BOND INDEX PORTFOLIO
ANNUAL REPORT TO INVESTORS
MAY 31, 1997
[Graphic]
Cusip 314204108
G01854-01 (7/97)
[Graphic]
BOND INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
ASSET-BACKED SECURITIES -- 0.3%
AUTOMOTIVE -- 0.3%
$ 109,913 Premier Auto Trust 1994-2, Class A3, 6.35%, 5/2/2000
$ 110,187
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $108,899) 110,187
CORPORATE BONDS -- 17.7%
AUTOMOBILE -- 1.1%
475,000 Ford Motor Co., Debenture, 7.125%,
11/15/2025 440,833
BANKING -- 0.8%
300,000 Summit Bancorp, Bond, 8.40%,
3/15/2027 302,082
BEVERAGE & TOBACCO -- 1.9%
275,000 Anheuser-Busch Cos., Inc., Note, 7.00%,
9/1/2005 273,586
150,000 PepsiCo, Inc., Debenture, 7.625%,
12/18/1998 152,835
350,000 Philip Morris Cos., Inc., Note, 6.375%,
2/1/2006 326,078
Total 752,499
COMMUNICATIONS -- 2.3%
200,000 Lucent Technologies, Inc., Note, 7.25%,
7/15/2006 201,850
450,000 Motorola, Inc., Debenture, 7.50%,
5/15/2025 451,300
250,000 Sprint Corp., Note, 8.125%,
7/15/2002 262,183
Total 915,333
DRUGS -- 0.6%
250,000 American Home Products Corp., Note, 7.70%, 2/15/2000 256,300
ELECTRONICS -- 0.8%
350,000 Oracle Corp., Sr. Note, 6.91%,
2/15/2007 338,961
FINANCE -- 2.4%
400,000 FINOVA Capital Corp., Note, 7.40%,
6/1/2007 401,676
250,000 Lehman Brothers Holdings, Inc., Note, 8.50%, 8/1/2015
262,840
300,000 Salomon, Inc., Sr. Note, 7.75%,
5/15/2000 307,278
Total 971,794
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
FINANCE - AUTOMOTIVE -- 0.7%
$ 300,000 General Motors Acceptance Corp., Note, 5.625%, 2/15/2001 $ 287,652
FOOD PRODUCTS -- 0.9%
350,000 Nabisco, Inc., Unsecd. Note, 8.00%,
1/15/2000 359,996
OIL & GAS -- 0.7%
265,000 Occidental Petroleum Corp., Sr. Note, 10.125%, 11/15/2001
296,328
RETAILERS -- 1.5%
300,000 Penney (J.C.) Co., Inc., Note, 7.375%,
6/15/2004 303,366
300,000 Wal-Mart Stores, Inc., Unsecd. Note, 7.50%, 5/15/2004
307,911
Total 611,277
SOVEREIGN GOVERNMENT -- 2.0%
150,000 Colombia, Republic of, Bond, 7.625%,
2/15/2007 144,210
300,000 Italy (Republic of), Debenture, 6.875%,
9/27/2023 276,483
400,000 Quebec, Province of, Debenture, 7.125%,
2/9/2024 369,732
Total 790,425
UTILITIES -- 2.0%
275,000 Duke Power Co., 1st Ref. Mtg., 7.50%,
8/1/2025 263,062
500,000 Pacific Gas & Electric Co., 1st Ref. Mtg., 7.875%,
3/1/2002 519,270
Total 782,332
TOTAL CORPORATE BONDS (IDENTIFIED COST $7,177,723) 7,105,812
GOVERNMENT AGENCIES -- 3.7%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 1.0%
200,000 7.23%,
12/17/2002 198,938
175,000 7.90%,
9/19/2001 182,929
Total 381,867
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 1.0%
390,000 7.50%,
2/11/2002 403,346
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
GOVERNMENT AGENCIES -- CONTINUED
GOVERNMENT AGENCY -- 1.7%
$ 675,000 Private Export Funding Corp., 7.30%, 1/31/2002
$ 692,341
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $1,488,047) 1,477,554
MORTGAGE-BACKED SECURITIES -- 28.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 9.7%
410,723 6.50%,
2/1/2011 401,350
440,713 7.00%,
1/1/2012 438,368
318,922 7.00%,
5/1/2024 312,942
306,595 7.00%,
6/1/2024 300,847
372,910 7.00%,
1/1/2027 363,468
495,175 7.50%,
6/1/2026 494,248
296,337 7.50%,
11/1/2026 295,688
400,000 7.50%,
5/1/2027 399,124
256,537 8.00%,
7/1/2002 262,574
371,281 8.50%,
3/1/2025 384,910
225,438 9.00%,
4/1/2022 239,690
Total 3,893,209
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 10.9%
300,000 7.00%,
5/1/2004 300,000
237,234 7.00%,
6/1/2009 236,862
381,916 7.00%,
5/1/2024 374,156
293,678 7.00%,
6/1/2024 287,437
297,527 7.50%,
6/1/2011 300,874
441,301 7.50%,
12/1/2011 446,266
236,733 7.50%,
2/1/2026 236,141
499,128 7.50%,
11/1/2026 497,097
466,255 8.00%,
3/1/2026 474,414
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
MORTGAGE-BACKED SECURITIES -- CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- CONTINUED
$ 394,782 8.50%, 8/1/2023
$ 411,884
465,875 8.50%,
10/1/2026 481,598
315,454 9.00%,
6/1/2025 332,605
Total 4,379,334
GOVERNMENT NATIONAL MORTGAGE ASSOCOCIATION -- 7.5%
457,086 7.50%,
7/15/2011 463,796
431,039 7.50%,
6/15/2024 431,172
479,747 7.50%,
6/15/2024 479,896
479,674 7.50%,
6/15/2026 477,722
465,031 8.00%,
8/15/2026 473,169
385,673 8.00%,
1/15/2027 392,422
120,578 9.50%,
1/15/2019 129,966
164,038 9.50%,
10/15/2020 176,728
Total 3,024,871
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $11,162,834)11,297,414
U.S. TREASURY SECURITIES -- 46.9%
U.S. TREASURY BONDS -- 13.2%
450,000 7.125%,
2/15/2023 456,327
3,375,000 7.25%,
5/15/2016 3,472,571
1,170,000 9.375%,
2/15/2006 1,377,488
Total 5,306,386
U.S. TREASURY NOTES -- 33.7%
1,425,000 5.875%,
8/15/1998 1,422,991
1,505,000 6.25%,
2/15/2003 1,484,547
1,500,000 6.50%,
5/31/2001 1,501,875
450,000 6.50%,
5/15/2005 446,063
500,000 6.50%,
10/15/2006 493,905
2,200,000 7.00%,
4/15/1999 2,231,614
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY SECURITIES -- CONTINUED
U.S. TREASURY NOTES -- CONTINUED
$ 1,025,000 7.125%, 10/15/1998
$ 1,039,729
975,000 7.25%,
5/15/2004 1,009,886
2,525,000 8.875%,
5/15/2000 2,695,438
1,200,000 9.00%,
5/15/1998 1,234,308
Total 13,560,356
TOTAL U.S. TREASURY SECURITIES (IDENTIFIED COST $18,957,873) 18,866,742
(A)REPURCHASE AGREEMENT -- 3.1%
1,240,000 BT Securities Corp., 5,56%, dated 5/30/1997, due 6/2/1997
(AT AMORTIZED
COST) 1,240,000
TOTAL INVESTMENTS (IDENTIFIED COST $40,135,376)(B) $ 40,097,709
</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
$40,142,407. The net unrealized depreciation of investments on a
federal tax basis amounts to $44,698 which is comprised of
$200,103 appreciation and $244,801 depreciation at May 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($40,230,345) at May 31, 1997.
(See Notes which are an integral part of the Financial Statements)
BOND INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $40,135,376
and tax cost $40,142,407) $40,097,709
Cash 2,371
Income receivable 450,370
Receivable for investments sold 104,522
Total assets 40,654,972
LIABILITIES:
Payable for investments purchased $398,940
Accrued expenses 25,687
Total liabilities 424,627
NET ASSETS $40,230,345
NET ASSETS CONSIST OF:
Paid in capital for beneficial interests $40,230,345
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BOND INDEX PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 2,117,053
EXPENSES:
Investment advisory fee $ 73,686
Administrative personnel and services fee 60,000
Custodian fees 27,056
Directors'/Trustees' fees 11,700
Auditing fees 20,258
Legal fees 4,800
Portfolio accounting fees 72,162
Printing and postage 2,500
Insurance premiums 2,613
Miscellaneous 2,381
Total expenses 277,156
Waivers and reimbursements --
Waiver of investment advisory fee $ (73,686)
Reimbursement of other operating expenses (144,521)
Total waivers and reimbursements (218,207)
Net expenses 58,949
Net investment income 2,058,104
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 54,299
Net change in unrealized depreciation of investments 65,788
Net realized and unrealized gain on investments 120,087
Change in net assets resulting from operations $ 2,178,191
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BOND INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 2,058,104 $ 1,141,277
Net realized gain on investments 54,299 228,503
Net change in unrealized appreciation (depreciation) 65,788 (715,007)
Change in net assets resulting from operations 2,178,191 654,773
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Additions 34,754,102 18,879,856
Reductions (19,301,390) (13,216,042)
Net increase from transactions in investors' beneficial interest 15,452,712 5,663,814
Change in net assets 17,630,903 6,318,587
NET ASSETS:
Beginning of period 22,599,442 16,280,855
End of period $ 40,230,345 $ 22,599,442
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED INVESTMENT PORTFOLIOS
BOND INDEX PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. ORGANIZATION
Federated Investment Portfolios (the "Portfolio Series") was organized
as a Massachusetts business trust under a Declaration of Trust dated
September 29, 1995. The Portfolio Series is currently comprised of one
portfolio, Bond Index Portfolio (the "Portfolio"). The Declaration of
Trust permits the Portfolio Series to issue an unlimited number of
shares of beneficial interests in the Portfolio. The Portfolio, which
began operations on January 2, 1996, is an open-end diversified
management investment company under the Investment Company Act of
1940, as amended (the "Act"). The investment objective of the
Portfolio is to provide investment results that correspond to the
investment performance of the Lehman Brothers Aggregate Bond Index.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Portfolio in the preparation of its
financial statements. These policies are in conformity with generally
accepted accounting principles.
PREDECESSOR PORTFOLIO -- Effective January 2, 1996, (the
"Transaction Date") the Portfolio received all of the assets of
Excelsior Institutional Bond Index Fund, a series of Excelsior
Institutional Trust, which had invested all of its assets in Bond
Market Portfolio (the "Predecessor Portfolio"), a portfolio of St.
James Portfolios, having a market value of $16,913,859, in exchange
for shares of beneficial interest in the Portfolio. These assets
acquired represented substantially all of the Predecessor
Portfolio's assets as of the Transaction Date. The Statement of
Changes in Net Assets, and Selected Financial Data presented herein
include the operations and selected financial data of the
Predecessor Portfolio for the periods prior to January 2, 1996.
INVESTMENT VALUATIONS -- Listed corporate bonds and other
fixed-income and asset backed securities are valued at the last sale
price reported on national securities exchanges. Unlisted bonds and
short-term obligations are valued at the prices provided by an
independent pricing service. Short-term securities obtained with
remaining maturities of sixty days or less may be stated at
amortized cost, which approximates market value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code,
as amended (the "Code"). Distributions to shareholders are recorded
on the ex-dividend date. Distributions are determined in accordance
with income tax regulations which may differ from generally accepted
accounting principles.
REPURCHASE AGREEMENTS -- The Portfolio may purchase portfolio
securities from financial institutions deemed to be creditworthy by
the investment adviser subject to the seller's agreement to
repurchase and the Portfolio's agreement to resell such securities
at mutually agreed upon prices. Securities purchased subject to such
repurchase agreements are deposited with the Portfolio's custodian
or are maintained in the Federal Reserve/Treasury book-entry system
and must have, at all times, an aggregate market value of not less
than 102% of the repurchase price (including accrued interest).
If the value of the underlying security, including accrued interest,
falls below 102% of the repurchase price plus accrued interest, the
Portfolio will require the seller to deposit additional collateral
by the next business day. Default or bankruptcy of the seller may,
however, expose the Portfolio to a risk of loss in the event that
the Portfolio is delayed or prevented from exercising its right to
dispose of the underlying collateral securities or to the extent
that proceeds from a sale of the underlying securities were less
than the repurchase price under the agreement.
FEDERAL INCOME TAXES -- The Portfolio will be treated as a
partnership for federal income tax purposes. As such, each investor
in the Portfolio will be subject to taxation on its share of the
Portfolio's ordinary income and capital gains. It is intended that
the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements
of Subchapter M of the Internal Revenue Code.
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. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Research Corp., the Portfolio's
investment adviser (the "Adviser"), is entitled to receive for its
services an annual investment advisory fee equal to 0.25% of the
Portfolio's average daily net assets. The Adviser has entered into a
subadvisory contract with the United States Trust Company of New
York ("U.S. Trust"). Under the terms of the subadvisory contract,
the Adviser is obligated to pay U.S. Trust an annual investment
advisory fee equal to 0.12% of the Portfolio's average daily net
assets. For the year ended May 31, 1997, the Adviser and U.S. Trust
voluntarily agreed to waive all of their fees.
ADMINISTRATIVE FEE -- Federated Administrative Services, Inc.
("FAS") provides the Portfolio with administrative personnel and
services. The FAS fee is based upon 0.05% on the first $1 billion of
average aggregate daily net assets of the Portfolio, subject to an
annual minimum fee of $60,000.
PORTFOLIO ACCOUNTING FEE -- Federated Services Company ("FServ"), an
affiliate of FAS, maintains the Portfolio's accounting records for
which it receives a fee. The fee is based on the level of the
Portfolio's average daily net assets for the period, plus
out-of-pocket expenses.
CUSTODIAN -- Effective June 5, 1996, State Street Bank and Trust
Company became the custodian of the Portfolio's assets for which it
receives a fee.
Prior to June 5, 1996, Investors Bank & Trust Company ("IBT") served
as custodian of the Portfolio's assets pursuant to a Custody
Agreement between IBT and the Portfolio.
GENERAL -- Certain of the Officers and Trustees of the Portfolio
Series are Officers and Directors or Trustees of the above
companies.
4. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term investments,
for the year ended May 31, 1997, were as follows:
COST OF PURCHASES $30,943,318
PROCEEDS FROM SALES $14,531,264
5. SELECTED FINANCIAL DATA
YEAR ENDED MAY 31,
1997 1996 1995(A)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.20% 0.09% 0.00%*
Net investment income 7.06% 7.00% 7.45%*
Expense waiver/reimbursement(b) 0.75% 0.89% 0.69%*
SUPPLEMENTAL DATA
Portfolio turnover 49% 43% 67%
* Computed on an annualized basis.
(a) Reflects operations for the period from July 11, 1994 (date of
initial public investment) to May 31, 1995.
(b) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Investors of the BOND INDEX PORTFOLIO:
We have audited the accompanying statement of assets and liabilities
of the Bond Index Portfolio, a series of Federated Investment
Portfolios, as of May 31, 1997, and the related statement of
operations for the year then ended and the statement of changes in net
assets for each of the two years in the period then ended. These
financial statements are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these
financial statements 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
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 May 31, 1997, by correspondence with the
custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Bond Index
Portfolio at May 31, 1997, the results of its operations for the year
then ended and the changes in its net assets for each of the two years
in the period then ended, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
July 15, 1997
TRUSTEES
John F. Donahue
J. Christopher Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Victor R. Siclari
Assistant Secretary
