N-CSRS 1 fisfiform.htm Federated Investment Series Funds, Inc. 


                                  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: 11/30/04


               Date of Reporting Period: Six months ended 5/31/04




Item 1.     Reports to Stockholders

Federated Investors
World-Class Investment Manager

Federated Bond Fund

Established 1987

A Portfolio of Federated Investment Series Funds, Inc.

17TH SEMI-ANNUAL SHAREHOLDER REPORT

May 31, 2004

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

FINANCIAL HIGHLIGHTS

FINANCIAL STATEMENTS

VOTING PROXIES ON FUND PORTFOLIO SECURITIES

Financial Highlights -- Class A Shares

(For a Share Outstanding Throughout Each Period)

  

Six Months
Ended
(unaudited)

   

  

Year Ended November 30,

  

Period
Ended

   

  

Year Ended
October 31,

  

5/31/2004

   

  

2003

   

  

2002

   

  

2001

   

  

11/30/2000

1

  

2000

   

  

1999

   

Net Asset Value, Beginning of Period

   

$9.04

   

   


$8.49

   

   


$8.72

   

   


$8.55

   

   


$8.65

   

   


$9.11

   

   


$9.82

   

Income From Investment Operations:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net investment income

   

0.27

   

   

0.58

   

   

0.62

2

   

0.66

   

   

0.06

   

   

0.69

   

   

0.67

   

Net realized and unrealized gain (loss) on investments

   

(0.14

)

   

0.55

   

   


(0.25

)2

   


0.19

   

   


(0.10

)

   


(0.44

)

   


(0.70

)

TOTAL FROM INVESTMENT OPERATIONS

   

0.13

   

   

1.13

   

   


0.37

   

   


0.85

   

   


(0.04

)

   


0.25

   

   


(0.03

)

Less Distributions:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Distributions from net investment income

   

(0.28

)

   

(0.58

)

   

(0.60

)

   

(0.68

)

   

(0.06

)

   

(0.71

)

   

(0.68

)

Net Asset Value, End of Period

   

$8.89

   

   

$9.04

   

   

$8.49

   

   

$8.72

   

   

$8.55

   

   

$8.65

   

   

$9.11

   

Total Return3

   

1.41

%

   

13.62

%

   

4.43

%

   

10.24

%

   

(0.46

)%

   

2.81

%

   

(0.35

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Net Assets:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Expenses

   

1.05

%4

   

1.05

%

   

1.06

%

   

1.06

%

   

1.05

%4

   

1.05

%

   

1.06

%

Net investment income

   

5.92

%4

   

6.32

%

   

7.13

%2

   

7.51

%

   

8.38

%4

   

7.85

%

   

7.07

%

Expense waiver/reimbursement5

   

0.18

%4

   

0.16

%

   

0.16

%

   

0.17

%

   

0.21

%4

   

0.18

%

   

0.16

%

Supplemental Data:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net assets, end of period (000 omitted)

   

$391,706

   

$377,436

   

$319,597


$232,594


$217,008


$216,101


$249,056


Portfolio turnover

   

18

%

   

28

%

   

27

%

   

31

%

   

2

%

   

27

%

   

30

%

1 The Fund changed its fiscal year-end from October 31 to November 30.

2 Effective December 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002, was to decrease net investment income per share by $0.01, increase net realized and unrealized gain (loss) per share by $0.01 and decrease the ratio of net investment income to average net assets from 7.26% to 7.13%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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

4 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and 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)

  

Six Months
Ended
(unaudited)

   

  

Year Ended November 30,

  

Period
Ended

   

  

Year Ended
October 31,

  

5/31/2004

   

  

2003

  

  

2002

   

  

2001

   

  

11/30/2000

1

  

2000

   

  

1999

   

Net Asset Value, Beginning of Period

   

$9.06

   

   


$8.51

   

   

$8.74

   

   

$8.57

   

   

$8.66

   

   

$9.12

   

   

$9.83

   

Income From Investment Operations:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net investment income

   

0.23

   

   

0.51

   

   

0.55

2

   

0.60

   

   

0.05

   

   

0.63

   

   

0.60

   

Net realized and unrealized gain (loss) on investments

   


(0.13

)

   


0.55

   

   

(0.25

)2

   

0.18

   

   

(0.09

)

   

(0.45

)

   

(0.70

)

TOTAL FROM INVESTMENT OPERATIONS

   

0.10

   

   


1.06

   

   

0.30

   

   

0.78

   

   

(0.04

)

   

0.18

   

   

(0.10

)

Less Distributions:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Distributions from net investment income

   

(0.24

)

   

(0.51

)

   

(0.53

)

   

(0.61

)

   

(0.05

)

   

(0.64

)

   

(0.61

)

Net Asset Value, End of Period

   

$8.92

   

   

$9.06

   

   

$8.51

   

   

$8.74

   

   

$8.57

   

   

$8.66

   

   

$9.12

   

Total Return3

   

1.10

%

   

12.69

%

   

3.60

%

   

9.35

%

   

(0.42

)%

   

2.02

%

   

(1.11

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Net Assets:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Expenses

   

1.85

%4

   

1.85

%

   

1.86

%

   

1.86

%

   

1.85

%4

   

1.85

%

   

1.86

%

Net investment income

   

5.12

%4

   

5.52

%

   

6.33

%2

   

6.70

%

   

7.56

%4

   

7.05

%

   

6.27

%

Expense waiver/reimbursement5

   

0.13

%4

   

0.11

%

   

0.11

%

   

0.12

%

   

0.16

%4

   

0.13

%

   

0.11

%

Supplemental Data:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net assets, end of period (000 omitted)

   

$434,946

   

$480,042

   

$426,299

   

$380,016

   

   

$286,738

   

$288,505

   

$345,034

   

Portfolio turnover

   

18

%

   

28

%

   

27

%

   

31

%

   

2

%

   

27

%

   

30

%

1 The Fund changed its fiscal year-end from October 31 to November 30.

2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002 was to decrease net investment income per share by $0.01, increase net realized and unrealized gain (loss) per share by $0.01, and decrease the ratio of net investment income to average net assets from 6.46% to 6.33%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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

4 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and 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)

  

Six Months
Ended
(unaudited)

   

  

Year Ended November 30,

  

Period
Ended

   

  

Year Ended
October 31,

  

5/31/2004

   

  

2003

   

  

2002

   

  

2001

   

  

11/30/2000

1

  

2000

   

  

1999

   

Net Asset Value, Beginning of Period

   

$9.07

   

   


$8.52

   

   

$8.74

   

   

$8.57

   

   

$8.66

   

   

$9.12

   

   

$9.83

   

Income From Investment Operations:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net investment income

   

0.23

   

   

0.51

   

   

0.54

2

   

0.60

   

   

0.05

   

   

0.63

   

   

0.60

   

Net realized and unrealized gain (loss) on investments

   

(0.14

)

   


0.55

   

   

(0.23

)2

   

0.18

   

   

(0.09

)

   

(0.45

)

   

(0.70

)

TOTAL FROM INVESTMENT OPERATIONS

   

0.09

   

   

1.06

   

   

0.31

   

   

0.78

   

   

(0.04

)

   

0.18

   

   

(0.10

)

Less Distributions:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Distributions from net investment income

   

(0.24

)

   

(0.51

)

   

(0.53

)

   

(0.61

)

   

(0.05

)

   

(0.64

)

   

(0.61

)

Net Asset Value, End of Period

   

$8.92

   

   

$9.07

   

   

$8.52

   

   

$8.74

   

   

$8.57

   

   

$8.66

   

   

$9.12

   

Total Return3

   

0.99

%

   

12.68

%

   

3.70

%

   

9.33

%

   

(0.42

)%

   

2.02

%

   

(1.11

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Net Assets:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Expenses

   

1.85

%4

   

1.85

%

   

1.86

%

   

1.86

%

   

1.85

%4

   

1.85

%

   

1.86

%

Net investment income

   

5.12

%4

   

5.52

%

   

6.33

%2

   

6.70

%

   

7.56

%4

   

7.04

%

   

6.27

%

Expense waiver/reimbursement5

   

0.13

%4

   

0.11

%

   

0.11

%

   

0.12

%

   

0.16

%4

   

0.13

%

   

0.11

%

Supplemental Data:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net assets, end of period (000 omitted)

   

$88,205

   

$91,905

   

$77,272

   

$82,973

   

$74,250

   

$75,821

   

$92,875

   

Portfolio turnover

   

18

%

   

28

%

   

27

%

   

31

%

   

2

%

   

27

%

   

30

%

1 The Fund changed its fiscal year-end from October 31 to November 30.

2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002 was to decrease net investment income per share by $0.01, increase net realized and unrealized gain (loss) per share by $0.01, and decrease the ratio of net investment income to average net assets from 6.46% to 6.33%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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

4 Computed on an annualized basis.

5 This voluntary expense decrease is reflected in both the expense and 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)

  

Six Months
Ended
(unaudited)

   

  

Year Ended November 30,

   

Period
Ended

   

  

Year Ended
October 31,

  

5/31/2004

   

  

2003

   

  

2002

   

  

2001

   

  

11/30/2000

1

  

2000

   

  

1999

   

Net Asset Value, Beginning of Period

   

$9.07

   

   


$8.52

   

   

$8.75

   

   

$8.57

   

   

$8.67

   

   

$9.12

   

   

$9.83

   

Income From Investment Operations:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net investment income

   

0.27

   

   

0.57

   

   

0.61

2

   

0.66

   

   

0.06

   

   

0.70

   

   

0.67

   

Net realized and unrealized gain (loss) on investments

   


(0.13

)

   


0.55

   

   

(0.24

)2

   

0.20

   

   

(0.10

)

   

(0.44

)

   

(0.70

)

TOTAL FROM INVESTMENT OPERATIONS

   

0.14

   

   


1.12

   

   

0.37

   

   

0.86

   

   

(0.04

)

   

0.26

   

   

(0.03

)

Less Distributions:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Distributions from net investment income

   

(0.28

)

   

(0.57

)

   

(0.60

)

   

(0.68

)

   

(0.06

)

   

(0.71

)

   

(0.68

)

Net Asset Value, End of Period

   

$8.93

   

   

$9.07

   

   

$8.52

   

   

$8.75

   

   

$8.57

   

   

$8.67

   

   

$9.12

   

Total Return3

   

1.50

%

   

13.53

%

   

4.39

%

   

10.30

%

   

(0.46

)%

   

2.92

%

   

(0.35

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios to Average Net Assets:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Expenses

   

1.08

%4

   

1.08

%

   

1.09

%

   

1.09

%

   

1.08

%4

   

1.08

%

   

1.09

%

Net investment income

   

5.89

%4

   

6.28

%

   

7.10

%2

   

7.48

%

   

8.33

%4

   

7.82

%

   

7.02

%

Expense waiver/ reimbursement5

   

0.15

%4

   

0.13

%

   

0.13

%

   

0.14

%

   

0.18

%4

   

0.15

%

   

0.13

%

Supplemental Data:

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

   

Net assets, end of period (000 omitted)

   

$218,761

   

$246,014

   

$252,905

   

$301,788

   

$306,621

   

$313,811

   

$375,902

   

Portfolio turnover

   

18

%

   

28

%

   

27

%

   

31

%

   

2

%

   

27

%

   

30

%

1 The Fund changed its fiscal year-end from October 31 to November 30.

2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002 was to decrease net investment income per share by $0.01, increase net realized and unrealized gain (loss) per share by $0.01, and decrease the ratio of net investment income to average net assets from 7.23% to 7.10%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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

4 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

May 31, 2004 (unaudited)

Principal
Amount

  

  

Value

   

   

   

   

CORPORATE BONDS--57.5%

   

   

   

   

   

   

   

Basic Industry - Chemicals--0.4%

   

   

   

   

$

5,900,000

1

Fertinitro Finance, Company Guarantee, 8.29%, 4/1/2020

   

$

4,705,250

   

   

   

   

Basic Industry - Metals & Mining--3.1%

   

   

   

   

   

9,600,000

   

Barrick Gold Corp., Deb., 7.50%, 5/1/2007

   

   

10,588,512

   

   

3,900,000

   

Inco Ltd., 5.70%, 10/15/2015

   

   

3,865,992

   

   

2,500,000

   

Noranda, Inc., 6.00%, 10/15/2015

   

   

2,533,625

   

   

7,500,000

   

Noranda, Inc., Deb., 8.125%, 6/15/2004

   

   

7,521,675

   

   

9,750,000

   

Placer Dome, Inc., Bond, 8.50%, 12/31/2045

   

   

10,894,065

   

   

   

   

TOTAL

   

   

35,403,869

   

   

   

   

Basic Industry - Paper--2.5%

   

   

   

   

   

2,600,000

   

International Paper Co., 4.25%, 1/15/2009

   

   

2,560,922

   

   

4,200,000

   

Louisiana-Pacific Corp., 8.875%, 8/15/2010

   

   

4,924,500

   

   

2,850,000

   

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

   

   

2,921,250

   

   

5,000,000

   

Westvaco Corp., 7.65%, 3/15/2027

   

   

5,653,900

   

   

4,500,000

   

Weyerhaeuser Co., Deb., 7.375%, 3/15/2032

   

   

4,887,495

   

   

2,800,000

   

Weyerhaeuser Co., Note, 5.50%, 3/15/2005

   

   

2,869,076

   

   

4,200,000

   

Weyerhaeuser Co., Note, 6.125%, 3/15/2007

   

   

4,460,946

   

   

   

   

TOTAL

   

   

28,278,089

   

   

   

   

Capital Goods - Aerospace & Defense--0.6%

   

   

   

   

   

2,235,000

   

Lockheed Martin Corp., Note, 8.20%, 12/1/2009

   

   

2,623,666

   

   

2,000,000

   

Raytheon Co., Deb., 7.20%, 8/15/2027

   

   

2,149,820

   

   

2,075,000

   

Raytheon Co., Note, 6.75%, 8/15/2007

   

   

2,252,060

   

   

   

   

TOTAL

   

   

7,025,546

   

   

   

   

Capital Goods - Building Materials--0.7%

   

   

   

   

   

2,700,000

   

CRH America, Inc., 5.30%, 10/15/2013

   

   

2,659,554

   

   

5,500,000

   

Masco Corp., Note, 5.875%, 7/15/2012

   

   

5,731,385

   

   

   

   

TOTAL

   

   

8,390,939

   

   

   

   

Capital Goods - Diversified Manufacturing--0.4%

   

   

   

   

   

2,500,000

1

Hutchison Whampoa International Ltd., 7.45%, 11/24/2033

   

   

2,339,175

   

   

1,350,000

   

Kennametal, Inc., 7.20%, 6/15/2012

   

   

1,429,812

   

   

1,000,000

   

Tyco International Group, Note, 5.80%, 8/1/2006

   

   

1,046,320

   

   

   

   

TOTAL

   

   

4,815,307

   

Principal
Amount

  

  

Value

   

   

   

   

CORPORATE BONDS--continued

   

   

   

   

   

   

   

Capital Goods - Environmental--1.7%

   

   

   

   

$

500,000

   

Republic Services, Inc., 7.125%, 5/15/2009

   

$

557,230

   

   

600,000

   

Republic Services, Inc., Note, 6.75%, 8/15/2011

   

   

656,670

   

   

7,750,000

   

Waste Management Inc., Sr. Note, 7.125%, 10/1/2007

   

   

8,534,455

   

   

8,210,000

   

Waste Management, Inc., Deb., 8.75%, 5/1/2018

   

   

9,177,631

   

   

   

   

TOTAL

   

   

18,925,986

   

   

   

   

Communications - Media & Cable--3.5%

   

   

   

   

   

615,000

   

British Sky Broadcasting Group PLC, 8.20%, 7/15/2009

   

   

712,779

   

   

5,100,000

   

British Sky Broadcasting Group PLC, Unsecd. Note, 7.30%, 10/15/2006

   

   

5,576,850

   

   

4,500,000

   

CF Cable TV, Inc., Note, 9.125%, 7/15/2007

   

   

4,792,500

   

   

3,000,000

   

Comcast Corp., 6.375%, 1/30/2006

   

   

3,162,810

   

   

1,500,000

2

Comcast Corp., 7.05%, 3/15/2033

   

   

1,561,110

   

   

11,290,000

   

Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013

   

   

12,745,394

   

   

3,500,000

   

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

   

   

3,554,950

   

   

1,000,000

   

Cox Communications, Inc., Unsecd. Note, 5.50%, 10/1/2015

   

   

955,820

   

   

6,250,000

   

Grupo Televisa S.A., Note, 8.00%, 9/13/2011

   

   

6,703,125

   

   

   

   

TOTAL

   

   

39,765,338

   

   

   

   

Communications - Media Noncable--1.0%

   

   

   

   

   

5,000,000

   

Clear Channel Communications, Inc., 6.00%, 11/1/2006

   

   

5,292,300

   

   

6,040,000

   

Reed Elsevier, Inc., Company Guarantee, 6.125%, 8/1/2006

   

   

6,429,520

   

   

   

   

TOTAL

   

   

11,721,820

   

   

   

   

Communications - Telecom Wireless--1.3%

   

   

   

   

   

10,315,000

   

AT&T Wireless Services, Inc., Sr. Note, 7.35%, 3/1/2006

   

   

11,099,249

   

   

2,762,000

   

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

   

   

3,238,445

   

   

   

   

TOTAL

   

   

14,337,694

   

   

   

   

Communications - Telecom Wirelines--3.1%

   

   

   

   

   

8,400,000

   

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

   

   

9,614,136

   

   

1,975,000

   

Citizens Communications Co., 9.00%, 8/15/2031

   

   

1,859,897

   

   

3,000,000

   

Deutsche Telekom International Finance BV, 5.25%, 7/22/2013

   

   

2,926,560

   

   

3,100,000

   

Sprint Capital Corp., Company Guarantee, 7.625%, 1/30/2011

   

   

3,450,362

   

   

2,000,000

   

Sprint Capital Corp., Company Guarantee, 8.75%, 3/15/2032

   

   

2,362,160

   

   

7,690,000

   

Telecom de Puerto Rico, Note, 6.65%, 5/15/2006

   

   

8,174,854

   

   

7,050,000

   

Telefonos de Mexico, Note, 4.50%, 11/19/2008

   

   

6,860,496

   

   

   

   

TOTAL

   

   

35,248,465

   

Principal
Amount

  

  

Value

   

   

   

   

CORPORATE BONDS--continued

   

   

   

   

   

   

   

Consumer Cyclical - Automotive--3.7%

   

   

   

   

$

2,000,000

   

DaimlerChrysler North America Holding Corp., 6.50%, 11/15/2013

   

$

2,026,040

   

   

4,350,000

   

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

   

   

4,150,291

   

   

2,500,000

2

Ford Motor Credit Co., 7.00%, 10/1/2013

   

   

2,516,100

   

   

10,000,000

   

Ford Motor Credit Co., Note, 6.50%, 1/25/2007

   

   

10,493,000

   

   

3,700,000

   

General Motors Acceptance Corp., 4.50%, 7/15/2006

   

   

3,761,309

   

   

6,250,000

   

General Motors Acceptance Corp., 6.875%, 9/15/2011

   

   

6,405,500

   

   

7,375,000

   

General Motors Acceptance Corp., 8.00%, 11/1/2031

   

   

7,453,544

   

   

3,000,000

2

General Motors Corp., Note, 8.375%, 7/15/2033

   

   

3,128,190

   

   

2,100,000

   

General Motors Corp., Note, 9.45%, 11/1/2011

   

   

2,462,208

   

   

   

   

TOTAL

   

   

42,396,182

   

   

   

   

Consumer Cyclical - Entertainment--1.6%

   

   

   

   

   

2,750,000

   

AOL Time Warner, Inc., 5.625%, 5/1/2005

   

   

2,833,902

   

   

4,500,000

   

AOL Time Warner, Inc., Bond, 7.625%, 4/15/2031

   

   

4,863,060

   

   

6,000,000

   

Carnival Corp., 3.75%, 11/15/2007

   

   

5,919,540

   

   

4,020,000

1

International Speedway Corp., 4.20%, 4/15/2009

   

   

3,947,881

   

   

100,000

   

Time Warner, Inc., Company Guarantee, 6.625%, 5/15/2029

   

   

97,399

   

   

   

   

TOTAL

   

   

17,661,782

   

   

   

   

Consumer Cyclical - Retailers--1.9%

   

   

   

   

   

3,150,000

   

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

   

   

3,301,735

   

   

3,900,000

2

Federated Department Stores, Inc., 6.625%, 4/1/2011

   

   

4,239,183

   

   

4,200,000

   

Neiman-Marcus Group, Inc., Sr. Deb., 7.125%, 6/1/2028

   

   

4,497,612

   

   

10,147,000

   

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

   

   

9,690,385

   

   

   

   

TOTAL

   

   

21,728,915

   

   

   

   

Consumer Cyclical - Services--0.7%

   

   

   

   

   

7,475,000

   

Boston University, 7.625%, 7/15/2097

   

   

8,465,213

   

   

   

   

Consumer Non-Cyclical - Consumer Products--0.9%

   

   

   

   

   

9,050,000

   

Alberto-Culver Co., Unsecd. Note, 8.25%, 11/1/2005

   

   

9,744,497

   

   

   

   

Consumer Non-Cyclical - Food/Beverage--0.7%

   

   

   

   

   

2,535,000

   

Anheuser-Busch Cos., Inc., Sr. Note, 7.10%, 6/15/2007

   

   

2,546,560

   

   

4,500,000

   

Kellogg Co., 7.45%, 4/1/2031

   

   

5,172,120

   

   

   

   

TOTAL

   

   

7,718,680

   

   

   

   

Consumer Non-Cyclical - Healthcare--0.4%

   

   

   

   

   

4,750,000

   

UnitedHealth Group, Inc., 7.50%, 11/15/2005

   

   

5,091,810

   

Principal
Amount

  

  

Value

   

   

   

   

CORPORATE BONDS--continued

   

   

   

   

   

   

   

Consumer Non-Cyclical - Pharmaceuticals--0.7%

   

   

   

   

$

2,940,000

2

AstraZeneca PLC, 5.40%, 6/1/2014

   

$

2,986,511

   

   

5,000,000

   

Wyeth, 6.50%, 2/1/2034

   

   

4,756,950

   

   

   

   

TOTAL

   

   

7,743,461

   

   

   

   

Consumer Non-Cyclical - Tobacco--0.3%

   

   

   

   

   

1,375,000

2

Altria Group, Inc., 5.625%, 11/4/2008

   

   

1,351,955

   

   

2,500,000

   

Philip Morris Cos., Inc., Note, 6.375%, 2/1/2006

   

   

2,562,325

   

   

   

   

TOTAL

   

   

3,914,280

   

   

   

   

Energy - Independent--1.6%

   

   

   

   

   

2,500,000

   

Anadarko Petroleum Corp., Unsecd. Note, 7.00%, 10/15/2006

   

   

2,721,425

   

   

2,000,000

   

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

   

   

2,301,220

   

   

2,250,000

   

Norcen Energy Resources, Inc., Deb., 7.375%, 5/15/2006

   

   

2,437,492

   

   

3,900,000

   

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

   

   

4,504,500

   

   

6,400,000

1

Ras Laffan Liquified Natural Gas, 3.437%, 9/15/2009

   

   

6,214,848

   

   

   

   

TOTAL

   

   

18,179,485

   

   

   

   

Energy - Integrated--2.1%

   

   

   

   

   

4,100,000

   

Conoco, Inc., 7.25%, 10/15/2031

   

   

4,634,886

   

   

3,000,000

   

Husky Oil Ltd., Company Guarantee, 8.90%, 8/15/2028

   

   

3,472,020

   

   

450,000

   

Husky Oil Ltd., Deb., 7.55%, 11/15/2016

   

   

510,079

   

   

6,100,000

   

Husky Oil Ltd., Sr. Note, 7.125%, 11/15/2006

   

   

6,485,947

   

   

4,650,000

   

Petro-Canada, Bond, 5.35%, 7/15/2033

   

   

4,028,434

   

   

220,000

   

Petro-Canada, Deb., 7.00%, 11/15/2028

   

   

237,142

   

   

4,150,000

1

Statoil ASA, 5.125%, 4/30/2014

   

   

4,092,481

   

   

   

   

TOTAL

   

   

23,460,989

   

   

   

   

Energy - Oil Field Services--0.0%

   

   

   

   

   

210,000

   

Noble Drilling Corp., Sr. Note, 7.50%, 3/15/2019

   

   

236,053

   

   

   

   

Energy - Refining--0.5%

   

   

   

   

   

2,500,000

   

Sunoco, Inc., Deb., 9.375%, 6/1/2016

   

   

2,793,900

   

   

2,250,000

   

Valero Energy Corp., 7.50%, 4/15/2032

   

   

2,488,387

   

   

   

   

TOTAL

   

   

5,282,287

   

Principal
Amount

  

  

Value

   

   

   

   

CORPORATE BONDS--continued

   

   

   

   

   

   

   

Financial Institution - Banking--5.9%

   

   

   

   

$

4,750,000

   

ABN AMRO Bank NV, Chicago, Sub. Deb., 7.30%, 12/1/2026

   

$

4,897,202

   

   

4,000,000

   

Astoria Financial Corp., Note, 5.75%, 10/15/2012

   

   

4,035,880

   

   

215,000

   

Bank of America Corp., 6.125%, 7/15/2004

   

   

216,385

   

   

6,175,000

   

City National Bank, Sub. Note, 6.375%, 1/15/2008

   

   

6,548,835

   

   

5,350,000

   

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

   

   

5,902,655

   

   

2,750,000

   

Crestar Financial Corp., Sub. Note, 8.75%, 11/15/2004

   

   

2,840,530

   

   

5,740,000

   

FirstBank Puerto Rico, Sub. Note, 7.625%, 12/20/2005

   

   

6,004,327

   

   

1,250,000

   

Household Finance Corp., Note, 6.75%, 5/15/2011

   

   

1,367,063

   

   

2,300,000

   

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

   

   

2,432,986

   

   

3,500,000

   

Hudson United Bancorp, 7.00%, 5/15/2012

   

   

3,791,410

   

   

10,626,209

1

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

   

   

11,944,603

   

   

3,800,000

1

Swedbank, Sub., 7.50%, 11/29/2049

   

   

4,130,444

   

   

5,200,000

   

Union Planters Corp., 4.375%, 12/1/2010

   

   

5,071,872

   

   

2,400,000

   

Washington Mutual Bank FA, Sub. Note, 6.875%, 6/15/2011

   

   

2,667,864

   

   

2,000,000

   

Washington Mutual Finance Corp., Sr. Note, 8.25%, 6/15/2005

   

   

2,119,300

   

   

3,500,000

   

Washington Mutual Inc., Sub. Note, 7.875%, 9/1/2004

   

   

3,551,030

   

   

   

   

TOTAL

   

   

67,522,386

   

   

   

   

Financial Institution - Brokerage--2.2%

   

   

   

   

   

6,995,000

   

Amvescap PLC, Sr. Note, 6.60%, 5/15/2005

   

   

7,265,637

   

   

4,255,000

1

FMR Corp., Bond, 7.57%, 6/15/2029

   

   

4,935,672

   

   

1,000,000

   

Franklin Resources, Inc., 3.70%, 4/15/2008

   

   

983,110

   

   

2,900,000

   

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

   

   

2,737,397

   

   

190,000

   

Goldman Sachs Group, Inc., Note, Series MTNB, 7.35%, 10/1/2009

   

   

213,737

   

   

2,100,000

   

Goldman Sachs Group, Inc., Sub. Note, 6.345%, 2/15/2034

   

   

1,982,337

   

   

185,000

   

Lehman Brothers Holdings, Inc., Note, 6.625%, 2/5/2006

   

   

196,844

   

   

5,750,000

   

Waddell & Reed Financial, Inc., 7.50%, 1/18/2006

   

   

6,157,848

   

   

   

   

TOTAL

   

   

24,472,582

   

   

   

   

Financial Institution - Finance Noncaptive--0.8%

   

   

   

   

   

4,050,000

   

Capital One Financial Corp., Note, 7.125%, 8/1/2008

   

   

4,350,145

   

   

115,000

   

Heller Financial, Inc., Note, 7.375%, 11/1/2009

   

   

130,432

   

   

215,000

   

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

   

   

222,452

   

   

3,250,000

   

Susa Partnership LP, 8.20%, 6/1/2017

   

   

4,029,968

   

   

   

   

TOTAL

   

   

8,732,997

   

Principal
Amount

  

  

Value

   

   

   

   

CORPORATE BONDS--continued

   

   

   

   

   

   

   

Financial Institution - Insurance - Life--2.9%

   

   

   

   

$

4,300,000

   

AXA-UAP, Sub. Note, 8.60%, 12/15/2030

   

$

5,252,278

   

   

450,000

   

American General Corp., Note, 7.75%, 4/1/2005

   

   

470,880

   

   

2,950,000

   

Delphi Financial Group, Inc., 9.31%, 3/25/2027

   

   

2,287,371

   

   

7,800,000

1

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

   

   

8,124,012

   

   

4,000,000

1

Pacific LifeCorp., Bond, 6.60%, 9/15/2033

   

   

4,111,680

   

   

1,225,000

1

Principal Financial Group, 6.125%, 10/15/2033

   

   

1,185,077

   

   

6,500,000

1

Reinsurance Group of America, Sr. Note, 7.25%, 4/1/2006

   

   

6,928,415

   

   

525,000

   

Transamerica Corp., Note, 6.75%, 11/15/2006

   

   

562,664

   

   

3,950,000

1

Union Central Life Insurance Co., Note, 8.20%, 11/1/2026

   

   

4,039,586

   

   

   

   

TOTAL

   

   

32,961,963

   

   

   

   

Financial Institution - Insurance - P&C--2.4%

   

   

   

   

   

250,000

   

Allstate Corp., 6.125%, 12/15/2032

   

   

246,950

   

   

3,900,000

1,2

Liberty Mutual Insurance Co., Sub. Note, 8.20%, 5/4/2007

   

   

4,371,588

   

   

7,300,000

1

MBIA Global Funding LLC, 2.875%, 11/30/2006

   

   

7,217,218

   

   

3,950,000

   

Marsh & McLennan Cos., Inc., Sr. Note, 7.125%, 6/15/2009

   

   

4,421,472

   

   

3,000,000

1

Oil Insurance Ltd., Sub. Deb., 5.15%, 8/15/2033

   

   

3,006,180

   

   

25,000

   

Progressive Corp., OH, Unsecd. Note, 7.30%, 6/1/2006

   

   

26,998

   

   

1,000,000

1

USF&G Corp., 8.312%, 7/1/2046

   

   

1,114,640

   

   

5,750,000

   

USF&G Corp., Company Guarantee, 8.47%, 1/10/2027

   

   

6,309,993

   

   

   

   

TOTAL

   

   

26,715,039

   

   

   

   

Financial Institution - REITs--1.0%

   

   

   

   

   

7,000,000

   

EOP Operating LP, 8.375%, 3/15/2006

   

   

7,637,910

   

   

185,000

   

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

   

   

204,508

   

   

3,000,000

   

Rouse Co., 5.375%, 11/26/2013

   

   

2,913,180

   

   

430,000

   

Simon Property Group, Inc., 6.35%, 8/28/2012

   

   

450,610

   

   

   

   

TOTAL

   

   

11,206,208

   

   

   

   

Foreign-Local-Govt--0.9%

   

   

   

   

   

9,000,000

   

Hydro Quebec, Sr. Deb., 6.30%, 5/11/2011

   

   

9,891,450

   

   

   

   

Sovereign--1.4%

   

   

   

   

   

3,500,000

   

Sweden, Government of, Deb., 10.25%, 11/1/2015

   

   

4,424,105

   

   

6,500,000

2

United Mexican States, 6.625%, 3/3/2015

   

   

6,532,500

   

   

4,800,000

   

United Mexican States, 7.50%, 4/8/2033

   

   

4,702,800

   

   

   

   

TOTAL

   

   

15,659,405

   

Principal
Amount

  

  

Value

   

   

   

   

CORPORATE BONDS--continued

   

   

   

   

   

   

   

Technology--1.0%

   

   

   

   

$

1,100,000

   

Dell Computer Corp., Deb., 7.10%, 4/15/2028

   

$

1,221,363

   

   

1,965,000

   

IBM Corp., Deb., 8.375%, 11/1/2019

   

   

2,462,007

   

   

1,400,000

   

SunGard Data Systems, Inc., 4.875%, 1/15/2014

   

   

1,322,748

   

   

6,000,000

   

Unisys Corp., 8.125%, 6/1/2006

   

   

6,435,000

   

   

   

   

TOTAL

   

   

11,441,118

   

   

   

   

Transportation - Airlines--0.7%

   

   

   

   

   

222,318

   

Continental Airlines, Inc., Pass Thru Cert., 7.73%, 3/15/2011

   

   

191,194

   

   

4,000,000

2

Delta Air Lines, Inc., Note, 8.30%, 12/15/2029

   

   

1,660,000

   

   

2,500,000

   

Delta Air Lines, Inc., Pass Thru Cert., 7.92%, 11/18/2010

   

   

1,687,500

   

   

2,187,087

   

Northwest Airlines Corp., Equip. Trust, 8.072%, 10/1/2019

   

   

2,353,852

   

   

207,839

   

Northwest Airlines Corp., Pass Thru Cert., 7.575%, 3/1/2019

   

   

207,320

   

   

1,995,000

   

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

   

   

2,096,905

   

   

   

   

TOTAL

   

   

8,196,771

   

   

   

   

Transportation - Railroads--0.6%

   

   

   

   

   

2,745,379

   

Burlington Northern Santa Fe, Pass Thru Cert., 7.57%, 1/2/2021

   

   

3,182,334

   

   

3,150,000

   

Canadian Pacific RR, 7.125%, 10/15/2031

   

   

3,545,010

   

   

   

   

TOTAL

   

   

6,727,344

   

   

   

   

Transportation - Services--0.6%

   

   

   

   

   

7,300,000

1

FedEx Corp., Unsecd. Note, 2.65%, 4/1/2007

   

   

7,111,879

   

   

   

   

Utility - Electric--3.7%

   

   

   

   

   

8,930,000

   

American Electric Power Co., Inc., Note, 6.125%, 5/15/2006

   

   

9,432,670

   

   

55,000

   

Baltimore Gas & Electric Co., 1st Ref. Mtg., 7.50%, 1/15/2007

   

   

60,535

   

   

5,150,000

   

Enersis S.A., Note, 7.40%, 12/1/2016

   

   

4,686,500

   

   

3,048,323

   

Homer City Funding, Sr. Secd. Note, 8.734%, 10/1/2026

   

   

3,246,463

   

   

5,500,000

1

Israel Electric Corp. Ltd., Sr. Note, 7.875%, 12/15/2026

   

   

5,715,215

   

   

3,900,000

   

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

   

   

4,193,553

   

   

1,950,000

   

Oncor, Inc., Deb., 7.00%, 9/1/2022

   

   

2,102,588

   

   

1,000,000

   

PSEG Power LLC, Company Guarantee, 7.75%, 4/15/2011

   

   

1,135,700

   

   

2,110,000

   

Pacific Gas & Electric Co., 6.05%, 3/1/2034

   

   

1,978,927

   

   

1,925,000

   

Pacific Gas & Electric Co., Unsecd. Note, 4.20%, 3/1/2011

   

   

1,833,659

   

   

4,000,000

   

Public Service Electric & Gas Co., 4.00%, 11/1/2008

   

   

3,963,440

   

   

3,500,000

1

Tenaga Nasional Berhad, Deb., 7.50%, 1/15/2096

   

   

3,177,160

   

   

   

   

TOTAL

   

   

41,526,410

   

   

   

   

TOTAL CORPORATE BONDS (IDENTIFIED COST $639,528,517)

   

   

652,407,489

   

Principal
Amount

  

  

Value

   

   

   

   

MORTGAGE-BACKED SECURITIES--0.1%

   

   

   

   

$

30,940

   

Federal Home Loan Mortgage Corp., Pool C00702, 6.00%, 1/1/2029

   

$

31,607

   

   

39,726

   

Federal Home Loan Mortgage Corp., Pool C00748, 6.00%, 4/1/2029

   

   

40,583

   

   

10,028

   

Federal Home Loan Mortgage Corp., Pool C20263, 6.00%, 1/1/2029

   

   

10,244

   

   

25,382

   

Federal Home Loan Mortgage Corp., Pool C25621, 6.50%, 5/1/2029

   

   

26,350

   

   

60,560

   

Federal Home Loan Mortgage Corp., Pool G10493, 6.00%, 4/1/2011

   

   

63,304

   

   

33,686

   

Federal National Mortgage Association, Pool 313324, 9.00%, 6/1/2017

   

   

37,339

   

   

46,158

   

Federal National Mortgage Association, Pool 323159, 7.50%, 4/1/2028

   

   

49,360

   

   

27,254

   

Federal National Mortgage Association, Pool 421223, 7.00%, 5/1/2028

   

   

28,761

   

   

45,413

   

Federal National Mortgage Association, Pool 429707, 6.50%, 5/1/2013

   

   

48,024

   

   

35,651

   

Federal National Mortgage Association, Pool 430232, 7.00%, 8/1/2028

   

   

37,578

   

   

133,783

   

Federal National Mortgage Association, Pool 439947, 6.50%, 11/1/2028

   

   

139,052

   

   

86,817

   

Federal National Mortgage Association, Pool 489867, 6.50%, 3/1/2029

   

   

90,154

   

   

30,157

   

Government National Mortgage Association, Pool 449491, 7.50%, 12/15/2027

   

   

32,325

   

   

13,494

   

Government National Mortgage Association, Pool 486467, 7.00%, 8/15/2028

   

   

14,303

   

   

54,052

   

Government National Mortgage Association, Pool 780339, 8.00%, 12/15/2023

   

   

59,322

   

   

33,426

   

Government National Mortgage Association, Pool 780340, 9.00%, 11/15/2017

   

   

37,385

   

   

30,700

   

Government National Mortgage Association, Pool 780373, 7.00%, 12/15/2023

   

   

32,743

   

   

   

   

TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $741,038)

   

   

778,434

   

   

   

   

MUNICIPALS--3.5%

   

   

   

   

   

5,630,000

   

Atlanta & Fulton County, GA Recreation Authority, Taxable Revenue Bonds, Series 1997, 7.00% Bonds (Downtown Arena Project)/(FSA INS), 12/1/2028

   

   

6,112,322

   

   

3,000,000

   

Harvard University, Revenue Bonds, 8.125% Bonds, 4/15/2007

   

   

3,387,150

   

   

6,050,000

   

Kansas City, MO Redevelopment Authority, 7.65% Bonds (FSA LOC), 11/1/2018

   

   

6,559,410

   

   

3,090,000

   

McKeesport, PA, Taxable G.O. Series B 1997, 7.30% Bonds (MBIA Insurance Corp. INS), 3/1/2020

   

   

3,239,865

   

   

3,000,000

   

Miami Florida Revenue Pension Obligation, 7.20% Bonds (AMBAC LOC), 12/1/2025

   

   

3,238,920

   

   

4,675,000

   

Pittsburgh, PA Urban Redevelopment Authority, 8.01% Bonds (Alcoa, Inc.), 6/1/2015

   

   

4,946,992

   

   

2,635,000

   

Pittsburgh, PA Urban Redevelopment Authority, 9.07% Bonds (CGIC GTD), 9/1/2014

   

   

2,867,960

   

   

2,200,000

   

Southeastern, PA Transportation Authority, (Series B), 8.75% Bonds (FGIC GTD), 3/1/2020

   

   

2,308,702

   

   

4,200,000

   

St. Johns County, FL Convention Center, Taxable Municipal Revenue Bonds, 8.00% Bonds (FSA INS), 1/1/2026

   

   

4,481,526

   

   

2,080,000

   

Tampa, FL Sports Authority, 8.02% Bonds (MBIA Insurance Corp. GTD), 10/1/2026

   

   

2,538,099

   

   

   

   

TOTAL MUNICIPALS (IDENTIFIED COST $37,150,867)

   

   

39,680,946

   

Shares or
Principal
Amount

  

  

Value

   

   

   

   

COMMON STOCKS--0.0%

   

   

   

   

   

   

   

Utility - Electric--0.0%

   

   

   

   

   

1,761

3

NRG Energy, Inc. (IDENTIFIED COST $38,566)

   

$

37,227

   

   

   

   

PREFERRED STOCKS--1.6%

   

   

   

   

   

   

   

Communications - Telecom Internet--0.0%

   

   

   

   

   

1,315

   

Global Crossing Holdings Ltd., PIK Pfd., 10.50%, Annual Dividend

   

   

0

   

   

   

   

Financial Institution - Banking--0.7%

   

   

   

   

   

142,000

   

Citigroup, Inc., Cumulative Pfd., Series F

   

   

7,348,500

   

   

   

   

Financial Institution - Brokerage--0.5%

   

   

   

   

   

130,000

   

Lehman Brothers Holdings, Inc., Pfd.

   

   

6,170,944

   

   

   

   

Financial Institution - REITs--0.4%

   

   

   

   

   

80,000

2

Prologis Trust, Cumulative REIT Perpetual Pfd. Stock, Series C

   

   

4,710,000

   

   

   

   

TOTAL PREFERRED STOCKS (IDENTIFIED COST $16,132,747)

   

   

18,229,444

   

   

   

   

ASSET-BACKED SECURITIES--0.6%

   

   

   

   

   

   

   

Financial Institution - Brokerage--0.3%

   

   

   

   

$

2,828,736

1

World Financial, Class B, 6.91%, 9/1/2013

   

   

3,063,860

   

   

   

   

Home Equity Loan--0.2%

   

   

   

   

   

2,430,662

1

125 Home Loan Owner Trust 1998-1A, Class B1, 9.26%, 2/15/2029

   

   

2,465,979

   

   

   

   

Manufactured Housing--0.0%

   

   

   

   

   

808,143

   

Green Tree Financial Corp. 1999-5, Class B1, 9.20%, 4/1/2031

   

   

52,780

   

   

   

   

Structured Product (Abs)--0.1%

   

   

   

   

   

773,865

   

Green Tree Financial Corp. 1992-2, Class B, 9.15%, 1/15/2018

   

   

639,932

   

   

   

   

TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $6,869,201)

   

   

6,222,551

   

   

   

   

COLLATERALIZED MORTGAGE OBLIGATIONS--0.0%

   

   

   

   

   

   

   

Commercial Mortgage--0.0%

   

   

   

   

   

325,000

   

Morgan Stanley Capital, Inc., Class A3, 6.48%, 6/3/2030

   

   

348,829

   

   

   

   

Non-Agency Mortgage--0.0%

   

   

   

   

   

344,628

1

SMFC Trust Asset-Backed Certificates, Series 1997-A, Class 4, 3.59421%, 1/28/2025

   

   

264,178

   

   

   

   

TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $644,551)

   

   

613,007

   

Principal
Amount
or Shares

  

  

Value

   

   

   

   

U.S. TREASURY--0.6%

   

   

   

   

$

5,780,000

2

United States Treasury Bond, 12.75%, 11/15/2010 (IDENTIFIED COST $6,836,989)

   

$

6,642,492

   

   

   

   

MUTUAL FUNDS--37.8%4

   

   

   

   

   

168,677

   

Federated Mortgage Core Portfolio

   

   

1,683,395

   

   

56,798,937

   

High Yield Bond Portfolio

   

   

383,960,816

   

   

12,886,061

   

Prime Value Obligations Fund, IS Shares

   

   

12,886,061

   

   

29,596,712

   

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

   

   

29,596,712

   

   

   

   

TOTAL MUTUAL FUNDS (IDENTIFIED COST $490,142,954)

   

   

428,126,984

   

   

   

   

TOTAL INVESTMENTS--101.7%
(IDENTIFIED COST $1,198,085,430)5

   

$

1,152,738,574

   

   

   

   

OTHER ASSETS AND LIABILITIES - NET--(1.7)%

   

   

(19,120,651

)

   

   

   

TOTAL NET ASSETS--100%

   

   

1,133,617,923

   

1 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the Fund's Board of Directors. At May 31, 2004, these securities amounted to $104,207,021 which represents 9.2% of total net assets.

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

3 Non-income producing

4 Affiliated companies.

5 The cost of investments for federal tax purposes amounts to $1,201,653,271.

Note: The categories of investments are shown as a percentage of total net assets at May 31, 2004.

The following acronyms are used throughout this portfolio:

AMBAC

--American Municipal Bond Assurance Corporation

CGIC

--Capital Guaranty Insurance Corporation

FGIC

--Financial Guaranty Insurance Company

FSA

--Financial Security Assurance

GTD

--Guaranteed

INS

--Insured

LOC

--Letter of Credit

PIK

--Payment in Kind

REIT

--Real Estate Investment Trust

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

May 31, 2004 (unaudited)

Assets:

  

   

   

  

   

   

   

Total investments in securities, at value including $428,126,984 of investments in affiliated issuers (Note 5) and $29,001,154 of securities loaned (identified cost $1,198,085,430)

   

   

   

   

$

1,152,738,574

   

Cash

   

   

   

   

   

273,919

   

Income receivable

   

   

   

   

   

12,456,125

   

Receivable for shares sold

   

   

   

   

   

1,886,250

   

Prepaid expense

   

   

   

   

   

43,590

   

TOTAL ASSETS

   

   

   

   

   

1,167,398,458

   

Liabilities:

   

   

   

   

   

   

   

Payable for shares redeemed

   

$

1,791,091

   

   

   

   

Income distribution payable

   

   

1,773,711

   

   

   

   

Payable on collateral due to broker

   

   

29,596,712

   

   

   

   

Payable for transfer and dividend disbursing agent fees and expenses (Note 5)

   

   

61,329

   

   

   

   

Payable for distribution services fee (Note 5)

   

   

335,696

   

   

   

   

Payable for shareholder services fee (Note 5)

   

   

221,996

   

   

   

   

TOTAL LIABILITIES

   

   

   

   

   

33,780,535

   

Net assets for 127,249,632 shares outstanding

   

   

   

   

$

1,133,617,923

   

Net Assets Consist of:

   

   

   

   

   

   

   

Paid in capital

   

   

   

   

$

1,236,917,915

   

Net unrealized depreciation of investments

   

   

   

   

   

(45,346,855

)

Accumulated net realized loss on investments

   

   

   

   

   

(53,980,081

)

Distributions in excess of net investment income

   

   

   

   

   

(3,973,056

)

TOTAL NET ASSETS

   

   

   

   

$

1,133,617,923

   

Net Asset Value, Offering Price and Redemption Proceeds Per Share

   

   

   

   

   

   

   

Class A Shares:

   

   

   

   

   

   

   

Net asset value per share ($391,706,177 ÷ 44,066,422 shares outstanding)

   

   

   

   

   

$8.89

   

Offering price per share (100/95.50 of $8.89)1

   

   

   

   

   

$9.31

   

Redemption proceeds per share

   

   

   

   

   

$8.89

   

Class B Shares:

   

   

   

   

   

   

   

Net asset value per share ($434,946,121 ÷ 48,784,427 shares outstanding)

   

   

   

   

   

$8.92

   

Offering price per share

   

   

   

   

   

$8.92

   

Redemption proceeds per share (94.50/100 of $8.92)1

   

   

   

   

   

$8.43

   

Class C Shares:

   

   

   

   

   

   

   

Net asset value per share ($88,204,882 ÷ 9,890,334 shares outstanding)

   

   

   

   

   

$8.92

   

Offering price per share (100/99.00 of $8.92)1

   

   

   

   

   

$9.01

   

Redemption proceeds per share (99.00/100 of $8.92)1

   

   

   

   

   

$8.83

   

Class F Shares:

   

   

   

   

   

   

   

Net asset value per share ($218,760,743 ÷ 24,508,449 shares outstanding)

   

   

   

   

   

$8.93

   

Offering price per share (100/99.00 of $8.93)1

   

   

   

   

   

$9.02

   

Redemption proceeds per share (99.00/100 of $8.93)1

   

   

   

   

   

$8.84

   

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

See Notes which are an integral part of the Financial Statements

Statement of Operations

Six Months Ended May 31, 2004 (unaudited)

Investment Income:

  

   

   

   

  

   

   

   

  

   

   

   

Dividends (including $17,592,128 received from affiliated issuers (Note 5))

   

   

   

   

   

   

   

   

   

$

18,173,161

   

Interest (including income on securities loaned of $8,609)

   

   

   

   

   

   

   

   

   

   

23,455,872

   

TOTAL INCOME

   

   

   

   

   

   

   

   

   

   

41,629,033

   

Expenses:

   

   

   

   

   

   

   

   

   

   

   

   

Investment adviser fee (Note 5)

   

   

   

   

   

$

4,480,427

   

   

   

   

   

Administrative personnel and services fee (Note 5)

   

   

   

   

   

   

477,315

   

   

   

   

   

Custodian fees

   

   

   

   

   

   

27,394

   

   

   

   

   

Transfer and dividend disbursing agent fees and expenses (Note 5)

   

   

   

   

   

   

594,232

   

   

   

   

   

Directors'/Trustees' fees

   

   

   

   

   

   

9,482

   

   

   

   

   

Auditing fees

   

   

   

   

   

   

9,067

   

   

   

   

   

Legal fees

   

   

   

   

   

   

2,773

   

   

   

   

   

Portfolio accounting fees (Note 5)

   

   

   

   

   

   

83,747

   

   

   

   

   

Distribution services fee--Class B Shares (Note 5)

   

   

   

   

   

   

1,751,464

   

   

   

   

   

Distribution services fee--Class C Shares (Note 5)

   

   

   

   

   

   

348,504

   

   

   

   

   

Shareholder services fee--Class A Shares (Note 5)

   

   

   

   

   

   

497,468

   

   

   

   

   

Shareholder services fee--Class B Shares (Note 5)

   

   

   

   

   

   

583,821

   

   

   

   

   

Shareholder services fee--Class C Shares (Note 5)

   

   

   

   

   

   

116,168

   

   

   

   

   

Shareholder services fee--Class F Shares (Note 5)

   

   

   

   

   

   

296,018

   

   

   

   

   

Share registration costs

   

   

   

   

   

   

49,706

   

   

   

   

   

Printing and postage

   

   

   

   

   

   

43,913

   

   

   

   

   

Insurance premiums

   

   

   

   

   

   

4,866

   

   

   

   

   

Taxes

   

   

   

   

   

   

40,931

   

   

   

   

   

Miscellaneous

   

   

   

   

   

   

7,709

   

   

   

   

   

TOTAL EXPENSES

   

   

   

   

   

   

9,425,005

   

   

   

   

   

Waivers and Reimbursement (Note 5):

   

   

   

   

   

   

   

   

   

   

   

   

Waiver/reimbursement of investment adviser fee

   

$

(694,316

)

   

   

   

   

   

   

   

   

Waiver of administrative personnel and services fee

   

   

(22,103

)

   

   

   

   

   

   

   

   

Waiver of transfer and dividend disbursing agent fees and expenses

   

   

(8,051

)

   

   

   

   

   

   

   

   

Waiver of shareholder services fee--Class A Shares

   

   

(99,494

)

   

   

   

   

   

   

   

   

Waiver of shareholder services fee--Class F Shares

   

   

(23,682

)

   

   

   

   

   

   

   

   

TOTAL WAIVERS AND REIMBURSEMENT

   

   

   

   

   

   

(847,646

)

   

   

   

   

Net expenses

   

   

   

   

   

   

   

   

   

   

8,577,359

   

Net investment income

   

   

   

   

   

   

   

   

   

   

33,051,674

   

Realized and Unrealized Gain (Loss) on Investments:

   

   

   

   

   

   

   

   

   

   

   

   

Net realized gain on investments (including realized gain of $4,161,795 on sales of investments in affiliated issuers) (Note 5)

   

   

   

   

   

   

   

   

   

   

10,692,272

   

Net change in unrealized depreciation of investments

   

   

   

   

   

   

   

   

   

   

(28,991,899

)

Net realized and unrealized loss on investments

   

   

   

   

   

   

   

   

   

   

(18,299,627

)

Change in net assets resulting from operations

   

   

   

   

   

   

   

   

   

$

14,752,047

   

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

 

   

  

Six Months
Ended
(unaudited)
5/31/2004

   

  

Year Ended
11/30/2003

   

Increase (Decrease) in Net Assets

   

   

   

   

   

   

   

   

Operations:

   

   

   

   

   

   

   

   

Net investment income

   

$

33,051,674

   

   

$

69,986,776

   

Net realized gain (loss) on investments

   

   

10,692,272

   

   

   

(1,057,077

)

Net change in unrealized appreciation/depreciation of investments

   

   

(28,991,899

)

   

   

75,237,380

   

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

   

   

14,752,047

   

   

   

144,167,079

   

Distributions to Shareholders:

   

   

   

   

   

   

   

   

Distributions from net investment income

   

   

   

   

   

   

   

   

Class A Shares

   

   

(12,249,168

)

   

   

(23,736,571

)

Class B Shares

   

   

(12,317,403

)

   

   

(26,735,648

)

Class C Shares

   

   

(2,459,130

)

   

   

(4,914,465

)

Class F Shares

   

   

(7,154,939

)

   

   

(16,521,769

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

   

   

(34,180,640

)

   

   

(71,908,453

)

Share Transactions:

   

   

   

   

   

   

   

   

Proceeds from sale of shares

   

   

144,001,492

   

   

   

479,778,364

   

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

   

   

22,957,005

   

   

   

46,129,594

   

Cost of shares redeemed

   

   

(209,309,751

)

   

   

(478,841,519

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

   

   

(42,351,254

)

   

   

47,066,439

   

Change in net assets

   

   

(61,779,847

)

   

   

119,325,065

   

Net Assets:

   

   

   

   

   

   

   

   

Beginning of period

   

   

1,195,397,770

   

   

   

1,076,072,705

   

End of period (including distributions in excess of net investment income of $(3,973,056) and $(2,844,090), respectively)

   

$

1,133,617,923

   

   

$

1,195,397,770

   

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

May 31, 2004 (unaudited)

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 portfolio. The financial statements included herein are those of the Federated Bond Fund (the "Fund"), a diversified portfolio. The Fund offers four classes of shares: Class A, Class B, Class C and Class F Shares. The investment objective of the Fund is to provide as high a 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

U.S. government securities, listed corporate bonds, other fixed income and asset backed securities, and unlisted securities and private placement securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. Listed equity securities are valued at the last sale price or official closing price reported on a national securities exchange. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Directors (the "Directors").

Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund may invest in Federated Core Trust, (the "Core Trust") which is independently 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 series of Core Trust, is to seek high current income by investing primarily in a diversified portfolio of lower rated fixed income securities. Federated receives no advisory or administrative fees on behalf of 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 received. Additional information regarding High Yield Bond Portfolio is available upon request.

Repurchase Agreements

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

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

Investment Income, Expenses and Distributions

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

Premium and Discount Amortization/Paydown Gains and Losses

All premiums and discounts 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 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.

Securities Lending

The Fund participates in a securities lending program providing for the lending of corporate bonds, equity and government securities to qualified brokers. Collateral for securities loaned is invested in an affiliated money market fund. Collateral is maintained at a minimum level of 102% of the market value 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 May 31, 2004, securities subject to this type of arrangement and related collateral were as follows:

Market Value of
Securities Loaned

  

Market Value
of Collateral

$29,001,154

 

$29,596,712

Restricted Securities

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

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.

3. CAPITAL STOCK

At May 31, 2004, par value shares ($0.001 per share) authorized were as follows:

Share Class Name

  

Number of Par Value
Capital Stock Authorized

Class A Shares

 

500,000,000

Class B Shares

 

500,000,000

Class C Shares

 

500,000,000

Class F Shares

 

500,000,000

TOTAL

 

2,000,000,000

Transactions in capital stock were as follows:

  

Six Months Ended
5/31/2004

  

Year Ended
11/30/2003

Class A Shares:

  

Shares

  

Amount

  

Shares

  

Amount

Shares sold

   

7,977,284

   

   

$

73,148,453

   

   

30,050,813

   

   

$

266,790,031

   

Shares issued to shareholders in payment of distributions declared


1,001,232



   

9,124,899



1,925,704



   

17,078,489


Shares redeemed

 

(6,670,787

)

   

   

(60,565,650

)

   

(27,860,864

)

   

   

(248,488,490

)

NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS

   

2,307,729

   



$

21,707,702



4,115,653




$

35,380,030


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Six Months Ended
5/31/2004

Year Ended
11/30/2003

Class B Shares:

  

Shares

Amount

Shares

Amount

Shares sold

   

3,023,279

   

   

$

27,753,614

   

   

13,963,934

   

   

$

123,964,450

   

Shares issued to shareholders in payment of distributions declared


837,908

   


   

7,664,107

   


1,760,692




15,654,859


Shares redeemed

 

(8,041,906

)

   

   

(73,562,189

)

   

(12,841,918

)

   

   

(114,266,784

)

NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS

   

(4,180,719

)



$

(38,144,468

)


2,882,708




$

25,352,525


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Six Months Ended
5/31/2004

Year Ended
11/30/2003

Class C Shares:

  

Shares

Amount

Shares

Amount

Shares sold

   

1,155,303

   

   

$

10,619,700

   

   

4,020,143

   

   

$

35,913,478

   

Shares issued to shareholders in payment of distributions declared


137,186

   



1,255,022

   


268,357



   

2,388,399


Shares redeemed

 

(1,539,087

)

   

   

(14,058,323

)

   

(3,226,312

)

   

   

(28,778,804

)

NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS

   

(246,598

)



$

(2,183,601

)


1,062,188




$

9,523,073


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Six Months Ended
5/31/2004

Year Ended
11/30/2003

Class F Shares:

  

Shares

Amount

Shares

Amount

Shares sold

   

3,521,917

   

   

$

32,479,725

   

   

5,979,184

   

   

$

53,110,405

   

Shares issued to shareholders in payment of distributions declared


536,548




4,912,977



1,237,468




11,007,847


Shares redeemed

 

(6,661,282

)

   

   

(61,123,589

)

   

(9,785,062

)

   

   

(87,307,441

)

NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS


(2,602,817

)



$

(23,730,887

)


(2,568,410

)



$

(23,189,189

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS


(4,722,405

)



$

(42,351,254

)


5,492,139




$

47,066,439

   

4. FEDERAL TAX INFORMATION

At May 31, 2004, the cost of investments for federal tax purposes was $1,201,653,271. The net unrealized depreciation of investments for federal tax purposes was $48,914,697. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $28,560,254 and net unrealized depreciation from investments for those securities having an excess of cost over value of $77,474,951.

At November 30, 2003, the Fund had a capital loss carryforward of $61,163,647 which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:

Expiration Year

  

Expiration Amount

2004

 

$  1,159,442

2005

 

$  1,501,483

2006

 

$ 10,134,280

2007

 

$  27,803,544

2008

 

$  2,000,841

2010

 

$ 15,739,984

2011

 

$  2,824,073

As a result of the tax-free transfer of assets from IAI Bond Fund to the Fund, certain capital loss carryforwards listed above may be limited.

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% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.

Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in other funds, which are managed by the Adviser, or an affiliate of the Adviser. The Adviser has agreed to reimburse certain investment adviser fees as a result of these transactions. Income distributions earned from investments in these funds are recorded as income in the accompanying financial statements and are listed below.

High Yield Bond Portfolio

  

$

17,464,418

Federated Mortgage Core Portfolio

  

$

74,974

Prime Value Obligations Fund

  

$

52,736

Administrative Fee

Federated Administrative Services (FAS), under the Administrative Services Agreement provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of all Federated funds as specified below:

Maximum Administrative Fee

  

Average Aggregate Daily Net Assets
of the Federated Funds

0.150%

 

on the first $5 billion

0.125%

 

on the next $5 billion

0.100%

 

on the next $10 billion

0.075%

 

on assets in excess of $20 billion

The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of shares. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.

Distribution Services Fee

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A, Class B 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%

For the six months ended May 31, 2004, Class A Shares did not incur a distribution services fee.

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.

Sales Charges

For the six months ended May 31, 2004, FSC retained $101,525 in sales charges from the sale of Class A Shares. FSC also retained $1,304 of contingent deferred sales charges relating to redemptions of Class C Shares and $511 relating to redemptions of Class F Shares. See "What Do Shares Cost?" in the Prospectus.

Shareholder Services Fee

Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares, Class C Shares and Class F Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion.

Transfer and Dividend Disbursing Agent Fees and Expenses

Federated Services Company (FServ) through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion.

Portfolio Accounting Fees

Prior to January 1, 2004, FServ maintained the Fund's accounting records for which it received a fee. The fee was based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. The fee paid to FServ during the reporting period was $13,983 after voluntary waiver, if applicable.

General

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

6. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended May 31, 2004, were as follows:

Purchases

  

$

179,441,222

Sales

 

$

221,602,433

7. LEGAL PROCEEDINGS

In October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated ("Funds"), were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations have been filed, and others may be filed in the future. Although Federated does 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 related regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

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.

VOTING PROXIES ON FUND PORTFOLIO SECURITIES

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. This information is also available from the EDGAR database on the SEC's Internet site at http://www.sec.gov.

IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY

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

Federated Investors
World-Class Investment Manager

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

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

Federated Securities Corp., Distributor

Cusip 31420F103
Cusip 31420F202
Cusip 31420F301
Cusip 31420F400

Federated is a registered mark of Federated Investors, Inc. 2004 ©Federated Investors, Inc.

2072302 (7/04)

 


Item 2.     Code of Ethics

            Not Applicable

Item 3.     Audit Committee Financial Expert

            Not Applicable

Item 4.     Principal Accountant Fees and Services

            Not Applicable

Item 5.     Audit Committee of Listed Registrants

            Not Applicable

Item 6.     Schedule of Investments

            Not Applicable

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

            Not Applicable

Item 8.     Purchases of Equity Securities by Closed-End Management
            Investment Company and Affiliated Purchasers

            Not Applicable

Item 9.     Submission of Matters to a Vote of Security Holders

            Not Applicable

Item 10.    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  half  year  (the  registrant's  second  half year in the case of an
     annual report) that have materially  affected,  or are reasonably likely to
     materially  affect,  the  registrant's   internal  control  over  financial
     reporting.

Item 11.    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 J. Thomas, Principal Financial Officer
Date        July 22, 2004


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


By          /S/ J. Christopher Donahue, Principal Executive Officer
Date        July 22, 2004


By          /S/ Richard J. Thomas, Principal Financial Officer
Date        July 22, 2004