[Graphic]
Federated Bond Index Fund
Semi-Annual Report to Shareholders
November 30, 1997
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Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 313909103
Cusip 313909202
G01738-02 (1/98)
[Graphic]
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report for Federated Bond Index Fund.
This report covers the first half of the fund's fiscal year, which is the
six-month period from June 1, 1997 through November 30, 1997.
Over the first six months of its fiscal year, which saw an improved environment
for bonds, Federated Bond Index Fund delivered strong performance. Institutional
Shares delivered a total return of 6.18%* through a share price increase of
$0.20 and dividends totaling $0.23 per share. Institutional Service Shares
produced a total return of 6.05%* through a share price increase of $0.21 and
dividends totaling $0.22 per share. Total net assets in the fund topped the
$41-million mark.
This 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 (47%),
mortgage-backed securities (27.5%), corporate bonds (16.8%), government agency
securities (4.4%), asset-backed securities (1.0%), and a repurchase agreement
(4.5%).
Thank you for participating in the broad performance potential of bonds through
Federated Bond Index Fund. As we begin a new fiscal half, we renew our
commitment to keep you up-to-date on your investment through the highest level
of service. As always, we welcome your comments or questions.
Sincerely,
[Graphic]
J. Christopher Donahue
President
January 15, 1998
* 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.
** 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 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).
INVESTMENT REVIEW
The six-month period from June 1, 1997 to November 30, 1997, ended with the
financial turmoil in southeast Asia and the resultant turbulence in global
equity markets providing a flight to quality bid in the U.S. Treasury market. As
a result, there was a sharp decline in interest rates, particularly at the long
end of the yield curve. By November 30, 1997, the yield on the benchmark 30-year
bond was just above 6% at 6.04%. This represents an 87 basis point decline in
yield since June 30, 1997. The yield on the 10-year note dropped by 81 basis
points to 5.86%. However, shorter maturities experienced much smaller declines
in yields. For example, the yield on the 2-year Treasury note dropped by 45
basis points to 5.75%. In fact, the yield on 3-month Treasury bills increased by
26 basis points to 5.19%. This difference in the change in interest rates caused
the yield curve to dramatically flatten with the 2-year/30-year spread
collapsing from 71 basis points to just 29 basis points.
The strong growth/low inflation drumbeat continued in the second half of 1997.
Gross Domestic Product growth for 1997 will likely come in around 4% which is
much higher than the 2-2.5% trend growth which has historically been considered
the speed limit for the economy. However, despite the 4% growth rate, inflation
continues to be subdued. For the twelve-month period ended November 30, 1997,
the Consumer Price Index has registered an increase of only 1.8%. In fact
consumer goods prices are actually falling. During the past six months, the
Consumer Price Index for goods excluding food and energy is down at a rate of
0.6%. The competitive devaluations taking place in Asia are likely to cause
consumer goods prices to fall more rapidly in the coming months. On the other
hand, the domestic labor market remains at historic tight levels. Payroll growth
over the three-month period ended November 1997 has averaged $330,000 per month
with an unemployment rate of 4.6% at the end of November. Wage pressures have
intensified with hourly wages in November increasing 4.1% over the prior
twelve-month period. Despite very strong economic data which would, under normal
circumstances, have prompted the Federal Reserve Board to tighten credit
conditions, official interest rates were left unchanged during the fourth
quarter of 1997. This was most likely due to the financial crisis in Asia.
The Corporate sector with a return of 7.33% for the six-month period ended
November 30, 1997, had the best sector return in the Lehman Brothers Aggregate
Bond Index. However, the flight to quality during the last part of the period
widened spreads across the credit spectrum and significantly eroded the
Corporate sector's return advantage. Hardest hit was the Yankee subsector,
particularly southeast Asian credits. The dramatic inversion in the southeast
Asian credit curve is evidenced in the difference in the returns on
intermediate-term securities. The intermediate Yankee subsector with a return of
4.97% for the reporting period underperformed intermediate Industrials by almost
100 basis points, while long Yankees were even with long Industrials. The
Governments sector had a return of 6.87% for the reporting period. Lower
interest rates and higher volatility resulted in the mortgage-backed securities
sector lagging with a return of 5.63%. For the six-month period ended November
30, 1997, the Federated Bond Index Fund had a total return of 6.18% for
Institutional Shares and 6.05% for Institutional Service Shares compared to a
return of 6.55% for the Lehman Brothers Aggregate Bond Index. For the
twelve-month period ended November 30, 1997, the Federated Bond Index Fund had a
return of 7.09% for Institutional Shares and 6.82% for Institutional Service
Shares compared to 7.55% for the Lehman Brothers Aggregate Bond Index.*
The turmoil in southeast Asia will contribute to a slowdown in the U.S. economy
by widening the trade deficit. The depreciating currencies will also have a
beneficial impact on inflation. Counterbalancing this positive outlook is strong
consumer confidence, a robust employment picture and rising wage pressures. If
the strength in domestic conditions persists and the Asian situation stabilizes,
the Federal Reserve Board may have to resume tightening credit conditions.
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, Federated Bond
Index Fund will be restructured to continue its close tracking of the Lehman
Brothers Aggregate Bond Index.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The average annual total return for Institutional Shares and Institutional
Service Shares of the fund for the period from February 22, 1996 (date of
initial public investment) to November 30, 1997, were 8.67% and 8.54%,
respectively
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED BOND INDEX FUND
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in the Portfolio, at value $ 39,543,587
Income receivable 2,191,108
Prepaid expenses 80,670
Deferred organizational costs 37,586
Total assets 41,852,951
LIABILITIES:
Income distribution payable $ 197,042
Accrued expenses 54,959
Total liabilities 252,001
Net Assets for 5,760,645 shares outstanding $ 41,600,950
NET ASSETS CONSIST OF:
Paid-in capital $ 40,777,032
Net unrealized appreciation of investments 740,505
Accumulated net realized gain on investments 83,413
Total Net Assets $ 41,600,950
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$28,358,310 / 3,926,928 shares outstanding $7.22
INSTITUTIONAL SERVICE SHARES:
$13,242,640 / 1,833,717 shares outstanding $7.22
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED BOND INDEX FUND
SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 1,116,827
EXPENSES:
Administrative personnel and services fee $ 45,000
Custodian fees 542
Transfer and dividend disbursing agent fees and expenses 24,666
Directors'/Trustees' fees 4,638
Auditing fees 3,547
Legal fees 1,650
Portfolio accounting fees 28,263
Shareholder services fee--Institutional Service Shares 14,576
Share registration costs 12,627
Printing and postage 10,524
Insurance premiums 1,983
Miscellaneous 7,873
Total expenses 155,889
Waivers and reimbursements--
Reimbursement of other operating expenses (125,684)
Net expenses 30,205
Net investment income 1,086,622
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS ALLOCATED FROM
PORTFOLIO:
Net realized gain on investment transactions allocated from the 59,168
Portfolio
Net change in unrealized appreciation of investments allocated from 882,450
the Portfolio
Net realized and unrealized gain on investments allocated from 941,688
the Portfolio
Change in net assets resulting from operations $ 2,028,240
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED BOND INDEX FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, MAY 31,
1997 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 1,086,622 $ 984,771
Net realized gain (loss) on investments in the Portfolio ($59,168 59,168 31,796
and ($15,128), respectively, as computed for federal tax
purposes)
Net change in unrealized appreciation/depreciation 882,450 (61,204)
Change in net assets resulting from operations 2,028,240 955,363
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (730,303) (916,368)
Institutional Service Shares (367,032) (65,450)
Change in net assets resulting from distributions to (1,097,335) (981,818)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 28,094,453 28,329,040
Net asset value of shares issued to shareholders in payment of 358,910 142,180
distributions declared
Cost of shares redeemed (12,777,767) (10,859,953)
Change in net assets resulting from share transactions 15,675,596 (17,611,267)
Change in net assets 16,606,501 17,584,812
NET ASSETS:
Beginning of period 24,994,449 7,409,637
End of period (including undistributed net investment income of $ 41,600,950 $ 24,994,449
$0 and $2,953, respectively)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, MAY 31,
1997 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 0.23 0.48 0.12
Net realized and unrealized gain
(loss) on investments 0.20 0.06 (0.29)
Total from investment operations 0.43 0.54 (0.17)
LESS DISTRIBUTIONS
Distributions from net investment income (0.23) (0.48) (0.12)
NET ASSET VALUE, END OF PERIOD $7.22 $7.02 $6.96
TOTAL RETURN(B) 6.18% 7.97% (2.32)%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.29%* 0.29% 0.09%
Net investment income 6.36%* 6.83% 7.01%
Expense waiver/reimbursement(c) 0.74%* 1.73% 8.18%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $28,358 $20,599 $7,409
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 22, 1996 (date of initial
public investment) 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)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, MAY 31,
1997 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 0.21 0.46 0.12
Net realized and unrealized gain (loss) on investments 0.21 0.06 (0.29)
Total from investment operations 0.42 0.52 (0.17)
LESS DISTRIBUTIONS
Distributions from net investment income (0.22) (0.46) (0.12)
NET ASSET VALUE, END OF PERIOD $7.22 $7.02 $6.96
TOTAL RETURN(B) 6.05% 7.70% (2.32%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.54%* 0.54% 0.09%
Net investment income 6.06%* 6.64% 7.01%
Expense waiver/reimbursement(c) 0.69%* 1.37% 8.18%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $13,243 $4,396 $0.2
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 22, 1996 (date of initial
public investment) 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)
NOTES TO FINANCIAL STATEMENTS
FEDERATED INVESTMENT TRUST
FEDERATED BOND INDEX FUND
NOVEMBER 30, 1997
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 Service 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
November 30, 1997, the Fund's beneficial interest in the Portfolio was 72.9%.
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 sub-adviser. 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.
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 principals.
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 at least once a month. Distributions to
shareholders of net realized capital gains, if any, are normally declared and
paid annually.
DEFERRED EXPENSE
Expenses incurred by the Fund in connection with its organization are being
amortized over a sixty month period.
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.
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
All the net income of the Portfolio is allocated pro rata to the Fund and the
other investors in the Portfolio at the time of such determination.
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.
<TABLE>
<CAPTION>
Period Ended Year Ended
November 30, 1997 May 31, 1997
Institutional Shares Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 2,075,477 $ 14,834,932 3,399,030 $ 23,963,635
Shares issued to shareholders in
payment of distributions declared 9,382 67,163 11,082 77,987
Shares redeemed (1,090,313) (7,791,401) (1,541,927) (10,829,602)
Net change resulting from
Institutional Share transactions 994,546 $ 7,110,694 1,868,185 $ 13,212,020
<CAPTION>
Period Ended Year Ended
November 30, 1997 May 31, 1997
<S> <C> <C> <C> <C>
Institutional Service Shares Shares Amount Shares Amount
Shares sold 1,865,166 $ 13,259,520 620,929 $ 4,365,405
Shares issued to shareholders in
payment of distributions declared 40,706 291,748 9,149 64,193
Shares redeemed (697,921) (4,986,366) (4,340) (30,351)
Net change resulting from 1,207,951 $ 8,564,902 625,738 $ 4,399,247
Institutional Service Share
transactions
Net change resulting from Share
transactions 2,202,497 $ 15,675,596 2,493,923 $ 17,611,267
</TABLE>
TRANSACTIONS WITH AFFILIATES
ADMINISTRATIVE FEE
Federated Services Company ("FServ") under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. This
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 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
FServ 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
agreed to reimburse FServ for the organizational expenses during the sixty month
period following the effective date.
GENERAL
Certain of the Officers and Directors 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 six
months ended November 30, 1997, were as follows:
ADDITIONS $29,742,372
REDUCTIONS $16,124,574
PORTFOLIO OF INVESTMENTS
BOND INDEX PORTFOLIO
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
ASSET-BACKED SECURITIES--1.0%
AUTOMOBILE--0.1%
$ 56,299 Premier Auto Trust 1994-2, Class A3, 6.35%, 5/2/2000 $ 56,334
FINANCIAL INTERMEDIARIES--0.9%
750,000 Citibank Credit Card Master Trust 1997-6, Class A, 8/15/2006 489,375
Total Asset-Backed Securities (identified cost $531,737) 545,709
CORPORATE BONDS--16.8%
AUTOMOBILE--0.8%
475,000 Ford Motor Co., Deb., 7.125%, 11/15/2025 486,457
BANKING--1.6%
550,000 GreenPoint Bank, Sr. Note, 6.70%, 7/15/2002 550,589
300,000 Summit Bancorp, Bond, 8.40%, 3/15/2027 328,605
Total 879,194
BEVERAGE & TOBACCO--1.4%
275,000 Anheuser-Busch Cos., Inc., Note, 7.00%, 9/1/2005 278,746
150,000 PepsiCo, Inc., Deb., 7.625%, 12/18/1998 152,265
350,000 Philip Morris Cos., Inc., Note, 6.375%, 2/1/2006 341,040
Total 772,051
COMMUNICATIONS--0.6%
300,000 Lucent Technologies, Inc., Note, 7.25%, 7/15/2006 316,071
ECOLOGICAL SERVICES & EQUIPMENT--0.5%
300,000 USA Waste Services, Inc., Sr. Note, 7.00%, 10/1/2004 304,314
FINANCE - AUTOMOTIVE--0.5%
300,000 General Motors Acceptance Corp., Note, 5.625%, 2/15/2001 294,585
FINANCIAL INTERMEDIARIES--2.5%
400,000 Bankers Trust New York Corp., Sub. Note, 8.25%, 5/1/2005 434,636
400,000 FINOVA Capital Corp., Note, 7.40%, 6/1/2007 420,612
250,000 Lehman Brothers Holdings, Inc., Note, 8.50%, 8/1/2015 284,928
300,000 Salomon, Inc., Sr. Note, 7.75%, 5/15/2000 308,883
Total 1,449,059
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
FOOD PRODUCTS--1.5%
$ 500,000 Hershey Foods Corp., 6.95%, 8/15/2012 $ 515,910
350,000 Nabisco, Inc., Unsecd. Note, 8.00%, 1/15/2000 360,840
Total 876,750
INDUSTRIAL--0.9%
500,000 Du Pont (E.I.) de Nemours & Co., Note, 6.50%, 9/1/2002 505,300
INSURANCE--0.7%
400,000 Hartford Life, Inc., Note, 7.10%, 6/15/2007 412,970
METALS & MINING--0.5%
250,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 261,838
OIL & GAS--0.5%
265,000 Occidental Petroleum Corp., Sr. Note, 10.125%, 11/15/2001 298,303
PHARMACEUTICAL--0.4%
250,000 American Home Products Corp., Note, 7.70%, 2/15/2000 256,825
RETAILERS--0.7%
400,000 Wal-Mart Stores, Inc., Unsecd. Note, 7.50%, 5/15/2004 424,136
SOVEREIGN--0.5%
300,000 Italy (Republic of), Deb., 6.875%, 9/27/2023 308,472
SOVEREIGN GOVERNMENT--1.4%
400,000 Colombia, Republic of, Bond, 7.625%, 2/15/2007 374,724
400,000 Quebec, Province of, Deb., Series NN, 7.125%, 2/9/2024 406,856
Total 781,580
TELECOMMUNICATIONS & CELLULAR--0.9%
500,000 Korea Telecom, Note, 7.40%, 12/1/1999 491,880
UTILITIES--0.9%
500,000 Pacific Gas & Electric Co., 1st Ref. Mtg., 7.875%, 3/1/2002 529,515
Total Corporate Bonds (identified cost $9,437,254) 9,649,300
GOVERNMENT AGENCIES--4.4%
FEDERAL HOME LOAN MORTGAGE CORPORATION--1.6%
475,000 7.10%, 4/10/2007 504,018
200,000 7.23%, 12/17/2002 200,000
175,000 7.90%, 9/19/2001 185,966
Total 889,984
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
GOVERNMENT AGENCIES--CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION--1.6%
$ 500,000 6.75%, 7/30/2007 $ 504,530
390,000 7.50%, 2/11/2002 410,354
Total 914,884
GOVERNMENT AGENCY--1.2%
675,000 Private Export Funding Corp., 7.30%, 1/31/2002 705,872
Total Government Agencies (identified cost $2,479,119) 2,510,740
MORTGAGE BACKED SECURITIES--27.5%
FEDERAL HOME LOAN MORTGAGE CORPORATION--8.9%
302,999 6.00%, 10/1/2012 296,748
399,153 6.50%, 2/1/2011 399,775
503,634 6.50%, 2/1/2027 494,503
419,917 7.00%, 1/1/2012 425,514
260,939 7.00%, 5/1/2024 263,222
288,266 7.00%, 6/1/2024 290,606
366,235 7.00%, 1/1/2027 367,491
291,435 7.50%, 11/1/2011 298,490
478,096 7.50%, 6/1/2026 488,207
287,320 7.50%, 11/1/2026 293,692
392,347 7.50%, 5/1/2027 400,684
279,764 8.00%, 6/1/2027 289,030
215,819 8.00%, 7/1/2002 220,431
336,699 8.50%, 3/1/2025 351,642
222,527 9.00%, 4/1/2022 239,006
Total 5,119,041
FEDERAL NATIONAL MORTGAGE ASSOCIATION--10.5%
221,814 6.00%, 7/1/2012 217,100
340,891 6.50%, 7/1/2012 339,718
596,419 6.50%, 5/1/2027 584,860
294,342 7.00%, 5/1/2004 297,559
212,030 7.00%, 6/1/2009 215,211
250,000 7.00%, 11/1/2012 252,733
371,760 7.00%, 5/1/2024 374,199
212,083 7.00%, 6/1/2024 213,475
490,394 7.00%, 3/1/2027 491,311
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
MORTGAGE BACKED SECURITIES--CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
$ 276,178 7.50%, 6/1/2011 $ 282,823
227,007 7.50%, 2/1/2026 231,761
450,528 7.50%, 11/1/2026 459,962
297,804 7.50%, 9/1/2027 303,760
297,000 7.50%, 11/1/2027 302,940
463,775 8.00%, 3/1/2026 480,002
360,502 8.50%, 8/1/2023 379,832
274,434 8.50%, 12/1/2026 286,695
273,725 9.00%, 6/1/2025 291,345
Total 6,005,286
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--8.1%
210,729 6.50%, 5/15/2011 211,386
298,468 6.50%, 5/15/2027 293,710
408,048 7.00%, 5/15/2026 409,194
344,105 7.00%, 4/15/2027 345,072
401,905 7.50%, 6/15/2024 410,948
465,754 7.50%, 6/15/2026 475,069
442,033 8.00%, 8/15/2026 457,088
371,239 8.00%, 1/15/2027 383,883
303,000 8.00%, 6/15/2027 313,320
361,520 8.50%, 5/15/2027 378,125
333,535 9.00%, 6/15/2025 355,421
353,499 9.00%, 10/15/2027 376,477
84,724 9.50%, 1/15/2019 91,993
125,352 9.50%, 10/15/2020 136,076
Total 4,637,762
Total Mortgage-Backed Securities (identified cost 15,762,089
$15,440,934)
U.S. TREASURY SECURITIES--60.8%
U.S. TREASURY BONDS--13.8%
1,900,000 6.00%, 2/15/2026 1,870,018
950,000 7.125%, 2/15/2023 1,069,938
575,000 7.25%, 5/15/2004 617,136
2,950,000 7.25%, 5/15/2016 3,318,278
370,000 9.375%, 2/15/2006 452,266
</TABLE>
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY SECURITIES--CONTINUED
U.S. TREASURY BONDS--CONTINUED
$ 400,000 11.75%, 11/15/2014 $ 591,376
Total 7,919,012
U.S. TREASURY NOTES--33.2%
2,805,000 6.25%, 2/15/2003 2,852,320
1,800,000 6.50%, 5/31/2001 1,836,558
850,000 6.50%, 5/15/2005 880,413
1,050,000 6.50%, 10/15/2006 1,091,832
5,050,000 7.00%, 4/15/1999 5,131,255
2,350,000 7.75%, 12/31/1999 2,438,501
300,000 7.75%, 2/15/2001 316,548
125,000 8.875%, 5/15/2000 4,413,090
Total 18,960,517
Total U.S. Treasury Securities (identified cost $26,215,449) 26,879,529
(A)REPURCHASE AGREEMENTS--4.5%
2,590,000 BT Securities Corp., 5.73%, dated 11/28/1997, due 12/1/1997 2,590,000
Total Investments (identified cost $56,694,493)(b) $ 57,937,367
</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 $56,694,493. The
net unrealized appreciation/depreciation of investments on a federal tax basis
amounts to $1,242,870 which is comprised of $1,295,462 appreciation and $52,592
depreciation at November 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($57,375,593) at November 30, 1997.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
BOND INDEX PORTFOLIO
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C>
Assets:
Total investments in securities, at value (identified
and tax cost $56,694,493) $ 57,937,367
Cash 276
Income receivable 685,021
Deferred organizational costs 3,730
Total assets 58,626,394
Liabilities:
Payable for investments purchased 1,250,801
Net Assets $ 57,375,593
Net Assets Consist of:
Paid-in capital for beneficial interests $ 57,375,593
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
BOND INDEX PORTFOLIO
SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 1,640,425
EXPENSES:
Investment advisory fee $62,000
Administrative personnel and services fee 30,000
Custodian fees 3,671
Directors'/Trustees' fees 4,073
Auditing fees 9,915
Legal fees 3,765
Portfolio accounting fees 38,053
Share registration costs 227
Printing and postage 2,996
Insurance premiums 1,505
Miscellaneous 1,973
Total expenses 158,178
Waivers and reimbursements--
Waiver of investment advisory fee $(62,000)
Reimbursement of other operating expenses (46,579)
Total waivers and reimbursements (108,579)
Net expenses 49,599
Net investment income 1,590,826
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 83,903
Net change in unrealized appreciation (depreciation)
of investments 1,280,541
Net realized and unrealized gain on investments 1,364,444
Change in net assets resulting from operations $ 2,955,270
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
BOND INDEX PORTFOLIO
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, MAY 31,
1997 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income/operating loss $ 1,590,826 $ 2,058,104
Net realized gain on investments 83,903 54,299
Net change in unrealized appreciation/depreciation 1,280,541 65,788
Change in net assets resulting from operations 2,955,270 2,178,191
TRANSACTIONS IN INVESTOR'S BENEFICIAL INTEREST--
Additions 32,487,561 34,754,102
Reductions (18,297,583) (19,301,390)
Net increase from transactions in Investor's beneficial 14,189,978 15,452,712
interest
Change in net assets 17,145,248 17,630,903
NET ASSETS:
Beginning of period 40,230,345 22,599,442
End of period $ 57,375,593 $ 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
NOVEMBER 30, 1997
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, the 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 (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.
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 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.
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.
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 sub-advisory contract with the United States Trust Company of Connecticut
("U.S. Trust"). Under the terms of the 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-month period ended November 30, 1997, 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 services and personnel. 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 Directors 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
six months ended November 30, 1997, were as follows:
COST OF PURCHASES $ 14,846,827
PROCEEDS FROM SALES $ 7,453,565
SELECTED FINANCIAL DATA
For the years ended May 31:
1997(A) 1997 1996 1995(B)
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.20%* 0.20% 0.09% 0.00%
Net investment income 6.41%* 7.06% 7.00% 7.45%
Expense waiver/reimbursement(c) 0.44%* 0.75% 0.89% 0.69%
SUPPLEMENTAL DATA:
Portfolio turnover 24% 49% 43% 67%
* Computed on an annualized basis.
(a) For the six months ended November 30, 1997 (unaudited).
(b) Reflects operations for the period from July 11, 1994 (date of initial
public investment) to May 31, 1995.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
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
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.
