[LOGO] Federated Investors
Since 1955
Federated
Bond
Fund
10th Annual Report
October 31, 1996
Established 1987
INCOME
President's Message
Dear Shareholder:
Federated Bond Fund was created in 1987, and I am pleased to present the 10th
Annual Report for the fund. The report, covering the 12-month period from
November 1, 1995, through October 31, 1996, opens with a discussion with Joseph
Balestrino, Vice President, Federated Advisers. Following his discussion,
detailing both the corporate market and recent activity in the fund's portfolio,
are a series of performance charts, a complete listing of the fund's holdings,
and the financial statements.
In a highly volatile interest rate environment, Federated Bond Fund continued to
produce a strong income stream while outperfoming its peer group, the Lipper
Corporate BBB-Rated Bond Funds average. The performance of the fund's share
classes during the period is shown below.*
Income Total Return
Class A Shares $0.71 7.21%
Class B Shares $0.64 6.40%
Class C Shares $0.64 6.40%
Class F Shares $0.71 7.18%
The fund's portfolio of corporate bonds reflects an emphasis on diversification
and quality. Holdings are extremely well diversified. On October 31, 1996, the
portfolio consisted of more than 250 bonds with an average rating of
BBB--approximately 80% of the assets are typically investment-grade bonds, while
the remaining assets are invested in high-yield corporate bonds.**
And, as of October 31, 1996, the fund received a four-star rating from
Morningstar, an independent mutual fund rating service, out of 1,054
fixed-income funds.***
* Performance quoted is based on net asset value and reflects past performance.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. Total
returns for the period based on offering price or the payment of the contingent
deferred sales charge for Class A, B, C, and F shares were 2.39%, 0.59%, 5.30%,
and 5.00%, respectively.
** Lower rated bonds involve a higher degree of risk than investment grade bonds
in return for higher yield potential.
***Morningstar proprietary ratings reflect historical risk-adjusted performance
as of October 31, 1996. They are subject to change every month. Past performance
is no guarantee of future results. Ratings are calculated from the funds' 3-, 5-
and 10-year average annual returns in excess of 90-day Treasury bill returns
with appropriate fee adjustments, and a risk factor that reflects fund
performance below 90-day T-bill returns. The 1-year rating is calculated using
the same methodology, but is not a component of the overall rating. The fund
received 4 stars for the three- and five-year periods and was rated among 1,054
and 572 fixed-income funds, respectively. For the 1-year period, the fund
received 3 stars and was rated among 1,654 fixed-income funds. Ten percent of
funds in a rating universe receive 5 stars, 22.5% receive 4 stars, 35% receive 3
stars. Ratings quoted are for the F Shares. Star ratings for other classes may
vary and are available only for classes with three years of performance history.
Thank you for participating in the income potential of Federated Bond Fund.
Remember, it's easy to increase your participation in the performance potential
of a diversified bond portfolio by reinvesting your earnings automatically in
additional fund shares.
As always, we welcome your comments, questions and suggestions.
Sincerely,
J. Christopher Donahue
President
December 15, 1996
Investment Review
[PHOTO APPEARS HERE]
Joseph Balestrino
Vice President
Federated Advisers
Q Joe, you have had over 10 years' experience in the high-yield and high-grade
bond markets. The last 12 months were not easy, so would you please comment on
what has been a volatile bond market environment during the 12-month period.
A For the fiscal year period ending October 31, 1996, the bond market exhibited
tremendous volatility that, in retrospect, displayed three distinct interest
rate environments. The fiscal year both started and ended in a very positive
fashion with interest rates falling under the expectation of a slower economy.
The middle months of the period (February-June 1996) were characterized by
sharply higher interest rates in response to much stronger than anticipated
economic data releases. As the period drew to a close, the economy was once
again sending mixed signals but with a bias toward reduced economic activity. In
particular, both consumer debt creation and incremental consumer spending, which
historically have been closely correlated, declined in October 1996, and
interest rates fell significantly.
In summary, the volatility over the past one year period was the equivalent of a
10-year cycle that occurred between 1984 and 1995.
Q Federated Bond Fund performed relatively well during this difficult period.
How has the fund been performing compared to all BBB rated bond funds as tracked
by Lipper Analytical Services?
A Consistent with bond market volatility, the fund's A, B, C, and F share
classes produced total returns of 7.21%, 6.40%, 6.40%, and 7.18%, respectively,
based on net asset value for the period ended October 31, 1996.* These returns
compared very favorably to the total return of 5.54% for the Lipper Corporate
BBB Rated Bond Funds category.**
* Performance quoted is based on net asset value and reflects past performance.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost. Total
return for the period based on offering price or the payment of the contingent
deferred sales charge for Class A, B, C, and F shares were 2.39%, 0.59%, 5.30%,
and 5.00%, respectively.
** Lipper averages do not include the effect of sales charges.
Q The fund's income distributions remain an important source of cash flow to
many shareholders. What were the fund's yields on October 31, 1996?
A At the period end, the fund's daily distribution rate+ based on net asset
value was 7.30%* (Class A shares) compared to the 10-year Treasury rate which
was 6.34% on that same day. The fund's distribution rates for Class B, C, and F
shares were 6.46%, 6.46% and 7.14%, respectively. The fund's 30-day current net
yields for Class A, B, C, and F shares were 6.99%, 6.51%, 6.51%, and 7.22%,
respectively.++
Q What strategies accounted for the fund's outperforming its Lipper peer group?
A We used two distinct strategies that enabled the fund to outperform its Lipper
peer group--the first related to the overall quality position, and second
related to the interest rate exposure or duration decision. Throughout much of
the fiscal year period, the fund maintained approximately 20% of total assets in
high-yield corporate securities. This minority, but still significant, position
generated not only an above-average income distribution for shareholders, but
just as importantly, served to cushion the falling price effect of rising rates
during the first half of 1996.
Relatively late in the fiscal period, at the end of August 1996, we concluded
that interest rates had increased faster and higher than justified by the
economic fundamentals. With no visible signs of documented inflation hikes, we
increased the portfolio's duration position to 5.8 years, which helped the fund
participate in significant price appreciation as interest rates fell hard and
fast during the months of September and October 1996.
* At the period end, Class A shares distribution rate based on offering price
was 6.97%.
+ The 30-day distribution rate reflects actual distributions made to
shareholders. It is calculated by dividing the monthly annualized dividend plus
short-term capital gains, if any, by the average 30-day offering price.
++The 30-day current net yield is calculated by dividing the investment income
per share for the prior 30 days by the maximum offering price per share on that
date. The figure is compounded and annualized.
Q As we leave 1996, what is your outlook for the year ahead?
A While the economy has continued to display pockets of both strength and
weakness, one must recognize that the current economic expansion has been over 5
years in length, when expansions typically last 3 years. Given that inflation
remains relatively low and corporate earnings are exhibiting a slower growth
pattern, we maintain a positive outlook for the year ahead. As a result, the
fund's shareholders can likely expect to see more of the same from a portfolio
strategy perspective, with a desire to produce above-average income and capital
appreciation potential should interest rates fall.
Two Ways You May Seek to Invest for Success in
Federated Bond Fund
Initial Investment:
If you had made an initial investment of $9,000, in the Class F Shares of
Federated Bond Fund* on 5/20/87, reinvested dividends and capital gains, and did
not redeem any shares, your account would be worth $21,782 on 10/31/96. You
would have earned a 9.80%** average annual total return for the 9-year
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 10/31/96, the Class A Shares' total return one year and since inception
(on 6/28/95) was 2.39% and 4.77%, respectively. Class B Shares' total return one
year and since inception (on 6/28/95) was 0.59% and 3.80%, respectively. Class C
Shares' total return one year and since inception (on 6/28/95) was 5.30% and
7.62%. Class F Shares' average annual one-year, five-year and since inception
(on 5/20/87) total returns were 5.00%, 10.38% and 9.81%, respectively.***
[CHART APPEARS HERE]
* On June 15, 1992, at a special meeting of shareholders, the shareholders
approved a change to the name of the fund from High Income Securities Fund to
Fortress Bond Fund, and a change to the fund's fundamental investment objective
to pursue as high a level of current income as is consistent with the
preservation of capital. This resulted in shifting the fund's focus from
investing not less than 65% of its assets in high-yield, lower quality
securities to not less than 65% of its assets in investment grade securities.
** Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 1.00% sales
charge and 1.00% contingent deferred sales charge.
***The total returns stated take into account the 4.50% sales charge for Class A
Shares, the 5.50% contingent deferred sales charge for Class B Shares, the 1.00%
contingent deferred sales charge for Class C Shares, the 1.00% sales charge and
1.00% contingent deferred sales charge for Class F Shares.
Data quoted represent past performance and do not guarantee future results.
Investment return and principal value will fluctuate so an investor's shares,
when redeemed, may be worth more or less than their original costs.
Federated Bond Fund
One Step at a Time:
$1,000 invested each year for 9 years (reinvesting all dividends and capital
gains) grew to $16,916.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class F Shares of Federated
Bond Fund on 5/20/87, reinvested your dividends and capital gains, and did not
redeem any shares, you would have invested only $9,000, but your account would
have reached a total value of $16,916 by 10/31/96. You would have earned an
average annual total return of 10.32%*.
A practical investment plan helps you pursue a high level of income through
corporate bonds. Through systematic investing, you buy shares on a regular basis
and reinvest all earnings. An investment plan works 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!
[CHART APPEARS HERE]
* No method of investing can guarantee a profit or protect against loss in down
markets. However, by investing regularly over time and buying shares at various
prices, investors can purchase more shares at lower prices, and all accumulated
shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing price
levels, the investor should consider whether or not to continue purchases
through periods of low price levels.
Federated Bond Fund
Hypothetical Investor Profile: Investing for High Monthly Income
John and Joan Wicker are a fictional couple who, like many other shareholders,
look for high monthly income opportunities.
John is an attorney in his late forties with an established client base. Joan is
a school teacher. On May 20, 1987, the Wickers invested $20,000 in Class F
Shares of Federated Bond Fund.
As this chart shows, over nine years their original investment in Class F Shares
has grown to $48,405. This represents a 9.80% average annual total return.* For
John and Joan, that means extra money to supplement their daughter's college
tuition.
[CHART APPEARS HERE]
*This hypothetical scenario is provided for illustrative purposes only and does
not represent the result obtained by any particular shareholder. Past
performance does not guarantee future results.
Federated Bond Fund--
(Class A Shares)
Growth of $10,000 Invested in Federated Bond Fund (Class A Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Bond Fund (Class A Shares) (the "Fund") from June 28, 1995 (start of
performance), to October 31, 1996, compared to the Lehman Brothers Corporate
Bond Index (LBCBI)+ and the Lipper Corporate Debt Funds BBB Rated Average
(LCDBBB).++
[CHART APPEARS HERE]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales
charge=$9,550). The Fund's performance assumes the reinvestment of all dividends
and distributions. The LBCBI and the LCDBBB have been adjusted to reflect
reinvestment of dividends on securities in the index and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBCBI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged.
++ The LCDBBB represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
Federated Bond Fund--
(Class B Shares)
Growth of $10,000 Invested in Federated Bond Fund (Class B Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Bond Fund (Class B Shares) (the "Fund") from June 28, 1995 (start of
performance), to October 31, 1996, compared to the Lehman Brothers Corporate
Bond Index (LBCBI)+ and the Lipper Corporate Debt Funds BBB Rated Average
(LCDBBB).++
[CHART APPEARS HERE]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 5.50% on any
redemption less than 1 year from the purchase date. The LBCBI and the LCDBBB
have been adjusted to reflect reinvestment of dividends on securities in the
index and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBCBI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged.
++ The LCDBBB represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
Federated Bond Fund--
(Class C Shares)
Growth of $10,000 Invested in Federated Bond Fund (Class C Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Bond Fund (Class C Shares) (the "Fund") from June 28, 1995 (start of
performance), to October 31, 1996, compared to the Lehman Brothers Corporate
Bond Index (LBCBI)+ and the Lipper Corporate Debt Funds BBB Rated Average
(LCDBBB).++
[CHART APPEARS HERE]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a contingent deferred sales charge of 1.00% on any
redemption less that 1 year from the purchase date. The LBCBI and the LCDBBB
have been adjusted to reflect reinvestment of dividends on securities in the
index and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBCBI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged.
++ The LCDBBB represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
Federated Bond Fund--
(Class F Shares)
Growth of $10,000 Invested in Federated Bond Fund (Class F Shares)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Bond Fund (Class F Shares) (the "Fund") from May 20, 1987 (start of
performance), to October 31, 1996, compared to the Lehman Brothers Corporate
Bond Index (LBCBI)+ and the Lipper Corporate Debt Funds BBB Rated Average
(LCDBBB).++
[CHART APPEARS HERE]
Past performance is not predictive of future performance. Your investment return
and principal value will fluctuate so when shares are redeemed, they may be
worth more or less than original cost. Mutual funds are not obligations of or
guaranteed by any bank and are not federally insured.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 1.00% ($10,000 investment minus $100 sales
charge=$9,900). The Fund's performance assumes the reinvestment of all dividends
and distributions. The LBCBI and the LCDBBB have been adjusted to reflect
reinvestment of dividends on securities in the index and average.
** Total return quoted reflects all applicable sales charges and contingent
deferred sales charges.
+ The LBCBI is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. This index is
unmanaged.
++ The LCDBBB represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into the
category, and is not adjusted to reflect any sales charges. However, these total
returns are reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
Federated Bond Fund
Portfolio of Investments
- --------------------------------------------------------------------------------
October 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--85.7%
- ------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE--0.6%
---------------------------------------------------------------------------------
$ 2,250,000 McDonnell-Douglas Corp., Note, 9.40%, 10/15/2001 $ 2,424,668
---------------------------------------------------------------------------------
500,000 Tracor, Inc., Sr. Sub. Note, 10.875%, 8/15/2001 538,750
--------------------------------------------------------------------------------- --------------
Total 2,963,418
--------------------------------------------------------------------------------- --------------
AUTOMOTIVE--0.6%
---------------------------------------------------------------------------------
800,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 884,000
---------------------------------------------------------------------------------
700,000 Collins & Aikman Products Co., Sr. Sub. Note, 11.50%, 4/15/2006 735,875
---------------------------------------------------------------------------------
550,000 Exide Corp., Sr. Note, 10.00%, 4/15/2005 566,500
---------------------------------------------------------------------------------
250,000 Lear Corp., Sub. Note, 9.50%, 7/15/2006 264,375
---------------------------------------------------------------------------------
500,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 500,000
--------------------------------------------------------------------------------- --------------
Total 2,950,750
--------------------------------------------------------------------------------- --------------
BANKING--9.3%
---------------------------------------------------------------------------------
6,000,000 African Development Bank, Note, 6.875%, 10/15/2015 5,826,600
---------------------------------------------------------------------------------
5,250,000 Banco Santander, Bank Guarantee, 7.875%, 4/15/2005 5,536,650
---------------------------------------------------------------------------------
7,475,000 Bank of Montreal, Sub. Note, 7.80%, 4/1/2007 7,919,314
---------------------------------------------------------------------------------
6,200,000 Bayerische Landesbank-NY, Note, 6.20%, 2/9/2006 5,927,820
---------------------------------------------------------------------------------
2,750,000 Crestar Financial Corp., Sub. Note, 8.75%, 11/15/2004 3,052,472
---------------------------------------------------------------------------------
675,000 (a)First Nationwide Escrow Corp., Sr. Sub. Note, 10.625%, 10/1/2003 710,437
---------------------------------------------------------------------------------
500,000 First Nationwide Holdings, Inc., Sr. Note, 12.25%, 5/15/2001 551,250
---------------------------------------------------------------------------------
3,000,000 FirstBank Puerto Rico, Sub. Note, 7.625%, 12/15/2005 3,019,593
---------------------------------------------------------------------------------
3,250,000 National Bank of Canada, Montreal, Sub. Note, 8.125%, 8/15/2004 3,482,570
---------------------------------------------------------------------------------
6,000,000 UBS--NY, Sub. Note, 7.25%, 7/15/2006 6,170,460
--------------------------------------------------------------------------------- --------------
Total 42,197,166
--------------------------------------------------------------------------------- --------------
BEVERAGE & TOBACCO--0.7%
---------------------------------------------------------------------------------
500,000 Dimon, Inc., Sr. Note, 8.875%, 6/1/2006 515,000
---------------------------------------------------------------------------------
1,000,000 RJR Nabisco, Inc., Note, 8.75%, 7/15/2007 1,001,580
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
BEVERAGE & TOBACCO--CONTINUED
---------------------------------------------------------------------------------
$ 1,750,000 RJR Nabisco, Inc., Note, 9.25%, 8/15/2013 $ 1,765,908
--------------------------------------------------------------------------------- --------------
Total 3,282,488
--------------------------------------------------------------------------------- --------------
BROADCAST RADIO & TV--2.0%
---------------------------------------------------------------------------------
375,000 Chancellor Broadcasting Co., Sr. Sub. Note, 12.50%, 10/1/2004 418,125
---------------------------------------------------------------------------------
500,000 Granite Broadcasting Corp., Sr. Sub. Note, 10.375%, 5/15/2005 510,625
---------------------------------------------------------------------------------
200,000 Granite Broadcasting Corp., Sr. Sub. Note, 9.375%, 12/1/2005 194,000
---------------------------------------------------------------------------------
875,000 Heritage Media Corp., Sr. Sub. Note, 8.75%, 2/15/2006 835,625
---------------------------------------------------------------------------------
250,000 Park Communications, Inc., 13.75%, 5/15/2004 290,000
---------------------------------------------------------------------------------
250,000 Pegasus Media, Note, 12.50%, 7/1/2005 270,000
---------------------------------------------------------------------------------
3,000,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 3,213,750
---------------------------------------------------------------------------------
700,000 SFX Broadcasting, Inc., Sr. Sub. Note, 10.75%, 5/15/2006 724,500
---------------------------------------------------------------------------------
500,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 12/15/2003 490,000
---------------------------------------------------------------------------------
400,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 9/30/2005 392,000
---------------------------------------------------------------------------------
100,000 Sullivan Broadcast Holdings Inc., Deb., 13.25%, 12/15/2006 92,500
---------------------------------------------------------------------------------
750,000 Sullivan Broadcast Holdings Inc., Sr. Sub. Note, 10.25%, 12/15/2005 755,625
---------------------------------------------------------------------------------
500,000 Young Broadcasting, Inc., Sr. Sub. Note, 10.125%, 2/15/2005 493,750
---------------------------------------------------------------------------------
250,000 Young Broadcasting, Inc., Sr. Sub. Note, 9.00%, 1/15/2006 229,375
--------------------------------------------------------------------------------- --------------
Total 8,909,875
--------------------------------------------------------------------------------- --------------
BUSINESS EQUIPMENT & SERVICES--0.4%
---------------------------------------------------------------------------------
500,000 Knoll Inc., Sr. Sub. Note, 10.875%, 3/15/2006 537,500
---------------------------------------------------------------------------------
500,000 Monarch Acquisition Corp., Sr. Note, 12.50%, 7/1/2003 550,000
---------------------------------------------------------------------------------
250,000 (a)Outsourcing Solutions, Inc., Sr. Sub. Note, 11.00%, 11/1/2006 255,625
---------------------------------------------------------------------------------
500,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 5/1/2005 550,000
--------------------------------------------------------------------------------- --------------
Total 1,893,125
--------------------------------------------------------------------------------- --------------
CABLE TELEVISION--5.3%
---------------------------------------------------------------------------------
400,000 (a)Australis Holdings Pty Limited, Unit, 15.00% accrual, 11/1/2002 224,360
---------------------------------------------------------------------------------
250,000 Australis Media Limited, Unit, 0/14.00%, 5/15/2003 145,000
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
CABLE TELEVISION--CONTINUED
---------------------------------------------------------------------------------
$ 350,000 Bell Cablemedia plc, Sr. Disc. Note, 0/11.875%, 9/15/2005 $ 262,062
---------------------------------------------------------------------------------
550,000 Bell Cablemedia plc, Sr. Disc. Note, 0/11.95%, 7/15/2004 456,500
---------------------------------------------------------------------------------
475,000 CAI Wireless Systems, Inc., Sr. Note, 12.25%, 9/15/2002 458,375
---------------------------------------------------------------------------------
4,000,000 CF Cable TV, Inc., Note, 9.125%, 7/15/2007 4,280,000
---------------------------------------------------------------------------------
250,000 CF Cable TV, Inc., Sr. Secd. 2nd Priority Note, 11.625%, 2/15/2005 288,750
---------------------------------------------------------------------------------
950,000 Cablevision Systems Corp., Sr. Sub. Deb., 9.875%, 2/15/2013 900,125
---------------------------------------------------------------------------------
250,000 Cablevision Systems Corp., Sr. Sub. Note, 9.25%, 11/1/2005 237,500
---------------------------------------------------------------------------------
700,000 Charter Communications Southeast, L.P., Sr. Note, 11.25%, 3/15/2006 717,500
---------------------------------------------------------------------------------
4,040,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 4,585,400
---------------------------------------------------------------------------------
500,000 Diamond Cable Co., Sr. Disc. Note, 0/11.75%, 12/15/2005 329,375
---------------------------------------------------------------------------------
750,000 Diamond Cable Co., Sr. Disc. Note, 0/13.25%, 9/30/2004 586,875
---------------------------------------------------------------------------------
675,000 EchoStar Satellite Broadcasting Corp., Sr. Disc. Note, 0/13.125%,
3/15/2004 477,562
---------------------------------------------------------------------------------
200,000 Insight Communication Co., Sr. Sub. Note, 11.25%, 3/1/2000 199,000
---------------------------------------------------------------------------------
1,000,000 International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/10.875%,
10/15/2003 795,000
---------------------------------------------------------------------------------
450,000 International Cabletel, Inc., Sr. Note, 0/11.50%, 2/1/2006 275,625
---------------------------------------------------------------------------------
250,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 2/15/2005 275,625
---------------------------------------------------------------------------------
350,000 Lenfest Communications Inc., Sr. Sub. Note, 10.50%, 6/15/2006 352,625
---------------------------------------------------------------------------------
300,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 306,750
---------------------------------------------------------------------------------
500,000 Rogers Cablesystems Ltd., Sr. Sub. Gtd. Note, 11.00%, 12/1/2015 517,500
---------------------------------------------------------------------------------
4,950,000 TKR Cable, Inc., Sr. Note, 10.50%, 10/30/2007 5,460,197
---------------------------------------------------------------------------------
1,675,000 TeleWest plc, Sr. Disc. Deb., 0/11.00%, 10/1/2007 1,080,375
---------------------------------------------------------------------------------
925,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 490,250
---------------------------------------------------------------------------------
250,000 Wireless One, Inc., Sr. Note, 13.00%, 10/15/2003 259,688
---------------------------------------------------------------------------------
250,000 Wireless One, Inc., Unit, 0/13.50%, 8/1/2006 131,250
--------------------------------------------------------------------------------- --------------
Total 24,093,269
--------------------------------------------------------------------------------- --------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
CHEMICALS & PLASTICS--2.4%
---------------------------------------------------------------------------------
$ 550,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 $ 609,812
---------------------------------------------------------------------------------
400,000 (a)Astor Corporation, Sr. Sub. Note, 10.50%, 10/15/2006 401,000
---------------------------------------------------------------------------------
1,700,000 (a)Bayer Corp, Deb., 6.50%, 10/1/2002 1,704,267
---------------------------------------------------------------------------------
2,000,000 (a)Bayer Corp, Deb., 7.125%, 10/1/2015 1,995,200
---------------------------------------------------------------------------------
750,000 Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 9/15/2008 761,250
---------------------------------------------------------------------------------
300,000 Crain Industries, Inc., Sr. Sub. Note, 13.50%, 8/15/2005 334,500
---------------------------------------------------------------------------------
700,000 Foamex L.P., Sr. Sub. Deb., 11.875%, 10/1/2004 750,750
---------------------------------------------------------------------------------
750,000 Harris Chemical North America, Inc., Sr. Note, 9.625%, 7/15/2001 768,750
---------------------------------------------------------------------------------
541,000 (a)ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002 558,583
---------------------------------------------------------------------------------
483,000 Polymer Group, Inc., Sr. Note, 12.25%, 7/15/2002 521,640
---------------------------------------------------------------------------------
500,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 457,500
---------------------------------------------------------------------------------
400,000 Sterling Chemicals Holdings, Inc., Sr. Disc. Note, 13.50%, 8/15/2008 217,000
---------------------------------------------------------------------------------
150,000 Sterling Chemicals, Inc., Sr. Sub. Note, 11.75%, 8/15/2006 152,250
---------------------------------------------------------------------------------
375,000 Uniroyal Technology Corp., Sr. Secd. Note, 11.75%, 6/1/2003 373,125
---------------------------------------------------------------------------------
1,000,000 Viridian, Inc., Note, 9.75%, 4/1/2003 1,070,000
--------------------------------------------------------------------------------- --------------
Total 10,675,627
--------------------------------------------------------------------------------- --------------
CLOTHING & TEXTILES--0.3%
---------------------------------------------------------------------------------
1,250,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 1,265,625
--------------------------------------------------------------------------------- --------------
CONGLOMERATES--0.7%
---------------------------------------------------------------------------------
2,950,000 Leucadia National Corp., Sr. Sub., 10.375%, 6/15/2002 3,178,625
--------------------------------------------------------------------------------- --------------
CONSUMER PRODUCTS--0.7%
---------------------------------------------------------------------------------
400,000 American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 419,000
---------------------------------------------------------------------------------
650,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 686,562
---------------------------------------------------------------------------------
300,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 13.75%, 8/1/2002 334,500
---------------------------------------------------------------------------------
250,000 ICON Health & Fitness, Inc., Sr. Sub. Note, 13.00%, 7/15/2002 278,750
---------------------------------------------------------------------------------
750,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 733,125
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--CONTINUED
---------------------------------------------------------------------------------
$ 550,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 $ 570,625
--------------------------------------------------------------------------------- --------------
Total 3,022,562
--------------------------------------------------------------------------------- --------------
CONTAINER & GLASS PRODUCTS--0.4%
---------------------------------------------------------------------------------
750,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.75%, 8/15/2004 780,000
---------------------------------------------------------------------------------
500,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.95%, 10/15/2004 525,625
---------------------------------------------------------------------------------
500,000 Packaging Resources Inc., Sr. Note, 11.625%, 5/1/2003 527,500
---------------------------------------------------------------------------------
125,000 (a)U.S. Can Corp., Sr. Sub. Note, 10.125%, 10/15/2006 129,375
--------------------------------------------------------------------------------- --------------
Total 1,962,500
--------------------------------------------------------------------------------- --------------
COSMETICS & TOILETRIES--0.1%
---------------------------------------------------------------------------------
375,000 Revlon Consumer Products Corp., Sr. Sub. Note, 10.50%, 2/15/2003 391,875
--------------------------------------------------------------------------------- --------------
ECOLOGICAL SERVICES & EQUIPMENT--1.6%
---------------------------------------------------------------------------------
1,000,000 ICF Kaiser International, Inc., Sr. Sub. Note, 13.00%, 12/31/2003 987,500
---------------------------------------------------------------------------------
650,000 (b)Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%, 2/15/2003 396,500
---------------------------------------------------------------------------------
5,460,000 WMX Technologies, Inc., Deb., 8.75%, 5/1/2018 6,050,390
--------------------------------------------------------------------------------- --------------
Total 7,434,390
--------------------------------------------------------------------------------- --------------
EDUCATION--0.7%
---------------------------------------------------------------------------------
3,000,000 Harvard University, Revenue Bonds, 8.125% Bonds, 4/15/2007 3,317,700
--------------------------------------------------------------------------------- --------------
ELECTRONICS--2.4%
---------------------------------------------------------------------------------
325,000 Advanced Micro Devices, Inc., Sr. Secd. Note, 11.00%, 8/1/2003 341,250
---------------------------------------------------------------------------------
5,500,000 Anixter International, Inc., Company Guarantee, 8.00%, 9/15/2003 5,647,180
---------------------------------------------------------------------------------
4,165,000 Harris Corp., Deb., 10.375%, 12/1/2018 4,673,338
--------------------------------------------------------------------------------- --------------
Total 10,661,768
--------------------------------------------------------------------------------- --------------
FINANCIAL INTERMEDIARIES--4.8%
---------------------------------------------------------------------------------
7,000,000 American General Corp., S.F. Deb., 9.625%, 2/1/2018 7,580,650
---------------------------------------------------------------------------------
500,000 ContiFinancial Corp., Sr. Note, 8.375%, 8/15/2003 513,750
---------------------------------------------------------------------------------
5,150,000 Donaldson, Lufkin and Jenrette Securities Corp., Note, 6.875%,
11/1/2005 5,063,480
---------------------------------------------------------------------------------
$ 3,910,000 Green Tree Financial Corp., Sr. Sub. Note, 10.25%, 6/1/2002 $ 4,559,021
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
FINANCIAL INTERMEDIARIES--CONTINUED
---------------------------------------------------------------------------------
2,000,000 Legg Mason, Inc., Note, 6.50%, 2/15/2006 1,909,840
---------------------------------------------------------------------------------
2,000,000 Merrill Lynch & Co., Inc., Medium Term Note, 7.25%, 6/14/2004 2,017,520
--------------------------------------------------------------------------------- --------------
Total 21,644,261
--------------------------------------------------------------------------------- --------------
FOOD & DRUG RETAILERS--2.3%
---------------------------------------------------------------------------------
500,000 Carr-Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 527,500
---------------------------------------------------------------------------------
7,731,000 Hook-Superx, Inc., Sr. Note, 10.125%, 6/1/2002 8,255,935
---------------------------------------------------------------------------------
500,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 508,125
---------------------------------------------------------------------------------
500,000 Ralph's Grocery Co., Sr. Sub. Note, 11.00%, 6/15/2005 501,875
---------------------------------------------------------------------------------
500,000 Smith's Food & Drug Centers, Inc., Sr. Sub. Note, 11.25%, 5/15/2007 545,000
--------------------------------------------------------------------------------- --------------
Total 10,338,435
--------------------------------------------------------------------------------- --------------
FOOD PRODUCTS--0.5%
---------------------------------------------------------------------------------
400,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 400,000
---------------------------------------------------------------------------------
550,000 (a)International Home Foods, Inc., Sr. Sub. Note, 10.375%, 11/1/2006 554,125
---------------------------------------------------------------------------------
500,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 515,000
---------------------------------------------------------------------------------
750,000 Specialty Foods Acquisition Corp., Sr. Secd. Disc. Deb., 0/13.00%,
8/15/2005 305,625
---------------------------------------------------------------------------------
425,000 Van de Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 465,375
--------------------------------------------------------------------------------- --------------
Total 2,240,125
--------------------------------------------------------------------------------- --------------
FOOD SERVICES--1.6%
---------------------------------------------------------------------------------
325,000 Americold Corp., Sr. Sub. Note, 12.875%, 5/1/2008 338,000
---------------------------------------------------------------------------------
6,500,000 Super Rite Foods Holdings Corp., Sr. Sub. Note, 10.625%, 4/1/2002 6,979,375
--------------------------------------------------------------------------------- --------------
Total 7,317,375
--------------------------------------------------------------------------------- --------------
FOREST PRODUCTS--2.0%
---------------------------------------------------------------------------------
400,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 428,000
---------------------------------------------------------------------------------
150,000 (a)Four M Corp., Sr. Secd. Note, 12.00%, 6/1/2006 156,000
---------------------------------------------------------------------------------
$ 425,000 Repap New Brunswick, 2nd Priority Sr. Secd. Note, 10.625%,
4/15/2005 $ 433,500
---------------------------------------------------------------------------------
625,000 Riverwood International Corp., Sr. Sub. Note, 10.875%, 4/1/2008 573,438
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
FOREST PRODUCTS--CONTINUED
---------------------------------------------------------------------------------
450,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 12/15/2004 483,750
---------------------------------------------------------------------------------
2,000,000 Smurfit Capital, Deb., 7.50%, 11/20/2025 1,980,660
---------------------------------------------------------------------------------
4,000,000 Smurfit Capital, Note, 6.75%, 11/20/2005 3,925,440
---------------------------------------------------------------------------------
200,000 (a)Stone Container Corp., Rating Adjustable Senior Notes, 11.875%,
8/1/2016 211,000
---------------------------------------------------------------------------------
500,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 525,625
---------------------------------------------------------------------------------
250,000 (a)Uniforet Inc., Sr. Note, 11.125%, 10/15/2006 247,500
--------------------------------------------------------------------------------- --------------
Total 8,964,913
--------------------------------------------------------------------------------- --------------
HEALTH SERVICES--1.1%
---------------------------------------------------------------------------------
2,500,000 Columbia/HCA Healthcare Corp., Deb., 7.50%, 11/15/2095 2,506,585
---------------------------------------------------------------------------------
2,000,000 Columbia/HCA Healthcare Corp., Note, 9.00%, 12/15/2014 2,342,460
--------------------------------------------------------------------------------- --------------
Total 4,849,045
--------------------------------------------------------------------------------- --------------
HEALTHCARE--0.5%
---------------------------------------------------------------------------------
700,000 (a)Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 752,500
---------------------------------------------------------------------------------
450,000 (a)Genesis Health Ventures, Inc., Sr. Sub. Note, 9.25%, 10/1/2006 451,687
---------------------------------------------------------------------------------
125,000 (a)Prime Succession Acquisition Corp., Sr. Sub. Note, 10.75%, 8/15/2004 134,375
---------------------------------------------------------------------------------
1,000,000 Tenet Healthcare Corp., Sr. Sub. Note, 10.125%, 3/1/2005 1,100,000
--------------------------------------------------------------------------------- --------------
Total 2,438,562
--------------------------------------------------------------------------------- --------------
HOTELS, MOTELS, INNS & CASINOS--0.2%
---------------------------------------------------------------------------------
500,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, 2/1/2008 521,875
---------------------------------------------------------------------------------
250,000 Motels of America, Inc., Sr. Sub. Note, 12.00%, 4/15/2004 211,250
--------------------------------------------------------------------------------- --------------
Total 733,125
--------------------------------------------------------------------------------- --------------
INDUSTRIAL PRODUCTS & EQUIPMENT--2.7%
---------------------------------------------------------------------------------
500,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 560,000
---------------------------------------------------------------------------------
$ 500,000 (a)Euramax International PLC, Sr. Sub. Note, 11.25%, 10/1/2006 $ 511,250
---------------------------------------------------------------------------------
250,000 (a)Intl Knife & Saw, Inc., Sr. Sub. Note, 11.375%, 11/15/2006 250,000
---------------------------------------------------------------------------------
200,000 Johnstown America Industries, Inc., Sr. Sub. Note, 11.75%, 8/15/2005 186,000
---------------------------------------------------------------------------------
5,764,000 Joy Technologies, Inc., Sr. Note, 10.25%, 9/1/2003 6,379,653
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
INDUSTRIAL PRODUCTS & EQUIPMENT--CONTINUED
---------------------------------------------------------------------------------
75,000 Mettler-Toledo, Inc., Sr. Sub. Note, 9.75%, 10/1/2006 76,969
---------------------------------------------------------------------------------
200,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 203,500
---------------------------------------------------------------------------------
4,235,000 Varity Corp., Sr. Note, 11.375%, 11/15/1998 4,246,265
--------------------------------------------------------------------------------- --------------
Total 12,413,637
--------------------------------------------------------------------------------- --------------
INSURANCE--11.0%
---------------------------------------------------------------------------------
3,000,000 Allmerica Financial Corp., Sr. Note, 7.625%, 10/15/2025 3,018,120
---------------------------------------------------------------------------------
5,515,000 CNA Financial Corp., Deb., 7.25%, 11/15/2023 5,305,981
---------------------------------------------------------------------------------
2,110,000 Continental Corp., Note, 8.25%, 4/15/1999 2,200,540
---------------------------------------------------------------------------------
5,000,000 Delphi Financial Group, Inc., Note, 8.00%, 10/1/2003 5,004,050
---------------------------------------------------------------------------------
3,000,000 (a)Equitable Life , Note, 7.70%, 12/1/2015 3,032,970
---------------------------------------------------------------------------------
6,250,000 GE Global Insurance, Note, 7.00%, 2/15/2026 6,047,063
---------------------------------------------------------------------------------
3,460,000 GEICO Corp., Deb., 9.15%, 9/15/2021 3,861,014
---------------------------------------------------------------------------------
4,500,000 (a)Pacific Mutual Life Insurance Company, Note, 7.90%, 12/30/2023 4,627,193
---------------------------------------------------------------------------------
3,000,000 (a)Principal Mutual Life Insurance Co., Note, 8.00%, 3/1/2044 3,022,890
---------------------------------------------------------------------------------
5,500,000 (a)Reinsurance Group of America, Sr. Note, 7.25%, 4/1/2006 5,532,450
---------------------------------------------------------------------------------
3,000,000 SunAmerica, Inc., Deb., 8.125%, 4/28/2023 3,156,210
---------------------------------------------------------------------------------
1,000,000 SunAmerica, Inc., Medium Term Note, 7.34%, 8/30/2005 1,021,330
---------------------------------------------------------------------------------
4,000,000 (a)Union Central Life Insurance Co., 8.20%, 11/1/2026 3,979,120
--------------------------------------------------------------------------------- --------------
Total 49,808,931
--------------------------------------------------------------------------------- --------------
LEISURE & ENTERTAINMENT--1.8%
---------------------------------------------------------------------------------
800,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 490,000
---------------------------------------------------------------------------------
250,000 AMF Group, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 259,375
---------------------------------------------------------------------------------
250,000 Affinity Group, Inc., Sr. Sub. Note, 11.50%, 10/15/2003 261,250
---------------------------------------------------------------------------------
$ 325,000 Cobblestone Golf Group, Inc., Sr. Note, 11.50%, 6/1/2003 $ 334,750
---------------------------------------------------------------------------------
5,500,000 Paramount Communications, Inc., Sr. Deb., 8.25%, 8/1/2022 5,098,060
---------------------------------------------------------------------------------
400,000 Premier Parks, Inc., Sr. Note, 12.00%, 8/15/2003 434,000
---------------------------------------------------------------------------------
1,450,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 1,312,250
--------------------------------------------------------------------------------- --------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT--CONTINUED
---------------------------------------------------------------------------------
Total 8,189,685
--------------------------------------------------------------------------------- --------------
MACHINERY & EQUIPMENT--0.3%
---------------------------------------------------------------------------------
600,000 Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 1/31/2003 628,500
---------------------------------------------------------------------------------
475,000 Primeco Inc., Sr. Sub. Note, 12.75%, 3/1/2005 534,375
---------------------------------------------------------------------------------
375,000 (a)Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 396,094
--------------------------------------------------------------------------------- --------------
Total 1,558,969
--------------------------------------------------------------------------------- --------------
METALS & MINING--2.4%
---------------------------------------------------------------------------------
2,700,000 ASARCO, Inc., Deb., 8.50%, 5/1/2025 2,880,036
---------------------------------------------------------------------------------
2,500,000 Magma Copper Co., Sr. Sub. Note, 12.00%, 12/15/2001 2,667,200
---------------------------------------------------------------------------------
600,000 (a)Royal Oak Mines, Sr. Sub. Note, 11.00%, 8/15/2006 625,500
---------------------------------------------------------------------------------
4,550,000 Santa Fe Pacific Gold, Note, 8.375%, 7/1/2005 4,653,058
--------------------------------------------------------------------------------- --------------
Total 10,825,794
--------------------------------------------------------------------------------- --------------
OIL & GAS--3.5%
---------------------------------------------------------------------------------
2,710,000 Ashland, Inc., Deb., 11.125%, 10/15/2017 2,979,347
---------------------------------------------------------------------------------
650,000 Clark USA, Inc., Sr. Note, Series B, 10.875%, 12/1/2005 674,375
---------------------------------------------------------------------------------
750,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 776,250
---------------------------------------------------------------------------------
200,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 9.50%, 11/1/2006 200,000
---------------------------------------------------------------------------------
175,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 11/15/2003 180,250
---------------------------------------------------------------------------------
500,000 HS Resources, Inc., Sr. Sub. Note, 9.875%, 12/1/2003 500,000
---------------------------------------------------------------------------------
475,000 Mesa Operating Company, Sr. Sub. Disc. Note, 0/11.625%, 7/1/2006 314,688
---------------------------------------------------------------------------------
500,000 Mesa Operating Company, Sr. Sub. Note, 10.625%, 7/1/2006 530,000
---------------------------------------------------------------------------------
2,500,000 Sun Co., Inc., Deb., 9.375%, 6/1/2016 2,833,200
---------------------------------------------------------------------------------
1,300,000 Tosco Corp., 1st Mtg. Bond, 9.00%, 3/15/1997 1,316,666
---------------------------------------------------------------------------------
$ 4,600,000 Tosco Corp., Sr. Note, 7.625%, 5/15/2006 $ 4,744,440
---------------------------------------------------------------------------------
750,000 United Meridian Corp., Sr. Sub. Note, 10.375%, 10/15/2005 813,750
--------------------------------------------------------------------------------- --------------
Total 15,862,966
--------------------------------------------------------------------------------- --------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING--3.4%
---------------------------------------------------------------------------------
500,000 Affiliated Newspaper, Sr. Disc. Note, 0/13.25%, 7/1/2006 392,500
---------------------------------------------------------------------------------
350,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 374,500
---------------------------------------------------------------------------------
375,000 Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%,
2/1/2006 364,218
---------------------------------------------------------------------------------
300,000 K-III Communications Corp., Company Guarantee, Series B, 8.50%, 2/1/2006 287,625
---------------------------------------------------------------------------------
1,500,000 News America Holdings, Inc., 10.125%, 10/15/2012 1,731,000
---------------------------------------------------------------------------------
4,000,000 News America Holdings, Inc., Deb., 7.90%, 12/1/2095 3,843,936
---------------------------------------------------------------------------------
8,305,000 Valassis Communication, Inc., Sr. Sub. Note, 9.375%, 3/15/1999 8,601,405
--------------------------------------------------------------------------------- --------------
Total 15,595,184
--------------------------------------------------------------------------------- --------------
REAL ESTATE--1.1%
---------------------------------------------------------------------------------
4,000,000 Price REIT, Inc., Sr. Note, 7.50%, 11/5/2006 3,990,560
---------------------------------------------------------------------------------
800,000 Trizec Finance Ltd., Sr. Note, 10.875%, 10/15/2005 882,000
--------------------------------------------------------------------------------- --------------
Total 4,872,560
--------------------------------------------------------------------------------- --------------
RETAILERS--2.8%
---------------------------------------------------------------------------------
850,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 867,000
---------------------------------------------------------------------------------
5,600,000 May Department Stores Co., Deb., 8.125%, 8/15/2035 5,888,288
---------------------------------------------------------------------------------
6,000,000 Penney (J.C.) Co., Inc., Deb., 7.65%, 8/15/2016 6,147,240
--------------------------------------------------------------------------------- --------------
Total 12,902,528
--------------------------------------------------------------------------------- --------------
SERVICES--1.3%
---------------------------------------------------------------------------------
600,000 Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 642,000
---------------------------------------------------------------------------------
5,000,000 Loewen Group Int'l, Sr. Note, 8.25%, 4/15/2003 5,089,300
--------------------------------------------------------------------------------- --------------
Total 5,731,300
--------------------------------------------------------------------------------- --------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT--7.4%
---------------------------------------------------------------------------------
$ 2,815,000 Colombia, Republic of, Note, 7.25%, 2/15/2003 $ 2,713,970
---------------------------------------------------------------------------------
2,000,000 Colombia, Republic of, Note, 8.75%, 10/6/1999 2,089,000
---------------------------------------------------------------------------------
4,500,000 (a)Freeport Terminal(Malta) Ltd, Gtd. Global Note, 7.50%, 3/29/2009 4,599,810
---------------------------------------------------------------------------------
1,400,000 New Zealand, Government of, Deb., 10.50%, 7/16/2000 1,463,000
---------------------------------------------------------------------------------
1,525,000 Ontario, Province of, Local Gov't. Guarantee, 17.00%, 11/5/2011 1,527,867
---------------------------------------------------------------------------------
1,500,000 Quebec, Province of, Deb., 13.25%, 9/15/2014 1,827,735
---------------------------------------------------------------------------------
5,000,000 Quebec, Province of, Deb., 7.50%, 7/15/2023 4,997,950
---------------------------------------------------------------------------------
4,100,000 South Africa, Republic of, Global Bond Deb., 9.625%, 12/15/1999 4,387,000
---------------------------------------------------------------------------------
3,500,000 Sweden, Kingdom of, Deb., 10.25%, 11/1/2015 4,488,750
---------------------------------------------------------------------------------
5,125,000 Swedish Export Credit, Deb., 9.875%, 3/15/2038 5,600,856
--------------------------------------------------------------------------------- --------------
Total 33,695,938
--------------------------------------------------------------------------------- --------------
STEEL--0.8%
---------------------------------------------------------------------------------
400,000 Acme Metals, Inc., Sr. Secd. Disc. Note, 0/13.50%, 8/1/2004 397,000
---------------------------------------------------------------------------------
250,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 248,750
---------------------------------------------------------------------------------
150,000 Bar Technologies, Inc., Company Guarantee, 13.50%, 4/1/2001 152,250
---------------------------------------------------------------------------------
250,000 Bayou Steel Corp., 1st Mtg. Note, 10.25%, 3/1/2001 237,500
---------------------------------------------------------------------------------
750,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 716,250
---------------------------------------------------------------------------------
600,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 625,500
---------------------------------------------------------------------------------
350,000 Republic Engineered Steel, Inc., 1st Mtg. Note, 9.875%, 12/15/2001 328,125
---------------------------------------------------------------------------------
750,000 Ryerson Tull, Inc., Sr. Note, 9.125%, 7/15/2006 779,063
--------------------------------------------------------------------------------- --------------
Total 3,484,438
--------------------------------------------------------------------------------- --------------
SURFACE TRANSPORTATION--2.3%
---------------------------------------------------------------------------------
750,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 813,750
---------------------------------------------------------------------------------
400,000 Great Dane Holdings, Inc., Sr. Sub. Deb., 12.75%, 8/1/2001 396,000
---------------------------------------------------------------------------------
1,500,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 1,477,500
---------------------------------------------------------------------------------
700,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 738,500
---------------------------------------------------------------------------------
5,250,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 6,221,250
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
SURFACE TRANSPORTATION--CONTINUED
---------------------------------------------------------------------------------
$ 750,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 $ 723,750
--------------------------------------------------------------------------------- --------------
Total 10,370,750
--------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--1.6%
---------------------------------------------------------------------------------
600,000 American Communications Services Inc., Sr. Disc. Note, 0/12.75%,
4/1/2006 313,500
---------------------------------------------------------------------------------
1,000,000 Brooks Fiber Properties, Inc., Sr. Disc. Note, 0/10.875%, 3/1/2006 587,500
---------------------------------------------------------------------------------
750,000 Cellular Communications International, Inc., Sr. Disc. Note, 13.25% accrual,
8/15/2000 491,250
---------------------------------------------------------------------------------
100,000 Fonorola, Inc., Sr. Secd. Note, 12.50%, 8/15/2002 108,500
---------------------------------------------------------------------------------
875,000 Intermedia Communications of Florida, Inc., Sr. Disc. Note, 0/12.50%, 5/15/2006 544,688
---------------------------------------------------------------------------------
1,000,000 (a)Millicom International Cellular S. A., Sr. Sub. Disc. Note, 0/13.50%, 6/1/2006 575,000
---------------------------------------------------------------------------------
250,000 (b)MobileMedia Communications, Inc., Sr. Sub. Note, 9.375%, 11/1/2007 138,750
---------------------------------------------------------------------------------
550,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/11.50%, 9/1/2003 401,500
---------------------------------------------------------------------------------
400,000 Nextlink Communications, L.L.C., Sr. Note, Series AI, 12.50%,
4/15/2006 411,000
---------------------------------------------------------------------------------
300,000 (a)Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 298,500
---------------------------------------------------------------------------------
500,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 8/1/2007 500,000
---------------------------------------------------------------------------------
500,000 PanAmSat, L.P., Sr. Sub. Disc. Note, 0/11.375%, 8/1/2003 460,625
---------------------------------------------------------------------------------
750,000 Teleport Communications Group, Inc., Sr. Disc. Note, 0/11.125%,
7/1/2007 485,625
---------------------------------------------------------------------------------
125,000 Teleport Communications Group, Inc., Sr. Note, 9.875%, 7/1/2006 128,125
---------------------------------------------------------------------------------
750,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 708,750
---------------------------------------------------------------------------------
950,000 Vanguard Cellular Systems, Inc., Deb., 9.375%, 4/15/2006 945,250
--------------------------------------------------------------------------------- --------------
Total 7,098,563
--------------------------------------------------------------------------------- --------------
UTILITIES--2.1%
---------------------------------------------------------------------------------
100,000 (a)CalEnergy Co., Inc., Sr. Note, 9.50%, 9/15/2006 102,500
---------------------------------------------------------------------------------
$ 1,000,000 California Energy Co., Inc., Sr. Disc. Note, 0/10.25%, 1/15/2004 $ 1,025,000
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
UTILITIES--CONTINUED
---------------------------------------------------------------------------------
750,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 5/1/2011 792,697
---------------------------------------------------------------------------------
1,500,000 Kansas Electric Power Co-op, Collateral Trust, 9.73%, 12/15/2017 1,632,495
---------------------------------------------------------------------------------
6,250,000 (a)Tenaga Nasional Berhad, Deb., 7.50%, 11/1/2025 6,098,656
--------------------------------------------------------------------------------- --------------
Total 9,651,348
--------------------------------------------------------------------------------- --------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $384,670,156) 388,789,195
--------------------------------------------------------------------------------- --------------
GOVERNMENT AGENCIES--2.0%
---------------------------------------------------------------------------------
7,035,000 Federal National Mortgage Association, 0/8.62%, 3/9/2022 6,506,812
---------------------------------------------------------------------------------
2,500,000 Overseas Private Investment, U.S. Gov't. Guarantee, 6.08%, 8/15/2004 2,455,775
--------------------------------------------------------------------------------- --------------
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $8,802,289) 8,962,587
--------------------------------------------------------------------------------- --------------
MUNICIPAL SECURITIES--8.2%
---------------------------------------------------------------------------------
1,000,000 Allegheny County Redevelopment Authority, 7.61% Bonds
(AMBAC LOC), 9/1/2015 1,004,230
---------------------------------------------------------------------------------
6,050,000 Kansas City, MO Redevelopment Authority, 7.65% Bonds
(FSA LOC), 11/1/2018 6,095,557
---------------------------------------------------------------------------------
3,000,000 Miami Florida Revenue Pension Obligation, 7.20% Bonds
(AMBAC LOC), 12/1/2025 2,856,510
---------------------------------------------------------------------------------
4,940,000 Minneapolis/St. Paul, MN Airport Commission, UT GO Taxable
Revenue Bonds (Series 9), 8.95% Bonds (Minneapolis/St. Paul, MN),
1/1/2022 5,457,218
---------------------------------------------------------------------------------
4,675,000 Pittsburgh, PA Urban Redevelopment Authority, 8.01% Bonds
(Aluminum Co. of America), 6/1/2015 4,801,926
---------------------------------------------------------------------------------
2,590,000 Pittsburgh, PA Urban Redevelopment Authority, 9.07% Bonds
(CGIC GTD), 9/1/2014 2,908,052
---------------------------------------------------------------------------------
4,200,000 St. Johns Cnty FL Convention Center, Taxable Muni Rev Bonds, 8.00% Bonds (FSA
INS), 1/1/2026 4,375,224
---------------------------------------------------------------------------------
2,200,000 Southeastern, PA Transportation Authority, (Series B), 8.75% Bonds (FGIC GTD),
3/1/2020 2,405,392
---------------------------------------------------------------------------------
$ 2,080,000 Tampa Florida Sports Authority, 8.02% Bonds (MBIA GTD),
10/1/2026 $ 2,192,611
---------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
CORPORATE BONDS--CONTINUED
- ------------------------------------------------------------------------------------------------
MUNICIPAL SECURITIES--CONTINUED
---------------------------------------------------------------------------------
5,000,000 West Valley City, UT Municipal Building Authority, Taxable Lease Revenue Bonds,
Series 1996A, 7.625% Bonds (West Valley Event Center Project)/(AMBAC INS),
5/1/2022 4,986,050
--------------------------------------------------------------------------------- --------------
TOTAL MUNICIPAL SECURITIES (IDENTIFIED COST $36,428,793) 37,082,770
--------------------------------------------------------------------------------- --------------
PREFERRED STOCK--0.1%
- ------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING--0.1%
---------------------------------------------------------------------------------
6,030 K-III Communications Corp., Cumulative PIK Pfd., Series B,
11.625% (identified cost $593,474) 599,985
--------------------------------------------------------------------------------- --------------
COMMON STOCKS--0.0%
- ------------------------------------------------------------------------------------------------
BROADCAST RADIO & TV--0.0%
---------------------------------------------------------------------------------
2,500 Park Communications, Inc., Warrants 51,250
---------------------------------------------------------------------------------
25 (a)Pegasus Media, Class B 7,500
---------------------------------------------------------------------------------
1,600 Sullivan Broadcast Holdings Inc., Class B 16,000
--------------------------------------------------------------------------------- --------------
Total 74,750
--------------------------------------------------------------------------------- --------------
CABLE TELEVISION--0.0%
---------------------------------------------------------------------------------
750 Wireless One, Inc., Warrants 3,750
--------------------------------------------------------------------------------- --------------
CHEMICALS & PLASTICS--0.0%
---------------------------------------------------------------------------------
400 Sterling Chemicals Holdings, Inc., Warrants 14,000
---------------------------------------------------------------------------------
3,750 Uniroyal Technology Corp., Warrants 6,797
--------------------------------------------------------------------------------- --------------
Total 20,797
--------------------------------------------------------------------------------- --------------
CONSUMER PRODUCTS--0.0%
---------------------------------------------------------------------------------
50 Hosiery Corp. of America, Inc. 350
---------------------------------------------------------------------------------
400 (a)IHF Capital, Inc., Warrants 20,000
--------------------------------------------------------------------------------- --------------
Total 20,350
--------------------------------------------------------------------------------- --------------
ECOLOGICAL SERVICES & EQUIPMENT--0.0%
---------------------------------------------------------------------------------
4,800 ICF Kaiser International, Inc., Warrants $ 2,400
--------------------------------------------------------------------------------- --------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
- ------------- --------------------------------------------------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.0%
---------------------------------------------------------------------------------
17,674 Grand Union Co. 119,299
--------------------------------------------------------------------------------- --------------
PRINTING & PUBLISHING--0.0%
---------------------------------------------------------------------------------
500 (b)Affiliated Newspaper 30,000
--------------------------------------------------------------------------------- --------------
STEEL--0.0%
---------------------------------------------------------------------------------
150 (a)Bar Technologies, Inc., Warrants 9,000
--------------------------------------------------------------------------------- --------------
TELECOMMUNICATIONS & CELLULAR--0.0%
---------------------------------------------------------------------------------
750 Cellular Communications International, Inc., Warrants 4,500
--------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $1,098,886) 284,846
--------------------------------------------------------------------------------- --------------
ASSET-BACKED SECURITIES--0.7%
- ------------------------------------------------------------------------------------------------
STRUCTURED PRODUCT--0.7%
---------------------------------------------------------------------------------
$ 1,000,000 Green Tree Financial Corp. 1992-2, Class B, 9.15%, 1/15/2018 1,026,440
---------------------------------------------------------------------------------
1,000,000 Merrill Lynch Mortgage Investment, Inc. 1988-H, Class B, 9.70%,
6/15/2008 1,040,000
---------------------------------------------------------------------------------
1,000,000 Residential Funding Corp. 1993-S26, Class A10, 7.50%, 7/25/2023 966,880
--------------------------------------------------------------------------------- --------------
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $3,051,875) 3,033,320
--------------------------------------------------------------------------------- --------------
U.S. TREASURY--1.5%
- ------------------------------------------------------------------------------------------------
800,000 United States Treasury Bond, 6.875%, 8/15/2025 817,968
---------------------------------------------------------------------------------
35,000,000 United States Treasury Bond, 0.0%, STRIP, 8/15/2023 5,772,200
--------------------------------------------------------------------------------- --------------
TOTAL U.S. TREASURY (IDENTIFIED COST $6,009,938) 6,590,168
--------------------------------------------------------------------------------- --------------
(C) REPURCHASE AGREEMENT--0.7%
- ------------------------------------------------------------------------------------------------
3,310,000 BT Securities Corporation, 5.55%, dated 10/31/1996, due 11/1/1996
(at amortized cost) 3,310,000
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $443,965,411)(D) $ 448,652,871
--------------------------------------------------------------------------------- --------------
</TABLE>
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At October 31, 1996, these securities
amounted to $42,174,467 which represents 9.3% of net assets.
(b) Non-income producing security.
Federated Bond Fund
- --------------------------------------------------------------------------------
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $444,044,776.
The net unrealized appreciation of investments on a federal tax basis
amounts to $4,608,095 which is comprised of $10,070,560 appreciation and
$5,462,465 depreciation at October 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($453,281,480) at October 31, 1996.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation CGIC--Capital Guaranty
Insurance Corporation FGIC--Financial Guaranty Insurance Company FSA--Financial
Security Assurance GO--General Obligation GTD--Guaranty INS--Insured LOC--Letter
of Credit LP--Limited Partnership MBIA--Municipal Bond Investors Assurance
PIK--Payment in Kind PLC--Public Limited Company REIT--Real Estate Investment
Trust STRIP-- Separate Trading of Registered
Interest & Principal of Securities
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
MOBILEMEDIA COMMUNICATIONS.
On November 1, 1996, MobileMedia Communications failed to make its scheduled
interest payment. Subsequent to November 30, 1996 holdings in these securities
have been sold.
MID-AMERICAN WASTE SYSTEMS, INC.
On February 15, 1996, Mid-American Waste Systems failed to make its scheduled
interest payment. Currently, the company is in negotiations with its debt
holders and has retained an investment bank to evaluate its options. The
unofficial subordinated bondholders group has retained legal counsel and
financial advisors and is monitoring the situation closely.
Federated Bond Fund
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
October 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $443,965,411, and tax cost $444,044,776) $448,652,871
- ---------------------------------------------------------------------------------------------------
Cash 10,457
- ---------------------------------------------------------------------------------------------------
Income receivable 9,046,178
- ---------------------------------------------------------------------------------------------------
Receivable for investments sold 5,681,056
- ---------------------------------------------------------------------------------------------------
Receivable for shares sold 2,791,567
- --------------------------------------------------------------------------------------------------- -----------
Total assets 466,182,129
- ---------------------------------------------------------------------------------------------------
LIABILITIES:
- ---------------------------------------------------------------------------------------
Payable for investments purchased $10,649,264
- ---------------------------------------------------------------------------------------
Income distribution payable 1,239,654
- ---------------------------------------------------------------------------------------
Payable for shares redeemed 693,347
- ---------------------------------------------------------------------------------------
Accrued expenses 318,384
- --------------------------------------------------------------------------------------- ----------
Total liabilities 12,900,649
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS for 46,642,989 shares outstanding $453,281,480
- --------------------------------------------------------------------------------------------------- -----------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------
Paid in capital $452,459,667
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 4,687,140
- ---------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (3,586,203)
- ---------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (279,124)
- --------------------------------------------------------------------------------------------------- -----------
Total Net Assets $453,281,480
- --------------------------------------------------------------------------------------------------- -----------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($37,044,798 / 3,811,668 shares outstanding) $9.72
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/95.50 of $9.72)* $10.18
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.50/100 of $9.72)** $9.67
- --------------------------------------------------------------------------------------------------- -----------
CLASS B SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($125,620,241 / 12,926,180 shares outstanding) $9.72
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $9.72
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (94.50/100 of $9.72)** $9.19
- --------------------------------------------------------------------------------------------------- -----------
CLASS C SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($22,896,604 / 2,356,018 shares outstanding) $9.72
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share $9.72
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.00/100 of $9.72)** $9.62
- --------------------------------------------------------------------------------------------------- -----------
CLASS F SHARES:
- ---------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($267,719,837 / 27,549,123 shares outstanding) $9.72
- --------------------------------------------------------------------------------------------------- -----------
Offering Price Per Share (100/99.00 of $9.72)* $9.82
- --------------------------------------------------------------------------------------------------- -----------
Redemption Proceeds Per Share (99.00/100 of $9.72)** $9.62
- --------------------------------------------------------------------------------------------------- -----------
</TABLE>
* See "Investing in Class A Shares" and "Investing in F Shares" in the
Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Federated Bond Fund
Statement of Operations
- --------------------------------------------------------------------------------
Year Ended October 31, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest $29,935,824
- ----------------------------------------------------------------------------------------------------
Dividends 46,012
- ---------------------------------------------------------------------------------------------------- -----------
Total income 29,981,836
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $2,650,984
- ----------------------------------------------------------------------------------------
Administrative personnel and services fee 267,242
- ----------------------------------------------------------------------------------------
Custodian fees 63,712
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 305,537
- ----------------------------------------------------------------------------------------
Directors'/Trustees' fees 10,113
- ----------------------------------------------------------------------------------------
Auditing fees 13,000
- ----------------------------------------------------------------------------------------
Legal fees 4,082
- ----------------------------------------------------------------------------------------
Portfolio accounting fees 150,863
- ----------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 615,497
- ----------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 100,671
- ----------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 57,618
- ----------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 205,166
- ----------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 33,557
- ----------------------------------------------------------------------------------------
Shareholder services fee--Class F Shares 587,321
- ----------------------------------------------------------------------------------------
Share registration costs 141,608
- ----------------------------------------------------------------------------------------
Printing and postage 73,225
- ----------------------------------------------------------------------------------------
Insurance premiums 6,993
- ----------------------------------------------------------------------------------------
Taxes 29,714
- ----------------------------------------------------------------------------------------
Miscellaneous 8,532
- ---------------------------------------------------------------------------------------- ----------
Total expenses 5,325,435
- ----------------------------------------------------------------------------------------
Waivers--
- -----------------------------------------------------------------------------
Waiver of investment advisory fee $(705,603)
- -----------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (11,524)
- -----------------------------------------------------------------------------
Waiver of shareholder services fee--Class F Shares (46,986)
- ----------------------------------------------------------------------------- ---------
Total waivers (764,113)
- ---------------------------------------------------------------------------------------- ----------
Net expenses 4,561,322
- ---------------------------------------------------------------------------------------------------- -----------
Net investment income 25,420,514
- ---------------------------------------------------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized loss on investments (149,872)
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 317,325
- ---------------------------------------------------------------------------------------------------- -----------
Net realized and unrealized gain on investments 167,453
- ---------------------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $25,587,967
- ---------------------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Bond Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------------------------------
Net investment income $ 25,420,514 $ 13,868,500
- ------------------------------------------------------------------------------------
Net realized gain (loss) on investments ($129,446 net loss and $101,014 net loss,
respectively, as computed for federal tax purposes) (149,872) (109,537)
- ------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments 317,325 12,228,666
- ------------------------------------------------------------------------------------ ------------- -------------
Change in net assets resulting from operations 25,587,967 25,987,629
- ------------------------------------------------------------------------------------ ------------- -------------
NET EQUALIZATION CREDITS (DEBITS)-- 620,232 226,707
- ------------------------------------------------------------------------------------ ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------------------------------
Distributions from net investment income
- ------------------------------------------------------------------------------------
Class A Shares (1,762,704) (53,960)
- ------------------------------------------------------------------------------------
Class B Shares (5,584,736) (282,414)
- ------------------------------------------------------------------------------------
Class C Shares (916,585) (60,261)
- ------------------------------------------------------------------------------------
Class F Shares (17,390,922) (13,317,767)
- ------------------------------------------------------------------------------------ ------------- -------------
Change in net assets resulting from distributions to shareholders (25,654,947) (13,714,402)
- ------------------------------------------------------------------------------------ ------------- -------------
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS ALLOCATED TO NET INVESTMENT INCOME)--
- ------------------------------------------------------------------------------------
Proceeds from sale of shares 287,180,090 105,072,745
- ------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions
declared 12,940,331 5,532,356
- ------------------------------------------------------------------------------------
Cost of shares redeemed (81,239,742) (35,527,541)
- ------------------------------------------------------------------------------------ ------------- -------------
Change in net assets resulting from share transactions 218,880,679 75,077,560
- ------------------------------------------------------------------------------------ ------------- -------------
Change in net assets 219,433,931 87,577,494
- ------------------------------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------------------------------
Beginning of period 233,847,549 146,270,055
- ------------------------------------------------------------------------------------ ------------- -------------
End of period (including undistributed net investment income
of $0 and $585,193, respectively) $ 453,281,480 $ 233,847,549
- ------------------------------------------------------------------------------------ ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Federated Bond Fund
Financial Highlights--Class A Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.76 $ 9.64
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.71 0.26
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.04) 0.11
- ---------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.67 0.37
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (0.71) (0.25)
- ---------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.72 $ 9.76
- ---------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 7.21% 3.92%
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 1.05% 1.02%*
- ----------------------------------------------------------------------------------------------
Net investment income 7.46% 8.22%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.25% 0.35%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $37,045 $5,070
- ----------------------------------------------------------------------------------------------
Portfolio turnover 49% 77%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from June 28, 1995 (date of initial
public offering) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Bond Fund
Financial Highlights--Class B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.76 $ 9.64
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.64 0.24
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.04) 0.11
- ---------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.60 0.35
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (0.64) (0.23)
- ---------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.72 $ 9.76
- ---------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 6.40% 3.72%
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 1.85% 1.81%*
- ----------------------------------------------------------------------------------------------
Net investment income 6.66% 7.36%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.20% 0.30%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $125,620 $27,768
- ----------------------------------------------------------------------------------------------
Portfolio turnover 49% 77%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from June 28, 1995 (date of initial
public offering) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Bond Fund
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.76 $ 9.64
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.64 0.24
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.04) 0.11
- ---------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.60 0.35
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (0.64) (0.23)
- ---------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.72 $ 9.76
- ---------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 6.40% 3.72%
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 1.85% 1.81%*
- ----------------------------------------------------------------------------------------------
Net investment income 6.70% 7.31%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.20% 0.30%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $22,897 $5,508
- ----------------------------------------------------------------------------------------------
Portfolio turnover 49% 77%
- ----------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from June 28, 1995 (date of initial
public offering) to October 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Bond Fund
Financial Highlights--Class F Shares
(formerly, Fortress Shares)
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992(A) 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 9.76 $ 9.08 $ 10.30 $ 9.23 $ 8.81 $ 6.89 $ 8.79 $ 9.86
- -------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------------
Net investment income 0.71 0.79 0.76 0.77 0.59 1.01 1.08 1.23
- -------------------------------
Net realized and unrealized
gain (loss) on investments (0.04) 0.65 (1.09) 1.07 0.43 1.92 (1.84) (1.07)
- ------------------------------- --------- --------- --------- --------- ----------- --------- --------- ---------
Total from investment
operations 0.67 1.44 (0.33) 1.84 1.02 2.93 (0.76) 0.16
- ------------------------------- --------- --------- --------- --------- ----------- --------- --------- ---------
LESS DISTRIBUTIONS
- -------------------------------
Distributions from net
investment income (0.71) (0.76) (0.75) (0.77) (0.60) (1.01) (1.14) (1.23)
- -------------------------------
Distributions from net
realized gain on investment
transactions -- -- (0.14) -- -- -- -- --
- ------------------------------- --------- --------- --------- --------- ----------- --------- --------- ---------
Total distributions (0.71) (0.76) (0.89) (0.77) (0.60) (1.01) (1.14) (1.23)
- ------------------------------- --------- --------- --------- --------- ----------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.72 $ 9.76 $ 9.08 $ 10.30 $ 9.23 $ 8.81 $ 6.89 $ 8.79
- ------------------------------- --------- --------- --------- --------- ----------- --------- --------- ---------
TOTAL RETURN (C) 7.18% 16.51% (3.41%) 20.61% 11.79% 44.62% (9.59%) 1.32%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 1.08% 1.03% 1.05% 1.04% 0.49%* 1.00% 1.01% 1.14%
- -------------------------------
Net investment income 7.38% 8.20% 7.92% 7.69% 8.05%* 12.17% 13.43% 12.81%
- -------------------------------
Expense waiver/ reimbursement
(d) 0.22% 0.31% 0.33% 0.61% 2.01%* 1.50% 1.49% 1.36%
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period
(000 omitted) $267,720 $195,502 $146,270 $125,762 $54,886 $6,068 $7,484 $4,734
- -------------------------------
Portfolio turnover 49% 77% 74% 51% 49% 33% 28% 38%
- -------------------------------
<CAPTION>
<S> <C>
1988(B)
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.06
- -------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------------
Net investment income 0.61
- -------------------------------
Net realized and unrealized
gain (loss) on investments (0.16)
- ------------------------------- -----------
Total from investment
operations 0.45
- ------------------------------- -----------
LESS DISTRIBUTIONS
- -------------------------------
Distributions from net
investment income (0.65)
- -------------------------------
Distributions from net
realized gain on investment
transactions --
- ------------------------------- -----------
Total distributions (0.65)
- ------------------------------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.86
- ------------------------------- -----------
TOTAL RETURN (C) 4.62%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 1.00%*
- -------------------------------
Net investment income 12.58%*
- -------------------------------
Expense waiver/ reimbursement
(d) 1.00%*
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period
(000 omitted) $4,968
- -------------------------------
Portfolio turnover 31%
- -------------------------------
</TABLE>
* Computed on an annualized basis.
(a) During the ten month period, the Fund changed its fiscal year-end from
December 31 to October 31.
(b) Reflects operations for the period from July 8, 1988 (date of initial public
investment) to December 31, 1988.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Federated Bond Fund
Notes to Financial Statements
- --------------------------------------------------------------------------------
October 31, 1996
1. ORGANIZATION
Investment Series Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of one portfolio. The
financial statements included herein are those of Federated Bond Fund (the
"Fund"), a diversified portfolio. The investment objective of the Fund is to
provide as high a level of current income as is consistent with the preservation
of capital.
The Fund offers four classes of shares: Class A Shares, Class B Shares, Class C
Shares and Class F Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed corporate bonds, U.S. government securities,
other fixed income and asset-backed 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. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities
with remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the
Federated Bond Fund
- --------------------------------------------------------------------------------
Internal Revenue Code, as amended (the "Code"). Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
section 988 transactions and accumulated equalization. The following
reclassifications have been made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED NET INCOME/ACCUMULATED DISTRIBUTIONS
PAID-IN CAPITAL REALIZED GAIN/LOSS IN EXCESS OF NET INVESTMENT INCOME
<S> <C> <C>
$ 1,241,041 $ 9,075 ($ 1,250,116)
</TABLE>
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At last fiscal year-end date, the Fund, for federal tax purposes, had a
capital loss carryforward of $3,590,286, which will reduce the Fund's
taxable income arising from future net realized gain on investments, if
any, to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal tax. Pursuant to the Code,
such capital loss carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2002 $ 3,359,826
- ------------------------------------------------------------------------------------
2003 $ 101,014
- ------------------------------------------------------------------------------------
2004 $ 129,446
- ------------------------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
EQUALIZATION--The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from sales and
costs of redemptions of fund shares (equivalent, on a per share basis, to
the amount of undistributed net investment income on the date of the
transaction) is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of fund shares.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand 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 Board of 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 each restricted security held at October 31, 1996
is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Astor Corporation, Sr. Sub. Note 10/2/1996 $ 402,875
- ------------------------------------------------------------------
Australis Holdings Pty Limited, Unit 10/29/1996 224,833
- ------------------------------------------------------------------
Bar Technologies, Inc., Warrants 8/27/1996 0
- ------------------------------------------------------------------
Bayer Corp, Deb. 9/26/1995-11/9/1995 1,992,050
- ------------------------------------------------------------------
Bayer Corp, Deb. 3/21/1996-4/17/1996 1,687,443
- ------------------------------------------------------------------
CalEnergy Co., Inc., Sr. Note 9/18/1996 99,616
- ------------------------------------------------------------------
Dade International, Inc., Sr. Sub. Note 4/30/1996-7/15/1996 718,250
- ------------------------------------------------------------------
Equitable Life, Note 10/17/1996 2,980,650
- ------------------------------------------------------------------
Euramax International Plc, Sr. Sub. Note 9/18/1996 504,000
- ------------------------------------------------------------------
First Nationwide Escrow Corp., Sr. Sub. Note 9/13/1996 686,875
- ------------------------------------------------------------------
Four M Corp., Sr. Secd. Note 5/23/1996 150,000
- ------------------------------------------------------------------
Freeport Terminal (Malta) Ltd, Gtd. Global Note 3/17/1994-12/7/1995 4,551,806
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
- ------------------------------------------------------------------
<S> <C> <C>
Genesis Health Ventures, Inc., Sr. Sub. Note 10/1/1996 450,000
- ------------------------------------------------------------------
IHF Capital, Inc., Warrants 11/4/1994 3,952
- ------------------------------------------------------------------
ISP Holding, Inc., Sr. Note 5/24/1994-2/14/1996 762,733
- ------------------------------------------------------------------
International Home Foods, Inc., Sr. Sub. Note 10/29/1996 550,000
- ------------------------------------------------------------------
International Knife & Saw, Inc., Sr. Sub. Note 10/31/1996 250,000
- ------------------------------------------------------------------
Millicom International Cellular S. A., Sr. Sub. Disc. Note 5/24/1996 558,085
- ------------------------------------------------------------------
Outsourcing Solutions, Inc., Sr. Sub. Note 10/31/1996 251,563
- ------------------------------------------------------------------
Pacific Mutual Life Insurance Company, Note 6/26/1996 4,366,260
- ------------------------------------------------------------------
Paging Network, Inc., Sr. Sub. Note 10/10/1996 300,000
- ------------------------------------------------------------------
Pegasus Media, Class B 10/31/1995 0
- ------------------------------------------------------------------
Prime Succession Acquisition Corp., Sr. Sub. Note 8/13/1996 125,000
- ------------------------------------------------------------------
Principal Mutual Life Insurance Co., Note 8/28/1995 2,847,450
- ------------------------------------------------------------------
Reinsurance Group of America, Sr. Note 3/19/1996 5,483,170
- ------------------------------------------------------------------
Royal Oak Mines, Sr. Sub. Note 8/5/1996-8/28/1996 599,750
- ------------------------------------------------------------------
Stone Container Corp., Rating Adjustable Sr. Notes 9/29/1994 496,410
- ------------------------------------------------------------------
Tenaga Nasional Berhad, Deb. 2/16/1996-10/3/1996 6,219,973
- ------------------------------------------------------------------
Tokheim Corp., Sr. Sub. Note 8/16/1996-9/4/1996 382,938
- ------------------------------------------------------------------
U.S. Can Corp., Sr. Sub. Note 10/10/1996 125,000
- ------------------------------------------------------------------
Union Central Life Insurance Co. 10/31/1996 3,979,120
- ------------------------------------------------------------------
Uniforet Inc., Sr. Note 10/7/1996 250,000
- ------------------------------------------------------------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At October 31, 1996, par value shares ($0.0001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
POUND OF PAR
VALUE
CAPITAL STOCK
CLASS NAME AUTHORIZED
<S> <C>
Class A 25,000,000
- -----------------------------------------------------------------------------------------------
Class B 25,000,000
- -----------------------------------------------------------------------------------------------
Class C 25,000,000
- -----------------------------------------------------------------------------------------------
Class F 525,000,000
- -----------------------------------------------------------------------------------------------
Unclassified 400,000,000
- ----------------------------------------------------------------------------------------------- -----------------
Total 1,000,000,000
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995(A)
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,691,576 $ 35,793,135 525,834 $ 5,078,460
- -------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 150,861 1,442,578 4,406 42,695
- -------------------------------------------------------------
Shares redeemed (550,070) (5,293,729) (10,939) (105,289)
- ------------------------------------------------------------- ---------- ------------- --------- ------------
Net change resulting from Class A Shares transactions 3,292,367 $ 31,941,984 519,301 $ 5,015,866
- ------------------------------------------------------------- ---------- ------------- --------- ------------
</TABLE>
Federated Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995(A)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 12,011,129 $ 116,306,127 2,842,775 $ 27,454,188
- -------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 336,941 3,224,612 17,428 168,835
- -------------------------------------------------------
Shares redeemed (2,267,434) (22,140,487) (14,659) (141,896)
- ------------------------------------------------------- ------------ -------------- ---------- -------------
Net change resulting from Class B Shares
transactions 10,080,636 $ 97,390,252 2,845,544 $ 27,481,127
- ------------------------------------------------------- ------------ -------------- ---------- -------------
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995(A)
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,109,387 $ 20,275,115 559,632 $ 5,403,663
- -------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 68,973 660,034 5,231 50,591
- -------------------------------------------------------------
Shares redeemed (386,472) (3,688,591) (733) (7,139)
- ------------------------------------------------------------- ---------- ------------- --------- ------------
Net change resulting from Class C Shares transactions 1,791,888 $ 17,246,558 564,130 $ 5,447,115
- ------------------------------------------------------------- ---------- ------------- --------- ------------
<CAPTION>
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995(A)
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 11,961,299 $ 114,805,713 7,165,637 $ 67,136,434
- -----------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 793,767 7,613,107 562,573 5,270,235
- -----------------------------------------------------
Shares redeemed (5,233,916) (50,116,935) (3,810,614) (35,273,217)
- ----------------------------------------------------- ------------ -------------- ----------- --------------
Net change resulting from Class F Shares
transactions 7,521,150 72,301,885 3,917,596 37,133,452
- ----------------------------------------------------- ------------ -------------- ----------- --------------
Net change resulting from Fund share
transactions 22,686,041 $ 218,880,679 7,846,571 $ 75,077,560
- ----------------------------------------------------- ------------ -------------- ----------- --------------
</TABLE>
(a) For the period from June 28, 1995 (date of initial public investment) to
October 31, 1995.
Federated Bond Fund
- --------------------------------------------------------------------------------
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 equal to
0.75% of the Fund's average daily net assets. The Adviser may voluntarily choose
to waive any portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
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 A, 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.
<TABLE>
<CAPTION>
% OF AVG. DAILY NET
SHARE CLASS NAME ASSETS OF CLASS
<S> <C>
Class A Shares 0.25%
- -----------------------------------------------------------------------------------------
Class B Shares 0.75%
- -----------------------------------------------------------------------------------------
Class C Shares 0.75%
- -----------------------------------------------------------------------------------------
</TABLE>
For the year ended October 31, 1996 Class A Shares did not incur a distribution
services fee.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25%
of average daily net assets of the Fund shares for the period. The fee paid to
FSS is used to finance certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive any portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its sole
discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the Fund.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
Federated Bond Fund
- --------------------------------------------------------------------------------
GENERAL--Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1996, were as follows:
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
PURCHASES $ 166,351,567
- -------------------------------------------------------------------------------------------------- --------------
SALES $ 387,167,809
- -------------------------------------------------------------------------------------------------- --------------
</TABLE>
Report of Ernst & Young LLP,
Independent Auditors
- --------------------------------------------------------------------------------
To the Directors and Shareholders of INVESTMENT SERIES FUNDS, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Bond Fund, (one of the portfolios
comprising Investment Series Funds, Inc.) as of October 31, 1996, and the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and the
financial highlights for each of the periods presented therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Bond Fund at October 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the periods presented
therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 16, 1996
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President, Treasurer and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. S. Elliott Cohan
Wesley W. Posvar Assistant Secretary
Marjorie P. Smuts
</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 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.
[LOGO] Federated Investors
Since 1955
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 461444507
Cusip 461444606
Cusip 461444705
Cusip 461444309
G01452-02 (12/96)
APPENDIX
A. 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, which shows that an initial investment of $9,000 in
Federated Bond Fund in 1987 would have grown to $21,782. The `x" axis reflects
the cost of investment, the "y" axis reflects computation periods from 1987 to
1996, and the right margin reflects a total investment range from $0 to $22,000.
The chart further indicates the ending market value attributable to principal,
as well as the ending market value attributable to capital gains and reinvested
dividends.
B. 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, which shows that an yearly investment of $1,000 in
Federated Bond Fund in 1987 would have grown to $16,916. The `x" axis reflects
the cost of investment, the "y" axis reflects computation periods from 1987 to
1996, and the right margin reflects a total investment range from $0 to $18,000.
The chart further indicates the ending market value attributable to principal,
as well as the ending market value attributable to capital gains and reinvested
dividends.
C. 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, which shows that an investment of $20,000 in Federated
Bond Fund in 1987 would have grown to $48,405. The `x" axis reflects the cost of
investment, the `y" axis reflects computation periods from 1987 to 1996, and the
right margin reflects a total investment range from $0 to $50,000. The chart
further indicates the ending market value attributable to principal, as well as
the ending market value attributable to capital gains and reinvested dividends
D. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of the fund are represented by a solid line, whereas the Lehman Brothers
Corpoated Bond Index (LBCBI) is represented by a broken dotted line, and the
Lipper Corporate Debt Funds BBB Rated Average (LCDBBB) is represented by a
broken dashed line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment in the Class A Shares of the fund,
the LBCBI, and the LCDBBB for the period from June 28, 1995 to October 31, 1996.
The `y" axis reflects the cost of the investment. The `x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Class A Shares of the fund as compared to LBCBI and LCDBBB; the ending values
are $10,640, $11,014 and $10,919,respectively. Beneath the list of the
components that correspond to the line graph are the following total return data
for the Class A Shares of the fund: total return figures for the 1 year period,
and start of performance. The corresponding total figures are as follows: 2.39%
and 4.77% respectively. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
E. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of the fund are represented by a solid line, whereas the Lehman Brothers
Corpoated Bond Index (LBCBI) is represented by a broken dotted line, and the
Lipper Corporate Debt Funds BBB Rated Average (LCDBBB) is represented by a
broken dashed line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment in the Class B Shares of the fund,
the LBCBI, and the LCDBBB for the period from June 28, 1995 to October 31, 1996.
The `y" axis reflects the cost of the investment. The `x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Class B Shares of the fund as compared to LBCBI and LCDBBB; the ending values
are $10,513, $11,014 and $10,919,respectively. Beneath the list of the
components that correspond to the line graph are the following total return data
for the Class B Shares of the fund: total return figures for the 1 year period,
and start of performance. The corresponding total figures are as follows: 0.59%
and 3.80% respectively. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
F. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of the fund are represented by a solid line, whereas the Lehman Brothers
Corpoated Bond Index (LBCBI) is represented by a broken dotted line, and the
Lipper Corporate Debt Funds BBB Rated Average (LCDBBB) is represented by a
broken dashed line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment in the Class C Shares of the fund,
the LBCBI, and the LCDBBB for the period from June 28, 1995 to October 31, 1996.
The `y" axis reflects the cost of the investment. The `x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Class C Shares of the fund as compared to LBCBI and LCDBBB; the ending values
are $11,036, $10,919 and $11,014,respectively. Beneath the list of the
components that correspond to the line graph are the following total return data
for the Class C Shares of the fund: total return figures for the 1 year period,
and start of performance. The corresponding total figures are as follows: 5.30%
and 7.62% respectively. The performance disclaimer and footnotes are listed
directly under the graphic presentation.
G. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class F
Shares of the fund are represented by a solid line, whereas the Lehman Brothers
Corpoated Bond Index (LBCBI) is represented by a broken dotted line, and the
Lipper Corporate Debt Funds BBB Rated Average (LCDBBB) is represented by a
broken dashed line. The line graph is a visual representation of a comparison of
change in value of a hypothetical investment in the Class F Shares of the fund,
the LBCBI, and the LCDBBB for the period from June 28, 1995 to October 31, 1996.
The `y" axis reflects the cost of the investment. The `x" axis reflects
computation periods from the ending value of the hypothetical investment in the
Class F Shares of the fund as compared to LBCBI and LCDBBB; the ending values
are $24,146, $24,197 and $21,921,respectively. Beneath the list of the
components that correspond to the line graph are the following total return data
for the Class F Shares of the fund: total return figures for the 1 year period,
5 year period and start of performance. The corresponding total figures are as
follows: 5.00% 10.38% and 9.81%, respectively. The performance disclaimer and
footnotes are listed directly under the graphic presentation.
