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Federated Investors
World-Class Investment Manager
Richard B. Fisher
President
Federated Utility Fund, Inc.
Dear Fellow Shareholder:
Federated Utility Fund, Inc. was created in 1988, and I am pleased to present its 13th Semi-Annual Report. The fund invests in good dividend-paying utility corporations--well-known and recognized companies--that supply light, heat and telecommunications services and products to millions of utility customers.1
The fund's total assets of $1.2 billion are invested in 57 corporations with a current yield of 2.9%. Domestic utilities make up 67% of the fund's holdings. SBC Communications, El Paso Energy, Edison International, and Enron are typical fund investments.
The fund's managers seek current income and growth in a broadly diversified portfolio in four distinct sectors: electrics, communications, natural gas and non-utility energy and/or telecommunication-related companies. These sector issues provide income and growth opportunities for shareholders.
This report covers the first half of the fund's fiscal year which is the six-month reporting period from March 1, 2000 through August 31, 2000. It begins with an interview with Steven J. Lehman, Vice President, who co-manages the fund with Linda A. Duessel, Senior Vice President, both of Passport Research, Ltd. Following their discussion of the current utility industry environment and the fund's performance, as well as its strategy and holdings, 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 37 holdings in stocks and 29 convertible securities, and third is the publication of the fund's financial statements. I urge all shareholders to review the fund's portfolio.
In the fund's history, share prices have declined only in 1994, when the Federal Reserve Board (the "Fed") increased rates five times. In 2000, the Fed has increased rates six times, which has had a negative effect on bonds and interest rate-sensitive securities, such as utilities. Naturally, the fund's share value was reduced in the last six months. However, from the end of 1994 to the present, the fund has performed very well. I believe the broad diversification, various sector weightings and the fund managers' investment strategy of using high-quality utility stocks positions the fund to serve investors well.
1 Funds whose investments are concentrated in a specific industry or sector may be subject to a higher degree of market risk than funds whose investments are diversified. Utility securities are interest rate sensitive, and a rise in interest rates can cause their value to fall.
During the six-month reporting period, the U.S. stock market recorded positive, but less-spectacular returns, as gains were concentrated among the relatively few large stocks that dominate the indexes used to measure the market. In this environment, the fund's low risk is becoming more of an attribute. The fund's beta of 0.6 means it is less volatile than the stock market overall.2
Individual share class total return performance for the six-month reporting period, including income and realized gains distributions, follows.3
|
|
Total Return |
|
Income |
|
Capital Gains |
|
Net Asset Value Change |
Class A Shares |
|
2.33% |
|
$0.179 |
|
$0.144 |
|
$11.62 to $11.55 = (0.60%) |
Class B Shares |
|
1.93% |
|
$0.135 |
|
$0.144 |
|
$11.63 to $11.56 = (0.60%) |
Class C Shares |
|
1.94% |
|
$0.135 |
|
$0.144 |
|
$11.62 to $11.55 = (0.60%) |
Class F Shares |
|
2.34% |
|
$0.180 |
|
$0.144 |
|
$11.62 to $11.55 = (0.60%) |
The U.S. economy remains relatively strong, inflation fears continue to be low, and the stock market continues to experience considerable day-to-day volatility. In this environment, the $1.2 billion Federated Utility Fund offers the conservative investor a disciplined approach to a fundamental market that has a long tradition of generating strong earnings and dividends.
Thank you for being among the approximately 90,000 shareholders who participate in the income and growth opportunities of the many vital utility services represented in your fund's portfolio. Remember, reinvesting your earnings is a convenient way to build the value of your account and help your shares increase through the benefit of monthly compounding of earnings.
As always, we welcome your comments and suggestions.
Sincerely,
Richard B. Fisher
Richard B. Fisher
President
October 15, 2000
2 Beta is a measure of a fund's or stock's volatility compared to that of the overall stock market, which, as measured by the S&P 500 Index, has a beta of 1.00. A fund with a lower beta can be expected to fluctuate in value less than the S&P 500 Index, whereas a fund with a higher beta will fluctuate more. A beta of 0.50 means that a fund can be expected to fluctuate in value half as much as the S&P 500 Index. The S&P 500 Index comprises common stocks in industry, transportation, and financial and public utility companies. This index is unmanaged and investments cannot be made in an index.
3 Performance quoted is based on net asset value, represents 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 for the six-month reporting period, based on offering price (i.e., less any applicable sales charge), for Class A, B, C and F Shares were (3.33%), (3.53%), 0.94% and 0.31%, respectively.
Steven J. Lehman
Vice President
Passport Research Ltd.
Linda A. Duessel
Senior Vice President
Passport Research Ltd.
Over the six-month reporting period, the Standard & Poor's (S&P) Utility Index returned 34.07%, and the S&P Communications Index returned (13.71%), compared to the S&P 500 Index return of 11.72%.1
US West, which merged with Qwest on June 30, returned 22.0% during the period. SBC Communications, the leading local incumbent carrier, returned 11.95%.
1 The S&P Utility Index is an unmanaged index comprising electric and natural gas utilities that track daily changes in the price of stocks. The S&P Communications Index, is an unmanaged index comprising telephone and communications-oriented utilities that track daily changes in the price of stocks. The S&P 500 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.
Natural gas stocks regained their terrific performance this year as natural gas prices hit record highs, a result of low production in the U.S. and Canada combined with rising demand. A sharp increase in gas-fired power plants has led to higher summer demand for gas, and technological advances in fuel cells and distributed generation of power at the customer's site increase the long-term demand. El Paso Energy, our largest holding along with pending merger partner Coastal Corp, returned 58.86% in the six-month reporting period. We expect tight gas market conditions to persist through next winter. Natural gas stocks continue to seem attractive.
Our top performer was Duke Energy, which returned 55.41%. We have emphasized natural gas and energy companies, along with telecommunication companies, instead of traditional electric utilities. The telecommunication and gas sectors seem to have superior growth prospects, and the decline in telecommunication stocks this year has improved their valuations, in our view. Among electric companies, we have favored unregulated power producers rather than local electric utility distribution companies.
No. We continue to favor telecommunications and utilities. Telecommunications services stocks on August 31, 2000 comprised 39% of the fund's net asset, utilities comprised 37%, and energy companies were at 8%.
Across every sector, we continue to emphasize companies that have strong cash flow and the management skill to deploy that cash into potentially attractive returns for shareholders.
For the first half of the fund's fiscal year, the fund's Class A Shares returned 2.33%, based on net asset value, compared to the return of 34.07% for the S&P Utility Index and the (13.71%) return of the S&P Communications Index. The fund's Class B, C and F Shares produced total returns of 1.93%, 1.94% and 2.34%, respectively, based on net asset value.2 The fund has exceptionally low risk (a beta of 0.60), so it is less than half as volatile as the stock market overall.3 Furthermore, the fund's dividend yield was 2.9% after expense as of August 31, 2000.
2 Performance quoted is based on net asset value, represents 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 for the period, based on offering price (i.e. less any applicable sales charge), for Class A, B, C and F Shares were (3.33%), (3.53%), 0.94% and 0.31%, respectively.
3 Beta is a measure of a fund's or stock's volatility compared to that of the overall stock market, which, as measured by the S&P 500 Index, has a beta of 1.00. A fund with a lower beta can be expected to fluctuate in value less than the S&P 500 Index, whereas a fund with a higher beta will fluctuate more. A beta of 0.50 means that a fund can be expected to fluctuate in value half as much as the S&P 500 Index.
Sector allocations were as follows:
Sector |
|
Percentage of |
|
Number |
Telecommunications |
|
39.17% |
|
32 |
Utilities |
|
36.79% |
|
19 |
Energy |
|
8.07% |
|
5 |
Consumer Staples |
|
6.34% |
|
5 |
Technology |
|
4.44% |
|
5 |
Cash Equivalents |
|
5.00% |
|
1 |
The top holdings were:
Company/Country |
|
Sector |
|
Percentage |
Coastal Corp. PRIDES (U.S.) |
|
Utilities |
|
3.38% |
El Paso Energy Corp. (U.S.) |
|
Utilites |
|
3.08% |
Worldcom, Inc. (U.S.) |
|
Communications |
|
3.04% |
Williams Companies, Inc. (U.S.) |
|
Utilities |
|
2.95% |
SBC Communications, Inc. (U.S.) |
|
Communications |
|
2.79% |
The following are examples of recent purchases:
Comcast (1.65% of net assets): Comcast is a leading U.S. cable company that we expect to benefit from strong demand for broadband internet access to homes.
Allegiance Telecom (1.20% of net assets): Allegiance is a leading emerging competitive telecommunications carrier that focuses on the underserved small business market in the United States.
We continue to favor telecommunications and natural gas stocks. The growth in demand for new telecommunications services remains robust, but investors seem troubled by the uncertainty caused by rapid changes in the industry, along with increased competition. The telecommunications sector continues to grow faster than the overall economy, and the stocks seem undervalued--particularly on a cash flow-to-growth basis. The recent decline in telecommunications stock prices presents attractive buying opportunities.
This is a period of unprecedented change for the utility sector. In this seemingly precarious market environment, we believe the utility sector offers strong prospects for growth, value, and safety relative to other equity investments. Of course, utilities in general offer relative safety due to the essential nature of their services.
If you had made an initial investment of $13,000 in the Class A Shares of Federated Utility Fund, Inc. on 5/27/88, reinvested your dividends and capital gains, and did not redeem any shares, your account would have been worth $51,334 on 8/31/00. You would have earned a 11.85%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 9/30/00, the Class A Shares' average annual 1-year, 5-year, and 10-year total returns were (3.46%), 10.08%, and 11.64%, respectively. Class B Shares' average annual 1-year, 5-year, and since inception (9/28/94) total returns were (3.81%), 10.26%, and 11.29%, respectively. Class C Shares' average annual 1-year, 5-year, and since inception (4/27/93) total returns were 0.43%, 10.49%, and 8.94%, respectively. Class F Shares' average annual 1-year and since inception (6/1/96) total returns were 0.23% and 10.99%, respectively.2
[Graphic Representation Omitted - See Appendix]
1 Total return represents the change in the value of an investment after reinvesting 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 is no guarantee of 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; Class F Shares, 1.00% sales charge and 1.00% contingent deferred sales charge.
$1,000 initial investment and subsequent investments of $1,000 each year for 12 years (reinvesting all dividends and capital gains) grew to $26,436.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Federated Utility Fund, Inc. on 5/27/88, reinvested your dividends and capital gains, and did not redeem any shares, you would have invested only $13,000, but your account would have reached a total value of $26,4361 by 8/31/00. You would have earned an average annual total return of 10.74%.
A practical investment plan helps you pursue long-term performance from utility securities. Through systematic investing, you buy shares on a regular basis and reinvest all earnings. An investment plan can work for 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]
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.
AUGUST 31, 2000 (UNAUDITED)
Shares |
|
|
|
|
Value |
|
|
|
|
COMMON STOCKS--49.7% |
|
|
|
|
|
|
Communication Services--19.5% |
|
|
|
|
383,600 |
1 |
Adelphia Business Solutions, Inc. |
|
$ |
5,730,025 |
|
297,200 |
1 |
Allegiance Telecom, Inc. |
|
|
14,804,275 |
|
474,100 |
|
Alltel Corp. |
|
|
23,971,681 |
|
648,000 |
|
BellSouth Corp. |
|
|
24,178,500 |
|
49,000 |
|
British Telecommunication PLC, ADR |
|
|
6,259,750 |
|
419,000 |
|
CenturyTel, Inc. |
|
|
12,072,437 |
|
282,000 |
1 |
ITXC Corp. |
|
|
5,640,000 |
|
165,800 |
1 |
NEXTLINK Communications, Inc. |
|
|
5,813,378 |
|
194,000 |
|
Nippon Telegraph & Telephone Corp., ADR |
|
|
11,676,375 |
|
825,500 |
|
SBC Communications, Inc. |
|
|
34,464,625 |
|
226,000 |
|
Telefonica SA, ADR |
|
|
12,952,625 |
|
224,500 |
|
Telefonos de Mexico, Class L, ADR |
|
|
12,221,219 |
|
558,140 |
|
Verizon Communications |
|
|
24,348,858 |
|
156,900 |
1 |
Viatel, Inc. |
|
|
2,147,569 |
|
121,900 |
1 |
Western Wireless Corp., Class A |
|
|
6,232,138 |
|
8,256 |
1 |
WinStar Communications, Inc. |
|
|
221,879 |
|
1,028,500 |
1 |
Worldcom, Inc. |
|
|
37,540,250 |
|
||||||
|
|
|
TOTAL |
|
|
240,275,584 |
|
||||||
|
|
|
Consumer Staples--2.5% |
|
|
|
|
547,500 |
1 |
Comcast Corp., Class A |
|
|
20,394,375 |
|
167,000 |
1 |
Cox Communications, Inc., Class A |
|
|
5,938,937 |
|
214,700 |
1 |
RCN Corp. |
|
|
5,206,475 |
|
||||||
|
|
|
TOTAL |
|
|
31,539,787 |
|
||||||
|
|
|
Energy--2.1% |
|
|
|
|
321,000 |
|
Burlington Resources, Inc. |
|
|
12,619,312 |
|
219,700 |
|
Phillips Petroleum Co. |
|
|
13,593,938 |
|
||||||
|
|
|
TOTAL |
|
|
26,213,250 |
|
||||||
Shares |
|
|
|
|
Value |
|
|
|
|
COMMON STOCKS--continued |
|
|
|
|
|
|
Technology--2.8% |
|
|
|
|
307,500 |
|
Motorola, Inc. |
|
$ |
11,089,219 |
|
377,700 |
|
Nokia Oyj, Class A, ADR |
|
|
16,972,894 |
|
533,000 |
1 |
Northpoint Communications Group, Inc. |
|
|
6,096,188 |
|
||||||
|
|
|
TOTAL |
|
|
34,158,301 |
|
||||||
|
|
|
Utilities--22.8% |
|
|
|
|
232,200 |
|
Duke Energy Corp. |
|
|
17,371,462 |
|
598,400 |
|
Dynegy, Inc. |
|
|
26,928,000 |
|
1,143,000 |
|
Edison International |
|
|
23,645,812 |
|
653,100 |
|
El Paso Energy Corp. |
|
|
38,043,075 |
|
401,000 |
|
Enron Corp. |
|
|
34,034,874 |
|
341,200 |
|
FPL Group, Inc. |
|
|
18,211,550 |
|
616,100 |
|
KeySpan Corp. |
|
|
21,216,944 |
|
575,600 |
|
Montana Power Co. |
|
|
20,757,575 |
|
467,400 |
|
NICOR, Inc. |
|
|
17,235,375 |
|
304,700 |
|
Peoples Energy Corp. |
|
|
9,902,750 |
|
495,700 |
|
TXU Corp. |
|
|
17,318,519 |
|
790,000 |
|
Williams Cos., Inc. (The) |
|
|
36,389,375 |
|
||||||
|
|
|
TOTAL |
|
|
281,055,311 |
|
||||||
|
|
|
TOTAL COMMON STOCKS (IDENTIFIED COST $580,277,388) |
|
|
613,242,233 |
|
||||||
|
|
|
PREFERRED STOCKS--38.5% |
|
|
|
|
|
|
Communication Services--14.4% |
|
|
|
|
308,300 |
2, 3 |
Alliant Energy Corp., Conv. Pfd., $4.91 (into McLeod USA) |
|
|
18,435,415 |
|
306,000 |
|
BroadWing, Inc., Cumulative Conv. Pfd., Series B, $3.38 |
|
|
15,223,500 |
|
321,800 |
|
Cox Communications, Inc., PRIDES, Sprint PCS, $6.59 |
|
|
30,731,900 |
|
215,500 |
|
Crown Castle International Corp., Conv. Pfd., $3.13 |
|
|
12,014,340 |
|
64,500 |
|
Global Crossing Ltd., Conv. Pfd., $17.06 |
|
|
15,802,500 |
|
704,500 |
|
Global TeleSystems Group, Inc., Conv. Pfd., $3.63 |
|
|
13,649,688 |
|
158,900 |
|
NEXTLINK Communications, Inc., Conv. Pfd., $3.25 |
|
|
26,397,263 |
|
344,800 |
2, 3 |
Qwest Communications International, Inc., Conv. Pfd., $2.40 |
|
|
28,923,203 |
|
213,600 |
2, 3 |
Viatel, Inc., Conv. Pfd., $3.88 |
|
|
4,512,300 |
|
7,750 |
2, 3 |
WinStar Communications, Inc., Conv. Pfd., $1.81 |
|
|
6,340,430 |
|
7,300 |
2, 3 |
WinStar Communications, Inc., Conv. Pfd., Series F, $72.50 |
|
|
5,986,000 |
|
||||||
|
|
|
TOTAL |
|
|
178,016,539 |
|
||||||
Shares or |
|
|
|
|
Value |
|
|
|
|
PREFERRED STOCKS--continued |
|
|
|
|
|
|
Consumer Staples--3.8% |
|
|
|
|
332,200 |
|
Cox Communications, Inc., PRIDES, $3.54 |
|
$ |
16,485,425 |
|
745,000 |
|
MediaOne Group, Inc., DECS, $3.26 |
|
|
30,172,500 |
|
||||||
|
|
|
TOTAL |
|
|
46,657,925 |
|
||||||
|
|
|
Energy--4.6% |
|
|
|
|
506,000 |
|
Apache Corp., Conv. Pfd., $2.02 |
|
|
27,418,875 |
|
550,300 |
|
Kerr-McGee Corp., DECS, $1.83 |
|
|
29,578,625 |
|
||||||
|
|
|
TOTAL |
|
|
56,997,500 |
|
||||||
|
|
|
Technology--1.7% |
|
|
|
|
165,000 |
|
Metromedia Fiber Network, Inc., DECS, $2.46 |
|
|
11,385,000 |
|
347,000 |
2, 3 |
PsiNet, Inc., Conv. Pfd., $3.50 |
|
|
9,176,762 |
|
||||||
|
|
|
TOTAL |
|
|
20,561,762 |
|
||||||
|
|
|
Utilities--14.0% |
|
|
|
|
225,200 |
2, 3 |
AES Corp., Conv. Pfd., $3.00 |
|
|
17,248,969 |
|
729,500 |
|
CMS Energy Corp., Conv. Pfd., $3.56 |
|
|
23,799,937 |
|
352,000 |
2, 3 |
Calpine Corp., Conv. Pfd., $2.50 |
|
|
22,792,000 |
|
1,086,700 |
|
Coastal Corp., PRIDES, $1.72 |
|
|
41,634,194 |
|
819,500 |
|
Enron Corp., Note, $1.49 |
|
|
28,170,313 |
|
461,100 |
|
K N Energy, Inc., Conv. Pfd., $3.55 |
|
|
23,314,369 |
|
592,000 |
2 |
Utilicorp United, Inc., Conv. Pfd., $2.15 |
|
|
15,651,000 |
|
||||||
|
|
|
TOTAL |
|
|
172,610,782 |
|
||||||
|
|
|
TOTAL PREFERRED STOCKS (IDENTIFIED COST $450,678,909) |
|
|
474,844,508 |
|
||||||
|
|
|
CORPORATE BONDS--6.6% |
|
|
|
|
|
|
Communication Services--5.3% |
|
|
|
$ |
19,825,000 |
|
Level 3 Communications, Inc., Conv. Bond, 6.00%, 3/15/2010 |
|
|
18,479,477 |
|
9,000,000 |
|
Level 3 Communications, Inc., Conv. Bond, 6.00%, 9/15/2009 |
|
|
13,089,150 |
|
15,400,000 |
2, 3 |
NEXTEL Communications, Inc., Conv. Bond, 5.25%, 1/15/2010 |
|
|
15,786,232 |
|
25,300,000 |
2, 3 |
NTL, Inc., Conv. Bond, 5.75%, 12/15/2009 |
|
|
17,397,545 |
|
||||||
|
|
|
TOTAL |
|
|
64,752,404 |
|
||||||
|
|
|
Energy--1.3% |
|
|
|
|
13,500,000 |
|
Kerr-McGee Corp., Conv. Bond, 5.25%, 2/15/2010 |
|
|
16,286,130 |
|
||||||
|
|
|
TOTAL CORPORATE BONDS (IDENTIFIED COST $83,526,216) |
|
|
81,038,534 |
|
||||||
Shares |
|
|
|
|
Value |
|
|
|
|
MUTUAL FUNDS--5.7%4 |
|
|
|
|
69,913,229 |
|
Prime Value Obligations Fund, Class IS (at net asset value) |
|
$ |
69,913,229 |
|
||||||
|
|
|
TOTAL INVESTMENTS (IDENTIFIED COST $1,184,395,742)5 |
|
$ |
1,239,038,504 |
|
1 Non-income producing security.
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. At August 31, 2000, these securities amounted to $162,249,856 which represents 13.2% of net assets. Included in these amounts, securities which have been deemed liquid amount to $146,598,856 which represents 11.9% of net assets.
3 Denotes a restricted security that has been deemed liquid by criteria approved by the fund's Board of Trustees.
4 Pursuant to an Exemptive Order, the Fund may invest in Prime Value Obligations Fund which is managed by Federated Investment Management Company, the Fund's adviser. Federated Investment Management Company has agreed to reimburse certain investment advisory fees as a result of these transactions.
5 The cost of investments for federal tax purposes amounts to $1,184,395,742. The net unrealized appreciation of investments on a federal tax basis amounts to $54,642,762 which is comprised of $176,577,329 appreciation and $121,934,567 depreciation at August 31, 2000.
Note: The categories of investments are shown as a percentage of net assets ($1,233,209,164) at August 31, 2000.
The following acronyms are used throughout this portfolio:
ADR |
--American Depositary Receipt |
DECS |
--Dividend Enhanced Convertible Stock |
PRIDES |
--Preferred Redeemable Increased Dividend Equity Securities |
See Notes which are an integral part of the Financial Statements
AUGUST 31, 2000 (UNAUDITED)
Assets: |
|
|
|
|
|
|
Total investments in securities, at value (identified and tax cost $1,184,395,742) |
|
|
|
|
$ |
1,239,038,504 |
Income receivable |
|
|
|
|
|
2,451,251 |
Receivable for investments sold |
|
|
|
|
|
4,940,185 |
Receivable for shares sold |
|
|
|
|
|
164,311 |
|
||||||
TOTAL ASSETS |
|
|
|
|
|
1,246,594,251 |
|
||||||
Liabilities: |
|
|
|
|
|
|
Payable for investments purchased |
|
$ |
10,851,671 |
|
|
|
Payable for shares redeemed |
|
|
1,488,127 |
|
|
|
Income distribution payable |
|
|
484,324 |
|
|
|
Accrued expenses |
|
|
560,965 |
|
|
|
|
||||||
TOTAL LIABILITIES |
|
|
|
|
|
13,385,087 |
|
||||||
Net assets for 106,782,071 shares outstanding |
|
|
|
|
$ |
1,233,209,164 |
|
||||||
Net Assets Consist of: |
|
|
|
|
|
|
Paid-in capital |
|
|
|
|
$ |
1,101,595,292 |
Net unrealized appreciation of investments |
|
|
|
|
|
54,642,762 |
Accumulated net realized gain on investments and foreign currency transactions |
|
|
|
|
|
72,573,198 |
Undistributed net investment income |
|
|
|
|
|
4,397,912 |
|
||||||
TOTAL NET ASSETS |
|
|
|
|
$ |
1,233,209,164 |
|
||||||
Net Asset Value, Offering Price and Redemption Proceeds Per Share |
|
|
|
|
|
|
Class A Shares: |
|
|
|
|
|
|
Net Asset Value Per Share ($650,708,125 ÷ 56,347,747 shares outstanding) |
|
|
|
|
|
$11.55 |
|
||||||
Offering Price Per Share (100/94.50 of $11.55)1 |
|
|
|
|
|
$12.22 |
|
||||||
Redemption Proceeds Per Share |
|
|
|
|
|
$11.55 |
|
||||||
Class B Shares: |
|
|
|
|
|
|
Net Asset Value Per Share ($125,564,180 ÷ 10,864,467 shares outstanding) |
|
|
|
|
|
$11.56 |
|
||||||
Offering Price Per Share |
|
|
|
|
|
$11.56 |
|
||||||
Redemption Proceeds Per Share (94.50/100 of $11.56)1 |
|
|
|
|
|
$10.92 |
|
||||||
Class C Shares: |
|
|
|
|
|
|
Net Asset Value Per Share ($45,448,367 ÷ 3,936,107 shares outstanding) |
|
|
|
|
|
$11.55 |
|
||||||
Offering Price Per Share |
|
|
|
|
|
$11.55 |
|
||||||
Redemption Proceeds Per Share (99.00/100 of $11.55)1 |
|
|
|
|
|
$11.43 |
|
||||||
Class F Shares: |
|
|
|
|
|
|
Net Asset Value Per Share ($411,488,492 ÷ 35,633,750 shares outstanding) |
|
|
|
|
|
$11.55 |
|
||||||
Offering Price Per Share (100/99.00 of $11.55)1 |
|
|
|
|
|
$11.67 |
|
||||||
Redemption Proceeds Per Share (99.00/100 of $11.55)1 |
|
|
|
|
|
$11.43 |
|
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
SIX MONTHS ENDED AUGUST 31, 2000 (UNAUDITED)
Investment Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends (net of foreign taxes withheld of $97,312) |
|
|
|
|
|
|
|
|
|
$ |
21,665,123 |
|
Interest |
|
|
|
|
|
|
|
|
|
|
3,498,727 |
|
|
||||||||||||
TOTAL INCOME |
|
|
|
|
|
|
|
|
|
|
25,163,850 |
|
|
||||||||||||
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Investment adviser fee |
|
|
|
|
|
$ |
4,841,827 |
|
|
|
|
|
Administrative personnel and services fee |
|
|
|
|
|
|
486,119 |
|
|
|
|
|
Custodian fees |
|
|
|
|
|
|
43,254 |
|
|
|
|
|
Transfer and dividend disbursing agent fees and expenses |
|
|
|
|
|
|
687,539 |
|
|
|
|
|
Directors'/Trustees' fees |
|
|
|
|
|
|
10,329 |
|
|
|
|
|
Auditing fees |
|
|
|
|
|
|
7,101 |
|
|
|
|
|
Legal fees |
|
|
|
|
|
|
3,228 |
|
|
|
|
|
Portfolio accounting fees |
|
|
|
|
|
|
77,469 |
|
|
|
|
|
Distribution services fee--Class B Shares |
|
|
|
|
|
|
492,146 |
|
|
|
|
|
Distribution services fee--Class C Shares |
|
|
|
|
|
|
184,397 |
|
|
|
|
|
Shareholder services fee--Class A Shares |
|
|
|
|
|
|
839,533 |
|
|
|
|
|
Shareholder services fee--Class B Shares |
|
|
|
|
|
|
164,049 |
|
|
|
|
|
Shareholder services fee--Class C Shares |
|
|
|
|
|
|
61,466 |
|
|
|
|
|
Shareholder services fee--Class F Shares |
|
|
|
|
|
|
548,895 |
|
|
|
|
|
Share registration costs |
|
|
|
|
|
|
51,000 |
|
|
|
|
|
Printing and postage |
|
|
|
|
|
|
137,508 |
|
|
|
|
|
Insurance premiums |
|
|
|
|
|
|
1,937 |
|
|
|
|
|
Taxes |
|
|
|
|
|
|
52,937 |
|
|
|
|
|
Miscellaneous |
|
|
|
|
|
|
27,760 |
|
|
|
|
|
|
||||||||||||
TOTAL EXPENSES |
|
|
|
|
|
|
8,718,494 |
|
|
|
|
|
|
||||||||||||
Waivers/Reimbursement and Expense Reduction: |
|
|
|
|
|
|
|
|
|
|
|
|
Waiver of shareholder services fee--Class A Shares |
|
$ |
(20,149 |
) |
|
|
|
|
|
|
|
|
Waiver of shareholder services fee--Class F Shares |
|
|
(65,867 |
) |
|
|
|
|
|
|
|
|
Reimbursement of investment adviser fee |
|
|
(1,071 |
) |
|
|
|
|
|
|
|
|
Fees paid indirectly from directed broker arrangements |
|
|
(17,206 |
) |
|
|
|
|
|
|
|
|
|
||||||||||||
TOTAL WAIVERS/REIMBURSEMENT AND EXPENSE REDUCTION |
|
|
|
|
|
|
(104,293 |
) |
|
|
|
|
|
||||||||||||
Net expenses |
|
|
|
|
|
|
|
|
|
|
8,614,201 |
|
|
||||||||||||
Net investment income |
|
|
|
|
|
|
|
|
|
|
16,549,649 |
|
|
||||||||||||
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain on investments and foreign currency transactions |
|
|
|
|
|
|
|
|
|
|
77,452,467 |
|
Net change in unrealized appreciation of investments |
|
|
|
|
|
|
|
|
|
|
(64,843,604 |
) |
|
||||||||||||
Net realized and unrealized gain on investments and foreign currency transactions |
|
|
|
|
|
|
|
|
|
|
12,608,863 |
|
|
||||||||||||
Change in net assets resulting from operations |
|
|
|
|
|
|
|
|
|
$ |
29,158,512 |
|
|
See Notes which are an integral part of the Financial Statements
|
|
|
Six Months |
|
|
|
Year Ended |
|
Increase (Decrease) in Net Assets |
|
|
|
|
|
|
|
|
Operations: |
|
|
|
|
|
|
|
|
Net investment income |
|
$ |
16,549,649 |
|
|
$ |
41,447,774 |
|
Net realized gain on investments and foreign currency transactions ($77,452,467 and $71,660,057, respectively, as computed for federal tax purposes) |
|
|
77,452,467 |
|
|
|
69,414,121 |
|
Net change in unrealized appreciation of investments |
|
|
(64,843,604 |
) |
|
|
(27,056,191 |
) |
|
||||||||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS |
|
|
29,158,512 |
|
|
|
83,805,704 |
|
|
||||||||
Distributions to Shareholders: |
|
|
|
|
|
|
|
|
Distributions from net investment income |
|
|
|
|
|
|
|
|
Class A Shares |
|
|
(10,237,816 |
) |
|
|
(21,775,165 |
) |
Class B Shares |
|
|
(1,506,897 |
) |
|
|
(3,155,014 |
) |
Class C Shares |
|
|
(563,749 |
) |
|
|
(1,246,785 |
) |
Class F Shares |
|
|
(6,708,669 |
) |
|
|
(15,367,536 |
) |
Distributions from net realized gain on investments and foreign currency transactions |
|
|
|
|
|
|
|
|
Class A Shares |
|
|
(8,200,941 |
) |
|
|
(68,358,939 |
) |
Class B Shares |
|
|
(1,610,429 |
) |
|
|
(13,297,183 |
) |
Class C Shares |
|
|
(603,016 |
) |
|
|
(5,320,817 |
) |
Class F Shares |
|
|
(5,386,305 |
) |
|
|
(48,515,415 |
) |
|
||||||||
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS |
|
|
(34,817,822 |
) |
|
|
(177,036,854 |
) |
|
||||||||
Share Transactions: |
|
|
|
|
|
|
|
|
Proceeds from sale of shares |
|
|
38,906,528 |
|
|
|
95,365,000 |
|
Net asset value of shares issued to shareholders in payment of distributions declared |
|
|
30,136,299 |
|
|
|
151,971,038 |
|
Cost of shares redeemed |
|
|
(167,033,148 |
) |
|
|
(332,645,288 |
) |
|
||||||||
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS |
|
|
(97,990,321 |
) |
|
|
(85,309,250 |
) |
|
||||||||
Change in net assets |
|
|
(103,649,631 |
) |
|
|
(178,540,400 |
) |
|
||||||||
Net Assets: |
|
|
|
|
|
|
|
|
Beginning of period |
|
|
1,336,858,795 |
|
|
|
1,515,399,195 |
|
|
||||||||
End of period (including undistributed net investment income of $4,397,912 and $6,865,394, respectively) |
|
$ |
1,233,209,164 |
|
|
$ |
1,336,858,795 |
|
|
See Notes which are an integral part of the Financial Statements
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
|
|
Six Months |
|
|
Year Ended February 28 or 29, |
|||||||||||||
|
|
2000 |
|
|
2000 |
|
|
1999 |
|
|
1998 |
|
|
1997 |
|
|
1996 |
|
Net Asset Value, Beginning of Period |
|
$11.62 |
|
|
$12.42 |
|
|
$14.07 |
|
|
$13.27 |
|
|
$12.79 |
|
|
$10.98 |
|
Income From Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
0.16 |
|
|
0.36 |
|
|
0.38 |
|
|
0.42 |
|
|
0.52 |
|
|
0.48 |
|
Net realized and unrealized gain on investments and foreign currency transactions |
|
0.09 |
|
|
0.34 |
|
|
0.64 |
|
|
2.52 |
|
|
1.22 |
|
|
1.82 |
|
|
||||||||||||||||||
TOTAL FROM INVESTMENT OPERATIONS |
|
0.25 |
|
|
0.70 |
|
|
1.02 |
|
|
2.94 |
|
|
1.74 |
|
|
2.30 |
|
|
||||||||||||||||||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from net investment income |
|
(0.18 |
) |
|
(0.36 |
) |
|
(0.36 |
) |
|
(0.41 |
) |
|
(0.52 |
) |
|
(0.48 |
) |
Distributions from net realized gain on investments and foreign currency transactions |
|
(0.14 |
) |
|
(1.14 |
) |
|
(2.31 |
) |
|
(1.73 |
) |
|
(0.74 |
) |
|
-- |
|
Distributions in excess of net investment income2 |
|
-- |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
(0.01 |
) |
|
||||||||||||||||||
TOTAL DISTRIBUTIONS |
|
(0.32 |
) |
|
(1.50 |
) |
|
(2.67 |
) |
|
(2.14 |
) |
|
(1.26 |
) |
|
(0.49 |
) |
|
||||||||||||||||||
Net Asset Value, End of Period |
|
$11.55 |
|
|
$11.62 |
|
|
$12.42 |
|
|
$14.07 |
|
|
$13.27 |
|
|
$12.79 |
|
|
||||||||||||||||||
Total Return3 |
|
2.33 |
% |
|
5.44 |
% |
|
7.04 |
% |
|
23.05 |
% |
|
14.34 |
% |
|
21.47 |
% |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Expenses |
|
1.24 |
%4 |
|
1.24 |
% |
|
1.23 |
% |
|
1.14 |
% |
|
1.15 |
% |
|
1.14 |
% |
|
||||||||||||||||||
Net investment income |
|
2.66 |
%4 |
|
2.86 |
% |
|
2.79 |
% |
|
3.01 |
% |
|
3.52 |
% |
|
4.09 |
% |
|
||||||||||||||||||
Expense waivers/reimbursement5 |
|
0.01 |
%4 |
|
0.01 |
% |
|
0.01 |
% |
|
0.11 |
% |
|
0.12 |
% |
|
0.15 |
% |
|
||||||||||||||||||
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net assets, end of period (000 omitted) |
|
$650,708 |
|
$688,761 |
|
$756,510 |
|
$778,059 |
|
$759,732 |
|
$816,687 |
|
|||||
|
||||||||||||||||||
Portfolio turnover |
|
44 |
% |
|
127 |
% |
|
94 |
% |
|
118 |
% |
|
44 |
% |
|
76 |
% |
|
1 For the year ended February 29, 2000, the fund was audited by Deloitte & Touche LLP. Each of the previous years was audited by other auditors.
2 Distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal income tax purposes.
3 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
4 Computed on an annualized basis.
5 This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
|
|
Six Months |
|
|
Year Ended February 28 or 29, |
|||||||||||||
|
|
2000 |
|
|
2000 |
|
|
1999 |
|
|
1998 |
|
|
1997 |
|
|
1996 |
|
Net Asset Value, Beginning of Period |
|
$11.63 |
|
|
$12.42 |
|
|
$14.08 |
|
|
$13.28 |
|
|
$12.77 |
|
|
$10.98 |
|
Income From Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
0.11 |
|
|
0.26 |
|
|
0.28 |
|
|
0.30 |
|
|
0.44 |
|
|
0.43 |
|
Net realized and unrealized gain on investments and foreign currency transactions |
|
0.10 |
|
|
0.35 |
|
|
0.63 |
|
|
2.53 |
|
|
1.21 |
|
|
1.77 |
|
|
||||||||||||||||||
TOTAL FROM INVESTMENT OPERATIONS |
|
0.21 |
|
|
0.61 |
|
|
0.91 |
|
|
2.83 |
|
|
1.65 |
|
|
2.20 |
|
|
||||||||||||||||||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from net investment income |
|
(0.14 |
) |
|
(0.26 |
) |
|
(0.26 |
) |
|
(0.30 |
) |
|
(0.40 |
) |
|
(0.41 |
) |
Distributions from net realized gain on investments and foreign currency transactions |
|
(0.14 |
) |
|
(1.14 |
) |
|
(2.31 |
) |
|
(1.73 |
) |
|
(0.74 |
) |
|
-- |
|
|
||||||||||||||||||
TOTAL DISTRIBUTIONS |
|
(0.28 |
) |
|
(1.40 |
) |
|
(2.57 |
) |
|
(2.03 |
) |
|
(1.14 |
) |
|
(0.41 |
) |
|
||||||||||||||||||
Net Asset Value, End of Period |
|
$11.56 |
|
|
$11.63 |
|
|
$12.42 |
|
|
$14.08 |
|
|
$13.28 |
|
|
$12.77 |
|
|
||||||||||||||||||
Total Return2 |
|
1.93 |
% |
|
4.73 |
% |
|
6.18 |
% |
|
22.10 |
% |
|
13.60 |
% |
|
20.45 |
% |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Expenses |
|
2.00 |
%3 |
|
1.99 |
% |
|
1.98 |
% |
|
1.90 |
% |
|
1.90 |
% |
|
1.90 |
% |
|
||||||||||||||||||
Net investment income |
|
1.90 |
%3 |
|
2.10 |
% |
|
2.04 |
% |
|
2.25 |
% |
|
2.81 |
% |
|
3.19 |
% |
|
||||||||||||||||||
Expense waivers/reimbursement4 |
|
-- |
|
|
-- |
|
|
-- |
|
|
0.10 |
% |
|
0.12 |
% |
|
0.14 |
% |
|
||||||||||||||||||
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net assets, end of period (000 omitted) |
|
$125,564 |
|
$135,245 |
|
$142,858 |
|
$121,549 |
|
$101,619 |
|
$85,650 |
|
|||||
|
||||||||||||||||||
Portfolio turnover |
|
44 |
% |
|
127 |
% |
|
94 |
% |
|
118 |
% |
|
44 |
% |
|
76 |
% |
|
1 For the year ended February 29, 2000, the fund was audited by Deloitte & Touche LLP. Each of the previous years was audited by other auditors.
2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
4 This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
|
|
Six Months |
|
|
Year Ended February 28 or 29, |
|||||||||||||
|
|
2000 |
|
|
2000 |
|
|
1999 |
|
|
1998 |
|
|
1997 |
|
|
1996 |
|
Net Asset Value, Beginning of Period |
|
$11.62 |
|
|
$12.42 |
|
|
$14.07 |
|
|
$13.28 |
|
|
$12.77 |
|
|
$10.98 |
|
Income From Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
0.12 |
|
|
0.26 |
|
|
0.28 |
|
|
0.31 |
|
|
0.42 |
|
|
0.39 |
|
Net realized and unrealized gain (loss) on investments and foreign currency transactions |
|
0.09 |
|
|
0.34 |
|
|
0.64 |
|
|
2.51 |
|
|
1.23 |
|
|
1.80 |
|
|
||||||||||||||||||
TOTAL FROM INVESTMENT OPERATIONS |
|
0.21 |
|
|
0.60 |
|
|
0.92 |
|
|
2.82 |
|
|
1.65 |
|
|
2.19 |
|
|
||||||||||||||||||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from net investment income |
|
(0.14 |
) |
|
(0.26 |
) |
|
(0.26 |
) |
|
(0.30 |
) |
|
(0.40 |
) |
|
(0.39 |
) |
Distributions from net realized gain on investments and foreign currency transactions |
|
(0.14 |
) |
|
(1.14 |
) |
|
(2.31 |
) |
|
(1.73 |
) |
|
(0.74 |
) |
|
-- |
|
Distributions in excess of net investment income2 |
|
-- |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
-- |
|
|
(0.01 |
) |
|
||||||||||||||||||
TOTAL DISTRIBUTIONS |
|
(0.28 |
) |
|
(1.40 |
) |
|
(2.57 |
) |
|
(2.03 |
) |
|
(1.14 |
) |
|
(0.40 |
) |
|
||||||||||||||||||
Net Asset Value, End of Period |
|
$11.55 |
|
|
$11.62 |
|
|
$12.42 |
|
|
$14.07 |
|
|
$13.28 |
|
|
$12.77 |
|
|
||||||||||||||||||
Total Return3 |
|
1.94 |
% |
|
4.65 |
% |
|
6.25 |
% |
|
23.03 |
% |
|
13.58 |
% |
|
20.43 |
% |
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Expenses |
|
2.00 |
%4 |
|
1.99 |
% |
|
1.98 |
% |
|
1.90 |
% |
|
1.90 |
% |
|
1.87 |
% |
|
||||||||||||||||||
Net investment income |
|
1.90 |
%4 |
|
2.11 |
% |
|
2.03 |
% |
|
2.25 |
% |
|
2.77 |
% |
|
3.35 |
% |
|
||||||||||||||||||
Expense waivers/reimbursements5 |
|
-- |
|
|
-- |
|
|
-- |
|
|
0.10 |
% |
|
0.12 |
% |
|
0.17 |
% |
|
||||||||||||||||||
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net assets, end of period (000 omitted) |
|
$45,448 |
|
$51,708 |
|
$58,012 |
|
$58,010 |
|
$58,196 |
|
$66,864 |
|
|||||
|
||||||||||||||||||
Portfolio turnover |
|
44 |
% |
|
127 |
% |
|
94 |
% |
|
118 |
% |
|
44 |
% |
|
76 |
% |
|
1 For the year ended February 29, 2000, the fund was audited by Deloitte & Touche LLP. Each of the previous years was audited by other auditors.
2 Distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles. These distributions do not represent a return of capital for federal income tax purposes.
3 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
4 Computed on an annualized basis.
5 This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
|
|
Six Months |
|
|
Year Ended February 28 or 29, |
||||||||||
|
|
2000 |
|
|
2000 |
|
|
1999 |
|
|
1998 |
|
|
1997 |
2 |
Net Asset Value, Beginning of Period |
|
$11.62 |
|
|
$12.41 |
|
|
$14.07 |
|
|
$13.27 |
|
|
$12.37 |
|
Income From Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income |
|
0.17 |
|
|
0.37 |
|
|
0.39 |
|
|
0.43 |
|
|
0.42 |
|
Net realized and unrealized gain on investments and foreign currency transactions |
|
0.08 |
|
|
0.34 |
|
|
0.63 |
|
|
2.51 |
|
|
1.20 |
|
|
|||||||||||||||
TOTAL FROM INVESTMENT OPERATIONS |
|
0.25 |
|
|
0.71 |
|
|
1.02 |
|
|
2.94 |
|
|
1.62 |
|
|
|||||||||||||||
Less Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions from net investment income |
|
(0.18 |
) |
|
(0.36 |
) |
|
(0.37 |
) |
|
(0.41 |
) |
|
(0.36 |
) |
Distributions from net realized gain on investments and foreign currency transactions |
|
(0.14 |
) |
|
(1.14 |
) |
|
(2.31 |
) |
|
(1.73 |
) |
|
(0.36 |
) |
|
|||||||||||||||
TOTAL DISTRIBUTIONS |
|
(0.32 |
) |
|
(1.50 |
) |
|
(2.68 |
) |
|
(2.14 |
) |
|
(0.72 |
) |
|
|||||||||||||||
Net Asset Value, End of Period |
|
$11.55 |
|
|
$11.62 |
|
|
$12.41 |
|
|
$14.07 |
|
|
$13.27 |
|
|
|||||||||||||||
Total Return3 |
|
2.34 |
% |
|
5.55 |
% |
|
6.99 |
% |
|
23.09 |
% |
|
13.39 |
% |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Expenses |
|
1.22 |
%4 |
|
1.21 |
% |
|
1.20 |
% |
|
1.12 |
% |
|
1.12 |
%4 |
|
|||||||||||||||
Net investment income |
|
2.68 |
%4 |
|
2.89 |
% |
|
2.81 |
% |
|
3.03 |
% |
|
3.79 |
%4 |
|
|||||||||||||||
Expense waivers/reimbursement5 |
|
0.03 |
%4 |
|
0.03 |
% |
|
0.03 |
% |
|
0.13 |
% |
|
0.15 |
%4 |
|
|||||||||||||||
Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net assets, end of period (000 omitted) |
|
$411,488 |
|
$461,145 |
|
$558,020 |
|
$625,142 |
|
$662,182 |
|
||||
|
|||||||||||||||
Portfolio turnover |
|
44 |
% |
|
127 |
% |
|
94 |
% |
|
118 |
% |
|
44 |
% |
|
1 For the year ended February 29, 2000, the fund was audited by Deloitte & Touche LLP. Each of the previous years was audited by other auditors.
2 Reflects operations for the period from June 1, 1996 (date of initial public investment) to February 28, 1997.
3 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.
4 Computed on an annualized basis.
5 This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
AUGUST 31, 2000 (UNAUDITED)
Federated Utility 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 four classes of shares: Class A Shares, Class B Shares, Class C Shares and Class F Shares. The primary investment objective of the Fund is current income and long-term growth of income.
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.
Listed corporate bonds, other fixed income securities, 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. Investments in other open-end registered investment companies are valued at net asset value. 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.
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 the collateral at least equals the repurchase price to be paid under the repurchase agreement.
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 Board of Directors (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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.
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. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Fund offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Fund based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary.
Withholding taxes on foreign interest and dividends have been provided for in accordance with the applicable country's tax rules and rates.
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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
The Fund may enter into foreign currency commitments for the delayed delivery of securities or foreign currency exchange transactions. The Fund may enter into foreign currency contract transactions to protect assets against adverse changes in foreign currency exchange rates or exchange control regulations. Purchased contracts are used to acquire exposure to foreign currencies; whereas, contracts to sell are used to hedge the Fund's securities against currency fluctuations. Risks may arise upon entering these transactions from the potential inability of counterparties to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign currency transactions are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement date. At August 31, 2000, the Fund had no outstanding foreign currency commitments.
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 August 31, 2000 is as follows:
Security |
|
Acquisition |
|
Acquisition |
Utilicorp United, Inc., Conv. Pfd. |
|
9/23/1999 |
|
$14,800,000 |
|
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.
Investment transactions are accounted for on a trade date basis.
At August 31, 2000, par value shares ($0.001 per share) authorized were as follows:
Share Class Name |
|
Number of Par |
Class A Shares |
|
250,000,000 |
Class B Shares |
|
250,000,000 |
Class C Shares |
|
250,000,000 |
Class F Shares |
|
250,000,000 |
TOTAL |
|
1,000,000,000 |
Transactions in capital stock were as follows:
|
|
Six Months Ended |
|
Year Ended |
||||||||||
Class A Shares: |
|
Shares |
|
|
|
Amount |
|
|
Shares |
|
|
|
Amount |
|
Shares sold |
|
1,975,220 |
|
|
$ |
22,894,833 |
|
|
2,973,111 |
|
|
$ |
37,023,922 |
|
Shares issued to shareholders in payment of distributions declared |
|
1,528,997 |
|
|
|
16,887,785 |
|
|
6,541,275 |
|
|
|
80,520,406 |
|
Shares redeemed |
|
(6,430,847 |
) |
|
|
(74,843,952 |
) |
|
(11,169,706 |
) |
|
|
(137,541,811 |
) |
|
||||||||||||||
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS |
|
(2,926,630 |
) |
|
$ |
(35,061,334 |
) |
|
(1,655,320 |
) |
|
$ |
(19,997,483) |
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
Year Ended |
|||||||||
Class B Shares: |
|
Shares |
|
|
|
Amount |
|
|
Shares |
|
|
|
Amount |
|
Shares sold |
|
822,159 |
|
|
$ |
9,551,026 |
|
|
2,535,063 |
|
|
$ |
31,594,546 |
|
Shares issued to shareholders in payment of distributions declared |
|
243,967 |
|
|
|
2,686,832 |
|
|
1,161,331 |
|
|
|
14,313,989 |
|
Shares redeemed |
|
(1,831,910 |
) |
|
|
(21,354,843 |
) |
|
(3,564,431 |
) |
|
|
(43,950,541 |
) |
|
||||||||||||||
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS |
|
(765,784 |
) |
|
$ |
(9,116,985 |
) |
|
131,963 |
|
|
$ |
1,957,994 |
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Year Ended |
||||||||||
Class C Shares: |
|
Shares |
|
|
|
Amount |
|
|
Shares |
|
|
|
Amount |
|
Shares sold |
|
123,291 |
|
|
$ |
1,442,381 |
|
|
645,667 |
|
|
$ |
8,049,395 |
|
Shares issued to shareholders in payment of distributions declared |
|
93,418 |
|
|
|
1,027,087 |
|
|
471,474 |
|
|
|
5,812,105 |
|
Shares redeemed |
|
(730,604 |
) |
|
|
(8,486,280 |
) |
|
(1,339,404 |
) |
|
|
(16,508,984 |
) |
|
||||||||||||||
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS |
|
(513,895 |
) |
|
$ |
(6,016,812 |
) |
|
(222,263 |
) |
|
$ |
(2,647,484 |
) |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
Year Ended |
||||||||||
Class F Shares: |
|
Shares |
|
|
|
Amount |
|
|
Shares |
|
|
|
Amount |
|
Shares sold |
|
422,156 |
|
|
$ |
5,018,288 |
|
|
1,494,448 |
|
|
$ |
18,697,137 |
|
Shares issued to shareholders in payment of distributions declared |
|
863,893 |
|
|
|
9,534,595 |
|
|
4,163,195 |
|
|
|
51,324,538 |
|
Shares redeemed |
|
(5,343,013 |
) |
|
|
(62,348,073 |
) |
|
(10,918,012 |
) |
|
|
(134,643,952 |
) |
|
||||||||||||||
NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS |
|
(4,056,964 |
) |
|
$ |
(47,795,190 |
) |
|
(5,260,369 |
) |
|
$ |
(64,622,277 |
) |
|
||||||||||||||
NET CHANGE RESULTING FROM SHARE TRANSACTIONS |
|
(8,263,273 |
) |
|
|
(97,990,321 |
) |
|
(7,005,989 |
) |
|
$ |
(85,309,250 |
) |
|
Passport Research Ltd., the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.75% of the Fund's average daily net assets. The Adviser's general partner is Federated Investment Management Company.
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 a scale that ranges from 0.15% to 0.075% of the average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.
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 Class B and Class C Shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC.
Share Class Name |
|
Percentage of Average |
Class B Shares |
|
0.75% |
Class C Shares |
|
0.75% |
Class F Shares |
|
0.25% |
For the six months ended August 31, 2000, Class F Shares did not incur a distribution 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. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion.
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.
The Fund directs portfolio trades to a broker that in turn pays a portion of the Fund's operating expenses. For the six months ended August 31, 2000, the Fund's expenses were reduced by $17,206 under these arrangements.
FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses.
Certain of the Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
Purchases and sales of investments, excluding short-term securities (and in-kind contributions), for the six months ended August 31, 2000, were as follows:
Purchases |
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$536,787,022 |
|
||
Sales |
|
$690,807,463 |
|
Chairman
President
Executive Vice President
Executive Vice President
Executive Vice President and Secretary
Treasurer
Vice President
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.
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT
AS OF AUGUST 31, 2000
Established 1988
Federated
Federated Utility Fund, Inc.
Federated Investors Funds
5800
Corporate Drive
Pittsburgh, PA
15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated
Securities Corp., Distributor
Cusip 314286105
Cusip 314286204
Cusip 314286303
Cusip 314286402
8092606 (10/00)
Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.
FEDERATED UTILITY FUND, INC. APPENDIX A1. The graphic presentation here displayed consists of a 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 5/27/88 to 8/31/00. The "y" axis is measured in increments of $10,000 ranging from $0 to $60,000 and indicates that the ending value of hypothetical initial investment of $13,000 in the fund's Class A Shares, assuming the reinvestment of capital gains and dividends, would have grown to $51,334 on 8/31/00. A2. 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 5/27/88 to 8/31/00. The "y" axis is measured in increments of $5,000 ranging from $0 to $30,000 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 $26,436 on 8/31/00.
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