[LOGO OF FEDERATED INVESTORS]
John F. Donahue
President
Federated Stock and Bond Fund, Inc.
President's Message
Dear Shareholder:
I am pleased to present the Annual Report for Federated Stock and Bond Fund,
Inc. This balanced fund started in 1934. For over six decades, the fund has
maintained a balanced position with high-quality stocks and various grades of
bonds--both U.S. government and corporate issues. Stocks are selected for
capital appreciation, and the bonds are selected for income. Currently, 60% of
the fund's assets are in stocks, and 40% are in bonds. At the end of the
reporting period, the fund's $282 million portfolio was diversified across 90
equity and 92 debt securities.
This report covers the 12-month period from November 1, 1998 through October 31,
1999. It begins with an interview with equity manager Michael P. Donnelly,
Senior Vice President, who co-manages the fund with bond manager Joseph M.
Balestrino, Senior Vice President, both of Federated Investment Management
Company. Following their discussion, detailing both the stock and bond markets
and the fund's strategies, are three additional items of shareholder interest.
First is a series of graphs showing the fund's long-term investment performance.
Second is a complete listing of the fund's stock and bond holdings, and third is
the publication of the fund's financial statements.
Please review this report and the fund's stock and bond holdings. The
corporations are easy to recognize as they provide goods and services that
impact our lives daily, for example: AT&T, Bristol-Meyer Squibb, and Sun
Microsystems. This balanced fund gives shareholders ownership of both
high-quality stocks and bonds. This balanced and broad diversification helps
reduce risk in both the stock and bond arenas. The fund's balanced approach has
served shareholders well since the fund began operation, as the following total
returns, based on net asset value, indicate.1
Class A Shares (since December 31, 1968), 8.97%;
Class B Shares (since August 30, 1996), 13.49%;
Class C Shares (since April 19, 1993), 10.70%.
1 Performance quoted is based on net asset value, reflects past performance
and is no guarantee of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Total returns since the fund began
operation through October 31, 1999 for the fund's Class A, B, and C Shares,
based on offering price (i.e., less any applicable sales charge), were
8.77%, 12.77%, and 10.70%, respectively.
During the fiscal year, both bonds and stocks experienced their share of
volatility. While high-quality, large- cap stocks experienced positive returns,
a number of the fund's "value" holdings lagged, as the market's performance was
concentrated among large-cap "growth" stocks, particularly those within the
technology sector. The entire bond market suffered as a rising rate environment
caused prices to decline. This was due to the Federal Reserve Board's (the
"Fed") raising interest rates three times in 1999. Nevertheless, the fund's
shares produced positive total returns for this reporting period.
Individual share class total return performance for the 12-month reporting
period, including income and capital gains distributions, follows./2/ <TABLE>
<CAPTION>
Total Return Income Capital Gains Net Asset Value Change
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A Shares 5.35% $0.53 $0.90 $19.14 to $18.71 = (2%)
- ----------------------------------------------------------------------------------------------------------------
Class B Shares 4.63% $0.39 $0.90 $19.10 to $18.68 = (2%)
- ----------------------------------------------------------------------------------------------------------------
Class C Shares 4.52% $0.39 $0.90 $19.07 to $18.63 = (2%)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
Thank you for participating in the growth and income potential of Federated
Stock and Bond Fund, Inc. You can easily increase your participation in the
performance potential of this diversified stock and bond portfolio by
reinvesting your quarterly earnings automatically in additional fund shares.
As always, we welcome your comments, questions and suggestions.
Sincerely,
John F. Donahue
President
December 15, 1999
2 The fund's total returns for the reporting period for Class A, B, and C
Shares, based on offering price (i.e., less any applicable sales charge), were
(0.43%), (0.75%), and 3.55%, respectively.
[Photo of Michael P. Donnelly]
Michael P. Donnelly
Senior Vice President
Federated Investment Management Company
[Photo of Joseph M. Balestrino]
Joseph M. Balestrino
Senior Vice President
Federated Investment Management Company
Investment Review
[Shareholders' Note: This fund is jointly managed by Mr. Donnelly, who is
primarily responsible for the stock portion of the fund's portfolio, and Mr.
Balestrino, who is primarily responsible for the bond portion of the fund's
portfolio.]
What are your comments on the stock and bond markets over the fund's fiscal
year, which saw a stock market of narrow breadth and a bond market impacted by
rising yields?
STOCKS
Overall the fund's fiscal year was a period of positive performance for stocks
as the Standard & Poors ("S&P") 500 Index1 returned 25.68%.However, this
performance was delivered in a very narrow fashion as the returns were
concentrated in a handful of ultra-large capitalization, predominantly
technology growth stocks. The average stock in the S&P 500 Index returned 15.60%
for the reporting period, and over one-half of the S&P 500 Index's fiscal year
return was delivered by only eleven stocks, seven of which were technology
stocks. In fact, five stocks--Microsoft, General Electric, Cisco Systems, Intel
and America Onlineprovided nearly one-third of the S&P 500 Index's total return.
For the reporting period, the technology sector within the S&P 500 Index
returned 66%. The fund's "value" strategy struggled.
1 The S&P is an unmanaged capitalization weighted index of 500 stocks designed
to measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries.
Investments cannot be made in an index.
Surprisingly, the reporting period was quite volatile from a market leadership
perspective. The market went from being extremely narrow for the first five
months of the reporting period, to broadening significantly in the April to June
time frame, and then reverting back to the old leadership for the final five
months of the fiscal year. The fiscal year started with explosive returns, as
the market dismissed the pessimism created by the Russian debt crisis and the
Long Term Capital Management hedge fund problems.
This dramatic recovery was concentrated in technology stocks and a short list
of large capitalization growth stocks. Starting in April, however, market
leadership rotated to a broader group of cyclical, commodity, and smaller
capitalization stocks. This move was sparked by strong first quarter earnings, a
revival in oil prices, and signs of a global economic recovery.
The perceived revival of global economic activity benefited areas of the
market, such as value stocks and small-cap stocks, that had not been the safe
havens from the global economic turmoil of the previous two years, and whose
earnings should benefit with a marked increase in global growth. However, this
leadership was short-lived, as the market reverted back to former leadership--a
fairly narrow list of technology and Internet growth stocks-- despite evidence
of a continued global economic recovery. This narrowing for the last five months
of the reporting period was perplexing from a normal market cycle perspective,
but it appears that the market has become fixated on technology and momentum
strategies.
BONDS
The bond market's total return performance for the first half of the year, as
represented by the Lehman Brothers Government/Corporate Total Bond Index, was
(0.12%).2 Bonds began the reporting period with a performance pattern far
different than the extreme conditions exhibited throughout the preceding third
quarter of 1998, when the international financial crisis accelerated and created
a large "flight to quality" into U.S. Treasury securities and out of all
"spread" products--corporates, mortgages, asset-backeds and emerging markets.
During the fourth quarter of 1998, interest rate levels rose across the entire
maturity spectrum with the 5-year Treasury yield rising the most, up 32 basis
points. All spread sectors, on the other hand, generated positive returns with
significant appreciation in the highest yielding asset classes--high-yield and
emerging markets--the areas that bore the brunt of the third quarter 1998
downside volatility.
From a total return standpoint, the second half of the 12-month reporting
period, which began in May 1999, resembled the first half, as the Lehman
Brothers Government/Corporate Total Bond Index again produced a (0.55%) return.
The second six months saw a continuation of the robust economy and a higher
interest rate pattern.
In total, the U.S. economy surpassed consensus expectations, and many of the
worldwide recessionary conditions significantly improved (Southeast Asia,
excluding Japan, for example). In such a strong environment, interest rates rose
across the entire maturity spectrum. Thus, total return performance was negative
for most high-quality fixed-income sectors, with only relatively short maturity
securities (i.e., 0-2 years) generating positive total returns.
2 Lehman Brothers Government/Corporate Total Bond Index is an unmanaged index of
approximately 5,000 issues which include non-convertible bonds publicly issued
by the U.S. government or its agencies; corporate bonds guaranteed by the U.S.
government and quasi-federal corporations; and, publicly issued, fixed-rate,
non-convertible, domestic bonds of companies in industry, public utilities,
and finance. Investments cannot be made in an index.
The latter part of the year saw moderation in terms of economic releasesand
the resultant impact on interest rate movements. The Fed increased the Fed Funds
Target Rate by 25 basis points at the end of the second quarter and once again
midway through the third quarter of 1999. Given the overall magnitude of the
interest rate increases from January to June, along with the widely anticipated
"official" rate hikes, the market's reaction to the Fed's moves was largely
nonexistent.
For the 12-month reporting period, the bond market, as represented by the
Lehman Brothers Government/Corporate Total Bond Index, produced a (0.66%) total
return. In terms of relative fixed-income sector performance, all of the various
spread sectors outperformed pure U.S. Treasury securities, generating modest but
positive total returns. Included among the better performing sectors were
mortgages, asset-backeds, investment- grade and high-yield corporate bonds.
Thus, the incremental spread in income relative to Treasuries served to more
than offset price deterioration caused by rising interest rates.
How did Federated Stock and Bond Fund, Inc. perform for its shareholders during
the 12-month reporting period ended October 31, 1999?
For the 12-month reporting period, the fund's Class A, B, and C Shares produced
total returns of 5.35%, 4.63%, and 4.52%, respectively, based on net asset
value./3/ These returns were less than the 11.30% total return of the Lipper
Balanced Funds Average./4/
3Performance quoted is based on net asset value, reflects past performance and
is no guarantee of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost. The total returns for the fund's Class A, B, and
C Shares, based on offering price (i.e., less any applicable sales charge),
were (0.43%), (0.75%), and 3.55%, respectively.
4 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the category indicated. Lipper returns do not take sales charges into
account.
The fund continued to show solid, long-term results. For example, the fund's
average annual total returns, based on net asset value, for Class A Shares for
the 5-year, 10-year, and sinceinception (12/31/68) periods ended October 31,
1999, were 14.25%, 10.65%, and 8.97%, respectively.5
What is your strategy for selecting stocks in this environment?
Our strategy in managing the fund remains consistent. We continue to add names
to the portfolio that look attractive on our valuation disciplines and have
favorable visible fundamentals, while eliminating those names with diminishing
prospects and unattractive valuations. We believe that our disciplined, style-
consistent approach will pay off as the market broadens and becomes more
sensitive to valuation and less driven by momentum strategies.
What were some of the fund's recent stock purchases?
Recent stock purchases included the following:
Bank of America Corp. (1.8% of stock portfolio): Selling at a significant
discount to its large peers, this leading national franchise was added to
further build our exposure to the banking industry. The integration of Nations
Bank is progressing well, and a recently announced share buyback should help the
company to outperform its peers.
Bell South Corp. (1.2% of stock portfolio): After performing well in 1998, Bell
South was struggling in 1999, bringing its valuation to two year lows relative
to the other Baby Bells. Bell South has strong management and a faster growth
rate than its Baby Bell peers.
5 Total returns for the fund's Class A Shares, based on offering price (i.e.,
less any applicable sales charge), for the 5-year, 10- year, and since
inception (12/31/68) periods ended October 31, 1999 were 12.96%, 10.03%, and
8.77%, respectively.
Computer Sciences Corp. (1.2% of stock portfolio): This stock was purchased
after mistakenly trading off with Enterprise Resource Planning (ERP) companies
over year 2000 fears. The company is not dependent on ERP sales and continued to
be a high-quality information tecnology outsourcing play, that has been winning
a number of large outsourcing deals with a healthy pipeline going into the next
year. Margin improvement should continue, and valuation is attractive.
PPG Industries, Inc. (1.0% of stock portfolio): We purchased this well-run,
high-return chemical company after relative valuations contracted over concerns
of mild dilution caused by two acquisitions in their coatings business. We
believe that both acquisitions add significantly to the value of the franchise,
and that they will be integrated quicker than expected.
Textron, Inc. (1.2% of stock portfolio): We purchased the stock of this multi-
industry company after it unduly sold-off over concerns about the commercial
aerospace market. We expect the company to meet or exceed its earnings estimates
for the fortieth straight quarter.
With respect to the fund's bond holdings, did you make any adjustments to the
fund's duration and quality?
Adjustments were made to both duration and average quality during the reporting
period. Interest rate exposure was reduced by shortening duration, and overall
quality was increased generally by significantly allocating more assets to the
mortgage-backed securities market and less to the high-yield corporate bond
market.
What were the fund's top 10 holdings in stocks and bonds as of October 31, 1999,
and how were the fund's holdings diversified by industry and quality?
STOCKS
<TABLE>
<CAPTION>
Percentage
of Stock
Name Portfolio
- --------------------------------------------------------------
<S> <C>
Sun Microsystems, Inc. 4.2%
- --------------------------------------------------------------
Lexmark Intl. Group, Class A 2.4%
- --------------------------------------------------------------
Kimberly-Clark Corp. 2.3%
- --------------------------------------------------------------
Conseco, Inc. 2.2%
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 2.2%
- --------------------------------------------------------------
Bank of America Corp. 1.8%
- --------------------------------------------------------------
Pharmacia & Upjohn, Inc. 1.7%
- --------------------------------------------------------------
First Data Corp. 1.7%
- --------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover Cos. 1.5%
- --------------------------------------------------------------
AT&T Corp. 1.5%
- --------------------------------------------------------------
TOTAL 21.5%
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Sector Percentage Percentage
of Stock of S&P
Portfolio 500 Index
- ----------------------------------------------------------------------
<S> <C> <C>
Finance 20.6% 15.5%
- ----------------------------------------------------------------------
Technology 16.6% 23.5%
- ----------------------------------------------------------------------
Capital Goods 11.0% 8.5%
- ----------------------------------------------------------------------
Health Care 9.9% 10.7%
- ----------------------------------------------------------------------
Consumer Staples 9.9% 11.9%
- ----------------------------------------------------------------------
Energy 8.6% 5.9%
- ----------------------------------------------------------------------
Consumer Cyclicals 8.2% 9.0%
- ----------------------------------------------------------------------
Communication Services 6.7% 8.5%
- ----------------------------------------------------------------------
Utilities 5.2% 2.8%
- ----------------------------------------------------------------------
Basic Materials 2.2% 3.0%
- ----------------------------------------------------------------------
Transportation 1.0% 0.8%
- ----------------------------------------------------------------------
</TABLE>
BONDS
<TABLE>
<CAPTION>
Percentage
of Bond
Name/Coupon/Maturity Portfolio
- ----------------------------------------------------------------------
<S> <C>
U.S. Treasury Note, 5.25% due 05/15/2004 5.92%
- ----------------------------------------------------------------------
U.S. Treasury Note, 5.625% due 05/15/2008 4.76%
- ----------------------------------------------------------------------
U.S. Treasury Note, 7.875% due 11/15/2004 4.61%
- ----------------------------------------------------------------------
U.S. Treasury Bond, 6.375% due 08/15/2027 2.59%
- ----------------------------------------------------------------------
Shopko Stores, 9.25% due 3/15/2022 1.76%
- ----------------------------------------------------------------------
Unisys Corp., 11.75% due 10/15/2004 1.73%
- ----------------------------------------------------------------------
INCO, Ltd., 9.60% due 06/15/2022 1.66%
- ----------------------------------------------------------------------
TKR Cable Inc., 10.50% due 10/30/2007 1.65%
- ----------------------------------------------------------------------
Philip Morris, 6.00% due 07/15/2001 1.62%
- ----------------------------------------------------------------------
U.S. Treasury Bond, 11.625% due 11/15/2004 1.60%
- ----------------------------------------------------------------------
TOTAL 27.90%
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Percentage
of Bond
Portfolio
- ----------------------------------------------------------------------
<S> <C>
AAA 52.18%
- ----------------------------------------------------------------------
AA 2.60%
- ----------------------------------------------------------------------
A 15.46%
- ----------------------------------------------------------------------
BBB 20.97%
- ----------------------------------------------------------------------
BB 8.59%
- ----------------------------------------------------------------------
B 0.19%
- ----------------------------------------------------------------------
CCC 0.01%
- ----------------------------------------------------------------------
</TABLE>
What is your outlook as we leave a weak year for bonds, a strong year for
stocks, and approach the year 2000?
STOCKS
The market appears overvalued by all traditional measures, but no visible
catalyst is positioned to change this. The two Fed tightenings of this summer
have simply taken back some of the liquidity that the Fed provided last summer
during the global financial crisis, and seem prudent given the apparent strength
of the global economy, wage pressures, and oil price increases. The trade
deficit and weak U.S. dollar are visible negatives. However, the market appears
to be able to look through both. Corporate earnings still appear to be
accelerating, and computer/technology-led productivity gains are keeping
published inflation figures muted. Given the relative valuation disparities
between the 30 largest public companies and the rest of the market, as well as
an accelerating earnings environment, market breadth should improve. Year 2000
fears leading to general market uncertainty may be holding back this improvement
currently, but we believe as we progress toward year-end, the market will
discount these fears and fundamentals should prevail.
BONDS
Both domestic and foreign economies will definitely be entering the year 2000 on
much stronger footing than the previous year, arguing for a cautious outlook in
the fixed-income markets. On the other hand, domestic interest rates have now
risen steadily for over one year, providing comfort that a more stable
environment may be in store for the year 2000. Additionally, consumer demand
indicators, which fueled the economy over the first half of 1999, are clearly
pointing to a slower growth environment. Included are such visible signs as
falling consumer confidence, auto sales and general retail sales activity. In
summary, fund management maintains a neutral position on the direction of
interest rates, feeling that the vast majority of rate increases may indeed be
concluded. The fund will also continue to emphasize the higher yielding bond
sectors, where particular value may have yet to be realized.
1 Lower rated bonds involve a higher degree of risk than investment grade bonds
in return for higher yield potential.
Two Ways You May Seek to Invest for Success:
Initial Investment
If you had made an initial investment of $31,000 in the Class A Shares of
Federated Stock and Bond Fund, Inc. on 12/31/68, reinvested dividends and
capital gains, and did not redeem any shares, your account would have been worth
$417,158 on 10/31/99. You would have earned an 8.80%1 average annual total
return for the investment life span.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends, and
you gain the benefit of compounding.
As of 9/30/99, the Class A Shares' average annual 1-year, 5-year, and 10-year
total returns were
1.55% 12.77%, and 9.81%, respectively. Class B Shares' average annual 1-year and
since-inception (8/30/96) total returns were 1.20% and 12.64%, respectively.
Class C Shares' average annual 1-year, 5-year and since-inception (4/19/93)
total returns were 5.59%, 13.13%, and 10.62%, respectively.2
Graphic representation omitted. See Appendix 1.
1 Total return represents the change in the value of an investment after
investing all income and capital gains, and takes into account the 5.50% sales
charge applicable to an initial investment in Class A Shares.Data quoted
represents past performance and does not guarantee future results. Investment
return and principal value will fluctuate, so an investor's shares, when
redeemed, may be worth more or less than their original cost.
2 The total returns stated take into account all applicable sales charges. The
maximum sales charges and contingent deferred sales charges for the fund are
as follows: Class A Shares, 5.50% sales charge; Class B Shares, 5.50%
contingent deferred sales charge; Class C Shares, 1.00% contingent deferred
sales charge.
One Step At a Time
$1,000 initial investment and subsequent investments of $1,000 each year for 30
years (reinvesting all dividends and capital gains) grew to $222,101.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of
Federated Stock and Bond Fund, Inc. on 12/31/68, reinvested your dividends and
capital gains, and did not redeem any shares, you would have invested only
$31,000, but your account would have reached a total value of $222,1011 by
10/31/99. You would have earned an average annual total return of 10.62%.
A practical investment plan helps you pursue long-term growth of capital and
income through a balanced portfolio of stocks and bonds. Through systematic
investing, you buy shares on a regular basis and reinvest all earnings. An
investment plan can workfor you when you invest only $1,000 annually. You can
take it one step at a time. Put time, money, and compounding to work.
Graphic representation omitted. See Appendix 2.
[GRAPH APPEARS HERE]
1 This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. No method of investing can guarantee a profit
or protect against loss in down markets.
Investing for College Education
David and Joan Rice are a fictional couple who, like many shareholders, are
searching for a way to make their money grow over time.
David and Joan are planning for the college education of their children. On
October 31, 1989, they invested $5,000 in the Class A Shares of Federated Stock
and Bond Fund, Inc. Since then, David and Joan have made additional investments
of $250 every month.
As this chart shows, over 10 years, the original $5,000 investment, along with
their additional monthly $250 investments totaling $35,000, has grown to
$65,320. This represents a10.62% average annual total return.1 For the Rices, a
dedicated program of monthly investments really paid off.
Graphic representation omitted. See Appendix 3.
1 This hypothetical scenario is provided for illustrative purposes only and
does not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
Federated Stock and Bond Fund, Inc.-Class A Shares
GROWTH OF A $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,0001 in the
Federated Stock and Bond Fund, Inc. (Class A Shares) (the "Fund") from October
31, 1989 to October 31, 1999 compared to the Standard and Poor's 500 Index (S&P
500),2 the Lehman Brothers Government/Corporate Bond Index (LBGCBI)/2/ and the
Lipper Balanced Funds Average (LBFA)./3/ <TABLE>
Graphic representation omitted. See Appendix 4.
<CAPTION>
Average Annual Total Return4 For The Period Ended
October 31, 1999
- -------------------------------------------------------------------
<S> <C>
1 Year (0.43%)
- -------------------------------------------------------------------
5 Years 12.96%
- -------------------------------------------------------------------
10 Years 10.03%
- -------------------------------------------------------------------
Start of Performance (12/31/68) 8.77%
- -------------------------------------------------------------------
</TABLE>
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 their original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
1Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 5.50% ($10,000 investment minus $550 sales charge =
$9,450). 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 indexes and in the average.
2The S&P 500 and the LBGCBI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires to
be reflected in the Fund's performance. The indexes are unmanaged.
3The 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 indicated, and is not adjusted to reflect any sales charges. However,
these total returns are reported net of expenses or other fees that the
Securities and Exchange Commission requires to be reflected in a Fund's
performance.
4 Total return quoted reflects all applicable sales charges.
Federated Stock and Bond Fund, Inc.-Class B Shares
GROWTH OF A $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,0001 in the
Federated Stock and Bond Fund, Inc. (Class B Shares) (the "Fund") from August
30, 1996 (start of performance) to October 31, 1999, compared to the Standard
and Poor's 500 Index (S&P 500),2 the Lehman Brothers Government/Corporate Bond
Index (LBGCBI)2 and the Lipper Balanced Funds Average (LBFA).3
<TABLE>
<CAPTION>
Average Annual Total Return4 For The Period Ended
October 31, 1999
- ------------------------------------------------------------------
<S> <C>
1 Year (0.75%)
- ------------------------------------------------------------------
Start of Performance (8/30/96) 12.77%
- ------------------------------------------------------------------
Graphic representation omitted. See Appendix 5.
</TABLE>
[GRAPH APPEARS HERE]
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 their original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
1 Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 3.00% contingent deferred sales charge on any
redemption of shares held up to four years from the purchase date. The maximum
contingent deferred sales charge is 5.50% on any redemption of shares held up
to one 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
indexes and in the average.
2The S&P 500 and the LBGCBI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires to
be reflected in the Fund's performance. The indexes are unmanaged.
3 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 indicated, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that
the Securities and Exchange Commission requires to be reflected in a Fund's
performance.
4 Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
Federated Stock and Bond Fund, Inc.-Class C Shares
GROWTH OF A $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,0001 in the
Federated Stock and Bond Fund, Inc. (Class C Shares) (the "Fund") from April 19,
1993 (start of performance) to October 31, 1999, compared to the Standard and
Poor's 500 Index (S&P 500),2 the Lehman Brothers Government/Corporate Bond Index
(LBGCBI)2 and the Lipper Balanced Funds Average (LBFA).3
<TABLE>
<CAPTION>
Average Annual Total Return4 For The Period Ended
October 31, 1999
- -----------------------------------------------------------------
<S> <C>
1 Year 3.55%
- -----------------------------------------------------------------
5 Years 13.33%
- -----------------------------------------------------------------
Start of Performance (4/19/93) 10.70%
- -----------------------------------------------------------------
</TABLE>
Graphic representation omitted. See Appendix 6.
[GRAPH APPEARS HERE]
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 their original cost. Mutual funds are not obligations of
or guaranteed by any bank and are not federally insured.
1 Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption
withinone 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 indexes and in the average.
2 The S&P 500 and the LBGCBI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires
to be reflected in the Fund's performance. The indexes are unmanaged.
3 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 indicated, and is not adjusted to reflect any sales charges.
However, these total returns are reported net of expenses or other fees that
the Securities and Exchange Commission requires to be reflected in a Fund's
performance.
4 Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
Portfolio of Investments
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Shares Value
- ------------------------------------------------------------------------------------------------------
COMMON STOCKS-55.9%
Basic Materials-1.2%
<S> <C> <C> <C>
88,965 Archer-Daniels-Midland Co. $ 1,095,382
220,700 LTV Corp. 800,037
26,900 PPG Industries, Inc. 1,630,813
TOTAL 3,526,232
Capital Goods-6.2%
31,300 Allied-Signal, Inc. 1,782,144
33,800 Deere & Co. 1,225,250
29,000 Ingersoll-Rand Co. 1,515,250
29,000 Johnson Controls, Inc. 1,761,750
19,348 Koninklijke (Royal) Philips Electronics NV, ADR 2,010,983
26,700 Northrop Grumman, Corp. 1,465,162
44,300 Parker-Hannifin Corp. 2,029,494
74,800 Tenneco, Inc. 1,196,800
24,300 Textron, Inc. 1,875,656
49,912 Tyco International Ltd. 1,993,360
34,100 Waste Management, Inc. 626,588
TOTAL 17,482,437
Communication Services-3.8%
51,050 AT&T Corp. 2,386,587
26,300 Bell Atlantic Corp. 1,707,856
42,200 BellSouth Corp. 1,899,000
30,300 GTE Corp. 2,272,500
38,900 U.S. West, Inc. 2,375,331
TOTAL 10,641,274
Consumer Cyclicals-4.6%
30,500 Block (H&R), Inc. 1,298,156
74,700 Cooper Tire & Rubber Co. 1,255,894
33,604 Delphi Automotive 552,366
60,900 Dillards, Inc., Class A 1,149,487
28,800 General Motors Corp. 2,023,200
61,400 Hasbro, Inc. 1,266,375
94,800 1 K Mart Corp. 953,925
COMMON STOCKS-continued
Consumer Cyclicals-continued
7,700 Knight-Ridder, Inc. $ 488,950
66,200 News Corp. Ltd., ADR 1,824,637
40,900 Wal-Mart Stores, Inc. 2,318,519
TOTAL 13,131,509
Consumer Staples-5.6%
59,200 Kimberly-Clark Corp. 3,737,000
44,400 1 King World Productions, Inc. 1,720,500
48,100 Nabisco Group Holdings Corp. 616,281
38,600 Philip Morris Cos., Inc. 972,238
82,400 Sara Lee Corp. 2,229,950
32,000 1 Tricon Global Restaurants, Inc. 1,286,000
55,300 UST, Inc. 1,531,119
22,596 Unilever N.V., ADR 1,506,871
47,500 1 Viacom, Inc., Class A 2,164,219
TOTAL 15,764,178
Energy-4.8%
46,100 Ashland, Inc. 1,521,300
13,200 Atlantic Richfield Co. 1,230,075
17,600 Chevron Corp. 1,607,100
78,700 ENSCO International, Inc. 1,524,813
23,800 Exxon Corp. 1,762,688
33,000 Royal Dutch Petroleum Co., ADR 1,977,938
51,300 Sunoco, Inc. 1,237,612
21,300 Texaco, Inc. 1,307,287
52,000 USX Corp. 1,514,500
TOTAL 13,683,313
Finance-11.3%
22,950 2,3 ABB AB, ADR 2,148,356
28,100 Allmerica Financial Corp. 1,606,969
59,500 Allstate Corp. 1,710,625
31,500 Bank One Corporation 1,183,219
44,400 Bank of America Corp 2,858,250
42,360 Bear Stearns Cos., Inc. 1,805,595
23,600 CIGNA Corp. 1,764,100
84,700 CIT Group, Inc., Class A 2,022,212
COMMON STOCKScontinued
Financecontinued
145,500 Conseco, Inc. $ 3,537,469
30,700 Hartford Financial Services Group, Inc. 1,590,644
41,900 Lincoln National Corp. 1,932,637
25,600 Loews Corp. 1,814,400
25,400 MBIA Insurance Corp. 1,449,388
24,400 Marsh & McLennan Cos., Inc. 1,929,125
21,800 Morgan Stanley, Dean Witter & Co. 2,404,813
62,700 Washington Mutual, Inc. 2,253,281
TOTAL 32,011,083
Health Care-5.6%
45,500 Abbott Laboratories 1,837,062
28,900 Baxter International, Inc. 1,874,887
181,500 1 Beverly Enterprises, Inc. 714,656
45,700 Bristol-Myers Squibb Co. 3,510,331
171,600 1 HEALTHSOUTH, Corp. 986,700
25,900 Merck & Co., Inc. 2,060,669
50,700 Pharmacia & Upjohn, Inc. 2,734,631
40,700 United Healthcare Corp. 2,103,681
TOTAL 15,822,617
Technology-9.3%
28,700 1 Computer Sciences Corp. 1,971,331
22,100 Eastman Kodak Co. 1,523,519
38,900 Electronic Data Systems Corp. 2,275,650
57,500 First Data Corp. 2,627,031
67,100 Galileo International, Inc. 2,017,194
24,100 International Business Machines Corp. 2,370,837
48,800 1 Lexmark Intl. Group, Class A 3,809,450
24,500 1 Novell, Inc. 491,531
45,200 1 Seagate Technology, Inc. 1,330,575
86,600 1 Storage Technology Corp. 1,363,950
63,100 1 Sun Microsystems, Inc. 6,676,769
TOTAL 26,457,837
Transportation-0.6%
5,200 Ryder Systems, Inc. 111,150
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal
Amount Value
- -------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS-continued
Transportation-continued
<S> <C> <C> <C>
28,100 Union Pacific Corp. 1,566,575
TOTAL 1,677,725
Utilities-2.9%
66,400 Entergy Corp. 1,987,850
31,200 FPL Group, Inc. 1,569,750
56,400 P G & E Corp. 1,293,675
41,100 Public Service Enterprises Group, Inc. 1,626,019
66,800 Reliant Energy, Inc. 1,820,300
TOTAL 8,297,594
TOTAL COMMON STOCKS (IDENTIFIED COST $131,402,852) 158,495,799
PREFERRED STOCK-0.3%
Financials-0.3%
1,000 Highwoods Properties, Inc., REIT Perpetual Pfd. Stock, Series A, $86.25 735,120
(IDENTIFIED COST $997,337)
ASSET-BACKED SECURITIES-0.6%
$ 1,250,000 2,3 125 Home Loan Owner Trust 1998-1A, Class B1, 9.26%, 2/15/2029 1,069,137
137,766 Green Tree Home Equity Loan Trust 1999-A, Class B2A, 7.44%, 2/15/2029 137,508
189,695 2,3 Merrill Lynch Mortgage Investors, Inc. 1998-FF3, Class BB, 5.50%, 11/20/2029 182,166
288,059 2 SMFC Trust Asset-Backed Certificates, Series 1997-A, Class B1-4, 7.7191%, 1/28/2025 243,770
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $1,834,103) 1,632,581
CORPORATE BONDS-19.5%
Automobiles-0.6%
800,000 Hertz Corp., Sr. Note, 7.00%, 1/15/2028 720,208
1,000,000 Meritor Automotive, Inc., Note, 6.80%, 2/15/2009 929,739
TOTAL 1,649,947
Banking-0.6%
500,000 2,3 Den Danske Bank Group, Note, 7.40%, 6/15/2010 493,070
100,000 2,3 Den Danske Bank Group, Sub. Note, 7.25%, 6/15/2005 99,323
500,000 2,3 Swedbank, Sub., 7.50%, 11/29/2049 473,959
700,000 National Bank of Canada, Montreal, Sub. Note, 8.125%, 8/15/2004 733,614
TOTAL 1,799,966
Basic Industry-1.7%
1,000,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 992,050
1,325,000 Inco Ltd., Note, 9.60%, 6/15/2022 1,283,103
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------------------------
CORPORATE BONDS-continued
Basic Industry-continued
<S><C> <C> <C> <C>
$ 500,000 2,3 Normandy Finance Ltd., Company Guarantee, 7.50%, 7/15/2005 $ 475,920
1,000,000 Placer Dome, Inc., Bond, 8.50%, 12/31/2045 946,130
150,000 Pope & Talbot, Inc., Deb., 8.375%, 6/1/2013 134,728
200,000 Santa Fe Pacific Gold, Deb., 8.375%, 7/1/2005 194,060
680,000 Southdown, Inc., Sr. Sub. Note, 10.00%, 3/1/2006 738,337
TOTAL 4,764,328
Chemicals0.5%
400,000 2,3 Fertinitro Finance, Company Guarantee, 8.29%, 4/1/2020 274,238
1,250,000 2,3 Reliance Industries Ltd., Bond, 8.25%, 1/15/2027 1,147,450
TOTAL 1,421,688
Consumer Durables0.3%
1,000,000 Arvin Industries, Inc., 9.50%, 2/1/2027 966,360
Consumer Non-Durables0.7%
1,281,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 1,251,537
750,000 Philip Morris Cos., Inc., Deb., 7.75%, 1/15/2027 691,740
TOTAL 1,943,277
Education0.3%
1,000,000 Boston University, 7.625%, 7/15/2097 942,610
Energy0.3%
750,000 Sun Co., Inc., 9.00%, 11/1/2024 811,163
Energy - Oil & Gas0.4%
1,250,000 Husky Oil Ltd., Sr. Note, 7.125%, 11/15/2006 1,156,763
Finance4.1%
500,000 Amvescap PLC, Sr. Note, 6.60%, 5/15/2005 478,065
450,000 Conseco, Inc., Note, 6.40%, 2/10/2003 424,872
1,000,000 Conseco, Inc., Sr. Note, 10.50%, 12/15/2004 1,076,480
300,000 Corp Andina De Fomento, Sr. Note, 7.75%, 3/1/2004 299,739
1,250,000 Delphi Financial Group, Inc., 9.31%, 3/25/2027 1,202,700
250,000 Delphi Financial Group, Inc., Note, 8.00%, 10/1/2003 248,928
1,125,000 2,3 FMR Corp., Deb., 7.57%, 6/15/2029 1,119,161
750,000 FirstBank Puerto Rico, Sub. Note, 7.625%, 12/20/2005 707,835
1,000,000 Ford Motor Credit Corp., Unsub., 6.875%, 6/5/2001 997,031
500,000 General Electric Capital Corp., Medium Term Note, 6.65%, 9/3/2002 500,775
CORPORATE BONDS-continued
Finance-continued
$ 300,000 General Motors Corp., Medium Term Note, 9.45%, 11/1/2011 $ 350,040
1,000,000 Green Tree Financial Corp., Sr. Sub. Note, 10.25%, 6/1/2002 1,047,620
1,225,000 Lehman Brothers Holdings, Inc., Bond, 6.20%, 1/15/2002 1,203,808
375,000 Provident Cos., Inc., Bond, 7.405%, 3/15/2038 336,866
1,000,000 Santander Finance Issuance, SA, Bank Guarantee, 7.875%, 4/15/2005 1,017,130
750,000 USF&G Corp., Company Guarantee, 8.47%, 1/10/2027 740,805
TOTAL 11,751,855
Finance-Insurance-0.5%
750,000 2,3 Life Re Capital Trust I, Company Guarantee, 8.72%, 6/15/2027 768,465
750,000 2,3 Union Central Life Insurance Co., Note, 8.20%, 11/1/2026 751,110
TOTAL 1,519,575
Forest Products & Publishing-0.4%
1,000,000 Donohue Forest Products, 7.625%, 5/15/2007 1,002,540
250,000 Quno Corp., Sr. Note, 9.125%, 5/15/2005 263,668
TOTAL 1,266,208
Health Care-0.3%
550,000 Tenet Healthcare Corp., Sr. Note, 8.00%, 1/15/2005 517,000
500,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.125%, 12/1/2008 455,000
TOTAL 972,000
Printing & Publishing-0.4%
1,000,000 News America Holdings, Inc., 10.125%, 10/15/2012 1,099,510
Producer Manufacturing-0.4%
1,000,000 Anixter International, Inc., Company Guarantee, 8.00%, 9/15/2003 995,170
RaceTrack-0.3%
850,000 2,3 International Speedway Corp., Sr. Note, Series 144A, 7.875%, 10/15/2004 848,835
Real Estate-1.1%
1,000,000 Price REIT, Inc., Sr. Note, 7.50%, 11/5/2006 981,950
500,000 Simon Property Group, Inc., Note, 7.125%, 2/9/2009 463,285
500,000 Storage USA, 8.20%, 6/1/2017 454,265
750,000 Storage USA, Deb., 7.50%, 12/1/2027 618,285
600,000 Sun Communities, Inc., Medium Term Note, 6.77%, 5/16/2005 548,544
TOTAL 3,066,329
CORPORATE BONDS-continued
Retail Trade-1.8%
$ 500,000 Dayton-Hudson Corp., Deb., 10.00%, 12/1/2000 $ 518,665
1,000,000 Harcourt General, Inc., Sr. Deb., 7.20%, 8/1/2027 884,010
1,123,339 K Mart Corp., Pass Thru Cert., 8.54%, 1/2/2015 1,113,005
1,000,000 May Department Stores Co., Deb., 8.125%, 8/15/2035 1,027,870
250,000 Sears, Roebuck & Co., Medium Term Note, 10.00%, 2/3/2012 291,052
1,250,000 Shopko Stores, Inc., Sr. Note, 9.25%, 3/15/2022 1,358,575
TOTAL 5,193,177
Services-1.5%
1,000,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 1,122,310
1,200,000 TKR Cable, Inc., Deb., 10.50%, 10/30/2007 1,272,672
1,000,000 USA Waste Services, Inc., Sr. Note, 7.125%, 10/1/2007 851,920
1,000,000 WMX Technologies, Inc., Deb., 8.75%, 5/1/2018 905,980
TOTAL 4,152,882
Sovereign Government-0.3%
250,000 Quebec, Province of, Deb., 9.125%, 8/22/2001 259,357
500,000 Sweden, Kingdom of, Deb., 10.25%, 11/1/2015 608,495
TOTAL 867,852
Technology-0.8%
1,000,000 Dell Computer Corp., Deb., 7.10%, 4/15/2028 923,130
1,200,000 Unisys Corp., Sr. Note, 11.75%, 10/15/2004 1,332,000
TOTAL 2,255,130
Telecommunications-0.3%
750,000 MetroNet Escrow Corp., Sr. Note, 10.625%, 11/1/2008 855,000
Transportation-0.1%
255,000 Southwest Airlines Co., Deb., 7.375%, 3/1/2027 247,345
Utilities-1.4%
750,000 2,3 Edison Mission Holding Co., Sr. Secd. Note, 8.734%, 10/1/2026 724,613
1,000,000 Enersis S.A., Note, 7.40%, 12/1/2016 836,940
750,000 2,3 Israel Electric Corp. Ltd., Sr. Note, 7.875%, 12/15/2026 679,890
100,000 2,3 Israel Electric Corp. Ltd., Sr. Secd. Note, 7.75%, 3/1/2009 98,451
500,000 LCI International, Inc., Sr. Note, 7.25%, 6/15/2007 493,200
600,000 Puget Sound Energy, Inc., Medium Term Note, 7.02%, 12/1/2027 548,592
CORPORATE BONDS-continued
Utilities-continued
$ 150,000 Qwest Communications International, Inc., Sr. Note, Series B, 7.50%, 11/1/2008 $ 147,750
500,000 2,3 Tenaga Nasional Berhad, Deb., 7.50%, 1/15/2096 360,300
TOTAL 3,889,736
Utility - Telephone-0.4%
1,015,000 Paramount Communications, Inc., Sr. Deb., 8.25%, 8/1/2022 1,013,752
TOTAL CORPORATE BONDS (IDENTIFIED COST $58,229,068) 55,450,458
GOVERNMENTS AGENCIES-6.1%
Treasury Securities-6.1%
1,000,000 United States Treasury Bond, 11.625%, 11/15/2004 1,233,990
400,000 United States Treasury Bond, 6.125%, 11/15/2027 386,760
2,000,000 United States Treasury Bond, 6.375%, 8/15/2027 1,994,560
750,000 United States Treasury Bond, 8.125%, 5/15/2021 890,400
790,000 United States Treasury Bond, 8.75%, 5/15/2017 975,445
4,700,000 United States Treasury Note, 5.25%, 5/15/2004 4,568,964
3,800,000 United States Treasury Note, 5.625%, 5/15/2008 3,667,798
3,300,000 United States Treasury Note, 7.875%, 11/15/2004 3,555,948
TOTAL GOVERNMENTS AGENCIES (IDENTIFIED COST $18,244,845) 17,273,865
Municipals-1.0%
500,000 Atlanta & Fulton County, GA, Recreation Authority, Taxable Revenue Bonds, Series 1997, 468,970
7.00% Bonds (Downtown Arena Project)/(FSA INS), 12/1/2028
1,000,000 Harvard University, MA, Revenue Bonds, 8.125% Bonds, 4/15/2007 1,069,260
1,000,000 Kansas City, MO Redevelopment Authority, Taxable, 7.65% Bonds (FSA LOC), 11/1/2018 994,260
250,000 McKeesport, PA, Taxable GO Series B 1997, 7.30% Bonds (MBIA INS), 3/1/2020 241,245
TOTAL MUNICIPALS (IDENTIFIED COST $2,801,355) 2,773,735
Mutual Funds-14.0%
4,066,604 Federated Mortgage Core Portfolio 39,364,729
41,742 Federated High Yield Bond Portfolio 361,068
TOTAL MUTUAL FUNDS (IDENTIFIED COST $40,393,577) 39,725,797
REPURCHASE AGREEMENT-1.9%/4/
$ 5,480,000 ABN AMRO, Inc., 5.34%, dated 10/29/1999, due 11/1/1999 (AT AMORTIZED COST) $ 5,480,000
TOTAL INVESTMENTS (IDENTIFIED COST $259,383,137)/5/ $ 281,567,355
</TABLE>
1 Non-income producing security.
2 Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At October 31, 1999, these securities amounted
to $11,958,214 which represents 4.2% of net assets. Included in these
amounts, securities which have been deemed liquid amounted to $11,714,444
which represents 4.1% of net assets.
3 Denotes a restricted security that has been deemed liquid by criteria
approved by the fund's board of directors.
4 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 joint
account with other Federated funds.
5 Pursuant to an Exemptive order, the fund may invest in Federated Core Trust
(the "Trust") which is also managed by Federated Investment Management
Company, the fund's adviser. The Trust is an open-end management investment
company under the Investment Company Act of 1940 available only to registered
investment companies and other institutional investors. High Yield Bond
Portfolio and Federated Mortgage Core Portfolio (the "Portfolios") are two
series of the Trust. Federated receives no fees on behalf of the Portfolios.
Income distributions from the Portfolios are declared daily and paid monthly.
Income distributions earned by the fund are recorded as dividend income in the
accompanying financial statements.
6 The cost of investments for federal tax purposes amounts to $261,970,763. The
net unrealized appreciation of investments on a federal tax basis amounts to
$19,596,592 which is comprised of $38,625,753 appreciation and $19,029,161
depreciation at October 31, 1999.
Note: The categories of investments are shown as a percentage of net assets
($283,523,836) at October 31, 1999.
The following acronyms are used throughout this portfolio:
ADR American Depositary Receipt
FSA Financial Security Assurance
INS Insured
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
REIT Real Estate Investment Trust
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
OCTOBER 31, 1999
<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Total investments in securities, at value (identified cost $259,383,137 $ 281,567,355
and tax cost $261,970,763)
Income receivable 2,385,216
Receivable for investments sold 830,189
Receivable for shares sold 508,334
TOTAL ASSETS 285,291,094
Liabilities:
Payable for investments purchased $ 1,345,072
Payable for shares redeemed 323,496
Payable to Bank 22,050
Payable for taxes withheld 958
Accrued expenses 75,682
TOTAL LIABILITIES 1,767,258
Net Assets for 15,163,444 shares outstanding $ 283,523,836
Net Assets Consist of:
Paid-in capital $ 256,830,168
Net unrealized appreciation of investments 22,184,218
Accumulated net realized gain on investments 3,826,342
Undistributed net investment income 683,108
TOTAL NET ASSETS $ 283,523,836
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Class A Shares:
Net Asset Value Per Share ($209,984,918 / 11,223,435 shares outstanding) $ 18.71
Offering Price Per Share (100/94.50 of $18.71)/1/ $ 19.80
Redemption Proceeds Per Share $ 18.71
Class B Shares:
Net Asset Value Per Share ($53,153,767 / 2,845,946 shares outstanding) $ 18.68
Offering Price Per Share $ 18.68
Redemption Proceeds Per Share (94.50/100 of $18.68)/1/ $ 17.65
Class C Shares:
Net Asset Value Per Share ($20,385,151 / 1,094,063 shares outstanding) $ 18.63
Offering Price Per Share $ 18.63
Redemption Proceeds Per Share (99/100 of $18.63)/1/ $ 18.44
</TABLE>
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
Dividends (net of foreign taxes withheld of $26,271) $ 4,472,118
Interest 6,564,248
TOTAL INCOME 11,036,366
Expenses:
Investment advisory fee $ 1,967,368
Administrative personnel and services fee 202,414
Custodian fees 17,909
Transfer and dividend disbursing agent fees and expenses 238,920
Directors'/Trustees' fees 12,203
Auditing fees 16,080
Legal fees 3,096
Portfolio accounting fees 95,843
Distribution services feeClass B Shares 302,829
Distribution services feeClass C Shares 123,106
Shareholder services feeClass A Shares 530,002
Shareholder services feeClass B Shares 100,943
Shareholder services feeClass C Shares 41,035
Share registration costs 53,849
Printing and postage 52,518
Taxes 16,061
Miscellaneous 21,525
TOTAL EXPENSES 3,795,701
Expense Reduction:
Fees paid indirectly from directed broker arrangements (15,293)
Net expenses 3,780,408
Net investment income 7,255,958
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 4,000,426
Net change in unrealized appreciation of investments (903,649)
Net realized and unrealized gain on investments 3,096,777
Change in net assets resulting from operations $ 10,352,735
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998
Increase (Decrease) in Net Assets
Operations:
<S> <C> <C>
Net investment income $ 7,255,958 $ 6,563,690
Net realized gain on investments ($6,415,282and $11,079,396, respectively, 4,000,426 11,035,163
as computed for tax purposes)
Net change in unrealized appreciation of investments (903,649) 1,575,841
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 10,352,735 19,174,694
Distributions to Shareholders:
Distributions from net investment income
Class A Shares (5,762,612) (6,313,087)
Class B Shares (781,333) (396,588)
Class C Shares (316,455) (114,568)
Distributions from net realized gains on investments
Class A Shares (9,293,762) (21,222,534)
Class B Shares (1,272,602) (737,810)
Class C Shares (512,145) (149,001)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (17,938,909) (28,933,588)
Share Transactions:
Proceeds from sale of shares 140,639,815 100,669,369
Net asset value of shares issued to shareholders in payment of distributions 15,292,348 24,499,769
declared
Cost of shares redeemed (97,770,656) (50,977,134)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 58,161,507 74,192,004
Change in net assets 50,575,333 64,433,110
Net Assets:
Beginning of period 232,948,503 168,515,393
End of period (including undistributed net investment income of $683,108 and $ 283,523,836 $ 232,948,503
$287,550, respectively)
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class A Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 19.14 $ 20.46 $ 18.96 $ 18.38 $ 16.25
Income From Investment Operations:
Net investment income 0.55 0.65 0.63 0.61 0.63
Net realized and unrealized gain on 0.45 1.37 3.34 1.81 2.21
investment
TOTAL FROM INVESTMENT OPERATIONS 1.00 2.02 3.97 2.42 2.84
Less Distributions:
Distributions from net investment income (0.53) (0.69) (0.56) (0.63) (0.62)
Distributions from net realized gain on (0.90) (2.65) (1.91) (1.21) (0.09)
investments
TOTAL DISTRIBUTIONS (1.43) (3.34) (2.47) (1.84) (0.71)
Net Asset Value, End of Period $ 18.71 $ 19.14 $ 20.46 $ 18.96 $ 18.38
Total Return1 5.35% 11.09% 23.02% 14.57% 17.99%
Ratios to Average Net Assets:
Expenses2 1.25% 1.32% 1.37% 1.37% 1.38%
Net investment income/2/ 2.85% 3.23% 2.90% 3.17% 3.40%
Expenses (after waivers) 1.25% 1.25% 1.21% 1.10% 1.07%
Net investment income (after waivers) 2.85% 3.30% 3.06% 3.44% 3.71%
Supplemental Data:
Net assets, end of period (000 omitted) $209,985 $196,149 $162,780 $130,694 $134,669
Portfolio turnover 46% 53% 87% 74% 68%
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class B Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<S> <C> <C> <C>
Year Ended October 31 1999 1998 1997 1996/1/
Net Asset Value, Beginning of Period $ 19.10 $ 20.45 $18.96 $17.89
Income From Investment Operations:
Net investment income 0.42 0.50 0.51 0.02
Net realized and unrealized gain on investments 0.45 1.37 3.34 1.05
TOTAL FROM INVESTMENT OPERATIONS 0.87 1.87 3.85 1.07
Less Distributions:
Distributions from net investment income (0.39) (0.57) (0.45)
Distributions from net realized gain on investments (0.90) (2.65) (1.91)
TOTAL DISTRIBUTIONS (1.29) (3.22) (2.36)
Net Asset Value, End of Period $ 18.68 $ 19.10 $20.45 $18.96
Total Return/2/ 4.63% 10.26% 22.20% 5.98
Ratios to Average Net Assets:
Expenses3 2.00% 2.07% 2.12% 2.11%/4/
Net investment income/3/ 2.10% 2.48% 2.15% 3.37%/4/
Expenses (after waivers) 2.00% 2.00% 1.96% 1.96%/4/
Net investment income (after waivers) 2.10% 2.55% 2.31% 3.52%/4/
Supplemental Data:
Net assets, end of period (000 omitted) $53,154 $26,487 $4,622 $ 94
Portfolio turnover 46% 53% 87% 74%
</TABLE>
1 Reflects operations for the period from August 30, 1996 (date of initial
public investment) to October 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class C Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<S> <C> <C> <C> <C>
Year Ended October 31 1999 1998 1997 1996/1/
Net Asset Value, Beginning of Period $ 19.07 $ 20.42 $18.96 $17.89
Income From Investment Operations:
Net investment income 0.42 0.50 0.47 0.04
Net realized and unrealized gain on investments 0.43 1.37 3.35 1.03
TOTAL FROM INVESTMENT OPERATIONS 0.85 1.87 3.82 1.07
Less Distributions:
Distributions from net investment income (0.39) (0.57) (0.45)
Distributions from net realized gain on investments (0.90) (2.65) (1.91)
TOTAL DISTRIBUTIONS (1.29) (3.22) (2.36)
Net Asset Value, End of Period $ 18.63 $ 19.07 $20.42 $18.96
Total Return2 4.52% 10.21% 22.08% 5.98%
Ratios to Average Net Assets:
Expenses3 2.00% 2.07% 2.12% 2.18%/4/
Net investment income3 2.10% 2.48% 2.15% 1.79%/4/
Expenses (after waivers) 2.00% 2.00% 1.96% 2.03%/4/
Net investment income (after waivers) 2.10% 2.55% 2.31% 1.94%/4/
Supplemental Data:
Net assets, end of period (000 omitted) $20,385 $10,312 $1,114 $ 2
Portfolio turnover 46% 53% 87% 74%
</TABLE>
1 Reflects operations for the period from August 30, 1996 (date of initial
public investment) to October 31, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
OCTOBER 31, 1999
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 objective of
the Fund is to provide relative safety of capital with the possibility of
long-term growth of capital and income.
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
Municipal bonds are valued by an independent pricing service, taking into
consideration yield, liquidity, risk, credit quality, coupon, maturity, type of
issue, and any other factors or market data the pricing service deems relevant.
U.S. government securities, listed corporate bonds, (other fixed income and
asset-backed securities), and unlisted securities and private placement
securities are generally valued at the mean of the latest bid and asked price as
furnished by an independent pricing service. Listed equity securities are valued
at the last sale price reported on a national securities exchange. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of 60 days or less at
the time of purchase may be valued at amortized cost, which approximates fair
market value. Investments in other open-end regulated investment companies are
valued at net asset value. Securities for which no quotations are readily
available are valued at their fair value as determined in good faith using
methods approved by the Board of Directors (the "Directors").
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 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"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Federal Taxes
It is the Fund's policy to comply with the provision of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provision for federal tax is
necessary.
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 by 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 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 the restricted security held at October 31, 1999 is
as follows:
<TABLE>
<CAPTION>
Acquisition Acquisition
Security Date Cost
<S> <C> <C>
SMFC Trust Asset- 2/4/1998 $263,484
Backed Certificates
</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.
CAPITAL STOCK
At October 31, 1999, par value shares ($0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
Class Name Number of Par Value Capital
Stock Authorized
<S> <C>
Class A Shares 750,000,000
Class B Shares 500,000,000
Class C Shares 500,000,000
TOTAL 1,750,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Class A Shares Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,882,384 $ 93,719,414 3,542,424 $ 67,544,429
Shares issued to shareholders in payment of 675,624 12,630,340 1,276,278 23,272,273
distributions declared
Shares redeemed (4,583,925) (86,666,074) (2,526,870) (48,035,912)
NET CHANGE RESULTING FROM
CLASS A SHARE TRANSACTIONS 974,083 $ 19,683,680 2,291,832 $ 42,780,790
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Class B Shares Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,752,255 $ 33,582,244 1,213,089 $ 23,170,632
Shares issued to shareholders in payment of 99,272 1,855,955 54,776 999,932
distributions declared
Shares redeemed (392,142) (7,502,838) (107,363) (2,039,916)
NET CHANGE RESULTING FROM
CLASS B SHARE TRANSACTIONS 1,459,385 $ 27,935,361 1,160,502 $ 22,130,648
</TABLE>
<TABLE>
<CAPTION>
Year Ended October 31 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Class C Shares Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 698,217 $ 13,338,157 520,556 $ 9,954,308
Shares issued to shareholders in payment of 43,196 806,053 12,508 227,564
distributions declared
Shares redeemed (188,043) (3,601,744) (46,910) (901,306)
NET CHANGE RESULTING FROM
CLASS C SHARE TRANSACTIONS 553,370 $ 10,542,466 486,154 $ 9,280,566
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 2,986,838 $ 58,161,507 3,938,488 $ 74,192,004
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee
Federated Investment Management Company, 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)
4.50% of the gross income of the Fund, excluding capital gains or losses.
Administrative Fee
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. 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 compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Shares.
The Plan provides that the Fund may incur distribution expenses according to the
following schedule annually, to compensate FSC: <TABLE> <CAPTION>
Percentage of
Average Daily Net
Share Class Name Assets of Class
- ----------------------------------------------------------
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
For the year ended October 31, 1999, Class A Shares did not incur a distribution
services fee.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts.
Transfer and Dividend Disbursing Agent Fees and Expenses
FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing
agent for the Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.
Portfolio Accounting Fees
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net asset for the period,
plus out-of-pocket expenses
Expense Reduction
The Fund directs certain portfolio trades to a broker that, in turn, pays a
portion of the Fund's operating expenses. For the year, the Fund's expenses were
reduced by $15,293 under these arrangements.
Interfund Transactions
For the year ended October 31, 1999, the Fund engaged in the purchase and sale
transactions with funds that have a common investment adviser (or affiliated
investment advisers), common Directors/Trustees, and/or common officers. These
purchase and sale transactions are made at current market value pursuant to Rule
17a-7 under the Act and amounted to $46,174,275 and $19,206,312, respectively.
General
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
year ended October 31, 1999, were as follows:
<TABLE>
<S> <C>
Purchases $164,922,851
Sales $120,903,680
</TABLE>
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
Independent Auditors' Report
TO THE BOARD OF TRUSTEES AND THE SHAREHOLDERS OF FEDERATED STOCK AND BOND FUND,
INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Federated Stock and Bond Fund, Inc. as of
October 31, 1999, the related statement of operations for the year then ended,
the statement of changes in net assets for the years ended October 31, 1999 and
1998, 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, 1999, 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 our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Stock and
Bond Fund, Inc. as of October 31, 1999, 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
Boston, Massachusetts
December 17, 1999
Directors
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
John F. Cunningham
J. Christopher Donahue
Lawrence D. Ellis, M.D.
Peter E. Madden
Charles F. Mansfield, Jr.
John E. Murray, Jr., J.D., S.J.D.
Marjorie P. Smuts
John S. Walsh
Officers
John F. Donahue
President
J. Thomas Madden
Chief Investment Officer
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President and Secretary
Richard B. Fisher
Vice President
Richard J. Thomas
Treasurer
C. Grant Anderson
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. Government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
ANNUAL REPORT
AS OF OCTOBER 31, 1999
[LOGO OF FEDERATED WORLD-CLASS INVESTMENT MANAGER]
Federated
Stock and Bond
Fund, Inc.
Incorporated 1934
ANNUAL REPORT
[LOGO OF FEDERATED INVESTORS]
Federated Stock and Bond Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor
Cusip 313911109
Cusip 313911208
Cusip 313911307
G01454-01 (12/99)
Federated is a registered mark
of Federated Investors, Inc.
1999 (c)Federated Investors, Inc.
[RECYCLED PAPER LOGO]
FEDERATED STOCK AND BOND FUND, INC.
APPENDIX 1:
The graphic presentation here displayed consists of a boxed legend in the upper
left quadrant indicating the components of the corresponding mountain chart. The
color coded mountain chart is a visual representation of the narrative text
above it. The "x" axis reflects computation periods from 12/31/68 to 10/31/99.
The "y" axis is measured in increments of $100,000 ranging from $0 to $500,000
and indicates that the ending value of a hypothetical initial investment of
$31,000,000 in the Fund's Class A Shares, assuming the reinvestment of capital
gains and dividends, would have grown to $417,158 on 10/31/99.
APPENDIX 2:
The graphic presentation here displayed consists of a boxed legend in the upper
left quadrant indicating the components of the corresponding mountain chart. The
color coded mountain chart is a visual representation of the narrative text
above it. The "x" axis reflects computation periods from 12/31/68 to 10/31/99.
The "y" axis is measured in increments of $50,000 ranging from $0 to $250,000
and indicates that the ending value of hypothetical yearly investments of $1,000
in the Fund's Class A Shares, assuming the reinvestment of capital gains and
dividends, would have grown to $222,101 on 10/31/99.
APPENDIX 3:
The graphic presentation here displayed consists of a boxed legend in the upper
left quadrant indicating the components of the corresponding mountain chart. The
color-coded mountain chart is a visual representation of the narrative text
above it. The "x" axis reflects computation periods from 10/31/89 to 10/31/99.
The "y" axis is measured in increments of $10,000 ranging from $0 to $80,000 and
indicates that the ending value of a hypothetical initial investment of $5,000
and subsequent monthly investments of $250 over 10 years in the Fund's Class A
Shares would have grown to $65,320 on 10/31/99.
APPENDIX 4:
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated Stock and Bond Fund, Inc., based on a 5.50% sales load are
represented by a solid line. The Standard & Poor's 500 Index (the "S&P 500") is
represented by a dotted line. The Lehman Brothers Government/Corporate Bond
Index (the "LBGCBI") is represented by a broken line and the Lipper Balanced
Funds Average (the "LBFA") is represented by a dashed line. The line graph is a
visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class A Shares of the Fund, the S&P 500 , the
LBGCBI and the LBFA. The "x" axis reflects computation periods from 10/31/88 to
10/31/99. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Fund's Class A
Shares, based on a 5.50% sales load, as compared to the S&P 500 , the LBGCBI and
the LBFA. The ending values were $25,998, $51,434, $21,269 and $29,508,
respectively. The legend in the top quadrant of the graphic presentation
indicates the Fund's Class A Shares Average Annual Total Returns for the
one-year, five-years and 10-years periods ended 10/31/99, and from the Fund's
start of performance (12/31/68) to 10/31/99. The total returns were (0.43%),
12.96%, 10.03% and 8.77%, respectively.
<PAGE>
APPENDIX 5:
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated Stock and Bond Fund, Inc., are represented by a solid line.
The Standard & Poor's 500 Index (the "S&P 500") is represented by a dotted line.
The Lehman Brothers Government/Corporate Bond Index (the "LBGCBI") is
represented by a broken line and the Lipper Balanced Funds Average (the "LBFA")
is represented by a dashed line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
B Shares of the Fund, the S&P 500 , the LBGCBI and the LBFA. The "x" axis
reflects computation periods from 8/30/96 to 10/31/99. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class B Shares, as compared to the S&P 500
, the LBGCBI and the LBFA. The ending values were $14,641, $21,984, $15,330 and
$12,414, respectively. The legend in the top quadrant of the graphic
presentation indicates the Fund's Class B Shares Average Annual Total Returns
for the one-year period ended 10/31/99, and from the Fund's start of performance
(8/30/96) to 10/31/99. The total returns were (0.75%), and 12.77%, respectively.
APPENDIX 6:
The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated Stock and Bond Fund, Inc., are represented by a solid line.
The Standard & Poor's 500 Index (the "S&P 500") is represented by a dotted line.
The Lehman Brothers Government/Corporate Bond Index (the "LBGCBI") is
represented by a broken line and the Lipper Balanced Funds Average (the "LBFA")
is represented by a dashed line. The line graph is a visual representation of a
comparison of change in value of a $10,000 hypothetical investment in the Class
C Shares of the Fund, the S&P 500 , the LBGCBI and the LBFA. The "x" axis
reflects computation periods from 4/19/93 to 10/31/99. The "y" axis reflects the
cost of the investment. The right margin reflects the ending value of the
hypothetical investment in the Fund's Class C Shares, as compared to the S&P 500
, the LBGCBI and the LBFA. The ending values were $19,443, $34,997, $21,120 and
$14,866, respectively. The legend in the top quadrant of the graphic
presentation indicates the Fund's Class C Shares Average Annual Total Returns
for the one-year and five-years periods ended 10/31/99, and from the Fund's
start of performance (4/19/93) to 10/31/99. The total returns were 3.55%, 13.33%
and 10.70%, respectively.
