- --------------------------------------------------------------------------------
FEDERATED
- --------------------------------------------------------------------------------
EXCHANGE
- --------------------------------------------------------------------------------
FUND, LTD.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Semi-ANNUAL REPORT
TO SHAREHOLDERS
June 30, 1995
ESTABLISHED 1977
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 314175100
8080107 (8/95)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to shareholders for Federated
Exchange Fund, Ltd. for the six-month period ended June 30, 1995. The Report
begins with an investment review by the fund's manager, followed by a complete
listing of the fund's portfolio and the financial statements.
The fund's portfolio consists of common stocks across the entire industrial
spectrum. Many of these stocks are well-known, industrial giants, and on the
last day of the reporting period included Eastman Kodak, Ford, GM, Mattel,
Philip Morris, Reebok, Sears, Texaco, Bristol-Myers Squibb, Caterpillar, General
Electric, DuPont, IBM, and AT&T.
I am very pleased to report that your fund recorded extremely strong performance
during the period. Dividends paid to shareholders totaled $0.62 per share. In
addition, the fund's net asset value increased substantially--from $68.84 on the
first day of the period to $80.77 on the last day of the period. As a result,
the fund's total return for the period was 18.28%.*
Thank you for your confidence in Federated Exchange Fund, Ltd. We will continue
to keep you informed about your investment. As always, we welcome your
questions, comments, or suggestions. Simply call Federated Investors Services
Department at 1-800-245-2423 and ask to speak with one of the fund's
representatives.
Sincerely,
John F. Donahue
President
August 15, 1995
* Past performance does not guarantee future results. Investment return and
principal value will fluctuate, therefore, investor's shares, when redeemed,
may be worth more or less than the original cost.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
FEDERATED EXCHANGE FUND, LTD.
JUNE 1995
An Interview with Peter Anderson and Tim Keefe, Co-Portfolio Managers
Q
Will you describe recent economic and market conditions that have
influenced your management of Federated Exchange Fund?
A
PETER: The economy is slowing, as predicted by most economists and
strategists. The first quarter real Gross Domestic Product ("GDP") growth
was about 2.7% (annual rate). That's down substantially from the last two
quarters of 1994, when GDP grew at a rate of over 4%--which was just too fast.
The question now is: Will growth slow further and will earnings be impacted? The
market has been concerned about this, and over the past few months less cyclical
companies have been doing somewhat better than cyclicals. We still see good
value in selected cyclicals because we don't think the economy shows any signs
of going into a recession in the near future. Aggregate corporate profits were
strong in the first quarter, and we expect that to continue, although some
cyclical areas will be affected by a sluggish economy.
Q
What impact have interest rates had on the stock market in recent months?
A
PETER: The long bond is now trading under 7.00%. It was as high as 8.15% in
late 1994. Certainly this decline in long term interest rates has been an
important factor in the strength of the stock market over the past six
months, along with strong earnings growth. The debate among economists currently
is whether the Federal Reserve Board will ease or maintain short rates at
current levels over the next several months, but this will depend on how much
the economy slows.
Q
What effect has the weak U.S. dollar had upon your portfolio decisions?
A
TIM: Many U.S. companies have benefited from the weak dollar, those which
are large exporters or have substantial international operations. This has
been a factor in our fundamental analysis of companies over the past year
or so. We have several holdings in companies which have substantial
international revenues. For example, Hewlett-Packard Co. is very big overseas,
with nearly $10 billion in sales in Europe alone last year. IBM is still getting
more than half their income from outside the U.S., and General Electric Co. is
also a very big player internationally. These companies can actually benefit
from the weakness of the dollar.
- --------------------------------------------------------------------------------
Q
How has Federated Exchange Fund been performing?
A
PETER: From December 31, 1994 through June 30, 1995, Federated Exchange
Fund had a total return of 18.28%. For the twelve months ended June 30,
1995, Federated Exchange Fund's total return was 19.58%.
Q
What are the current investment themes in the portfolio?
A
PETER: The largest sector in the fund is finance. We're overweight in this
area relative to the Standard & Poor's ("S&P") 500 Index. About 12.5% of
the portfolio consisted of finance stocks at the end of June, 1995. The S&P
500 Index has a weighting of about 11% in finance.
TIM: We own several bank stocks such as Citicorp and Bank of Boston Corp. We
also own Dean Witter, Discover & Co., which has a strong position in the credit
card business. Travelers Group, Inc., a financial services conglomerate, which
we have held for over three years, continues to do well. The financial sector
has been doing well recently since these stocks are somewhat interest rate
sensitive.
Q
What technology stocks are in the portfolio?
A
PETER: Hewlett Packard Co. is still our biggest holding in this sector. The
stock has performed well recently, after the company reported excellent
first quarter earnings. We also have positions in some well-managed
"defense conglomerates" such as Raytheon Co. and Rockwell International Corp.
Both have substantial non-defense businesses, which are doing very well.
TIM: One turnaround situation we have in information technology is IBM. The
stock declined substantially from 1990-1993, but, about a year ago, actions
taken by new management began to pay off. For the last four quarters, IBM's
earnings have exceeded expectations.
Q
What are your holdings in the industrial/manufacturing sector?
A
PETER: We're overweighted in this area. We own Caterpillar, Inc. and Deere
& Co., both of which experienced a good first quarter. Textron, Inc. a
conglomerate that's restructuring to enhance shareholder value, is our
largest holding in this sector.
- --------------------------------------------------------------------------------
Q
What other new names are in the Fund?
A
TIM: One area that looks attractive is natural gas, and the recent purchase
of Columbia Gas Systems, Inc. in the Fund is a natural gas play. Natural
gas prices have been under pressure, but, on an asset value basis, the
stock is very cheap. Enron Corp., another holding, is also a play in natural
gas.
Q
What about other recent additions to the Fund?
A
TIM: In the consumer services sector, we purchased Gannett, which owns USA
TODAY, a daily publication that has finally turned profitable. USA TODAY is
leveraging their consumer franchise, entering the international arena and
adding services. The company features substantial leverage with continued
growth, good cash flow and an excellent newspaper operation that's national in
scope.
Eastman Chemical Co. is another recent purchase. A specialty chemical company,
it is the world's leading manufacturer of PET [polyethylene terephthalate], a
plastic used to make soda bottles and other packaging. It's
capacity-constrained, and there is limited capacity coming on line. So, we don't
think that the earnings have peaked on a cyclical or secular basis.
Q
How do you view the outlook for various market sectors over the next 6
months?
A
PETER: Consumer-related stocks continue to be a difficult place to find
attractive values. Manufacturing, technology, and finance stocks will
probably be more rewarding, assuming a slowing economy doesn't eventually
turn into a recession. We're still looking for companies that are well-run and
shareholder-oriented, with a strategy for enhancing shareholder value. We want
to buy these stocks when our quantitative disciplines indicate that they are
attractively priced, I.E., undervalued.
Q
That's a lot of good detail about the Fund. Is there anything else about
your work that's new and interesting?
A
PETER: One of the things that we're doing that I think is significant is
the fact that we're now able to do more fundamental research and company
contact. We have added a number of analysts to our equity research group
over the past year. Since fundamental analysis is an important part of our
process, we can look at more companies in greater detail than ever before.
FEDERATED EXCHANGE FUND, LTD.
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
VALUE
- ---------- --------------------------------------------------------------
- ----- -----------
<C> <C> <S>
<C>
COMMON STOCKS--97.3%
- --------------------------------------------------------------------------------
- -----
BASIC INDUSTRY--7.3%
--------------------------------------------------------------
- -----
19,700 Eastman Chemical Co.
$ 1,172,150
--------------------------------------------------------------
- -----
29,800 FMC Corp.
2,004,050
--------------------------------------------------------------
- -----
29,000 Phelps Dodge Corp.
1,711,000
--------------------------------------------------------------
- -----
73,700 Praxair, Inc.
1,842,500
--------------------------------------------------------------
- ----- -----------
Total
6,729,700
--------------------------------------------------------------
- ----- -----------
CONSUMER--DURABLES--9.4%
--------------------------------------------------------------
- -----
35,500 Eastman Kodak Co.
2,152,188
--------------------------------------------------------------
- -----
52,500 Ford Motor Co.
1,561,875
--------------------------------------------------------------
- -----
59,300 General Motors Corp.
2,579,550
--------------------------------------------------------------
- -----
64,400 Mattel, Inc.
1,674,400
--------------------------------------------------------------
- -----
23,600 RJR Nabisco Holdings Corp.
657,850
--------------------------------------------------------------
- ----- -----------
Total
8,625,863
--------------------------------------------------------------
- ----- -----------
CONSUMER NON-DURABLES--9.1%
--------------------------------------------------------------
- -----
29,900 Avon Products, Inc.
2,003,300
--------------------------------------------------------------
- -----
36,000 IBP, Inc.
1,566,000
--------------------------------------------------------------
- -----
37,600 Philip Morris Cos., Inc.
2,796,500
--------------------------------------------------------------
- -----
8,000 PMI Group, Inc.
347,000
--------------------------------------------------------------
- -----
48,000 Reebok International, Ltd.
1,632,000
--------------------------------------------------------------
- ----- -----------
Total
8,344,800
--------------------------------------------------------------
- ----- -----------
CONSUMER SERVICES--6.0%
--------------------------------------------------------------
- -----
60,250 American Stores Co.
1,694,531
--------------------------------------------------------------
- -----
16,000 Gannett Co., Inc.
868,000
--------------------------------------------------------------
- -----
49,100 Sears Roebuck and Co.
2,939,863
--------------------------------------------------------------
- ----- -----------
Total
5,502,394
--------------------------------------------------------------
- ----- -----------
</TABLE>
FEDERATED EXCHANGE FUND, LTD.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
VALUE
- ---------- --------------------------------------------------------------
- ----- -----------
<C> <C> <S>
<C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------
- -----
ELECTRONIC TECHNOLOGY--4.8%
--------------------------------------------------------------
- -----
26,000 Intel Corp.
$ 1,646,125
--------------------------------------------------------------
- -----
43,900 Lockheed Martin Corp.
2,771,187
--------------------------------------------------------------
- ----- -----------
Total
4,417,312
--------------------------------------------------------------
- ----- -----------
ENERGY--9.4%
--------------------------------------------------------------
- -----
47,000 Chevron Corp.
2,191,375
--------------------------------------------------------------
- -----
27,300 Mapco, Inc.
1,583,400
--------------------------------------------------------------
- -----
31,100 Texaco Inc.
2,040,937
--------------------------------------------------------------
- -----
100,000 USX-Marathon Group
1,975,000
--------------------------------------------------------------
- -----
20,061 Western Atlas, Inc.
890,207
--------------------------------------------------------------
- ----- -----------
Total
8,680,919
--------------------------------------------------------------
- ----- -----------
ENERGY MINERALS--0.9%
--------------------------------------------------------------
- -----
23,000 Burlington Resources, Inc.
848,125
--------------------------------------------------------------
- ----- -----------
FINANCE--12.4%
--------------------------------------------------------------
- -----
25,000 American Express Co.
878,125
--------------------------------------------------------------
- -----
40,500 Bank of Boston Corp.
1,518,750
--------------------------------------------------------------
- -----
31,097 Citicorp
1,799,739
--------------------------------------------------------------
- -----
23,145 Dean Witter, Discover & Co.
1,087,815
--------------------------------------------------------------
- -----
13,400 First Interstate Bancorp
1,075,350
--------------------------------------------------------------
- -----
33,000 Mellon Bank Corp.
1,373,625
--------------------------------------------------------------
- -----
19,200 Nationsbank Corp.
1,029,600
--------------------------------------------------------------
- -----
29,500 Providian Corp.
1,069,375
--------------------------------------------------------------
- -----
36,266 Travelers Group, Inc.
1,586,637
--------------------------------------------------------------
- ----- -----------
Total
11,419,016
--------------------------------------------------------------
- ----- -----------
</TABLE>
FEDERATED EXCHANGE FUND, LTD.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
VALUE
- ---------- --------------------------------------------------------------
- ----- -----------
<C> <C> <S>
<C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------
- -----
HEALTH CARE--7.4%
--------------------------------------------------------------
- -----
29,500 American Home Products Corp.
$ 2,282,563
--------------------------------------------------------------
- -----
37,000 Becton, Dickinson & Co.
2,155,250
--------------------------------------------------------------
- -----
34,400 Bristol-Myers Squibb Co.
2,343,500
--------------------------------------------------------------
- ----- -----------
Total
6,781,313
--------------------------------------------------------------
- ----- -----------
INDUSTRIAL/MANUFACTURING--10.0%
--------------------------------------------------------------
- -----
18,500 Caterpillar, Inc.
1,188,625
--------------------------------------------------------------
- -----
11,700 Deere & Co.
1,001,813
--------------------------------------------------------------
- -----
26,100 General Electric Co.
1,471,388
--------------------------------------------------------------
- -----
22,061 Litton Industries, Inc.
813,499
--------------------------------------------------------------
- -----
19,300 Loews Corp.
2,335,300
--------------------------------------------------------------
- -----
41,700 Textron, Inc.
2,423,812
--------------------------------------------------------------
- ----- -----------
Total
9,234,437
--------------------------------------------------------------
- ----- -----------
PROCESS INDUSTRIES--2.2%
--------------------------------------------------------------
- -----
29,800 Du Point (E.I.) de Nemours & Co.
2,048,750
--------------------------------------------------------------
- ----- -----------
PRODUCER MANUFACTURING--1.5%
--------------------------------------------------------------
- -----
12,000 ITT Corp.
1,410,000
--------------------------------------------------------------
- ----- -----------
TECHNOLOGY--9.3%
--------------------------------------------------------------
- -----
37,400 Hewlett Packard Co.
2,786,300
--------------------------------------------------------------
- -----
14,000 International Business Machines
1,344,000
--------------------------------------------------------------
- -----
28,700 Raytheon Co.
2,227,838
--------------------------------------------------------------
- -----
47,700 Rockwell International Corp.
2,182,275
--------------------------------------------------------------
- ----- -----------
Total
8,540,413
--------------------------------------------------------------
- ----- -----------
UTILITIES--7.6%
--------------------------------------------------------------
- -----
40,000 AT & T Corp.
2,125,000
--------------------------------------------------------------
- -----
75,000 Columbia Gas Systems, Inc.
2,381,250
--------------------------------------------------------------
- -----
</TABLE>
FEDERATED EXCHANGE FUND, LTD.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT
VALUE
- ---------- --------------------------------------------------------------
- ----- -----------
<C> <C> <S>
<C>
COMMON STOCKS--CONTINUED
- --------------------------------------------------------------------------------
- -----
UTILITIES--CONTINUED
--------------------------------------------------------------
- -----
33,600 Enron Corp.
$ 1,180,200
--------------------------------------------------------------
- -----
60,800 MCI Communications Corp.
1,337,600
--------------------------------------------------------------
- ----- -----------
Total
7,024,050
--------------------------------------------------------------
- ----- -----------
TOTAL COMMON STOCKS (IDENTIFIED COST, $64,472,195)
89,607,092
--------------------------------------------------------------
- ----- -----------
CONVERTIBLE SECURITIES--1.8%
- --------------------------------------------------------------------------------
- -----
CONSUMER NON-DURABLES--1.1%
--------------------------------------------------------------
- -----
165,000 RJR Nabisco Holdings, Conv. Pfd., Series C
1,010,625
--------------------------------------------------------------
- ----- -----------
FINANCE--0.7%
--------------------------------------------------------------
- -----
31,709 Citicorp, Conv. Pfd., Series P, 8.25%
642,107
--------------------------------------------------------------
- ----- -----------
TOTAL CONVERTIBLE SECURITIES (IDENTIFIED COST, $1,540,208)
1,652,732
--------------------------------------------------------------
- ----- -----------
*REPURCHASE AGREEMENT--0.2%
- --------------------------------------------------------------------------------
- -----
$ 145,000 J.P. Morgan Securities, Inc., 6.125%, dated 6/30/95, due
7/3/95
(AT AMORTIZED COST)
145,000
--------------------------------------------------------------
- ----- -----------
TOTAL INVESTMENTS (IDENTIFIED COST $66,157,403) (A)
$91,404,824
--------------------------------------------------------------
- ----- -----------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(a) The cost for federal tax purposes amounts to $66,157,403. The net unrealized
appreciation of investments on a federal tax basis amounts to $25,247,421,
which is comprised of $25,635,266 appreciation and $387,845 depreciation at
June 30, 1995.
Note: The categories of investments are shown as a percentage of net assets
($92,114,542) at June 30, 1995.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EXCHANGE FUND, LTD.
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
<C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $66,157,403)
$91,404,824
- --------------------------------------------------------------------------------
Cash
3,506
- --------------------------------------------------------------------------------
Receivable for investments sold
1,603,476
- --------------------------------------------------------------------------------
Income receivable
191,190
- --------------------------------------------------------------------------------
- -----------
Total assets
93,202,996
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $797,750
- ---------------------------------------------------------------------
Distribution payable July 7, 1995, on shares requesting payment in
cash--
- ---------------------------------------------------------------------
From net investment income ($0.27 per share) 238,271
- ---------------------------------------------------------------------
Payable for shares of partnership interest redeemed 18,796
- ---------------------------------------------------------------------
Accrued expenses 33,637
- --------------------------------------------------------------------- --------
Total liabilities
1,088,454
- --------------------------------------------------------------------------------
- -----------
NET ASSETS for 1,140,441 shares of partnership interest
$92,114,542
- --------------------------------------------------------------------------------
- -----------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments, less the excess of
cost of partnership interest redeemed over proceeds from sales of partnership
interest (including shares issued to partners electing to receive payment of
distributions in shares)
$66,831,133
- --------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments
25,247,421
- --------------------------------------------------------------------------------
Undistributed net investment income
35,988
- --------------------------------------------------------------------------------
- -----------
Total Net Assets
$92,114,542
- --------------------------------------------------------------------------------
- -----------
NET ASSETS applicable to shares of partnership interest owned by:
- --------------------------------------------------------------------------------
Limited partners (1,128,526 shares)
$91,152,156
- --------------------------------------------------------------------------------
Managing General partners--
- --------------------------------------------------------------------------------
Managing partners (22 shares) 1,777
- ---------------------------------------------------------------------
Non-managing general partner (11,893 shares) 960,609
962,386
- --------------------------------------------------------------------- --------
- -----------
Net Assets (1,140,441 shares)
$92,114,542
- --------------------------------------------------------------------------------
- -----------
NET ASSET VALUE and redemption price per share of partnership interest
$80.77
- --------------------------------------------------------------------------------
- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED EXCHANGE FUND, LTD.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
<C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Dividends
$ 1,111,116
- --------------------------------------------------------------------------------
Interest
65,180
- --------------------------------------------------------------------------------
- -----------
Total investment income
1,176,296
- --------------------------------------------------------------------------------
- -----------
EXPENSES--
- --------------------------------------------------------------------------------
Investment advisory fee $291,041
- ---------------------------------------------------------------------
Fees of managing general partners not affiliated with the investment
adviser 21,061
- ---------------------------------------------------------------------
Administrative personnel and services fee 61,987
- ---------------------------------------------------------------------
Custodian and portfolio accounting fees 27,511
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 7,011
- ---------------------------------------------------------------------
Auditing fees 8,981
- ---------------------------------------------------------------------
Legal fees 5,330
- ---------------------------------------------------------------------
Printing and postage 3,441
- ---------------------------------------------------------------------
Local taxes 8,446
- ---------------------------------------------------------------------
Insurance premiums 2,534
- ---------------------------------------------------------------------
Share registration costs 120
- ---------------------------------------------------------------------
Shareholder services fee 42,803
- ---------------------------------------------------------------------
Miscellaneous 545
- --------------------------------------------------------------------- --------
Total expenses
480,811
- --------------------------------------------------------------------------------
- -----------
Net investment income
695,485
- --------------------------------------------------------------------------------
- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments
3,335,554
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments
10,461,685
- --------------------------------------------------------------------------------
- -----------
Net realized and unrealized gain (loss) on investments
13,797,239
- --------------------------------------------------------------------------------
- -----------
Change in net assets resulting from operations
$14,492,724
- --------------------------------------------------------------------------------
- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED EXCHANGE FUND, LTD.
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE
YEAR ENDED
30, 1995
DECEMBER 30,
(UNAUDITED)
1994
----------- -
- ------------
<S> <C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 695,485
$ 1,414,866
- ------------------------------------------------------------
Net realized gain (loss) on investment transactions
($3,335,554 net gain and $3,740,852 net gain,
respectively, as computed for federal income tax purposes) 3,335,554
5,307,218
- ------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments 10,461,685
(6,996,355)
- ------------------------------------------------------------ ---------- -
- ------------
Change in net assets resulting from operations 14,492,724
(274,271)
- ------------------------------------------------------------ ---------- -
- ------------
DISTRIBUTIONS TO PARTNERS--
- ------------------------------------------------------------
Distributions to partners from net investment income (712,852 )
(1,361,721)
- ------------------------------------------------------------
Distributions to partners from net realized gains on
investment transactions --
(1,407,972)
- ------------------------------------------------------------ ---------- -
- ------------
Change in net assets from distributions to partners (712,852 )
(2,769,693)
- ------------------------------------------------------------ ---------- -
- ------------
TRANSACTIONS IN SHARES OF PARTNERSHIP INTEREST--
- ------------------------------------------------------------
Cost of shares of partnership interest redeemed (3,200,179 )
(5,296,494)
- ------------------------------------------------------------
Net asset value of shares issued or issuable to partners
electing to receive payment of distributions in shares 157,832
768,903
- ------------------------------------------------------------ ---------- -
- ------------
Change in net assets from transactions in shares of
partnership interest (3,042,347 )
(4,527,591)
- ------------------------------------------------------------ ---------- -
- ------------
Change in net assets 10,737,525
(7,571,555)
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 81,377,017
88,948,572
- ------------------------------------------------------------ ---------- -
- ------------
End of period (including undistributed net investment income
of $35,988 and $53,355, respectively) $92,114,542
$81,377,017
- ------------------------------------------------------------ ---------- -
- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED EXCHANGE FUND, LTD.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEAR ENDED
DECEMBER 31,
30, 1995 -------------------------
- -----------------------------
(UNAUDITED) 1994 1993
1992 1991 1990
----------- ------ ------ -
- ----- ------ ------
<S> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 68.84 $71.39 $65.83
$61.65 $50.56 $54.93
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.61 1.18 1.13
1.36 1.16 1.46
- -----------------------------------
Net realized and unrealized gain
(loss) on investments 11.94 (1.39) 6.30
5.57 12.62 (3.86)
- ----------------------------------- -------- ------ ------ -
- ----- ------ ------
Total from investment operations 12.55 (0.21) 7.43
6.93 13.78 (2.40)
- ----------------------------------- -------- ------ ------ -
- ----- ------ ------
LESS DISTRIBUTIONS
- -----------------------------------
Dividends to partners from net
investment income (0.62) (1.14) (1.16)
(1.38) (1.15) (1.51)
- -----------------------------------
Distributions to partners from
net realized gains on investment
transactions -- (1.20) (0.71)
(1.37) (1.54) (0.46)
- ----------------------------------- -------- ------ ------ -
- ----- ------ ------
Total distributions (0.62) (2.34) (1.87)
(2.75) (2.69) (1.97)
- ----------------------------------- -------- ------ ------ -
- ----- ------ ------
NET ASSET VALUE, END OF PERIOD $ 80.77 $68.84 $71.39
$65.83 $61.65 $50.56
- ----------------------------------- -------- ------ ------ -
- ----- ------ ------
TOTAL RETURN(A) 18.28% (.30%) 11.31%
11.38% 27.42% (4.43%)
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 1.12%(b) 1.15% 1.15%
1.11% 1.12% 1.07%
- -----------------------------------
Net investment income 1.62%(b) 1.63% 1.59%
2.13% 1.97% 2.76%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000
omitted) $92,115 $81,377 $88,949
$91,551 $90,503 $79,114
- -----------------------------------
Portfolio turnover 15% 23% 26%
47% 54% 61%
- -----------------------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
FEDERATED EXCHANGE FUND, LTD.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Exchange Fund, Ltd. (the "Fund") is a limited partnership formed under
The Uniform Limited Partnership Act of California and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. Pursuant to the Fund's Partnership Agreement, all
partnership interests, whether of a limited partner or a general partner, are
represented by shares of the same class.
(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 COSTS--The Fund's initial portfolio was acquired on January 1,
1977, in an exchange of Fund shares of partnership interest for securities
deposited by investors. The federal income tax cost of the securities is
based on the individual investor's tax cost basis immediately prior to the
exchange, or, if acquired subsequently, the Fund's purchase cost.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities and
short-term securities are generally valued at the prices provided by an
independent pricing service. 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 guidelines and/or
standards reviewed or established by the Managing General Partners. 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.
FEDERATED EXCHANGE FUND, LTD.
- --------------------------------------------------------------------------------
INVESTMENT INCOME AND EXPENSES--Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code").
INCOME TAXES AND DISTRIBUTIONS TO PARTNERS--No provision is made by the
Fund for federal or state taxes on the taxable income of the partnership
because each partner is individually responsible for the payment of any
taxes on his share of such taxable income. The Managing General Partners
may distribute net investment income, exclusive of capital gains, to the
holders of shares annually or at more frequent intervals. The Managing
General Partners will determine annually what portion, if any, of the
partnership's net realized capital gains will be distributed.
(3) SHARES OF PARTNERSHIP INTEREST
Transactions in shares of partnership interest were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED
JUNE 30, 1995
DECEMBER 31, 1994
-------------- ----
- --------------
<S> <C> <C>
- -------------------------------------------------------
Shares of partnership interest redeemed (43,664)
(74,930)
- -------------------------------------------------------
Shares issued or issuable to partners electing to
receive payment of distributions in shares 2,045
11,082
- ------------------------------------------------------- ----------- ----
- ---------
Net change resulting from partnership transactions (41,619)
(63,848)
- ------------------------------------------------------- ----------- ----
- ---------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee. Such
fee is paid daily based on annual rates of: (a) 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. The Adviser may voluntarily choose to waive a portion
of its fee. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund administrative personnel
and services. The FAS fee is based on the level of average aggregate daily net
assets of all funds advised by subsidiaries of Federated Investors for the
period. The administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average daily net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts.
FEDERATED EXCHANGE FUND, LTD.
- --------------------------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company serves as transfer and dividend disbursing agent for the Fund.
The fee is based on the size, type, and number of accounts and transactions by
shareholders.
Certain of the Managing General Partners of the Fund are Officers and Directors
or Trustees of the above corporations.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1995:
<TABLE>
<S>
<C>
- -------------------------------------------------------------------------------
PURCHASES
$12,305,734
- -------------------------------------------------------------------------------
- -----------
SALES
$13,060,951
- -------------------------------------------------------------------------------
- -----------
</TABLE>
In addition, investments having an aggregate market value of $2,689,469 at dates
of redemption were distributed in payment for shares of partnership interest
redeemed.
<TABLE>
<S> <C>
MANAGING
GENERAL PARTNERS OFFICERS
- --------------------------------------------------------------------------------
- -------------
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 and
Secretary
Gregor F. Meyer Richard B. Fisher
John E. Murray, Jr. Vice President
Wesley W. Posvar David M. Taylor
Marjorie P. Smuts Treasurer
Robert C. Rosselot
NON-MANAGING GENERAL PARTNER Assistant Secretary
Exchange Fund Research Corp.
</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.
