N-CSR 1 fsbfform.htm FEDERATED STOCK AND FUND, INC. SEMI-ANNUAL 


                                  United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form N-CSR
   Certified Shareholder Report of Registered Management Investment Companies




                                      811-1

                      (Investment Company Act File Number)


                       Federated Stock and Bond Fund, Inc.
         _______________________________________________________________

               (Exact Name of Registrant as Specified in Charter)


                            Federated Investors Funds
                              5800 Corporate Drive
                       Pittsburgh, Pennsylvania 15237-7000


                                 (412) 288-1900
                         (Registrant's Telephone Number)


                           John W. McGonigle, Esquire
                            Federated Investors Tower
                               1001 Liberty Avenue
                       Pittsburgh, Pennsylvania 15222-3779
                     (Name and Address of Agent for Service)
                (Notices should be sent to the Agent for Service)






                        Date of Fiscal Year End: 10/31/03


               Date of Reporting Period: Six months ended 4/30/03




Item 1.     Reports to Stockholders

 

Federated Investors
World-Class Investment Manager

Federated Stock and Bond Fund, Inc.

 

 


SEMI-ANNUAL SHAREHOLDER REPORT

April 30, 2003

FINANCIAL HIGHLIGHTS

FINANCIAL STATEMENTS

Financial Highlights -- Class A Shares

(For a Share Outstanding Throughout Each Period)

  

Six Months
Ended
(unaudited)

   

  

Year Ended October 31,

  

4/30/2003

   

  

2002

   

  

2001

   

  

2000

   

  

1999

   

  

1998

   

Net Asset Value, Beginning of Period

   

$15.61

   

   

$17.22

   

   

$18.78

   

   

$18.71

   

   

$19.14

   

   

$20.46

   

Income From Investment Operations:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net investment income

   

0.18

   

   

0.39

   

   

0.48

   

   

0.55

   

   

0.55

   

   

0.65

   

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts

   

0.42

   

   


(1.62

)

   


(1.04

)

   


0.48

   

   

0.45

   

   

1.37

   

TOTAL FROM INVESTMENT OPERATIONS

   

0.60

   

   

(1.23

)

   

(0.56

)

   

1.03

   

   

1.00

   

   

2.02

   

Less Distributions:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Distributions from net investment income

   

(0.17

)

   

(0.38

)

   

(0.53

)

   

(0.54

)

   

(0.53

)

   

(0.69

)

Distributions from net realized gain on investments, foreign currency transactions and futures contracts

   

--

   

   

--

   

   

(0.47

)

   

(0.42

)

   

(0.90

)

   

(2.65

)

TOTAL DISTRIBUTIONS

   

(0.17

)

   

(0.38

)

   

(1.00

)

   

(0.96

)

   

(1.43

)

   

(3.34

)

Net Asset Value, End of Period

   

$16.04

   

   

$15.61

   

   

$17.22

   

   

$18.78

   

   

$18.71

   

   

$19.14

   

Total Return1

   

3.86

%

   

(7.32

)%

   

(3.12

)%

   

5.79

%

   

5.35

%

   

11.09

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Net Assets:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Expenses

   

1.30

%2,3

   

1.26

%3

   

1.31

%

   

1.29

%

   

1.25

%

   

1.25

%

Net investment income

   

2.26

%2

   

2.32

%

   

2.64

%

   

2.98

%

   

2.85

%

   

3.30

%

Expense waiver/reimbursement4

   

0.00

%2,5

   

0.00

%5

   

0.00

%5

   

0.00

%5

   

0.00

%5

   

0.07

%

Supplemental Data:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net assets, end of period (000 omitted)

   

$197,753

   

$184,294

   

$175,854

   

$177,236

   

$209,985

   

$196,149

   

Portfolio turnover

   

49

%

   

54

%

   

28

%

   

26

%

   

46

%

   

53

%

1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.

2 Computed on an annualized basis.

3 The expense ratio is calculated without the reduction for fees paid indirectly for directed brokerage arrangements.

4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

5 Represents less than 0.01%.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class B Shares

(For a Share Outstanding Throughout Each Period)

  

Six Months
Ended
(unaudited)

   

  

Year Ended October 31,

  

4/30/2003

   

  

2002

   

  

2001

   

  

2000

   

  

1999

   

  

1998

   

Net Asset Value, Beginning of Period

   

$15.58

   

   

$17.19

   

   

$18.75

   

   

$18.68

   

   

$19.10

   

   

$20.45

   

Income From Investment Operations:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net investment income

   

0.12

   

   

0.26

   

   

0.35

   

   

0.41

   

   

0.42

   

   

0.50

   

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts

   

0.42

   

   


(1.62

)

   


(1.05

)

   


0.49

   

   

0.45

   

   

1.37

   

TOTAL FROM INVESTMENT OPERATIONS

   

0.54

   

   

(1.36

)

   

(0.70

)

   

0.90

   

   

0.87

   

   

1.87

   

Less Distributions:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Distributions from net investment income

   

(0.11

)

   

(0.25

)

   

(0.39

)

   

(0.41

)

   

(0.39

)

   

(0.57

)

Distributions from net realized gain on investments, foreign currency transactions and futures contracts

   

--

   

   

--

   

   

(0.47

)

   

(0.42

)

   

(0.90

)

   

(2.65

)

TOTAL DISTRIBUTIONS

   

(0.11

)

   

(0.25

)

   

(0.86

)

   

(0.83

)

   

(1.29

)

   

(3.22

)

Net Asset Value, End of Period

   

$16.01

   

   

$15.58

   

   

$17.19

   

   

$18.75

   

   

$18.68

   

   

$19.10

   

Total Return1

   

3.48

%

   

(8.02

)%

   

(3.85

)%

   

5.02

%

   

4.63

%

   

10.26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Net Assets:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Expenses

   

2.05

%2,3

   

2.01

%3

   

2.06

%

   

2.04

%

   

2.00

%

   

2.00

%

Net investment income

   

1.51

%2

   

1.57

%

   

1.89

%

   

2.26

%

   

2.10

%

   

2.55

%

Expense waiver/reimbursement4

   

0.00

%2,5

   

0.00

%5

   

0.00

%5

   

0.00

%5

   

0.00

%5

   

0.07

%

Supplemental Data:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net assets, end of period (000 omitted)

   

$61,988

   

$59,165

   

$60,058

   

$48,898

   

$53,154

   

$26,487

   

Portfolio turnover

   

49

%

   

54

%

   

28

%

   

26

%

   

46

%

   

53

%

1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.

2 Computed on an annualized basis.

3 The expense ratio is calculated without the reduction for fees paid indirectly for directed brokerage arrangements.

4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

5 Represents less than 0.01%.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class C Shares

(For a Share Outstanding Throughout Each Period)

   

Six Months
Ended
(unaudited)

   

  

Year Ended October 31,

  

4/30/2003

   

  

2002

   

  

2001

   

  

2000

   

  

1999

   

  

1998

   

Net Asset Value, Beginning of Period

   

$15.54

   

   

$17.15

   

   

$18.70

   

   

$18.63

   

   

$19.07

   

   

$20.42

   

Income From Investment Operations:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net investment income

   

0.12

   

   

0.26

   

   

0.35

   

   

0.41

   

   

0.42

   

   

0.50

   

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts

   

0.42

   

   


(1.62

)

   


(1.04

)

   


0.49

   

   

0.43

   

   

1.37

   

TOTAL FROM INVESTMENT OPERATIONS

   

0.54

   

   

(1.36

)

   

(0.69

)

   

0.90

   

   

0.85

   

   

1.87

   

Less Distributions:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Distributions from net investment income

   

(0.11

)

   

(0.25

)

   

(0.39

)

   

(0.41

)

   

(0.39

)

   

(0.57

)

Distributions from net realized gain on investments, foreign currency transactions and futures contracts

   

--

   

   

--

   

   

(0.47

)

   

(0.42

)

   

(0.90

)

   

(2.65

)

TOTAL DISTRIBUTIONS

   

(0.11

)

   

(0.25

)

   

(0.86

)

   

(0.83

)

   

(1.29

)

   

(3.22

)

Net Asset Value, End of Period

   

$15.97

   

   

$15.54

   

   

$17.15

   

   

$18.70

   

   

$18.63

   

   

$19.07

   

Total Return1

   

3.49

%

   

(8.03

)%

   

(3.81

)%

   

5.04

%

   

4.52

%

   

10.21

%

Ratios to Average Net Assets:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Expenses

   

2.05

%2,3

   

2.01

%3

   

2.06

%

   

2.04

%

   

2.00

%

   

2.00

%

Net investment income

   

1.51

%2

   

1.57

%

   

1.89

%

   

2.26

%

   

2.10

%

   

2.55

%

Expense waiver/reimbursement4

   

0.00

%2,5

   

0.00

%5

   

0.00

%5

   

0.00

%5

   

0.00

%5

   

0.07

%

Supplemental Data:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net assets, end of period (000 omitted)

   

$23,686

   

$22,567

   

$24,032

   

$21,909

   

$20,385

   

$10,312

   

Portfolio turnover

   

49

%

   

54

%

   

28

%

   

26

%

   

46

%

   

53

%

1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.

2 Computed on an annualized basis.

3 The expense ratio is calculated without the reduction for fees paid indirectly for directed brokerage arrangements.

4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

5 Represents less than 0.01%.

See Notes which are an integral part of the Financial Statements

Financial Highlights -- Class K Shares

(For a Share Outstanding Throughout Each Period)

  

Period
Ended
(unaudited)
4/30/2003

1

Net Asset Value, Beginning of Period

   

$15.61

   

Income From Investment Operations:

   

   

   

Net investment income

   

0.01

   

Net realized and unrealized gain on investments, foreign currency transactions and futures contracts

   

0.42

   

TOTAL FROM INVESTMENT OPERATIONS

   

0.43

   

Net Asset Value, End of Period

   

$16.04

   

Total Return2

   

2.75

%

 

 

 

 

Ratios to Average Net Assets:

   

   

   

Expenses

   

1.80

%3,4

Net investment income

   

1.76

%3

Expense waiver/reimbursement5

   

0.00

%3,6

Supplemental Data:

   

   

   

Net assets, end of period (000 omitted)

   

$0

7

Portfolio turnover

   

49

%8

1 Reflects operations for the period from April 8, 2003 (start of performance) to April 30, 2003.

2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable.

3 Computed on an annualized basis.

4 The expense ratio is calculated without the reduction for fees paid indirectly for directed brokerage arrangements.

5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

6 Represents less than 0.01%.

7 Represents less than $1,000.

8 Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the six months ended April 30, 2003.

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

April 30, 2003 (unaudited)

Shares

  

  

Value

 

 

 

STOCKS--57.2%

 

 

 

 

 

 

COMMON STOCKS--55.4%

 

 

 

 

 

 

Consumer Discretionary--5.3%

 

 

 

 

93,900

1

AOL Time Warner, Inc.

 

$

1,284,552

 

24,400

1

Clear Channel Communications, Inc.

 

 

954,284

 

40,500

1

Comcast Corp., Class A

 

 

1,292,355

 

22,600

 

Gannett Co., Inc.

 

 

1,711,272

 

28,800

 

Home Depot, Inc.

 

 

810,144

 

28,000

2

Interpublic Group Cos., Inc.

 

 

319,200

 

16,700

 

Johnson Controls, Inc.

 

 

1,373,408

 

5,500

1

Kohl's Corp.

 

 

312,400

 

19,700

 

Lowe's Cos., Inc.

 

 

864,633

 

18,100

2

Nike, Inc., Class B

 

 

968,893

 

15,500

 

Omnicom Group, Inc.

 

 

959,450

 

55,900

 

Target Corp.

 

 

1,869,296

 

40,200

1

Viacom, Inc., Class B

 

 

1,745,082

 

25,900

 

Walt Disney Co.

   

   

483,294

 

 

 

TOTAL

   

   

14,948,263

 

 

 

Consumer Staples--6.8%

 

 

 

 

23,000

 

Altria Group, Inc.

 

 

707,480

 

17,300

 

Anheuser-Busch Cos., Inc.

 

 

862,924

 

61,700

 

Coca-Cola Co.

 

 

2,492,680

 

42,200

1

Costco Wholesale Corp.

 

 

1,461,386

 

31,200

 

Gillette Co.

 

 

950,040

 

107,100

1

Kroger Co.

 

 

1,531,530

 

13,800

 

McCormick & Co., Inc.

 

 

342,102

 

45,700

 

PepsiCo, Inc.

 

 

1,977,896

 

26,500

 

Procter & Gamble Co.

 

 

2,381,025

 

27,200

 

UST, Inc.

 

 

852,176

 

26,600

 

Walgreen Co.

 

 

820,876

 

67,400

 

Wal-Mart Stores, Inc.

 

 

3,795,968

 

18,900

 

Wrigley (Wm.), Jr. Co.

 

 

1,071,819

 

 

 

TOTAL

 

 

19,247,902

Shares

  

  

Value

 

 

 

STOCKS--continued

 

 

 

 

 

 

COMMON STOCKS--continued

 

 

 

 

 

 

Energy--4.3%

 

 

 

 

16,900

 

Anadarko Petroleum Corp.

 

$

750,360

 

21,300

 

BP Amoco PLC, ADR

 

 

820,902

 

36,800

2

Baker Hughes, Inc.

 

 

1,030,400

 

32,800

 

ChevronTexaco Corp.

 

 

2,060,168

 

14,900

 

ConocoPhillips

 

 

749,470

 

100,500

 

Exxon Mobil Corp.

 

 

3,537,600

 

41,600

 

Royal Dutch Petroleum Co., ADR

 

 

1,700,608

 

40,700

 

Schlumberger Ltd.

 

 

1,706,551

 

 

 

TOTAL

 

 

12,356,059

 

 

 

Financials--8.4%

 

 

 

 

27,400

 

American International Group, Inc.

 

 

1,587,830

 

1,000

1

Arcadia Financial Ltd. - Warrants

 

 

10

 

11,700

 

Bank One Corp.

 

 

421,785

 

31,400

 

Bank of America Corp.

 

 

2,325,170

 

64,100

 

Bank of New York Co., Inc.

 

 

1,695,445

 

103,700

 

Citigroup, Inc.

 

 

4,070,225

 

14,500

 

Federal Home Loan Mortgage Corp.

 

 

839,550

 

17,700

 

Federal National Mortgage Association

 

 

1,281,303

 

11,700

 

Fifth Third Bancorp

 

 

576,693

 

18,500

 

FleetBoston Financial Corp.

 

 

490,620

 

2,200

 

Goldman Sachs Group, Inc.

 

 

166,980

 

33,300

 

Lehman Brothers Holdings, Inc.

 

 

2,096,901

 

41,100

 

Lincoln National Corp.

 

 

1,313,556

 

46,100

 

Marsh & McLennan Cos., Inc.

 

 

2,198,048

 

12,900

 

Morgan Stanley

 

 

577,275

 

3,500

 

SLM Holding Corp.

 

 

392,000

 

12,600

 

Wachovia Corp.

 

 

481,446

 

40,200

 

Washington Mutual, Inc.

 

 

1,587,900

 

33,900

 

Wells Fargo & Co.

 

 

1,636,014

 

 

 

TOTAL

 

 

23,738,751

Shares

  

  

Value

 

 

 

STOCKS--continued

 

 

 

 

 

 

COMMON STOCKS--continued

 

 

 

 

 

 

Healthcare--9.9%

 

 

 

 

30,000

 

Abbott Laboratories

 

$

1,218,900

 

20,100

1

Amgen, Inc.

 

 

1,232,331

 

13,900

1

Anthem, Inc.

 

 

954,096

 

51,100

 

Baxter International, Inc.

 

 

1,175,300

 

25,600

1

Biogen, Inc.

 

 

972,544

 

39,300

 

Bristol-Myers Squibb Co.

 

 

1,003,722

 

13,500

 

Cardinal Health, Inc.

 

 

746,280

 

26,600

 

Guidant Corp.

 

 

1,037,134

 

48,800

 

Johnson & Johnson

 

 

2,750,368

 

35,900

 

Lilly (Eli) & Co.

 

 

2,291,138

 

9,200

 

Medtronic, Inc.

 

 

439,208

 

46,200

 

Merck & Co., Inc.

 

 

2,687,916

 

53,250

 

Mylan Laboratories, Inc.

 

 

1,505,378

 

186,600

 

Pfizer, Inc.

 

 

5,737,950

 

87,400

 

Schering Plough Corp.

 

 

1,581,940

 

28,000

1

St. Jude Medical, Inc.

 

 

1,468,880

 

27,200

 

Wyeth

 

 

1,184,016

 

 

 

TOTAL

 

 

27,987,101

 

 

 

Industrials--6.2%

 

 

 

 

18,400

 

3M Co.

 

 

2,319,136

 

16,800

2

Caterpillar, Inc.

 

 

883,680

 

22,700

 

Danaher Corp.

 

 

1,565,846

 

18,400

 

Deere & Co.

 

 

810,152

 

22,000

 

Eaton Corp.

 

 

1,805,540

 

143,400

 

General Electric Co.

 

 

4,223,130

 

31,100

 

Lockheed Martin Corp.

 

 

1,556,555

 

50,700

 

Raytheon Co.

 

 

1,517,451

 

36,700

 

Textron, Inc.

 

 

1,082,283

 

27,800

 

Tyco International Ltd.

 

 

433,680

 

66,100

 

Waste Management, Inc.

 

 

1,435,692

 

 

 

TOTAL

 

 

17,633,145

Shares

  

  

Value

 

 

 

STOCKS--continued

 

 

 

 

 

 

COMMON STOCKS--continued

 

 

 

 

 

 

Information Technology--7.8%

 

 

 

 

136,200

1

Applied Materials, Inc.

 

$

1,988,520

 

94,600

1

Cisco Systems, Inc.

 

 

1,422,784

 

53,900

1

Dell Computer Corp.

 

 

1,558,249

 

132,000

1

EMC Corp. Mass

 

 

1,199,880

 

23,200

 

Electronic Data Systems Corp.

 

 

421,080

 

45,000

1

FIserv, Inc.

 

 

1,324,800

 

49,500

 

Hewlett-Packard Co.

 

 

806,850

 

62,300

 

Intel Corp.

 

 

1,146,320

 

27,800

 

International Business Machines Corp.

 

 

2,360,220

 

17,600

1

Intuit, Inc.

 

 

682,528

 

26,100

1

Lexmark International Group, Class A

 

 

1,944,711

 

173,200

 

Microsoft Corp.

 

 

4,428,724

 

51,700

 

Nokia Oyj, ADR, Class A

 

 

856,669

 

109,000

1

Oracle Corp.

 

 

1,294,920

 

34,000

1

SunGuard Data Systems, Inc.

 

 

731,000

 

 

 

TOTAL

 

 

22,167,255

 

 

 

Materials--1.8%

 

 

 

 

64,700

 

Alcoa, Inc.

 

 

1,483,571

 

57,000

 

International Paper Co.

 

 

2,037,750

 

43,800

 

MeadWestvaco Corp.

 

 

1,033,242

 

35,300

 

Monsanto Co.

 

 

614,220

 

 

 

TOTAL

 

 

5,168,783

 

 

 

Telecommunication Services--2.6%

 

 

 

 

96

1

AT&T Canada, Inc., Class A

 

 

2,579

 

5,177

1

AT&T Canada, Inc., Class B

 

 

139,727

 

47,200

 

BellSouth Corp.

 

 

1,203,128

 

92,600

 

SBC Communications, Inc.

 

 

2,163,136

 

100,800

 

Sprint Corp. (FON Group)

 

 

1,160,208

 

74,400

 

Verizon Communications

 

 

2,781,072

 

 

 

TOTAL

 

 

7,449,850

Shares or
Principal
Amount

  

  

Value

 

 

 

STOCKS--continued

 

 

 

 

 

 

COMMON STOCKS--continued

 

 

 

 

 

 

Utilities--2.3%

 

 

 

 

54,800

 

Cinergy Corp.

 

$

1,870,872

 

11,100

 

FPL Group, Inc.

 

 

675,657

 

29,300

 

FirstEnergy Corp.

 

 

988,289

 

67,800

 

NiSource, Inc.

 

 

1,281,420

 

37,000

 

Sempra Energy

 

 

993,080

 

22,900

 

Southern Co.

 

 

666,161

 

 

 

TOTAL

 

 

6,475,479

 

 

 

TOTAL COMMON STOCKS (IDENTIFIED COST $163,361,015)

 

 

157,172,588

 

 

 

FUTURES CONTRACT COLLATERAL--1.8%

 

 

 

$

5,000,000

3

United States Treasury Bill, 6/26/2003 (identified cost $4,990,472)

 

 

4,991,300

 

 

 

TOTAL STOCKS (IDENTIFIED COST $168,351,487)

 

 

162,163,888

 

 

 

ASSET-BACKED SECURITIES--0.2%

 

 

 

 

613,985

4

125 Home Loan Owner Trust 1998-1A B1, 9.26%, 02/15/2029

 

 

644,205

 

92,013

4

SMFC Trust Asset-Backed Certificates, Series 1997-A 4, 4.425%, 1/28/2025

 

 

70,735

 

 

 

TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $697,860)

 

 

714,940

 

 

 

COLLATERALIZED MORTGAGE OBLIGATION--0.9%

 

 

 

 

2,688,632

 

Federal National Mortgage Association, 1.820%, 9/25/2032 (IDENTIFIED COST $2,686,952)

 

 

2,696,429

 

 

 

CORPORATE BONDS--13.4%

 

 

 

 

 

 

Basic Ind. - Chemicals--0.1%

 

 

 

 

400,000

4

Fertinitro Finance, Company Guarantee, 8.29%, 4/01/2020

 

 

155,000

 

 

 

Basic Ind. - Metals & Mining--0.3%

 

 

 

 

500,000

 

Great Central Mining, 8.875%, 4/01/2008

 

 

302,500

 

500,000

4

Normandy Finance Ltd., Company Guarantee, 7.5%, 7/15/2005

 

 

532,445

 

 

 

TOTAL

 

 

834,945

 

 

 

Basic Ind. - Paper--0.0%

 

 

 

 

150,000

 

Pope & Talbot, Inc., 8.375%, 6/1/2013

 

 

137,250

 

 

 

Cap. Goods - Diversified Manufacturing--0.2%

 

 

 

 

500,000

 

Kennametal, Inc., 7.2%, 6/15/2012

 

 

526,625

 

 

 

Cap. Goods - Environmental--0.4%

 

 

 

 

1,000,000

 

Waste Management, Inc., Deb., 8.75%, 5/01/2018

 

 

1,192,970

 

 

 

Cap. Goods- Aerospace & Defense--0.6%

 

 

 

 

500,000

2

Boeing Capital Corp., 6.5%, 2/15/2012

 

 

540,315

 

50,000

 

Lockheed Martin Corp., Note, 8.2%, 12/01/2009

 

 

61,826

 

500,000

 

Raytheon Co., Note, 6.3%, 3/15/2005

 

 

536,315

 

500,000

 

Raytheon Co., Unsecd. Note, 5.375%, 4/01/2013

 

 

517,575

 

 

 

TOTAL

 

 

1,656,031

Principal
Amount

  

  

Value

 

 

 

CORPORATE BONDS--continued

 

 

 

 

 

 

Communications - Media & Cable--0.2%

 

 

 

$

250,000

 

Comcast Corp., Note, 6.875%, 6/15/2009

 

$

279,630

 

250,000

 

Cox Communications Inc., Medium Term Note, 6.69%, 9/20/2004

 

 

263,692

 

 

 

TOTAL

 

 

543,322

 

 

 

Communications - Media Noncable--0.9%

 

 

 

 

500,000

 

Clear Channel Communicate, 7.65%, 9/15/2010

 

 

588,135

 

500,000

 

News America Holdings, Sr. Deb., 9.25%, 2/1/2013

 

 

643,150

 

250,000

 

Reed Elsevier, Inc., 6.75%, 8/01/2011

 

 

287,115

 

1,000,000

 

Univision Communications, Inc., 7.85%, 7/15/2011

 

 

1,166,260

 

 

 

TOTAL

 

 

2,684,660

 

 

 

Communications - Telecom Wirelines--0.7%

 

 

 

 

200,000

 

CenturyTel, Inc., 8.375%, 10/15/2010

 

 

246,080

 

250,000

 

Citizens Communications Co., Unsecd. Note, 9.25%, 5/15/2011

 

 

314,687

 

1,100,000

 

Verizon Global Funding, Note, 7.25%, 12/01/2010

 

 

1,287,220

 

 

 

TOTAL

 

 

1,847,987

 

 

 

Consumer Cyclical - Automotive--0.3%

 

 

 

 

250,000

 

Ford Motor Co., Unsecd. Note, 7.45%, 7/16/2031

 

 

224,665

 

500,000

 

General Motors Corp., Note, 7.2%, 1/15/2011

 

 

507,810

 

 

 

TOTAL

 

 

732,475

 

 

 

Consumer Cyclical - Entertainment--0.7%

 

 

 

 

750,000

 

AOL Time Warner, Inc., Note, 6.75%, 4/15/2011

 

 

816,390

 

1,000,000

 

International Speedway Co, 7.875%, 10/15/2004

 

 

1,069,630

 

 

 

TOTAL

 

 

1,886,020

 

 

 

Consumer Cyclical - Retailers--0.6%

 

 

 

 

500,000

 

CVS Corp., 5.625%, 3/15/2006

 

 

544,200

 

1,250,000

 

Shopko Stores, Sr. Note, 9.25%, 3/15/2022

 

 

1,043,750

 

200,000

 

Target Corp., Unsecd. Note, 7.5%, 8/15/2010

 

 

240,426

 

 

 

TOTAL

 

 

1,828,376

 

 

 

Consumer Non - Food/Beverage--0.1%

 

 

 

 

300,000

 

Kellogg Co., 6.6%, 4/01/2011

 

 

343,257

 

 

 

Consumer Products--0.3%

 

 

 

 

700,000

 

Albecca, Inc., Company Guarantee, 10.75%, 8/15/2008

 

 

753,375

 

 

 

Energy - Integrated--0.2%

 

 

 

 

250,000

 

Conoco Funding Co., 7.25%, 10/15/2031

 

 

304,045

 

250,000

 

Conoco, Inc., 5.45%, 10/15/2006

 

 

272,750

 

35,000

 

Petro-Canada, Inc., Deb., 7%, 11/15/2028

 

 

37,072

 

 

 

TOTAL

 

 

613,867

Principal
Amount

  

  

Value

 

 

 

CORPORATE BONDS--continued

 

 

 

 

 

 

Energy - Oil Field Services--0.0%

 

 

 

$

50,000

 

Noble Drilling Corp., Sr. Note, 7.5%, 3/15/2019

 

$

56,461

 

 

 

Finance - Automotive--0.3%

 

 

 

 

250,000

 

Ford Motor Credit Corp., Note, 7.375%, 10/28/2009

 

 

255,082

 

500,000

 

General Motors Acceptance, 7.5%, 7/15/2005

 

 

537,035

 

 

 

TOTAL

 

 

792,117

 

 

 

Financial Inst. - Banking--1.2%

 

 

 

 

750,000

 

FirstBank Puerto Rico, Sub. Note, 7.625%, 12/15/2005

 

 

792,068

 

60,000

 

HSBC USA, Inc., Sub. Note, 6.625%, 3/01/2009

 

 

67,998

 

500,000

 

J.P. Morgan Chase & Co., 5.75%, 1/02/2013

 

 

533,145

 

200,000

 

Northern Trust Corp., 4.6%, 2/01/2013

 

 

203,452

 

491,084

4

Regional Diversified Funding, 9.25%, 3/15/2030

 

 

578,733

 

1,100,000

 

US BANK NA, 6.3%, 2/04/2014

 

 

1,263,152

 

 

 

TOTAL

 

 

3,438,548

 

 

 

Financial Inst. - Brokerage--0.6%

 

 

 

 

250,000

 

Goldman Sachs Group, Inc., 6.125%, 2/15/2033

 

 

256,162

 

550,000

 

Goldman Sachs Group, Inc., 6.6%, 1/15/2012

 

 

620,620

 

500,000

 

Lehman Brothers Holdings, 7.875%, 8/15/2010

 

 

600,770

 

250,000

 

Morgan Stanley Group, In, 5.3%, 3/01/2013

 

 

258,543

 

 

 

TOTAL

 

 

1,736,095

 

 

 

Financial Inst. - Finance Noncaptive--0.1%

 

 

 

 

30,000

 

Heller Financial, Inc., Note, 7.375%, 11/01/2009

 

 

35,511

 

300,000

 

Household Finance Corp., Unsecd. Note, 5.75%, 1/30/2007

 

 

326,817

 

55,000

 

Newcourt Credit Group, In, Company Guarantee, 6.875%, 2/16/2005

 

 

58,660

 

 

 

TOTAL

 

 

420,988

 

 

 

Financial Inst. - Insurance - Life--1.0%

 

 

 

 

250,000

 

Delphi Financial Group, Note, 8.00%, 10/1/2003

 

 

254,282

 

1,250,000

 

Delphi Funding, 9.31%, 3/25/2027

 

 

998,687

 

750,000

4

Life Re Capital Trust I, Company Guarantee, 8.72%, 6/15/2027

 

 

832,403

 

750,000

4

Union Central Life Ins Co, Note, 8.2%, 11/1/2026

 

 

789,900

 

 

 

TOTAL

 

 

2,875,272

 

 

 

Financial Inst. - Reits--0.5%

 

 

 

 

675,000

 

EOP Operating LP, 7.375%, 11/15/2003

 

 

693,522

 

45,000

 

Mack-Cali Realty Corp., Note, 7.25%, 3/15/2009

 

 

51,350

 

500,000

4

Simon Property Group, In, 6.35%, 8/28/2012

   

   

539,460

 

 

 

TOTAL

 

 

1,284,332

 

 

 

Financial Intermediaries--0.2%

 

 

 

 

500,000

4

Fidelity Investments, 4.75%, 3/01/2013

 

 

504,765

Principal
Amount

  

  

Value

 

 

 

CORPORATE BONDS--continued

 

 

 

 

 

 

Financial Services--0.0%

 

 

 

$

45,000

 

Associates Corp. of North America, Sr. Note, 5.5%, 2/15/2004

 

$

46,505

 

 

 

Food & Drug Retailers--0.5%

 

 

 

 

500,000

2

Albertsons, Inc., 7.5%, 2/15/2011

 

 

580,815

 

125,000

 

Meyer (Fred), Inc., Company Guarantee, 7.45%, 3/01/2008

 

 

143,676

 

750,000

 

Safeway, Inc., Note, 7.25%, 9/15/2004

   

   

799,380

 

 

 

TOTAL

 

 

1,523,871

 

 

 

Food Products--0.1%

 

 

 

 

250,000

 

General Mills, Inc., 6%, 2/15/2012

 

 

275,208

 

 

 

Healthcare--0.1%

 

 

 

 

250,000

 

HCA - The Healthcare Corp., 6.95%, 5/01/2012

 

 

268,675

 

 

 

Insurance - Multi-line--0.3%

 

 

 

 

400,000

 

AXA-UAP, Sub. Note, 8.6%, 12/15/2030

 

 

480,960

 

250,000

4

Travelers Property Casualty, 5%, 3/15/2013

 

 

252,910

 

 

 

TOTAL

 

 

733,870

 

 

 

Metal & Mining--0.1%

 

 

 

 

250,000

 

BHP Finance (USA), Inc., 4.8%, 4/15/2013

 

 

254,953

 

 

 

Oil & Gas--0.7%

 

 

 

 

250,000

 

Devon Financing Corp., 6.875%, 9/30/2011

 

 

288,315

 

500,000

 

Devon Financing Corp., 7.875%, 9/30/2031

 

 

620,140

 

1,000,000

 

Pemex Project Funding Master, Company Guarantee, 9.125%, 10/13/2010

 

 

1,202,500

 

 

 

TOTAL

 

 

2,110,955

 

 

 

State/Provincial--0.2%

 

 

 

 

650,000

 

New South Wales, State of, Local Gov't. Guarantee, 6.5%, 5/01/2006

 

 

425,881

 

 

 

Supranational--0.1%

 

 

 

 

300,000

 

Corp Andina De Fomento, Bond, 7.375%, 1/18/2011

 

 

323,505

 

 

 

Technology Services--0.3%

 

 

 

 

250,000

 

Computer Sciences Corp., 5%, 2/15/2013

 

 

254,252

 

500,000

 

International Business Machines Corp., 4.875%, 10/01/2006

 

 

538,245

 

 

 

TOTAL

 

 

792,497

 

 

 

Telecommunications & Cellular--0.1%

 

 

 

 

50,000

2

Insight Midwest LP, Sr. Note, 9.75%, 10/01/2009

 

 

53,938

 

260,000

 

Tritel PCS, Inc., Sr. Sub. Note, 10.375%, 1/15/2011

 

 

307,450

 

 

 

TOTAL

 

 

361,388

 

 

 

Transportation - Airlines--0.1%

 

 

 

 

53,870

 

Northwest Airlines Pass, Pass Thru Cert., 7.575%, 3/01/2019

 

 

51,311

 

255,000

 

Southwest Airlines Co., Deb., 7.375%, 3/1/2027

 

 

268,750

 

 

 

TOTAL

 

 

320,061

Principal
Amount

  

  

Value

 

 

 

CORPORATE BONDS--continued

 

 

 

 

 

 

Transportation - Railroads--0.1%

 

 

 

$

200,000

 

Canadian Pacific RR, 6.25%, 10/15/2011

 

$

223,768

 

 

 

Utilities--0.2%

 

 

 

 

100,000

 

CMS Energy Corp., 8.375%, 7/01/2003

 

 

99,500

 

75,000

 

Calpine Corp., Note, 7.75%, 4/15/2009

 

 

54,375

 

250,000

 

Duke Energy Corp., Note, 6.25%, 1/15/2012

 

 

274,820

 

25,000

1

NRG Energy, Inc., Bond, 1.00%, 11/01/2003

 

 

9,375

 

 

 

TOTAL

 

 

438,070

 

 

 

Utility - Electric--1.0%

 

 

 

 

200,000

 

Arizona Public Service Co, 6.375%, 10/15/2011

 

 

219,200

 

250,000

 

FirstEnergy Corp., 6.45%, 11/15/2011

 

 

270,975

 

250,000

 

FirstEnergy Corp., 7.375%, 11/15/2031

 

 

275,343

 

750,000

 

Homer City Funding, Sr. Secd. Note, 8.734%, 10/01/2026

 

 

751,875

 

250,000

4

Israel Electric Corp. Ltd., 7.95%, 5/30/2011

 

 

266,590

 

500,000

 

MidAmerican Energy Co., Unsecd. Note, 6.75%, 12/30/2031

 

 

568,725

 

500,000

 

Oncor, Inc., Deb., 7%, 9/01/2022

 

 

553,075

 

 

 

TOTAL

 

 

2,905,783

 

 

 

TOTAL CORPORATE BONDS (IDENTIFIED COST $36,364,370)

 

 

37,849,728

 

 

 

GOVERNMENT AGENCIES--1.9%

 

 

 

 

1,000,000

 

Federal Home Loan Mortgage Corp., 3.250%, 11/15/2004

 

 

1,028,120

 

2,000,000

 

Federal Home Loan Mortgage Corp., 4.050%, 6/21/2005

 

 

2,053,200

 

1,500,000

 

Federal Home Loan Mortgage Corp., 5.750%, 4/15/2008

 

 

1,686,915

 

500,000

 

Federal National Mortgage Association, 4.375%, 10/15/2006

 

 

533,115

 

 

 

TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $4,900,080)

 

 

5,301,350

 

 

 

GOVERNMENTS/AGENCIES--1.6%

 

 

 

 

700,000

 

Austria, Government of, Bond, Series 98 1, 5%, 1/15/2008

 

 

841,011

 

550,000

 

Canada, Government of, Series WU42, 5%, 9/01/2004

 

 

391,677

 

750,000

 

Germany, Government of, Bond, 3.75%, 1/04/2009

 

 

850,735

 

700,000

 

Germany, Government of, Bond, 5.25%, 1/04/2011

 

 

851,389

 

700,000

 

Germany, Government of, Bond, Series 139, 4%, 2/16/2007

 

 

808,107

 

500,000

 

Quebec, Province of, 5.75%, 2/15/2009

 

 

559,000

 

250,000

 

Quebec, Province of, Deb., 7.5%, 9/15/2029

   

   

323,965

 

 

 

TOTAL GOVERNMENTS/AGENCIES (IDENTIFIED COST $3,683,341)

 

 

4,625,884

Principal
Amount

  

  

Value

 

 

 

MORTGAGE BACKED SECURITIES--3.7%

 

 

 

$

999,901

 

Federal Home Loan Mortgage Corp. Pool C01435, 6.000%, 30 Year, 12/1/2032

 

$

1,040,837

 

80,691

 

Federal Home Loan Mortgage Corp. Pool C25621, 6.500%, 5/1/2029

 

 

84,448

 

21,385

 

Federal Home Loan Mortgage Corp. Pool E77591, 6.500%, 7/1/2014

 

 

22,708

 

21,961

 

Federal National Mortgage Association Pool 303168, 9.500%, 30 Year, 2/1/2025

 

 

24,281

 

18,772

 

Federal National Mortgage Association Pool 323159, 7.500%, 4/1/2028

 

 

20,103

 

8,884

 

Federal National Mortgage Association Pool 323970, 7.000%, 15 Year, 10/1/2014

 

 

9,506

 

34,286

 

Federal National Mortgage Association Pool 443215, 6.000%, 10/1/2028

 

 

35,808

 

50,269

 

Federal National Mortgage Association Pool 511365, 7.000%, 8/1/2029

 

 

53,190

 

4,838

 

Federal National Mortgage Association Pool 514184, 7.500%, 9/1/2029

 

 

5,169

 

4,331,130

 

Federal National Mortgage Association Pool 657348, 5.000%, 15 Year, 9/1/2017

 

 

4,467,821

 

20,645

 

Government National Mortgage Association Pool 352214, 7.000%, 4/15/2023

 

 

22,058

 

9,312

 

Government National Mortgage Association Pool 462739, 7.500%, 5/15/2028

 

 

9,972

 

9,162

 

Government National Mortgage Association Pool 464835, 6.500%, 9/15/2028

 

 

9,669

 

783,701

 

Government National Mortgage Association Pool 548300, 5.000%, 30 Year, 12/15/2032

 

 

790,558

 

338,108

 

Government National Mortgage Association Pool 548302, 5.000%, 30 Year, 1/15/2033

 

 

341,067

 

1,870,361

 

Government National Mortgage Association Pool 553004, 5.000%, 30 Year, 1/15/2033

 

 

1,901,335

 

1,489,869

 

Government National Mortgage Association Pool 589575, 5.500%, 30 Year, 10/15/2032

 

 

1,537,828

 

17,331

 

Government National Mortgage Association Pool 780339, 8.000%, 30 Year, 12/15/2023

 

 

19,010

 

 

 

TOTAL MORTGAGE BACKED SECURITIES (IDENTIFIED COST $10,229,461)

 

 

10,395,368

 

 

 

U.S. TREASURY--1.7%

 

 

 

 

750,000

 

United States Treasury Bond, 6.875%, 8/15/2025

 

 

955,665

 

750,000

 

United States Treasury Bond, 8.125%, 5/15/2021

 

 

1,060,665

 

790,000

2

United States Treasury Bond, 8.750%, 5/15/2017

 

 

1,148,091

 

730,000

2

United States Treasury Note, 3.250%, 8/15/2007

 

 

749,732

 

700,000

 

United States Treasury Note, 7.875%, 11/15/2004

   

   

769,566

 

 

 

TOTAL U.S. TREASURY (IDENTIFIED COST $4,330,225)

 

 

4,683,719

Shares

  

  

Value

 

 

 

MUTUAL FUNDS--20.9%

 

 

 

 

 

 

High Yield Bond--2.2%

 

 

 

 

955,809

 

High Yield Bond Portfolio

 

$ 

6,241,435

 

 

 

Mortgage Backed Securities--10.8%

 

 

 

 

2,960,363

 

Federated Mortgage Core Portfolio

 

 

30,521,346

 

 

 

Money Market Funds--7.9%

 

 

 

 

16,078,898

 

Prime Value Obligations Fund, Class IS

 

 

16,078,898

 

6,432,663

 

Prime Value Obligations Fund, Class IS (held as collateral for securities lending)

 

 

6,432,663

 

 

 

TOTAL

 

 

22,511,561

 

 

 

TOTAL MUTUAL FUNDS (IDENTIFIED COST $57,294,230)

 

 

59,274,342

 

 

 

TOTAL INVESTMENTS--101.5% (IDENTIFIED COST $288,538,006) 5

 

 

287,705,648

 

 

 

OTHER ASSETS AND LIABILITIES -- NET--(1.5)%

 

 

(4,277,566)

 

 

 

TOTAL NET ASSETS--100%

 

$

283,428,082

1 Non-income producing security.

2 Certain shares and/or principal amounts are temporarily on loan to unaffiliated broker/dealers.

3 Treasury bill held as collateral for S&P 500 futures contracts.

4 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's board of directors. At April 30, 2003, these securities amounted to $5,167,146 which represents 1.8% of total net assets.

5 The cost of investments for federal tax purposes amounts to $288,538,006.

Note: The categories of investments are shown as a percentage of total net assets at April 30, 2003.

The following acronym is used throughout this portfolio:

ADR

--American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

April 30, 2003 (unaudited)

Assets:

  

   

   

  

   

   

   

Total investments in securities, at value including $6,203,372 of securities loaned (identified cost $288,538,006)

   

   

   

   

$

287,705,648

   

Cash denominated in foreign currency (cost of $190,876)

   

   

   

   

   

203,881

   

Income receivable

   

   

   

   

   

1,199,941

   

Receivable for investments sold

   

   

   

   

   

1,148,963

   

Receivable for shares sold

   

   

   

   

   

636,070

   

TOTAL ASSETS

   

   

   

   

   

290,894,503

   

Liabilities:

   

   

   

   

   

   

   

Payable for investments purchased

   

$

504,054

   

   

   

   

Payable for shares redeemed

   

   

457,741

   

   

   

   

Payable to bank

   

   

4,511

   

   

   

   

Payable on collateral due to broker

   

   

6,432,663

   

   

   

   

Accrued expenses

   

   

67,452

   

   

   

   

TOTAL LIABILITIES

   

   

   

   

   

7,466,421

   

Net assets for 17,681,551 shares outstanding

   

   

   

   

$

283,428,082

   

Net Assets Consist of:

   

   

   

   

   

   

   

Paid in capital

   

   

   

   

$

299,428,264

   

Net unrealized depreciation of investments, translation of assets and liabilities in foreign currency and futures contracts

   


   

   

   


(287,339

)

Accumulated net realized loss on investments, foreign currency transactions and futures contracts

   

   

   

   

   

(16,121,380

)

Undistributed net investment income

   

   

   

   

   

408,537

   

TOTAL NET ASSETS

   

   

   

   

$

283,428,082

   

Net Asset Value, Offering Price and Redemption Proceeds Per Share

   

   

   

   

   

   

   

Class A Shares:

   

   

   

   

   

   

   

Net asset value per share ($197,753,068 ÷ 12,326,603 shares outstanding)

   

   

   

   

   

$16.04

   

Offering price per share (100/94.50 of $16.04)1

   

   

   

   

   

$16.97

   

Redemption proceeds per share

   

   

   

   

   

$16.04

   

Class B Shares:

   

   

   

   

   

   

   

Net asset value per share ($61,988,457 ÷ 3,871,755 shares outstanding)

   

   

   

   

   

$16.01

   

Offering price per share

   

   

   

   

   

$16.01

   

Redemption proceeds per share (94.50/100 of $16.01)1

   

   

   

   

   

$15.13

   

Class C Shares:

   

   

   

   

   

   

   

Net asset value per share ($23,686,301 ÷ 1,483,177 shares outstanding)

   

   

   

   

   

$15.97

   

Offering price per share (100/99.00 of 15.97)1

   

   

   

   

   

$16.13

   

Redemption proceeds per share (99.00/100 of $15.97)1

   

   

   

   

   

$15.81

   

Class K Shares:

   

   

   

   

   

   

   

Net asset value per share ($256.01 ÷ 15.958 shares outstanding)

   

   

   

   

   

$16.04

   

Offering price per share

   

   

   

   

   

$16.04

   

Redemption proceeds per share

   

   

   

   

   

$16.04

   

1 See "What Do Shares Cost?" in the Prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

Six Months Ended April 30, 2003 (unaudited)

Investment Income:

  

   

   

   

  

   

   

   

  

   

   

   

Dividends (net of foreign taxes withheld of $10,425)

   

   

   

   

   

   

   

   

   

$

2,678,600

   

Interest (including income on securities loaned of $7,855)

   

   

   

   

   

   

   

   

   

   

2,125,063

   

TOTAL INCOME

   

   

   

   

   

   

   

   

   

   

4,803,663

   

Expenses:

   

   

   

   

   

   

   

   

   

   

   

   

Investment adviser fee

   

   

   

   

   

$

959,195

   

   

   

   

   

Administrative personnel and services fee

   

   

   

   

   

   

101,604

   

   

   

   

   

Custodian fees

   

   

   

   

   

   

10,743

   

   

   

   

   

Transfer and dividend disbursing agent fees and expenses -- Class A Shares

   

   

   

   

   

   

138,732

   

   

   

   

   

Transfer and dividend disbursing agent fees and expenses -- Class B Shares

   

   

   

   

   

   

41,880

   

   

   

   

   

Transfer and dividend disbursing agent fees and expenses -- Class C Shares

   

   

   

   

   

   

15,773

   

   

   

   

   

Transfer and dividend disbursing agent fees and expenses -- Class K Shares

   

   

   

   

   

   

0

1

   

   

   

   

Directors'/Trustees' fees

   

   

   

   

   

   

6,309

   

   

   

   

   

Auditing fees

   

   

   

   

   

   

8,007

   

   

   

   

   

Legal fees

   

   

   

   

   

   

2,521

   

   

   

   

   

Portfolio accounting fees

   

   

   

   

   

   

49,912

   

   

   

   

   

Distribution services fee--Class B Shares

   

   

   

   

   

   

223,441

   

   

   

   

   

Distribution services fee--Class C Shares

   

   

   

   

   

   

85,188

   

   

   

   

   

Distribution services fee--Class K Shares

   

   

   

   

   

   

0

1

   

   

   

   

Shareholder services fee--Class A Shares

   

   

   

   

   

   

234,902

   

   

   

   

   

Shareholder services fee--Class B Shares

   

   

   

   

   

   

74,481

   

   

   

   

   

Shareholder services fee--Class C Shares

   

   

   

   

   

   

28,396

   

   

   

   

   

Share registration costs

   

   

   

   

   

   

35,283

   

   

   

   

   

Printing and postage

   

   

   

   

   

   

37,478

   

   

   

   

   

Insurance premiums

   

   

   

   

   

   

765

   

   

   

   

   

Taxes

   

   

   

   

   

   

9,536

   

   

   

   

   

Miscellaneous

   

   

   

   

   

   

5,868

   

   

   

   

   

TOTAL EXPENSES

   

   

   

   

   

   

2,070,014

   

   

   

   

   

Waiver, Reimbursement and Expense Reduction:

   

   

   

   

   

   

   

   

   

   

   

   

Waiver of investment adviser fee

   

$

(2,074

)

   

   

   

   

   

   

   

   

Reimbursement of investment adviser fee

   

   

(1,343

)

   

   

   

   

   

   

   

   

Fees paid indirectly from directed broker arrangements

   

   

(2,063

)

   

   

   

   

   

   

   

   

TOTAL WAIVER, REIMBURSEMENT AND EXPENSE REDUCTION

   

   

   

   

   

   

(5,480

)

   

   

   

   

Net expenses

   

   

   

   

   

   

   

   

   

   

2,064,534

   

Net investment income

   

   

   

   

   

   

   

   

   

   

2,739,129

   

Realized and Unrealized Gain (Loss) on Investments, Foreign Currency Transactions and Futures Contracts:

   

   

   

   

   

   

   

   

   

   

   

   

Net realized loss on investments and foreign currency transactions

   

   

   

   

   

   

   

   

   

   

(2,592,821

)

Net realized loss on futures contracts

   

   

   

   

   

   

   

   

   

   

(15,159

)

Net change in unrealized depreciation of investments, translation of assets and liabilities in foreign currency and futures contracts





   



   

   

   


9,910,443

   

Net realized and unrealized gain on investments, foreign currency and futures contracts

   

   

   

   

   

   

   

   

   

   

7,302,463

   

Change in net assets resulting from operations

   

   

   

   

   

   

   

   

   

$

10,041,592

   

1 Represents less than $1.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

 

   

  

Six Months
Ended
(unaudited)
4/30/2003

   

  

Year Ended
10/31/2002

   

Increase (Decrease) in Net Assets

   

   

   

   

   

   

   

   

Operations:

   

   

   

   

   

   

   

   

Net investment income

   

$

2,739,129

   

   

$

5,743,997

   

Net realized loss on investments, foreign currency transactions and futures contracts

   

   

(2,607,980

)

   

   

(9,286,800

)

Net change in unrealized appreciation/depreciation of investments, translation of assets and liabilities in foreign currency and futures contracts

   

   

9,910,443

   

   

   

(18,837,481

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

   

   

10,041,592

   

   

   

(22,380,284

)

Distributions to Shareholders:

   

   

   

   

   

   

   

   

Distributions from net investment income

   

   

   

   

   

   

   

   

Class A Shares

   

   

(2,025,794

)

   

   

(4,149,628

)

Class B Shares

   

   

(422,656

)

   

   

(953,497

)

Class C Shares

   

   

(161,434

)

   

   

(363,217

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

   

   

(2,609,884

)

   

   

(5,466,342

)

Share Transactions:

   

   

   

   

   

   

   

   

Proceeds from sale of shares

   

   

44,543,226

   

   

   

102,779,882

   

Net asset value of shares issued to shareholders in payment of distributions declared

   

   

2,348,774

   

   

   

4,869,260

   

Cost of shares redeemed

   

   

(36,922,084

)

   

   

(73,719,239

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

   

   

9,969,916

   

   

   

33,929,903

   

Change in net assets

   

   

17,401,624

   

   

   

6,083,277

   

Net Assets:

   

   

   

   

   

   

   

   

Beginning of period

   

   

266,026,458

   

   

   

259,943,181

   

End of period (including undistributed net investment income of $408,537 and $279,292, respectively)

   

$

283,428,082

   

   

$

266,026,458

   

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

April 30, 2003 (unaudited)

ORGANIZATION

Federated Stock and Bond Fund, Inc. (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares and Class K Shares. Effective April 8, 2003, the Fund added Class K Shares. The investment objective of the Fund is to provide relative safety of capital with the possibility of long-term growth of capital and income. Consideration is also given to current income.

SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles ("GAAP").

Investment Valuation

U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities and private placement securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Listed equity securities are valued at the last sale price reported on a national securities exchange. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available, or whose values have been affected by a significant event occurring after the close of their primary markets, are valued at fair value as determined in good faith using methods approved by the Board of Directors (the "Directors").

Repurchase Agreements

It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of collateral at least equals the repurchase price to be paid under the repurchase agreement.

The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Directors. Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

Investment Income, Expenses and Distributions

Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Fund offers multiple classes of shares, which differ in their respective transfer and dividend disbursing agent, distribution and service fees. All shareholders bear the common expenses of the Fund based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Premium and Discount Amortization/Paydown Gains and Losses

All premiums and discounts are amortized/accreted. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses) are classified as part of investment income.

Federal Taxes

It is the Funds' policy to comply with the Subchapter M provision of the Internal Revenue Code (the "Code"), and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary.

When-Issued and Delayed Delivery Transactions

The Funds may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Foreign Currency Translation

The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies ("FC") are translated into U.S. dollars based on the rate of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.

Futures Contracts

The Fund purchases stock index futures contracts to manage cashflows, enhance yield, and to potentially reduce transaction costs. Upon entering into a stock index futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. For the six months ended April 30, 2003, the Fund had realized losses of $15,159 on futures contracts.

Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with changes in the value of the underlying securities.

At April 30, 2003, the Fund had outstanding futures contracts as set forth below:

Expiration Date

  

Contracts to Receive

  

Position

  

Unrealized
Appreciation

June 2003

 

22 S&P 500 Index Futures

 

Long

 

$529,645

Securities Lending

The Fund participates in a securities lending program providing for the lending of corporate bonds, equity and government securities to qualified brokers. Collateral for securities loaned is invested in an affiliated money market fund. Collateral is maintained at a minimum level of 102% of the market value on investments loaned, plus interest, if applicable. Earnings on collateral are allocated between the custodian securities lending agent, as a fee for its services under the program, and the Fund, according to agreed-upon rates.

As of April 30, 2003, securities subject to this type of arrangement and related collateral were as follows:

Market Value of
Securities Loaned

  

Market Value
of Collateral

$6,203,372

 

$6,432,663

Restricted Securities

Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in good faith using methods approved by the Directors.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 a trade date basis.

CAPITAL STOCK

At April 30, 2003, par value shares ($0.001 per share) authorized were as follows:

Share Class Name

  

Number of Par Value
Capital Stock Authorized

Class A Shares

 

750,000,000

Class B Shares

 

500,000,000

Class C Shares

 

500,000,000

Class K Shares

 

500,000,000

TOTAL

 

2,250,000,000

Transactions in capital stock were as follows:

  

Six Months Ended
4/30/2003

  

Year Ended
10/31/2002

Class A Shares:

  

Shares

  

Amount

  

Shares

  

Amount

Shares sold

   

2,176,214

   

   

$

34,087,278

   

   

4,452,697

   

   

$

74,821,478

   

Shares issued to shareholders in payment of distributions declared

   

117,770

   

   

   

1,839,845

   

   

216,498

   

   

   

3,696,620

   

Shares redeemed

   

(1,773,184

)

   

   

(27,619,993

)

   

(3,073,577

)

   

   

(51,181,066

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

   

520,800

   

   

$

8,307,130

   

   

1,595,618

   

   

$

27,337,032

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
4/30/2003

Year Ended
10/31/2002

Class B Shares:

Shares

Amount

Shares

Amount

Shares sold

   

532,300

   

   

$

8,290,614

   

   

1,360,605

   

   

$

23,050,923

   

Shares issued to shareholders in payment of distributions declared

   

23,534

   

   

   

367,776

   

   

49,499

   

   

   

846,270

   

Shares redeemed

   

(481,872

)

   

   

(7,478,538

)

   

(1,105,827

)

   

   

(18,207,545

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

   

73,962

   

   

$

1,179,852

   

   

304,277

   

   

$

5,689,648

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended
4/30/2003

Year Ended
10/31/2002

Class C Shares:

Shares

Amount

Shares

Amount

Shares sold

   

139,217

   

   

$

2,165,084

   

   

290,604

   

   

$

4,907,481

   

Shares issued to shareholders in payment of distributions declared

   

9,059

   

   

   

141,153

   

   

19,124

   

   

   

326,370

   

Shares redeemed

   

(117,290

)

   

   

(1,823,552

)

   

(258,821

)

   

   

(4,330,628

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

   

30,986

   

   

$

482,685

   

   

50,907

   

   

$

903,223

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period Ended
4/30/20031

Year Ended
10/31/2002

Class K Shares:

Shares

Amount

Shares

Amount

Shares sold

   

16

   

   

$

250

   

   

   

   

   

   

   

   

Shares redeemed

   

0

2

   

   

(1

)

   

   

   

   

   

   

   

NET CHANGE RESULTING FROM CLASS K SHARE TRANSACTIONS

   

16

   

   

$

249

   

   

   

   

   

   

   

   

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

   

625,764

   

   

$

9,969,916

   

   

1,950,802

   

   

$

33,929,903

   

1 Reflects operations for the period from April 8, 2003 (start of performance) to April 30, 2003.

2 Represents less than 1 share.

FEDERAL TAX INFORMATION

At April 30, 2003, the cost of investments for federal tax purposes was $288,538,006. The net unrealized depreciation of investments for federal tax purposes was $832,358. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $16,601,868 and net unrealized depreciation from investments for those securities having an excess of cost over value of $17,434,226.

At October 31, 2002, the Fund had a capital loss carryforward of $12,987,435 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of 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:

Expiration Year

  

Expiration Amount

2009

  

$3,600,347

2010

  

$9,387,088

Other Taxes

As an open-end management investment company incorporated in the state of Maryland but domiciled in Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to (a) a maximum of 0.55% of the average daily net assets of the Fund, and (b) 4.50% of the gross income of the Fund, excluding capital gains or losses. 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.

Pursuant to an Exemptive Order, the Fund may invest in Prime Value Obligations Fund which is managed by the Adviser. The Adviser has agreed to reimburse certain investment adviser fees as a result of these transactions.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Funds with administrative personnel and services. The fee paid to FServ is based on a scale that ranges from 0.150% to 0.075% of the average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

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 B, Class C and Class K Shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC:

Share Class Name

  

Percentage of Average Daily
Net Assets of Class

Class B Shares

 

0.75%

Class C Shares

 

0.75%

Class K Shares

 

0.50%

Shareholder Services Fee

Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund's Class A Shares, Class B Shares and Class C Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts.

Transfer and Dividend Disbursing Agent Fees and Expenses

FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders.

Portfolio Accounting Fees

FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of each Fund's average daily net assets for the period, plus out-of-pocket expenses.

Expense Reduction

The Fund directs certain portfolio trades to a broker that in turn pays a portion of the Fund's operating expenses. For the six months ended April 30, 2003, the Fund's expenses were reduced by $2,063 under these arrangements.

General

Certain of the Officers and Directors of the Corporation are Officers and Directors or Trustees of the above companies.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended April 30, 2003, were as follows:

Purchases

  

$

121,999,573

Sales

  

$

99,383,445

Purchases and sales of long-term U.S. government securities for the six months ended April 30, 2003, were as follows:

Purchases

  

$

14,076,428

Sales

  

$

22,676,629

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.

IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY

In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called "householding"), as permitted by applicable rules. The Fund's "householding" program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the householding program. The Fund is also permitted to treat a shareholder as having given consent ("implied consent") if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to "household" at least sixty (60) days before it begins "householding" and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to "opt out" of householding. Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of householding at any time by calling 1-800-341-7400.

Federated Investors
World-Class Investment Manager


Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com

Contact us at 1-800-341-7400 or
www.federatedinvestors.com/contact

Federated Securities Corp., Distributor

Cusip 313911109
Cusip 313911208
Cusip 313911307

Federated is a registered mark of Federated Investors, Inc. 2003 ©Federated Investors, Inc.

8080105 (6/03)

 

Item 2.     Code of Ethics

            Not Applicable

Item 3.     Audit Committee Financial Expert

            Not Applicable

Item 4.     Principal Accountant Fees and Services

            Not Applicable

Items 5-6   [Reserved]

Item 7.     Disclosure of Proxy Voting Policies and Procedures for Closed-End
            Management Investment Companies

            Not Applicable

Item 8.     [Reserved]

Item 9.     Controls and Procedures

(a)  The   registrant's   President  and  Treasurer   have  concluded  that  the
     registrant's  disclosure  controls and procedures (as defined in rule 30a-2
     under the  Investment  Company Act of 1940 (the  "Act")) are  effective  in
     design  and  operation  and  are  sufficient  to  form  the  basis  of  the
     certifications  required  by Rule  30a-2  under  the  Act,  based  on their
     evaluation of these  disclosure  controls and procedures  within 90 days of
     the filing date of this report on Form N-CSR.

(b)  There were no significant changes in the registrant's internal controls, or
     the internal  controls of its service  providers,  or in other factors that
     could  significantly  affect these controls subsequent to the date of their
     evaluation,  including any  corrective  actions with regard to  significant
     deficiencies and material weaknesses.

Item 10.    Exhibits


                                   SIGNATURES

Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Registrant  Federated Stock and Bond Fund, Inc.

By          /S/ Richard J. Thomas, Principal Financial Officer
Date        June 24, 2003

Pursuant to the  requirements  of the  Securities  Exchange  Act of 1934 and the
Investment  Company  Act of  1940,  this  report  has been  signed  below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.


By          /S/ J. Christopher Donahue, Principal Executive Officer


Date        June 25, 2003


By          /S/ Richard J. Thomas, Principal Financial Officer


Date        June 24, 2003