PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Stock and
Bond Fund, Inc. for the six-month period ended April 30, 1995. Included in this
report is our Investment Review, followed by the fund's Portfolio of
Investments, Financial Statements and Financial Highlights.
The fund seeks to provide investors with relative safety of capital with the
possibility of long-term growth of capital and income. On the last day of the
reporting period, the fund's net assets were invested more heavily in bonds than
in equities to take advantage of the potential benefits the bond market might
hold as economic growth slows.
At the close of the period, the fund's net assets stood at $125 million. Between
the first and last days of the period, the fund's net asset value per share
increased from $16.25 to $16.73 per share.
Thank you for your continued confidence in the fund. As always, we welcome your
comments and suggestions.
Sincerely,
John F. Donahue
President
June 15, 1995
1
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
EQUITY
The main concerns in the stock market six months ago were that the economy was
too strong, that the Federal Reserve Board would be forced to continually raise
interest rates to stop inflation from accelerating, and that equity markets
would remain under pressure. Since then, the interest rate on 30-year Treasury
bonds has fallen more than 100 basis points, and the dollar has declined more
than 15% against the mark and the yen. Operating rates are now below the
critical 85% level, lessening the concern over inflation, and Gross Domestic
Product growth has slowed from 5.1% in the fourth quarter of 1994, to 2.7% in
the first quarter of 1995. The "soft landing" scenario is now seen as the most
likely one. This change produced the expected reaction from the U.S. equity
markets. At the end of the reporting period, the six month total return of the
Standard & Poor's 500 Index ("S&P 500")* was 10.46%.
The job of the equity portfolio managers for Stock and Bond Fund, Inc. (the
"Fund"), is to find the best relative values among the roughly 600 stocks that
make up our universe. While numerous strategists are voicing concern about the
direction of the market at this time, as we review the Fund's portfolio, we see
many stocks which we believe are outstanding values, selling at just 7-10 times
estimated 1995 earnings, with solid management and prospects. Current areas of
emphasis in the Fund's portfolio include interest rate sensitive finance stocks
such as Citicorp, Travelers Corp and Dean Witter Discover. Also showing good
relative value and earnings momentum is the technology sector. Technology
continues to be an important theme in the Fund with major holdings in Raytheon,
General Motors Class "E" (GM's EDS subsidiary) and Intel Corp. The Fund
continues to have significant holdings in the producer manufacturing sector as
these stocks appear attractively priced with price-earnings ratios generally in
the 7-10 range. Major holdings in the producer manufacturing sector include
Textron Inc., FMC Corp., and Loews Corp. 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 and utility sectors continue to be underweighted.
FIXED INCOME
The bond portion of the Fund is invested entirely in investment grade fixed
income securities. Among the Fund's investments are U.S. Treasuries, government
agency and mortgage-backed securities, and investment grade corporate bonds.
The six-month period ended April 30, 1995 was very positive for investment grade
fixed income investors, in that interest rates declined for all Treasury
securities with maturities between 2 years and 30 years, as well as spread
product (i.e. mortgages and corporates), outperforming comparable maturity
Treasuries. While the economic expansion continued to move forward through the
first six months of the Fund's fiscal year, the pace of growth clearly slowed
with no significant uptick in real
* THIS INDEX IS UNMANAGED.
2
inflation. As a result, a compelling high real rate of return drove interest
rates lower over the past six months while corporate credit quality continued to
improve.
In mid-July 1994, the Fund had altered its interest rate outlook from negative
to neutral, which translated into a new target duration of 100% of the Lehman
Brothers Government/Corporate Index.* Over the past six months, the duration was
maintained at the neutral position, thus fully participating in the interest
rate rally.
Relative to portfolio composition, the Fund has modestly downgraded the overall
quality by increasing the allocation to investment grade corporate bonds up to
approximately 20 percent of the total fixed income portion, thus benefiting from
the yield spread contraction between corporate and government securities. The
bond portion remains overly-concentrated in the highest quality spectrum, with
Treasuries comprising approximately two-thirds of the bond portion at April 30,
1995, with the remainder in mortgage-backed securities.
* THIS INDEX IS UNMANAGED.
3
STOCK AND BOND FUND, INC.
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--43.7%
- -------------------------------------------------------------------------
CONSUMER DURABLES--2.7%
------------------------------------------------------------
26,000 Eastman Kodak Co. $ 1,495,000
------------------------------------------------------------
82,812 Mattel, Inc. 1,966,785
------------------------------------------------------------ ------------
Total 3,461,785
------------------------------------------------------------ ------------
CONSUMER NON-DURABLES--2.3%
------------------------------------------------------------
27,000 Philip Morris Cos., Inc. 1,829,250
------------------------------------------------------------
35,000 Reebok International Ltd. 1,093,750
------------------------------------------------------------ ------------
Total 2,923,000
------------------------------------------------------------ ------------
CONSUMER SERVICES--0.4%
------------------------------------------------------------
10,500 Gannett Co., Inc. 552,563
------------------------------------------------------------ ------------
ELECTRONIC TECHNOLOGY--4.1%
------------------------------------------------------------
27,000 Computer Sciences Corp. 1,333,125
------------------------------------------------------------
9,300 Intel Corp. 952,088
------------------------------------------------------------
10,200 International Business Machines Corp. 966,450
------------------------------------------------------------
8,200 Litton Industries, Inc. 283,925
------------------------------------------------------------
21,600 Raytheon Co. 1,571,400
------------------------------------------------------------ ------------
Total 5,106,988
------------------------------------------------------------ ------------
ENERGY MINERALS--5.2%
------------------------------------------------------------
33,000 Burlington Resources, Inc. 1,291,125
------------------------------------------------------------
36,000 Chevron Corp. 1,705,500
------------------------------------------------------------
14,000 Exxon Corp. 974,750
------------------------------------------------------------
20,000 Mapco, Inc. 1,137,500
------------------------------------------------------------
20,000 Texaco, Inc. 1,367,500
------------------------------------------------------------ ------------
Total 6,476,375
------------------------------------------------------------ ------------
FINANCE--7.9%
------------------------------------------------------------
18,000 American Express Co. 625,500
------------------------------------------------------------
30,000 Bank of Boston Corp. 1,005,000
------------------------------------------------------------
</TABLE>
4
STOCK AND BOND FUND, INC.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------
FINANCE--CONTINUED
------------------------------------------------------------
32,000 Citicorp $ 1,484,000
------------------------------------------------------------
23,714 Dean Witter, Discover & Co. 1,004,881
------------------------------------------------------------
9,900 First Interstate Bancorp 761,063
------------------------------------------------------------
36,483 Mellon Bank Corp. 1,431,958
------------------------------------------------------------
14,300 NationsBank Corp. 715,000
------------------------------------------------------------
18,000 Providian Corp. 614,250
------------------------------------------------------------
37,500 Ryder Systems, Inc. 876,563
------------------------------------------------------------
5,800 The PMI Group, Inc. 216,050
------------------------------------------------------------
26,866 Travelers Group, Inc. 1,111,581
------------------------------------------------------------ ------------
Total 9,845,846
------------------------------------------------------------ ------------
HEALTH SERVICES--0.7%
------------------------------------------------------------
33,000 U.S. Healthcare, Inc. 882,750
------------------------------------------------------------ ------------
HEALTH TECHNOLOGY--3.8%
------------------------------------------------------------
25,300 American Home Products Corp. 1,951,263
------------------------------------------------------------
24,000 Becton, Dickinson & Co. 1,338,000
------------------------------------------------------------
22,500 Bristol-Myers Squibb Co. 1,465,313
------------------------------------------------------------ ------------
Total 4,754,576
------------------------------------------------------------ ------------
INDUSTRIAL SERVICES--0.7%
------------------------------------------------------------
38,500 Baker Hughes, Inc. 866,250
------------------------------------------------------------ ------------
NON-ENERGY MINERALS--0.9%
------------------------------------------------------------
20,000 Phelps Dodge Corp. 1,132,500
------------------------------------------------------------ ------------
PROCESS INDUSTRIES--2.2%
------------------------------------------------------------
12,700 Eastman Chemical Co. 720,725
------------------------------------------------------------
22,000 Lubrizol Corp. 767,250
------------------------------------------------------------
53,000 Praxair, Inc. 1,258,750
------------------------------------------------------------ ------------
Total 2,746,725
------------------------------------------------------------ ------------
PRODUCER MANUFACTURING--5.9%
------------------------------------------------------------
12,000 Caterpillar, Inc. 702,000
------------------------------------------------------------
</TABLE>
5
STOCK AND BOND FUND, INC.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- -------------------------------------------------------------------------
PRODUCER MANUFACTURING--CONTINUED
------------------------------------------------------------
8,800 Deere & Co. $ 721,600
------------------------------------------------------------
27,000 FMC Corp. 1,657,125
------------------------------------------------------------
19,600 General Electric Co. 1,097,600
------------------------------------------------------------
13,600 Loews Corp. 1,385,500
------------------------------------------------------------
31,000 Textron, Inc. 1,767,000
------------------------------------------------------------ ------------
Total 7,330,825
------------------------------------------------------------ ------------
RETAIL TRADE--2.7%
------------------------------------------------------------
52,000 American Stores Co. 1,332,500
------------------------------------------------------------
37,700 Sears, Roebuck & Co. 2,045,225
------------------------------------------------------------ ------------
Total 3,377,725
------------------------------------------------------------ ------------
TECHNOLOGY SERVICES--1.5%
------------------------------------------------------------
44,000 General Motors Corp., Class E 1,903,000
------------------------------------------------------------ ------------
UTILITIES--2.7%
------------------------------------------------------------
28,900 AT&T Corp. 1,466,675
------------------------------------------------------------
40,000 MCI Communications Corp. 870,000
------------------------------------------------------------
50,000 Portland General Corp. 1,037,500
------------------------------------------------------------ ------------
Total 3,374,175
------------------------------------------------------------ ------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $44,838,998) 54,735,083
------------------------------------------------------------ ------------
PREFERRED STOCKS--1.6%
- -------------------------------------------------------------------------
CONSUMER DURABLE--1.0%
------------------------------------------------------------
14,000 Ford Motor Co., Conv. Pfd., Series A, $4.20 1,233,750
------------------------------------------------------------ ------------
CONSUMER NON-DURABLE--0.6%
------------------------------------------------------------
122,000 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $.60 732,000
------------------------------------------------------------ ------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $1,783,769) 1,965,750
------------------------------------------------------------ ------------
</TABLE>
6
STOCK AND BOND FUND, INC.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS--14.3%
- -------------------------------------------------------------------------
CONSUMER DURABLES--2.0%
------------------------------------------------------------
$ 1,000,000 Chrysler Auburn Hills, Deb., 12.00%, 5/1/2020 $ 1,385,470
------------------------------------------------------------
1,000,000 General Motors Corp., Deb., 9.125%, 7/15/2001 1,067,000
------------------------------------------------------------ ------------
Total 2,452,470
------------------------------------------------------------ ------------
CONSUMER NON-DURABLES--0.9%
------------------------------------------------------------
1,281,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 1,176,816
------------------------------------------------------------ ------------
ENERGY MINERALS--1.7%
------------------------------------------------------------
1,000,000 Exxon Capital Corp., Deb., 7.875%, 4/15/1996 1,012,440
------------------------------------------------------------
1,000,000 Occidental Petroleum Corp., Sr. Note, 11.75%, 3/15/2011 1,087,870
------------------------------------------------------------ ------------
Total 2,100,310
------------------------------------------------------------ ------------
FINANCE--6.0%
------------------------------------------------------------
1,250,000 CNA Financial Corp., Deb., 7.25%, 11/15/2023 1,042,663
------------------------------------------------------------
1,000,000 Delaware Management Holding, Sr. Note, 10.25%, 3/15/2004 1,126,020
------------------------------------------------------------
1,300,000 Equitable Cos., Inc., Sr. Note, 9.00%, 12/15/2004 1,368,081
------------------------------------------------------------
1,000,000 Ford Motor Credit Co., Medium Term Note, 5.32%, 9/15/1998 942,190
------------------------------------------------------------
1,000,000 Lehman Brothers Holdings, Inc., Note, 5.04%, 12/15/1996 964,740
------------------------------------------------------------
1,000,000 Norwest Corp., Deb., 9.25%, 5/1/1997 1,040,860
------------------------------------------------------------
1,000,000 Santander Finance Issuance, Bank Guarantee, 7.875%,
4/15/2005 998,030
------------------------------------------------------------ ------------
Total 7,482,584
------------------------------------------------------------ ------------
HEALTH SERVICES--0.8%
------------------------------------------------------------
1,000,000 Columbia HCA Healthcare Corp., Medium Term Note, 8.70%,
2/10/2010 1,061,910
------------------------------------------------------------ ------------
PRODUCER MANUFACTURING--0.8%
------------------------------------------------------------
1,000,000 General Electric Co., Deb., 7.875%, 5/1/1996 1,011,420
------------------------------------------------------------ ------------
RETAIL TRADE--0.9%
------------------------------------------------------------
1,000,000 Penney (J.C.) Co., Inc., Deb., 9.45%, 7/15/2002 1,090,660
------------------------------------------------------------ ------------
UTILITIES--1.2%
------------------------------------------------------------
500,000 Chesapeake & Potomac Telephone Co. of VA, Deb., 7.875%,
1/15/2022 498,495
------------------------------------------------------------
1,000,000 Michigan Bell Telephone Co., Deb., 7.85%, 1/15/2022 996,430
------------------------------------------------------------ ------------
</TABLE>
7
STOCK AND BOND FUND, INC.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- -------------------------------------------------------------------------
UTILITIES--CONTINUED
------------------------------------------------------------
Total $ 1,494,925
------------------------------------------------------------ ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $18,478,290) 17,871,095
------------------------------------------------------------ ------------
GOVERNMENT OBLIGATIONS--33.9%
- -------------------------------------------------------------------------
GOVERNMENT AGENCIES SECURITIES--1.8%
------------------------------------------------------------
$ 500,000 Federal Home Loan Bank System, Deb., 5.70%, 1/15/1998 475,835
------------------------------------------------------------
1,500,000 Federal Home Loan Mortgage Corp., Deb., 5.86%, 3/25/1996 1,479,165
------------------------------------------------------------
350,000 Federal National Mortgage Association, 5.86%, 6/1/1998 338,524
------------------------------------------------------------ ------------
Total 2,293,524
------------------------------------------------------------ ------------
MORTGAGE-BACKED SECURITIES--8.0%
------------------------------------------------------------
1,415,435 Federal Home Loan Mortgage Corp. Pool #C00092, 8.00%,
1/1/2022 1,413,199
------------------------------------------------------------
1,341,390 Federal National Mortgage Association Pool #271756, 8.50%,
5/1/2022 1,363,174
------------------------------------------------------------
38,688 Federal National Mortgage Association Pool #50796, 7.50%,
9/1/2023 37,817
------------------------------------------------------------
704,617 Federal National Mortgage Association Pool #124009, 9.00%,
11/1/2021 727,284
------------------------------------------------------------
962,372 Federal National Mortgage Association Pool #50659, 7.00%,
11/1/2007 916,043
------------------------------------------------------------
551,859 Government National Mortgage Association Pool #299165,
9.50%, 12/15/2020 580,826
------------------------------------------------------------
978,323 Government National Mortgage Association Pool #369457,
8.00%, 9/15/2024 978,313
------------------------------------------------------------
978,701 Government National Mortgage Association Pool #392923,
9.50%, 2/15/2025 1,030,073
------------------------------------------------------------
1,092,217 Government National Mortgage Association Pool #354686,
7.50%, 11/15/2023 1,065,578
------------------------------------------------------------
1,008,519 Government National Mortgage Association Pool #385622,
6.50%, 5/15/2024 923,097
------------------------------------------------------------
1,000,000 Prudential Home Mort. 1992-32, Class A6, 7.50%, 10/25/2022 959,375
------------------------------------------------------------ ------------
Total 9,994,779
------------------------------------------------------------ ------------
TREASURY SECURITIES--24.1%
------------------------------------------------------------
15,070,000 United States Treasury Bonds, 7.25%-11.625%,
11/15/2004-2/15/2019 17,411,091
------------------------------------------------------------
</TABLE>
8
STOCK AND BOND FUND, INC.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------
TREASURY SECURITIES--CONTINUED
------------------------------------------------------------
$12,530,000 United States Treasury Notes, 5.875%-7.875%,
3/31/1996-8/15/2001 $ 12,692,213
------------------------------------------------------------ ------------
Total 30,103,304
------------------------------------------------------------ ------------
TOTAL GOVERNMENT OBLIGATIONS (IDENTIFIED COST,
$40,677,906) 42,391,607
------------------------------------------------------------ ------------
(a) REPURCHASE AGREEMENT--5.7%
- -------------------------------------------------------------------------
7,080,000 J.P. Morgan Securities, Inc., 5.97%, dated 4/28/1995, due
5/1/1995 (at amortized cost) 7,080,000
------------------------------------------------------------ ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $112,858,963) (b) $124,043,535
------------------------------------------------------------ ------------
------------
(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 $112,858,963.
The unrealized appreciation of investments on a federal tax basis amounts
to $11,184,572, which is comprised of $12,150,265 appreciation and $965,693
depreciation at April 30, 1995.
Note: The categories of investments are shown as a percentage of net assets
($125,135,207) at April 30, 1995.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
9
STOCK AND BOND FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $112,858,963) $124,043,535
- ---------------------------------------------------------------------------------------------
Cash 7,141
- ---------------------------------------------------------------------------------------------
Income receivable 1,230,397
- ---------------------------------------------------------------------------------------------
Receivable for investments sold 1,876,303
- ---------------------------------------------------------------------------------------------
Receivable for shares sold 61,151
- ---------------------------------------------------------------------------------------------
Deferred expenses 7,392
- --------------------------------------------------------------------------------------------- ------------
Total assets 127,225,919
- ---------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------------
Payable for investments purchased $2,025,203
- --------------------------------------------------------------------------------
Payable for shares redeemed 66,890
- --------------------------------------------------------------------------------
Accrued expenses (1,381)
- -------------------------------------------------------------------------------- ----------
Total liabilities 2,090,712
- --------------------------------------------------------------------------------------------- ------------
NET ASSETS for 7,479,078 shares outstanding $125,135,207
- --------------------------------------------------------------------------------------------- ------------
------------
NET ASSETS CONSISTS OF:
- ---------------------------------------------------------------------------------------------
Paid in capital $108,803,959
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 11,184,572
- ---------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments 2,582,097
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 2,564,579
- --------------------------------------------------------------------------------------------- ------------
Total Net Assets $125,135,207
- --------------------------------------------------------------------------------------------- ------------
------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
($125,135,207 DIVIDED BY 7,479,078 shares outstanding) $ 16.73
- --------------------------------------------------------------------------------------------- ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
10
STOCK AND BOND FUND, INC.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest $2,136,606
- ----------------------------------------------------------------------------------
Dividends 828,786
- ---------------------------------------------------------------------------------- ----------
Total income 2,965,392
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $452,008
- -----------------------------------------------------------------------
Administrative personnel and services fee 61,987
- -----------------------------------------------------------------------
Custodian fees 25,641
- -----------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and
expenses 45,812
- -----------------------------------------------------------------------
Directors'/Trustees' fees 2,492
- -----------------------------------------------------------------------
Auditing fees 6,442
- -----------------------------------------------------------------------
Legal fees 8,636
- -----------------------------------------------------------------------
Portfolio accounting fees 19,001
- -----------------------------------------------------------------------
Shareholder services fee 51,065
- -----------------------------------------------------------------------
Share registration costs 14,580
- -----------------------------------------------------------------------
Printing and postage 15,936
- -----------------------------------------------------------------------
Insurance premiums 3,138
- -----------------------------------------------------------------------
Taxes 7,421
- -----------------------------------------------------------------------
Miscellaneous 1,691
- ----------------------------------------------------------------------- --------
Total expenses 715,850
- -----------------------------------------------------------------------
Deduct--
- ------------------------------------------------------------
Waiver of investment advisory fee $ 60,617
- ------------------------------------------------------------
Waiver of shareholder services fee 10,334 70,951
- ------------------------------------------------------------ -------- --------
Net expenses 644,899
- ---------------------------------------------------------------------------------- ----------
Net investment income 2,320,493
- ---------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------
Net realized gain (loss) on investments 2,582,290
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 1,648,870
- ---------------------------------------------------------------------------------- ----------
Net realized and unrealized gain(loss) on investments 4,231,160
- ---------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $6,551,653
- ---------------------------------------------------------------------------------- ----------
----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
11
STOCK AND BOND FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
APRIL 30, YEAR ENDED
1995 OCTOBER 31,
(UNAUDITED) 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 2,320,493 $ 3,988,625
- ---------------------------------------------------------------------------
Net realized gain/loss on investments ($2,582,290 and $1,349,184,
respectively, as computed for federal income
tax purposes) 2,582,290 1,349,184
- ---------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 1,648,870 (5,913,664)
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from operations 6,551,653 (575,855)
- --------------------------------------------------------------------------- ------------- -------------
NET EQUALIZATION CREDITS/DEBITS (71,212) 26,597
- --------------------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------
Distributions from net investment income:
- ---------------------------------------------------------------------------
Class A (2,240,751) (4,128,685)
- ---------------------------------------------------------------------------
Class C -- (13,593)
- ---------------------------------------------------------------------------
Distributions from net realized gains:
- ---------------------------------------------------------------------------
Class A (700,551) --
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions to
shareholders (2,941,302) (4,142,278)
- --------------------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------------
Proceeds from sale of Shares 13,988,614 38,530,728
- ---------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 2,014,555 2,833,419
- ---------------------------------------------------------------------------
Cost of Shares redeemed (19,788,965) (35,969,675)
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions (3,785,796) 5,394,472
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets (246,657) 702,936
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 125,381,864 124,678,928
- --------------------------------------------------------------------------- ------------- -------------
End of period (including undistributed net investment income of $2,564,579
and $2,556,047, respectively) $125,135,207 $125,381,864
- --------------------------------------------------------------------------- ------------- -------------
------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
12
STOCK AND BOND FUND, INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL PERIOD ENDED OCTOBER 31,
30, 1995 -------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990(a)
- ---------------------------------------- ----------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.25 $16.87 $15.91 $15.74 $13.60 $15.11
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.31 0.51 0.55 0.65 0.74 1.37
- ----------------------------------------
Net realized and unrealized gain
(loss) on investments 0.56 (0.59) 1.58 0.39 2.17 (2.22)
- ---------------------------------------- ----------- -------- -------- ------- ------- -------
Total from investment operations 0.87 (0.08) 2.13 1.04 2.91 (0.85)
- ---------------------------------------- ----------- -------- -------- ------- ------- -------
LESS DISTRIBUTIONS
- ----------------------------------------
Distributions from net investment
income (0.30) (0.54) (0.56) (0.68) (0.77) (0.66)
- ----------------------------------------
Distributions from net realized gain
on investment transactions (0.09) -- (0.61) (0.19) -- --
- ---------------------------------------- ----------- -------- -------- ------- ------- -------
Total distributions (0.39) (0.54) (1.17) (0.87) (0.77) (0.66)
- ---------------------------------------- ----------- -------- -------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $16.73 $16.25 $16.87 $15.91 $15.74 $13.60
- ---------------------------------------- ----------- -------- -------- ------- ------- -------
----------- -------- -------- ------- ------- -------
TOTAL RETURN (b) 5.47% (0.48%) 14.10% 7.94% 21.78% (5.90%)
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 1.06%(c) 1.06% 1.04% 1.04% 1.01% 1.01%(c)
- ----------------------------------------
Net investment income 3.82%(c) 3.23% 3.49% 4.15% 4.91% 5.77%(c)
- ----------------------------------------
Expense waiver/ reimbursement (d) 0.12%(c) 0.07% 0.20% 0.21% 0.45% 0.54%(c)
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000
omitted) $125,135 $125,382 $124,583 $95,387 $88,534 $79,003
- ----------------------------------------
Portfolio Turnover 30% 45% 51% 43% 72% 49%
- ----------------------------------------
<CAPTION>
PERIOD ENDED DECEMBER 31,
-----------------------------------------------
1989 1988 1987 1986 1985
- ---------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.94 $14.89 $15.34 $15.24 $13.60
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.91 0.85 0.81 0.85 0.90
- ----------------------------------------
Net realized and unrealized gain
(loss) on investments 0.91 0.52 (0.24) 1.17 2.18
- ---------------------------------------- ------- ------- ------- ------- -------
Total from investment operations 1.82 1.37 0.57 2.02 3.08
- ---------------------------------------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS
- ----------------------------------------
Distributions from net investment
income (0.94) (0.86) (0.79) (0.86) (0.90)
- ----------------------------------------
Distributions from net realized gain
on investment transactions (0.71) (0.46) (0.23) (1.06) (0.54)
- ---------------------------------------- ------- ------- ------- ------- -------
Total distributions (1.65) (1.32) (1.02) (1.92) (1.44)
- ---------------------------------------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $15.11 $14.94 $14.89 $15.34 $15.24
- ---------------------------------------- ------- ------- ------- ------- -------
------- ------- ------- ------- -------
TOTAL RETURN (b) 12.46% 9.28% 3.58% 13.77% 24.09%
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 1.01% 1.00% 1.00% 1.00% 1.30%
- ----------------------------------------
Net investment income 5.82% 5.53% 5.07% 5.43% 6.42%
- ----------------------------------------
Expense waiver/ reimbursement (d) 0.51% 0.39% 0.22% 0.30% 0.27%
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000
omitted) $88,367 $90,504 $92,105 $75,441 $37,792
- ----------------------------------------
Portfolio Turnover 26% 131% 110% 40% 42%
- ----------------------------------------
<FN>
(a) For the ten months ended October 31, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
13
STOCK AND BOND FUND, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION
The Stock and Bond Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. Previously, the Fund provided two classes of
shares ("Class A Shares" and "Class C Shares"). On May 19, 1994, the Board of
Directors (the "Directors") authorized the combination of Class C Shares with
Class A Shares, the termination of all contracts entered into by the Fund on
behalf of Class C Shares, and the amendment of the Articles of Incorporation to
reclassify Class A Shares and Class C Shares as unclassified shares. In
connection with these actions, as of August 31, 1994, the "Class C Shares" were
no longer offered.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed corporate bonds (and other fixed income and
asset-backed securities) are 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 fair market
value. Listed equity securities are valued at the last sale price reported
on national securities exchanges. U.S. government securities are generally
valued at the mean between the over-the-counter bid and asked prices as
furnished by an independent pricing service.
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
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
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's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Directors. Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the repurchase
price on the sale of collateral securities.
14
STOCK AND BOND FUND, INC.
- ---------------------------------------------------------
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 (the "Code").
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 income. Accordingly, no
provisions for federal tax are necessary.
EQUALIZATION--The Fund follows the accounting practice known as
equalization, in which a portion of the proceeds from sales and costs of
redemptions of fund shares equivalent, on a per share basis, to the amount
of undistributed 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 Fund shares.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At April 30, 1995, there were 2,000,000,000 shares of $0.001 par value capital
stock authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED APRIL YEAR ENDED OCTOBER 31,
30, 1995 1994
------------------------ ------------------------
CLASS A SHARES SHARES DOLLARS SHARES DOLLARS
- ---------------------------------------------------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 885,178 $13,988,614 2,338,641 $ 37,487,658
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 129,590 2,014,555 174,458 2,825,356
- ----------------------------------------------------------------------
Shares redeemed (1,253,767) ($19,788,965) (2,181,393) (34,829,553)
- ---------------------------------------------------------------------- ---------- ------------ ---------- ------------
Net change resulting from Class A Share transactions (238,999) ($ 3,785,796) 331,706 $ 5,483,461
- ---------------------------------------------------------------------- ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
15
STOCK AND BOND FUND, INC.
- ---------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD YEAR ENDED OCTOBER 31,
ENDED APRIL 30, 1995 1994
------------------------ ------------------------
CLASS C SHARES SHARES DOLLARS SHARES DOLLARS
- ---------------------------------------------------------------------- ---------- ------------ ---------- ------------
Shares sold -- -- 64,355 $ 1,043,070
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared -- -- 497 8,063
- ----------------------------------------------------------------------
Shares redeemed -- -- (70,562) (1,140,122)
- ---------------------------------------------------------------------- ---------- ------------ ---------- ------------
Net change resulting from Class C Share transactions -- -- (5,710) ($ 88,989)
- ---------------------------------------------------------------------- ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
Net change resulting from Fund share transactions (238,999) ($ 3,785,796) 325,996 $ 5,394,472
- ---------------------------------------------------------------------- ---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to: (a) a maximum of .55 of 1% of the Fund's average daily net assets of
the Fund, and (b) 4.5% of the gross income of the Fund, excluding capital gains
or losses. The Adviser may voluntarily choose to waive a portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. The fee is to obtain
certain services for shareholders and to maintain shareholder accounts.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--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.
PORTFOLIO ACCOUNTING FEES--FServ also 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.
16
STOCK AND BOND FUND, INC.
- ---------------------------------------------------------
GENERAL--Certain of the Officers and Directors of the Fund are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended April 30, 1995, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
<S> <C>
PURCHASES $34,774,138
- ---------------------------------------------------------------------- -----------
SALES $43,453,459
- ---------------------------------------------------------------------- -----------
</TABLE>
17
<TABLE>
<CAPTION>
DIRECTORS OFFICERS
- ---------------------------------------------------------
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley PRESIDENT
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland VICE PRESIDENT
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. VICE PRESIDENT
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden VICE PRESIDENT AND TREASURER
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. VICE PRESIDENT AND SECRETARY
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts ASSISTANT TREASURER
J. Crilley Kelly
ASSISTANT SECRETARY
</TABLE>
Mutual funds are not bank deposits or obligations, are not
guaranteed by any bank, and are not insured or guaranteed by the
U.S. government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency. Investment
in mutual funds involves investment risk, including possible loss
of principal.
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the Fund's
prospectus which contains facts concerning its objective and
policies, management fees, expenses and other information.
18
- --------------------------------------------------------------------------------
STOCK
- --------------------------------------------------------------------------------
AND
- --------------------------------------------------------------------------------
BOND
- --------------------------------------------------------------------------------
FUND,
- --------------------------------------------------------------------------------
INC.
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1995
[LOGO] Federated Securities Corp.
Distributor
A subsidiary of FEDERATED
INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
86101A104
8080105 (6/95) --------------------------------------
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[LOGO]
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