
sales charge, as compared to the S&P 500, the FTGU and the LUFA. The ending
values were $17,298, $22,110, $18,745 and $17,429, respectively. The legend in
the bottom quadrant of the graphic presentation indicates the Fund's Class B
Shares Average Annual Total Returns for the one-year period ended 11/30/98 and
from the start of performance of the Fund's Class B Shares (7/25/95) to
11/30/98. The total returns were 14.03% and 17.79%, respectively.
A34. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated World Utility Fund, (the "Fund") based are represented by a
solid line. The Standard & Poor's 500 Index (the "S&P 500") is represented by a
dotted line, the FT Actuaries S&P Global Utility Index (the "FTGU") is
represented by a dashed line, and the Lipper Utility Funds Average (the "LUFA")
is represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
C Shares of the Fund, the S&P 500, the FTGU and the LUFA. The "x" axis reflects
computation periods from 7/25/95 to 11/30/98. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the Fund's Class C Shares, based on a 1.00% contingent deferred
sales charge, as compared to the S&P 500, the FTGU and the LUFA. The ending
values were $17,584, $22,110, $18,745 and $17,429, respectively. The legend in
the bottom quadrant of the graphic presentation indicates the Fund's Class C
Shares Average Annual Total Returns for the one-year period ended 11/30/98 and
from the start of performance of the Fund's Class C Shares (7/25/95) to
11/30/98. The total returns were 18.50% and 18.36%, respectively.
A35. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class F
Shares of Federated World Utility Fund, (the "Fund") based are represented by a
solid line. The Standard & Poor's 500 Index (the "S&P 500") is represented by a
dotted line, the FT Actuaries S&P Global Utility Index (the "FTGU") is
represented by a dashed line, and the Lipper Utility Funds Average (the "LUFA")
is represented by a broken line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
F Shares of the Fund, the S&P 500, the FTGU and the LUFA. The "x" axis reflects
computation periods from 7/25/95 to 11/30/98. The "y" axis reflects the cost of
the investment. The right margin reflects the ending value of the hypothetical
investment in the Fund's Class F Shares, based on a 1.00% maximum sales charge,
as compared to the S&P 500, the FTGU and the LUFA. The ending values were
$19,362, $28,670, $20,032 and $18,882, respectively. The legend in the bottom
quadrant of the graphic presentation indicates the Fund's Class F Shares Average
Annual Total Returns for the one-year period ended 11/30/98 and from the start
of performance of the Fund's Class F Shares (4/22/94) to 11/30/98. The total
returns were 18.25% and 15.41%, respectively.
