STOCK
AND
BOND
FUND,
INC.
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
8080105 (6/94)
PRESIDENT'S MESSAGE
- - - --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of Stock and Bond
Fund, Inc. (the "Fund") for the six-month period ended April 30, 1994. Included
for your review are the Financial Statements, which contain the Fund's Portfolio
of Investments, and our Investment Review, which discusses the economic
influences on the Fund during the report period, as well as our outlook for the
stock and bond markets.
The Fund's net assets on the last day of the report period were almost equally
invested in bonds and stocks, with a minor position in a repurchase agreement.
The bond portion of the portfolio continues to be invested primarily in U.S.
Treasury securities, which we believe still offer the most attractive
risk/reward relationship in the fixed-income market. The Fund's equity holdings
remain diversified among several sectors and industry groups.
At the end of the period, net assets stood at $126.3 million. Consistent with
market fluctuations caused by rising interest rates early in the year, the
Fund's net asset value decreased by $0.81 for Class A Shares and $0.82 for Class
C Shares during the period.*
We believe that the attractive, diversified long-term investment opportunities
offered by the Fund's portfolio may make it a wise investment in any economic
environment.
We continue our commitment to provide you with quality investment products and
the highest level of service. As always, we invite your comments and
suggestions.
Sincerely,
John F. Donahue
President
June 15, 1994
* 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.
INVESTMENT REVIEW
- - - --------------------------------------------------------------------------------
EQUITY
Over the past six months the stock market has displayed levels of volatility
which have not been seen in quite some time. After rallying quite nicely from
mid-December through the end of January, stocks corrected by nearly 10% in
reaction to the tightening of Federal Reserve policy and the subsequent rise in
interest rates. From the bottom established in early April, stocks rallied about
2.73% through the end of April. For the entire six month period, stocks provided
a total return of -2.39% as measured by the Standard & Poor's 500 Index* (the
"S&P 500").
The economic statistics during the first quarter of 1994 showed surprising
strengths, particularly in key areas such as autos, housing, and capital
spending. While this has led to fears of higher inflation, the case for a
significant rise in inflation still appears weak. We believe that if real Gross
Domestic Product ("GDP") growth for the remainder of 1994 is in the 3% area,
inflation should remain subdued and corporate profits should register 10-15%
growth.
After historically low S&P 500 price volatility in 1992 and 1993, investors
should be prepared to see increased volatility in the months ahead. The Fund's
management recognizes that this environment may offer opportunities, but will
also call for increased selectivity.
One of the goals of the Fund's management is to offer a relatively low risk
portfolio, while achieving competitive returns. Diversification plays an
important role in developing the risk profile. Current areas of emphasis in the
Fund's portfolio include "restructuring cyclicals" experiencing strong earnings
gains, such as Ford, General Motors, and Sears Roebuck. Technology continues to
be an important theme in the Fund with major holdings in Raytheon and General
Motors Class "E" (GM's EDS subsidiary). The Fund continues to have significant
holdings in the finance sector as these stocks appear attractively priced with
P/E ratios in the area of 7-10 times. In the controversial area of health care,
the Fund is approximately market weighted vs. the S&P 500 with emphasis on
higher yielding stocks, such as Bristol Myers and American Home Products. The
consumer non-durable sector continues to be underweighted.
FIXED INCOME
The six-month period ending April 30, 1994, was a very difficult period for the
investment grade fixed income market. Interest rates rose across the yield curve
by as much as 1.8%, causing a return of
- - - -4.62% for the benchmark Lehman Brothers Government/Corporate Bond Index* (the
"Index"). The fixed income portion of the Fund performed significantly better
than that Index, however, as the Fund was positioned for the two major themes
that directed the market during the period. First, in anticipation of rising
interest rates, the fixed income portion was defensive in nature as it
maintained a duration or interest rate sensitivity of 80% of the Index. Second,
in anticipation of a flattening yield curve, the portfolio had a barbelled
structure to avoid the relative underperformance of the intermediate term
sector.
While we do not expect interest rates to rise at the same magnitude as they did
over the last six months, our outlook for the fixed income market continues to
be a somewhat defensive one. Sustainable economic growth should continue to put
upward pressure on rates, as bond investors attempt to protect against potential
inflation. In addition, as we enter an environment where the Federal Reserve is
raising short-term interest rates in an attempt to pre-empt inflation, the yield
curve should continue to flatten. Thus, the portfolio has maintained a below
Index duration with a bias toward a barbelled portfolio structure. Finally, the
fixed income portion preserves its average AAA credit quality rating, as all of
the securities in the portfolio are rated AA and above.**
* These indices are unmanaged.
** Ratings are subject to change.
STOCK AND BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
APRIL 30, 1994
(UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- - - ------------- --------------------------------------------------------------------------------- ---------------
COMMON STOCKS--47.2%
- - - ------------------------------------------------------------------------------------------------
BASIC INDUSTRY--4.0%
---------------------------------------------------------------------------------
10,500 Aluminum Co. of America $ 714,000
---------------------------------------------------------------------------------
27,000 FMC Corp. 1,279,125
---------------------------------------------------------------------------------
22,000 Lubrizol Corp. 794,750
---------------------------------------------------------------------------------
20,000 Phelps Dodge Corp. 1,107,500
---------------------------------------------------------------------------------
53,000 Praxair, Inc. 1,013,625
---------------------------------------------------------------------------------
3,500 Rayonier, Inc. 98,875
--------------------------------------------------------------------------------- ---------------
Total 5,007,875
--------------------------------------------------------------------------------- ---------------
CONSUMER DURABLES--3.7%
---------------------------------------------------------------------------------
26,000 Eastman Kodak Co. 1,079,000
---------------------------------------------------------------------------------
34,000 General Motors Corp. 1,929,500
---------------------------------------------------------------------------------
66,250 Mattel, Inc. 1,664,531
--------------------------------------------------------------------------------- ---------------
Total 4,673,031
--------------------------------------------------------------------------------- ---------------
CONSUMER NON-DURABLES--2.9%
---------------------------------------------------------------------------------
27,000 Philip Morris Cos., Inc. 1,471,500
---------------------------------------------------------------------------------
69,000 Reebok International Ltd. 2,121,750
--------------------------------------------------------------------------------- ---------------
Total 3,593,250
--------------------------------------------------------------------------------- ---------------
CONSUMER SERVICES--3.7%
---------------------------------------------------------------------------------
52,000 American Stores Co. 1,300,000
---------------------------------------------------------------------------------
12,000 Dun & Bradstreet Corp. 705,000
---------------------------------------------------------------------------------
37,700 Sears, Roebuck & Co. 1,771,900
---------------------------------------------------------------------------------
45,000 Tele-Communications, Inc. 883,125
--------------------------------------------------------------------------------- ---------------
Total 4,660,025
--------------------------------------------------------------------------------- ---------------
</TABLE>
STOCK AND BOND FUND, INC.
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- - - ------------- --------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- - - ------------------------------------------------------------------------------------------------
ENERGY--4.5%
---------------------------------------------------------------------------------
38,500 Baker Hughes, Inc. $ 707,437
---------------------------------------------------------------------------------
18,000 Chevron Corp. 1,602,000
---------------------------------------------------------------------------------
14,000 Exxon Corp. 880,250
---------------------------------------------------------------------------------
20,000 Mapco, Inc. 1,290,000
---------------------------------------------------------------------------------
20,000 Texaco, Inc. 1,287,500
--------------------------------------------------------------------------------- ---------------
Total 5,767,187
--------------------------------------------------------------------------------- ---------------
FINANCE--7.7%
---------------------------------------------------------------------------------
12,000 Bankers Trust of New York Corp. 802,500
---------------------------------------------------------------------------------
26,000 Citicorp 962,000
---------------------------------------------------------------------------------
23,714 Dean Witter, Discover & Co. 892,239
---------------------------------------------------------------------------------
14,000 Dreyfus Corp. 675,500
---------------------------------------------------------------------------------
14,000 Federal National Mortgage Association 1,165,500
---------------------------------------------------------------------------------
12,000 Mellon Bank Corp. 669,000
---------------------------------------------------------------------------------
44,000 National City Corp. 1,177,000
---------------------------------------------------------------------------------
24,000 PNC Financial Corp. 669,000
---------------------------------------------------------------------------------
8,700 TIG Holdings, Inc. 156,600
---------------------------------------------------------------------------------
22,000 Transamerica Corp. 1,108,250
---------------------------------------------------------------------------------
42,666 Travelers, Inc. 1,482,643
--------------------------------------------------------------------------------- ---------------
Total 9,760,232
--------------------------------------------------------------------------------- ---------------
HEALTH CARE--4.6%
---------------------------------------------------------------------------------
25,300 American Home Products Corp. 1,461,075
---------------------------------------------------------------------------------
24,000 Becton, Dickinson & Co. 927,000
---------------------------------------------------------------------------------
22,500 Bristol-Myers Squibb Co. 1,212,187
---------------------------------------------------------------------------------
16,500 Schering Plough Corp. 1,006,500
---------------------------------------------------------------------------------
33,000 U.S. Healthcare, Inc. 1,237,500
--------------------------------------------------------------------------------- ---------------
Total 5,844,262
--------------------------------------------------------------------------------- ---------------
</TABLE>
STOCK AND BOND FUND, INC.
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- - - ------------- --------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- - - ------------------------------------------------------------------------------------------------
INDUSTRIAL/MANUFACTURING--5.5%
---------------------------------------------------------------------------------
12,000 Dover Corp. $ 660,000
---------------------------------------------------------------------------------
17,000 General Electric Co. 1,617,125
---------------------------------------------------------------------------------
14,000 ITT Corp. 1,256,500
---------------------------------------------------------------------------------
19,800 Loews Corp. 1,772,100
---------------------------------------------------------------------------------
31,000 Textron, Inc. 1,635,250
--------------------------------------------------------------------------------- ---------------
Total 6,940,975
--------------------------------------------------------------------------------- ---------------
TECHNOLOGY--5.7%
---------------------------------------------------------------------------------
27,000 Computer Sciences Corp. 1,026,000
---------------------------------------------------------------------------------
17,000 E Systems, Inc. 682,125
---------------------------------------------------------------------------------
10,000 General Dynamics Corp. 405,000
---------------------------------------------------------------------------------
44,000 General Motors Corp. "E" 1,485,000
---------------------------------------------------------------------------------
25,000 Harris Corp. 1,096,875
---------------------------------------------------------------------------------
26,000 Raytheon Co. 1,677,000
---------------------------------------------------------------------------------
26,000 Tandy Corp. 861,250
--------------------------------------------------------------------------------- ---------------
Total 7,233,250
--------------------------------------------------------------------------------- ---------------
TRANSPORTATION--0.9%
---------------------------------------------------------------------------------
44,000 Ryder Systems, Inc. 1,100,000
--------------------------------------------------------------------------------- ---------------
UTILITIES--4.0%
---------------------------------------------------------------------------------
28,900 AT&T Corp. 1,477,513
---------------------------------------------------------------------------------
18,000 Duke Power Co. 659,250
---------------------------------------------------------------------------------
40,000 MCI Communications Corp. 915,000
---------------------------------------------------------------------------------
33,000 NIPSCO Industries, Inc. 1,043,625
---------------------------------------------------------------------------------
50,000 Portland General Corp. 943,750
--------------------------------------------------------------------------------- ---------------
Total 5,039,138
--------------------------------------------------------------------------------- ---------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $52,442,184) 59,619,225
--------------------------------------------------------------------------------- ---------------
</TABLE>
STOCK AND BOND FUND, INC.
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- - - ------------- --------------------------------------------------------------------------------- ---------------
CONVERTIBLE PREFERRED STOCKS--2.5%
- - - ------------------------------------------------------------------------------------------------
CONSUMER DURABLES--1.1%
---------------------------------------------------------------------------------
14,000 Ford Motor Co., Cumulative Conv. Pfd., Series A $ 1,351,000
--------------------------------------------------------------------------------- ---------------
CONSUMER NON-DURABLES--0.6%
---------------------------------------------------------------------------------
122,000 RJR Nabisco Holdings 793,000
--------------------------------------------------------------------------------- ---------------
INDUSTRIAL/MANUFACTURING--0.5%
---------------------------------------------------------------------------------
45,000 *Westinghouse Electric Corp. 556,380
--------------------------------------------------------------------------------- ---------------
TECHNOLOGY--0.3%
---------------------------------------------------------------------------------
13,000 Tandy Corp., Conv. Pfd., Series C 420,875
--------------------------------------------------------------------------------- ---------------
TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST, $2,024,069) 3,121,255
--------------------------------------------------------------------------------- ---------------
CORPORATE BONDS--2.8%
- - - ------------------------------------------------------------------------------------------------
ENERGY--0.8%
---------------------------------------------------------------------------------
$ 1,000,000 Exxon Capital Corp., Note 7.875%, 4/15/96 1,034,100
--------------------------------------------------------------------------------- ---------------
INDUSTRIAL/MANUFACTURING--0.8%
---------------------------------------------------------------------------------
1,000,000 General Electric Co., Note 7.875%, 5/1/96 1,029,940
--------------------------------------------------------------------------------- ---------------
UTILITIES--1.2%
---------------------------------------------------------------------------------
500,000 Chesapeake & Potomac Bell Telephone Co., Note 7.875%, 1/15/2022 498,825
---------------------------------------------------------------------------------
1,000,000 Michigan Bell Telephone Co., Note 7.85%, 1/15/2022 996,410
--------------------------------------------------------------------------------- ---------------
Total 1,495,235
--------------------------------------------------------------------------------- ---------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $3,478,321) 3,559,275
--------------------------------------------------------------------------------- ---------------
GOVERNMENT AGENCIES--40.1%
- - - ------------------------------------------------------------------------------------------------
GOVERNMENT AGENCIES--3.2%
---------------------------------------------------------------------------------
500,000 Federal Home Loan Bank, 4.32%, 1/15/98 488,125
---------------------------------------------------------------------------------
1,500,000 Federal Home Loan Mortgage Corp. Deb., 4.29%, 3/25/96 1,480,905
---------------------------------------------------------------------------------
1,623,160 Federal Home Loan Mortgage Corp., PoundC00092, 8.00%, 1/1/2022 1,621,635
---------------------------------------------------------------------------------
350,000 Federal National Mortgage Association, 4.22%, 6/1/98 345,002
--------------------------------------------------------------------------------- ---------------
Total 3,935,667
--------------------------------------------------------------------------------- ---------------
</TABLE>
STOCK AND BOND FUND, INC.
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- - - ------------- --------------------------------------------------------------------------------- ---------------
GOVERNMENT AGENCIES--CONTINUED
- - - ------------------------------------------------------------------------------------------------
TREASURY SECURITIES--36.9%
---------------------------------------------------------------------------------
$ 4,940,000 United States Treasury Bond, 7.25%, 5/15/2016 $ 4,829,196
---------------------------------------------------------------------------------
500,000 United States Treasury Bond, 8.00%, 11/15/2021 532,340
---------------------------------------------------------------------------------
7,460,000 United States Treasury Bond, 8.875%, 2/15/2019 8,631,593
---------------------------------------------------------------------------------
1,920,000 United States Treasury Bond, 9.375%, 2/15/2006 2,249,933
---------------------------------------------------------------------------------
7,000,000 United States Treasury Note, 3.875%, 3/31/95 6,931,050
---------------------------------------------------------------------------------
7,000,000 United States Treasury Note, 4.25%, 1/31/95 6,971,300
---------------------------------------------------------------------------------
2,840,000 United States Treasury Note, 6.875%, 3/31/97 2,894,301
---------------------------------------------------------------------------------
1,100,000 United States Treasury Note, 7.75%, 3/31/96 1,139,710
---------------------------------------------------------------------------------
12,000,000 United States Treasury Note, 7.875%, 7/15/96 12,488,400
--------------------------------------------------------------------------------- ---------------
Total 46,667,823
--------------------------------------------------------------------------------- ---------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST, $49,854,872) 50,603,490
--------------------------------------------------------------------------------- ---------------
MORTGAGE-BACKED SECURITIES--2.8%
- - - ------------------------------------------------------------------------------------------------
GOVERNMENT AGENCIES--2.8%
---------------------------------------------------------------------------------
1,080,879 Federal National Mortgage Association Pool Pound050659, 7.00%,
11/1/2021 1,020,415
---------------------------------------------------------------------------------
40,922 Federal National Mortgage Association Pool Pound050796, 7.50%,
9/1/2023 39,797
---------------------------------------------------------------------------------
890,148 Federal National Mortgage Association Pool Pound124009, 9.00%,
11/1/2021 922,416
---------------------------------------------------------------------------------
1,556,522 Federal National Mortgage Association Pool Pound271756, 8.50%,
5/1/2022 1,583,761
--------------------------------------------------------------------------------- ---------------
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST, $3,756,411) 3,566,389
--------------------------------------------------------------------------------- ---------------
STRUCTURED PRODUCTS--1.5%
- - - ------------------------------------------------------------------------------------------------
GOVERNMENT AGENCIES--1.5%
---------------------------------------------------------------------------------
1,139,400 Government National Mortgage Association, 7.50%, 11/15/2023 1,104,147
---------------------------------------------------------------------------------
745,989 Government National Mortgage Association, 9.50%, 12/15/2020 786,549
--------------------------------------------------------------------------------- ---------------
TOTAL STRUCTURED PRODUCTS (IDENTIFIED COST, $1,997,877) 1,890,696
--------------------------------------------------------------------------------- ---------------
</TABLE>
STOCK AND BOND FUND, INC.
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- - - ------------- --------------------------------------------------------------------------------- ---------------
**REPURCHASE AGREEMENT--3.2%
- - - ------------------------------------------------------------------------------------------------
$ 3,935,000 J.P. Morgan Securities, Inc., 3.60%, 5/2/94 $ 3,935,000
--------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST, $117,488,734) $ 126,295,330\
--------------------------------------------------------------------------------- ---------------
</TABLE>
*Denotes restricted security. (Note 2F)
**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.
\The cost for federal tax purposes amounts to $117,488,734. The net unrealized
appreciation of investments on a federal tax basis amounts to $8,806,596 which
is comprised of $10,894,038 appreciation and $2,087,442 depreciation at April
30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($126,269,243) at April 30, 1994.
(See Notes which are an integral part of the Financial Statements)
STOCK AND BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
(UNAUDITED)
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- - - -------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified cost and tax cost, $117,488,734) $ 126,295,330
- - - -------------------------------------------------------------------------------------------------
Cash 10,357
- - - -------------------------------------------------------------------------------------------------
Dividends and interest receivable 1,007,822
- - - -------------------------------------------------------------------------------------------------
Receivable for capital stock sold 77,771
- - - -------------------------------------------------------------------------------------------------
Deferred expenses (Note 2G) 27,941
- - - ------------------------------------------------------------------------------------------------- ---------------
Total assets 127,419,221
- - - -------------------------------------------------------------------------------------------------
LIABILITIES:
- - - -------------------------------------------------------------------------------------------------
Payable for investments purchased $ 793,000
- - - ------------------------------------------------------------------------------------
Payable for capital stock redeemed 298,142
- - - ------------------------------------------------------------------------------------
Accrued expenses 58,836
- - - ------------------------------------------------------------------------------------ -----------
Total liabilities 1,149,978
- - - ------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 7,863,693 shares of capital stock outstanding $ 126,269,243
- - - ------------------------------------------------------------------------------------------------- ---------------
NET ASSETS CONSIST OF:
- - - -------------------------------------------------------------------------------------------------
Paid-in capital $ 114,900,964
- - - -------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investments 8,806,596
- - - -------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (20,818)
- - - -------------------------------------------------------------------------------------------------
Undistributed net investment income 2,582,501
- - - ------------------------------------------------------------------------------------------------- ---------------
Total $ 126,269,243
- - - ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Class A; ($125,431,518 / 7,811,412 shares of capital stock outstanding) $16.06
- - - ------------------------------------------------------------------------------------------------- ---------------
Class C; ($837,725 / 52,281 shares of capital stock outstanding) $16.02
- - - ------------------------------------------------------------------------------------------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STOCK AND BOND FUND, INC.
STATEMENT OF OPERATIONS
Six months ended April 30, 1994
(unaudited)
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
- - - ----------------------------------------------------------------------------------------------------
Interest $ 1,730,074
- - - ----------------------------------------------------------------------------------------------------
Dividends 820,544
- - - ---------------------------------------------------------------------------------------------------- ------------
Total investment income (Note 2C) 2,550,618
- - - ----------------------------------------------------------------------------------------------------
EXPENSES:
- - - ----------------------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 459,020
- - - ----------------------------------------------------------------------------------------
Directors' fees 5,000
- - - ----------------------------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 139,346
- - - ----------------------------------------------------------------------------------------
Custodian and portfolio accounting fees and expenses 49,900
- - - ----------------------------------------------------------------------------------------
Capital stock registration fees 27,436
- - - ----------------------------------------------------------------------------------------
Auditing fees 10,063
- - - ----------------------------------------------------------------------------------------
Legal fees 9,300
- - - ----------------------------------------------------------------------------------------
Insurance 3,620
- - - ----------------------------------------------------------------------------------------
Printing and postage 13,500
- - - ----------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses (Note 4) 25,780
- - - ----------------------------------------------------------------------------------------
Shareholder services fees (Note 4) 504
- - - ----------------------------------------------------------------------------------------
Distribution services fees (Note 4) 1,513
- - - ----------------------------------------------------------------------------------------
Taxes 7,783
- - - ----------------------------------------------------------------------------------------
Miscellaneous 5,500
- - - ---------------------------------------------------------------------------------------- ----------
Total expenses 758,265
- - - ----------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 91,569
- - - ---------------------------------------------------------------------------------------- ----------
Net expenses 666,696
- - - ---------------------------------------------------------------------------------------------------- ------------
Net investment income 1,883,922
- - - ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- - - ----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) 628,008
- - - ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (6,642,771)
- - - ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized (loss) on investments (6,014,763)
- - - ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ (4,130,841)
- - - ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STOCK AND BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- - - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS: 1994* 1993
- - - ---------------------------------------------------------------------------------- -------------- --------------
OPERATIONS--
- - - ----------------------------------------------------------------------------------
Net investment income $ 1,883,922 $ 3,867,816
- - - ----------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($628,008 net gain, and
$648,826 net loss, respectively, as computed for federal tax purposes) 628,008 (648,826)
- - - ----------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (6,642,771) 11,161,979
- - - ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets from operations (4,130,841) 14,380,969
- - - ---------------------------------------------------------------------------------- -------------- --------------
NET EQUALIZATION CREDITS (NOTE 2E)-- 66,521 129,581
- - - ---------------------------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- - - ----------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A Shares (2,046,924) (3,755,624)
- - - ----------------------------------------------------------------------------------
Class C Shares (4,121) (38)
- - - ----------------------------------------------------------------------------------
Distributions to shareholders from net realized gain on investment transactions
Class A Shares -- (3,675,092)
- - - ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets resulting from distributions to shareholders (2,051,045) (7,430,754)
- - - ---------------------------------------------------------------------------------- -------------- --------------
CAPITAL STOCK TRANSACTIONS (NOTE 3)
(EXCLUSIVE OF AMOUNTS ALLOCATED TO NET INVESTMENT INCOME)--
- - - ----------------------------------------------------------------------------------
Net proceeds from sales of shares 23,255,933 38,398,216
- - - ----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders electing to receive payment of
dividends in capital stock 1,383,798 5,226,747
- - - ----------------------------------------------------------------------------------
Cost of shares redeemed (16,934,051) (21,412,900)
- - - ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets from capital stock transactions 7,705,680 22,212,063
- - - ---------------------------------------------------------------------------------- -------------- --------------
Change in net assets 1,590,315 29,291,859
- - - ----------------------------------------------------------------------------------
NET ASSETS:
- - - ----------------------------------------------------------------------------------
Beginning of period 124,678,928 95,387,069
- - - ---------------------------------------------------------------------------------- -------------- --------------
End of period (including undistributed net investment
income of $2,582,501, and $2,683,103, respectively) $ 126,269,243 $ 124,678,928
- - - ---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
*Six months ended April 30, 1994 (unaudited)
(See Notes which are an integral part of the Financial Statements)
STOCK AND BOND FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS A SHARES
- - - --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994* 1993 1992 1991 1990** 1989 1988 1987 1986
NET ASSET VALUE, BEGINNING
OF PERIOD $ 16.87 $ 15.91 $ 15.74 $ 13.60 $ 15.11 $ 14.94 $ 14.89 $ 15.34 $ 15.24
- - - --------------------------
INCOME FROM INVESTMENT
OPERATIONS
- - - --------------------------
Net investment income 0.25 0.55 0.65 0.74 1.37 0.91 0.85 0.81 0.85
- - - --------------------------
Net realized and
unrealized gain (loss) on
investments (0.79) 1.58 0.39 2.17 (2.22) 0.91 0.52 (0.24) 1.17
- - - -------------------------- --------- --------- --------- --------- ----------- --------- --------- --------- ---------
Total from investment
operations (0.54) 2.13 1.04 2.91 (0.85) 1.82 1.37 0.57 2.02
- - - --------------------------
LESS DISTRIBUTIONS
- - - --------------------------
Dividends to shareholders
from net investment
income (0.27) (0.56) (0.68) (0.77) (0.66) (0.94) (0.86) (0.79) (0.86)
- - - --------------------------
Distributions to
shareholders from net
realized gain on
investments -- (0.61) (0.19) -- -- (0.71) (0.46) (0.23) (1.06)
- - - -------------------------- --------- --------- --------- --------- ----------- --------- --------- --------- ---------
Total distributions (0.27) (1.17) (0.87) (0.77) (0.66) (1.65) (1.32) (1.02) (1.92)
- - - -------------------------- --------- --------- --------- --------- ----------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $ 16.06 $ 16.87 $ 15.91 $ 15.74 $ 13.60 $ 15.11 $ 14.94 $ 14.89 $ 15.34
- - - -------------------------- --------- --------- --------- --------- ----------- --------- --------- --------- ---------
TOTAL RETURN*** (3.24)% 14.10% 7.94% 21.78% (5.90)% 12.46% 9.28% 3.58% 13.77%
- - - --------------------------
RATIOS TO AVERAGE NET
ASSETS
- - - --------------------------
Expenses 1.05 (a) 1.04% 1.04% 1.01% 1.01%(a) 1.01% 1.00% 1.00% 1.00%
- - - --------------------------
Net investment income 3.08 (a) 3.49% 4.15% 4.91% 5.77%(a) 5.82% 5.53% 5.07% 5.43%
- - - --------------------------
Expense adjustment (b) 0.15 (a) 0.20% 0.21% 0.45% 0.54%(a) 0.51% 0.39% 0.22% 0.30%
- - - --------------------------
SUPPLEMENTAL DATA
- - - --------------------------
Net assets, end of period
(000 omitted) $125,432 $124,583 $95,387 $88,534 $79,003 $88,367 $90,504 $92,105 $75,441
--------------------------
Portfolio turnover
rate**** 23% 51% 43% 72% 49 % 26% 131% 110% 40%
- - - --------------------------
<CAPTION>
<S> <C>
1985
NET ASSET VALUE, BEGINNING
OF PERIOD $ 13.60
- - - --------------------------
INCOME FROM INVESTMENT
OPERATIONS
- - - --------------------------
Net investment income 0.90
- - - --------------------------
Net realized and
unrealized gain (loss) on
investments 2.18
- - - -------------------------- ---------
Total from investment
operations 3.08
- - - --------------------------
LESS DISTRIBUTIONS
- - - --------------------------
Dividends to shareholders
from net investment
income (0.90)
- - - --------------------------
Distributions to
shareholders from net
realized gain on
investments (0.54)
- - - -------------------------- ---------
Total distributions (1.44)
- - - -------------------------- ---------
NET ASSET VALUE, END OF
PERIOD $ 15.24
- - - -------------------------- ---------
TOTAL RETURN*** 24.09%
- - - --------------------------
RATIOS TO AVERAGE NET
ASSETS
- - - --------------------------
Expenses 1.30%
- - - --------------------------
Net investment income 6.42%
- - - --------------------------
Expense adjustment (b) 0.27%
- - - --------------------------
SUPPLEMENTAL DATA
- - - --------------------------
Net assets, end of period
(000 omitted) $37,792
- - - --------------------------
Portfolio turnover
rate**** 42%
- - - --------------------------
</TABLE>
* For six months ended April 30, 1994 (unaudited).
** For the ten months ended October 31, 1990.
*** Based on net asset value which does not reflect the sales load or
contingent deferred sales charge, if applicable.
**** Represents portfolio turnover for the entire Fund.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
STOCK AND BOND FUND, INC.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
- - - --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1994* 1993**
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.84 $ 16.18
- - - ------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- - - ------------------------------------------------------------------------------------
Net investment income 0.17 0.38
- - - ------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.80) 0.48
- - - ------------------------------------------------------------------------------------ --------- -----------
Total from investment operations (0.63) 0.86
- - - ------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- - - ------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.19) (0.20)
- - - ------------------------------------------------------------------------------------ --------- -----------
NET ASSET VALUE, END OF PERIOD $ 16.02 $ 16.84
- - - ------------------------------------------------------------------------------------ --------- -----------
TOTAL RETURN*** (3.79)% 5.54%
- - - ------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- - - ------------------------------------------------------------------------------------
Expenses 2.05 (a) 2.04%(a)
- - - ------------------------------------------------------------------------------------
Net investment income 2.08 (a) 2.01%(a)
- - - ------------------------------------------------------------------------------------
Expense adjustment (b) 0.15 (a) 0.20%(a)
- - - ------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- - - ------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 838 $ 96
- - - ------------------------------------------------------------------------------------
Portfolio turnover rate**** 23% 51 %
- - - ------------------------------------------------------------------------------------
</TABLE>
* For six months ended April 30, 1994 (unaudited).
** Reflects operations for the period from April 19, 1993 (start of
performance) to October 31, 1993.
*** Based on net asset value which does not reflect the sales load or
contingent deferred sales charge, if applicable.
**** Represents portfolio turnover for the entire Fund.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
STOCK AND BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1994
(UNAUDITED)
- - - --------------------------------------------------------------------------------
(1) ORGANIZATION
The Stock and Bond Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, no-load, management
investment company.
The Fund provides two classes of shares ("Class A Shares" and "Class C Shares").
Class C Shares are identical in all respects to Class A Shares except that Class
C Shares are sold pursuant to a shareholder services plan and a distribution
plan which is adopted in accordance with the Investment Company Act Rule 12b-1.
(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. The
policies are in conformity with generally accepted accounting principals (GAAP).
A. INVESTMENT VALUATIONS--Listed equity securities, corporate bonds and other
fixed income securities are valued at the last sales price reported on
national securities exchanges. Unlisted securities and bonds are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days, or less may be stated
at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure the value at
least equals the principal amount of the repurchase agreement, including
accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund adviser to be creditworthy pursuant to guidelines established
by the Directors. Risks may arise from the potential inability of
counterparties to honor the terms of a repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount
if applicable, are amortized as required by the Internal Revenue Code, as
amended ("Code").
STOCK AND BOND FUND, INC.
- - - --------------------------------------------------------------------------------
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. At October 31,
1993, the Fund, for federal tax purposes had a capital loss carryforward of
$648,826, which will expire in 2001, and which will reduce the Fund's
taxable income arising from future net realized gain on investments, if
any, to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax.
E. EQUALIZATION--The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
redemptions of capital stock equivalent, on a per share basis to the amount
of undistributed and net investment income on the date of the transaction,
is credited or charged to undistributed net investment income. As a result,
undistributed net investment income per share is unaffected by sales or
redemptions of capital stock.
F. RESTRICTED SECURITIES--A restricted security is one which has been
purchased through a private offering and cannot be sold without prior
registration under the Securities Act of 1933 or pursuant to an exemption
therefrom. Subsequent costs of registration of such securities are borne by
the issuer. A secondary market exists for certain privately placed
securities. Certain of the dealers with whom the Fund does business are
active participants in such markets and provide trade data on various
restricted securities. The Fund's restricted securities are valued at the
price provided by an independent pricing service or at bid or asked prices
provided by dealers in the secondary market. Additional information on each
restricted security held is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
DATE COST
<S> <C> <C>
SECURITY
Westinghouse Electric Corp. 3/22/94 $ 649,800
</TABLE>
G. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of Class C Shares in its first fiscal year, excluding the
initial expense of registering the shares, have been deferred and are being
amortized using the straight-line method through April 1998.
H. OTHER--Investment transactions are accounted for on the trade date.
STOCK AND BOND FUND, INC.
- - - --------------------------------------------------------------------------------
(3) CAPITAL STOCK
At April 30, 1994, there were 2,000,000,000 shares of $0.001 par value capital
stock authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED 10/31/94* YEAR ENDED 10/31/93
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES DOLLARS SHARES DOLLARS
<CAPTION>
- - - ----------------------------------------------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Shares sold 1,374,051 $ 22,478,864 2,386,696 $ 38,303,285
- - - -----------------------------------------------
Shares issued to shareholders electing
to receive payment of dividends
in capital stock 83,847 1,380,963 334,836 5,226,710
- - - -----------------------------------------------
Shares redeemed (1,032,857) (16,912,208) (1,331,495) (21,412,848)
- - - ----------------------------------------------- ------------ --------------- ------------ ---------------
Net change resulting from Fund share
transactions 425,041 $ 6,947,619 1,390,037 $ 22,117,147
- - - ----------------------------------------------- ------------ --------------- ------------ ---------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 10/31/94* YEAR ENDED 10/31/93**
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES DOLLARS SHARES DOLLARS
<CAPTION>
- - - --------------------------------------------------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Shares sold 47,723 $ 777,069 5,711 $ 94,931
- - - ---------------------------------------------------
Shares issued to shareholders electing
to receive payment of dividends in
capital stock 171 2,835 2 37
- - - ---------------------------------------------------
Shares redeemed (1,323) (21,843) (3) (52)
- - - --------------------------------------------------- --------- ----------- ----------- ---------
Net change resulting from Fund share
transactions 46,571 $ 758,061 5,710 $ 94,916
- - - --------------------------------------------------- --------- ----------- ----------- ---------
</TABLE>
* Six months ended April 30, 1994.
** For the period from April 17, 1993 (date of initial public offering) to
October 31, 1993.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to .55 of 1% of the Fund's average daily net assets, plus 4.5% of the Fund's
gross income, excluding capital gains or losses. Adviser may voluntarily choose
to waive a portion of its fee. Adviser can modify or terminate this voluntary
waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ('FAS") provides the Fund
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the fee is based on
the level of average aggregate daily net assets of all funds
STOCK AND BOND FUND, INC.
- - - --------------------------------------------------------------------------------
advised by subsidiaries of Federated Investors for the period. The
administrative fee received during any fiscal year shall be at least $125,000
per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION PLAN--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Under the terms
of the Plan, the Fund will compensate Federated Securities Corp. ("FSC") the
principal distributor, from the net assets of the Fund to finance activities
intended to result in the sale of the Fund's Class C Shares. The Plan provides
that the Fund may incur distribution expenses up to .75 of 1% of the average
daily net assets of the Class C Shares, annually, to compensate "FSC".
SHAREHOLDER SERVICES PLAN--Under the terms of a shareholder services agreement
with "FSC" the Fund will pay "FSC" up to .25 of 1% of average net assets of the
Class C Shares for the period. This fee is to obtain certain personal services
for shareholders and the maintenance of shareholder accounts.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Fund. The fee is based on the size, type and
number of accounts and transactions made by shareholders.
Certain of the Officers and Directors of the Fund are Officers and Directors of
the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases, and sales of investments, excluding short-term securities, for the
six months ended April 30, 1994 were as follows:
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------------------------------
<S> <C>
PURCHASES $ 38,547,077
- - - -------------------------------------------------------------------------------------------------- --------------
SALES $ 28,585,509
- - - -------------------------------------------------------------------------------------------------- --------------
</TABLE>
DIRECTORS OFFICERS
- - - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
John T. Conroy, Jr. President
William J. Copeland J. Christopher Donahue
James E. Dowd Vice President
Lawrence D. Ellis, M.D. Richard B. Fisher
Edward L. Flaherty, Jr. Vice President
Peter E. Madden Edward C. Gonzales
Gregor F. Meyer Vice President and Treasurer
Wesley W. Posvar John W. McGonigle
Marjorie P. Smuts Vice President and Secretary
John A. Staley, IV
Vice President
David M. Taylor
Assistant Treasurer
J. Crilley Kelly
Assistant Secretary
</TABLE>
Mutual funds are not obligations of or insured by any bank, nor are they insured
by the federal government or any of its agencies. Investment in these shares
involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
