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: 11/30/05 -------- Date of Reporting Period: Six months ended 5/31/05 ------------------------ Item 1. Reports to Stockholders
Federated
World-Class Investment Manager
Federated Stock and Bond Fund, Inc.
Established 1934
SEMI-ANNUAL SHAREHOLDER REPORT
May 31, 2005
Class A Shares
Class B Shares
Class C Shares
Class K Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
BOARD REVIEW OF ADVISORY CONTRACT
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Financial Highlights-Class A Shares
(For a Share Outstanding Throughout Each Period)
Six Months Ended (unaudited) | Year Ended | Period Ended | |||||||
| 5/31/2005 | | 11/30/2004 | | 11/30/2003 | 1 | |||
Net Asset Value, Beginning of Period | $18.38 | $17.38 | $17.32 | ||||||
Income From Investment Operations: | |||||||||
Net investment income | 0.14 | 0.36 | 0.02 | ||||||
Net realized and unrealized gain (loss) on investments, foreign currency transactions, and futures contracts | 0.18 | 1.01 | 0.11 | ||||||
TOTAL FROM INVESTMENT OPERATIONS | 0.32 | 1.37 | 0.13 | ||||||
Less Distributions: | |||||||||
Distributions from net investment income | (0.13 | ) | (0.37 | ) | (0.07 | ) | |||
Distributions from net realized gain on investments, foreign currency transactions, and futures contracts | - -- | - -- | - -- | ||||||
TOTAL DISTRIBUTIONS | (0.13 | ) | (0.37 | ) | (0.07 | ) | |||
Net Asset Value, End of Period | $18.57 | $18.38 | $17.38 | ||||||
Total Return 2 | 1.74 | % 3 | 7.89 | % | 0.75 | % | |||
Ratios to Average Net Assets: | |||||||||
Expenses | 1.24 | % 4,5 | 1.29 | % 5 | 1.26 | % 4,5 | |||
Net investment income | 1.50 | % 4 | 1.72 | % | 1.64 | % 4 | |||
Expense waiver/reimbursement 6 | 0.00 | % 4,7 | 0.01 | % | 0.01 | % 4 | |||
Supplemental Data: | |||||||||
Net assets, end of period (000 omitted) | $230,150 | $237,428 | $226,701 | ||||||
Portfolio turnover | 17 | % | 47 | % | 1 | % |
1 The Fund changed its fiscal year end from October 31 to November 30. This period represents the one-month period from November 1, 2003 to November 30, 2003.
2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
3 During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on total return. (See Notes to Financial Statements, Note 5.)
4 Computed on an annualized basis.
5 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements. The impact to the expense ratios was less than 0.01% for the six months ended May 31, 2005, the year ended November 30, 2004, the period ended November 30, 2003, and the years ended October 31, 2003 and October 31, 2002, respectively, after taking into account these expense reductions.
6 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
7 Represents less than 0.01%.
See Notes which are an integral part of the Financial Statements
Year Ended October 31, | |||||||||||
| 2003 | | 2002 | | 2001 | | 2000 | ||||
$15.61 | $17.22 | $18.78 | $18.71 | ||||||||
0.31 | 0.39 | 0.48 | 0.55 | ||||||||
1.71 | (1.62 | ) | (1.04 | ) | 0.48 | ||||||
2.02 | (1.23 | ) | (0.56 | ) | 1.03 | ||||||
(0.31 | ) | (0.38 | ) | (0.53 | ) | (0.54 | ) | ||||
-- | - -- | (0.47 | ) | (0.42 | ) | ||||||
(0.31 | ) | (0.38 | ) | (1.00 | ) | (0.96 | ) | ||||
$17.32 | $15.61 | $17.22 | $18.78 | ||||||||
13.08 | % | (7.32 | )% | (3.12 | )% | 5.79 | % | ||||
1.31 | % 5 | 1.26 | % 5 | 1.31 | % | 1.29 | % | ||||
1.89 | % | 2.32 | % | 2.64 | % | 2.98 | % | ||||
0.00 | % 7 | 0.00 | % 7 | 0.00 | % 7 | 0.00 | % 7 | ||||
$224,461 | $184,294 | $175,854 | $177,236 | ||||||||
74 | % | 54 | % | 28 | % | 26 |
Financial Highlights-Class B Shares
(For a Share Outstanding Throughout Each Period)
Six Months Ended (unaudited) | Year Ended | Period Ended | |||||||
| 5/31/2005 | | 11/30/2004 | | 11/30/2003 | 1 | |||
Net Asset Value, Beginning of Period | $18.36 | $17.36 | $17.28 | ||||||
Income From Investment Operations: | |||||||||
Net investment income | 0.07 | 0.23 | 0.01 | ||||||
Net realized and unrealized gain (loss) on investments, foreign currency transactions, and futures contracts | 0.18 | 1.00 | 0.11 | ||||||
TOTAL FROM INVESTMENT OPERATIONS | 0.25 | 1.23 | 0.12 | ||||||
Less Distributions: | |||||||||
Distributions from net investment income | (0.06 | ) | (0.23 | ) | (0.04 | ) | |||
Distributions from net realized gain on investments, foreign currency transactions, and futures contracts | - -- | - -- | - -- | ||||||
TOTAL DISTRIBUTIONS | (0.06 | ) | (0.23 | ) | (0.04 | ) | |||
Net Asset Value, End of Period | $18.55 | $18.36 | $17.36 | ||||||
Total Return 2 | 1.35 | % 3 | 7.08 | % | 0.68 | % | |||
Ratios to Average Net Assets: | |||||||||
Expenses | 1.99 | % 4,5 | 2.04 | % 5 | 2.01 | % 4,5 | |||
Net investment income | 0.75 | % 4 | 0.97 | % | 0.89 | % 4 | |||
Expense waiver/reimbursement 6 | 0.00 | % 4,7 | 0.01 | % | 0.01 | % 4 | |||
Supplemental Data: | |||||||||
Net assets, end of period (000 omitted) | $68,854 | $73,911 | $72,412 | ||||||
Portfolio turnover | 17 | % | 47 | % | 1 | % |
1 The Fund changed its fiscal year end from October 31 to November 30. This period represents the one-month period from November 1, 2003 to November 30, 2003.
2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
3 During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on total return. (See Notes to Financial Statements, Note 5.)
4 Computed on an annualized basis.
5 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements. The impact to the expense ratios was less than 0.01% for the six months ended May 31, 2005, the year ended November 30, 2004, the period ended November 30, 2003, and the years ended October 31, 2003 and October 31, 2002, respectively, after taking into account these expense reductions.
6 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
7 Represents less than 0.01%.
See Notes which are an integral part of the Financial Statements
Year Ended October 31, | |||||||||||
2003 | | 2002 | | 2001 | | 2000 | |||||
$15.58 | $17.19 | $18.75 | $18.68 | ||||||||
0.19 | 0.26 | 0.35 | 0.41 | ||||||||
1.70 | (1.62 | ) | (1.05 | ) | 0.49 | ||||||
1.89 | (1.36 | ) | (0.70 | ) | 0.90 | ||||||
(0.19 | ) | (0.25 | ) | (0.39 | ) | (0.41 | ) | ||||
-- | - -- | (0.47 | ) | (0.42 | ) | ||||||
(0.19 | ) | (0.25 | ) | (0.86 | ) | (0.83 | ) | ||||
$17.28 | $15.58 | $17.19 | $18.75 | ||||||||
12.22 | % | (8.02 | )% | (3.85 | )% | 5.02 | % | ||||
2.06 | % 5 | 2.01 | % 5 | 2.06 | % | 2.04 | % | ||||
1.14 | % | 1.57 | % | 1.89 | % | 2.26 | % | ||||
0.00 | % 7 | 0.00 | % 7 | 0.00 | % 7 | 0.00 | % 7 | ||||
$71,836 | $59,165 | $60,058 | $48,898 | ||||||||
74 | % | 54 | % | 28 | % | 26 | % |
Financial Highlights-Class C Shares
(For a Share Outstanding Throughout Each Period)
Six Months Ended (unaudited) | Year Ended | Period Ended | ||||||
| 5/31/2005 | 11/30/2004 | 11/30/2003 | |||||
Net Asset Value, Beginning of Period | $18.31 | $17.32 | $17.24 | |||||
Income From Investment Operations: | ||||||||
Net investment income | 0.07 | 0.23 | 0.01 | |||||
Net realized and unrealized gain (loss) on investments, foreign currency transactions, and futures contracts | 0.19 | 1.00 | 0.11 | |||||
TOTAL FROM INVESTMENT OPERATIONS | 0.26 | 1.23 | 0.12 | |||||
Less Distributions: | ||||||||
Distributions from net investment income | (0.06 | ) | (0.24 | ) | (0.04 | ) | ||
Distributions from net realized gain on investments, foreign currency transactions, and futures contracts | - -- | - -- | - -- | |||||
TOTAL DISTRIBUTIONS | (0.06 | ) | (0.24 | ) | (0.04 | ) | ||
Net Asset Value, End of Period | $18.51 | $18.31 | $17.32 | |||||
Total Return 2 | 1.43 | % 3 | 7.09 | % | 0.68 | % | ||
Ratios to Average Net Assets: | ||||||||
Expenses | 1.96 | % 4,5 | 2.02 | % 5 | 2.01 | % 4,5 | ||
Net investment income | 0.78 | % 4 | 0.99 | % | 0.89 | % 4 | ||
Expense waiver/reimbursement 6 | 0.00 | % 4,7 | 0.01 | % | 0.01 | % 4 | ||
Supplemental Data: | ||||||||
Net assets, end of period (000 omitted) | $29,160 | $26,704 | $27,853 | |||||
Portfolio turnover | 17 | % | 47 | % | 1 | % |
1 The Fund changed its fiscal year end from October 31 to November 30. This period represents the one-month period from November 1, 2003 to November 30, 2003.
2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
3 During the period, the Fund was reimbursed by the Adviser, which had an impact of 0.05% on total return. (See Notes to Financial Statements, Note 5.)
4 Computed on an annualized basis.
5 The expense ratio is calculated without reduction for fees paid indirectly for directed brokerage arrangements. The impact to the expense ratios was less than 0.01% for the six months ended May 31, 2005, the year ended November 30, 2004, the period ended November 30, 2003, and the years ended October 31, 2003 and October 31, 2002, respectively, after taking into account these expense reductions.
6 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
7 Represents less than 0.01%.
See Notes which are an integral part of the Financial Statements
Year Ended October 31, | |||||||||||
| 2003 | | 2002 | | 2001 | | 2000 | ||||
$15.54 | $17.15 | $18.70 | $18.63 | ||||||||
0.19 | 0.26 | 0.35 | 0.41 | ||||||||
1.70 | (1.62 | ) | (1.04 | ) | 0.49 | ||||||
1.89 | (1.36 | ) | (0.69 | ) | 0.90 | ||||||
(0.19 | ) | (0.25 | ) | (0.39 | ) | (0.41 | ) | ||||
-- | - -- | (0.47 | ) | (0.42 | ) | ||||||
(0.19 | ) | (0.25 | ) | (0.86 | ) | (0.83 | ) | ||||
$17.24 | $15.54 | $17.15 | $18.70 | ||||||||
12.25 | % | (8.03 | )% | (3.81 | )% | 5.04 | % | ||||
2.04 | % 5 | 2.01 | % 5 | 2.06 | % | 2.04 | % | ||||
1.16 | % | 1.57 | % | 1.89 | % | 2.26 | % | ||||
0.00 | % 7 | 0.00 | % 7 | 0.00 | % 7 | 0.00 | % 7 | ||||
$27,731 | $22,567 | $24,032 | $21,909 | ||||||||
74 | % | 54 | % | 28 | % | 26 | % |
Financial Highlights-Class K Shares
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 5/31/2005 | | Year Ended 11/30/2004 | | Period Ended 11/30/2003 | 1 | | Period Ended 10/31/2003 | 2 | |||
Net Asset Value, Beginning of Period | $18.40 | $17.38 | $17.32 | $15.61 | ||||||||
Income From Investment Operations: | ||||||||||||
Net investment income | 0.10 | 0.29 | 0.01 | 0.10 | ||||||||
Net realized and unrealized gain on investments, foreign currency transactions, and futures contracts | 0.18 | 1.03 | 0.10 | 1.71 | ||||||||
TOTAL FROM INVESTMENT OPERATIONS | 0.28 | 1.32 | 0.11 | 1.81 | ||||||||
Less Distributions: | ||||||||||||
Distributions from net investment income | (0.09 | ) | (0.30 | ) | (0.05 | ) | (0.10 | ) | ||||
Net Asset Value, End of Period | $18.59 | $18.40 | $17.38 | $17.32 | ||||||||
Total Return 3 | 1.51 | % 4 | 7.64 | % | 0.64 | % | 11.64 | % | ||||
Ratios to Average Net Assets: | ||||||||||||
Expenses | 1.69 | % 5,6 | 1.74 | % 6 | 1.78 | % ,5,6 | 1.81 | % 5,6 | ||||
Net investment income | 1.07 | % 5 | 2.52 | % | 1.14 | % 5 | 1.39 | % 5 | ||||
Expense waiver/reimbursement 7 | 0.00 | % 5,8 | 0.01 | % | 0.01 | % 5 | 0.00 | % 5,8 | ||||
Supplemental Data: | ||||||||||||
Net assets, end of period (000 omitted) | $381 | $65 | $0 | 9 | $0 | 9 | ||||||
Portfolio turnover | 17 | % | 47 | % | 1 | % | 74 | % |
1 The Fund changed its fiscal year end from October 31 to November 30. This period represents the one-month period from November 1, 2003 to November 30, 2003.
2 Reflects operations for the period from April 8, 2003 (start of performance) to October 31, 2003.
3 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable.Total returns for periods of less than one year are not annualized.
4 During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on total return. (See Notes to Financial Statements, Note 5.)
5 Computed on an annualized basis.
6 The expense ratio is calculated without the reduction for fees paid indirectly for directed brokerage arrangements. The impact to the expenses ratios was less than 0.01% for the six months ended May 31, 2005, the year ended November 30, 2004 and the periods ended November 30, 2003 and October 31, 2003, respectively, after taking into account these expense reductions.
7 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
8 Represents less than 0.01%.
9 Represents less than $1,000.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees; to the extent applicable, distribution (12b-1) fees and/or shareholder services fees; and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2004 to May 31, 2005.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| Beginning Account Value 12/1/2004 | | Ending Account Value 5/31/2005 | | Expenses Paid During Period 1 | |
Actual: | ||||||
Class A Shares | $1,000 | $1,017.40 | $ 6.24 | |||
Class B Shares | $1,000 | $1,013.50 | $ 9.99 | |||
Class C Shares | $1,000 | $1,014.30 | $ 9.84 | |||
Class K Shares | $1,000 | $1,015.10 | $ 8.49 | |||
Hypothetical (assuming a 5% return before expenses): | ||||||
Class A Shares | $1,000 | $1,018.75 | $ 6.24 | |||
Class B Shares | $1,000 | $1,015.01 | $ 10.00 | |||
Class C Shares | $1,000 | $1,015.16 | $ 9.85 | |||
Class K Shares | $1,000 | $1,016.50 | $ 8.50 |
1 Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). The annualized expense ratios are as follows:
Class A Shares | | 1.24% |
Class B Shares | 1.99% | |
Class C Shares | 1.96% | |
Class K Shares | 1.69% |
Portfolio of Investments Summary Tables
At May 31, 2005, the Fund's portfolio composition 1 was as follows:
Sector | | Percentage of Total Net Assets | |
Domestic Equity | 68.5 | % | |
Corporate Debt Securities | 10.7 | % | |
Mortgage-Backed Securities | 8.1 | % | |
U.S. Treasury and Agency Securities | 6.5 | % | |
International Equity | 0.7 | % | |
Foreign Debt Securities | 1.1 | % | |
Asset-Backed Securities | 0.1 | % | |
Cash Equivalents 2 | 6.5 | % | |
Other Assets and Liabilities--Net | (2.2 | )% | |
TOTAL | 100.0 | % |
1 See the Fund's Prospectus for a description of the principal types of securities in which the Fund invests. As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of these tables, the affiliated investment company (other than an affiliated money market fund) is not treated as a single portfolio security, but rather the Fund is treated as owning a pro rata portion of each security and other assets and liabilities owned by the affiliated investment company.
2 Cash Equivalents includes any investments in money market mutual funds and/or overnight repurchase agreements.
At May 31, 2005, the Fund's credit-quality ratings composition 3 for its fixed-income securities was as follows:
S&P Long-Term Ratings as Percentage of Fixed-Income Securities | Moody's Long-Term Ratings as Percentage of Fixed-Income Securities | |||||
AAA | | 57.9% | Aaa | | 58.2% | |
AA | 1.8% | Aa | 3.2% | |||
A | 9.9% | A | 9.1% | |||
BBB | 14.1% | Baa | 14.8% | |||
BB | 9.2% | Ba | 5.3% | |||
B | 4.4% | B | 4.8% | |||
CCC | 1.0% | Caa | 1.5% | |||
CC | 0.0% | Ca | 0.1% | |||
C | 0.0% | C | 0.0% | |||
Not Rated by S&P | 1.7% | Not Rated by Moody's | 3.0% | |||
TOTAL | 100.0% | TOTAL | 100.0% |
At May 31, 2005, the Fund's sector composition 4 for its equity securities was as follows:
Sector | | Percentage of Equity Securities |
Financials | 19.4% | |
Information Technology | 19.3% | |
Consumer Discretionary | 13.7% | |
Healthcare | 11.5% | |
Consumer Staples | 11.4% | |
Industrials | 9.8% | |
Energy | 8.1% | |
Telecommunication Services | 3.9% | |
Materials | 2.0% | |
Utilities | 0.9% | |
TOTAL | 100.0% |
3 These tables depict the long-term, credit-quality ratings assigned to the Fund's portfolio holdings by Standard & Poor's (S&P) and Moody's Investor Service (Moody's), each of which is a nationally recognized statistical rating organization (NRSRO). These credit-quality ratings are shown without regard to gradations within a given rating category. For example, securities rated "A-" have been included in the "A" rated category.
Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit quality ratings in the Fund's Statement of Additional Information.
Holdings that are rated only by a different NRSRO than the one identified have been included in the "Not rated by..." category. Of the portfolio's fixed-income securities, less than 0.01% do not have long-term ratings by either of these NRSROs. Rated securities that have been prerefunded, but not rated again by the NRSRO, also have been included in the "Not rated by..." category.
4 Sector classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the adviser assigns a classification to securities not classified by the GICS and to securities for which the adviser does not have access to the classification made by the GICS.
Portfolio of Investments
May 31, 2005 (unaudited)
Shares | | | Value | ||||
STOCKS--68.5% | |||||||
COMMON STOCKS--68.5% | |||||||
Consumer Discretionary--9.4% | |||||||
62,600 | Clear Channel Communications, Inc. | $ | 1,829,798 | ||||
76,500 | 1 | Comcast Corp., Special Class A | 2,420,460 | ||||
56,900 | Gap (The), Inc. | 1,194,900 | |||||
29,100 | Hasbro, Inc. | 587,238 | |||||
89,500 | Home Depot, Inc. | 3,521,825 | |||||
95,300 | 1 | Interpublic Group Cos., Inc. | 1,176,002 | ||||
35,300 | Johnson Controls, Inc. | 2,000,098 | |||||
93,000 | McDonald's Corp. | 2,877,420 | |||||
26,500 | Nike, Inc., Class B | 2,178,300 | |||||
22,200 | Omnicom Group, Inc. | 1,817,958 | |||||
59,000 | Target Corp. | 3,168,300 | |||||
102,700 | 1 | Time Warner, Inc. | 1,786,980 | ||||
83,900 | Viacom, Inc., Class B | 2,876,931 | |||||
126,900 | Walt Disney Co. | 3,482,136 | |||||
TOTAL | 30,918,346 | ||||||
Consumer Staples--7.8% | |||||||
88,000 | Altria Group, Inc. | 5,908,320 | |||||
73,500 | Coca-Cola Co. | 3,280,305 | |||||
81,750 | Gillette Co. | 4,311,495 | |||||
148,400 | 1 | Kroger Co. | 2,488,668 | ||||
58,500 | PepsiCo, Inc. | 3,293,550 | |||||
34,600 | Procter & Gamble Co. | 1,908,190 | |||||
95,600 | Wal-Mart Stores, Inc. | 4,515,188 | |||||
TOTAL | 25,705,716 | ||||||
Energy--5.6% | |||||||
48,400 | ChevronTexaco Corp. | 2,602,952 | |||||
22,300 | ConocoPhillips | 2,404,832 | |||||
181,400 | Exxon Mobil Corp. | 10,194,680 | |||||
27,800 | Halliburton Co. | 1,188,172 | |||||
37,700 | 1 | Transocean Sedco Forex, Inc. | 1,877,837 | ||||
TOTAL | 18,268,473 | ||||||
Shares | | | Value | ||||
STOCKS--continued | |||||||
COMMON STOCKS--continued | |||||||
Financials--13.3% | |||||||
26,300 | Ace, Ltd. | $ | 1,136,686 | ||||
55,700 | Allstate Corp. | 3,241,740 | |||||
34,700 | American International Group, Inc. | 1,927,585 | |||||
1,000 | 1 | Arcadia Financial Ltd. - Warrants | 0 | ||||
77,300 | Bank of America Corp. | 3,580,536 | |||||
78,600 | Bank of New York Co., Inc. | 2,265,252 | |||||
124,100 | Citigroup, Inc. | 5,846,351 | |||||
25,300 | Federal National Mortgage Association | 1,498,772 | |||||
21,800 | Goldman Sachs Group, Inc. | 2,125,500 | |||||
99,200 | J.P. Morgan Chase & Co. | 3,546,400 | |||||
27,800 | Lehman Brothers Holdings, Inc. | 2,563,160 | |||||
136,800 | MBNA Corp. | 2,885,112 | |||||
66,100 | Merrill Lynch & Co., Inc. | 3,586,586 | |||||
79,300 | Morgan Stanley | 3,882,528 | |||||
46,100 | Wachovia Corp. | 2,339,575 | |||||
54,400 | Wells Fargo & Co. | 3,286,304 | |||||
TOTAL | 43,712,087 | ||||||
Healthcare--7.9% | |||||||
56,900 | Abbott Laboratories | 2,744,856 | |||||
71,400 | Baxter International, Inc. | 2,634,660 | |||||
19,650 | 1 | Biogen Idec, Inc. | 768,315 | ||||
8,000 | 1 | Genentech, Inc. | 634,000 | ||||
20,800 | HCA, Inc. | 1,123,200 | |||||
40,825 | Johnson & Johnson | 2,739,357 | |||||
43,000 | McKesson HBOC, Inc. | 1,731,610 | |||||
76,000 | Medtronic, Inc. | 4,085,000 | |||||
46,000 | Merck & Co., Inc. | 1,492,240 | |||||
140,300 | Pfizer, Inc. | 3,914,370 | |||||
93,000 | Wyeth | 4,033,410 | |||||
TOTAL | 25,901,018 | ||||||
Shares | | | Value | ||||
STOCKS--continued | |||||||
COMMON STOCKS--continued | |||||||
Industrials--6.7% | |||||||
44,700 | 3M Co. | $ | 3,426,255 | ||||
24,900 | Caterpillar, Inc. | 2,343,339 | |||||
296,700 | General Electric Co. | 10,823,616 | |||||
117,400 | Tyco International Ltd. | 3,396,382 | |||||
70,400 | Waste Management, Inc. | 2,076,096 | |||||
TOTAL | 22,065,688 | ||||||
Information Technology--13.2% | |||||||
66,800 | Analog Devices, Inc. | 2,476,944 | |||||
396,600 | 1 | Applied Materials, Inc. | 6,508,206 | ||||
75,600 | 1 | BMC Software, Inc. | 1,286,712 | ||||
244,900 | 1 | Cisco Systems, Inc. | 4,746,162 | ||||
67,800 | 1 | Dell, Inc. | 2,704,542 | ||||
254,400 | 1 | EMC Corp. Mass | 3,576,864 | ||||
160,800 | Intel Corp. | 4,330,344 | |||||
35,600 | International Business Machines Corp. | 2,689,580 | |||||
66,200 | 1 | KLA-Tencor Corp. | 3,006,142 | ||||
43,600 | 1 | Lam Research Corp. | 1,337,648 | ||||
225,600 | Microsoft Corp. | 5,820,480 | |||||
285,000 | 1 | Oracle Corp. | 3,653,700 | ||||
58,900 | 1 | Siebel Systems, Inc. | 543,058 | ||||
30,500 | 1 | Symantec Corp. | 689,605 | ||||
TOTAL | 43,369,987 | ||||||
Materials--1.4% | |||||||
75,600 | Alcoa, Inc. | 2,048,760 | |||||
52,000 | Du Pont (E.I.) de Nemours & Co. | 2,418,520 | |||||
TOTAL | 4,467,280 | ||||||
Telecommunication Services--2.6% | |||||||
105,000 | BellSouth Corp. | 2,809,800 | |||||
146,000 | SBC Communications, Inc. | 3,413,480 | |||||
59,500 | Verizon Communications | 2,105,110 | |||||
13,400 | Vodafone Group PLC, ADR | 337,412 | |||||
TOTAL | 8,665,802 | ||||||
Shares or Principal Amount | | | Value | ||||
STOCKS--continued | |||||||
COMMON STOCKS--continued | |||||||
Utilities--0.6% | |||||||
81,800 | NiSource, Inc. | $ | 1,971,380 | ||||
440 | 1 | NRG Energy, Inc. | 15,730 | ||||
TOTAL | 1,987,110 | ||||||
TOTAL COMMON STOCKS (IDENTIFIED COST $193,229,812) | 225,061,507 | ||||||
ASSET-BACKED SECURITIES--0.1% | |||||||
$ | 198,209 | 2,3 | 125 Home Loan Owner Trust 1998-1A B1, 9.26%, 2/15/2029 | 200,191 | |||
237,464 | Residential Asset Mortgage Pro 2003RS11 AIIB, 12/25/2033 | 237,725 | |||||
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $435,581) | 437,916 | ||||||
COLLATERALIZED MORTGAGE OBLIGATIONS--0.6% | |||||||
943,970 | Federal National Mortgage Association REMIC 2002-52 FG, 3.590%, 9/25/2032 | 953,691 | |||||
750,006 | Morgan Stanley Capital, Inc. 2004-T13 A1, 2.85%, 9/13/2045 | 729,884 | |||||
13,310 | 2 | SMFC Trust Asset-Backed Certificates, 1997-A B1-4, 1/28/2027 | 10,494 | ||||
404,651 | Wells Fargo Mortgage Backed Se 2003-18 Series 2003-18, Class A1, 5.5%, 12/25/2033 | 406,658 | |||||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $2,115,961) | 2,100,727 | ||||||
CORPORATE BONDS--9.0% | |||||||
Basic Industry - Chemicals--0.0% | |||||||
80,000 | Albemarle Corp., Sr. Note, 5.1%, 2/1/2015 | 79,301 | |||||
Basic Industry - Metals & Mining--0.1% | |||||||
80,000 | Alcan, Inc., 5%, 6/1/2015 | 79,808 | |||||
100,000 | Inco Ltd., 5.7%, 10/15/2015 | 102,871 | |||||
120,000 | Newmont Mining Corp., 5.875%, 4/1/2035 | 121,756 | |||||
100,000 | Thiokol Corp., Sr. Note, 6.625%, 3/1/2008 | 106,229 | |||||
TOTAL | 410,664 | ||||||
Basic Industry - Paper--0.2% | |||||||
70,000 | International Paper Co., 5.5%, 1/15/2014 | 72,017 | |||||
200,000 | Louisiana-Pacific Corp., 8.875%, 8/15/2010 | 227,202 | |||||
150,000 | Pope & Talbot, Inc., 8.375%, 6/1/2013 | 155,250 | |||||
275,000 | Weyerhaeuser Co., Deb., 7.375%, 3/15/2032 | 318,802 | |||||
TOTAL | 773,271 | ||||||
Principal Amount | | | Value | ||||
CORPORATE BONDS--continued | |||||||
Capital Goods - Diversified Manufacturing--0.3% | |||||||
$ | 250,000 | General Electric Co., Note, 5%, 2/1/2013 | $ | 257,805 | |||
250,000 | Kennametal, Inc., 7.2%, 6/15/2012 | 278,648 | |||||
250,000 | 2,3 | Tyco International Group, 4.436%, 6/15/2007 | 251,155 | ||||
20,000 | Tyco International Group, Company Guarantee, 6.875%, 1/15/2029 | 23,684 | |||||
250,000 | Tyco International Group, Note, 5.8%, 8/1/2006 | 255,033 | |||||
TOTAL | 1,066,325 | ||||||
Communications - Media & Cable--0.6% | |||||||
100,000 | Comcast Corp., 7.05%, 3/15/2033 | 119,745 | |||||
200,000 | Continental Cablevision, Sr. Note, 8.3%, 5/15/2006 | 208,090 | |||||
110,000 | 2,3 | Cox Communications, Inc., 4.625%, 1/15/2010 | 109,451 | ||||
120,000 | 2,3 | Cox Communications, Inc., 5.45%, 12/15/2014 | 121,824 | ||||
750,000 | Cox Communications, Inc., 7.75%, 8/15/2006 | 778,628 | |||||
230,000 | 2,3 | Grupo Televisa S.A., 6.625%, 3/18/2025 | 230,623 | ||||
250,000 | Lenfest Communication, Inc., Sr. Note, 8.375%, 11/1/2005 | 255,998 | |||||
TOTAL | 1,824,359 | ||||||
Communications - Media Noncable--0.4% | |||||||
500,000 | British Sky Broadcasting Group PLC, Note, 6.875%, 2/23/2009 | 537,081 | |||||
250,000 | Clear Channel Communication, 3.125%, 2/1/2007 | 242,904 | |||||
130,000 | New York Times Co., 4.5%, 3/15/2010 | 130,904 | |||||
100,000 | New York Times Co., 5%, 3/15/2015 | 102,306 | |||||
300,000 | Univision Communications, Sr. Note, 3.5%, 10/15/2007 | 294,957 | |||||
TOTAL | 1,308,152 | ||||||
Communications - Telecom Internet--0.0% | |||||||
50,000 | Insight Midwest LP, Sr. Note, 9.75%, 10/1/2009 | 52,250 | |||||
Communications - Telecom Wireless--0.2% | |||||||
250,000 | AT&T Wireless Services, Sr. Note, 7.35%, 3/1/2006 | 256,290 | |||||
500,000 | Sprint Capital Corp., 7.125%, 1/30/2006 | 510,137 | |||||
TOTAL | 766,427 | ||||||
Communications - Telecom Wirelines--0.4% | |||||||
100,000 | BellSouth Corp., 5.2%, 9/15/2014 | 102,500 | |||||
150,000 | Citizens Communications, 9%, 8/15/2031 | 153,750 | |||||
250,000 | Citizens Communications, Unsecd. Note, 9.25%, 5/15/2011 | 278,125 | |||||
Principal Amount | | | Value | ||||
CORPORATE BONDS--continued | |||||||
Communications - Telecom Wirelines - continued | |||||||
$ | 100,000 | Deutsche Telekom Interna, 5.25%, 7/22/2013 | $ | 103,463 | |||
100,000 | SBC Communications, Inc., 5.1%, 9/15/2014 | 101,612 | |||||
200,000 | Telefonos de Mexico, Note, 4.5%, 11/19/2008 | 198,294 | |||||
400,000 | Verizon Global Funding, 7.75%, 6/15/2032 | 510,044 | |||||
TOTAL | 1,447,788 | ||||||
Consumer Cyclical - Automotive--0.5% | |||||||
250,000 | DaimlerChrysler N.A., 6.5%, 11/15/2013 | 266,155 | |||||
250,000 | Ford Motor Credit Co., Note, 7.375%, 10/28/2009 | 242,051 | |||||
100,000 | General Motors Acceptance, 4.5%, 7/15/2006 | 98,118 | |||||
500,000 | General Motors Acceptance, 7.5%, 7/15/2005 | 501,175 | |||||
500,000 | General Motors Corp., Note, 7.2%, 1/15/2011 | 430,387 | |||||
250,000 | General Motors Corp., Note, 8.375%, 7/15/2033 | 191,944 | |||||
TOTAL | 1,729,830 | ||||||
Consumer Cyclical - Entertainment--0.2% | |||||||
300,000 | AOL Time Warner, Inc., Bond, 7.7%, 5/1/2032 | 379,320 | |||||
300,000 | Carnival Corp., 3.75%, 11/15/2007 | 297,435 | |||||
20,000 | International Speedway C, 4.2%, 4/15/2009 | 19,808 | |||||
80,000 | International Speedway C, 5.4%, 4/15/2014 | 83,106 | |||||
TOTAL | 779,669 | ||||||
Consumer Cyclical - Retailers--0.3% | |||||||
500,000 | CVS Corp., 5.625%, 3/15/2006 | 507,145 | |||||
246,706 | 2,3 | CVS Corp., Pass Thru Cert., 5.298%, 1/11/2027 | 255,396 | ||||
90,000 | Neiman-Marcus Group, Inc., Sr. Deb., 7.125%, 6/1/2028 | 82,305 | |||||
250,000 | Wal-Mart Stores, Inc., Unsecd. Note, 3.375%, 10/1/2008 | 244,685 | |||||
TOTAL | 1,089,531 | ||||||
Consumer Non-Cyclical Food/Beverage--0.2% | |||||||
75,000 | Diageo Finance BV, Unsecd. Note, 3%, 12/15/2006 | 73,978 | |||||
500,000 | Kraft Foods, Inc., Note, 4.625%, 11/1/2006 | 504,160 | |||||
TOTAL | 578,138 | ||||||
Consumer Non-Cyclical Healthcare--0.1% | |||||||
260,000 | Boston Scientific Corp., 5.45%, 6/15/2014 | 274,193 | |||||
Principal Amount | | | Value | ||||
CORPORATE BONDS--continued | |||||||
Consumer Non-Cyclical Pharmaceuticals--0.1% | |||||||
$ | 100,000 | Pharmacia Corp., Sr. Deb., 6.5%, 12/1/2018 | $ | 116,352 | |||
100,000 | Wyeth, Unsecd. Note, 5.5%, 2/1/2014 | 104,742 | |||||
TOTAL | 221,094 | ||||||
Consumer Non-Cyclical Supermarkets--0.1% | |||||||
250,000 | Kroger Co., 7.5%, 4/1/2031 | 293,237 | |||||
Consumer Non-Cyclical Tobacco--0.1% | |||||||
65,000 | Altria Group, Inc., 5.625%, 11/4/2008 | 67,261 | |||||
70,000 | Philip Morris, Note, 6.375%, 2/1/2006 | 70,987 | |||||
TOTAL | 138,248 | ||||||
Energy - Independent--0.1% | |||||||
75,000 | Calpine Corp., Note, 7.75%, 4/15/2009 | 43,875 | |||||
120,000 | Canadian Natural Resource, 4.9%, 12/1/2014 | 119,630 | |||||
157,890 | 2,3 | Ras Laffan Liquified Nat, 3.437%, 9/15/2009 | 153,330 | ||||
TOTAL | 316,835 | ||||||
Energy - Integrated--0.3% | |||||||
250,000 | Conoco, Inc., 5.45%, 10/15/2006 | 255,165 | |||||
500,000 | Husky Oil Ltd., Company Guarantee, 8.9%, 8/15/2028 | 553,140 | |||||
35,000 | Petro-Canada, Deb., 7%, 11/15/2028 | 41,999 | |||||
100,000 | 2,3 | Statoil ASA, 5.125%, 4/30/2014 | 104,143 | ||||
TOTAL | 954,447 | ||||||
Energy - Oil Field Services--0.0% | |||||||
50,000 | Noble Drilling Corp., Sr. Note, 7.5%, 3/15/2019 | 60,787 | |||||
Energy - Refining--0.1% | |||||||
300,000 | Valero Energy Corp., 7.5%, 4/15/2032 | 359,418 | |||||
Financial Institution - Banking--1.1% | |||||||
78,000,000 | Bk Nederlandse Gemeenten, Sr. Unsub., 0.8%, 9/22/2008 | 733,502 | |||||
300,000 | Corp Andina De Fomento, Bond, 7.375%, 1/18/2011 | 342,498 | |||||
750,000 | Firstbank Puerto Rico, Sub. Note, 7.625%, 12/20/2005 | 757,489 | |||||
160,000 | HSBC Finance Corp., 4.75%, 4/15/2010 | 161,957 | |||||
60,000 | HSBC USA, Inc., Sub. Note, 6.625%, 3/1/2009 | 64,972 | |||||
250,000 | J.P. Morgan Chase & Co., Sub. Note, 5.125%, 9/15/2014 | 256,930 | |||||
Principal Amount | | | Value | ||||
CORPORATE BONDS--continued | |||||||
Financial Institution - Banking--continued | |||||||
$ | 250,000 | Marshall & Ilsley Bank, Sr. Note, 4.4%, 3/15/2010 | $ | 250,988 | |||
477,778 | 2,3 | Regional Diversified Funding, 9.25%, 3/15/2030 | 586,123 | ||||
120,000 | Union Planters Corp., 4.375%, 12/1/2010 | 120,116 | |||||
100,000 | US BANK N.A., 6.3%, 2/4/2014 | 112,764 | |||||
100,000 | US Banc Cap I, Company Guarantee, 8.27%, 12/15/2026 | 109,417 | |||||
210,000 | Wachovia Bank N.A., Sub. Note, 4.875%, 2/1/2015 | 212,621 | |||||
TOTAL | 3,709,377 | ||||||
Financial Institution - Brokerage--0.5% | |||||||
190,000 | Amvescap PLC, Note, 4.5%, 12/15/2009 | 186,789 | |||||
250,000 | Bear Stearns Cos., Inc., Unsecd. Note, 3.25%, 3/25/2009 | 240,802 | |||||
500,000 | 2,3 | FMR Corp., 4.75%, 3/1/2013 | 499,260 | ||||
250,000 | Goldman Sachs Group, Inc., 6.125%, 2/15/2033 | 272,325 | |||||
250,000 | Lehman Brothers Holdings, 7.875%, 8/15/2010 | 290,018 | |||||
250,000 | Morgan Stanley Group, Inc., 5.3%, 3/1/2013 | 258,435 | |||||
TOTAL | 1,747,629 | ||||||
Financial Institution - Finance Noncaptive--0.3% | |||||||
345,000 | 2,3 | Berkshire Hathaway, Inc., 4.85%, 1/15/2015 | 343,637 | ||||
250,000 | Capital One Financial, Note, 7.125%, 8/1/2008 | 267,711 | |||||
30,000 | Heller Financial, Inc., Note, 7.375%, 11/1/2009 | 33,598 | |||||
220,000 | SLM Corp., Floating Rate Note, 12/15/2014 | 216,150 | |||||
TOTAL | 861,096 | ||||||
Financial Institution - Insurance - Life--1.2% | |||||||
400,000 | AXA-UAP, Sub. Note, 8.6%, 12/15/2030 | 543,780 | |||||
1,250,000 | Delphi Funding, 9.31%, 3/25/2027 | 1,371,875 | |||||
750,000 | 2,3 | Life Re Capital Trust I, Company Guarantee, 8.72%, 6/15/2027 | 864,300 | ||||
300,000 | 2,3 | Pacific LifeCorp., Bond, 6.6%, 9/15/2033 | 351,159 | ||||
750,000 | 2,3 | Union Central Life Ins Co, Note, 8.2%, 11/1/2026 | 880,410 | ||||
TOTAL | 4,011,524 | ||||||
Financial Institution - Insurance - P&C--0.1% | |||||||
250,000 | 2,3 | MBIA Global Funding LLC, 2.875%, 11/30/2006 | 245,183 | ||||
100,000 | 2,3 | Oil Insurance Ltd., Sub. Deb., 5.15%, 8/15/2033 | 101,682 | ||||
TOTAL | 346,865 | ||||||
Principal Amount | | | Value | ||||
CORPORATE BONDS--continued | |||||||
Financial Institution - REITs--0.1% | |||||||
$ | 45,000 | Mack-Cali Realty Corp., Note, 7.25%, 3/15/2009 | $ | 49,146 | |||
250,000 | Simon Property Group, Inc, 6.35%, 8/28/2012 | 271,268 | |||||
TOTAL | 320,414 | ||||||
Municipal Services--0.1% | |||||||
140,000 | 2,3 | Army Hawaii Family Housing, 5.524%, 6/15/2050 | 148,144 | ||||
Sovereign--0.2% | |||||||
300,000 | KFW-Kredit Wiederaufbau, 2.7%, 3/1/2007 | 293,895 | |||||
175,000 | United Mexican States, 6.625%, 3/3/2015 | 191,888 | |||||
TOTAL | 485,783 | ||||||
State/Provincial--0.2% | |||||||
650,000 | New South Wales, State of, Local Gov't. Guarantee, 6.5%, 5/1/2006 | 496,236 | |||||
Technology--0.1% | |||||||
200,000 | Deluxe Corp., 5.125%, 10/1/2014 | 192,604 | |||||
200,000 | First Data Corp., 4.7%, 8/1/2013 | 201,592 | |||||
TOTAL | 394,196 | ||||||
Transportation - Airlines--0.1% | |||||||
255,000 | Southwest Airlines Co., Deb., 7.375%, 3/1/2027 | 305,834 | |||||
Transportation - Railroads--0.2% | |||||||
140,000 | Burlington Northern, Inc., Mtg. Bond, 9.25%, 10/1/2006 | 149,322 | |||||
100,000 | Burlington Northern Sant, 4.875%, 1/15/2015 | 101,079 | |||||
200,000 | Canadian Pacific RR, 6.25%, 10/15/2011 | 220,360 | |||||
100,000 | Union Pacific Corp., 4.875%, 1/15/2015 | 100,170 | |||||
TOTAL | 570,931 | ||||||
Transportation - Services--0.1% | |||||||
200,000 | FedEx Corp., Note, 2.65%, 4/1/2007 | 194,942 | |||||
Utility - Electric--0.4% | |||||||
200,000 | Alabama Power Co., 2.8%, 12/1/2006 | 196,574 | |||||
105,000 | American Electric Power C, Note, 6.125%, 5/15/2006 | 107,216 | |||||
250,000 | Consolidated Natural Gas, 5%, 12/1/2014 | 252,233 | |||||
300,000 | FirstEnergy Corp., 5.5%, 11/15/2006 | 305,538 | |||||
120,000 | MidAmerican Energy Co., 4.65%, 10/1/2014 | 119,536 | |||||
130,000 | Pacific Gas & Electric C, 6.05%, 3/1/2034 | 143,802 | |||||
100,000 | Pacific Gas & Electric Co., Unsecd. Note, 4.2%, 3/1/2011 | 99,061 | |||||
100,000 | Scottish Power PLC, 4.91%, 3/15/2010 | 101,071 | |||||
TOTAL | 1,325,031 | ||||||
Principal Amount | | | Value | ||||
CORPORATE BONDS--continued | |||||||
Utility - Natural Gas Pipelines--0.0% | |||||||
$ | 100,000 | Kinder Morgan Energy Par, Sr. Unsecd. Note, 5.8%, 3/15/2035 | $ | 100,407 | |||
TOTAL CORPORATE BONDS (IDENTIFIED COST $28,673,124) | 29,542,373 | ||||||
GOVERNMENT AGENCIES--1.5% | |||||||
1,000,000 | Federal Home Loan Mortgage Corp., 5.750%, 4/15/2008 | 1,051,260 | |||||
375,000 | Federal Home Loan Mortgage Corp., 6.250%, 7/15/2032 | 463,118 | |||||
3,000,000 | Federal National Mortgage Association, 4.250%, 5/15/2009 | 3,030,690 | |||||
500,000 | Federal National Mortgage Association, 4.375%, 10/15/2006 | 504,585 | |||||
TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $4,953,426) | 5,049,653 | ||||||
GOVERNMENTS/AGENCIES--0.4% | |||||||
350,000 | Germany, Government of, Bond, 3.75%, 1/4/2009 | 449,908 | |||||
85,000,000 | Italy, Series INTL, 0.65%, 3/20/2009 | 796,666 | |||||
TOTAL GOVERNMENTS/AGENCIES (IDENTIFIED COST $1,079,243) | 1,246,574 | ||||||
MORTGAGE-BACKED SECURITIES--0.0% | |||||||
15,004 | Federal Home Loan Mortgage Corp. Pool C25621, 6.500%, 5/1/2029 | 15,615 | |||||
5,596 | Federal Home Loan Mortgage Corp. Pool E77591, 6.500%, 7/1/2014 | 5,851 | |||||
8,644 | Federal National Mortgage Association Pool 303168, 9.500%, 30 Year, 2/1/2025 | 9,838 | |||||
5,241 | Federal National Mortgage Association Pool 323159, 7.500%, 4/1/2028 | 5,631 | |||||
2,752 | Federal National Mortgage Association Pool 323970, 7.000%, 15 Year, 10/1/2014 | 2,893 | |||||
9,084 | Federal National Mortgage Association Pool 443215, 6.000%, 10/1/2028 | 9,364 | |||||
6,727 | Federal National Mortgage Association Pool 511365, 7.000%, 8/1/2029 | 7,119 | |||||
967 | Federal National Mortgage Association Pool 514184, 7.500%, 9/1/2029 | 1,037 | |||||
4,190 | Government National Mortgage Association Pool 352214, 7.000%, 4/15/2023 | 4,447 | |||||
2,448 | Government National Mortgage Association Pool 462739, 7.500%, 5/15/2028 | 2,644 | |||||
2,873 | Government National Mortgage Association Pool 464835, 6.500%, 9/15/2028 | 3,026 | |||||
6,004 | Government National Mortgage Association Pool 780339, 8.000%, 30 Year, 12/15/2023 | 6,530 | |||||
TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $69,816) | 73,995 | ||||||
U.S. TREASURY--5.0% | |||||||
3,542,280 | U.S. Treasury Inflation Protected Note, Series A-2015, 1.625%, 1/15/2015 | 3,546,708 | |||||
6,000,000 | 4 | United States Treasury Bill, 6/23/2005 | 5,990,063 | ||||
1,650,000 | United States Treasury Bond, 12.750%, 11/15/2010 | 1,720,389 | |||||
1,500,000 | United States Treasury Bond, 6.250%, 8/15/2023 | 1,848,990 | |||||
1,500,000 | United States Treasury Note, 3.500%, 2/15/2010 | 1,484,055 | |||||
500,000 | United States Treasury Note, 4.000%, 2/15/2014 | 501,250 | |||||
750,000 | United States Treasury Note, 4.000%, 2/15/2015 | 748,358 | |||||
Principal Amount or Shares | | | Value | ||||
U.S. TREASURY--continued | |||||||
$ | 35,000 | United States Treasury Note, 4.375%, 8/15/2012 | $ | 36,378 | |||
300,000 | United States Treasury Note, 4.750%, 5/15/2014 | 317,016 | |||||
35,000 | United States Treasury Note, 4.875%, 2/15/2012 | 37,193 | |||||
40,000 | United States Treasury Note, 5.000%, 2/15/2011 | 42,481 | |||||
TOTAL U.S. TREASURY (IDENTIFIED COST $16,144,029) | 16,272,881 | ||||||
MUTUAL FUNDS--10.8% 5 | |||||||
115,555 | Emerging Markets Fixed Income Core Fund | 1,954,880 | |||||
263,992 | Federated International Capital Appreciation Fund, Class A | 2,492,080 | |||||
2,411,017 | Federated Mortgage Core Portfolio | 24,447,713 | |||||
950,656 | High Yield Bond Portfolio | 6,407,417 | |||||
TOTAL MUTUAL FUNDS (IDENTIFIED COST $33,837,657) | 35,302,090 | ||||||
REPURCHASE AGREEMENT--4.9% | |||||||
$ | 16,180,000 | Interest in $3,070,000,000 joint repurchase agreement with Barclays Capital, Inc., 3.080%, dated 5/31/2005 to be repurchased at $16,181,384 on 6/1/2005, collateralized by U.S. Government Agency Obligations with various maturities to 5/5/2008, collateral market value $3,131,400,678 (AT AMORTIZED COST) | 16,180,000 | ||||
TOTAL INVESTMENTS--100.8% (IDENTIFIED COST $296,718,649) 6 | 331,267,716 | ||||||
OTHER ASSETS AND LIABILITIES - NET--(0.8)% | (2,722,891 | ) | |||||
TOTAL NET ASSETS--100% | $ | 328,544,825 |
1 Non-income producing security.
2 Denotes a restricted security, including securities purchased under Rule 144A of the Securities Act of 1933. These securities, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. At May 31, 2005, these securities amounted to $5,456,505 which represents 1.7% of total net assets.
3 Denotes a restricted security, including securities purchased under Rule 144A that have been deemed liquid by criteria approved by the Fund's Board of Directors. At May 31, 2005, these securities amounted to $5,446,011 which represents 1.7% of total net assets.
4 Pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding long futures contracts.
5 Affiliated companies.
6 The cost of investments for federal tax purposes amounts to $296,728,451.
Note: The categories of investments are shown as a percentage of total net assets at May 31, 2005.
The following acronyms are used throughout this portfolio:
ADR | - --American Depositary Receipt |
REITs | - --Real Estate Investment Trusts |
REMIC | - --Real Estate Mortgage Investment Conduit |
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
May 31, 2005 (unaudited)
Assets: | ||||||||
Total investments in securities, at value including $35,302,090 of investments in affiliated issuers (Note 5) (identified cost $296,718,649) | $ | 331,267,716 | ||||||
Cash | 2,344 | |||||||
Cash denominated in foreign currencies (cost of $128,869) | 130,842 | |||||||
Income receivable | 970,922 | |||||||
Receivable for investments sold | 3,969,255 | |||||||
Receivable for shares sold | 641,868 | |||||||
TOTAL ASSETS | 336,982,947 | |||||||
Liabilities: | ||||||||
Payable for investments purchased | $ | 6,870,514 | ||||||
Payable for shares redeemed | 1,102,191 | |||||||
Income distribution payable | 74,650 | |||||||
Payable for distribution services fee (Note 5) | 62,059 | |||||||
Payable for shareholder services fee (Note 5) | 130,780 | |||||||
Payable for daily variation margin | 16,000 | |||||||
Accrued expenses | 181,928 | |||||||
TOTAL LIABILITIES | 8,438,122 | |||||||
Net assets for 17,699,616 shares outstanding | $ | 328,544,825 | ||||||
Net Assets Consist of: | ||||||||
Paid-in capital | $298,637,285 | |||||||
Net unrealized appreciation of investments and translation of assets and liabilities in foreign currency transactions | 34,534,593 | |||||||
Accumulated net realized loss on investments, foreign currency transactions and futures contracts | (4,402,383 | ) | ||||||
Distributions in excess of net investment income | (224,670 | ) | ||||||
TOTAL NET ASSETS | $ | 328,544,825 |
Statement of Assets and Liabilities-continued
May 31, 2005 (unaudited)
Net Asset Value, Offering Price, and Redemption Proceeds Per Share | ||||||||
Class A Shares: | ||||||||
Net asset value per share ($230,149,798 ÷ 12,391,998 shares outstanding), $0.001 par value, 750,000,000 shares authorized | $18.57 | |||||||
Offering price per share (100/94.50 of $18.57) 1 | $19.65 | |||||||
Redemption proceeds per share | $18.57 | |||||||
Class B Shares: | ||||||||
Net asset value per share ($68,854,164 ÷ 3,711,341 shares outstanding), $0.001 par value, 500,000,000 shares authorized | $18.55 | |||||||
Offering price per share | $18.55 | |||||||
Redemption proceeds per share (94.50/100 of $18.55) 1 | $17.53 | |||||||
Class C Shares: | ||||||||
Net asset value per share ($29,160,275 ÷ 1,575,805 shares outstanding), $0.001 par value, 500,000,000 shares authorized | $18.51 | |||||||
Offering price per share (100/99.00 of $18.50) 1 | $18.70 | |||||||
Redemption proceeds per share (99.00/100 of $18.50) 1 | $18.32 | |||||||
Class K Shares: | ||||||||
Net asset value per share ($380,588 ÷ 20,472 shares outstanding), $0.001 par value, 250,000,000 shares authorized | $18.59 | |||||||
Offering price per share | $18.59 | |||||||
Redemption proceeds per share | $18.59 |
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 May 31, 2005 (unaudited)
Investment Income: | |||||||||||
Dividends (including $936,438 received from affiliated issuers) (Note 5) | $ | 3,089,863 | |||||||||
Interest | 1,408,880 | ||||||||||
Investment income allocated from affiliated partnership (Note 5) | 103,844 | ||||||||||
TOTAL INCOME | 4,602,587 | ||||||||||
Expenses: | |||||||||||
Investment adviser fee (Note 5) | $ | 1,130,884 | |||||||||
Administrative personnel and services fee (Note 5) | 133,968 | ||||||||||
Custodian fees | 12,567 | ||||||||||
Transfer and dividend disbursing agent fees and expenses-- Class A Shares | 158,320 | ||||||||||
Transfer and dividend disbursing agent fees and expenses-- Class B Shares | 47,422 | ||||||||||
Transfer and dividend disbursing agent fees and expenses-- Class C Shares | 13,677 | ||||||||||
Transfer and dividend disbursing agent fees and expenses-- Class K Shares | 326 | ||||||||||
Directors'/Trustees' fees | 6,620 | ||||||||||
Auditing fees | 17,738 | ||||||||||
Legal fees | 5,705 | ||||||||||
Portfolio accounting fees | 61,662 | ||||||||||
Distribution services fee--Class B Shares (Note 5) | 267,663 | ||||||||||
Distribution services fee--Class C Shares (Note 5) | 104,006 | ||||||||||
Distribution services fee--Class K Shares (Note 5) | 517 | ||||||||||
Shareholder services fee--Class A Shares (Note 5) | 288,355 | ||||||||||
Shareholder services fee--Class B Shares (Note 5) | 89,221 | ||||||||||
Shareholder services fee--Class C Shares (Note 5) | 34,429 | ||||||||||
Share registration costs | 29,038 | ||||||||||
Printing and postage | 35,080 | ||||||||||
Insurance premiums | 5,121 | ||||||||||
Taxes | 11,262 | ||||||||||
Miscellaneous | 5,831 | ||||||||||
EXPENSES BEFORE ALLOCATION | 2,459,412 | ||||||||||
Expenses allocated from partnership (Note 5) | 734 | ||||||||||
TOTAL EXPENSES | 2,460,146 |
Statement of Operations-continued
Six Months Ended May 31, 2005 (unaudited)
Waivers, Reimbursements, and Expense Reduction: | |||||||||||
Reimbursement of investment adviser fee (Note 5) | $ | (745 | ) | ||||||||
Waiver of administrative personnel and services fee (Note 5) | (5,896 | ) | |||||||||
Reimbursement of shareholder services fee--Class A Shares (Note 5) | (168 | ) | |||||||||
Fees paid indirectly from directed broker arrangements | (3,692 | ) | |||||||||
TOTAL WAIVER, REIMBURSEMENTS, AND EXPENSE REDUCTION | $ | (10,501 | ) | ||||||||
Net expenses | $ | 2,449,645 | |||||||||
Net investment income | 2,152,942 | ||||||||||
Realized and Unrealized Gain (Loss) on Investments, Foreign Currency Transactions, and Futures Contracts: | |||||||||||
Net realized gain on investments and foreign currency transactions (including realized gain of $279,641 on sales of investments in affiliated issuers (Note 5) | 1,293,823 | ||||||||||
Net realized gain allocated from partnership | 57,622 | ||||||||||
Net increase due to reimbursement from Adviser (Note 5) | 13,304 | ||||||||||
Net change in unrealized appreciation of investments, translation of assets and liabilities in foreign currency and futures contracts | 1,963,068 | ||||||||||
Net realized and unrealized gain on investments, foreign currency and futures contracts | 3,327,817 | ||||||||||
Change in net assets resulting from operations | $5,480,759 |
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
| Six Months Ended (unaudited) 5/31/2005 | | Year Ended 11/30/2004 | ||||
Increase (Decrease) in Net Assets | |||||||
Operations: | |||||||
Net investment income | $2,152,942 | $4,944,341 | |||||
Net realized gain on investments, including allocation from partnership, foreign currency transactions and futures contracts | 1,351,445 | 10,616,794 | |||||
Net increase due to reimbursement from Adviser (Note 5) | 13,304 | - -- | |||||
Net change in unrealized appreciation/depreciation of investments, translation of assets and liabilities in foreign currency and futures contracts | 1,963,068 | 8,649,725 | |||||
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 5,480,759 | 24,210,860 | |||||
Distributions to Shareholders: | |||||||
Distributions from net investment income | |||||||
Class A Shares | (1,632,383 | ) | (4,667,324 | ) | |||
Class B Shares | (222,978 | ) | (922,174 | ) | |||
Class C Shares | (96,339 | ) | (342,172 | ) | |||
Class K Shares | (1,585 | ) | (616 | ) | |||
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (1,953,285 | ) | (5,932,286 | ) | |||
Share Transactions: | |||||||
Proceeds from sale of shares | 26,165,620 | 76,616,248 | |||||
Net asset value of shares issued to shareholders in payment of distributions declared | 1,803,759 | 5,441,326 | |||||
Cost of shares redeemed | (41,059,323 | ) | (89,194,830 | ) | |||
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (13,089,944 | ) | (7,137,256 | ) | |||
Change in net assets | (9,562,470 | ) | 11,141,318 | ||||
Net Assets: | |||||||
Beginning of period | 338,107,295 | 326,965,977 | |||||
End of period (including distributions in excess of net investment income of $(224,670) and $(424,327), respectively) | $328,544,825 | $338,107,295 |
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
May 31, 2005 (unaudited)
1. 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. The primary 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.
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 (GAAP) in the United States of America.
Investment Valuation
Domestic and foreign equity securities are valued at the last sale price or official closing price reported in the market in which they are primarily traded (either a national securities exchange or the over-the-counter market), if available. If unavailable, the security is generally valued at the mean between the last closing bid and asked prices. With respect to valuation of foreign securities, trading in foreign cities may be completed at times which vary from the closing of the New York Stock Exchange (NYSE). Therefore, foreign securities are valued at the latest closing price on the exchange on which they are traded immediately prior to the closing of the NYSE. Foreign securities quoted in foreign currencies are translated in U.S. dollars at the foreign exchange rate in effect at 4:00 p.m., Eastern time, on the day the value of the foreign security is determined. Fixed-income, listed corporate bonds, unlisted securities, and private placement securities are generally valued at the mean of the latest bid and ask price as furnished by an independent pricing service. Mortgage-backed security values furnished by an independent pricing service are based on the aggregate investment value of the projected cash flows to be generated by the security. 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 between the close of their primary markets and the closing of the NYSE are valued at fair value as determined in accordance with procedures established by and under general supervision of 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 the collateral at least equals the repurchase price to be paid under the repurchase agreement.
The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the 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, Gains and Losses, 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. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that each class bears certain expenses unique to that class such as transfer and dividend disbursing agent, distribution and shareholder services fees. 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 on fixed-income securities are amortized/accreted for financial statement purposes. 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 Fund's 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 income tax is necessary.
Withholding taxes on foreign interest, dividends, and capital gains have been provided for in accordance with the applicable country's tax rules and rates.
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.
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. 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 rates 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 trade and settlement dates on securities transactions, the difference 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.
Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. For the six months ended May 31, 2005, the Fund had no realized gains on future contracts.
At May 31, 2005, the Fund had the following open futures contracts:
Expiration Date | | Contracts to Receive | | Position | | Unrealized Depreciation |
June 2005 | 20 S&P 500 Index Futures | Long | $(16,000) |
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 accordance with procedures established by and under general supervision of the Directors.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Directors, held at May 31, 2005, is as follows:
Security | | Acquisition Date | | Acquisition Cost |
SMFC Trust Asset-Backed Certificates, 1997-A B1-4, 1/28/2027 | 2/4/1998 | $12,174 |
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. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. CAPITAL STOCK
The following tables summarize capital stock activity:
| Six Months Ended 5/31/2005 | Year Ended 11/30/2004 | ||||||||||||
Class A Shares: | | Shares | | Amount | | Shares | | Amount | ||||||
Shares sold | 941,090 | $ | 17,534,541 | 3,012,983 | $ | 54,649,834 | ||||||||
Shares issued to shareholders in payment of distributions declared | 81,308 | 1,520,941 | 237,861 | 4,326,049 | ||||||||||
Shares redeemed | (1,547,162 | ) | (28,812,668 | ) | (3,380,335 | ) | (60,894,926 | ) | ||||||
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | (524,764 | ) | $ | (9,757,186 | ) | (129,491 | ) | $ | (1,919,043 | ) | ||||
| Six Months Ended 5/31/2005 | Year Ended 11/30/2004 | ||||||||||||
Class B Shares: | | Shares | Amount | Shares | Amount | |||||||||
Shares sold | 194,486 | $ | 3,610,716 | 826,006 | $ | 14,865,982 | ||||||||
Shares issued to shareholders in payment of distributions declared | 10,588 | 197,820 | 45,002 | 819,238 | ||||||||||
Shares redeemed | (519,116 | ) | (9,643,268 | ) | (1,017,579 | ) | (18,276,666 | ) | ||||||
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS | (314,042 | ) | $ | (5,834,732 | ) | (146,571 | ) | $ | (2,591,446 | ) | ||||
| Six Months Ended 5/31/2005 | Year Ended 11/30/2004 | ||||||||||||
Class C Shares: | | Shares | | Amount | Shares | Amount | ||||||||
Shares sold | 252,909 | $ | 4,683,191 | 390,136 | $ | 7,035,438 | ||||||||
Shares issued to shareholders in payment of distributions declared | 4,477 | 83,413 | 16,260 | 295,427 | ||||||||||
Shares redeemed | (139,676 | ) | (2,583,613 | ) | (556,838 | ) | (10,020,595 | ) | ||||||
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS | 117,710 | $ | 2,182,991 | (150,442 | ) | $ | (2,689,730 | ) | ||||||
| Six Months Ended 5/31/2005 | Year Ended 11/30/2004 | ||||||||||||
Class K Shares: | | Shares | Amount | Shares | Amount | |||||||||
Shares sold | 17,926 | $ | 337,172 | 3,616 | $ | 64,994 | ||||||||
Shares issued to shareholders in payment of distributions declared | 85 | 1,585 | 33 | 612 | ||||||||||
Shares redeemed | (1,060 | ) | (19,774 | ) | (143 | ) | (2,643 | ) | ||||||
NET CHANGE RESULTING FROM CLASS K SHARE TRANSACTIONS | 16,951 | $ | 318,983 | 3,506 | $ | 62,963 | ||||||||
NET CHANGE RESULTING FROM SHARE TRANSACTIONS | (704,145 | ) | $ | (13,089,944 | ) | (422,998 | ) | $ | (7,137,256 | ) |
4. FEDERAL TAX INFORMATION
At May 31, 2005, the cost of investments for federal tax purposes was $296,728,451. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation resulting from changes in foreign currency exchange rates and any unrealized depreciation from futures contracts was $34,539,265. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $38,528,046 and net unrealized depreciation from investments for those securities having an excess of cost over value of $3,988,781.
At November 30, 2004, the Fund had a capital loss carryforward of $5,184,479 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 | $3,628,480 | |
2010 | $1,555,999 |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Equity Management Company of Pennsylvania, 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.
Certain of the Fund's assets are managed by Federated Investment Management Company (the "Sub-Adviser"). Under the terms of a sub-adviser agreement between the Adviser and the Sub-Adviser, the Sub-Adviser receives an allocable portion of the Fund's adviser fee. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense.
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund may invest in other funds which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of these transactions. Income earned from investments in these funds are recorded as income in the accompanying financial statements and are listed below:
Emerging Markets Fixed Income Core Fund | | $ | 103,844 |
Federated Mortgage Core Portfolio | | $ | 662,746 |
High-Yield Bond Portfolio | $ | 273,672 | |
Prime Value Obligations Fund | $ | 20 |
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of all Federated funds as specified below:
Maximum Administrative Fee | | Average Aggregate Daily Net Assets of the Federated Funds |
0.150% | on the first $5 billion | |
0.125% | on the next $5 billion | |
0.100% | on the next $10 billion | |
0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
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 daily net assets of the Fund's Class B Shares, Class C Shares, and Class K Shares to finance activities intended to result in the sale of these 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% |
FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended May 31, 2005, FSC retained $13,638 of fees paid by the Fund.
Sales Charges
For the six months ended May 31, 2005, FSC retained $17,376 in sales charges from the sale of Class A Shares. FSC also retained $1,044 of contingent deferred sales charges relating to redemptions of Class C Shares. See "What Do Shares Cost?" in the Prospectus.
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 the 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. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended May 31, 2005, FSSC retained $32,218 of fees paid by the Fund.
The Fund may invest in other funds serviced by FSSC under this agreement. FSSC has agreed to reimburse the Fund for certain shareholder services fees received by FSSC as a result of these transactions.
Expense Reduction
The Fund directs portfolio trades to a broker that in turn pays a portion of the Fund's operating expenses. For the six months ended May 31, 2005, the Fund's expenses were reduced by $3,692 under these arrangements.
Other
For the six months ended May 31, 2005, the Fund's Adviser made a voluntary contribution to the Fund of $13,304 for losses on investments inadvertently sold by the Fund.
General
Certain of the Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the year ended May 31, 2005, were as follows:
Purchases | | $ | 42,600,277 |
Sales | $ | 60,775,894 |
7. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated (Funds) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
Board Review of Advisory Contract
As required by the 1940 Act, the Fund's Board has reviewed the Fund's investment advisory contract and subadvisory contracts. The Board's decision to approve these contracts reflects the exercise of its business judgment on whether to continue the existing arrangements. During its review of these contracts, the Board considers many factors, among the most material of which are: the Fund's investment objectives; the Adviser's management philosophy, personnel, processes, and investment and operating strategies; long-term performance; the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry; the range of comparable fees for similar funds in the mutual fund industry; the range and quality of services provided to the Fund and its shareholders by the Federated organization in addition to investment advisory services; and the Fund's relationship to the Federated family of funds.
In its decision to appoint or renew an Adviser, the Board is mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognizes that most shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and in the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's "selection" or approval of the Adviser must reflect the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board also considers the compensation and benefits received by the Adviser and subadviser. This includes fees received for services provided to the Fund by other entities in the Federated organization and research services received by the Adviser from brokers that execute fund trades, as well as advisory fees. In this regard, the Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the Fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize "economies of scale" as the Fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with the Fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts bearing on the Adviser's service and fee. The Fund's Board is aware of these factors and is guided by them in its review of the Fund's advisory contract to the extent they are appropriate and relevant, as discussed further below.
The Board considers and weighs these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and is assisted in its deliberations by the advice of independent legal counsel. In this regard, the Board requests and receives substantial and detailed information about the Fund and the Federated organization. Federated provides much of this information at each regular meeting of the Board, and furnishes additional reports in connection with the particular meeting at which the Board's formal review of the advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board's evaluation of an advisory contract is informed by reports covering such matters as: the Adviser's investment philosophy, personnel, and processes; operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or "peer group" funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The evaluation process is evolutionary, reflecting continually developing considerations. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be particularly useful, given the high degree of competition in the mutual fund business. The Board focuses on comparisons with other similar mutual funds (rather than non-mutual fund products or services) because, simply put, they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle already chosen by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group may be a useful indicator of how the Adviser is executing on the Fund's investment program, which would in turn assist the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services are such as to warrant continuation of the advisory contract.
The Board also receives financial information about Federated, including reports on the compensation and benefits Federated derives from its relationships with the Federated funds. These reports cover not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The reports also discuss any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades as well as waivers of fees and/or reimbursements of expenses. In order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waive fees and/or reimburse expenses. Although the Board considers the profitability of the Federated organization as a whole, it does not evaluate, on a fund-by-fund basis, Federated's "profitability" and/or "costs" (which would include an assessment as to whether "economies of scale" would be realized if the fund were to grow to some sufficient size). In the Board's view, the cost of performing advisory services on a fund-specific basis is both difficult to estimate satisfactorily and a relatively minor consideration in its overall evaluation. Analyzing isolated funds would require constructed allocations of the costs of shared resources and operations based on artificial assumptions that are inconsistent with the existing relationships within a large and diversified family of funds that receive advisory and other services from the same organization. Although the Board is always eager to discover any genuine "economies of scale," its experience has been that such "economies" are likely to arise only when a fund grows dramatically, and becomes and remains very large in size. Even in these instances, purchase and redemption activity, as well as the presence of expense limitations (if any), may offset any perceived economies. As suggested above, the Board considers the information it receives about the Fund's performance and expenses as compared to an appropriate set of similar competing funds to be more relevant.
The Board bases its decision to approve an advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above are relevant to every Federated fund, nor does the Board consider any one of them to be determinative. With respect to the factors that are relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provide a satisfactory basis to support the decision to continue the existing arrangements.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on "Form N-PX" of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available through Federated's website. Go to FederatedInvestors.com, select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC's website at www.sec.gov.
QUARTERLY PORTFOLIO SCHEDULE
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on "Form N-Q." These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the "Products" section of Federated's website at FederatedInvestors.com by clicking on "Portfolio Holdings" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.
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 Shareholder 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: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Federated
World-Class Investment Manager
Federated Stock and Bond Fund, Inc.
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 313911109
Cusip 313911208
Cusip 313911307
Cusip 313911406
8080105 (7/05)
Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.
Item 2. Code of Ethics Not Applicable Item 3. Audit Committee Financial Expert Not Applicable Item 4. Principal Accountant Fees and Services Not Applicable Item 5. Audit Committee of Listed Registrants Not Applicable Item 6. Schedule of Investments Not Applicable Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies Not Applicable Item 8. Portfolio Managers of Closed-End Management Investment Companies Not Applicable Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers Not Applicable Item 10. Submission of Matters to a Vote of Security Holders Not Applicable Item 11. 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-3(c) under 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 changes in the registrant's internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. 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 Richard J. Thomas, Principal Financial Officer Date July 15, 2005 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 J. Christopher Donahue, Principal Executive Officer Date July 15, 2005 By /S/Richard J. Thomas Richard J. Thomas, Principal Financial Officer Date July 15, 2005