FEDERATED
BOND INDEX
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1996
Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 313909103
Cusip 313909202
G01738-02 (1/97)
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report for Federated Bond Index
Fund, which covers the period from June 1, 1996 through November 30, 1996.
Over the period, Federated Bond Index Fund produced a total return of 7.05%
for Institutional Shares and 6.91% for Institutional Service Shares.*
Dividends per share totaled $0.24 for Institutional Shares and $0.23 for
Institutional Service Shares. The net asset value of both share classes
increased from $6.96 on the first day of the period to $7.20 on the last
day. Total assets also increased by more than $6.4 million to reach $13.9
million on the last day of the period.
Federated Bond Index Fund pursues the investment performance of the overall
bond market as measured by the Lehman Brothers Aggregate Bond Index.** This
index is a benchmark for broad bond market performance and includes U.S.
Treasury and agency securities, corporate investment grade bonds, and
mortgage-backed securities.
To efficiently pursue the performance of this index, Federated Bond Index
Fund invests all of its assets in Bond Index Portfolio, a mutual fund with
the same investment objective.+ At the end of the period, the assets of the
Bond Index Portfolio were well diversified across U.S. Treasury notes and
bonds (48%), mortgage-backed securities (28.1%), corporate bonds (16.2%),
government agency securities (5.4%), asset-backed securities (0.7%), and a
repurchase agreement (0.6%).
Thank you for joining other investors who have entrusted more than $13
million to this fund to pursue the performance potential of bonds. As
always, we welcome your comments or questions.
Sincerely,
J. Christopher Donahue
President
January 15, 1997
* Performance quoted reflects past performance. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
** Lehman Brothers Aggregate Bond Index is an unmanaged index measuring both
the capital price changes and income provided by the underlying universe of
securities comprised of U.S. Treasury and agency obligations, foreign
obligations, U.S. investment-grade corporate debt and mortgage-backed
obligations. Investments cannot be made in an index.
+ Federated Bond Index Fund, Institutional Shares and Institutional Service
Shares, invests all of its assets through a two-tier Hub and Spoke(R) fund
structure (Hub and Spoke(R) is a registered service mark of Signature
Financial Group, Inc. and is used under a license with Federated Services
Company).
INVESTMENT REVIEW
The period from June 1, 1996 to November 30, 1996 was marked by a sharp drop
in interest rates. The 1-Year Treasury bill and the 2-Year Treasury note
experienced yield decreases of 39 basis points and 65 basis points, to 5.35%
and 5.58%, respectively. At the longer end of the yield curve, the yield of
the 10-Year Treasury note declined by 80 basis points to 6.05%, while the
benchmark 30-Year bond ended the period at 6.36%, which corresponds to a
drop in yield of 63 basis points. As a result of the greater yield reduction
for longer maturities, the yield curve flattened with the 2-Year/10-Year
spread decreasing by 15 basis points to 47 basis points.
Strong economic growth in the early part of the period raised fears that the
Federal Reserve Board (the "Fed") would soon increase the federal funds
rate. However, softening retail sales during the summer slowed down economic
growth. This slowdown combined with subdued inflation to keep the Fed on
hold during the period. The deceleration in third quarter Gross Domestic
Product was prompted by the sharp slowdown in consumer spending, which
dropped from a strong 3.5% rate during the first half of 1996 to a meager
0.4% rate in the third quarter. However, the reduction in consumer spending
may only represent a pause following strong spending earlier in the year.
The unemployment rate has continued to hover at record lows, and consumer
confidence measures are currently at seven-year highs. The tightness in the
labor markets is also reflected in the acceleration in average hourly
earnings, which showed a year-over-year increase of 3.5% at the end of
November after having remained below 3% for most of 1995. Hence, creeping
wage pressures could percolate into overall inflation unless the wage
increases are offset by a corresponding increase in productivity.
The deterioration in the trade balance was another contributor to the
slowdown in Gross Domestic Product in the second half of 1996. This resulted
from the slow growth in Europe and the growth slowdown in Asia which led to
weak U.S. export gains. However, relaxed monetary policies in these regions
should result in a growth pick-up in 1997 leading to faster U.S. export
gains and an improved trade balance and a resulting positive contribution to
Gross Domestic Product.
Sharply lower interest rates during the reporting period caused the
mortgage-backed securities sector in the Lehman Brothers Aggregate Bond
Index, with a total return for the period of 6.99%, to lag the other sectors
in the index. Since the beginning of 1996, however, the mortgage-backed
securities sector has by far been the best performing sector. Government
National Mortgage Association securities continued to outperform
conventional mortgage-backed securities by 10 to 13 basis points during the
period. Corporate bonds reported the best total return for the period with a
return of 8.60%. Within the corporate sector, bonds rated Baa bolstered by
steady economic growth and low inflation continued to outperform higher
quality bonds by 58 to 93 basis points. Long Yankees were the best
performing sub-sector in corporate bonds, helped by the significant spread
tightening in selected sovereigns. These bonds tightened by 24 basis points
to the 30-Year Treasury bond. For the six-month period ended November 30,
1996, the Institutional Shares of the fund had a total return of 7.05%*
compared to a return of 7.31% for the Lehman Brothers Aggregate Bond Index.
The total return for Institutional Service Shares of the fund, for the same
period, was 6.91%.*
The lower yields by the end of November 1996 could provide further impetus
to the interest rate sensitive sectors of the economy, such as housing,
during 1997. As a result, yields could face upward pressures in the new year
unless the already high levels of consumer debt dampen consumer spending.
Depending on the changes that are expected to take place in the level of
interest rates, in the shape of the yield curve and in spreads, the fund
will be restructured to continue its close tracking of the Lehman Brothers
Aggregate Bond Index.
* Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
FEDERATED BOND INDEX FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C> <C>
Total investments in securities, at value (identified and tax cost $13,354,710) $ 13,615,784
Income receivable 347,550
Prepaid expenses 12,123
Total assets 13,975,457
LIABILITIES:
Income distribution payable $68,811
Accrued expenses 17,777
Total liabilities 86,588
Net Assets for 1,927,709 shares outstanding $ 13,888,869
NET ASSETS CONSIST OF:
Paid in capital $ 13,615,467
Net unrealized appreciation of investments 261,074
Accumulated net realized gain on investments and futures 12,328
Total Net Assets $ 13,888,869
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$13,878,518 / 1,926,272 shares outstanding $7.20
INSTITUTIONAL SERVICE SHARES:
$10,352 / 1,437 shares outstanding $7.20
(See Notes which are an integral part of the Financial Statements)
FEDERATED BOND INDEX FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
INVESTMENT INCOME:
Interest $ 337,781
EXPENSES:
Administrative personnel and services fee $ 45,000
Custodian fees 5,982
Transfer and dividend disbursing agent fees and expenses 16,360
Directors'/Trustees' fees 590
Auditing fees 1,239
Legal fees 3,100
Portfolio accounting fees 25,668
Share registration costs 12,184
Printing and postage 2,212
Miscellaneous 6,645
Total expenses 118,980
Reimbursement of other operation expenses (114,622)
Net expenses 4,358
Net investment income 333,423
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 12,123
Net change in unrealized appreciation of investments 341,891
Net realized and unrealized gain on investments 354,014
Change in net assets resulting from operations $ 687,437
(See Notes which are an integral part of the Financial Statements)
FEDERATED BOND INDEX FUND
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED PERIOD
(UNAUDITED) ENDED
NOVEMBER 30, MAY 31,
1996 1996*
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 333,423 $ 40,256
Net realized gain (loss) on investments
($12,123 and $0, respectively, as computed for federal tax purposes) 12,123 206
Net change in unrealized appreciation (depreciation) 341,891 (80,811)
Change in net assets resulting from operations 687,437 (40,349)
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Institutional Shares (333,236) (40,252)
Institutional Service Shares (188) (4)
Change in net assets resulting from distributions to
shareholders (333,424) (40,256)
SHARE TRANSACTIONS --
Proceeds from sale of shares 14,306,493 7,689,089
Net asset value of shares issued to shareholders in payment of
distributions declared 19,066 5,918
Cost of shares redeemed (8,200,340) (304,765)
Change in net assets resulting from share transactions 6,125,219 7,390,242
Change in net assets 6,479,232 7,309,637
NET ASSETS:
Beginning of period 7,409,637 100,000
End of period $ 13,888,869 $ 7,409,637
* For the period from February 22, 1996 (start of performance) to May 31,
1996.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED BOND INDEX FUND
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
(UNAUDITED) ENDED
NOVEMBER 30, MAY 31,
1996 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.96 $ 7.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.24 0.12
Net realized and unrealized gain (loss) on investments 0.24 (0.29)
Total from investment operations 0.48 (0.17)
LESS DISTRIBUTIONS --
Distributions from net investment income (0.24) (0.12)
NET ASSET VALUE, END OF PERIOD $ 7.20 $ 6.96
TOTAL RETURN(B) 7.05% (2.32%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.09%* 0.09%*
Net investment income 6.86%* 7.01%*
Expense waiver/reimbursement(c) 2.36%* 8.18%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $13,879 $7,409
* Computed on an annualized basis.
(a) Reflects operations for the period from February 22, 1996 (start of
performance) to May 31, 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.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED BOND INDEX FUND
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
(UNAUDITED) ENDED
NOVEMBER 30, MAY 31,
1996 1996(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.96 $ 7.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.23 0.12
Net realized and unrealized gain (loss) on investments 0.24 (0.29)
Total from investment operations 0.47 (0.17)
LESS DISTRIBUTIONS --
Distributions from net investment income (0.23) (0.12)
NET ASSET VALUE, END OF PERIOD $ 7.20 $ 6.96
TOTAL RETURN(B) 6.91% (2.32%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.09%* 0.09%*
Net investment income 6.61%* 7.01%*
Expense waiver/reimbursement(c) 2.36%* 8.18%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $10 $0.2
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 22, 1996 (start of
performance) to May 31, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED INVESTMENT TRUST
FEDERATED BOND INDEX FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
1. ORGANIZATION
Federated Investment Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust currently consists of one fund. The financial
statements included herein are only those of Federated Bond Index Fund (the
"Fund"), a diversified portfolio. The Fund offers two classes of shares:
Institutional Shares and Institutional Service Shares.
The investment objective of the Fund is to provide investment results that
correspond to the investment performance of the Lehman Brothers Aggregate
Bond Index, a broad market-weighted index which encompasses U.S. Treasury
and agency securities, corporate investment grade bonds, and mortgage-backed
securities. The Fund seeks to achieve its investment objective by investing
all of its assets in Bond Index Portfolio, a portfolio (the "Portfolio") of
Federated Investment Portfolios, an open-end diversified management
investment company. The Fund has the same investment objective and policies
as the Portfolio. The value of the Fund's investment reflects it
proportionate beneficial interest in the net assets of the Portfolio. At
November 30, 1996, the Fund's beneficial interest in the Portfolio was
49.7%.
Federated Research Corp. is the investment adviser for the Portfolio.
Federated Research Corp. has delegated the daily management of the security
holdings of the Portfolio to the investment manager, United States Trust
Company of New York ("U.S. Trust"), acting as subadviser. The advisory fee
is charged to the Portfolio.
The performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio, including the schedule
of investments, are included elsewhere in this report and should be read in
conjunction with the Trust's financial statements.
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.
VALUATION OF INVESTMENTS -- Valuation of securities by the Portfolio is
discussed in Note 2 of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
INVESTMENT INCOME -- The Fund records its share of net investment income,
realized and unrealized gain and loss and adjusts its investment in the
Portfolio each day. All the net investment income and realized and
unrealized gain and loss of the Portfolio is allocated to the Fund and other
investors in the Portfolio at the time of such determination.
DIVIDENDS TO SHAREHOLDERS -- Dividends equal to all or substantially all of
the Fund's net investment income will be declared daily and paid monthly.
Distributions to shareholders of net realized capital gains, if any, are
normally declared and paid annually.
FEDERAL INCOME TAXES -- It is the policy of the Fund to comply with the
provisions of the Internal Revenue Code, as amended, applicable to regulated
investment companies and to distribute each year substantially all of its
taxable income to its shareholders. For Federal income tax purposes, the
Fund is treated as a single entity for the purpose of determining such
qualification. Net capital losses of the Fund of $323 attributable to
security transactions incurred after October 31, 1995, are treated as
arising on June 1, 1996, the first day of the Fund's next taxable year.
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. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value) for
each class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, 1996 MAY 31, 1996*
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,026,297 $ 14,271,714 1,093,118 $ 7,688,791
Shares issued to shareholders in payment of
distributions declared 2,696 18,943 846 5,915
Shares redeemed (1,166,918) (8,175,229) (43,560) (304,664)
Net change resulting from
Institutional Share transactions 862,075 $ 6,115,428 1,050,404 $ 7,390,042
</TABLE>
* For the period from February 22, 1996 (date of initial public offering) to
May 31, 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, 1996 MAY 31, 1996*
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 4,983 $ 34,779 41 $298
Shares issued to shareholders in payment of
distributions declared 18 123 1 3
Shares redeemed (3,592) (25,111) (14) (101)
Net change resulting from
Institutional Service Share transactions 1,409 $ 9,791 28 $200
Net change resulting from Trust Share
transactions 863,484 $ 6,125,219 1,050,432 $7,390,242
</TABLE>
* For the period from February 22, 1996 (date of initial public offering) to
May 31, 1996.
4. TRANSACTIONS WITH AFFILIATES
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the Master
Agreement for Administration and Management Services, provides the Fund with
administrative personnel and services. The fee paid to FServ is based on the
level of average daily net assets of the Fund for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $60,000 per fund 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 reimburse 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 Institutional Service Shares. The Plan provides
that the Fund may incur distribution expenses up to 0.25% of the average
daily net assets of the Institutional Service Shares, annually, to reimburse
FSC.
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to 0.25% of average daily net assets of the Fund shares for the period.
The fee paid to FSS is used to finance certain services for shareholders and
to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $50,230 were borne
initially by FServ.
The Fund has agreed to reimburse FServ for the organizational expenses
during the five-year period following effective date.
GENERAL -- Certain of the Officers and Trustees of the Trust are Officers
and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Additions and reductions in the Fund's investment in the Portfolio for the
period ended November 30, 1996, were as follows:
ADDITIONS $13,369,823
REDUCTIONS $7,532,019
BOND INDEX PORTFOLIO
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
ASSET-BACKED SECURITIES -- 0.7%
AUTOMOTIVE -- 0.7%
$ 185,881 Premier Auto Trust 1994-2, Class A3, 6.35%, 5/2/2000 $ 186,578
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $184,167) 186,578
CORPORATE BONDS -- 16.2%
AUTOMOBILE -- 1.0%
275,000 Ford Motor Co., Debenture, 7.125%, 11/15/2025 273,644
BEVERAGE & TOBACCO -- 2.8%
275,000 Anheuser-Busch Cos., Inc., Note, 7.00%, 9/1/2005 281,517
150,000 PepsiCo, Inc., Debenture, 7.625%, 12/18/1998 155,057
350,000 Philip Morris Cos., Inc., Note, 6.375%, 2/1/2006 336,354
Total 772,928
COMMUNICATIONS -- 2.7%
200,000 Lucent Technologies, Inc., Note, 7.25%, 7/15/2006 209,910
250,000 Motorola, Inc., Debenture, 7.50%, 5/15/2025 267,092
250,000 Sprint Corp., Note, 8.125%, 7/15/2002 269,715
Total 746,717
DRUGS -- 0.9%
250,000 American Home Products Corp., Note, 7.70%, 2/15/2000 261,942
FINANCE -- 1.4%
110,000 Bank of Boston Corp., Sub. Note, 6.625%, 12/1/2005 108,822
250,000 Lehman Brothers Holdings, Inc., Note, 8.50%, 8/1/2015 271,547
Total 380,369
FINANCE - AUTOMOTIVE -- 1.0%
300,000 General Motors Acceptance Corp., Note, 5.625%, 2/15/2001 292,773
FOOD PRODUCTS -- 1.3%
350,000 Nabisco, Inc., Unsecd. Note, 8.00%, 1/15/2000 367,283
PRINCIPAL
AMOUNT VALUE
CORPORATE BONDS -- CONTINUED
RETAILERS -- 2.2%
$ 300,000 Penney (J.C.) Co., Inc., Note, 7.375%, 6/15/2004 $ 313,986
300,000 Wal-Mart Stores, Inc., Unsecd. Note, 7.50%, 5/15/2004 319,848
Total 633,834
SOVEREIGN GOVERNMENT -- 1.9%
300,000 Italy (Republic of), Debenture, 6.875%, 9/27/2023 294,348
250,000 Quebec, Province of, Debenture, 7.125%, 2/9/2024 244,798
Total 539,146
UTILITIES -- 1.0%
275,000 Duke Power Co., 1st Ref. Mtg., 7.50%, 8/1/2025 280,038
TOTAL CORPORATE BONDS (IDENTIFIED COST $4,418,940) 4,548,674
GOVERNMENT AGENCIES -- 5.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 1.4%
200,000 7.23%, 12/17/2002 201,968
175,000 7.90%, 9/19/2001 188,727
Total 390,695
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 1.5%
390,000 7.50%, 2/11/2002 414,983
GOVERNMENT AGENCY -- 2.5%
675,000 Private Export Funding Corp., 7.30%, 1/31/2002 710,748
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $1,484,936) 1,516,426
MORTGAGE BACKED SECURITIES -- 28.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION -- 8.0%
455,147 6.50%, 2/1/2011 441,946
322,029 7.00%, 5/1/2024 321,926
317,440 7.00%, 6/1/2024 316,843
497,823 7.50%, 6/1/2026 504,598
397,909 8.50%, 3/1/2025 415,317
245,836 9.00%, 4/1/2022 262,619
Total 2,263,249
PRINCIPAL
AMOUNT VALUE
MORTGAGE BACKED SECURITIES -- CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 11.8%
$ 269,401 7.00%, 6/1/2009 $ 272,543
421,472 7.00%, 5/1/2024 419,892
377,333 7.00%, 6/1/2024 375,563
311,997 7.50%, 6/1/2011 318,527
245,850 7.50%, 2/1/2026 248,692
278,232 8.00%, 7/1/2002 286,665
425,110 8.50%, 8/1/2023 446,498
550,112 8.50%, 10/1/2026 573,316
357,045 9.00%, 6/1/2025 377,796
Total 3,319,492
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 8.3%
504,601 7.50%, 6/15/2024 513,588
448,714 7.50%, 6/15/2024 456,288
491,799 7.50%, 6/15/2026 498,866
475,000 8.00%, 8/15/2026 489,545
140,230 9.50%, 1/15/2019 152,719
195,179 9.50%, 10/15/2020 212,439
Total 2,323,445
TOTAL MORTGAGE BACKED SECURITIES (IDENTIFIED COST $7,668,135) 7,906,186
U.S. TREASURY SECURITIES -- 48.0%
U.S. TREASURY BONDS -- 16.2%
1,250,000 7.25%, 5/15/2004 1,344,725
2,675,000 7.25%, 5/15/2016 2,912,834
245,000 9.375%, 2/15/2006 301,963
Total 4,559,522
U.S. TREASURY NOTES -- 31.8%
1,425,000 5.875%, 8/15/1998 1,432,125
805,000 6.25%, 2/15/2003 819,337
PRINCIPAL
AMOUNT VALUE
U.S. TREASURY SECURITIES -- CONTINUED
U.S. TREASURY NOTES -- CONTINUED
$ 1,075,000 6.50%, 5/31/2001 $ 1,103,391
1,800,000 7.00%, 4/15/1999 1,854,000
825,000 7.125%, 10/15/1998 847,432
1,000,000 8.875%, 5/15/2000 1,097,660
1,700,000 9.00%, 5/15/1998 1,781,549
Total 8,935,494
TOTAL U.S. TREASURY SECURITIES (IDENTIFIED COST $13,176,976) 13,495,016
(A)REPURCHASE AGREEMENT -- 0.6%
165,000 BT Securities Corp., 5.72%, dated 11/29/1996, due 12/2/1996
(AT AMORTIZED COST) 165,000
TOTAL INVESTMENTS (IDENTIFIED COST $27,098,154)(B) $ 27,817,880
</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 $27,098,154.
The net unrealized appreciation of investments on a federal tax basis
amounts to $719,726 which is comprised of $730,214 appreciation and $10,488
depreciation at November 30, 1996.
Note: The categories of investments are shown as a percentage of net assets
($28,117,876) at November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
BOND INDEX PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Total investments in securities, at value (identified and tax cost $27,098,154) $ 27,817,880
Cash 2,114
Income receivable 305,523
Total assets 28,125,517
LIABILITIES:
Accrued expenses 7,641
Net Assets $ 28,117,876
NET ASSETS CONSIST OF:
Paid in capital for beneficial interests $ 28,117,876
(See Notes which are an integral part of the Financial Statements)
BOND INDEX PORTFOLIO
STATEMENT OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1996 (UNAUDITED)
INVESTMENT INCOME:
Interest $ 916,705
EXPENSES:
Investment advisory fee $ 32,207
Administrative personnel and services fee 30,000
Custodian fees 5,274
Auditing fees 4,386
Legal fees 2,000
Portfolio accounting fees 28,629
Share registration costs 900
Miscellaneous 1,624
Total expenses 105,020
Waivers and reimbursements --
Waiver of investment advisory fee $(32,207)
Reimbursement of other operating expenses by Adviser (47,048)
Total waivers and reimbursements (79,255)
Net expenses 25,765
Net investment income 890,940
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 38,995
Net change in unrealized appreciation of investments 823,181
Net realized and unrealized gain on investments 862,176
Change in net assets resulting from operations $ 1,753,116
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BOND INDEX PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, MAY 31,
1996 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 890,940 $ 1,141,277
Net realized gain on investments 38,995 228,503
Net change in unrealized appreciation (depreciation) 823,181 (715,007)
Change in net assets resulting from operations 1,753,116 654,773
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST:
Additions 17,973,137 18,879,856
Reductions (14,207,819) (13,216,042)
Net increase from transactions in investors' beneficial interest 3,765,318 5,663,814
Total increase in Net Assets 5,518,434 6,318,587
NET ASSETS:
Beginning of period 22,599,442 16,280,855
End of period $28,117,876 $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
NOVEMBER 30, 1996 (UNAUDITED)
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 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 Operations, 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 investors 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.
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 six months ended November 30, 1996, the Adviser
and U.S. Trust have 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 -- 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 & 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 six months ended November 30, 1996 were as follows:
COST OF PURCHASES $ 14,463,718
PROCEEDS FROM SALES $ 9,951,920
5. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
NOVEMBER 30, MAY 31,
1996 1996 1995(A)
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.20%* 0.09% 0.00%*
Net investment income 6.99%* 7.00% 7.45%*
Expense waiver/reimbursement(b) 0.62%* 0.89% 0.69%*
SUPPLEMENTAL DATA
Portfolio turnover 40% 43% 67%
</TABLE>
* 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.
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
J. Crilley Kelly
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including 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.
