PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the third Annual Report for Federated Bond Index Fund,
which covers the fund's fiscal year period from June 1, 1997 through May 31,
1998.
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.
Federated Bond Index Fund pursues the performance of this index by investing all
of its assets in Bond Index Portfolio, a mutual fund with the same investment
objective.+
The report opens with a commentary by the portfolio manager of Bond Index
Portfolio, followed by a series of charts that show total return performance for
Institutional Shares and Institutional Service Shares. These charts incorporate
the performance record of Bond Index Portfolio from its inception on July 11,
1994 through February 22, 1996. From February 22, 1996 through May 31, 1998, the
performance is that of Federated Bond Index Fund. Next are the financial
statements of Federated Bond Index Fund, and a complete listing of the holdings
in which it invests through the Bond Index Portfolio.
At the end of the reporting period, the $66 million in assets of the Bond Index
Portfolio were well-diversified across U.S. Treasury notes and bonds (44.5%),
mortgage-backed securities (27.5%), corporate bonds (17.3%), government agency
securities (3.5%), asset-backed securities (0.8%), and a repurchase agreement
(5.3%).
Over its fiscal year, Federated Bond Index Fund produced relatively strong
performance. Institutional Shares delivered a total return of 10.41% through a
share price increase of $0.26 and dividends totaling $0.45 per share.
Institutional Service Shares produced a total return of 10.14% through a share
price increase of $0.26 and dividends totaling $0.43 per share.**
Thank you for participating in the opportunities of the broad bond market
through the diversification and professional management of Federated Bond Index
Fund. As always, we welcome your comments or questions.
Sincerely,
[Graphic]
J. Christopher Donahue
President
July 15, 1998
* 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, U.S.
investment-grade corporate debt and mortgage-backed obligations. Investments
cannot be made in an index.
** Performance quoted reflects 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.
+ Federated Bond Index Fund, Institutional Shares and Institutional Service
Shares, invests all of its assets through a two-tier Hub and Spoke fund
structure. (Hub and Spoke is a registered service mark of Signature
Financial Group, Inc. and is used under a license with Federated Services
Company.
MANAGEMENT DISCUSSION AND ANALYSIS
Federated Bond Index Fund's portfolio is managed to track the characteristics of
the Lehman Brothers Aggregate Bond Index (the "Index"),* a broad market-weighted
index comprised of U.S. Treasury, agency, mortgage-backed and investment grade
corporate securities with maturities of at least one year.
During the fund's annual reporting period, fixed income performance reflected
above trend economic growth combined with subdued inflation. U.S. Treasury
yields steadily declined as consumer prices increased at only a 1.70% annual
rate through May 1998 and the Asian financial crisis eliminated the possibility
of a tightening of Federal Reserve Board (the "Fed") monetary policy. The
30-year Treasury bond yield declined from 6.91% at the end of May 1997 to 5.80%
at the end of May 1998. The 2- to 30-year coupon curve flattened from 71 to 28
basis points as the front end of the yield curve was anchored to the unchanged
Federal Funds target rate of 5.50%. Although the impact of the Asian crisis is
difficult to estimate, the U.S. economy should slow on the margin and allow Fed
monetary policy to remain on hold.
The fund's Institutional Shares and Institutional Service Shares net total
returns for the fiscal year ended May 31, 1998 were 10.41% and 10.14%,
respectively,** compared to 10.91% for the Index. The corporate sector
outperformed the government and mortgage-backed sectors within the Index.
However, on a duration-adjusted basis, the mortgage-backed sector outperformed
as volatility continued to decline. As of May 31, 1998, the Index was comprised
of 48% government, 30% mortgage-backed, 21% corporate, and 1% asset-backed
securities with an average duration of 4.5 years.
Depending on the changes that take place with the level of interest rates, the
shape of the yield curve and sector spreads, the fund will be restructured to
continue its close tracking of the Index.
* 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, U.S.
investment-grade corporate debt and mortgage-backed obligations. 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.
FEDERATED BOND INDEX FUND
INSTITUTIONAL SHARES
GROWTH OF $25,000 INVESTED IN FEDERATED BOND INDEX FUND
The graph below illustrates the hypothetical investment of $25,000* in the
Federated Bond Index Fund (the "Fund") (Institutional Shares) from July 11, 1994
(start of performance) to May 31, 1998, compared to the Lehman Brothers
Aggregate Bond Index ("LBAG").**
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 ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
[Graphic-SEE APPENDIX]
* Performance information for periods prior to February 22, 1996, is related to
Bond Index Portfolio in which Federated Bond Index Fund invests all of its
assets through a two-tier Hub and Spoke fund structure (Hub and Spoke
is a registered service mark of Signature Financial Group, Inc. and is used
under a license with Federated Services Company). Effective January 2, 1996,
Bond Index 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, a portfolio of St. James Portfolios.
Therefore, performance information for periods prior to January 2, 1996,
includes that of Bond Market Portfolio. Future performance of the Federated Bond
Index Fund will be affected by differences in expenses.
** The fund's performance assumes the reinvestment of all dividends and
distributions. The LBAG has been adjusted to reflect reinvestment of dividends
on securities in the index. The LBAG 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 BOND INDEX FUND
INSTITUTIONAL SERVICE SHARES
GROWTH OF $10,000 INVESTED IN FEDERATED BOND INDEX FUND
The graph below illustrates the hypothetical investment of $10,000* in the
Federated Bond Index Fund (the "Fund") (Institutional Service Shares) from July
11, 1994 (start of performance) to May 31, 1998, compared to the Lehman
Brothers Aggregate Bond Index ("LBAG").**
[Graphic]
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 ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Performance information for periods prior to February 22, 1996, is related to
Bond Index Portfolio in which Federated Bond Index Fund invests all of its
assets through a two-tier Hub and Spoke fund structure (Hub and Spoke
is a registered service mark of Signature Financial Group, Inc. and is used
under a license with Federated Services Company). Effective January 2, 1996,
Bond Index 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, a portfolio of St. James Portfolios.
Therefore, performance information for periods prior to January 2, 1996,
includes that of Bond Market Portfolio. Future performance of the Federated Bond
Index Fund will be affected by differences in expenses.
** The fund's performance assumes the reinvestment of all dividends and
distributions. The LBAG has been adjusted to reflect reinvestment of dividends
on securities in the index. The LBAG 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.
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED BOND INDEX FUND
MAY 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in the Portfolio, at value $ 62,034,256
Income receivable 3,800,781
Receivable for shares sold 480,869
Prepaid expenses 388,212
Deferred organizational costs 31,818
Total assets 66,735,936
LIABILITIES:
Payable for shares redeemed $ 64
Income distribution payable 166,627
Accrued expenses 149,081
Total liabilities 315,772
Net Assets for 9,124,591 shares outstanding $ 66,420,164
NET ASSETS CONSIST OF:
Paid in capital $ 65,186,529
Net unrealized appreciation of investments in the Portfolio 861,351
Accumulated net realized gain on investments in the Portfolio 392,990
Distributions in excess of net investment income (20,706)
Total Net Assets $ 66,420,164
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$40,368,404 / 5,545,869 shares outstanding $7.28
INSTITUTIONAL SERVICE SHARES:
$26,051,760 / 3,578,722 shares outstanding $7.28
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED BOND INDEX FUND
YEAR ENDED MAY 31, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 2,748,403
Expenses allocated from the Portfolio (85,412)
Net investment income allocated from the Portfolio 2,662,991
EXPENSES:
Administrative personnel and services fee $ 89,754
Transfer and dividend disbursing agent fees and expenses 46,510
Directors'/Trustees' fees 12,730
Auditing fees 7,500
Legal fees 2,900
Portfolio accounting fees 55,647
Shareholder services fee--Institutional Shares 68,360
Shareholder services fee--Institutional Service Shares 37,965
Share registration costs 27,919
Printing and postage 24,706
Insurance premiums 2,702
Miscellaneous 35,103
Total expenses 411,796
Waivers and reimbursements--
Waiver of shareholders services fee--Institutional $ (68,360)
Shares
Reimbursement of other operating expenses (267,201)
Total waivers (335,561)
Net expenses 76,235
Net investment income 2,586,756
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
ALLOCATED FROM THE PORTFOLIO:
Net realized gain on investment transactions allocated 379,654
from the Portfolio
Net change in unrealized appreciation of investments 1,003,366
allocated from the Portfolio
Net realized and unrealized gain on investments 1,383,020
allocated from the Portfolio
Change in net assets resulting from operations $ 3,969,776
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED BOND INDEX FUND
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 2,586,756 $ 984,771
Net realized gain on investments in the Portfolio ($296,684 net 379,654 31,796
gain and $15,128 net loss, respectively, as computed for federal
tax purposes)
Net change in unrealized appreciation/depreciation in the 1,003,366 (61,204)
Portfolio
Change in net assets resulting from operations 3,969,776 955,363
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (1,709,348) (916,368)
Institutional Service Shares (901,067) (65,450)
Distributions from net realized gains
Institutional Shares (12,982) --
Institutional Service Shares (5,684) --
Change in net assets resulting from distributions to (2,629,081) (981,818)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 68,913,043 28,329,040
Net asset value of shares issued to shareholders in payment of 1,095,971 142,180
distributions declared
Cost of shares redeemed (29,923,994) (10,859,953)
Change in net assets resulting from share transactions 40,085,020 17,611,267
Change in net assets 41,425,715 17,584,812
NET ASSETS:
Beginning of period 24,994,449 7,409,637
End of period (including undistributed net investment income of $ 66,420,164 $ 24,994,449
$0 and $2,953, respectively)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
FEDERATED BOND INDEX FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $7.02 $6.96 $7.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.45 0.48 0.12
Net realized and unrealized gain
(loss) on investments from the Portfolio 0.26 0.06 (0.29)
Total from investment operations 0.71 0.54 (0.17)
LESS DISTRIBUTIONS
Distributions from net investment income (0.45) (0.48) (0.12)
Distributions from net realized gain on
investments from the Portfolio 0.00(b) -- --
Total distributions (0.45) (0.48) (0.12)
NET ASSET VALUE, END OF PERIOD $7.28 $7.02 $6.96
TOTAL RETURN(C) 10.41% 7.97% (2.32%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.29% 0.29% 0.09%*
Net investment income 6.20% 6.83% 7.01%*
Expense waiver/reimbursement(d) 0.89% 1.73% 8.18%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $40,368 $20,599 $7,409
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 22, 1996 (start of
performance) to May 31, 1996.
(b) Distributions from net realized gain on investments from the Portfolio were
less than one cent per share.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
FEDERATED BOND INDEX FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997 1996(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $7.02 $6.96 $7.25
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.43 0.46 0.12
Net realized and unrealized gain (loss) on investments from the Portfolio 0.26 0.06 (0.29)
Total from investment operations 0.69 0.52 (0.17)
LESS DISTRIBUTIONS
Distributions from net investment income (0.43) (0.46) (0.12)
Distributions from net realized gain on investments from the Portfolio 0.00(b) -- --
Total distributions (0.43) (0.46) (0.12)
NET ASSET VALUE, END OF PERIOD $7.28 $7.02 $6.96
TOTAL RETURN(C) 10.14% 7.70% (2.32%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.54% 0.54% 0.09%*
Net investment income 5.88% 6.64% 7.01%*
Expense waiver/reimbursement(d) 0.61% 1.37% 8.18%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $26,052 $4,396 $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) Distributions from net realized gain on investments from the Portfolio were
less than one cent per share.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED INVESTMENT TRUST
FEDERATED BOND INDEX FUND
MAY 31, 1998
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 those of Federated Bond Index Fund (the "Fund").
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
investable assets in Bond Index Portfolio, the corresponding 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 its
proportionate beneficial interest in the net assets of the Portfolio. At May 31,
1998, the Fund's beneficial interest in the Portfolio was 93.8%.
Federated Research Corp. (the "Adviser") is the investment adviser for the
Portfolio. The Adviser 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. Effective May 31, 1998, the Adviser assumed the daily management
of the Portfolio's security holdings.
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.
PENDING MERGER
As of the close of business on March 31, 1998, the Fund comprised of the only
spoke fund to the Portfolio. In consideration of this, the Board of Trustees of
the Trust has approved withdrawing the assets from the Portfolio provided the
shareholders of the Fund approve the reorganization. The reorganization will
give effect to the proposed transfer of assets from the Fund in exchange for
Institutional Shares and Institutional Service Shares of Federated Total Return
Bond Fund.
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
Valuation of securities by the Portfolio is discussed in 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 realized and unrealized gain and loss of the Portfolio is
allocated pro rata 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 at least once a month. Distributions to
shareholders of net realized capital gains, if any, are normally declared and
paid annually.
FEDERAL 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.
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.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees (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>
Year Ended May 31,
1998 1997
Institutional Shares Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 5,590,887 $ 40,336,570 3,399,030 $ 23,963,635
Shares issued to shareholders in 26,174 189,045 11,082 77,987
payment of distributions declared
Shares redeemed (3,003,574) (21,668,398) (1,541,927) (10,829,602)
Net change resulting from 2,613,487 $ 18,857,217 1,868,185 $ 13,212,020
Institutional Share transactions
<CAPTION>
Year Ended May 31,
1998 1997
Institutional Service Shares Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 3,975,800 $ 28,576,473 620,929 $ 4,365,405
Shares issued to shareholders in 125,450 906,926 9,149 64,193
payment of distributions declared
Shares redeemed (1,148,294) (8,255,596) (4,340) (30,351)
Net change resulting from 2,952,956 $ 21,227,803 625,738 $ 4,399,247
Institutional Service Share
transactions
Net change resulting from share 5,566,443 $ 40,085,020 2,493,923 $ 17,611,267
transactions
</TABLE>
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 any fiscal year 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 Trust's
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 for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of its fee at its sole discretion.
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 $50,320 were borne initially by FServ. The Fund has
reimbursed FServ for the organizational expenses. These expenses have been
deferred and are being amortized during the sixty-month period following the
Fund's effective date.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Additions and reductions in the Fund's investment in the Portfolio for the year
ended May 31, 1998, were as follows:
ADDITIONS $56,552,501
REDUCTIONS $19,640,802
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.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders of FEDERATED BOND INDEX FUND:
We have audited the accompanying statement of assets and liabilities of
Federated Bond Index Fund, a portfolio of Federated Investment Trust, as of May
31, 1998, and the related statement of operations for the year then ended, and
the statement of changes in net assets and financial highlights for the periods
presented therein. These financial statements and financial highlights are the
responsibility of the Trust'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. 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 Bond Index Fund at May 31, 1998, the results of its operations for the
year then ended, and changes in its net assets and financial highlights for the
periods presented therein, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
July 15, 1998
PORTFOLIO OF INVESTMENTS
BOND INDEX PORTFOLIO
MAY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
ASSET-BACKED SECURITIES--0.8%
FINANCIAL INTERMEDIARIES--0.8%
$ 750,000 Citibank Credit Card Master Trust 1997-6, Class A, (principal $ 515,625
only), 8/15/2006
TOTAL ASSET-BACKED SECURITIES 515,625
(IDENTIFIED COST $494,765)
CORPORATE BONDS--17.3%
AUTOMOBILE--0.8%
45,000 Ford Motor Co., Deb., 7.125%, 11/15/2025 501,021
BANKING--2.0%
400,000 ABN-AMRO Bank NV, Chicago, Sub., 7.55%, 6/28/2006 429,452
550,000 GreenPoint Bank, Sr. Note, 6.70%, 7/15/2002 558,058
300,000 Summit Bancorp, Bond, 8.40%, 3/15/2027 326,295
Total 1,313,805
BEVERAGE & TOBACCO--1.2%
275,000 Anheuser-Busch Cos., Inc., Note, 7.00%, 9/1/2005 283,470
500,000 Philip Morris Cos., Inc., Note, 6.375%, 2/1/2006 493,015
Total 776,485
COMMUNICATIONS--1.7%
550,000 Lucent Technologies, Inc., Note, 7.25%, 7/15/2006 589,661
500,000 MCI Communications Corp., Sr. Note, 7.125%, 1/20/2000 507,385
Total 1,097,046
ECOLOGICAL SERVICES & EQUIPMENT--0.5%
300,000 USA Waste Services, Inc., Sr. Note, 7.00%, 10/1/2004 308,511
ELECTRONICS--0.6%
400,000 International Business Machines Corp., Sr. Deb., 6.50%, 396,060
1/15/2028
FINANCE--2.2%
400,000 Bankers Trust New York Corp., Sub. Note, 8.25%, 5/1/2005 438,936
400,000 FINOVA Capital Corp., Note, 7.40%, 6/1/2007 426,792
250,000 Lehman Brothers Holdings, Inc., Note, 8.50%, 8/1/2015 289,660
300,000 Salomon, Inc., Sr. Note, 7.75%, 5/15/2000 309,294
Total 1,464,682
FINANCE - AUTOMOTIVE--0.4%
300,000 General Motors Acceptance Corp., Note, 5.625%, 2/15/2001 297,492
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
FOOD PRODUCTS--0.8%
$ 500,000 Hershey Foods Corp., 6.95%, 8/15/2012 $ 532,155
INSURANCE--0.6%
400,000 Hartford Life, Inc., Note, 7.10%, 6/15/2007 418,515
METALS & MINING--0.4%
250,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 264,293
OIL & GAS--0.5%
265,000 Occidental Petroleum Corp., Sr. Note, 10.125%, 11/15/2001 295,594
PHARMACEUTICAL--1.4%
500,000 American Home Products Corp., Note, 7.70%, 2/15/2000 514,175
400,000 Lilly (Eli) & Co., Unsecd. Note, 6.57%, 1/1/2016 410,704
Total 924,879
RETAILERS--0.6%
400,000 Wal-Mart Stores, Inc., Unsecd. Note, 7.50%, 5/15/2004 428,104
SOVEREIGN--2.8%
600,000 Canada, Government of, Bond, 6.50%, 5/30/2001 611,058
500,000 Du Pont (E.I.) de Nemours & Co., Note, 6.50%, 9/1/2002 508,595
300,000 Italy (Republic of), Deb., 6.875%, 9/27/2023 324,603
400,000 Quebec, Province of, Deb., Series NN, 7.125%, 2/9/2024 423,952
Total 1,868,208
UTILITIES--0.8%
500,000 Pacific Gas & Electric Co., 1st Ref. Mtg., 7.875%, 3/1/2002 530,490
TOTAL CORPORATE BONDS (IDENTIFIED COST $11,048,152) 11,417,340
GOVERNMENT AGENCIES--3.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION--1.0%
475,000 7.10%, 4/10/2007 512,482
175,000 7.90%, 9/19/2001 185,992
Total 698,474
FEDERAL NATIONAL MORTGAGE ASSOCIATION--1.4%
500,000 6.75%, 7/30/2007 509,060
300,000 7.50%, 2/11/2002 411,512
Total 920,572
GOVERNMENT AGENCY--1.1%
675,000 Private Export Funding Corp., 7.30%, 1/31/2002 709,643
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $2,280,414) 2,328,689
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
MORTGAGE BACKED SECURITIES--27.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION--9.1%
$ 292,949 6.00%, 10/1/2012 $ 289,835
366,731 6.50%, 2/1/2011 370,739
597,045 6.50%, 2/1/2028 594,245
373,193 7.00%, 1/1/2012 381,318
237,534 7.00%, 5/1/2024 241,617
265,287 7.00%, 6/1/2024 269,848
326,763 7.00%, 1/1/2027 331,766
1,100,000 7.00%, 5/1/2028 1,116,841
243,386 7.50%, 11/1/2011 251,028
359,323 7.50%, 6/1/2026 369,086
229,902 7.50%, 11/1/2026 236,224
343,219 7.50%, 5/1/2027 352,658
163,762 8.00%, 7/1/2002 166,923
248,993 8.00%, 6/1/2027 258,408
342,760 8.00%, 12/1/1999 355,719
229,358 8.50%, 3/1/2025 239,821
181,593 9.00%, 4/1/2022 193,566
Total 6,019,642
FEDERAL NATIONAL MORTGAGE ASSOCIATION--10.8%
395,230 6.00%, 3/1/2013 390,535
321,495 6.50%, 7/1/2012 323,302
592,321 6.50%, 5/1/2027 588,803
244,747 7.00%, 5/1/2004 248,212
159,836 7.00%, 6/1/2009 163,282
243,963 7.00%, 11/1/2012 248,764
360,603 7.00%, 5/1/2024 366,127
210,029 7.00%, 6/1/2024 213,112
446,751 7.00%, 3/1/2027 453,032
349,419 7.00%, 3/1/2028 354,332
241,516 7.50%, 6/1/2011 249,138
222,905 7.50%, 2/1/2026 229,173
230,475 7.50%, 11/1/2026 236,884
284,420 7.50%, 11/1/2027 292,330
1,200,000 7.50%, 1/1/2028 1,233,372
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
MORTGAGE BACKED SECURITIES--CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
$ 349,306 7.50%, 3/1/2028 $ 359,020
418,007 8.00%, 3/1/2026 434,009
302,095 8.50%, 8/1/2023 318,235
219,167 8.50%, 12/1/2026 229,234
208,408 9.00%, 6/1/2025 221,041
Total 7,151,937
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--7.6%
205,495 6.50%, 5/15/2011 208,448
296,866 6.50%, 5/15/2027 295,474
376,476 7.00%, 5/15/2026 382,356
341,849 7.00%, 4/15/2027 347,188
499,040 7.00%, 1/15/2028 506,835
370,123 7.50%, 6/15/2024 381,804
443,237 7.50%, 6/15/2026 456,809
600,000 7.50%, 10/15/2027 618,372
383,751 8.00%, 8/15/2026 398,978
316,469 8.00%, 1/15/2027 329,026
256,560 8.00%, 6/15/2027 266,740
292,574 8.50%, 5/15/2027 308,757
275,793 9.00%, 6/15/2025 295,526
84,110 9.50%, 1/15/2019 91,185
107,468 9.50%, 10/15/2020 116,453
Total 5,003,951
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $17,810,144) 18,175,530
U.S. TREASURY--44.5%
U.S. TREASURY BONDS--13.3%
1,850,000 6.00%, 2/15/2026 1,877,750
2,050,000 7.125%, 2/15/2023 2,371,912
575,000 7.25%, 5/15/2004 621,811
3,025,000 7.25%, 5/15/2016 3,482,531
300,000 11.75%, 11/15/2014 447,843
Total 8,801,847
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY--CONTINUED
U.S. TREASURY NOTES--31.2%
$ 3,855,000 6.25%, 2/15/2003 $ 3,956,194
1,750,000 6.50%, 5/31/2001 1,793,470
1,575,000 6.50%, 5/15/2005 1,653,262
1,750,000 6.50%, 10/15/2006 1,843,520
2,125,000 7.00%, 4/15/1999 2,151,563
2,300,000 7.75%, 12/31/1999 2,374,750
3,050,000 7.75%, 2/15/2001 3,214,881
3,425,000 8.875%, 5/15/2000 3,631,562
Total 20,619,202
TOTAL U.S. TREASURY SECURITIES (IDENTIFIED COST $28,927,797) 29,421,049
(A)REPURCHASE AGREEMENT--5.3%
3,480,000 BT Securities Corp., 5.57%, dated 5/29/1998, due 6/1/1998 (AT 3,480,000
AMORTIZED COST)
TOTAL INVESTMENTS (IDENTIFIED COST $64,041,272)(B) $ 65,338,233
</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 $64,047,702. The
net unrealized appreciation of investments on a federal tax basis amounts to
$1,290,531 which is comprised of $1,312,135 appreciation and $21,604
depreciation at May 31, 1998.
Note: The categories of investments are shown as a percentage of net assets
($66,110,100) at May 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
BOND INDEX PORTFOLIO
MAY 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified
cost $64,041,272 and tax cost $64,047,702) $ 65,338,233
Income receivable 799,107
Deferred organizational costs 3,156
Total assets 66,140,496
LIABILITIES:
Payable to Bank $ 844
Accrued expenses 29,552
Total liabilities 30,396
NET ASSETS $ 66,110,100
NET ASSETS CONSIST OF:
Paid in capital for beneficial interest $ 66,110,100
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
BOND INDEX PORTFOLIO
YEAR ENDED MAY 31, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 3,583,365
EXPENSES:
Investment advisory fee $138,149
Administrative personnel and services fee 59,834
Custodian fees 8,960
Directors'/Trustees' fees 12,000
Auditing fees 19,660
Legal fees 4,265
Portfolio accounting fees 65,135
Printing and postage 2,995
Insurance premiums 2,534
Miscellaneous 8,440
Total expenses 321,972
Waivers and reimbursements--
Waiver of investment advisory fee $ (138,149)
Reimbursement of other operating expenses (73,304)
Total waivers and reimbursements (211,453)
Net expenses 110,519
Net investment income 3,472,846
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 488,422
Net change in unrealized appreciation of investments 1,334,628
Net realized and unrealized gain on investments 1,823,050
Change in net assets resulting from operations $ 5,295,896
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 3,472,846 $ 2,058,104
Net realized gain on investments 488,422 54,299
Net change in unrealized appreciation/depreciation 1,334,628 65,788
Change in net assets resulting from operations 5,295,896 2,178,191
TRANSACTIONS IN INVESTORS' BENEFICIAL INTEREST--
Additions 59,348,731 34,754,102
Reductions (38,764,872) (19,301,390)
Net increase from transactions in investors' beneficial 20,583,859 15,452,712
interest
Change in net assets 25,879,755 17,630,903
NET ASSETS:
Beginning of period 40,230,345 22,599,442
End of period $ 66,110,100 $ 40,230,345
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED INVESTMENT PORTFOLIOS
BOND INDEX PORTFOLIO
MAY 31, 1998
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. As of the close of business on
March 31, 1998, Federated Bond Index Fund comprised the only spoke fund to the
Portfolio.
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.
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 securities 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.
DEFERRED ORGANIZATION EXPENSES
Organization expenses incurred by the Portfolio in connection with its
organization have been deferred and are being amortized over a period not to
exceed sixty months beginning with the commencement of operations of the
Portfolio.
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.
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, 1998, the
Adviser and U.S. Trust have voluntarily agreed to waive all of their fees.
Effective May 31, 1998, the Adviser assumed the daily management of the
Portfolio's security holdings.
ADMINISTRATIVE FEE
Federated Administrative Services ("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.
GENERAL
Certain of the Officers and Trustees of the Portfolio Series are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term investments, for the
year ended May 31, 1998, were as follows:
COST OF PURCHASES $56,476,910
PROCEEDS FROM SALES $35,084,147
SELECTED FINANCIAL DATA
YEAR ENDED MAY 31,
1998 1997 1996(C) 1995(A)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.20% 0.20% 0.09% 0.00%*
Net investment income 6.28% 7.06% 7.00% 7.45%*
Expense waiver/reimbursement(b) 0.38% 0.75% 0.89% 0.69%*
SUPPLEMENTAL DATA
Portfolio turnover 67% 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.
(c) The Selected Financial Data presented herein include the selected financial
data of the Bond Market Portfolio, a portfolio of St. James Portfolios, for the
periods prior to January 2, 1996.
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Portfolio could be adversely
affected if the computer systems used by the Portfolio's service providers do
not properly process and calculate date-related information and data from and
after January 1, 2000. The Portfolio'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 Portfolio'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 Portfolio.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Trustees and Investors of BOND INDEX PORTFOLIO:
We have audited the accompanying statement of assets and liabilities of Bond
Index Portfolio, a portfolio of Federated Investment Portfolios, as of May 31,
1998, 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, 1998, by correspondence with the
custodian and brokers or other appropriate auditing procedures where replies
form 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 referred to above present fairly, in
all material respects, the financial position of Bond Index Portfolio at May 31,
1998, the results of its operations for the year then ended, and 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, 1998
TRUSTEES
John F. Donahue
J. Christopher 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
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Anthony R. Bosch
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 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.
Federated Bond Index Fund
Annual Report to Shareholders
May 31, 1998
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 313909103
Cusip 313909202
G01738-03 (7/98)
[Graphic]
A. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left hand
quadrant. The Institutional Shares of Federated Bond Index Fund (the "Fund") are
represented by a solid line. The Lehman Brothers Aggregate Bond Index (the
"Index") is represented by a dotted line. The line graph is a visual
representation of a comparison of change in value of a $25,000 hypothetical
investment in the Institutional Shares of the Fund, and the Index. The "x" axis
reflects computation periods from 7/11/94 to 5/31/98. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Institutional Shares, as compared to the
Index. The ending values were $34,452 and $35,024, respectively. The legend
below the graphic presentation indicates the Fund's Institutional Shares Average
Annual Total Returns for the one-year and start of performance (7/11/94)
cumulative and annualized.
The total returns were 10.41%, 37.83%, and 8.60%, respectively.
B. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left hand
quadrant. The Institutional Service Shares of Federated Bond Index Fund (the
"Fund") are represented by a solid line. The Lehman Brothers Aggregate Bond
Index (the "Index") 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 Institutional Service Shares of the Fund and the Index. The
"x" axis reflects computation periods from 7/11/94 to 5/31/98. The "y" axis
reflects the cost of the investment. The right margin reflects the ending value
of the hypothetical investment in the Fund's Institutional Service Shares, as
compared to the Index. The ending values were $13,712 and $14,009, respectively.
The legend below the graphic presentation indicates the Fund's Institutional
Service Shares Average Annual Total Returns for the one-year and start of
performance (7/11/94) cumulative and annualized. The total returns were 10.14%,
37.12%, and 8.45%, respectively.
