Federated Investment Series Funds NCSR Certified annual shareholder report (management investment company)




                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM N-CSR
   CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES




                                   811-07021

                      (Investment Company Act File Number)


                    Federated Investment Series Funds, 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:  11/30/06


             Date of Reporting Period:  Fiscal year ended 11/30/06








ITEM 1.     REPORTS TO STOCKHOLDERS

Federated
World-Class Investment Manager

Federated Bond Fund

Established 1987

A Portfolio of Federated Investment Series Funds, Inc.

20TH ANNUAL SHAREHOLDER REPORT

November 30, 2006

Class A Shares
Class B Shares
Class C Shares
Class F Shares

FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
PORTFOLIO OF INVESTMENTS SUMMARY TABLE
PORTFOLIO OF INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
STATEMENT OF OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
NOTES TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BOARD OF DIRECTORS AND CORPORATION OFFICERS
EVALUATION AND APPROVAL 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)

Year Ended November 30	2006		2005	¹	2004		2003		2002
Net Asset Value, Beginning of Period	$8.79		$9.09		$9.04		$8.49		$8.72
Income From Investment Operations:
Net investment income	0.50		0.52		0.53		0.58		0.62
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts	0.13		(0.31	)	0.08		0.55		(0.25	)
TOTAL FROM INVESTMENT OPERATIONS	0.63		0.21		0.61		1.13		0.37
Less Distributions:
Distributions from net investment income	(0.49	)	(0.51	)	(0.56	)	(0.58	)	(0.60	)
Net Asset Value, End of Period	$8.93		$8.79		$9.09		$9.04		$8.49
Total Return²	7.47	%	2.36	%	6.89	%	13.62	%	4.43	%

Ratios to Average Net Assets:
Net expenses³	0.99	%	1.06	%	1.05	%	1.05	%	1.06	%
Net investment income	5.48	%	5.37	%	5.81	%	6.32	%	7.13	%
Expense waiver/reimbursement⁴	0.26	%	0.19	%	0.17	%	0.16	%	0.16	%
Supplemental Data:
Net assets, end of period (000 omitted)	$478,755		$442,294		$395,445		$377,436		$319,597
Portfolio turnover	34	%	34	%	25	%	28	%	27	%

1 Beginning with the year ended November 30, 2005, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

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, if any, are not annualized.

3 Pursuant to a settlement with the New York Attorney General, the Adviser has agreed to waive investment adviser fees in compliance with an Assurance of Discontinuance dated November 17, 2005. The net investment adviser fee was reduced to 0.5557% effective January 1, 2006 and may not be increased until after December 31, 2010.

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

See Notes which are an integral part of the Financial Statements

Financial Highlights - Class B Shares

(For a Share Outstanding Throughout Each Period)

Year Ended November 30	2006		2005	¹	2004		2003		2002
Net Asset Value, Beginning of Period	$8.82		$9.12		$9.06		$8.51		$8.74
Income From Investment Operations:
Net investment income	0.43		0.45		0.46		0.51		0.55
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts	0.13		(0.31	)	0.08		0.55		(0.25	)
TOTAL FROM INVESTMENT OPERATIONS	0.56		0.14		0.54		1.06		0.30
Less Distributions:
Distributions from net investment income	(0.42	)	(0.44	)	(0.48	)	(0.51	)	(0.53	)
Net Asset Value, End of Period	$8.96		$8.82		$9.12		$9.06		$8.51
Total Return²	6.59	%	1.53	%	6.12	%	12.69	%	3.60	%

Ratios to Average Net Assets:
Net expenses³	1.79	%	1.85	%	1.85	%	1.85	%	1.86	%
Net investment income	4.68	%	4.57	%	5.04	%	5.52	%	6.33	%
Expense waiver/reimbursement⁴	0.21	%	0.15	%	0.12	%	0.11	%	0.11	%
Supplemental Data:
Net assets, end of period (000 omitted)	$292,622		$353,858		$417,278		$480,042		$426,299
Portfolio turnover	34	%	34	%	25	%	28	%	27	%

1 Beginning with the year ended November 30, 2005, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

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

See Notes which are an integral part of the Financial Statements

Financial Highlights - Class C Shares

(For a Share Outstanding Throughout Each Period)

Year Ended November 30	2006		2005	¹	2004		2003		2002
Net Asset Value, Beginning of Period	$8.82		$9.12		$9.07		$8.52		$8.74
Income From Investment Operations:
Net investment income	0.43		0.45		0.46		0.51		0.54
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts	0.13		(0.31	)	0.07		0.55		(0.23	)
TOTAL FROM INVESTMENT OPERATIONS	0.56		0.14		0.53		1.06		0.31
Less Distributions:
Distributions from net investment income	(0.42	)	(0.44	)	(0.48	)	(0.51	)	(0.53	)
Net Asset Value, End of Period	$8.96		$8.82		$9.12		$9.07		$8.52
Total Return²	6.60	%	1.54	%	6.00	%	12.68	%	3.70	%

Ratios to Average Net Assets:
Net expenses³	1.79	%	1.85	%	1.85	%	1.85	%	1.86	%
Net investment income	4.68	%	4.57	%	5.02	%	5.52	%	6.33	%
Expense waiver/reimbursement⁴	0.21	%	0.15	%	0.12	%	0.11	%	0.11	%
Supplemental Data:
Net assets, end of period (000 omitted)	$95,453		$90,716		$89,339		$91,905		$77,272
Portfolio turnover	34	%	34	%	25	%	28	%	27	%

1 Beginning with the year ended November 30, 2005, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

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

See Notes which are an integral part of the Financial Statements

Financial Highlights - Class F Shares

(For a Share Outstanding Throughout Each Period)

Year Ended November 30	2006		2005	¹	2004		2003		2002
Net Asset Value, Beginning of Period	$8.83		$9.13		$9.07		$8.52		$8.75
Income From Investment Operations:
Net investment income	0.50		0.52		0.53		0.57		0.61
Net realized and unrealized gain (loss) on investments, futures contracts and swap contracts	0.13		(0.31	)	0.08		0.55		(0.24	)
TOTAL FROM INVESTMENT OPERATIONS	0.63		0.21		0.61		1.12		0.37
Less Distributions:
Distributions from net investment income	(0.49	)	(0.51	)	(0.55	)	(0.57	)	(0.60	)
Net Asset Value, End of Period	$8.97		$8.83		$9.13		$9.07		$8.52
Total Return²	7.41	%	2.32	%	6.94	%	13.53	%	4.39	%

Ratios to Average Net Assets:
Net expenses³	1.03	%	1.08	%	1.08	%	1.08	%	1.09	%
Net investment income	5.45	%	5.34	%	5.80	%	6.28	%	7.10	%
Expense waiver/reimbursement⁴	0.21	%	0.16	%	0.14	%	0.13	%	0.13	%
Supplemental Data:
Net assets, end of period (000 omitted)	$170,464		$185,591		$211,844		$246,014		$252,905
Portfolio turnover	34	%	34	%	25	%	28	%	27	%

1 Beginning with the year ended November 30, 2005, the Fund was audited by Ernst & Young LLP. The previous years were audited by another independent registered public accounting firm.

3 Pursuant to a settlement with the New York Attorney General, the Adviser has agreed to waive investment adviser fees in compliance with an assurance of Discontinuance dated November 17, 2005. The net investment adviser fee was reduced to 0.5557% effective January 1, 2006 and may not be increased until after December 31, 2010.

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

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 June 1, 2006 to November 30, 2006.

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 required to be provided to enable you to compare the ongoing costs of investing in the Fund with 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 6/1/2006	Ending Account Value 11/30/2006	Expenses Paid During Period¹
Actual:
Class A Shares	$1,000	$1,066.20	$5.13
Class B Shares	$1,000	$1,061.70	$9.25
Class C Shares	$1,000	$1,060.60	$9.19
Class F Shares	$1,000	$1,065.80	$5.28
Hypothetical (assuming a 5% return before expenses):
Class A Shares	$1,000	$1,020.10	$5.01
Class B Shares	$1,000	$1,016.09	$9.05
Class C Shares	$1,000	$1,016.14	$9.00
Class F Shares	$1,000	$1,019.95	$5.16

1 Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). The annualized net expense ratios are as follows:

Class A Shares		0.99%
Class B Shares		1.79%
Class C Shares		1.78%
Class F Shares		1.02%

Management's Discussion of Fund Performance

For the 12-month reporting period ended November 30, 2006, the fund's Class A Shares produced a total return of 7.47% based on net asset value, as compared to the 6.19% return for the fund's peer group as represented by the Lipper Corporate Debt Funds BBB Rated Average¹ and a 6.20% return for the Lehman Brothers U.S. Credit Index (LBUSC).² Total returns based on net asset value for the fund's Class B Shares, Class C Shares and Class F Shares were 6.59%, 6.60% and 7.41%, respectively.

During the period, the most significant factors affecting the fund's performance were: (1) the effect of changing interest rates (referred to as "duration"³ ); (2) the allocation of the portfolio among securities of similar types of issuers (referred to as "sectors"); and (3) the selection of individual securities within the investment-grade corporate sector.

1 Lipper figures represent the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling into the category indicated. These figures do not reflect sales charges.

2 The LBUSC is composed of all publicly issued, fixed-rate, nonconvertible, investment-grade corporate debt. Issues are rated at least Baa by Moody's Investors Service or BBB by Standard & Poor's, if unrated by Moody's. Collateralized Mortgage Obligations are not included. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. The LBUSC is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission (SEC) requires to be reflected in the fund's performance. The index is unmanaged and it is not possible to invest directly in an index. The fund's total return for the most recently completed fiscal year reflected actual cash flows, transaction costs and other expenses which were not reflected in the total return of the LBUSC.

3 Duration is the measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in the interest rates than securities of shorter durations.

For purposes of the following, the discussion will focus on the performance of the fund's Class A Shares.

MARKET OVERVIEW

Over the 12-month reporting period ended November 30, 2006, interest rate levels for U.S. Treasury securities with intermediate to longer maturities were little changed. This point-to-point description, however, hides the fact that the 12-month reporting period can be divided into two distinct periods: (1) from November 30, 2005 to June 30, 2006, interest rate levels rose sharply as the Federal Reserve Board (the "Fed") raised the Federal Funds Target Rate at each of its five meetings; and (2) from June 30, 2006 to November 30, 2006, the Fed made no rate changes at its three subsequent meetings and interest rate levels fell sharply. In concert with the latter rate decline, U.S. gross domestic product experienced decelerating growth throughout calendar year 2006, starting with a 5.6% real (after inflation) growth rate in the first quarter, a 2.6% real growth rate in the second quarter and an estimate of 2.2% (as of this writing) in the third quarter. In essence, the period from December 2005 through June 2006 can easily be described as a bear market environment as rates rose and high-quality bond prices fell.⁴ The period from July 2006 through fiscal year end November 2006 represented a bull market environment with falling interest rates and rising high-quality bond prices. For this entire fiscal year, the fund's net asset value rose in value.

DURATION

Duration management benefited fund shareholders. The fund was positioned shorter (i.e., less interest rate sensitive) from December 2005 through April 2006, a period when rates rose. Conversely, the fund was positioned longer (i.e., more interest rate sensitive) from May 2006 through November 2006, a period when rates fell and bond prices rose.

4 Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices.

SECTOR

The fund maintained the vast majority of assets in the corporate bond sector over the reporting period, a period in which corporate bonds (both investment-grade and high-yield bonds⁵ ) significantly outperformed U.S. government securities of comparable maturity. The fund secondarily maintained a position in high-yield bonds throughout the reporting period - again, a period when high-yield bonds provided much higher returns than all domestic higher quality sectors. The fund did reduce its high-yield bond allocation in the latter half of the reporting period (between 20 and 25% of assets relative to 30% or greater of assets at the beginning of the reporting period), thus limiting potential performance. Nonetheless, owning high-yield bonds throughout the reporting period served to benefit shareholders.

SECURITY SELECTION

Security selection was a meaningful positive for the fund's performance. During the reporting period, individual corporate bond holdings that had the greatest impact included Citizens Communications, Ford Motor Credit, General Motors, General Nutrition, Grupo Televisa, Lehman Brothers, Placer Dome and Regional Diversified Funding. In contrast, but to a much lesser degree, holdings that detracted from fund performance were HCA, Inc., Pope & Talbot, SLM Corp. and Weyerhauser.

5 High-yield, lower rated securities generally entail greater market, credit, and liquidity risks than investment-grade securities. Credit ratings pertain only to the securities in the portfolio and do not protect fund shares against market risk.

GROWTH OF A $10,000 INVESTMENT - CLASS A SHARES

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Bond Fund (Class A Shares) (the "Fund") from October 31, 1996 to November 30, 2006, compared to the Lehman Brothers U.S. Credit Index (LBUSC)² and the Lipper Corporate Debt Funds BBB Rated Average (LCDBBB).²

Average Annual Total Returns³ for the Period Ended 11/30/2006
1 Year		2.68%
5 Years		5.91%
10 Years		5.47%

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured. Total returns shown include the maximum sales charge of 4.50%.

1 Represents a hypothetical investment of $10,000 in the Fund after deducting the maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge = $9,550). The Fund's performance assumes the reinvestment of all dividends and distributions. The LBUSC and the LCDBBB have been adjusted to reflect reinvestment of dividends on securities in the index and average.

2 The LBUSC and LCDBBB are not adjusted to reflect sales charges, expenses, or other fees that the Securities and Exchange Commission (SEC) requires to be reflected in the Fund's performance. The LCDBBB represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling in the category indicated, and is not adjusted to reflect any sales charges. However, these total returns are reported net of expenses or other fees that the SEC requires to be reflected in a mutual fund's performance. The index is unmanaged, and, unlike the Fund, is not affected by cashflows. It is not possible to invest directly in an index or an average.

3 Total returns quoted reflect all applicable sales charges.

GROWTH OF A $10,000 INVESTMENT - CLASS B SHARES

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Bond Fund (Class B Shares) (the "Fund") from October 31, 1996 to November 30, 2006, compared to the Lehman Brothers U.S. Credit Index (LBUSC)² and the Lipper Corporate Debt Funds BBB Rated Average (LCDBBB).²

Average Annual Total Returns³ for the Period Ended 11/30/2006
1 Year		1.09%
5 Years		5.72%
10 Years		5.30%

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value of the Fund does not reflect a contingent deferred sales charge on any redemption over seven years from the purchase date. The maximum contingent deferred sales charge is 5.50% on any redemption less than one year from the purchase date. The Fund's performance assumes the reinvestment of all dividends and distributions. The LBUSC and the LCDBBB have been adjusted to reflect reinvestment of dividends on securities in the index and average.

2 The LBUSC and the LCDBBB are not adjusted to reflect sales charges, expenses, or other fees that the SEC requires to be reflected in the Fund's performance. The LCDBBB represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling in the category indicated, and is not adjusted to reflect any sales charges. However, these total returns are reported net of expenses or other fees that the SEC requires to be reflected in a mutual fund's performance. The index is unmanaged, and, unlike the Fund, is not affected by cashflows. It is not possible to invest directly in an index or an average.

3 Total returns quoted reflect all applicable contingent deferred sales charges.

GROWTH OF A $10,000 INVESTMENT - CLASS C SHARES

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Bond Fund (Class C Shares) (the "Fund") from October 31, 1996 to November 30, 2006, compared to the Lehman Brothers U.S. Credit Index (LBUSC)² and the Lipper Corporate Debt Funds BBB Rated Average (LCDBBB).²

Average Annual Total Returns³ for the Period Ended 11/30/2006
1 Year		4.53%
5 Years		5.82%
10 Years		5.03%

1 Represents a hypothetical investment of $10,000 in the Fund. Effective April 1, 2003, the Fund began to charge a maximum sales charge of 1.00%. A 1.00% contingent deferred sales charge would be applied on any redemption less than one year from the purchase date. The Fund's performance assumes the reinvestment of all dividends and distributions. The LBUSC and the LCDBBB have been adjusted to reflect reinvestment of dividends on securities in the index and average.

2 The LBUSC and LCDBBB are not adjusted to reflect sales charges, expenses, or other fees that the SEC requires to be reflected in the Fund's performance. The LCDBBB represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling in the category indicated, and is not adjusted to reflect any sales charges. However, these total returns are reported net of expenses or other fees that the SEC requires to be reflected in a mutual fund's performance. The index is unmanaged, and, unlike the Fund, is not affected by cashflows. It is not possible to invest directly in an index or an average.

3 Total returns quoted reflect all applicable sales charges and contingent deferred sales charges.

GROWTH OF A $10,000 INVESTMENT - CLASS F SHARES

The graph below illustrates the hypothetical investment of $10,000¹ in the Federated Bond Fund (Class F Shares) (the "Fund") from October 31, 1996 to November 30, 2006 compared to the Lehman Brothers U.S. Credit Index (LBUSC)² and the Lipper Corporate Debt Funds BBB Rated Average (LCDBBB).²

Average Annual Total Returns³ for the Period Ended 11/30/2006
1 Year		5.33%
5 Years		6.63%
10 Years		5.85%

1 Represents a hypothetical investment of $10,000 in the Fund after deducting the maximum sales charge of 1.00% ($10,000 investment minus $100 sales charge = $9,900). A 1.00% contingent deferred sales charge would be applied on any redemption less than three years from the purchase date. The Fund's performance assumes the reinvestment of all dividends and distributions. The LBUSC and the LCDBBB have been adjusted to reflect reinvestment of dividends on securities in the index and average.

3 Total returns quoted reflect all applicable sales charges and contingent deferred sales charges.

Portfolio of Investments Summary Table

At November 30, 2006, the Fund's portfolio composition¹ was as follows:

Security Type	Percentage of Total Net Assets²
Corporate Debt Securities	85.5	%
U.S. Treasury and Agency Securities³	7.2	%
Municipal Securities	1.8	%
Asset-Backed Securities	0.1	%
Mortgage-Backed Securities⁴	0.1	%
Securities Lending Collateral⁵	5.5	%
Other Security Types⁶	2.0	%
Cash Equivalents⁷	2.7	%
Other Assets and Liabilities--Net⁸	(4.9	)%
TOTAL	100.0	%

1 See the Fund's Prospectus and Statement of Additional Information for a description of these security types.

2 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 each other asset and liability owned by the affiliated investment company. Accordingly, the percentages of total net assets shown in the table will differ from those presented on the Portfolio of Investments.

3 For purposes of this table, U.S. Treasury and Agency Securities do not include mortgage-backed securities guaranteed by Government Sponsored Entities (GSEs).

4 For purposes of this table, mortgage-backed securities include mortgage-backed securities guaranteed by GSEs and adjustable rate mortgage-backed securities.

5 Cash collateral received from lending portfolio securities which is invested in short-term investments such as repurchase agreements or money market mutual funds.

6 Other security types consist of common stock and preferred stock.

7 Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements other than those representing securities lending collateral.

8 See Statement of Assets and Liabilities.

Portfolio of Investments

November 30, 2006

Principal Amount					Value
			CORPORATE BONDS--64.5%
			Basic Industry - Chemicals--0.8%
$	3,760,000		Albemarle Corp., Sr. Note, 5.10%, 2/1/2015	$	3,629,622
	4,900,000	^1,2	Fertinitro Finance, Company Guarantee, 8.29%, 4/1/2020		4,201,750
			TOTAL		7,831,372
			Basic Industry - Metals & Mining--3.9%
	2,770,000		Alcan, Inc., 5.75%, 6/1/2035		2,692,001
	3,760,000		BHP Finance (USA), Inc., 5.00%, 12/15/2010		3,762,157
	5,000,000		Barrick Gold Corp., 4.875%, 11/15/2014		4,817,235
	7,359,000		Barrick Gold Corp., Deb., 7.50%, 5/1/2007		7,427,707
	3,325,000	^1,2	Codelco, Inc., Bond, 5.625%, 9/21/2035		3,254,064
	1,550,000		Newmont Mining Corp., 5.875%, 4/1/2035		1,501,900
	2,500,000		Noranda, Inc., 6.00%, 10/15/2015		2,576,226
	9,750,000		Placer Dome, Inc., Bond, 8.50%, 12/31/2045		9,759,404
	3,285,000		Vale Overseas Ltd., 6.875%, 11/21/2036		3,375,338
	1,500,000	^1,2	Xstrata Finance Canada Ltd., Unsecd. Note, 5.50%, 11/16/2011		1,514,839
			TOTAL		40,680,871
			Basic Industry - Paper--2.1%
	2,600,000		International Paper Co., 4.25%, 1/15/2009		2,553,726
	6,980,000		Louisiana-Pacific Corp., 8.875%, 8/15/2010		7,624,031
	2,850,000		Pope & Talbot, Inc., 8.375%, 6/1/2013		2,280,000
	5,000,000		Westvaco Corp., 7.65%, 3/15/2027		5,341,279
	3,750,000		Weyerhaeuser Co., Deb., 7.375%, 3/15/2032		3,939,722
			TOTAL		21,738,758
			Capital Goods - Aerospace & Defense--0.7%
	3,650,000	^1,2	BAE Systems Holdings, Inc., 5.20%, 8/15/2015		3,553,433
	1,129,000		Raytheon Co., Note, 6.75%, 8/15/2007		1,139,567
	2,840,000		Raytheon Co., Unsecd. Note, 5.375%, 4/1/2013		2,875,880
			TOTAL		7,568,880
			Capital Goods - Building Materials--0.8%
	2,700,000		CRH America, Inc., 5.30%, 10/15/2013		2,662,023
	5,500,000		Masco Corp., Note, 5.875%, 7/15/2012		5,566,033
			TOTAL		8,228,056
Principal Amount					Value
			CORPORATE BONDS--continued
			Capital Goods - Diversified Manufacturing--1.5%
$	2,940,000		Briggs & Stratton Corp., Company Guarantee, 8.875%, 3/15/2011	$	3,211,950
	1,580,000	^1,2	Hutchison Whampoa Ltd., 6.50%, 2/13/2013		1,671,357
	2,025,000		Thomas & Betts Corp., Note, 7.25%, 6/1/2013		2,139,463
	4,600,000	^1,2	Tyco International Group SA, Note, 4.436%, 6/15/2007		4,585,125
	3,500,000		Tyco International Group SA, Company Guarantee, 6.00%, 11/15/2013		3,673,903
			TOTAL		15,281,798
			Capital Goods - Environmental--1.7%
	500,000		Republic Services, Inc., Note, 6.086%, 3/15/2035		518,423
	600,000		Republic Services, Inc., Note, 6.75%, 8/15/2011		637,656
	8,210,000		Waste Management, Inc., Deb., 8.75%, 5/1/2018		8,560,819
	7,475,000		Waste Management, Inc., Sr. Note, 7.125%, 10/1/2007		7,581,671
			TOTAL		17,298,569
			Communications - Media & Cable--2.1%
	900,000		Comcast Corp., 7.05%, 3/15/2033		996,129
	4,700,000		Comcast Corp., 7.125%, 6/15/2013		5,127,857
	5,480,000		Comcast Corp., Company Guarantee, 6.50%, 1/15/2017		5,814,141
	4,630,000		Cox Communications, Inc., Unsecd. Note, 4.625%, 1/15/2010		4,559,721
	5,010,000		Cox Communications, Inc., Unsecd. Note, 5.45%, 12/15/2014		4,953,883
			TOTAL		21,451,731
			Communications - Media Noncable--0.8%
	615,000		British Sky Broadcasting Group PLC, 8.20%, 7/15/2009		659,763
	6,880,000		Grupo Televisa S.A., 6.625%, 3/18/2025		7,363,664
			TOTAL		8,023,427
			Communications - Telecom Wireless--1.4%
	5,500,000		AT&T Wireless Services, Inc., 8.75%, 3/1/2031		7,363,636
	3,100,000		America Movil S.A. de C.V., Note, 5.75%, 1/15/2015		3,086,205
	1,900,000		Sprint Capital Corp., Company Guarantee, 8.75%, 3/15/2032		2,387,485
	1,860,000		Sprint Capital Corp., Note, 8.375%, 3/15/2012		2,099,891
			TOTAL		14,937,217
			Communications - Telecom Wirelines--3.4%
	3,810,000		BellSouth Corp., 5.20%, 9/15/2014		3,774,285
	2,620,000		Citizens Communications Co., 9.00%, 8/15/2031		2,868,900
	3,000,000		Deutsche Telekom International Finance BV, 5.25%, 7/22/2013		2,978,697
	1,980,000		Embarq Corp., 6.738%, 6/1/2013		2,060,047
	4,940,000	^1,2	KT Corp., Note, 5.875%, 6/24/2014		5,047,778
Principal Amount					Value
			CORPORATE BONDS--continued
			Communications - Telecom Wirelines--continued
$	3,870,000		SBC Communications, Inc., 5.10%, 9/15/2014	$	3,816,626
	2,580,000		Telefonica SA, Company Guarantee, 7.045%, 6/20/2036		2,815,009
	7,050,000		Telefonos de Mexico, Note, 4.50%, 11/19/2008		6,947,775
	4,931,000		Verizon Global Funding, Note, 7.25%, 12/1/2010		5,314,967
			TOTAL		35,624,084
			Consumer Cyclical - Automotive--3.7%
	5,000,000		DaimlerChrysler North America Holding Corp., 6.50%, 11/15/2013		5,209,420
	7,740,000		DaimlerChrysler North America Holding Corp., Note, 4.875%, 6/15/2010		7,605,901
	10,000,000		Ford Motor Credit Co., Note, 6.50%, 1/25/2007		10,003,270
	3,250,000		General Motors Acceptance Corp., 6.875%, 9/15/2011		3,349,479
	4,875,000		General Motors Acceptance Corp., 8.00%, 11/1/2031		5,479,802
	2,100,000		General Motors Corp., Note, 9.45%, 11/1/2011		2,081,625
	4,800,000	^1,2	Nissan Motor Acceptance Corp., Sr. Unsecd. Note, 5.625%, 3/14/2011		4,843,981
			TOTAL		38,573,478
			Consumer Cyclical - Entertainment--1.6%
	6,000,000		Carnival Corp., 3.75%, 11/15/2007		5,918,877
	4,020,000		International Speedway Corp., 4.20%, 4/15/2009		3,921,301
	2,500,000		Time Warner, Inc., 5.50%, 11/15/2011		2,518,915
	3,800,000		Walt Disney Co., Note, 5.70%, 7/15/2011		3,898,391
			TOTAL		16,257,484
			Consumer Cyclical - Lodging--0.1%
	1,530,000	^1,2	Wyndham Worldwide Corp., 6.00%, 12/1/2016		1,522,977
			Consumer Cyclical - Retailers--0.9%
	2,229,614	^1,2	CVS Corp., Pass Thru Cert., 5.298%, 1/11/2027		2,155,981
	500,000		CVS Corp., Sr. Note, 5.75%, 8/15/2011		512,280
	2,270,000		Home Depot, Inc., 5.40%, 3/1/2016		2,267,169
	2,560,000		Target Corp., Note, 5.875%, 7/15/2016		2,695,566
	1,710,000		Wal-Mart Stores, Inc., 5.25%, 9/1/2035		1,627,824
			TOTAL		9,258,820
			Consumer Cyclical - Services--0.9%
	7,475,000		Boston University, 7.625%, 7/15/2097		8,934,516
			Consumer Non-Cyclical Food/Beverage--0.8%
	2,550,000		Bottling Group LLC, Note, 5.50%, 4/1/2016		2,602,558
	2,000,000		Kraft Foods, Inc., 5.625%, 11/1/2011		2,042,950
	3,220,000	^1,2	SABMiller PLC, Note, 6.50%, 7/1/2016		3,420,660
			TOTAL		8,066,168
Principal Amount					Value
			CORPORATE BONDS--continued
			Consumer Non-Cyclical Health Care--0.8%
$	2,200,000		Anthem, Inc., 6.80%, 8/1/2012	$	2,368,982
	2,040,000		Medtronic, Inc., Note, Series B, 4.375%, 9/15/2010		1,997,011
	2,630,000		Quest Diagnostic, Inc., Note, 5.45%, 11/1/2015		2,586,653
	1,660,000		Thermo Electron Corp., Sr. Unsecd. Note, 5.00%, 6/1/2015		1,581,989
			TOTAL		8,534,635
			Consumer Non-Cyclical Pharmaceuticals--0.9%
	3,660,000		Genentech, Inc., Note, 4.75%, 7/15/2015		3,559,672
	1,920,000		Pharmacia Corp., Sr. Deb., 6.50%, 12/1/2018		2,149,659
	4,000,000		Wyeth, Unsecd. Note, 5.50%, 2/1/2014		4,061,993
			TOTAL		9,771,324
			Consumer Non-Cyclical Tobacco--0.2%
	1,375,000		Altria Group, Inc., 5.625%, 11/4/2008		1,387,095
	1,000,000		Altria Group, Inc., Note, 7.00%, 11/4/2013		1,107,011
			TOTAL		2,494,106
			Energy - Independent--1.3%
	460,000		Canadian Natural Resources Ltd., 4.90%, 12/1/2014		441,914
	5,890,000		Canadian Natural Resources Ltd., 5.85%, 2/1/2035		5,612,629
	495,000	^1,2	Pemex Project Funding Master, 5.75%, 12/15/2015		492,773
	3,450,000		Pemex Project Funding Master, Company Guarantee, 9.125%, 10/13/2010		3,875,385
	3,648,000	^1,2	Ras Laffan Liquified Natural Gas, 3.437%, 9/15/2009		3,519,023
			TOTAL		13,941,724
			Energy - Integrated--2.0%
	4,100,000		Conoco, Inc., 7.25%, 10/15/2031		4,987,430
	3,000,000		Husky Oil Ltd., Company Guarantee, 8.90%, 8/15/2028		3,169,131
	450,000		Husky Oil Ltd., Deb., 7.55%, 11/15/2016		514,001
	4,650,000		Petro-Canada, Bond, 5.35%, 7/15/2033		4,264,444
	220,000		Petro-Canada, Deb., 7.00%, 11/15/2028		242,909
	3,570,000	^1,2	Qatar Petroleum, 5.579%, 5/30/2011		3,604,894
	4,150,000	^1,2	Statoil ASA, 5.125%, 4/30/2014		4,116,651
			TOTAL		20,899,460
			Energy - Oil Field Services--0.0%
	210,000		Noble Drilling Corp., Sr. Note, 7.50%, 3/15/2019		237,266
			Energy - Refining--0.3%
	2,250,000		Valero Energy Corp., 7.50%, 4/15/2032		2,656,753
Principal Amount					Value
			CORPORATE BONDS--continued
			Financial Institution - Banking--11.8%
$	4,750,000		ABN AMRO Bank NV, Chicago, Sub. Deb., 7.30%, 12/1/2026	$	4,750,142
	4,000,000		Astoria Financial Corp., Note, 5.75%, 10/15/2012		4,070,800
	5,000,000	^1,2	Barclays Bank PLC, 5.926%, 12/31/2049		5,114,000
	6,175,000		City National Bank, Sub. Note, 6.375%, 1/15/2008		6,283,621
	2,876,000		Colonial BancGroup, Inc., Note, 6.375%, 12/1/2015		3,005,869
	5,350,000		Corp Andina De Fomento, Bond, 7.375%, 1/18/2011		5,757,618
	4,720,000		Credit Suisse First Boston USA, Inc., Sr. Note, 5.50%, 8/16/2011		4,818,866
	6,000,000		HSBC Finance Capital Trust IX, Note, 5.911%, 11/30/2035		6,121,490
	2,200,000		HSBC Finance Corp., 4.75%, 4/15/2010		2,187,078
	2,770,000		HSBC Finance Corp., 5.00%, 6/30/2015		2,724,970
	1,800,000		Household Finance Corp., Unsecd. Note, 5.75%, 1/30/2007		1,800,957
	3,500,000		Hudson United Bancorp, 7.00%, 5/15/2012		3,790,017
	870,000		J.P. Morgan Chase & Co., Sub. Deb., 8.00%, 4/29/2027		1,111,518
	13,900,000		J.P. Morgan Chase & Co., Sub. Note, 5.125%, 9/15/2014		13,852,358
	3,975,000		Manufacturers & Traders Trust Co., Sub. Note, 5.629%, 12/1/2021		3,951,179
	5,000,000		Marshall & Ilsley Bank, Milwaukee, Sr. Note, 4.40%, 3/15/2010		4,901,275
	1,790,000		Northern Trust Corp., Sr. Note, 5.30%, 8/29/2011		1,812,974
	1,530,000		PNC Financial Services Group, Company Guarantee, 8.625%, 12/31/2026		1,602,253
	4,020,000		PNC Funding Corp., Sub. Note, 7.50%, 11/1/2009		4,289,239
	2,520,000		Popular North America, Inc., 5.65%, 4/15/2009		2,546,581
	10,511,111	^1,2	Regional Diversified Funding, 9.25%, 3/15/2030		12,251,281
	3,870,000	^1,2	Sovereign Bancorp, Inc., Sr. Note, 4.80%, 9/1/2010		3,804,620
	1,700,000		State Street Bank and Trust Co., Sub. Note, 5.30%, 1/15/2016		1,726,111
	5,580,000		U.S. Bank, N.A., Sub. Note, 4.95%, 10/30/2014		5,519,384
	5,000,000		Wachovia Bank N.A., 4.80%, 11/1/2014		4,859,570
	3,440,000		Wachovia Bank N.A., Sub. Note, 4.875%, 2/1/2015		3,371,535
	500,000		Washington Mutual Bank, 5.125%, 1/15/2015		490,846
	2,400,000		Washington Mutual Bank, Sub. Note, 6.875%, 6/15/2011		2,564,061
	3,370,000		Zions Bancorp, Sub. Note, 5.50%, 11/16/2015		3,386,825
			TOTAL		122,467,038
			Financial Institution - Brokerage--2.4%
	8,140,000		Amvescap PLC, Note, 4.50%, 12/15/2009		7,998,757
	4,255,000	^1,2	FMR Corp., Bond, 7.57%, 6/15/2029		5,287,055
	1,000,000		Franklin Resources, Inc., 3.70%, 4/15/2008		983,406
	2,900,000		Goldman Sachs Group, Inc., 6.125%, 2/15/2033		3,058,616
	190,000		Goldman Sachs Group, Inc., Note, Series MTNB, 7.35%, 10/1/2009		202,103
Principal Amount					Value
			CORPORATE BONDS--continued
			Financial Institution - Brokerage--continued
$	2,100,000		Goldman Sachs Group, Inc., Sub. Note, 6.345%, 2/15/2034	$	2,194,103
	1,200,000		Lehman Brothers Holdings, Inc., 5.75%, 5/17/2013		1,241,714
	1,020,000		Nuveen Investments, 5.00%, 9/15/2010		1,010,171
	1,020,000		Nuveen Investments, 5.50%, 9/15/2015		999,280
	2,239,608	^1,2	World Financial, Pass Thru Cert., Series 96 WFP, 6.91%, 9/1/2013		2,377,377
			TOTAL		25,352,582
			Financial Institution - Finance Noncaptive--3.2%
	5,000,000		American International Group, Inc., Sr. Note, 4.70%, 10/1/2010		4,957,860
	4,295,000		Berkshire Hathaway, Inc., Company Guarantee, 4.85%, 1/15/2015		4,242,003
	4,050,000		Capital One Financial Corp., Note, 7.125%, 8/1/2008		4,175,641
	115,000		Heller Financial, Inc., Note, 7.375%, 11/1/2009		122,478
	1,500,000	^1,2	ILFC E-Capital Trust I, 5.90%, 12/21/2065		1,529,940
	3,100,000		International Lease Finance Corp., 4.875%, 9/1/2010		3,080,212
	3,090,000		Residential Capital Corp., 6.00%, 2/22/2011		3,134,938
	8,790,000		SLM Corp., Floating Rate Note, 6.093%, 12/15/2014		8,381,318
	3,250,000		Susa Partnership LP, 8.20%, 6/1/2017		3,924,901
			TOTAL		33,549,291
			Financial Institution - Insurance - Health--0.1%
	810,000		Aetna US Healthcare, 5.75%, 6/15/2011		829,999
			Financial Institution - Insurance - Life--2.3%
	2,750,000		AXA-UAP, Sub. Note, 8.60%, 12/15/2030		3,656,763
	2,950,000		Delphi Financial Group, Inc., 9.31%, 3/25/2027		3,099,444
	7,800,000	^1,2	Life Re Capital Trust I, Company Guarantee, 8.72%, 6/15/2027		8,422,441
	4,000,000	^1,2	Pacific LifeCorp., Bond, 6.60%, 9/15/2033		4,467,081
	3,950,000	^1,2	Union Central Life Insurance Co., Note, 8.20%, 11/1/2026		4,510,560
			TOTAL		24,156,289
			Financial Institution - Insurance - P&C--2.2%
	1,370,000		CNA Financial Corp., Note, 6.00%, 8/15/2011		1,408,490
	1,710,000		Horace Mann Educators Corp., Sr. Note, 6.85%, 4/15/2016		1,784,645
	4,000,000	^1,2	Liberty Mutual Group, Inc., Unsecd. Note, 5.75%, 3/15/2014		4,035,986
	3,900,000	^1,2	Liberty Mutual Insurance Co., Sub. Note, 8.20%, 5/4/2007		3,942,288
	265,000		The St. Paul Travelers Cos., Inc., Sr. Unsecd. Note, 5.50%, 12/1/2015		269,509
	1,000,000	^1,2	USF&G Corp., 8.312%, 7/1/2046		1,232,507
	5,750,000		USF&G Corp., Company Guarantee, 8.47%, 1/10/2027		6,018,549
	4,040,000	^1,2	ZFS Finance USA Trust I, Jr. Sub. Note, 6.15%, 12/15/2065		4,112,841
			TOTAL		22,804,815
Principal Amount					Value
			CORPORATE BONDS--continued
			Financial Institution - REITs--0.8%
$	2,000,000		Archstone-Smith Trust, 5.625%, 8/15/2014	$	2,048,334
	3,000,000		Health Care Property Investors, Inc., 5.95%, 9/15/2011		3,060,530
	185,000		Mack-Cali Realty Corp., Note, 7.25%, 3/15/2009		193,326
	430,000		Simon Property Group, Inc., 6.35%, 8/28/2012		455,011
	2,330,000		Simon Property Group, Inc., Note, 5.60%, 9/1/2011		2,376,089
			TOTAL		8,133,290
			Foreign-Local-Gov't.--0.8%
	7,900,000		Hydro Quebec, Sr. Deb., 6.30%, 5/11/2011		8,245,747
			Municipal Services--0.5%
	1,825,000	^1,2	Army Hawaii Family Housing, 5.524%, 6/15/2050		1,845,111
	2,980,000	^1,2	Camp Pendleton & Quantico Housing LLC, 5.572%, 10/1/2050		2,981,490
			TOTAL		4,826,601
			Sovereign--0.4%
	3,500,000		Sweden, Government of, Deb., 10.25%, 11/1/2015		4,049,242
			Technology--1.1%
	3,745,000		Cisco Systems, Inc., Note, 5.25%, 2/22/2011		3,791,263
	1,100,000		Dell Computer Corp., Deb., 7.10%, 4/15/2028		1,269,128
	965,000		IBM Corp., Deb., 8.375%, 11/1/2019		1,235,215
	5,120,000		Oracle Corp., Sr. Unsecd. Note, Series WI, 5.00%, 1/15/2011		5,110,542
			TOTAL		11,406,148
			Transportation - Airlines--0.5%
	710,000		Southwest Airlines Co., 6.50%, 3/1/2012		749,180
	1,995,000		Southwest Airlines Co., Deb., 7.375%, 3/1/2027		2,295,565
	2,070,000		Southwest Airlines Co., Unsecd. Note, 5.25%, 10/1/2014		2,042,779
			TOTAL		5,087,524
			Transportation - Railroads--1.2%
	1,200,000		Burlington Northern Santa Fe Corp., 4.875%, 1/15/2015		1,173,148
	2,476,984		Burlington Northern Santa Fe Corp., Pass Thru Cert., 7.57%, 1/2/2021		2,821,981
	3,150,000		Canadian Pacific RR, 7.125%, 10/15/2031		3,822,912
	655,000		Norfolk Southern Corp., Note, 6.75%, 2/15/2011		697,562
	3,580,000		Union Pacific Corp., 4.875%, 1/15/2015		3,495,282
			TOTAL		12,010,885
			Transportation - Services--0.9%
	7,300,000		FedEx Corp., Note, 2.65%, 4/1/2007		7,235,094
	1,570,000		FedEx Corp., Note, 5.50%, 8/15/2009		1,587,451
			TOTAL		8,822,545
Principal Amount					Value
			CORPORATE BONDS--continued
			Utility - Electric--2.6%
$	55,000		Baltimore Gas & Electric Co., 1st Ref. Mtg., 7.50%, 1/15/2007	$	55,109
	1,310,000		Consolidated Edison Co., Sr. Unsecd. Note, 5.50%, 9/15/2016		1,335,934
	2,390,000		Consolidated Natural Gas Co., 5.00%, 12/1/2014		2,333,827
	2,000,000		Dominion Resources, Inc., Unsecd. Note, 5.95%, 6/15/2035		2,047,762
	2,765,000		Duke Capital Corp., Sr. Note, 6.25%, 2/15/2013		2,896,425
	5,150,000		Enersis S.A., Note, 7.40%, 12/1/2016		5,722,665
	1,000,000		PSEG Power LLC, Company Guarantee, 7.75%, 4/15/2011		1,092,506
	1,670,000		PSI Energy, Inc., Bond, 6.05%, 6/15/2016		1,754,098
	1,410,000		Pacific Gas & Electric Co., 6.05%, 3/1/2034		1,479,991
	2,925,000		Pacific Gas & Electric Co., Unsecd. Note, 4.20%, 3/1/2011		2,827,847
	4,000,000		Public Service Electric & Gas Co., 4.00%, 11/1/2008		3,920,679
	2,020,000		Westar Energy, Inc., 5.875%, 7/15/2036		1,988,922
			TOTAL		27,455,765
			Utility - Natural Gas Distributor--0.7%
	7,395,000		Atmos Energy Corp., 4.00%, 10/15/2009		7,148,079
			Utility - Natural Gas Pipelines--0.3%
	3,300,000		Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 5.80%, 3/15/2035		3,110,012
			TOTAL CORPORATE BONDS (IDENTIFIED COST $657,323,734)		669,269,326
			CORPORATE NOTES--0.4%
			Communications - Telecom Wirelines--0.4%
	4,595,000		Telecom Italia Capital, Note, 4.875%, 10/1/2010 (IDENTIFIED COST $4,593,135)		4,505,817
			MORTGAGE-BACKED SECURITIES--0.0%
	15,986		Federal Home Loan Mortgage Corp., Pool C00702, 6.00%, 1/1/2029		16,274
	18,788		Federal Home Loan Mortgage Corp., Pool C00748, 6.00%, 4/1/2029		19,127
	4,740		Federal Home Loan Mortgage Corp., Pool C20263, 6.00%, 1/1/2029		4,825
	9,468		Federal Home Loan Mortgage Corp., Pool C25621, 6.50%, 5/1/2029		9,742
	23,090		Federal Home Loan Mortgage Corp., Pool G10493, 6.00%, 4/1/2011		23,487
	16,740		Federal National Mortgage Association, Pool 313324, 9.00%, 6/1/2017		18,154
	18,274		Federal National Mortgage Association, Pool 323159, 7.50%, 4/1/2028		19,022
	9,151		Federal National Mortgage Association, Pool 421223, 7.00%, 5/1/2028		9,495
	17,721		Federal National Mortgage Association, Pool 429707, 6.50%, 5/1/2013		18,134
	15,907		Federal National Mortgage Association, Pool 430232, 7.00%, 8/1/2028		16,504
	59,636		Federal National Mortgage Association, Pool 439947, 6.50%, 11/1/2028		61,352
	46,636		Federal National Mortgage Association, Pool 489867, 6.50%, 3/1/2029		47,977
Principal Amount or Shares					Value
			MORTGAGE-BACKED SECURITIES--continued
$	12,970		Government National Mortgage Association, Pool 449491, 7.50%, 12/15/2027	$	13,619
	5,533		Government National Mortgage Association, Pool 486467, 7.00%, 8/15/2028		5,755
	24,114		Government National Mortgage Association, Pool 780339, 8.00%, 12/15/2023		25,676
	17,061		Government National Mortgage Association, Pool 780340, 9.00%, 11/15/2017		18,704
	14,419		Government National Mortgage Association, Pool 780373, 7.00%, 12/15/2023		15,015
			TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $331,985)		342,862
			MUNICIPALS--1.9%
	6,050,000		Kansas City, MO Redevelopment Authority, 7.65% Bonds (FSA LOC), 11/1/2018		6,181,104
	3,090,000		McKeesport, PA, Taxable G.O. Series B 1997, 7.30% Bonds (MBIA Insurance Corp. INS), 3/1/2020		3,173,523
	4,675,000		Pittsburgh, PA Urban Redevelopment Authority, 8.01% Bonds (Alcoa, Inc.), 6/1/2015		4,777,523
	2,200,000		Southeastern, PA Transportation Authority, (Series B), 8.75% Bonds (FGIC GTD), 3/1/2020		2,204,686
	2,080,000		Tampa, FL Sports Authority, 8.02% Bonds (MBIA Insurance Corp. GTD), 10/1/2026		2,643,347
			TOTAL MUNICIPALS (IDENTIFIED COST $18,286,269)		18,980,183
			GOVERNMENTS/AGENCIES--1.5%
			Sovereign--1.5%
	6,500,000		United Mexican States, 6.625%, 3/3/2015		6,992,700
	3,600,000		United Mexican States, 7.50%, 4/8/2033		4,278,600
	3,600,000		United Mexican States, Note, 9.875%, 2/1/2010		4,090,680
			TOTAL GOVERNMENTS/AGENCIES (IDENTIFIED COST $14,767,600)		15,361,980
			COMMON STOCKS--0.0%
			Finance--0.0%
	10,585	³	Arcadia Financial Ltd., Warrants		0
			Utility - Electric--0.0%
	45	³	NRG Energy, Inc.		2,561
			TOTAL COMMON STOCKS (IDENTIFIED COST $2,041)		2,561
Shares or Principal Amount					Value
			PREFERRED STOCKS--1.9%
			Financial Institution - Banking--0.7%
	138,000		Citigroup, Inc., Cumulative Pfd., Series F, $3.18 Annual Dividend	$	6,962,100
			Financial Institution - Brokerage--0.7%
	130,000		Lehman Brothers Holdings, Inc., Pfd., $2.84 Annual Dividend		6,760,000
			Financial Institution - REITs--0.5%
	80,000		Prologis, Cumulative REIT Perpetual Pfd. Stock, Series C, $4.27 Annual Dividend		5,213,600
			TOTAL PREFERRED STOCKS (IDENTIFIED COST $15,816,388)		18,935,700
			ASSET-BACKED SECURITIES--0.1%
			Home Equity Loan--0.1%
$	628,605	^1,2	125 Home Loan Owner Trust 1998-1A, Class B1, 9.26%, 2/15/2029 (IDENTIFIED COST $628,311)		628,605
			COLLATERALIZED MORTGAGE OBLIGATIONS--0.0%
			Commercial Mortgage--0.0%
	325,000		Morgan Stanley Capital, Inc., Class A3, 6.48%, 6/3/2030		327,551
			Non-Agency Mortgage--0.0%
	93,309	^1,2	SMFC Trust Asset-Backed Certificates, 1997-A, Class 4, 7.52558%, 1/28/2027		73,714
			TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $477,865)		401,265
			U.S. TREASURY--5.7%
	7,000,000	⁴	United States Treasury Bond, 4.50%, 2/15/2036		6,928,906
	9,000,000	⁴	United States Treasury Note, 4.25%, 11/15/2014		8,878,667
	2,000,000		United States Treasury Note, 4.50%, 2/15/2016		2,005,210
	11,500,000	^4,5	United States Treasury Note, 4.75%, 3/31/2011		11,630,553
	16,000,000	⁴	United States Treasury Note, 4.875%, 4/30/2011		16,268,834
	13,000,000	⁴	United States Treasury Note, 5.125%, 5/15/2016		13,650,636
			TOTAL U.S. TREASURY (IDENTIFIED COST $57,769,157)		59,362,806
			MUTUAL FUNDS--21.7%⁶
	20,763		Federated Mortgage Core Portfolio		206,800
	32,852,687		High-Yield Bond Portfolio		225,040,905
			TOTAL MUTUAL FUNDS (IDENTIFIED COST $290,238,041)		225,247,705
Principal Amount					Value
			REPURCHASE AGREEMENTS--7.4%
$	19,909,000		Interest in $2,000,000,000 joint repurchase agreement 5.32%, dated 11/30/2006 under which Credit Suisse First Boston Corp. will repurchase U.S. Government Agency securities with various maturities to 8/16/2043 for $2,000,295,556 on 12/1/2006. The market value of the underlying securities at the end of the period was $2,060,008,358.	$	19,909,000
	29,000,000		Interest in $2,750,000,000 joint repurchase agreement 5.32%, dated 11/30/2006 under which Barclays Capital, Inc. will repurchase U.S. Government Agency securities with various maturities to 10/18/2016 for $2,750,406,389 on 12/1/2006. The market value of the underlying securities at the end of the period was $2,805,000,660 (purchased with proceeds from securities lending collateral).		29,000,000
	28,189,000		Interest in $2,450,000,000 joint repurchase agreement 5.32%, dated 11/30/2006 under which UBS Securities LLC will repurchase a U.S. Treasury and U.S. Government Agency securities with various maturities to 11/1/2036 for $2,450,362,056 on 12/1/2006. The market value of the underlying securities at the end of the period was $2,509,908,960 (purchased with proceeds from securities lending collateral).		28,189,000
			TOTAL REPURCHASE AGREEMENTS (AT COST)		77,098,000
			TOTAL INVESTMENTS--105.1% (IDENTIFIED COST $1,137,332,526)⁷		1,090,136,810
			OTHER ASSETS AND LIABILITIES - NET--(5.1)%		(52,842,986	)
			TOTAL NET ASSETS--100%	$	1,037,293,824

1 Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At November 30, 2006, these restricted securities amounted to $114,122,183, which represented 11.0% of total net assets.

2 Denotes a restricted security that may be resold without restriction to "qualified institutional buyers" as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors. At November 30, 2006, these liquid restricted securities amounted to $114,122,183, which represented 11.0% of total net assets.

3 Non-income producing security.

4 All or a portion of these securities are temporarily on loan to unaffiliated brokers/dealers.

5 Pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding futures contracts.

6 Affiliated companies.

7 The cost of investments for federal tax purposes amounts to $1,142,862,823.

At November 30, 2006, the Fund had the following outstanding long futures contracts:

Contracts³	Number of Contracts	Notional Value	Expiration Date	Unrealized Appreciation
U.S. Treasury Notes 10-Year Futures	600	$65,512,500	March 2007	$184,974
U.S. Treasury Notes 5-Year Futures	400	$42,462,500	March 2007	$76,441

At November 30, 2006, the Fund had the following outstanding credit default swaps:

Credit Default
Swaps Counterparty

Reference Entity

Buy/Sell

Pay/Receive
Fixed Rate

Expiration
Date

Notional
Amount

Unrealized
Depreciation

Goldman Sachs LLP

Dow Jones CDXHY325

Buy

0.325%

12/20/2011

$24,000,000

$(473,355)

Note: The categories of investments are shown as a percentage of total net assets at November 30, 2006.

The following acronyms are used throughout this portfolio:

FGIC	- --Financial Guaranty Insurance Company
FSA	- --Financial Security Assurance
GO	- --General Obligation
GTD	- --Guaranteed
INS	- --Insured
LOC	- --Letter of Credit
REITs	- --Real Estate Investment Trusts

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

November 30, 2006

Assets:
Total investments in securities, at value including $55,840,567 of securities loaned and $225,247,705 of investments in affiliated issuers (Note 5) (identified cost $1,137,332,526)			$	1,090,136,810
Cash				7,779
Income receivable				11,658,850
Receivable for investments sold				40,529
Receivable for shares sold				1,824,964
Receivable for daily variation margin				341,580
TOTAL ASSETS				1,104,010,512
Liabilities:
Payable for investments purchased	$	5,497,977
Payable for shares redeemed		1,511,546
Income distribution payable		967,505
Payable for distribution services fee (Note 5)		238,727
Payable for shareholder services fee (Note 5)		304,702
Payable for collateral due to broker		57,189,000
Net payable for swap contracts		627,022
Accrued expenses		380,209
TOTAL LIABILITIES				66,716,688
Net assets for 115,972,462 shares outstanding			$	1,037,293,824
Net Assets Consist of:
Paid-in capital			$	1,137,137,026
Net unrealized depreciation of investments, futures contracts and swap contracts				(47,407,656	)
Accumulated net realized loss on investments, futures contracts and swap contracts				(52,214,673	)
Distributions in excess of net investment income				(220,873	)
TOTAL NET ASSETS			$	1,037,293,824

Statement of Assets and Liabilities-continued

November 30, 2006

Net Asset Value, Offering Price and Redemption Proceeds Per Share
Class A Shares:
Net asset value per share ($478,755,484 ÷ 53,639,447 shares outstanding), $0.001 par value, 500,000,000 shares authorized						$8.93
Offering price per share (100/95.50 of $8.93)¹						$9.35
Redemption proceeds per share						$8.93
Class B Shares:
Net asset value per share ($292,622,094 ÷ 32,670,356 shares outstanding), $0.001 par value, 500,000,000 shares authorized						$8.96
Offering price per share						$8.96
Redemption proceeds per share (94.50/100 of $8.96)¹						$8.47
Class C Shares:
Net asset value per share ($95,452,624 ÷ 10,654,687 shares outstanding), $0.001 par value, 500,000,000 shares authorized						$8.96
Offering price per share (100/99.00 of $8.96)¹						$9.05
Redemption proceeds per share (99.00/100 of $8.96)¹						$8.87
Class F Shares:
Net asset value per share ($170,463,622 ÷ 19,007,972 shares outstanding), $0.001 par value, 500,000,000 shares authorized						$8.97
Offering price per share (100/99.00 of $8.97)¹						$9.06
Redemption proceeds per share (99.00/100 of $8.97)¹						$8.88

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

See Notes which are an integral part of the Financial Statements

Statement of Operations

Year Ended November 30, 2006

Investment Income:
Dividends (including $20,273,808 received from affiliated issuers (Note 5)			$	21,383,222
Interest (including income on securities loaned of $1,764)				45,058,323
TOTAL INCOME				66,441,545
Expenses:
Investment adviser fee (Note 5)	$	7,693,870
Administrative personnel and services fee (Note 5)		816,334
Custodian fees		43,434
Transfer and dividend disbursing agent fees and expenses		1,220,783
Directors'/Trustees' fees		18,093
Auditing fees		19,943
Legal fees		47,994
Portfolio accounting fees		169,452
Distribution services fee--Class B Shares (Note 5)		2,381,543
Distribution services fee--Class C Shares (Note 5)		679,760
Shareholder services fee--Class A Shares (Note 5)		1,097,897
Shareholder services fee--Class B Shares (Note 5)		793,848
Shareholder services fee--Class C Shares (Note 5)		223,336
Shareholder services fee--Class F Shares (Note 5)		408,143
Share registration costs		75,760
Printing and postage		111,482
Insurance premiums		11,055
Taxes		80,500
Miscellaneous		12,457
TOTAL EXPENSES		15,905,684

Statement of Operations-continued

Year Ended November 30, 2006

Waivers and Reimbursements (Note 5):
Waiver of investment adviser fee	$	(2,133,129	)
Waiver of administrative personnel and services fee		(34,637	)
Waiver of shareholder services fee--Class A Shares		(84,484	)
Waiver of shareholder services fee--Class F Shares		(9,402	)
Reimbursement of shareholder services fee--Class A Shares		(120,271	)
TOTAL WAIVERS AND REIMBURSEMENTS				$	(2,381,923	)
Net expenses							$	13,523,761
Net investment income								52,917,784
Realized and Unrealized Gain (Loss) on Investments, Futures Contracts and Swap Contracts:
Net realized loss on investments (including net realized loss of $563,631 on sales of investments in affiliated issuers (Note 5))								(4,068,176	)
Net realized gain on futures contracts								3,058,729
Net realized loss on swap contracts								(90,000	)
Net change in unrealized depreciation of investments								18,365,312
Net change in unrealized appreciation of futures contracts								261,415
Net change in unrealized depreciation of swap contracts								(473,355	)
Net realized and unrealized gain on investments, futures contracts and swap contracts								17,053,925
Change in net assets resulting from operations							$	69,971,709

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Year Ended November 30		2006			2005
Increase (Decrease) in Net Assets
Operations:
Net investment income	$	52,917,784		$	55,505,952
Net realized gain (loss) on investments, futures contracts and swap contracts		(1,099,447	)		7,603,681
Net change in unrealized appreciation/depreciation of investments, futures contracts and swap contracts		18,153,372			(41,814,709	)
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS		69,971,709			21,294,924
Distributions to Shareholders:
Distributions from net investment income
Class A Shares		(25,111,889	)		(23,973,426	)
Class B Shares		(15,207,010	)		(18,900,282	)
Class C Shares		(4,368,416	)		(4,490,037	)
Class F Shares		(9,501,126	)		(11,330,881	)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS		(54,188,441	)		(58,694,626	)
Share Transactions:
Proceeds from sale of shares		214,379,452			242,578,943
Net asset value of shares issued to shareholders in payment of distributions declared		42,602,116			42,765,179
Cost of shares redeemed		(307,929,203	)		(289,392,373	)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS		(50,947,635	)		(4,048,251	)
Change in net assets		(35,164,367	)		(41,447,953	)
Net Assets:
Beginning of period		1,072,458,191			1,113,906,144
End of period (including distributions in excess of net investment income of $(220,873) and $(1,087,184), respectively)	$	1,037,293,824		$	1,072,458,191

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

November 30, 2006

1. ORGANIZATION

Federated Investment Series Funds, Inc. (the "Corporation") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Corporation consists of one diversified portfolio, Federated Bond Fund (the "Fund"). The Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares and Class F Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is provide a high level of current income as is consistent with the preservation of capital.

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

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to 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;
in the absence of recorded sales for equity securities, according to the mean between the last closing bid and asked prices;
futures contracts and options are generally valued at market values established by the exchanges on which they are traded at the close of trading on such exchanges. Options traded in the over-the-counter market are generally valued according to the mean between the last bid and the last asked price for the option as provided by an investment dealer or other financial institution that deals in the option. The Board of Directors (the "Directors") may determine in good faith that another method of valuing such investments is necessary to appraise their fair market value;
for mortgage-backed securities, based on the aggregate investment value of the projected cash flows to be generated by the security, as furnished by an independent pricing service;
for investments in other open-end regulated investment companies, based on net asset value;
for other fixed-income securities, according to prices as furnished by an independent pricing service, except that fixed-income securities with remaining maturities of less than 60 days at the time of purchase are valued at amortized cost;
prices for credit default swaps are furnished by an independent pricing service and are based upon a valuation model incorporating default probabilities, recovery rates and other market data or factors; and
for all other securities at fair value as determined in accordance with procedures established by and under the general supervision of the Directors.

Prices for fixed-income securities furnished by a pricing service may be based on a valuation matrix which incorporates both dealer-supplied valuations and electronic data processing techniques. Such prices (other than prices of mortgage-backed securities) are generally intended to be indicative of the bid prices currently offered to institutional investors for the securities, except that prices for corporate fixed-income and asset-backed securities traded in the United States are generally intended to be indicative of the mean between such bid prices and asked prices. The Directors have approved the use of such pricing services. A number of pricing services are available, and the Fund may use various pricing services or discontinue the use of any pricing service.

Prices provided by independent pricing services may be determined without relying exclusively on quoted prices and may consider institutional trading in similar groups of securities, yield, quality, stability, risk, coupon rate, maturity, type of issue, trading characteristics, and other market data or factors. From time to time, when prices cannot be obtained from an independent pricing service, securities may be valued based on quotes from broker-dealers or other financial institutions that trade the securities.

Trading in foreign securities may be completed at times which vary from the closing of the New York Stock Exchange (NYSE). In computing its net asset value, the Fund values foreign securities using the latest closing price on the exchange on which they are traded immediately prior to the closing of the NYSE. Certain foreign currency exchange rates are generally determined at the latest rate prior to the closing of the NYSE. Foreign securities quoted in foreign currencies are translated into U.S. dollars at current rates. Events that affect these values and exchange rates may occur between the times at which they are determined and the closing of the NYSE. If such events materially affect the value of portfolio securities, these securities may be valued at their fair value as determined in good faith by the Fund's Directors, although the actual calculation may be done by others.

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund may invest in portfolios of Federated Core Trust, (Core Trust) which is managed by Federated Investment Management Company, the Fund's adviser. Core Trust is an open-end management company, registered under the Act, available only to registered investment companies and other institutional investors.

The investment objective of High Yield Bond Portfolio, a portfolio of Core Trust, is to seek high current income by investing primarily in a diversified portfolio of lower rated fixed-income securities. The investment objective of Federated Mortgage Core Portfolio, a portfolio of Core Trust, is to provide total return. Federated receives no advisory or administrative fees from the Funds within the Core Trust. Income distributions from Core Trust are declared daily and paid monthly, and are recorded by the Fund as dividend income. Capital gain distributions, if any, from Core Trust are declared and paid annually, and are recorded by the Fund as capital gains. The performance of the Fund is directly affected by the performance of the Core Trust. A copy of the Core Trust's financial statements is available on the EDGAR Database on the SEC's website www.sec.gov, at the Commission's public reference room in Washington, DC or upon request from the Fund by calling 1-800-341-7400.

Repurchase Agreements

It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a "securities entitlement" and exercises "control" as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.

With respect to agreements to repurchase U.S. government securities and cash items, the Fund treats the repurchase agreement as an investment in the underlying securities and not as an obligation of the other party to the repurchase agreement. Other repurchase agreements are treated as obligations of the other party secured by the underlying securities. Nevertheless, the insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.

The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.

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. Distributions of net investment income are declared and paid monthly. 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 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.

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.

Swap Agreements

The Fund may enter into swap contracts. A swap is an exchange of cash payments between the Fund and another party, which is based on a specific financial index or other reference instrument. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. When a swap contract is closed, the Fund recognizes a realized gain or loss. For the year ended November 30, 2006, the Fund had realized losses of $90,000 on swap contracts.

The Fund utilized credit default swap contracts. The "buyer" in a credit default contract is obligated to pay the "seller" a periodic stream of payments over the term of the contract provided that no event of default on an underlying reference obligation has occurred. If an event of default occurs, the seller must pay the buyer the full notional value, or the "par value," of the reference obligation in exchange for the reference obligation. The Fund may be either the buyer or seller in a credit default swap transaction. If the Fund is a buyer and no event of default occurs, the Fund will lose its investment and recover nothing. However, if an event of default occurs, the Fund will receive the full notional value of the reference obligation that may have little or no value. As a seller, the Fund receives a fixed rate of income throughout the term of the contract provided that there is no default event. If an event of default occurs, the seller must pay the buyer the full notional value of the reference obligation. Credit default swap transactions involve greater risks than if a Fund had invested in reference obligation directly. The cash paid or received on a credit default swap is recognized as realized gains or losses when such a payment is paid or received.

Risks may arise upon entering into swap agreements from the potential inability of the counterparties to meet the terms of their contract, from unanticipated changes in the value of the financial index on which the swap agreement is based, or from unfavorable changes in market conditions or interest rates. The Fund uses swaps for hedging purposes to reduce its exposure to interest rate fluctuations.

Swap contracts outstanding at period end, if any, are listed after the Fund's portfolio of investments.

Futures Contracts

The Fund can buy or sell financial futures contracts to manage cashflows, enhance yield and to potentially reduce transaction costs. Upon entering into a financial 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 year ended November 30, 2006, the Fund had net realized gains on futures contracts of $3,058,729.

Futures contracts outstanding at period end, if any, are listed after the fund's portfolio of investments.

Securities Lending

The Fund participates in a securities lending program providing for the lending of corporate bonds and government securities to qualified brokers. The Fund normally receives cash collateral for securities loaned that is invested in an affiliated money market fund or invested in short-term securities including repurchase agreements. Collateral is maintained at a minimum level of 100% of the market value of investments loaned, plus interest, if applicable. Earnings on collateral are allocated between the securities lending agent, as a fee for its services under the program, and the Fund, according to agreed-upon rates.

As of November 30, 2006, securities subject to this type of arrangement and related collateral were as follows:

Market Value of Securities Loaned		Market Value of Collateral
$55,840,567		$57,189,000

Restricted Securities

Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security 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 such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Fund's Board of Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Fund's Board of 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. Realized gains and losses from investment transactions are recorded on an identified cost basis.

3. CAPITAL STOCK

The following tables summarize capital stock activity:

Year Ended November 30	2006					��	2005
Class A Shares:	Shares			Amount			Shares			Amount
Shares sold	15,833,362		$	138,477,761			16,009,559		$	144,314,952
Shares issued to shareholders in payment of distributions declared	2,390,048			20,867,782			2,098,433			18,858,769
Shares redeemed	(14,921,505	)		(130,356,906	)		(11,264,314	)		(101,441,392	)
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS	3,301,905		$	28,988,637			6,843,678		$	61,732,329

Year Ended November 30	2006						2005
Class B Shares:	Shares			Amount			Shares			Amount
Shares sold	2,687,137		$	23,577,996			4,055,085		$	36,771,299
Shares issued to shareholders in payment of distributions declared	1,353,622			11,861,223			1,452,760			13,105,792
Shares redeemed	(11,508,823	)		(100,870,709	)		(11,123,212	)		(100,593,140	)
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS	(7,468,064	)	$	(65,431,490	)		(5,615,367	)	$	(50,716,049	)

Year Ended November 30	2006						2005
Class C Shares:	Shares			Amount			Shares			Amount
Shares sold	3,098,716		$	27,186,001			2,766,039		$	25,078,650
Shares issued to shareholders in payment of distributions declared	301,531			2,643,620			278,619			2,513,582
Shares redeemed	(3,032,947	)		(26,616,602	)		(2,549,604	)		(23,018,731	)
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS	367,300		$	3,213,019			495,054		$	4,573,501

Year Ended November 30	2006						2005
Class F Shares:	Shares			Amount			Shares			Amount
Shares sold	2,857,592		$	25,137,694			4,009,830		$	36,414,042
Shares issued to shareholders in payment of distributions declared	823,903			7,229,491			917,386			8,287,036
Shares redeemed	(5,699,393	)		(50,084,986	)		(7,101,756	)		(64,339,110	)
NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS	(2,017,898	)	$	(17,717,801	)		(2,174,540	)	$	(19,638,032	)
NET CHANGE RESULTING FROM SHARE TRANSACTIONS	(5,816,757	)	$	(50,947,635	)		(451,175	)	$	(4,048,251	)

4. FEDERAL TAX INFORMATION

The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are due in part to differing treatments for discount accretion/premium amortization on debt securities.

For the year ended November 30, 2006, permanent differences identified and reclassified among the components of net assets were as follows:

Increase (Decrease)
Paid-In Capital	Distributions in Excess of Net Investment Income	Accumulated Net Realized (Losses)
$4,668	$2,136,968	$(2,141,636)

Net investment income (loss), net realized gains (losses), and net assets were not affected by this reclassification.

The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended November 30, 2006 and 2005, was as follows:

		2006		2005
Ordinary income¹		$54,188,441		$58,694,626

1 For tax purposes short-term capital gain distributions are considered ordinary income distributions.

As of November 30, 2006, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income	$	(720,437	)
Net unrealized depreciation	$	(52,726,013	)
Capital loss carryforward	$	(46,396,752	)

The difference between book-basis and tax-basis net unrealized depreciation is attributable in part to differing treatments for the deferral of losses on wash sales, defaulted bond interest and discount accretion/premium amortization on debt securities.

At November 30, 2006, the cost of investments for federal tax purposes was $1,142,862,823. The net unrealized depreciation of investments for federal tax purposes excluding any unrealized appreciation (depreciation) from futures contracts and swap contracts was $52,726,013. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $25,411,803 and net unrealized depreciation from investments for those securities having an excess of cost over value of $78,137,816.

At November 30, 2006, the Fund had a capital loss carryforward of $46,396,752 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 income tax. Pursuant to the Code, such capital loss carryforward will expire as follows:

Expiration Year		Expiration Amount
2007		$ 20,569,670
2008		$ 2,000,841
2010		$15,739,984
2011		$ 2,824,073
2014		$ 5,262,184

5. 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 0.75%. 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. For the year ended November 30, 2006, the Adviser voluntarily waived $316,744 of its fee.

Pursuant to a settlement with the New York Attorney General, the Adviser has agreed to waive investment adviser fees in compliance with an Assurance of Discontinuance dated November 17, 2005. The net adviser fee was reduced to 0.5557% effective January 1, 2006 and may not be increased until after December 31, 2010.

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 certain 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. For the year ended November 30, 2006, the net fee paid to FAS was 0.076% of average aggregate daily net assets of the Fund.

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 A Shares, Class B Shares and Class C 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 A Shares		0.25%
Class B Shares		0.75%
Class C Shares		0.75%

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. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended November 30, 2006, FSC retained $119,234 of fees paid by the Fund.

For the year ended November 30, 2006, the Fund's Class A Shares did not incur a distribution services fee.

Sales Charges

For the year ended November 30, 2006, FSC retained $137,626 in sales charges from the sale of Class A Shares. FSC also retained $1,212 of contingent deferred sales charges relating to redemptions of Class A Shares, $4,376 relating to redemptions of Class C Shares and $6,004 relating to redemptions of Class F Shares. See "What Do Shares Cost?" in the Prospectus.

Shareholder Services Fee

The Fund may pay fees (Service Fees) up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares, Class C Shares and Class F Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. FSSC or these financial intermediaries may voluntarily choose to waive any portion of their fee. In addition, FSSC may voluntarily reimburse the Fund for shareholder services fees. This voluntary waiver and/or reimbursement can be modified or terminated at any time. For the year ended November 30, 2006, FSSC voluntarily waived $93,886 of its fee and voluntarily reimbursed $120,271 of shareholder services fees. For the year ended November 30, 2006, FSSC received $2,529 of fees paid by the Fund.

General

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

Transactions with Affiliated Companies

Affiliated holdings are mutual 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 transactions in other mutual funds. The Adviser was not paid an investment adviser fee by the affiliated mutual funds listed below. Therefore, the Adviser was not required to reimburse the Fund any investment adviser fee in connection with the investments in affiliated mutual funds listed below. Transactions with affiliated companies during the year ended November 30, 2006 are as follows:

Affiliates	Balance of Shares Held 11/30/2005	Purchases/ Additions	Sales/ Reductions	Balance of Shares Held 11/30/2006	Value	Dividend Income
Federated Mortgage Core Portfolio	19,724	1,039	- --	20,763	$ 206,800	$ 11,181
High Yield Bond Portfolio	40,511,676	3,010,918	10,669,907	32,852,687	225,040,905	20,262,627
TOTAL OF AFFILIATED TRANSACTIONS	40,531,400	3,011,957	10,669,907	32,873,450	$225,247,705	$20,273,808

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the year ended November 30, 2006, were as follows:

Purchases		$	219,073,202
Sales		$	282,093,284

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. 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. These lawsuits began to be filed shortly after Federated's first public announcement that it had received requests for information on shareholder trading activities in the Funds from the Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General ("NYAG"), and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay for the benefit of fund shareholders additional disgorgement and a civil money penalty in the aggregate amount of an additional $72 million. 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. The Board of the Funds has retained the law firm of Dickstein Shapiro LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and intend to defend this litigation. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys' fees and expenses, 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.

8. RECENT ACCOUNTING PRONOUNCEMENTS

On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken in the course of preparing the Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of no later than May 30, 2008. At this time, management is evaluating the implications of FIN 48 and its impact in the financial statements has not yet been determined.

In addition, in September 2006, FASB issued Statement on Financial Accounting Standards No. 157, "Fair Value Measurements" (FAS 157) which is effective for fiscal years beginning after November 15, 2007. FAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the impact the adoption of FAS 157 will have on the Funds' financial statement disclosures.

9. SUBSEQUENT EVENT

On December 21, 2006, the Fund entered into a $150,000,000 unsecured, uncommitted discretionary line of credit (LOC) with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate of 0.65% over the federal funds rate.

Report of Independent Registered Public Accounting Firm

TO THE BOARD OF DIRECTORS OF FEDERATED INVESTMENT SERIES FUNDS, INC. AND SHAREHOLDERS OF FEDERATED BOND FUND:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Federated Bond Fund (the "Fund") as of November 30, 2006, and the related statement of operations for the year ended, and the statement of changes in net assets and financial highlights for each of the two years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for each of the three years in the period ended, November 30, 2004, were audited by another independent registered public accounting firm whose report, dated January 21, 2005, expressed an unqualified opinion on those financial highlights.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2006, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Federated Bond Fund at November 30, 2006, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for each of the two years in the period then ended, in conformity with U.S. generally accepted accounting principles.

Ernst & Young LLP

Boston, Massachusetts
January 12, 2007

Board of Directors and Corporation Officers

The Board is responsible for managing the Corporation's business affairs and for exercising all the Corporation's powers except those reserved for the shareholders. The following tables give information about each Board member and the senior officers of the Fund. Where required, the tables separately list Board members who are "interested persons" of the Fund (i.e., "Interested" Board members) and those who are not (i.e., "Independent" Board members). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA. As of December 31, 2006, the Corporation comprised one portfolio, and the Federated Fund Complex consisted of 45 investment companies (comprising 148 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Board member oversees all portfolios in the Federated Fund Complex and serves for an indefinite term. The Fund's Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-341-7400.

INTERESTED DIRECTORS BACKGROUND


Name Birth Date Address Positions Held with Corporation Date Service Began		Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)
John F. Donahue* Birth Date: July 28, 1924 DIRECTOR Began serving: May 1992		Principal Occupations : Director or Trustee of the Federated Fund Complex; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Complex's Executive Committee. Previous Positions : Chairman of the Federated Fund Complex; Trustee, Federated Investment Management Company and Chairman and Director, Federated Investment Counseling.

J. Christopher Donahue* Birth Date: April 11, 1949 PRESIDENT AND DIRECTOR Began serving: May 1992		Principal Occupations : Principal Executive Officer and President of the Federated Fund Complex; Director or Trustee of some of the Funds in the Federated Fund Complex; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (Investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company. Previous Positions : President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd.


Name Birth Date Address Positions Held with Corporation Date Service Began		Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)
Lawrence D. Ellis, M.D.* Birth Date: October 11, 1932 3471 Fifth Avenue Suite 1111 Pittsburgh, PA DIRECTOR Began serving: May 1992		Principal Occupations : Director or Trustee of the Federated Fund Complex; Professor of Medicine, University of Pittsburgh; Medical Director, University of Pittsburgh Medical Center Downtown; Hematologist, Oncologist and Internist, University of Pittsburgh Medical Center. Other Directorships Held : Member, National Board of Trustees, Leukemia Society of America. Previous Positions : Trustee, University of Pittsburgh; Director, University of Pittsburgh Medical Center.

* Family relationships and reasons for "interested" status: John F. Donahue is the father of J. Christopher Donahue; both are "interested" due to the positions they hold with Federated Investors, Inc. and its subsidiaries. Lawrence D. Ellis, M.D. is "interested" because his son-in-law is employed by the Fund's principal underwriter, Federated Securities Corp.

INDEPENDENT DIRECTORS BACKGROUND


Name Birth Date Address Positions Held with Corporation Date Service Began		Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)
Thomas G. Bigley Birth Date: February 3, 1934 15 Old Timber Trail Pittsburgh, PA DIRECTOR Began serving: October 1995		Principal Occupation : Director or Trustee of the Federated Fund Complex. Other Directorships Held : Director, Member of Executive Committee, Children's Hospital of Pittsburgh; Director, University of Pittsburgh. Previous Position : Senior Partner, Ernst & Young LLP.

John T. Conroy, Jr. Birth Date: June 23, 1937 Investment Properties Corporation 3838 North Tamiami Trail Suite 402 Naples, FL DIRECTOR Began serving: May 1992		Principal Occupations : Director or Trustee of the Federated Fund Complex; Chairman of the Board, Investment Properties Corporation; Partner or Trustee in private real estate ventures in Southwest Florida. Previous Positions : President, Investment Properties Corporation; Senior Vice President, John R. Wood and Associates, Inc., Realtors; President, Naples Property Management, Inc. and Northgate Village Development Corporation.


Name Birth Date Address Positions Held with Corporation Date Service Began		Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)
Nicholas P. Constantakis Birth Date: September 3, 1939 175 Woodshire Drive Pittsburgh, PA DIRECTOR Began serving: February 1998		Principal Occupation : Director or Trustee of the Federated Fund Complex. Other Directorships Held : Director and Member of the Audit Committee, Michael Baker Corporation (engineering and energy services worldwide). Previous Position : Partner, Andersen Worldwide SC.

John F. Cunningham Birth Date: March 5, 1943 353 El Brillo Way Palm Beach, FL DIRECTOR Began serving: January 1999		Principal Occupation : Director or Trustee of the Federated Fund Complex; Director, WinsorTech. Other Directorships Held : Chairman, President and Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston College. Previous Positions : Director, Redgate Communications and EMC Corporation (computer storage systems); Chairman of the Board and Chief Executive Officer, Computer Consoles, Inc.; President and Chief Operating Officer, Wang Laboratories; Director, First National Bank of Boston; Director, Apollo Computer, Inc.

Peter E. Madden Birth Date: March 16, 1942 One Royal Palm Way 100 Royal Palm Way Palm Beach, FL DIRECTOR Began serving: May 1992		Principal Occupation : Director or Trustee of the Federated Fund Complex. Other Directorships Held : Board of Overseers, Babson College. Previous Positions : Representative, Commonwealth of Massachusetts General Court; President, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.

Charles F. Mansfield, Jr. Birth Date: April 10, 1945 80 South Road Westhampton Beach, NY DIRECTOR Began serving: January 1999		Principal Occupations : Director or Trustee of the Federated Fund Complex; Management Consultant. Previous Positions : Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President DVC Group, Inc. (marketing, communications and technology).


Name Birth Date Address Positions Held with Corporation Date Service Began		Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)
John E. Murray, Jr., J.D., S.J.D. Birth Date: December 20, 1932 Chancellor, Duquesne University Pittsburgh, PA CHAIRMAN AND DIRECTOR Began serving: February 1995		Principal Occupations : Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Complex; Chancellor and Law Professor, Duquesne University; Partner, Murray, Hogue & Lannis. Other Directorships Held : Director, Michael Baker Corp. (engineering, construction, operations and technical services). Previous Positions : President, Duquesne University; Dean and Professor of Law, University of Pittsburgh School of Law; Dean and Professor of Law, Villanova University School of Law.

Thomas M. O'Neill Birth Date: June 14, 1951 95 Standish Street P.O. Box 2779 Duxbury, MA DIRECTOR Began serving: October 2006		Principal Occupations : Director or Trustee of the Federated Fund Complex; Managing Director and Partner, Navigator Management Company, L.P. (investment and strategic consulting). Other Directorships Held : Director, Midway Pacific (lumber); Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College. Previous Positions : Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; and Credit Analyst and Lending Officer, Fleet Bank.

Marjorie P. Smuts Birth Date: June 21, 1935 4905 Bayard Street Pittsburgh, PA DIRECTOR Began serving: May 1992		Principal Occupations : Director or Trustee of the Federated Fund Complex; Public Relations/Marketing Consultant/Conference Coordinator. Previous Positions : National Spokesperson, Aluminum Company of America; television producer; President, Marj Palmer Assoc.; Owner, Scandia Bord.


Name Birth Date Address Positions Held with Corporation Date Service Began		Principal Occupation(s) for Past Five Years, Other Directorships Held and Previous Position(s)
John S. Walsh Birth Date: November 28, 1957 2604 William Drive Valparaiso, IN DIRECTOR Began serving: January 1999		Principal Occupations : Director or Trustee of the Federated Fund Complex; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc. Previous Position : Vice President, Walsh & Kelly, Inc.

James F. Will Birth Date: October 12, 1938 Saint Vincent College Latrobe, PA DIRECTOR Began serving: April 2006		Principal Occupations : Director or Trustee of the Federated Fund Complex; Vice Chancellor and President, Saint Vincent College. Other Directorships Held : Alleghany Corporation. Previous Positions : Chairman, President and Chief Executive Officer, Armco, Inc.; President and Chief Executive Officer, Cyclops Industries; President and Chief Operating Officer, Kaiser Steel Corporation.

OFFICERS


Name Birth Date Positions Held with Corporation Date Service Began		Principal Occupation(s) for Past Five Years and Previous Position(s)
John W. McGonigle Birth Date: October 26, 1938 EXECUTIVE VICE PRESIDENT AND SECRETARY Began serving: May 1992		Principal Occupations : Executive Vice President and Secretary of the Federated Fund Complex; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc. Previous Positions : Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp.

Richard A. Novak Birth Date: December 25, 1963 TREASURER Began serving: January 2006		Principal Occupations : Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc. Previous Positions : Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company; held various financial management positions within The Mercy Hospital of Pittsburgh; Auditor, Arthur Andersen & Co.


Name Birth Date Positions Held with Corporation Date Service Began		Principal Occupation(s) for Past Five Years and Previous Position(s)
Richard B. Fisher Birth Date: May 17, 1923 VICE PRESIDENT Began serving: May 1992		Principal Occupations : Vice Chairman or Vice President of some of the Funds in the Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp. Previous Positions : President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice President, Federated Investors, Inc. and Director and Chief Executive Officer, Federated Securities Corp.

Brian P. Bouda Birth Date: February 28, 1947 SENIOR VICE PRESIDENT AND CHIEF COMPLIANCE OFFICER Began serving: January 2006		Principal Occupations : Senior Vice President and Chief Compliance Officer of the Federated Fund Complex; Vice President and Chief Compliance Officer of Federated Investors, Inc.; and Chief Compliance Officer of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.

Robert J. Ostrowski Birth Date: April 26, 1963 CHIEF INVESTMENT OFFICER Began serving: May 2004		Principal Occupations : Robert J. Ostrowski joined Federated in 1987 as an Investment Analyst and became a Portfolio Manager in 1990. He was named Chief Investment Officer of taxable, fixed-income products in 2004 and also serves as a Senior Portfolio Manager. He has been a Senior Vice President of the Fund's Adviser since 1997. Mr. Ostrowski is a Chartered Financial Analyst. He received his M.S. in Industrial Administration from Carnegie Mellon University.

Joseph M. Balestrino Birth Date: November 3, 1954 VICE PRESIDENT Began serving: November 1998		Principal Occupations : Joseph M. Balestrino has been the Fund's Portfolio Manager since September 1993. He is Vice President of the Corporation. Mr. Balestrino joined Federated in 1986 and has been a Senior Portfolio Manager and Senior Vice President of the Fund's Adviser since 1998. He was a Portfolio Manager and a Vice President of the Fund's Adviser from 1995 to 1998. Mr. Balestrino served as a Portfolio Manager and an Assistant Vice President of the Adviser from 1993 to 1995. Mr. Balestrino is a Chartered Financial Analyst and received his Master's Degree in Urban and Regional Planning from the University of Pittsburgh.

Evaluation and Approval of Advisory Contract

FEDERATED BOND FUND (THE "FUND")

The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2006. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.

Prior to the meeting, the Adviser had recommended that the Federated Funds appoint a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated Fund. The Senior Officer appointed by the Funds has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent written evaluation that covered topics discussed below, which the Board considered, along with other information, in deciding to approve the advisory contract.

During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the 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 Federated fund trades, as well as advisory fees. The Board is also familiar with judicial decisions concerning allegedly excessive investment advisory fees which have indicated 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 the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for like services and costs to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates from supplying such services. The Board was aware of these considerations and was 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 considered and weighed 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 was assisted in its deliberations by the advice of independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise the Senior Officer's evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional reports in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board has received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's evaluation, accompanying data and additional reports covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and 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 investment objectives; 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 (if any); the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates; the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; 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 Board's evaluation process is evolutionary. 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 focused on comparisons with other similar mutual funds more heavily 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 in fact chosen and maintained 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 was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences included, but are not limited to targeting different investors, being subject to different laws and regulations, different legal structure, distribution costs, average account size and portfolio management techniques made necessary by different cash flows. The Senior Officer did not consider these fee schedules to be significant in determining the appropriateness of mutual fund advisory contracts.

The Senior Officer reviewed reports compiled by Federated, and directed the preparation of independent reports, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups is of significance in judging the reasonableness of proposed fees.

For both the one and three year periods ending December 31, 2005, the Fund's performance was above the median of the relevant peer group.

The Board also received financial information about Federated, including reports on the compensation and benefits Federated derived from its relationships with the Federated Funds. These reports covered 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 discussed 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 waived fees and/or reimbursed expenses and have indicated to the Board their intention to do so in the future, where appropriate.

Federated furnished reports, requested by the Senior Officer, that reported revenues on a fund by fund basis and made estimates of the allocation of expenses on a fund by fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs and the lack of consensus on how to allocate those costs causes such allocation reports to be of questionable value. The allocation reports were considered in the analysis by the Board but were determined to be of limited use.

The Board also reviewed profitability information for Federated and other publicly held fund management companies, provided by the Senior Officer, who noted the limited availability of such information, and concluded that Federated's profit margins did not appear to be excessive.

The Senior Officer's evaluation also discussed the notion of possible realization of "economies of scale" as a fund grows larger. The Board considered in this regard that the Adviser has made significant additional investments in the portfolio management and distribution efforts supporting all of the Federated funds and that the benefits of any economies, should they exist, were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with "breakpoints" that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.

During the year ending December 31, 2005, the Fund's investment advisory fee after waivers and expense reimbursements, if any, was above the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive. The Board will continue to monitor advisory fees and other expenses borne by the Fund.

No changes were recommended to, and no objection was raised to the continuation of the Fund's advisory contract, and the Senior Officer noted that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. For 2005, the Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates was satisfactory.

In its decision to continue an existing investment advisory contract, the Board was 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 recognized 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 approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.

The Board based its decision to approve the 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 were relevant to every Federated Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.

The Senior Officer also made recommendations relating to the organization and availability of data and verification of processes for purposes of implementing future evaluations which the Adviser has agreed to implement.

Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, 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 the Federated Investors 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.

Federated
World-Class Investment Manager

Federated Bond Fund
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 31420F103
Cusip 31420F202
Cusip 31420F301
Cusip 31420F400

29747 (1/07)

Federated is a registered mark of Federated Investors, Inc. 2007 (c)Federated Investors, Inc.


ITEM 2.     CODE OF ETHICS

(a) As of the end of the period covered by this report, the registrant has
adopted a code of ethics (the "Section 406 Standards for Investment Companies -
Ethical Standards for Principal Executive and Financial Officers") that applies
to the registrant's Principal Executive Officer and Principal Financial Officer;
the registrant's Principal Financial Officer also serves as the Principal
Accounting Officer.

(c) Not Applicable

(d) Not Applicable

(e) Not Applicable

(f)(3) The registrant hereby undertakes to provide any person, without charge,
upon request, a copy of the code of ethics.  To request a copy of the code of
ethics, contact the registrant at 1-800-341-7400, and ask for a copy of the
Section 406 Standards for Investment Companies - Ethical Standards for Principal
Executive and Financial Officers.


ITEM 3.     AUDIT COMMITTEE FINANCIAL EXPERT

The registrant's Board has determined that each member of the Board's Audit
Committee is an "audit committee financial expert," and that each such member is
"independent," for purposes of this Item.  The Audit Committee consists of the
following Board members:  Thomas G. Bigley, John T. Conroy, Jr., Nicholas P.
Constantakis and Charles F. Mansfield, Jr.


ITEM 4.     PRINCIPAL ACCOUNTANT FEES AND SERVICES



(a)         Audit Fees billed to the registrant for the two most recent fiscal
years:

                  Fiscal year ended 2006 - $21,000

                  Fiscal year ended 2005 - $19,895



(b)         Audit-Related Fees billed to the registrant for the two most recent
fiscal years:

                  Fiscal year ended 2006 - $0

                  Fiscal year ended 2005 - $0

      Amount requiring approval of the registrant's audit committee pursuant to
      paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $1,509
      respectively.  Fiscal year ended 2005 - Sarbanes Oxley sec. 302
      procedures.



(c)          Tax Fees billed to the registrant for the two most recent fiscal
years:

                  Fiscal year ended 2006 - $0

                  Fiscal year ended 2005 - $0

      Amount requiring approval of the registrant's audit committee pursuant to
      paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0
      respectively.



(d)         All Other Fees billed to the registrant for the two most recent
fiscal years:

                  Fiscal year ended 2006 - $0

                  Fiscal year ended 2005 - $0

      Amount requiring approval of the registrant's audit committee pursuant to
      paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $9,412
      respectively.  Fiscal year ended 2005- Executive compensation analysis.



(e)(1)      Audit Committee Policies regarding Pre-approval of Services.

            The Audit Committee is required to pre-approve audit and non-audit
services performed by the independent auditor in order to assure that the
provision of such services do not impair the auditor's independence.  Unless a
type of service to be provided by the independent auditor has received general
pre-approval, it will require specific pre-approval by the Audit Committee.  Any
proposed services exceeding pre-approved cost levels will require specific pre-
approval by the Audit Committee.

            Certain services have the general pre-approval of the Audit
Committee.  The term of the general pre-approval is 12 months from the date of
pre-approval, unless the Audit Committee specifically provides for a different
period.  The Audit Committee will annually review the services that may be
provided by the independent auditor without obtaining specific pre-approval from
the Audit Committee and may grant general pre-approval for such services.  The
Audit Committee will revise the list of general pre-approved services from time
to time, based on subsequent determinations.  The Audit Committee will not
delegate its responsibilities to pre-approve services performed by the
independent auditor to management.

            The Audit Committee has delegated pre-approval authority to its
Chairman.  The Chairman will report any pre-approval decisions to the Audit
Committee at its next scheduled meeting.  The Committee will designate another
member with such pre-approval authority when the Chairman is unavailable.



AUDIT SERVICES

      The annual Audit services engagement terms and fees will be subject to the
specific pre-approval of the Audit Committee.  The Audit Committee must approve
any changes in terms, conditions and fees resulting from changes in audit scope,
registered investment company (RIC) structure or other matters.

      In addition to the annual Audit services engagement specifically approved
by the Audit Committee, the Audit Committee may grant general pre-approval for
other Audit Services, which are those services that only the independent auditor
reasonably can provide.  The Audit Committee has pre-approved certain Audit
services, all other Audit services must be specifically pre-approved by the
Audit Committee.



AUDIT-RELATED SERVICES

      Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
financial statements or that are traditionally performed by the independent
auditor.  The Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor, and has pre-approved
certain Audit-related services, all other Audit-related services must be
specifically pre-approved by the Audit Committee.



TAX SERVICES

      The Audit Committee believes that the independent auditor can provide Tax
services to the Company such as tax compliance, tax planning and tax advice
without impairing the auditor's independence.  However, the Audit Committee will
not permit the retention of the independent auditor in connection with a
transaction initially recommended by the independent auditor, the purpose of
which may be tax avoidance and the tax treatment of which may not be supported
in the Internal Revenue Code and related regulations.  The Audit Committee has
pre-approved certain Tax services, all Tax services involving large and complex
transactions must be specifically pre-approved by the Audit Committee.



ALL OTHER SERVICES

      With respect to the provision of services other than audit, review or
attest services the pre-approval requirement is waived if:



      (1)         The aggregate amount of all such services provided constitutes
                  no more than five percent of the total amount of revenues paid
                  by the registrant, the registrant's adviser (not including any
                  sub-adviser whose role is primarily portfolio management and
                  is subcontracted with or overseen by another investment
                  adviser), and any entity controlling, controlled by, or under
                  common control with the investment adviser that provides
                  ongoing services to the registrant to its accountant during
                  the fiscal year in which the services are provided;
      (2)         Such services were not recognized by the registrant, the
                  registrant's adviser (not including any sub-adviser whose role
                  is primarily portfolio management and is subcontracted with or
                  overseen by another investment adviser), and any entity
                  controlling, controlled by, or under common control with the
                  investment adviser that provides ongoing services to the
                  registrant  at the time of the engagement to be non-audit
                  services; and
      (3)         Such services are promptly brought to the attention of the
                  Audit Committee of the issuer and approved prior to the
                  completion of the audit by the Audit Committee or by one or
                  more members of the Audit Committee who are members of the
                  board of directors to whom authority to grant such approvals
                  has been delegated by the Audit Committee.


      The Audit Committee may grant general pre-approval to those permissible
non-audit services classified as All Other services that it believes are routine
and recurring services, and would not impair the independence of the auditor.



      The SEC's rules and relevant guidance should be consulted to determine the
precise definitions of prohibited non-audit services and the applicability of
exceptions to certain of the prohibitions.



PRE-APPROVAL FEE LEVELS

      Pre-approval fee levels for all services to be provided by the independent
auditor will be established annually by the Audit Committee.  Any proposed
services exceeding these levels will require specific pre-approval by the Audit
Committee.



PROCEDURES

      Requests or applications to provide services that require specific
approval by the Audit Committee will be submitted to the Audit Committee by both
the independent auditor and the Principal Accounting Officer and/or Internal
Auditor, and must include a joint statement as to whether, in their view, the
request or application is consistent with the SEC's rules on auditor
independence.





(e)(2)      Percentage of services identified in items 4(b) through 4(d) that
were approved by the registrants audit committee pursuant to paragraph
(c)(7)(i)(C) of Rule 2-01 of Regulation S-X:

            4(b)

            Fiscal year ended 2006 - 0%

            Fiscal year ended 2005 - 0%

            Percentage of services provided to the registrants investment
            adviser and any entity controlling, controlled by, or under common
            control with the investment adviser that provides ongoing services
            to the registrant that were approved by the registrants audit
            committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
            Regulation S-X, 0% and 0% respectively.



            4(c)

            Fiscal year ended 2006 - 0%

            Fiscal year ended 2005 - 0%

            Percentage of services provided to the registrants investment
            adviser and any entity controlling, controlled by, or under common
            control with the investment adviser that provides ongoing services
            to the registrant that were approved by the registrants audit
            committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
            Regulation S-X, 0% and 0% respectively.



            4(d)

            Fiscal year ended 2006 - 0%

            Fiscal year ended 2005 - 0%

            Percentage of services provided to the registrants investment
            adviser and any entity controlling, controlled by, or under common
            control with the investment adviser that provides ongoing services
            to the registrant that were approved by the registrants audit
            committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
            Regulation S-X, 0% and 0% respectively.



(f)   NA


(g)   Non-Audit Fees billed to the registrant, the registrant's investment
      adviser, and certain entities controlling, controlled by or under common
      control with the investment adviser:


            Fiscal year ended 2006 - $157,119

            Fiscal year ended 2005 - $71,493



(h)         The registrant's Audit Committee has considered that the provision
of non-audit services that were rendered to the registrant's adviser (not
including any sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the investment adviser
that provides ongoing services to the registrant that were not pre-approved
pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible
with maintaining the principal accountant's independence.



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 INVESTMENT SERIES FUNDS, INC.

BY          /S/ RICHARD A. NOVAK
                             (INSERT NAME AND TITLE)

            Richard A. Novak, Principal Financial Officer
DATE        January 23, 2007


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        January 23, 2007


BY          /S/ RICHARD A. NOVAK

            Richard A. Novak, Principal Financial Officer
DATE        January 23, 2007

Federated Investment Series Funds N-CSRCertified annual shareholder report (management investment company)

FederatedWorld-Class Investment Manager

Federated Bond Fund

20TH ANNUAL SHAREHOLDER REPORT

Class A SharesClass B SharesClass C SharesClass F Shares

Financial Highlights - Class A Shares

Financial Highlights - Class B Shares

Financial Highlights - Class C Shares

Financial Highlights - Class F Shares

Shareholder Expense Example

ACTUAL EXPENSES

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

Management's Discussion of Fund Performance

MARKET OVERVIEW

DURATION

SECTOR

SECURITY SELECTION

GROWTH OF A $10,000 INVESTMENT - CLASS A SHARES

GROWTH OF A $10,000 INVESTMENT - CLASS B SHARES

GROWTH OF A $10,000 INVESTMENT - CLASS C SHARES

GROWTH OF A $10,000 INVESTMENT - CLASS F SHARES

Portfolio of Investments Summary Table

Portfolio of Investments

Statement of Assets and Liabilities

Statement of Assets and Liabilities-continued

Statement of Operations

Statement of Operations-continued

Statement of Changes in Net Assets

Notes to Financial Statements

1. ORGANIZATION

2. SIGNIFICANT ACCOUNTING POLICIES

Investment Valuation

Repurchase Agreements

Investment Income, Gains and Losses, Expenses and Distributions

Premium and Discount Amortization/Paydown Gains and Losses

Federal Taxes

Other Taxes

When-Issued and Delayed Delivery Transactions

Swap Agreements

Futures Contracts

Securities Lending

Restricted Securities

Use of Estimates

Other

3. CAPITAL STOCK

4. FEDERAL TAX INFORMATION

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Administrative Fee

Distribution Services Fee

Sales Charges

Shareholder Services Fee

General

Transactions with Affiliated Companies

6. INVESTMENT TRANSACTIONS

7. LEGAL PROCEEDINGS

8. RECENT ACCOUNTING PRONOUNCEMENTS

9. SUBSEQUENT EVENT

Report of Independent Registered Public Accounting Firm

TO THE BOARD OF DIRECTORS OF FEDERATED INVESTMENT SERIES FUNDS, INC. AND SHAREHOLDERS OF FEDERATED BOND FUND:

Board of Directors and Corporation Officers

INTERESTED DIRECTORS BACKGROUND

INDEPENDENT DIRECTORS BACKGROUND

OFFICERS

Evaluation and Approval of Advisory Contract

FEDERATED BOND FUND (THE "FUND")

Voting Proxies on Fund Portfolio Securities

Quarterly Portfolio Schedule

FederatedWorld-Class Investment Manager

Federated
World-Class Investment Manager

Class A Shares
Class B Shares
Class C Shares
Class F Shares

Federated
World-Class Investment Manager