[LOGO OF FEDERATED INVESTORS]
Federated
Stock and Bond
Fund, Inc.
(formerly, Stock and
Bond Fund, Inc.)
Annual Report
October 31, 1996
Established 1986
GROWTH & INCOME
President's Message
- ------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Federated Stock
and Bond Fund, Inc. for the 12-month period from November 1, 1995, through
October 31, 1996. First, you will find a discussion with portfolio managers
Peter R. Anderson, Senior Vice President, and Joseph Balestrino, Vice
President, Federated Management. Following their discussions, detailing both
the stock and bond markets and the fund's strategies, are a series of
performance charts, a complete listing of the fund's holdings, and the
financial statements.
Federated Stock and Bond Fund, Inc. enables investors to participate in the
benefits of two key financial markets. This diversification helps provide a
degree of protection of your capital in uncertain economic times as you pursue
growth of capital and income. The fund's balanced portfolio reflects an
emphasis on diversification and quality. At the end of the report period,
holdings were diversified across more than 160 stocks and bonds.
During the report period, the fund's stock holdings helped the portfolio
weather a volatile bond market. A net asset value increase, good income
distributions, and capital gains helped the Class A Shares of the fund produce
a total return of 14.57% based on net asset value for the period ended October
31, 1996.*
NAV Capital Total
Increase Income Gains Return
Class A Shares $18.38 to $18.96=3% $0.61 $1.21 14.57%
The fund's Class A Shares were joined by two new share classes Class B Shares
-
and Class C Shares which began operation on August 30, 1996.
-
Thank you for participating in the growth and income potential of Federated
Stock and Bond Fund, Inc. Remember, it is easy to increase your participation
in the performance potential of a diversified stock and bond portfolio by
reinvesting your earnings automatically in additional fund shares.
As always, we welcome your comments, questions and suggestions.
Sincerely,
John F. Donahue
President
December 15, 1996
*Performance quoted is based on net asset value and reflects past performance.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Total return for the period based on offering price for Class A Shares was
8.27%.
Investment Review
- -------------------------------------------------------------------------------
Peter R. Anderson
Senior Vice President
Federated Management
Joseph Balestrino
Vice President
Federated Management
During the 12-month report period, the strong stock market and weak bond market
both displayed volatility, with both ending on strong notes. What is your
analysis?
During the last 12 months, market actions might have combined the best of both
worlds.
Regarding the stock market, for the 12 months ended October 31, 1996, the
Standard & Poor's 500 Index* ("S&P 500") had a total return of 24.10%,
continuing the market strength that began in late 1994. The market did correct
about 9% in the May 1996 to July 1996 period, but came roaring back as strong
second quarter earnings were reported, and investors sharply increased their
purchases of equity mutual funds. Also, long-term interest rates declined
during the July 1996 to October 1996 period, supporting an upward revaluation
of equities. Part of the market's strength in October was due to the probable
outcome of the election. With no one party controlling both the White House and
Congress, federal spending and inflation should remain constrained.
For the bond market, the period was generally negative for high-quality bonds
due to stronger than anticipated economic growth that caused interest rates to
rise across the entire maturity spectrum. In this environment, mortgage-backed
bonds and corporate bonds (known as spread products) outperformed
comparable-maturity Treasury issues. Toward the end of the report period,
investors in corporate bonds particularly the lower medium- to low-quality area
-
of the market were especially well compensated as credit fundamentals continued
-
to improve and demand rose in the secondary corporate market due to a summer
lull in new issues. Over the 12-month period covered by this report, the total
return of the bond market as measured by the Lehman Brothers
Government/Corporate Bond Index* was 5.39%.
*Standard & Poor's 500 Index is a composite index of common stocks in industry,
transportation, and financial and public utility companies that can be used to
compare to the total returns of funds whose portfolios are invested primarily
in common stocks. Lehman Brothers Government/Corporate Bond Index is comprised
of a large universe of bonds issued by industrial, utility and financial
companies which have a minimum rating of Baa by Moody's Investors Service,
Inc., BBB by Standard & Poor's Ratings Group or, in the case of junk bonds not
rated by either of the previously mentioned services, BBB by Fitch Investors
Service, Inc. These indices are unmanaged, and investments may not be made in
an index.
- -------------------------------------------------------------------------------
Balance between stock and bond holdings is a popular investment objective of
many investors. How does Federated Stock and Bond Fund, Inc. combine stock and
bond investments?
Federated Stock and Bond Fund, Inc. invests 60%-70% of its assets in high
quality stocks and 30%-40% in corporate and government bonds. This allocation
helps the fund pursue growth without undue risk, as well as a reasonable level
of current income. At the end of the report period, more than 59% of the fund's
portfolio was invested in stocks with 38.9% invested in bonds.
How did the fund perform for its shareholders during the one-year period from
November 1, 1995, through October 31, 1996?
For the 12-month period, the fund's Class A Shares produced a strong total
return of 14.57%.** This performance is based on net asset value and includes
capital appreciation, income dividends, and capital gains.
Founded in 1968, the fund has continued to show solid, long-term results. For
example, annualized total returns based on net asset value for Class A Shares
for the 5-year, 10-year, and since-inception (12/31/68) periods ending October
31, 1996, were 10.63%, 9.25%, and 8.55%, respectively.**
Did you make any significant changes to the fund's holdings during the period?
Our stock selection process is primarily bottom-driven, which means we focus on
selecting quality individual stocks according to value, price momentum and
earnings estimates and not on attempting to time the market. These disciplines
-
are especially important in our current higher risk market environment.
Purchases and sales reflect a move toward greater diversification and less
cyclically sensitive stocks as we increased holdings in Consumer Non-Durables,
Energy, Retail and Utilities, and reduced holdings with deteriorating earnings
outlooks in Basic Industry and Technology. Currently, no sectors are heavily
overweighted or underweighted in the portfolio as compared to the S&P 500.
**The total return for Class A Shares based on offering price was 8.27%. Total
returns for Class B Shares and Class C Shares, which began operation on
8/30/96, were 5.98% and 5.98% based on net asset value, and 0.50% and 3.95%
based on offering price, respectively. Total returns for Class A Shares based
on offering price for the 5-year, 10-year, and since inception (12/31/68)
periods ending October 31, 1996, were 9.38%, 8.63%, and 8.33%, respectively.
- -------------------------------------------------------------------------------
Recent additions include the following stocks:
H. J. Heinz Co. The stock of this major food producer has underperformed since
-
early 1996 creating an opportunity for value managers. We expect earnings of
Heinz to grow over the next 12 months.
United Healthcare HMO stocks, including United Healthcare, declined
-
significantly in the first half of 1996. We expect United to resume earnings
per share growth with modest rate increase and rapid enrollment growth.
Marsh and McLennan This company is the largest insurance broker in the U.S.,
-
and provides other financial services such as money management. The stock, in
our opinion, is one of the most undervalued stocks in the Finance sector of our
universe.
Dayton-Hudson Dayton's earnings have been lackluster for the past 5 years, as
-
the discount division of this retailer (Target) has done well, but margins have
suffered in the company's other divisions. We expect a significant earnings
recovery over the next year.
Regarding bonds, during the second half of the fiscal year period, the fund's
management concluded that the interest rate increase represented an attractive
opportunity to lengthen the bond portfolio's average maturity. Inflation has
remained subdued throughout 1996, and thus, the rise in rates was viewed as a
means to capture a higher inflation-adjusted investment, i.e. real rate of
return. As a result, the bond portion moved from a neutral maturity position
to a longer position relative to the Lehman Brothers Government/Corporate Bond
Index. No significant changes were made to the overall quality or sector
weightings.
- -------------------------------------------------------------------------------
What were the fund's top 10 holdings in stocks and bonds as of October 31,
1996, and how are the fund's holdings diversified by industry and quality?
The top holdings and sector weightings were as follows:
Stocks
Name % of Stock Portfolio
Philip Morris Cos., Inc. 2.5%
Unilever N.V. 2.5%
CIGNA Corp. 2.3%
Marsh & McLennan Cos., Inc. 2.2%
MCI Communications Corp. 2.0%
Wal-Mart Stores, Inc. 2.0%
Texaco, Inc. 1.9%
Avon Products, Inc. 1.9%
Bristol-Myers Squibb Co. 1.9%
Federal National Mortgage Assn. 1.8%
Total % of stock portfolio 21.0%
Sector Weightings
Asset Class % of Stock Portfolio % of S&P 500
Consumer Non-Durables 14.2% 12.0%
Finance 15.0% 14.8%
Utilities 12.2% 10.5%
Energy Minerals 12.3% 9.1%
Health Care 11.6% 10.5%
Technology 7.7% 13.9%
Basic Industry 6.9% 6.5%
Producer Manufacturing 5.3% 7.5%
Retail Trade 5.3% 4.8%
Miscellaneous 3.4% 0.0%
Services 3.4% 5.2%
Consumer Durables 2.0% 3.9%
Transportation 0.7% 1.4%
Total % of stock portfolio 100.0% 100.1%
- -------------------------------------------------------------------------------
Bonds
Name % of Bond Portfolio
U.S. Treasury Bond, 11.625% due 11/15/04 10.50%
U.S. Treasury Note, 6.250% due 06/30/98 9.75%
U.S. Treasury Bond, 7.250% due 05/15/16 7.39%
CNA Financial Corp., 7.250% due 11/15/23 3.79%
Bank of Montreal, 7.80% due 04/01/07 3.13%
Salomon Inc., 7.02% due 09/25/98 2.75%
American General Corp., 9.625% due 02/01/18 2.67%
Loewen Group International, 8.25% due 04/15/03 2.61%
U.S. Treasury Bond, 9.375% due 02/15/06 2.56%
Philip Morris, 6.00% due 07/15/01 2.45%
Total % of bond portfolio 47.60%
Quality Composition (corporate holdings)
`Graphic representation ``A'' omitted. See Appendix.''
- ------------------------------------------------------------------------------
As we approach the close of 1996, what is your outlook for both markets?
With mixed economic signals and the stock market at a new high, the bears have
become more vocal, citing various measures that suggest overvaluation. With the
market at elevated levels, we do expect more volatility and sector rotation
over the next few months. Nevertheless, equity investors should not lose sight
of longer term positives underpinning the market. These factors are
incorporated in some of the major themes in our investment strategy in
-
particular industry consolidation, technology, and globalization of markets.
Turning to bonds, our contacts at corporate America strongly suggest to us that
the peak in the earnings growth rate occurred during 1995. Thus, with low
inflation and a highly leveraged consumer, we have become more positive on the
outlook for fixed-income securities and expect to continue gradually extending
the average maturity position of the bond portfolio.
Shareholder Meeting Results
- ------------------------------------------------------------------------------
A Special Meeting of the Shareholders of Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.) was held on August 26, 1996. On June 24,
1996, the record date for shareholders voting at the meeting, there were
7,559,566 total outstanding shares. The following item was considered by
shareholders and the results of their voting were as follows:
Abstentions Withheld
and Broker Authority
Agenda Item For Against Non-Votes to Vote
1. To approve or disapprove changing the Fund's fundamental investment policies
and certain of the Fund's fundamental investment limitations to non-
fundamental investment policies and non-fundamental investment limitations.
2,952,184 811,094 156,398 0
Federated Stock & Bond Fund, Inc. (Class A Shares)
- ------------------------------------------------------------------------------
Growth of $25,000 Invested in Federated Stock & Bond Fund, Inc. (Class A
Shares)
The graph below illustrates the hypothetical investment of $25,000 in the
Federated Stock & Bond Fund, Inc. (Class A Shares) (the "Fund") from October
31, 1986 to October 31, 1996 compared to the Standard and Poor's 500 Index
(S&P 500)+, the Lehman Brothers Government/Corporate Bond Index (LBGCBI)+ and
the Lipper Balanced Funds Average (LBFA).++
`Graphic representation ``B'' omitted. See Appendix.''
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
*Represents a hypothetical investment of $25,000 in the Fund. As of October 1,
1996, the maximum sales charge was 5.50%. The Fund's performance assumes the
reinvestment of all dividends and distributions. The S&P 500, LBGCBI, and
LBFA have been adjusted to reflect reinvestment of dividends on securities
in the indices and average.
**Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+The S&P 500 and the LBGCBI are not adjusted to reflect sales charges,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance. The indices are unmanaged.
++The LBFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category, and is not adjusted to reflect any sales charges. However,
these total returns are reported net of expenses or other fees that the SEC
requires to be reflected in a fund's performance.
Federated Stock & Bond Fund, Inc. (Class B Shares)
- ------------------------------------------------------------------------------
Growth of $25,000 Invested in Federated Stock & Bond Fund, Inc. (Class A
Shares)
The graph below illustrates the hypothetical investment of $25,000 in the
Federated Stock & Bond Fund, Inc. (Class B Shares) (the "Fund") from August 30,
1996 (start of performance) to October 31, 1996 compared to the Standard and
Poor's 500 Index (S&P 500)+, the Lehman Brothers Government/Corporate Bond
Index (LBGCBI)+ and the Lipper Balanced Funds Average (LBFA).++
`Graphic representation ``C'' omitted. See Appendix.''
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
*Represents a hypothetical investment of $25,000 in the Fund. The ending
value of the Fund reflects a 5.50% contingent deferred sales charge on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500,
LBGCBI and LBFA have been adjusted to reflect reinvestment of dividends on
securities in the indices and average.
**Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+The S&P 500 and the LBGCBI are not adjusted to reflect sales charges,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance. The indices are unmanaged.
++The LBFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the category, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees
that the SEC requires to be reflected in a fund's performance.
Federated Stock & Bond Fund, Inc. (Class C Shares)
- ------------------------------------------------------------------------------
Growth of $25,000 Invested in Federated Stock & Bond Fund, Inc. (Class C Shares)
The graph below illustrates the hypothetical investment of $25,000 in the
Federated Stock & Bond Fund, Inc. (Class C Shares) (the "Fund") from August 30,
1996 (start of performance) to October 31, 1996 compared to the Standard and
Poor's 500 Index (S&P 500)+, the Lehman Brothers Government/Corporate Bond
Index (LBGCBI)+ and the Lipper Balanced Funds Average (LBFA).++
`Graphic representation ``D'' omitted. See Appendix.''
Past performance is not predictive of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they may
be worth more or less than original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
*Represents a hypothetical investment of $25,000 in the Fund. The ending
value of the Fund reflects a 1.00% contingent deferred sales charge on any
redemption less than 1 year from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The S&P 500,
LBGCBI and LBFA have been adjusted to reflect reinvestment of dividends on
securities in the indices and average.
**Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+The S&P 500 and the LBGCBI are not adjusted to reflect sales charges,
expenses, or other fees that the SEC requires to be reflected in the Fund's
performance. The indices are unmanaged.
++The LBFA represents the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the category, and is not adjusted to reflect any sales charges. However,
these total returns are reported net of expenses or other fees that the SEC
requires to be reflected in a fund's performance.
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
Portfolio of Investments
- --------------------------------------------------------------------------------
October 31, 1996
<TABLE>
<CAPTION>
SHARES VALUE
<S> <S> <C>
STOCKS--57.6% ----------------------------------------------------------------------------------
BASIC INDUSTRY--4.1%
----------------------------------------------------------------------------------
52,500 Allegheny Teledyne, Inc. $ 1,122,188
----------------------------------------------------------------------------------
11,700 Aluminum Co. of America 685,913
----------------------------------------------------------------------------------
13,500 Betz Laboratories, Inc. 708,750
----------------------------------------------------------------------------------
9,400 Du Pont (E.I.) de Nemours & Co. 871,850
----------------------------------------------------------------------------------
18,400 International Paper Co. 786,600
----------------------------------------------------------------------------------
29,500 Morton International, Inc. 1,161,563
---------------------------------------------------------------------------------- --------------
Total 5,336,864
---------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--1.2%
----------------------------------------------------------------------------------
12,000 General Motors Corp. 646,500
----------------------------------------------------------------------------------
6,361 Martin Marietta Materials 151,074
----------------------------------------------------------------------------------
35,000 Rubbermaid, Inc. 813,750
---------------------------------------------------------------------------------- --------------
Total 1,611,324
---------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--8.4%
----------------------------------------------------------------------------------
27,200 Avon Products, Inc. 1,475,600
----------------------------------------------------------------------------------
10,400 CPC International, Inc. 820,300
----------------------------------------------------------------------------------
14,900 Heinz (H.J.) Co. 528,950
----------------------------------------------------------------------------------
56,300 IBP, Inc. 1,407,500
----------------------------------------------------------------------------------
10,300 Kimberly-Clark Corp. 960,475
----------------------------------------------------------------------------------
21,200 Philip Morris Cos., Inc. 1,963,650
----------------------------------------------------------------------------------
24,800 Tambrands, Inc. 1,057,100
----------------------------------------------------------------------------------
12,500 Unilever N.V., ADR 1,910,938
----------------------------------------------------------------------------------
12,900 V.F. Corp. 843,338
---------------------------------------------------------------------------------- --------------
Total 10,967,851
---------------------------------------------------------------------------------- --------------
ENERGY MINERALS--7.4%
----------------------------------------------------------------------------------
25,700 Baker Hughes, Inc. 915,563
----------------------------------------------------------------------------------
20,000 Chevron Corp. 1,315,000
----------------------------------------------------------------------------------
13,200 Exxon Corp. $ 1,169,850
----------------------------------------------------------------------------------
</TABLE>
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
ENERGY MINERALS--CONTINUED
----------------------------------------------------------------------------------
38,200 Occidental Petroleum Corp. 935,900
----------------------------------------------------------------------------------
4,300 Royal Dutch Petroleum Co., ADR 711,113
----------------------------------------------------------------------------------
14,700 Texaco, Inc. 1,493,888
----------------------------------------------------------------------------------
52,800 USX Corp. 1,155,000
----------------------------------------------------------------------------------
38,238 Union Pacific Resources Group, Inc. 1,051,554
----------------------------------------------------------------------------------
12,800 Western Atlas, Inc. 888,000
---------------------------------------------------------------------------------- --------------
Total 9,635,868
---------------------------------------------------------------------------------- --------------
FINANCE--8.8%
----------------------------------------------------------------------------------
23,700 Allstate Corp. 1,330,163
----------------------------------------------------------------------------------
13,500 CIGNA Corp. 1,761,750
----------------------------------------------------------------------------------
14,500 Chase Manhattan Corp. 1,243,375
----------------------------------------------------------------------------------
9,400 Citicorp 930,600
----------------------------------------------------------------------------------
12,300 Dean Witter, Discover & Co. 724,163
----------------------------------------------------------------------------------
36,300 Federal National Mortgage Association 1,420,238
----------------------------------------------------------------------------------
16,000 Marsh & McLennan Cos., Inc. 1,666,000
----------------------------------------------------------------------------------
19,600 National City Corp. 850,150
----------------------------------------------------------------------------------
17,300 Providian Corp. 813,100
----------------------------------------------------------------------------------
14,899 Travelers Group, Inc. 808,271
---------------------------------------------------------------------------------- --------------
Total 11,547,810
---------------------------------------------------------------------------------- --------------
HEALTH CARE--7.0%
----------------------------------------------------------------------------------
23,000 Abbott Laboratories 1,164,375
----------------------------------------------------------------------------------
20,300 American Home Products Corp. 1,243,375
----------------------------------------------------------------------------------
22,500 Bausch & Lomb, Inc. 759,375
----------------------------------------------------------------------------------
42,400 Biomet, Inc. 683,700
----------------------------------------------------------------------------------
13,500 Bristol-Myers Squibb Co. 1,427,625
----------------------------------------------------------------------------------
20,100 Columbia/HCA Healthcare Corp. 718,575
----------------------------------------------------------------------------------
52,400 Healthsource, Inc. $ 641,900
----------------------------------------------------------------------------------
</TABLE>
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
HEALTH CARE--CONTINUED
----------------------------------------------------------------------------------
11,800 Merck & Co., Inc. 874,675
----------------------------------------------------------------------------------
12,300 Smithkline Beecham Corp., ADR 770,288
----------------------------------------------------------------------------------
22,500 United Healthcare Corp. 852,188
---------------------------------------------------------------------------------- --------------
Total 9,136,076
---------------------------------------------------------------------------------- --------------
PRODUCER MANUFACTURING--3.1%
----------------------------------------------------------------------------------
11,100 FMC Corp. 817,238
----------------------------------------------------------------------------------
11,400 General Electric Co. 1,102,950
----------------------------------------------------------------------------------
9,000 Loews Corp. 743,625
----------------------------------------------------------------------------------
16,000 Textron, Inc. 1,420,000
---------------------------------------------------------------------------------- --------------
Total 4,083,813
---------------------------------------------------------------------------------- --------------
RETAIL TRADE--3.2%
----------------------------------------------------------------------------------
28,800 Dayton-Hudson Corp. 997,200
----------------------------------------------------------------------------------
6,500 Great Atlantic & Pacific Tea Co., Inc. 195,000
----------------------------------------------------------------------------------
28,900 Sears, Roebuck & Co. 1,398,038
----------------------------------------------------------------------------------
58,000 Wal-Mart Stores, Inc. 1,544,250
---------------------------------------------------------------------------------- --------------
Total 4,134,488
---------------------------------------------------------------------------------- --------------
SERVICES--2.0%
----------------------------------------------------------------------------------
14,000 Block (H&R), Inc. 346,500
----------------------------------------------------------------------------------
47,800 Browning-Ferris Industries, Inc. 1,254,750
----------------------------------------------------------------------------------
13,800 Gannett Co., Inc. 1,047,075
---------------------------------------------------------------------------------- --------------
Total 2,648,325
---------------------------------------------------------------------------------- --------------
TECHNOLOGY--4.6%
----------------------------------------------------------------------------------
24,000 Analog Devices, Inc. 624,000
----------------------------------------------------------------------------------
26,400 Electronic Data Systems Corp. 1,188,000
----------------------------------------------------------------------------------
10,000 Intel Corp. 1,098,750
----------------------------------------------------------------------------------
3,200 International Business Machines Corp. 412,800
----------------------------------------------------------------------------------
6,153 Lockheed Martin Corp. $ 551,463
----------------------------------------------------------------------------------
</TABLE>
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
TECHNOLOGY--CONTINUED
----------------------------------------------------------------------------------
7,907 Lucent Technologies, Inc. 371,629
----------------------------------------------------------------------------------
14,300 Raytheon Co. 704,275
----------------------------------------------------------------------------------
19,000 Rockwell International Corp. 1,045,000
---------------------------------------------------------------------------------- --------------
Total 5,995,917
---------------------------------------------------------------------------------- --------------
TRANSPORTATION--0.4%
----------------------------------------------------------------------------------
10,200 Union Pacific Corp. 572,475
---------------------------------------------------------------------------------- --------------
UTILITIES--7.4%
----------------------------------------------------------------------------------
24,400 AT&T Corp. 850,950
----------------------------------------------------------------------------------
24,800 CMS Energy Corp. 784,300
----------------------------------------------------------------------------------
16,800 (a) Columbia Gas System, Inc. 1,020,600
----------------------------------------------------------------------------------
25,700 Enron Corp. 1,195,050
----------------------------------------------------------------------------------
17,100 FPL Group, Inc. 786,600
----------------------------------------------------------------------------------
30,000 GTE Corp. 1,263,750
----------------------------------------------------------------------------------
61,500 MCI Communications Corp. 1,545,188
----------------------------------------------------------------------------------
33,900 Pacific Gas & Electric Co. 796,650
----------------------------------------------------------------------------------
32,500 Southern Co. 719,063
----------------------------------------------------------------------------------
28,900 TECO Energy, Inc. 711,663
---------------------------------------------------------------------------------- --------------
Total 9,673,814
---------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $60,347,607) 75,344,625
---------------------------------------------------------------------------------- --------------
PREFERRED STOCKS--1.2%
- ------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--0.5%
----------------------------------------------------------------------------------
17,100 Dole Food, Inc., ACES, $2.75 673,313
---------------------------------------------------------------------------------- --------------
PRODUCER MANUFACTURING--0.7%
----------------------------------------------------------------------------------
52,800 Westinghouse Electric Corp., PEPS, Series C, $1.30 852,245
---------------------------------------------------------------------------------- --------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,459,585) 1,525,558
---------------------------------------------------------------------------------- --------------
</TABLE>
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <S> <C>
CORPORATE BONDS--22.9%
- ------------------------------------------------------------------------------------------------
BASIC INDUSTRY--0.5%
----------------------------------------------------------------------------------
$ 500,000 Sweden, Kingdom of, Deb., 10.25%, 11/1/2015 $ 641,250
---------------------------------------------------------------------------------- --------------
CONSUMER DURABLES--0.6%
----------------------------------------------------------------------------------
750,000 Smurfit Capital, Note, 6.75%, 11/20/2005 736,020
---------------------------------------------------------------------------------- --------------
CONSUMER NON-DURABLES--0.9%
----------------------------------------------------------------------------------
1,281,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 1,242,109
---------------------------------------------------------------------------------- --------------
ELECTRICAL EQUIPMENT--0.8%
----------------------------------------------------------------------------------
1,000,000 Harvard University, Revenue Bonds, 8.125% Bonds, 4/15/2007 1,105,900
---------------------------------------------------------------------------------- --------------
FINANCE--12.4%
----------------------------------------------------------------------------------
1,000,000 African Development Bank, Note, 6.875%, 10/15/2015 971,100
----------------------------------------------------------------------------------
1,250,000 American General Corp., S.F. Deb., 9.625%, 2/1/2018 1,353,688
----------------------------------------------------------------------------------
1,000,000 Banco Santander, Bank Guarantee, 7.875%, 4/15/2005 1,054,600
----------------------------------------------------------------------------------
1,500,000 Bank of Montreal, Sub. Note, 7.80%, 4/1/2007 1,589,160
----------------------------------------------------------------------------------
1,000,000 Bayerische Landesbank-NY, Note, 6.20%, 2/9/2006 956,100
----------------------------------------------------------------------------------
2,000,000 CNA Financial Corp., Deb., 7.25%, 11/15/2023 1,924,200
----------------------------------------------------------------------------------
250,000 Continental Corp., Note, 8.25%, 4/15/1999 260,728
----------------------------------------------------------------------------------
1,000,000 (b)Equitable Life, Note, 7.70%, 12/1/2015 1,010,990
----------------------------------------------------------------------------------
1,000,000 Legg Mason, Inc., Note, 6.50%, 2/15/2006 954,920
----------------------------------------------------------------------------------
1,000,000 Morgan Stanley Group, Inc., Deb., 9.25%, 3/1/1998 1,042,680
----------------------------------------------------------------------------------
1,000,000 News America Holdings, Inc., 10.125%, 10/15/2012 1,154,000
----------------------------------------------------------------------------------
1,000,000 Norwest Financial, Inc., Note, 6.23%, 9/1/1998 1,004,440
----------------------------------------------------------------------------------
500,000 Price REIT, Inc., Sr. Note, 7.50%, 11/5/2006 498,820
----------------------------------------------------------------------------------
1,375,000 Salomon, Inc., Sr. Note, 7.02%, 9/25/1998 1,392,243
----------------------------------------------------------------------------------
1,000,000 Swedish Export Credit, Deb., 9.875%, 3/15/2038 1,092,850
---------------------------------------------------------------------------------- --------------
Total 16,260,519
---------------------------------------------------------------------------------- --------------
FOOD & BEVERAGE--0.1%
----------------------------------------------------------------------------------
100,000 (b)International Home Foods, Inc., Sr. Sub. Note, 10.375%, 11/1/2006 100,750
---------------------------------------------------------------------------------- --------------
</TABLE>
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
HEALTH CARE--0.9%
----------------------------------------------------------------------------------
$ 1,000,000 Columbia/HCA Healthcare Corp., Note, 9.00%, 12/15/2014 $ 1,171,230
---------------------------------------------------------------------------------- --------------
PRODUCER MANUFACTURING--1.6%
----------------------------------------------------------------------------------
1,000,000 Anixter International, Inc., Company Guarantee, 8.00%, 9/15/2003 1,026,760
----------------------------------------------------------------------------------
1,000,000 Joy Technologies, Inc., Sr. Note, 10.25%, 9/1/2003 1,106,810
---------------------------------------------------------------------------------- --------------
Total 2,133,570
---------------------------------------------------------------------------------- --------------
RETAIL TRADE--1.6%
----------------------------------------------------------------------------------
1,000,000 May Department Stores Co., Deb., 8.125%, 8/15/2035 1,051,480
----------------------------------------------------------------------------------
1,000,000 Penney (J.C.) Co., Inc., Deb., 7.65%, 8/15/2016 1,024,540
---------------------------------------------------------------------------------- --------------
Total 2,076,020
---------------------------------------------------------------------------------- --------------
SERVICES--1.9%
----------------------------------------------------------------------------------
1,000,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 1,135,000
----------------------------------------------------------------------------------
1,300,000 Loewen Group, Inc., Sr. Note, 8.25%, 4/15/2003 1,323,218
---------------------------------------------------------------------------------- --------------
Total 2,458,218
---------------------------------------------------------------------------------- --------------
TECHNOLOGY--0.8%
----------------------------------------------------------------------------------
1,000,000 Kansas City, MO Redevelopment Authority, 7.65% Bonds (FSA LOC), 11/1/2018 1,007,530
---------------------------------------------------------------------------------- --------------
UTILITIES--0.8%
----------------------------------------------------------------------------------
1,000,000 Michigan Bell Telephone Co., Deb., 7.85%, 1/15/2022 1,080,590
---------------------------------------------------------------------------------- --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $29,216,083) 30,013,706
---------------------------------------------------------------------------------- --------------
GOVERNMENT OBLIGATIONS--15.8%
- ------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY SECURITIES--1.1%
----------------------------------------------------------------------------------
500,000 Federal Home Loan Bank System, Deb., 4.76%, 1/15/1998 490,880
----------------------------------------------------------------------------------
1,000,000 Federal National Mortgage Association, 0/8.62%, 3/9/2022 924,920
---------------------------------------------------------------------------------- --------------
Total 1,415,800
---------------------------------------------------------------------------------- --------------
MORTGAGE-BACKED SECURITIES--3.0%
----------------------------------------------------------------------------------
897 Federal Home Loan Mortgage Corp., 8.50%, 5/1/1997 909
----------------------------------------------------------------------------------
$ 518,229 Federal National Mortgage Association, 9.00%, 11/1/2021 $ 545,104
----------------------------------------------------------------------------------
</TABLE>
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <S> <C>
GOVERNMENT OBLIGATIONS--CONTINUED
- ------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--CONTINUED
----------------------------------------------------------------------------------
769,522 Federal National Mortgage Association, 7.00%, 11/1/2007 755,079
----------------------------------------------------------------------------------
33,514 Federal National Mortgage Association, 7.50%, 9/1/2023 33,639
----------------------------------------------------------------------------------
318,032 Government National Mortgage Association, 9.50%, 12/15/2020 343,570
----------------------------------------------------------------------------------
241,233 Government National Mortgage Association, 7.00%, 5/15/2023 236,705
----------------------------------------------------------------------------------
734,163 Government National Mortgage Association, 7.00%, 8/15/2023 720,383
----------------------------------------------------------------------------------
820,577 Government National Mortgage Association, 8.00%, 9/15/2024 839,541
----------------------------------------------------------------------------------
448,105 Government National Mortgage Association, 9.50%, 2/15/2025 484,088
---------------------------------------------------------------------------------- --------------
Total 3,959,018
---------------------------------------------------------------------------------- --------------
TREASURY SECURITIES--11.7%
----------------------------------------------------------------------------------
4,000,000 United States Treasury Bond, 11.625%, 11/15/2004 5,324,400
----------------------------------------------------------------------------------
3,540,000 United States Treasury Bond, 7.25%, 5/15/2016 3,745,886
----------------------------------------------------------------------------------
1,070,000 United States Treasury Bond, 9.375%, 2/15/2006 1,296,166
----------------------------------------------------------------------------------
4,900,000 United States Treasury Note, 6.25%, 6/30/1998 4,944,983
---------------------------------------------------------------------------------- --------------
Total 15,311,435
---------------------------------------------------------------------------------- --------------
TOTAL GOVERNMENT OBLIGATIONS (IDENTIFIED COST $19,697,916) 20,686,253
---------------------------------------------------------------------------------- --------------
(C) REPURCHASE AGREEMENT--1.9%
- ------------------------------------------------------------------------------------------------
2,430,000 BT Securities Corporation, 5.55%, dated 10/31/1996, due 11/1/1996 (AT AMORTIZED
COST) 2,430,000
---------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $113,151,191)(D) $ 130,000,142
---------------------------------------------------------------------------------- --------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions under Federal
Securities laws. At October 31, 1996, these securities amounted to
$1,111,740 which represents .9% of net assets.
(c) 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.
(d) The cost of investments for federal tax purposes amounts to $113,219,719.
The net unrealized appreciation of investments on a federal tax basis
amounts to $16,780,423 which is comprised of $17,327,781 appreciation and
$547,358 depreciation at October 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($130,788,926) at October 31, 1996.
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <S> <C>
ACES -- Adjustable Convertible Extendable Securities
ADR -- American Depository Receipt
FSA -- Financial Security Assurance
LOC -- Letter of Credit
PEPS -- Participating Equity Preferred Stock
REIT -- Real Estate Investment Trust
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
October 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $113,151,191, and tax cost $113,219,719) $130,000,142
- ---------------------------------------------------------------------------------------------------
Income receivable 1,117,631
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 1,332,936
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 154,756
- ---------------------------------------------------------------------------------------------------
Deferred expenses 4,928
- --------------------------------------------------------------------------------------------------- -----------
Total assets 132,610,393
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------
Payable for investments purchased $1,033,126
- ----------------------------------------------------------------------------------------
Payable for shares redeemed 686,829
- ----------------------------------------------------------------------------------------
Payable to Bank 28,039
- ----------------------------------------------------------------------------------------
Accrued expenses 73,473
- ---------------------------------------------------------------------------------------- ---------
Total liabilities 1,821,467
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 6,896,434 shares outstanding $130,788,926
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $100,362,341
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 16,848,951
- ---------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments 13,295,575
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income 282,059
- --------------------------------------------------------------------------------------------------- -----------
Total Net Assets $130,788,926
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($130,693,561 / 6,891,406 shares outstanding) $18.96
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/94.50 of $18.96)* $20.06
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share $18.96
- --------------------------------------------------------------------------------------------------- -----------
CLASS B SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($93,507 / 4,930 shares outstanding) $18.96
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $18.96
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (94.50/100 of $18.97)** $17.93
- --------------------------------------------------------------------------------------------------- -----------
CLASS C SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($1,858 / 98 shares outstanding) $18.96
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $18.96
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.00/100 of $18.96)** $18.77
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
*See "What Shares Cost" in the Prospectus.
**See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended October 31, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Dividends $1,775,008
- ----------------------------------------------------------------------------------------------------
Interest 4,418,288
- ---------------------------------------------------------------------------------------------------- ----------
Total income 6,193,296
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------------
Investment advisory fee $1,028,943
- -----------------------------------------------------------------------------------------
Administrative personnel and services fee 204,571
- -----------------------------------------------------------------------------------------
Custodian fees 37,395
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 116,723
- -----------------------------------------------------------------------------------------
Directors'/Trustees' fees 7,025
- -----------------------------------------------------------------------------------------
Auditing fees 17,900
- -----------------------------------------------------------------------------------------
Legal fees 7,546
- -----------------------------------------------------------------------------------------
Portfolio accounting fees 56,454
- -----------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 19
- -----------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 2
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 340,939
- -----------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 6
- -----------------------------------------------------------------------------------------
Share registration costs 45,229
- -----------------------------------------------------------------------------------------
Printing and postage 32,356
- -----------------------------------------------------------------------------------------
Insurance premiums 4,043
- -----------------------------------------------------------------------------------------
Taxes 22,998
- -----------------------------------------------------------------------------------------
Miscellaneous 10,048
- ----------------------------------------------------------------------------------------- ---------
Total expenses 1,932,197
- -----------------------------------------------------------------------------------------
Waivers--
- -----------------------------------------------------------------------------------------
Waiver of investment advisory fee $(206,429)
- ------------------------------------------------------------------------------
Waivor of administrative personnel and services fee (69,571)
- ------------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (160,968)
- ------------------------------------------------------------------------------ ---------
Total waivers (436,968)
- ----------------------------------------------------------------------------------------- ---------
Net expenses 1,495,229
- ---------------------------------------------------------------------------------------------------- ----------
Net investment income 4,698,067
- ---------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
- --------------------------------------------------------------------------------------------------------------------
Net realized gain on investments $13,222,540
- ---------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 246,245
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 13,468,785
- ---------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $18,166,852
- ---------------------------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, 1996 October 31, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------
Net investment income $ 4,698,067 $ 4,746,653
- ----------------------------------------------------------------------
Net realized gain (loss) on investments ($13,291,068 and $9,527,257,
respectively, as computed for federal tax purposes) 13,222,540 9,527,257
- ----------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 246,245 7,067,004
- ---------------------------------------------------------------------- -------------------- --------------------
Change in net assets resulting from operations 18,166,852 21,340,914
- ---------------------------------------------------------------------- -------------------- --------------------
NET EQUALIZATION CREDITS (DEBITS)-- (105,828) (98,118)
- ---------------------------------------------------------------------- -------------------- --------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------------
Class A Shares (4,746,649) (4,670,579)
- ----------------------------------------------------------------------
Distributions from net investment gains
- ----------------------------------------------------------------------
Class A Shares (9,454,029) (700,551)
- ---------------------------------------------------------------------- -------------------- --------------------
Change in net assets resulting from distributions to
shareholders (14,200,678) (5,371,130)
- ---------------------------------------------------------------------- -------------------- --------------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------
Proceeds from sale of shares 35,914,004 28,842,050
- ----------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 11,037,554 3,810,223
- ----------------------------------------------------------------------
Cost of shares redeemed (54,691,774) (39,237,007)
- ---------------------------------------------------------------------- -------------------- --------------------
Change in net assets resulting from share transactions (7,740,216) (6,584,734)
- ---------------------------------------------------------------------- -------------------- --------------------
Change in net assets (3,879,870) 9,286,932
- ----------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------
Beginning of period 134,668,796 125,381,864
- ---------------------------------------------------------------------- -------------------- --------------------
End of period (including undistributed net investment income of
$282,059 and $2,534,002, respectively) $ 130,788,926 $ 134,668,796
- ---------------------------------------------------------------------- -------------------- --------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Stock and Bond Fund, Inc.
(formerly, 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>
1996 1995 1994 1993 1992 1991 1990(A) 1989
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.38 $ 16.25 $ 16.87 $ 15.91 $ 15.74 $ 13.60 $ 15.11 $ 14.94
- ------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------
Net investment income 0.61 0.63 0.51 0.55 0.65 0.74 1.37 0.91
- ------------------------------------
Net realized and unrealized gain
(loss)
on investments 1.81 2.21 (0.59) 1.58 0.39 2.17 (2.22) 0.91
- ------------------------------------ --------- --------- --------- --------- --------- --------- ----- ---------
Total from investment operations 2.42 2.84 (0.08) 2.13 1.04 2.91 (0.85) 1.82
- ------------------------------------ --------- --------- --------- --------- --------- --------- ----- ---------
LESS DISTRIBUTIONS
- ------------------------------------
Distributions from net investment
income (0.63) (0.62) (0.54) (0.56) (0.68) (0.77) (0.66) (0.94)
- ------------------------------------
Distributions from net realized
gain on investment transactions (1.21) (0.09) -- (0.61) (0.19) -- -- (0.71)
- ------------------------------------ --------- --------- --------- --------- --------- --------- ----- ---------
Total distributions (1.84) (0.71) (0.54) (1.17) (0.87) (0.77) (0.66) (1.65)
- ------------------------------------ --------- --------- --------- --------- --------- --------- ----- ---------
NET ASSET VALUE, END OF PERIOD $ 18.96 $ 18.38 $ 16.25 $ 16.87 $ 15.91 $ 15.74 $ 13.60 $ 15.11
- ------------------------------------ --------- --------- --------- --------- --------- --------- ----- ---------
TOTAL RETURN (B) 14.57% 17.99% (0.48)% 14.10% 7.94% 21.78% (5.90)% 12.46%
- ------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------
Expenses 1.10% 1.07% 1.06% 1.04% 1.04% 1.01% 1.01%* 1.01%
- ------------------------------------
Net investment income 3.44% 3.71% 3.23% 3.49% 4.15% 4.91% 5.77%* 5.82%
- ------------------------------------
Expense waiver/reimbursement (c) 0.27% 0.31% 0.07% 0.20% 0.21% 0.45% 0.54%* 0.51%
- ------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------
Net assets, end of period (000
omitted) $130,694 $134,669 $125,382 $124,583 $95,387 $88,534 $79,003 $88,367
- ------------------------------------
Average commission rate paid $ .0307 -- -- -- -- -- -- --
- ------------------------------------
Portfolio turnover 74% 68% 45% 51% 43% 72% 49 % 26%
- ------------------------------------
<CAPTION>
<S> <C> <C>
1988 1987
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.89 $ 15.34
- ------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------
Net investment income 0.85 0.81
- ------------------------------------
Net realized and unrealized gain
(loss)
on investments 0.52 (0.24)
- ------------------------------------ --------- ---------
Total from investment operations 1.37 0.57
- ------------------------------------ --------- ---------
LESS DISTRIBUTIONS
- ------------------------------------
Distributions from net investment
income (0.86) (0.79)
- ------------------------------------
Distributions from net realized
gain on investment transactions (0.46) (0.23)
- ------------------------------------ --------- ---------
Total distributions (1.32) (1.02)
- ------------------------------------ --------- ---------
NET ASSET VALUE, END OF PERIOD $ 14.94 $ 14.89
- ------------------------------------ --------- ---------
TOTAL RETURN (B) 9.28% 3.58%
- ------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------
Expenses 1.00% 1.00%
- ------------------------------------
Net investment income 5.53% 5.07%
- ------------------------------------
Expense waiver/reimbursement (c) 0.39% 0.22%
- ------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------
Net assets, end of period (000
omitted) $90,504 $92,105
- ------------------------------------
Average commission rate paid -- --
- ------------------------------------
Portfolio turnover 131% 110%
- ------------------------------------
</TABLE>
(a) Reflects operations for the ten month period ended October 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
Financial Highlights--Class B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
<S> <C>
1996(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.89
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.02
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.05
- -------------------------------------------------------------------------------------------------- -------
Total from investment operations 1.07
- -------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 18.96
- -------------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 5.98%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.96%*
- --------------------------------------------------------------------------------------------------
Net investment income 3.52%*
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.15%*
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $94
- --------------------------------------------------------------------------------------------------
Average commission rate paid $ .0307
- --------------------------------------------------------------------------------------------------
Portfolio turnover 74 %
- --------------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 30, 1996 (date of initial
public offering) to October 31, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.89
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.04
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1.03
- -------------------------------------------------------------------------------------------------- -------
Total from investment operations 1.07
- -------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 18.96
- -------------------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 5.98%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 2.03%*
- --------------------------------------------------------------------------------------------------
Net investment income 1.94%*
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.15%*
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $2
- --------------------------------------------------------------------------------------------------
Average commission rate paid $ .0307
- --------------------------------------------------------------------------------------------------
Portfolio turnover 74 %
- --------------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 30, 1996 (date of initial
public offering) to October 31, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1996
(1) ORGANIZATION
Federated 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. The Fund offers three classes of shares:
Class A Shares, Class B Shares and Class C Shares. The investment objectives of
the Fund are to provide relative safety of capital with the possibility of
long-term growth of capital and income.
The Fund's Board of Directors (the "Directors") approved a change in the name of
the Fund as follows:
<TABLE>
<S> <C>
EFFECTIVE DATE NEW NAME
March 31, 1996 Federated Stock and Bond Fund, Inc.
</TABLE>
Effective August 29, 1996 the Fund added Class B Shares and Class C Shares.
(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 equity securities are valued at the last sale
price reported on a national securities exchange. U.S. government
securities, listed corporate bonds, and unlisted securities are generally
valued at the mean of the latest bid and asked price as furnished by an
independent pricing service. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities
with remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
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 under repurchase
agreement transactions. 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
26
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
the repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
accumulated equalization. The following reclassification was made to the
financial statements.
<TABLE>
<CAPTION>
PAID-IN CAPITAL UNDISTRIBUTED NET INVESTMENT INCOME
<S> <C>
2,097,534 (2,097,534)
</TABLE>
Net investment income, net realized gains, and net assets were not affected
by this reclass.
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. With equalization, 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.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand of the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the
27
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
price provided by dealers in the secondary market, or if no market prices
are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at October 31, 1996
is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Equitable Life 10/17/96 993,550
- ----------------------------------------------------------------------------------
International Home Foods, Inc. 10/29/96 100,000
- ----------------------------------------------------------------------------------
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At October 31, 1996, par value shares ($0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
POUND OF PAR VALUE
CAPITAL STOCK AUTHORIZED
<S> <C>
Class A 750,000,000
- ----------------------------------------------------------------------------------
Class B 500,000,000
- ----------------------------------------------------------------------------------
Class C 500,000,000
- ----------------------------------------------------------------------------------
</TABLE>
28
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
<S> <C> <C> <C> <C>
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------ ----------- -------------- ----------- --------------
Shares sold 2,010,466 $ 35,819,180 1,746,255 $ 28,842,050
- ------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 635,946 11,037,554 233,136 3,810,223
- ------------------------------------------------------
Shares redeemed (3,082,912) (54,691,774) (2,369,562) (39,237,007)
- ------------------------------------------------------ ----------- -------------- ----------- --------------
Net change resulting from Class A share transactions (436,500) $ (7,835,040) $ (390,171) $ (6,584,734)
- ------------------------------------------------------ ----------- -------------- ----------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1996(A)
CLASS B SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 4,930 $ 93,028
- -----------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared -- --
- -----------------------------------------------------------------------------------------
Shares redeemed -- --
- ----------------------------------------------------------------------------------------- ----------- -----------
Net change resulting from Class B share transactions 4,930 $ 93,028
- ----------------------------------------------------------------------------------------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31, 1996(A)
CLASS C SHARES SHARES AMOUNT
<S> <C> <C>
Shares sold 98 $ 1,796
- ---------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared -- --
- ---------------------------------------------------------------------------------------
Shares redeemed -- --
- --------------------------------------------------------------------------------------- --------- -------------
Net change resulting from Class C share transactions 98 $ 1,796
- --------------------------------------------------------------------------------------- --------- -------------
Net change resulting from share transactions (431,472) $ (7,740,216)
- --------------------------------------------------------------------------------------- --------- -------------
</TABLE>
(a) For the period from August 30, 1996 (date of initial public offering) to
October 31, 1996.
(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 0.55% of the average daily net assets of the Fund, and
(b) 4.5% of the gross income of the Fund, excluding capital gains or losses.
29
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid 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.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the plan, the Fund will
reimburse Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may incur distribution
expenses of the average daily net assets of each class as follows:
<TABLE>
<S> <C>
Class A 0.25%
- ----------------------------------------------------------
Class B 0.75%
- ----------------------------------------------------------
Class C 0.75%
- ----------------------------------------------------------
</TABLE>
For the year ended October 31, 1996, Class A did not incur a distribution
services fee.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund shares for the period. The fee paid to
FSS is used to finance certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive any portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its sole
discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, serves as
transfer and dividend disbursing agent for the Fund. The fee paid is based on
the size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Directors of the Fund are Officers and
Directors or Trustees of the above companies.
30
Federated Stock and Bond Fund, Inc.
(formerly, Stock and Bond Fund, Inc.)
- --------------------------------------------------------------------------------
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
October 31, 1996, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 103,584,945
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 83,815,765
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
31
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
FEDERATED STOCK AND BOND FUND, INC.
(formerly, Stock and Bond Fund, Inc.):
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Stock and Bond Fund, Inc. as of
October 31, 1996, and the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended October 31,
1996 and 1995, and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
October 31, 1996 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial higlights present
fairly, in all material respects, the financial position of Federated Stock and
Bond Fund, Inc. as of October 31, 1996, the results of its operations, the
changes in its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
December 6, 1996
32
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley President
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland Executive Vice President
James E. Dowd Edward C. Gonzales
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Peter E. Madden Executive Vice President, Treasurer and Secretary
Gregor F. Meyer Richard B. Fisher
John E. Murray, Jr. Vice President
Wesley W. Posvar J. Crilley Kelly
Marjorie P. Smuts 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.
33
[LOGO OF FEDERATED INVESTORS]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and a subsidiary of Federated Investors.
Cusip 313911109
Cusip 313911208
Cusip 313911307
G01454-01 (12/96)
A. The graphic presentation here displayed consists of a pie chart. The
pie chart which depicts Quality Composition (corporate holdings) is divided
as follows: A--23.60%; AA--10.09%; AAA--49.47%; B--0.20%; BB--2.64%; BBB--
14.00%.
B.The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. Federated Stock and Bond Fund, Inc.-Class A Shares is
represented by a solid line, whereas Standard & Poor's Index is represented
by a dotted line, Lehman Brothers Government/Corporate Bond Index is
represented by a broken line, and Lipper Balanced Funds Average is
represented by a broken dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $25,000
investment in Federated Stock and Bond Fund, Inc.-Class A Shares and
Standard & Poor's 500 Index, Lehman Brothers Government/Corporate Bond
Index, and Lipper Balanced Funds Average for the period from October 31,
1986 (start of performance) to October 31, 1996. The `y'' axis reflects
the cost of the investment. the `x'' axis reflects computation periods
from the ending value of the hypothetical investment in Federated Stock and
Bond Fund, Inc. as compared to Standard & Poor's 500 Index, Lehman Brothers
Government/Corporate Bond Index, and Lipper Balanced Funds Average; the
ending values are $60,524; $97,896; $56,380; and $68,185, respectively.
Beneath the list of components that correspond to the line graph are the
following average annual total return data for Federated Stock and Bond
Fund, Inc.-Class A Shares: total return figures for the one-year, five-
year, 10-year, and start of performance to October 31, 1996 are as follows:
8.27%, 9.38%, 8.63%, and 8.33%, respectively.
C.The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. Federated Stock and Bond Fund, Inc.-Class B Shares is
represented by a solid line, whereas Standard & Poor's Index is represented
by a dotted line, Lehman Brothers Government/Corporate Bond Index is
represented by a broken line, and Lipper Balanced Funds Average is
represented by a broken dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $25,000
investment in Federated Stock and Bond Fund, Inc.-Class B Shares and
Standard & Poor's 500 Index, Lehman Brothers Government/Corporate Bond
Index, and Lipper Balanced Funds Average for the period from August 30,
1996 (start of performance) to October 31, 1996. The `y'' axis reflects
the cost of the investment. the `x'' axis reflects computation periods
from the ending value of the hypothetical investment in Federated Stock and
Bond Fund, Inc. as compared to Standard & Poor's 500 Index, Lehman Brothers
Government/Corporate Bond Index, and Lipper Balanced Funds Average; the
ending values are $25,128; $27,135; $26,038; and $26,403, respectively.
Beneath the list of components that correspond to the line graph is the
average annual total return data for Federated Stock and Bond Fund, Inc.-
Class B Shares: total return for the period from August 30, 1996 (start of
performance) to October 31, 1996 was 0.50%.
D.The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath the
graphic presentation. Federated Stock and Bond Fund, Inc.-Class C Shares is
represented by a solid line, whereas Standard & Poor's Index is represented
by a dotted line, Lehman Brothers Government/Corporate Bond Index is
represented by a broken line, and Lipper Balanced Funds Average is
represented by a broken dotted line. The line graph is a visual
representation of a comparison of change in value of a hypothetical $25,000
investment in Federated Stock and Bond Fund, Inc.-Class C Shares and
Standard & Poor's 500 Index, Lehman Brothers Government/Corporate Bond
Index, and Lipper Balanced Funds Average for the period from August 30,
1996 (start of performance) to October 31, 1996. The `y'' axis reflects
the cost of the investment. the `x'' axis reflects computation periods
from the ending value of the hypothetical investment in Federated Stock and
Bond Fund, Inc. as compared to Standard & Poor's 500 Index, Lehman Brothers
Government/Corporate Bond Index, and Lipper Balanced Funds Average; the
ending values are $26,248; $27,135; $26,038; and $26,403, respectively.
Beneath the list of components that correspond to the line graph is the
average annual total return data for Federated Stock and Bond Fund, Inc.-
Class C Shares: total return for the period from August 30, 1996 (start of
performance) to October 31, 1996 was 3.95%.
