United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of Registered Management Investment Companies
811-21822
(Investment Company Act File Number)
Federated Managed Pool Series
______________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(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: 12/31/2012
Date of Reporting Period: Six months ended 06/30/2012
Item 1. Reports to Stockholders
| | Semi-Annual Shareholder Report |
| | June 30, 2012 |
|
Federated Corporate Bond Strategy Portfolio
A Portfolio of Federated Managed Pool Series
Not FDIC Insured
May Lose Value
No Bank Guarantee
Portfolio of Investments Summary Table (unaudited)
At June 30, 2012, the Fund's portfolio composition1 was as follows:
Security Type | Percentage of Total Net Assets |
Corporate Debt Securities | 92.4% |
Foreign Government Debt Securities | 5.5% |
Municipal Security | 0.4% |
Derivative Contracts2,3 | (0.0)% |
Cash Equivalents4 | 0.4% |
Other Assets and Liabilities — Net5 | 1.3% |
TOTAL | 100.0% |
1 | See the Fund's Prospectus and Statement of Additional Information for a description of these security types. |
2 | Represents less than 0.1%. |
3 | Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report. |
4 | Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements. |
5 | Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report Portfolio of Investments
June 30, 2012 (unaudited)
Principal Amount or Shares | | | Value |
| | Corporate Bonds – 92.4% | |
| | Basic Industry - Chemicals – 3.3% | |
$15,000 | | Albemarle Corp., Sr. Note, 5.10%, 2/1/2015 | 16,320 |
525,000 | | Dow Chemical Co., Note, 8.55%, 5/15/2019 | 699,629 |
250,000 | | Eastman Chemical Co., Sr. Unsecd. Note, 5.50%, 11/15/2019 | 285,936 |
120,000 | 1,2 | Incitec Pivot Finance LLC, Company Guarantee, Series 144A, 4.00%, 12/7/2015 | 123,581 |
85,000 | 1,2 | Incitec Pivot Finance LLC, Company Guarantee, Series 144A, 6.00%, 12/10/2019 | 93,396 |
160,000 | | RPM International, Inc., Sr. Unsecd. Note, 6.125%, 10/15/2019 | 183,503 |
| | TOTAL | 1,402,365 |
| | Basic Industry - Metals & Mining – 6.8% | |
250,000 | | Alcoa, Inc., Note, 5.55%, 2/1/2017 | 273,285 |
110,000 | | Allegheny Technologies, Inc., Sr. Note, 9.375%, 6/1/2019 | 140,231 |
200,000 | 1,2 | Anglo American Capital PLC, Company Guarantee, Series 144A, 2.625%, 4/3/2017 | 199,860 |
235,000 | | Anglogold Ashanti Holdings PLC, Sr. Note, 6.50%, 4/15/2040 | 229,861 |
85,000 | | ArcelorMittal, Sr. Unsecd. Note, 4.50%, 2/25/2017 | 83,821 |
600,000 | | ArcelorMittal, Sr. Unsecd. Note, 5.25%, 8/5/2020 | 576,482 |
310,000 | | ArcelorMittal, Sr. Unsecd. Note, 6.75%, 3/1/2041 | 290,546 |
150,000 | | Carpenter Technology Corp., Sr. Unsecd. Note, 5.20%, 7/15/2021 | 156,941 |
130,000 | 1,2 | Gerdau S.A., Company Guarantee, Series 144A, 5.75%, 1/30/2021 | 135,395 |
250,000 | 1,2 | Gold Fields Orogen Holding BVI Ltd., Company Guarantee, Series 144A, 4.875%, 10/7/2020 | 238,769 |
200,000 | 1,2 | Hyundai Steel Co., Sr. Unsecd. Note, Series 144A, 4.625%, 4/21/2016 | 208,120 |
250,000 | | Southern Copper Corp., Note, 6.75%, 4/16/2040 | 267,547 |
100,000 | | Xstrata Canada Corp., 6.00%, 10/15/2015 | 110,300 |
| | TOTAL | 2,911,158 |
| | Basic Industry - Paper – 1.6% | |
245,000 | | International Paper Co., Sr. Unsecd. Note, 7.50%, 8/15/2021 | 313,268 |
140,000 | | Plum Creek Timberlands LP, Sr. Unsecd. Note, 4.70%, 3/15/2021 | 145,824 |
100,000 | | Weyerhaeuser Co., Sr. Unsecd. Note, 7.375%, 10/1/2019 | 118,433 |
100,000 | | Weyerhaeuser Co., Sr. Unsecd. Note, 7.375%, 3/15/2032 | 112,105 |
| | TOTAL | 689,630 |
| | Capital Goods - Aerospace & Defense – 0.4% | |
100,000 | | Embraer SA, Sr. Unsecd. Note, 5.15%, 6/15/2022 | 102,900 |
100,000 | 1,2 | Meccanica Holdings USA, Inc., Company Guarantee, Series 144A, 6.25%, 1/15/2040 | 75,856 |
| | TOTAL | 178,756 |
| | Capital Goods - Building Materials – 0.8% | |
60,000 | | Masco Corp., Sr. Unsecd. Note, 5.95%, 3/15/2022 | 61,922 |
30,000 | | Masco Corp., Sr. Unsecd. Note, 7.125%, 3/15/2020 | 33,170 |
200,000 | | Valmont Industries, Inc., Sr. Unsecd. Note, 6.625%, 4/20/2020 | 235,200 |
| | TOTAL | 330,292 |
| | Capital Goods - Construction Machinery – 0.3% | |
120,000 | | AGCO Corp., Sr. Unsecd. Note, 5.875%, 12/1/2021 | 130,568 |
| | Capital Goods - Diversified Manufacturing – 0.9% | |
200,000 | 1,2 | Hutchison Whampoa International Ltd., Company Guarantee, Series 144A, 3.50%, 1/13/2017 | 207,959 |
50,000 | | Textron Financial Corp., 5.40%, 4/28/2013 | 51,372 |
136,000 | 1,2 | Textron Financial Corp., Jr. Sub. Note, Series 144A, 6.00%, 2/15/2067 | 108,120 |
| | TOTAL | 367,451 |
| | Capital Goods - Packaging – 0.8% | |
65,000 | | Packaging Corp. of America, Sr. Unsecd. Note, 3.90%, 6/15/2022 | 65,394 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$40,000 | 1,2 | Rock-Tenn Co., Sr. Unsecd. Note, Series 144A, 4.45%, 3/1/2019 | 41,170 |
220,000 | | Sonoco Products Co., Sr. Unsecd. Note, 5.75%, 11/1/2040 | 250,560 |
| | TOTAL | 357,124 |
| | Communications - Media & Cable – 3.5% | |
225,000 | | Comcast Corp., 7.05%, 3/15/2033 | 285,287 |
50,000 | | Comcast Corp., Sr. Sub. Deb., 10.625%, 7/15/2012 | 50,129 |
245,000 | | DIRECTV Holdings LLC, Company Guarantee, 6.375%, 3/1/2041 | 281,856 |
40,000 | | Time Warner Cable, Inc., Company Guarantee, 5.50%, 9/1/2041 | 43,747 |
90,000 | | Time Warner Cable, Inc., Company Guarantee, 6.75%, 6/15/2039 | 110,201 |
420,000 | | Time Warner Cable, Inc., Company Guarantee, 8.25%, 4/1/2019 | 549,856 |
50,000 | | Time Warner Cable, Inc., Company Guarantee, 8.75%, 2/14/2019 | 66,602 |
100,000 | | Time Warner Cable, Inc., Sr. Unsecd. Note, 5.85%, 5/1/2017 | 117,682 |
| | TOTAL | 1,505,360 |
| | Communications - Media Noncable – 3.0% | |
100,000 | | Grupo Televisa S.A., 6.625%, 3/18/2025 | 123,566 |
290,000 | | Interpublic Group of Cos., Inc., Sr. Unsecd. Note, 10.00%, 7/15/2017 | 329,150 |
70,000 | | Interpublic Group of Cos., Inc., Sr. Unsecd. Note, 4.00%, 3/15/2022 | 71,265 |
100,000 | | News America Holdings, Inc., Sr. Deb., 6.75%, 1/9/2038 | 111,379 |
350,000 | | News America, Inc., Company Guarantee, 5.65%, 8/15/2020 | 406,074 |
155,000 | | Omnicom Group, Inc., Sr. Unsecd. Note, 3.625%, 5/1/2022 | 157,950 |
100,000 | 1,2 | Pearson Funding Two PLC, Sr. Unsecd. Note, Series 144A, 4.00%, 5/17/2016 | 106,306 |
| | TOTAL | 1,305,690 |
| | Communications - Telecom Wireless – 0.4% | |
180,000 | | Telefonaktiebolaget LM Ericsson, Sr. Unsecd. Note, 4.125%, 5/15/2022 | 181,007 |
| | Communications - Telecom Wirelines – 4.0% | |
300,000 | | CenturyLink, Inc., Sr. Note, Series Q, 6.15%, 9/15/2019 | 310,079 |
250,000 | | CenturyLink, Inc., Sr. Unsecd. Note, 6.45%, 6/15/2021 | 260,762 |
485,000 | | CenturyLink, Inc., Sr. Unsecd. Note, 7.65%, 3/15/2042 | 472,560 |
100,000 | | Rogers Communications, Inc., Company Guarantee, 6.80%, 8/15/2018 | 123,548 |
325,000 | | Telecom Italia Capital SA, Company Guarantee, 6.00%, 9/30/2034 | 251,063 |
325,000 | | Telefonica Emisiones S.A.U., Company Guarantee, 5.462%, 2/16/2021 | 283,662 |
40,000 | | Telefonica SA, Company Guarantee, 7.045%, 6/20/2036 | 35,099 |
| | TOTAL | 1,736,773 |
| | Consumer Cyclical - Automotive – 1.9% | |
50,000 | 1,2 | American Honda Finance Corp., Series 144A, 7.625%, 10/1/2018 | 64,095 |
200,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 3.00%, 6/12/2017 | 199,216 |
270,000 | 1,2 | Harley-Davidson Financial Services, Inc., Sr. Unsecd. Note, Series 144A, 2.70%, 3/15/2017 | 274,337 |
170,000 | 1,2 | Hyundai Capital Services, Inc., Note, Series 144A, 6.00%, 5/5/2015 | 185,079 |
100,000 | 1,2 | RCI Banque SA, Sr. Unsecd. Note, Series 144A, 4.60%, 4/12/2016 | 99,699 |
| | TOTAL | 822,426 |
| | Consumer Cyclical - Entertainment – 1.5% | |
250,000 | | NBC Universal, Inc., Sr. Unsecd. Note, 6.40%, 4/30/2040 | 306,911 |
200,000 | | Time Warner, Inc., Company Guarantee, 6.20%, 3/15/2040 | 233,982 |
95,000 | | Viacom, Inc., Sr. Unsecd. Note, 2.50%, 12/15/2016 | 98,504 |
| | TOTAL | 639,397 |
| | Consumer Cyclical - Lodging – 2.0% | |
250,000 | | Choice Hotels International, Inc., Company Guarantee, 5.70%, 8/28/2020 | 258,112 |
310,000 | | Marriott International, Inc., Sr. Unsecd. Note, 3.00%, 3/1/2019 | 314,067 |
280,000 | | Wyndham Worldwide Corp., Sr. Unsecd. Note, 4.25%, 3/1/2022 | 282,704 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$20,000 | | Wyndham Worldwide Corp., Sr. Unsecd. Note, 5.625%, 3/1/2021 | 21,829 |
1,000 | | Wyndham Worldwide Corp., Sr. Unsecd. Note, 6.00%, 12/1/2016 | 1,114 |
| | TOTAL | 877,826 |
| | Consumer Cyclical - Retailers – 0.4% | |
80,000 | | Advance Auto Parts, Inc., Company Guarantee, 4.50%, 1/15/2022 | 83,995 |
60,000 | | O'Reilly Automotive, Inc., Company Guarantee, 4.875%, 1/14/2021 | 64,655 |
| | TOTAL | 148,650 |
| | Consumer Non-Cyclical - Food/Beverage – 2.8% | |
80,000 | 1,2 | Bacardi Ltd., Sr. Note, Series 144A, 7.45%, 4/1/2014 | 88,364 |
100,000 | 1,2 | Grupo Bimbo SAB de CV, Sr. Unsecd. Note, Series 144A, 4.50%, 1/25/2022 | 106,704 |
120,000 | | Kellogg Co., 1.75%, 5/17/2017 | 120,189 |
300,000 | | Kraft Foods, Inc., Sr. Unsecd. Note, 6.50%, 2/9/2040 | 387,277 |
180,000 | 1,2 | Pernod-Ricard SA, Sr. Unsecd. Note, Series 144A, 4.25%, 7/15/2022 | 185,110 |
150,000 | 1,2 | Pernod-Ricard SA, Sr. Unsecd. Note, Series 144A, 5.75%, 4/7/2021 | 169,752 |
60,000 | | Ralcorp Holdings, Inc., Sr. Secd. Note, 6.625%, 8/15/2039 | 62,013 |
65,000 | | Tyson Foods, Inc., Sr. Unsecd. Note, 4.50%, 6/15/2022 | 67,275 |
| | TOTAL | 1,186,684 |
| | Consumer Non-Cyclical - Health Care – 0.1% | |
35,000 | | CareFusion Corp., Sr. Unsecd. Note, 6.375%, 8/1/2019 | 41,363 |
| | Consumer Non-Cyclical - Pharmaceuticals – 0.1% | |
40,000 | | Dentsply International, Inc., Sr. Unsecd. Note, 2.75%, 8/15/2016 | 40,724 |
| | Consumer Non-Cyclical - Tobacco – 1.6% | |
415,000 | | Altria Group, Inc., 9.25%, 8/6/2019 | 577,677 |
100,000 | | Lorillard Tobacco Co., Sr. Unsecd. Note, 7.00%, 8/4/2041 | 108,948 |
| | TOTAL | 686,625 |
| | Energy - Independent – 5.3% | |
50,000 | | Canadian Natural Resources Ltd., 5.45%, 10/1/2012 | 50,585 |
50,000 | 1,2 | Petroleos Mexicanos, Company Guarantee, Series 144A, 6.50%, 6/2/2041 | 58,625 |
850,000 | | Petroleos Mexicanos, Company Guarantee, Series WI, 4.875%, 3/15/2015 | 921,188 |
590,000 | | Petroleos Mexicanos, Company Guarantee, Series WI, 5.50%, 1/21/2021 | 669,650 |
240,000 | | Petroleos Mexicanos, Company Guarantee, Series WI, 6.00%, 3/5/2020 | 278,760 |
100,000 | | Talisman Energy, Inc., Sr. Unsecd. Note, 3.75%, 2/1/2021 | 100,472 |
175,000 | | Talisman Energy, Inc., Sr. Unsecd. Note, 5.50%, 5/15/2042 | 180,662 |
35,773 | 1,2 | Tengizchevroil LLP, Series 144A, 6.124%, 11/15/2014 | 37,404 |
| | TOTAL | 2,297,346 |
| | Energy - Integrated – 3.0% | |
100,000 | | Hess Corp., 7.00%, 2/15/2014 | 109,418 |
95,000 | | Husky Energy, Inc., Sr. Unsecd. Note, 3.95%, 4/15/2022 | 97,123 |
100,000 | | Husky Oil Ltd., Deb., 7.55%, 11/15/2016 | 118,933 |
100,000 | | Petro-Canada, Bond, 5.35%, 7/15/2033 | 104,881 |
280,000 | | Petrobras International Finance Co., Company Guarantee, 6.75%, 1/27/2041 | 330,242 |
100,000 | | Petrobras International Finance Co., Sr. Unsecd. Note, 2.875%, 2/6/2015 | 101,763 |
155,000 | 1,2 | Phillips 66, Sr. Unsecd. Note, Series 144A, 1.95%, 3/5/2015 | 156,231 |
265,000 | 1,2 | Phillips 66, Sr. Unsecd. Note, Series 144A, 4.30%, 4/1/2022 | 279,550 |
| | TOTAL | 1,298,141 |
| | Energy - Oil Field Services – 1.8% | |
35,000 | | Nabors Industries, Inc., Company Guarantee, 5.00%, 9/15/2020 | 37,436 |
100,000 | | Nabors Industries, Inc., Company Guarantee, 9.25%, 1/15/2019 | 130,066 |
90,000 | | Noble Holding International Ltd., Company Guarantee, 4.90%, 8/1/2020 | 97,966 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$100,000 | | Noble Holding International Ltd., Sr. Unsecd. Note, 3.05%, 3/1/2016 | 103,625 |
50,000 | 1,2 | Schlumberger Investment SA, Company Guarantee, Series 144A, 1.95%, 9/14/2016 | 51,309 |
150,000 | | Weatherford International Ltd., 7.00%, 3/15/2038 | 172,042 |
165,000 | | Weatherford International Ltd., Sr. Unsecd. Note, 5.95%, 4/15/2042 | 174,403 |
| | TOTAL | 766,847 |
| | Energy - Refining – 1.2% | |
150,000 | | Marathon Petroleum Corp., Sr. Unsecd. Note, 6.50%, 3/1/2041 | 171,268 |
250,000 | | Valero Energy Corp., 9.375%, 3/15/2019 | 329,160 |
| | TOTAL | 500,428 |
| | Financial Institution - Banking – 9.9% | |
200,000 | | Associated Banc-Corp., Sr. Unsecd. Note, 5.125%, 3/28/2016 | 214,317 |
350,000 | | Bank of America Corp., Sr. Unsecd. Note, 5.00%, 5/13/2021 | 362,000 |
30,000 | | Capital One Capital IV, 6.745%, 2/17/2037 | 30,150 |
270,000 | | Capital One Capital V, 10.25%, 8/15/2039 | 276,750 |
150,000 | | Capital One Capital VI, 8.875%, 5/15/2040 | 153,330 |
240,000 | | Capital One Financial Corp., Sr. Note, 7.375%, 5/23/2014 | 263,785 |
350,000 | | Citigroup, Inc., Sr. Unsecd. Note, 4.45%, 1/10/2017 | 367,410 |
270,000 | | City National Corp., Note, 5.25%, 9/15/2020 | 287,828 |
310,000 | | Fifth Third Bancorp, Sr. Unsecd. Note, 3.625%, 1/25/2016 | 327,357 |
350,000 | | Goldman Sachs Group, Inc., Sr. Unsecd. Note, 5.375%, 3/15/2020 | 361,090 |
110,000 | | HSBC Holdings PLC, Sr. Unsecd. Note, 5.10%, 4/5/2021 | 123,117 |
100,000 | | HSBC USA, Inc., Sr. Unsecd. Note, 2.375%, 2/13/2015 | 101,216 |
40,000 | | Huntington Bancshares, Inc., Sub. Note, 7.00%, 12/15/2020 | 46,944 |
200,000 | | J.P. Morgan Chase & Co., Sr. Unsecd. Note, 4.50%, 1/24/2022 | 216,033 |
75,000 | | Morgan Stanley, Sr. Unsecd. Note, 4.75%, 3/22/2017 | 74,945 |
350,000 | | Morgan Stanley, Sr. Unsecd. Note, 5.75%, 1/25/2021 | 345,921 |
355,000 | | SunTrust Banks, Inc., Sr. Unsecd. Note, 3.60%, 4/15/2016 | 369,078 |
290,000 | | Suntrust Capital VIII, Jr. Sub. Note, 6.10%, 12/15/2036 | 290,552 |
50,000 | | Wilmington Trust Corp., Sub. Note, 8.50%, 4/2/2018 | 59,664 |
| | TOTAL | 4,271,487 |
| | Financial Institution - Brokerage – 3.3% | |
190,000 | 1,2 | Cantor Fitzgerald LP, Bond, Series 144A, 7.875%, 10/15/2019 | 190,224 |
10,000 | | Eaton Vance Corp., 6.50%, 10/2/2017 | 11,442 |
75,000 | 1,2 | FMR LLC, Series 144A, 4.75%, 3/1/2013 | 76,728 |
150,000 | | Janus Capital Group, Inc., Sr. Note, 6.70%, 6/15/2017 | 161,138 |
250,000 | | Jefferies Group, Inc., Sr. Unsecd. Note, 6.875%, 4/15/2021 | 252,652 |
200,000 | 1,2 | Legg Mason, Inc., Sr. Unsecd. Note, Series 144A, 5.50%, 5/21/2019 | 202,647 |
500,000 | | Raymond James Financial, Inc., Sr. Unsecd. Note, 5.625%, 4/1/2024 | 535,486 |
| | TOTAL | 1,430,317 |
| | Financial Institution - Finance Noncaptive – 1.7% | |
100,000 | | HSBC Finance Capital Trust IX, Note, 5.911%, 11/30/2035 | 94,375 |
70,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 4.875%, 4/1/2015 | 70,400 |
480,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 5.75%, 5/15/2016 | 487,584 |
70,000 | 1,2 | Macquarie Group Ltd., Sr. Unsecd. Note, Series 144A, 6.00%, 1/14/2020 | 69,784 |
| | TOTAL | 722,143 |
| | Financial Institution - Insurance - Life – 5.1% | |
75,000 | | AXA-UAP, Sub. Note, 8.60%, 12/15/2030 | 80,481 |
100,000 | | American International Group, Inc., Sr. Unsecd. Note, 4.25%, 9/15/2014 | 103,753 |
425,000 | | American International Group, Inc., Sr. Unsecd. Note, 6.40%, 12/15/2020 | 481,995 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$120,000 | | Hartford Financial Services Group, Inc., Sr. Unsecd. Note, 5.125%, 4/15/2022 | 123,903 |
120,000 | | Hartford Financial Services Group, Inc., Sr. Unsecd. Note, 6.625%, 4/15/2042 | 124,157 |
110,000 | | Lincoln National Corp., Sr. Note, 7.00%, 6/15/2040 | 130,336 |
200,000 | | Lincoln National Corp., Sr. Unsecd. Note, 6.25%, 2/15/2020 | 226,811 |
100,000 | | MetLife, Inc., Jr. Sub. Note, 10.75%, 8/1/2039 | 140,250 |
50,000 | 1,2 | Penn Mutual Life Insurance Co., Sr. Note, Series 144A, 7.625%, 6/15/2040 | 61,954 |
150,000 | | Prudential Financial, Inc., Sr. Note, Series MTND, 7.375%, 6/15/2019 | 183,431 |
300,000 | | Prudential Financial, Inc., Sr. Unsecd. Note, 5.375%, 6/21/2020 | 332,736 |
200,000 | | Prudential Financial, Inc., Sr. Unsecd. Note, Series MTN, 4.75%, 9/17/2015 | 215,515 |
| | TOTAL | 2,205,322 |
| | Financial Institution - Insurance - P&C – 2.7% | |
450,000 | | CNA Financial Corp., 6.50%, 8/15/2016 | 507,019 |
50,000 | | CNA Financial Corp., Sr. Unsecd. Note, 5.875%, 8/15/2020 | 55,108 |
50,000 | | CNA Financial Corp., Sr. Unsecd. Note, 7.35%, 11/15/2019 | 59,272 |
75,000 | | Horace Mann Educators Corp., Sr. Note, 6.85%, 4/15/2016 | 81,281 |
60,000 | 1,2 | Liberty Mutual Group, Inc., Company Guarantee, Series 144A, 5.00%, 6/1/2021 | 60,534 |
20,000 | 1,2 | Liberty Mutual Group, Inc., Series 144A, 4.95%, 5/1/2022 | 19,930 |
125,000 | 1,2 | Liberty Mutual Group, Inc., Unsecd. Note, Series 144A, 5.75%, 3/15/2014 | 132,044 |
195,000 | 1,2 | Nationwide Mutual Insurance Co., Sub. Note, Series 144A, 9.375%, 8/15/2039 | 258,330 |
| | TOTAL | 1,173,518 |
| | Financial Institution - REITs – 3.9% | |
60,000 | | Alexandria Real Estate Equities, Inc., Sr. Unsecd. Note, 4.60%, 4/1/2022 | 61,599 |
100,000 | | Boston Properties LP, Sr. Unsecd. Note, 5.875%, 10/15/2019 | 115,519 |
325,000 | | Equity One, Inc., Bond, 6.00%, 9/15/2017 | 353,192 |
230,000 | | Health Care REIT, Inc., Sr. Unsecd. Note, 6.125%, 4/15/2020 | 256,597 |
200,000 | | Liberty Property LP, 6.625%, 10/1/2017 | 231,887 |
200,000 | | ProLogis, Inc., Sr. Unsecd. Note, 6.875%, 3/15/2020 | 239,723 |
210,000 | | Regency Centers LP, Company Guarantee, 4.80%, 4/15/2021 | 225,133 |
110,000 | | Tanger Properties LP, Sr. Unsecd. Note, 6.125%, 6/1/2020 | 127,115 |
70,000 | | UDR, Inc., Company Guarantee, 4.625%, 1/10/2022 | 74,336 |
| | TOTAL | 1,685,101 |
| | Technology – 2.4% | |
100,000 | | BMC Software, Inc., 7.25%, 6/1/2018 | 120,640 |
50,000 | | BMC Software, Inc., Sr. Unsecd. Note, 4.25%, 2/15/2022 | 50,174 |
320,000 | | Fiserv, Inc., Sr. Note, 6.80%, 11/20/2017 | 382,284 |
130,000 | | Juniper Networks, Inc., Sr. Unsecd. Note, 5.95%, 3/15/2041 | 150,391 |
75,000 | | Verisk Analytics, Inc., Sr. Unsecd. Note, 4.875%, 1/15/2019 | 80,450 |
170,000 | | Xerox Corp., Sr. Unsecd. Note, 2.95%, 3/15/2017 | 172,189 |
60,000 | | Xerox Corp., Sr. Unsecd. Note, 4.50%, 5/15/2021 | 62,422 |
| | TOTAL | 1,018,550 |
| | Transportation - Airlines – 0.8% | |
75,000 | | Southwest Airlines Co., Deb., 7.375%, 3/1/2027 | 86,346 |
220,000 | | Southwest Airlines Co., Sr. Unsecd. Note, 5.125%, 3/1/2017 | 241,809 |
| | TOTAL | 328,155 |
| | Transportation - Railroads – 0.5% | |
100,000 | | Canadian Pacific Railway Co., Sr. Unsecd. Note, 4.45%, 3/15/2023 | 106,524 |
100,000 | | Canadian Pacific RR, 7.125%, 10/15/2031 | 126,766 |
| | TOTAL | 233,290 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
| | Transportation - Services – 2.5% | |
$330,000 | 1,2 | Enterprise Rent-A-Car USA Finance Co., Sr. Unsecd. Note, Series 144A, 5.625%, 3/15/2042 | 338,273 |
420,000 | 1,2 | Penske Truck Leasing Co. LP & PTL Finance Corp., Series 144A, 3.75%, 5/11/2017 | 423,959 |
100,000 | | Ryder System, Inc., Sr. Unsecd. Note, Series MTN, 3.50%, 6/1/2017 | 105,127 |
180,000 | | Ryder System, Inc., Sr. Unsecd. Note, Series MTN, 7.20%, 9/1/2015 | 206,252 |
| | TOTAL | 1,073,611 |
| | Utility - Electric – 6.4% | |
200,000 | | Appalachian Power Co., Sr. Unsecd. Note, 7.00%, 4/1/2038 | 269,243 |
75,000 | | Cleveland Electric Illuminating Co., Sr. Unsecd. Note, 5.95%, 12/15/2036 | 85,182 |
100,000 | | Commonwealth Edison Co., 1st Mtg. Bond, 6.15%, 9/15/2017 | 121,277 |
50,000 | | Dominion Resources, Inc., Sr. Unsecd. Note, 8.875%, 1/15/2019 | 68,095 |
100,000 | 1,2 | Enel Finance International SA, Company Guarantee, Series 144A, 3.875%, 10/7/2014 | 98,380 |
160,000 | | Exelon Generation Co. LLC, Sr. Unsecd. Note, 5.75%, 10/1/2041 | 167,373 |
100,000 | | Exelon Generation Co. LLC, Sr. Unsecd. Note, 6.25%, 10/1/2039 | 108,825 |
50,000 | | FPL Group Capital, Inc., 7.875%, 12/15/2015 | 59,963 |
420,000 | | FirstEnergy Solutions Corp., Company Guarantee, 6.05%, 8/15/2021 | 462,424 |
54,769 | 1,2 | Great River Energy, 1st Mtg. Note, Series 144A, 5.829%, 7/1/2017 | 58,552 |
160,000 | | KCP&L Greater Missouri Operations Co., Sr. Unsecd. Note, 11.875%, 7/1/2012 | 160,000 |
200,000 | | National Rural Utilities Cooperative Finance Corp., Sr. Unsecd. Note, 10.375%, 11/1/2018 | 290,306 |
50,000 | | PPL Energy Supply LLC, Sr. Unsecd. Note, 6.00%, 12/15/2036 | 53,526 |
200,000 | 1,2 | PPL WEM Holdings PLC, Sr. Unsecd. Note, Series 144A, 5.375%, 5/1/2021 | 216,015 |
30,000 | | Progress Energy, Inc., 7.05%, 3/15/2019 | 37,785 |
80,000 | | TECO Finance, Inc., Company Guarantee, 5.15%, 3/15/2020 | 91,648 |
250,000 | | UIL Holdings Corp., Sr. Unsecd. Note, 4.625%, 10/1/2020 | 262,204 |
100,000 | | Union Electric Co., 6.00%, 4/1/2018 | 118,976 |
| | TOTAL | 2,729,774 |
| | Utility - Natural Gas Distributor – 0.6% | |
25,000 | | Atmos Energy Corp., 5.125%, 1/15/2013 | 25,569 |
40,000 | 1,2 | Florida Gas Transmission Co. LLC, Sr. Unsecd. Note, Series 144A, 5.45%, 7/15/2020 | 44,749 |
90,000 | | National Fuel Gas Co., Sr. Unsecd. Note, 4.90%, 12/1/2021 | 97,342 |
75,000 | | Sempra Energy, Sr. Unsecd. Note, 6.50%, 6/1/2016 | 88,341 |
| | TOTAL | 256,001 |
| | Utility - Natural Gas Pipelines – 5.1% | |
75,000 | | Consolidated Natural Gas Co., Series A, 5.00%, 12/1/2014 | 81,483 |
75,000 | | Duke Capital Corp., Sr. Note, 6.25%, 2/15/2013 | 77,161 |
80,000 | | Enbridge Energy Partners LP, Sr. Unsecd. Note, 5.50%, 9/15/2040 | 86,990 |
50,000 | | Enterprise Products Operating LLC, 4.60%, 8/1/2012 | 50,146 |
200,000 | | Enterprise Products Operating LLC, Company Guarantee, 5.25%, 1/31/2020 | 229,609 |
500,000 | | Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 3.95%, 9/1/2022 | 508,004 |
325,000 | | Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 5.80%, 3/15/2035 | 345,698 |
370,000 | | Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 6.375%, 3/1/2041 | 423,866 |
240,000 | | Spectra Energy Capital LLC, Company Guarantee, 5.65%, 3/1/2020 | 273,083 |
120,000 | | Williams Partners LP, 5.25%, 3/15/2020 | 135,130 |
| | TOTAL | 2,211,170 |
| | TOTAL CORPORATE BONDS (IDENTIFIED COST $37,081,918) | 39,741,070 |
| | MUNICIPAL BOND – 0.4% | |
| | Municipal Services – 0.4% | |
180,000 | | Chicago, IL, Taxable Project and Refunding Series 2012B GO Bonds, 5.432% Bonds, 1/1/2042 (IDENTIFIED COST $180,000) | 179,055 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
| | Foreign Governments/Agencies – 5.5% | |
| | Sovereign – 5.5% | |
$600,000 | | Brazil, Government of, Sr. Unsecd. Note, 4.875%, 1/22/2021 | 693,900 |
200,000 | | Brazil, Government of, Sr. Unsecd. Note, 6.00%, 1/17/2017 | 235,600 |
250,000 | | Colombia, Government of, Sr. Unsecd. Note, 4.375%, 7/12/2021 | 280,750 |
300,000 | | Panama, Government of, Sr. Unsecd. Note, 5.20%, 1/30/2020 | 350,250 |
190,000 | | Peru, Government of, 6.55%, 3/14/2037 | 258,590 |
206,000 | | United Mexican States, 6.75%, 9/27/2034 | 281,190 |
210,000 | | United Mexican States, Note, 5.625%, 1/15/2017 | 244,388 |
| | TOTAL FOREIGN GOVERNMENTS/AGENCIES (IDENTIFIED COST $2,064,911) | 2,344,668 |
| | MUTUAL FUND – 0.4% | |
170,129 | 3,4 | Federated Prime Value Obligations Fund, Institutional Shares, 0.22% (AT NET ASSET VALUE) | 170,129 |
| | TOTAL INVESTMENTS — 98.7% (IDENTIFIED COST $39,496,958)5 | 42,434,922 |
| | OTHER ASSETS AND LIABILITIES - NET — 1.3%6 | 567,633 |
| | TOTAL NET ASSETS — 100% | $43,002,555 |
At June 30, 2012, the Fund had the following outstanding futures contracts:
Description | Number of Contracts | Notional Value | Expiration Date | Unrealized Depreciation |
7 U.S. Treasury Bond 30-Year Short Futures | 20 | $2,959,375 | September 2012 | $(5,514) |
7 U.S. Treasury Notes 5-Year Short Futures | 5 | $619,844 | September 2012 | $(636) |
7 U.S. Treasury Notes 10-Year Short Futures | 25 | $3,334,375 | September 2012 | $(14,900) |
UNREALIZED DEPRECIATION ON FUTURES CONTRACTS | $(21,050) |
Unrealized Depreciation on Futures Contracts is included in “Other Assets and Liabilities — Net.”
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 June 30, 2012, these restricted securities amounted to $5,546,894, which represented 12.9% 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 Trustees (the “Trustees”). At June 30, 2012, these liquid restricted securities amounted to $5,546,894, which represented 12.9% of total net assets. |
3 | Affiliated holding. |
4 | 7-Day net yield. |
5 | Also represents cost for federal tax purposes. |
6 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
7 | Non-income producing security. |
Note: The categories of investments are shown as a percentage of total net assets at June 30, 2012.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable. Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost. Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
Semi-Annual Shareholder Report
The following is a summary of the inputs used, as of June 30, 2012, in valuing the Fund's assets carried at fair value:Valuation Inputs |
| Level 1 — Quoted Prices and Investments in Mutual Funds | Level 2 — Other Significant Observable Inputs | Level 3 — Significant Unobservable Inputs | Total |
Debt Securities: | | | | |
Corporate Bonds | $ — | $39,741,070 | $ — | $39,741,070 |
Municipal Bond | — | 179,055 | — | 179,055 |
Foreign Governments/Agencies | — | 2,344,668 | — | 2,344,668 |
Mutual Fund | 170,129 | — | — | 170,129 |
TOTAL SECURITIES | $170,129 | $42,264,793 | $ — | $42,434,922 |
OTHER FINANCIAL INSTRUMENTS* | $(21,050) | $ — | $ — | $(21,050) |
* | Other financial instruments include futures contracts. |
The following acronyms are used throughout this portfolio:
GO | — General Obligation |
MTN | — Medium Term Note |
REIT(s) | — Real Estate Investment Trust(s) |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 6/30/2012 | Year Ended December 31, |
2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $10.73 | $10.78 | $10.37 | $8.76 | $10.21 | $10.33 |
Income From Investment Operations: | | | | | | |
Net investment income | 0.27 | 0.57 | 0.57 | 0.59 | 0.58 | 0.62 |
Net realized and unrealized gain (loss) on investments and futures contracts | 0.28 | 0.18 | 0.41 | 1.61 | (1.44) | (0.10) |
TOTAL FROM INVESTMENT OPERATIONS | 0.55 | 0.75 | 0.98 | 2.20 | (0.86) | 0.52 |
Less Distributions: | | | | | | |
Distributions from net investment income | (0.27) | (0.57) | (0.57) | (0.59) | (0.58) | (0.62) |
Distributions from net realized gain on investments and futures contracts | — | (0.23) | — | — | (0.01) | (0.02) |
TOTAL DISTRIBUTIONS | (0.27) | (0.80) | (0.57) | (0.59) | (0.59) | (0.64) |
Net Asset Value, End of Period | $11.01 | $10.73 | $10.78 | $10.37 | $8.76 | $10.21 |
Total Return1 | 5.16% | 7.12% | 9.56% | 25.84% | (8.75)% | 5.22% |
Ratios to Average Net Assets: | | | | | | |
Net expenses2 | 0.00%3 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
Net investment income | 4.99%3 | 5.19% | 5.28% | 6.01% | 6.03% | 6.09% |
Expense waiver/reimbursement4 | 0.73%3 | 0.80% | 0.85% | 1.68% | 2.40% | 4.89%5 |
Supplemental Data: | | | | | | |
Net assets, end of period (000 omitted) | $43,003 | $36,321 | $46,004 | $30,886 | $12,525 | $7,797 |
Portfolio turnover | 14% | 80% | 31% | 42% | 89% | 29% |
1 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
2 | The Adviser has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. |
3 | Computed on an annualized basis. |
4 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
5 | Additional information relating to contractual expense waivers, which has no effect on net expenses, net investment income and net assets previously reported, has been provided to conform to the current year presentation. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Assets and Liabilities
June 30, 2012 (unaudited)
Assets: | | |
Total investment in securities, at value including $170,129 of investment in an affiliated holding (Note 5) (identified cost $39,496,958) | | $42,434,922 |
Restricted cash (Note 2) | | 86,750 |
Income receivable | | 629,923 |
Receivable for daily variation margin | | 52,227 |
TOTAL ASSETS | | 43,203,822 |
Liabilities: | | |
Payable for shares redeemed | $175 | |
Income distribution payable | 176,173 | |
Payable to adviser (Note 5) | 1,342 | |
Payable for Directors'/Trustees' fees | 423 | |
Payable for auditing fees | 12,175 | |
Payable for portfolio accounting fees | 10,979 | |
TOTAL LIABILITIES | | 201,267 |
Net assets for 3,905,964 shares outstanding | | $43,002,555 |
Net Assets Consist of: | | |
Paid-in capital | | $39,939,821 |
Net unrealized appreciation of investments and futures contracts | | 2,916,914 |
Accumulated net realized gain on investments and futures contracts | | 142,095 |
Undistributed net investment income | | 3,725 |
TOTAL NET ASSETS | | $43,002,555 |
Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
$43,002,555 ÷ 3,905,964 shares outstanding, no par value, unlimited shares authorized | | $11.01 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations
Six Months Ended June 30, 2012 (unaudited)
Investment Income: | | | |
Interest | | | $1,028,659 |
Dividends received from an affiliated holding (Note 5) | | | 656 |
TOTAL INCOME | | | 1,029,315 |
Expenses: | | | |
Administrative fee (Note 5) | | $74,590 | |
Custodian fees | | 4,670 | |
Transfer and dividend disbursing agent fees and expenses | | 2,851 | |
Directors'/Trustees' fees | | 1,167 | |
Auditing fees | | 12,150 | |
Legal fees | | 4,023 | |
Portfolio accounting fees | | 32,605 | |
Share registration costs | | 11,138 | |
Printing and postage | | 4,630 | |
Insurance premiums | | 1,791 | |
Miscellaneous | | 1,607 | |
TOTAL EXPENSES | | 151,222 | |
Waiver and Reimbursement (Note 5): | | | |
Waiver of administrative fee | $(12,226) | | |
Reimbursement of other operating expenses | (138,996) | | |
TOTAL WAIVER AND REIMBURSEMENT | | (151,222) | |
Net expenses | | | — |
Net investment income | | | 1,029,315 |
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts: | | | |
Net realized gain on investments | | | 373,503 |
Net realized loss on futures contracts | | | (204,749) |
Net change in unrealized appreciation of investments | | | 847,666 |
Net change in unrealized depreciation of futures contracts | | | 13,441 |
Net realized and unrealized gain on investments and futures contracts | | | 1,029,861 |
Change in net assets resulting from operations | | | $2,059,176 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets
| Six Months Ended (unaudited) 6/30/2012 | Year Ended 12/31/2011 |
Increase (Decrease) in Net Assets | | |
Operations: | | |
Net investment income | $1,029,315 | $2,226,630 |
Net realized gain on investments and futures contracts | 168,754 | 823,322 |
Net change in unrealized appreciation/depreciation of investments and futures contracts | 861,107 | (11,259) |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 2,059,176 | 3,038,693 |
Distributions to Shareholders: | | |
Distributions from net investment income | (1,028,643) | (2,226,103) |
Distributions from net realized gain on investments and futures contracts | — | (788,367) |
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (1,028,643) | (3,014,470) |
Share Transactions: | | |
Proceeds from sale of shares | 9,464,094 | 17,427,295 |
Net asset value of shares issued to shareholders in payment of distributions declared | 1,031 | 76,117 |
Cost of shares redeemed | (3,813,897) | (27,210,376) |
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 5,651,228 | (9,706,964) |
Change in net assets | 6,681,761 | (9,682,741) |
Net Assets: | | |
Beginning of period | 36,320,794 | 46,003,535 |
End of period (including undistributed net investment income of $3,725 and $3,053, respectively) | $43,002,555 | $36,320,794 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements
June 30, 2012 (unaudited)
1. ORGANIZATION
Federated Managed Pool Series (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of four portfolios. The financial statements included herein are only those of Federated Corporate Bond Strategy Portfolio (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The investment objective of the Fund is to provide total return.
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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Shares of other mutual funds are valued based upon their reported NAVs.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation and Significant Events Procedures
The Trustees have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) or an affiliated adviser, and others to determine fair value of securities and in overseeing the calculation of the NAV. The Trustees have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures or options contracts;
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
Semi-Annual Shareholder Report- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Trustees have approved the use of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Repurchase Agreements
The Fund may invest in repurchase agreements for short-term liquidity purposes. 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.
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
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. 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 daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Premium and Discount Amortization/Paydown Gains and Losses
All premiums and discounts on fixed-income securities are amortized/accreted using the effective interest rate method. 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 and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended June 30, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
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.
Futures Contracts
The Fund purchases and sells financial futures contracts to manage cash flows, 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 which is shown as Restricted Cash in the Statement of Assets and Liabilities. 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. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.
Futures contracts outstanding at period end are listed after the Fund's Portfolio of Investments.
The average notional value of short futures contracts held by the Fund throughout the period was $5,040,977. This is based on amounts held as of each month-end throughout the six-month period.
Restricted Securities
The Fund may purchase securities which are considered restricted. 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 Semi-Annual Shareholder Report
transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. 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 Trustees.Additional Disclosure Related to Derivative Instruments
Fair Value of Derivative Instruments |
| Asset |
| Statement of Assets and Liabilities Location | Fair Value |
Derivatives not accounted for as hedging instruments under ASC Topic 815 | | |
Interest rate contracts | Receivable for daily variation margin | $(21,050)* |
* | Includes cumulative depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities. |
The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended June 30, 2012
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
| Futures |
Interest rate contracts | $(204,749) |
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
| Futures |
Interest rate contracts | $13,441 |
Other
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.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| Six Months Ended 6/30/2012 | Year Ended 12/31/2011 |
Shares sold | 868,963 | 1,593,526 |
Shares issued to shareholders in payment of distributions declared | 94 | 7,140 |
Shares redeemed | (348,774) | (2,481,311) |
NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 520,283 | (880,645) |
4. FEDERAL TAX INFORMATION
At June 30, 2012, the cost of investments for federal tax purposes was $39,496,958. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized depreciation resulting from futures contracts was $2,937,964. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $3,137,352 and net unrealized depreciation from investments for those securities having an excess of cost over value of $199,388.
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The Adviser provides investment adviser services at no fee, because all eligible investors are: (1) in separately managed or wrap fee programs, who often pay a single aggregate fee to the wrap program sponsor for all costs and expenses of the wrap-fee programs; (2) in certain other separately managed accounts and discretionary investment accounts; or (3) to the extent permitted under applicable law, other Federated funds. The Adviser has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. For the six months ended June 30, 2012, the Adviser reimbursed $138,996 of other operating expenses.
Semi-Annual Shareholder Report
Administrative FeeFederated 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:
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 six months ended June 30, 2012, FAS waived $12,226 of its fee. The net fee paid to FAS was 0.302% of average daily net assets of the Fund. The Fund is currently being charged the minimum administrative fee; therefore the fee as a percentage of average daily net assets is greater than the amounts presented in the chart above. For the six months ended June 30, 2012, the Fund's Adviser reimbursed the Fund for any fee paid to FAS.
General
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
Transactions Involving Affiliated Holdings
Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. Transactions involving the affiliated holding during the six months ended June 30, 2012, were as follows:
| Federated Prime Value Obligations Fund, Institutional Shares |
Balance of Shares Held 12/31/2011 | 480,533 |
Purchases/Additions | 9,970,507 |
Sales/Reductions | 10,280,911 |
Balance of Shares Held 6/30/2012 | 170,129 |
Value | $170,129 |
Dividend Income | $656 |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended June 30, 2012, were as follows:
Purchases | $10,532,861 |
Sales | $4,314,982 |
7. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement 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 offered to the Fund by PNC Bank at the time of the borrowing. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012, the Fund did not utilize the LOC.
8. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012, the program was not utilized.
9. subsequent events
On August 15, 2012, the Trustees approved the elimination of minimum administrative personnel and services fees effective September 1, 2012. Prior to this date, the administrative fee received during any fiscal year was at least $150,000 per portfolio and $40,000 per each additional class of Shares.
Management has evaluated subsequent events through the date the financial statements were issued, and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including to the extent applicable, management fees, 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 January 1, 2012 to June 30, 2012.
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. 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.
| Beginning Account Value 1/31/2012 | Ending Account Value 6/30/2012 | Expenses Paid During Period1 |
Actual | $1,000 | $1,051.60 | $0.00 |
Hypothetical (assuming a 5% return before expenses) | $1,000 | $1,024.86 | $0.00 |
1 | Expenses are equal to the Fund's annualized net expense ratio of 0.00%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). Federated Investment Management Company has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. |
Semi-Annual Shareholder Report Evaluation and Approval of Advisory Contract – May 2012
Federated Corporate Bond Strategy Portfolio (the “Fund”)
Following a review and recommendation of approval by the Fund's independent trustees, the Fund's Board reviewed and approved at its May 2012 meetings the Fund's investment advisory contract for an additional one-year period. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements. The Fund is distinctive in that it is designed for the efficient management of a particular asset class and is made available for investment only to other Federated funds and a limited number of other accredited investors. In addition, the Adviser does not charge an investment advisory fee for its services although it or its affiliates may receive compensation for managing assets invested in the Fund.
The Federated Funds' Board had previously appointed 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 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 (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
As previously noted, the Adviser does not charge an investment advisory fee for its services; however, the Board did consider compensation and benefits received by the Adviser, including 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. The Board is also familiar with and considered 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 to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be 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 independent legal counsel. Throughout the year and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent trustees and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the trustees. 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 information covering such matters as: the Adviser's investment philosophy, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance, and comments on the reasons for performance; the Fund's investment objectives; the Fund's overall expense structure; the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; 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 Semi-Annual Shareholder Report
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.The Fund's performance when compared to its benchmark index was also deemed to be relevant by the Board as 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.
The Board was informed by the Adviser that, for the periods covered by the Evaluation, the Fund underperformed its benchmark index for the one-year, three-year and five-year period. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
Because the Adviser does not charge the Fund an investment advisory fee, the Fund's Board does not consider fee comparisons to other mutual funds or other institutional or separate accounts to be relevant.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. Because the Adviser does not charge an investment advisory fee for its services, this information generally covered 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 information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waive non-advisory fees and/or reimburse other expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate advisory and administrative services to the Fund for the fees paid.
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 necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. In particular, due to the unusual nature of the Fund as primarily an internal product with no advisory fee, the Board does not consider the assessment of whether economies of scale would be realized if the Fund were to grow to some sufficient size to be relevant. 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 arrangement.
Semi-Annual Shareholder Report 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, as well as a report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30, are available, without charge and upon request, by calling 1-800-341-7400. These materials are also available at 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.)
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder ReportFederated Corporate Bond Strategy Portfolio
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31421P100
35282 (8/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| | Semi-Annual Shareholder Report |
| | June 30, 2012 |
|
Federated High-Yield Strategy Portfolio
A Portfolio of Federated Managed Pool Series
Not FDIC Insured
May Lose Value
No Bank Guarantee
Federated High-Yield Strategy Portfolio
Portfolio of Investments Summary Table (unaudited)
At June 30, 2012, the Fund's index classification1 was as follows:
Index Classification | Percentage of Total Net Assets2 |
Technology | 13.6% |
Health Care | 9.2% |
Energy | 8.0% |
Automotive | 7.2% |
Media – Non-cable | 6.7% |
Financial Institutions | 5.3% |
Gaming | 4.6% |
Retailers | 4.4% |
Food & Beverage | 4.2% |
Packaging | 4.2% |
Consumer Products | 3.9% |
Industrial — Other | 3.9% |
Chemicals | 3.5% |
Wireless Communications | 3.1% |
Building Materials | 2.9% |
Other3 | 13.6% |
Cash Equivalents4 | 1.2% |
Other Assets and Liabilities — Net5 | 0.5% |
TOTAL | 100.0% |
1 | Barclays Capital changed the name of the Index from “Barclays Capital U.S. Corporate High Yield 2% Issuer Capped Index” to “Barclays U.S. Corporate High Yield 2% Issuer Capped Index” (BHY2%ICI). Index classifications are based upon, and individual portfolio securities are assigned to, the classifications and subclassifications of the BHY2%ICI. Individual portfolio securities that are not included in the BHY2%ICI are assigned to an index classification by the Fund's Adviser. |
2 | As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of this table, the affiliated investment company (other than an affiliated money market mutual 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, index classifications which constitute less than 2.5% of the Fund's total net assets have been aggregated under the designation “Other.” |
4 | Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements. |
5 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report Portfolio of Investments
June 30, 2012 (unaudited)
Shares | | | Value |
| | MUTUAL FUND – 100.4% | |
1,611,863 | 1 | High Yield Bond Portfolio | 10,557,703 |
| | TOTAL INVESTMENTS — 100.4% (IDENTIFIED COST $10,544,696)2 | 10,557,703 |
| | OTHER ASSETS AND LIABILITIES - NET — (0.4)%3 | (41,189) |
| | TOTAL NET ASSETS — 100% | $10,516,514 |
1 | Due to this affiliated holding representing greater than 75% of the Fund's total net assets, a copy of the affiliated holding's most recent Annual Report is included with this Report. |
2 | Also represents cost for federal tax purposes. |
3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at June 30, 2012.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of June 30, 2012, all investments of the Fund utilized Level 1 inputs in valuing the Fund's assets carried at fair value. High Yield Bond Portfolio (HYCORE) is an affiliated holding offered only to registered investment companies and other accredited investors.
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 6/30/2012 | Year Ended December 31, | Period Ended 12/31/20081 |
2011 | 2010 | 2009 |
Net Asset Value, Beginning of Period | $13.32 | $13.79 | $14.18 | $10.41 | $10.00 |
Income From Investment Operations: | | | | | |
Net investment income | 0.61 | 1.22 | 1.40 | 1.27 | 0.03 |
Net realized and unrealized gain (loss) on investments | 0.42 | (0.41) | 0.62 | 3.92 | 0.41 |
TOTAL FROM INVESTMENT OPERATIONS | 1.03 | 0.81 | 2.02 | 5.19 | 0.44 |
Less Distributions: | | | | | |
Distributions from net investment income | (0.61) | (1.22) | (1.40) | (1.27) | (0.03) |
Distributions from net realized gain on investments | — | (0.06) | (1.01) | (0.15) | — |
TOTAL DISTRIBUTIONS | (0.61) | (1.28) | (2.41) | (1.42) | (0.03) |
Net Asset Value, End of Period | $13.74 | $13.32 | $13.79 | $14.18 | $10.41 |
Total Return2 | 7.85% | 6.09% | 15.07% | 52.35% | 4.38% |
Ratios to Average Net Assets: | | | | | |
Net expenses3 | 0.00%4 | 0.00% | 0.00% | 0.00% | 0.00%4 |
Net investment income | 9.06%4 | 8.98% | 9.68% | 9.42% | 16.78%4 |
Expense waiver/reimbursement5 | 2.71%4 | 3.07% | 2.92% | 7.69% | 932.30%4 |
Supplemental Data: | | | | | |
Net assets, end of period (000 omitted) | $10,517 | $8,900 | $9,720 | $9,156 | $435 |
Portfolio turnover | 17% | 82% | 125% | 40% | 0% |
1 | Reflects operations for the period from December 24, 2008 (date of initial investment) to December 31, 2008. |
2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
3 | The Adviser has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. |
4 | Computed on an annualized basis. |
5 | 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
Semi-Annual Shareholder Report Statement of Assets and Liabilities
June 30, 2012 (unaudited)
Assets: | | |
Total investment in an affiliated holding (Note 5) (identified cost $10,544,696) | | $10,557,703 |
Receivable for investments sold | | 115,000 |
TOTAL ASSETS | | 10,672,703 |
Liabilities: | | |
Bank overdraft | $30,467 | |
Income distribution payable | 89,529 | |
Payable to adviser (Note 5) | 9,721 | |
Payable for Directors'/Trustees' fees | 409 | |
Payable for auditing fees | 12,175 | |
Payable for portfolio accounting fees | 6,858 | |
Accrued expenses | 7,030 | |
TOTAL LIABILITIES | | 156,189 |
Net assets for 765,523 shares outstanding | | $10,516,514 |
Net Assets Consist of: | | |
Paid-in capital | | $10,536,366 |
Net unrealized appreciation of investments | | 13,007 |
Accumulated net realized loss on investments | | (32,966) |
Undistributed net investment income | | 107 |
TOTAL NET ASSETS | | $10,516,514 |
Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
$10,516,514 ÷ 765,523 shares outstanding, no par value, unlimited shares authorized | | $13.74 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations
Six Months Ended June 30, 2012 (unaudited)
Investment Income: | | | |
Dividends received from an affiliated holding (Note 5) | | | $450,853 |
Expenses: | | | |
Administrative fee (Note 5) | | $74,590 | |
Custodian fees | | 1,397 | |
Transfer and dividend disbursing agent fees and expenses | | 1,334 | |
Directors'/Trustees' fees | | 1,010 | |
Auditing fees | | 12,150 | |
Legal fees | | 4,022 | |
Portfolio accounting fees | | 20,941 | |
Share registration costs | | 10,118 | |
Printing and postage | | 7,337 | |
Insurance premiums | | 1,766 | |
Miscellaneous | | 482 | |
TOTAL EXPENSES | | 135,147 | |
Waiver and Reimbursement (Note 5): | | | |
Waiver of administrative fee | $(12,383) | | |
Reimbursement of other operating expenses | (122,764) | | |
TOTAL WAIVER AND REIMBURSEMENT | | (135,147) | |
Net expenses | | | — |
Net investment income | | | 450,853 |
Realized and Unrealized Gain on Investments: | | | |
Net realized gain on sales of investments in an affiliated holding (Note 5) | | | 60,115 |
Net change in unrealized depreciation of investments | | | 238,555 |
Net realized and unrealized gain on investments | | | 298,670 |
Change in net assets resulting from operations | | | $749,523 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets
| Six Months Ended (unaudited) 6/30/2012 | Year Ended 12/31/2011 |
Increase (Decrease) in Net Assets | | |
Operations: | | |
Net investment income | $450,853 | $841,149 |
Net realized gain (loss) on investments | 60,115 | (93,081) |
Net change in unrealized appreciation/depreciation of investments | 238,555 | (344,031) |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 749,523 | 404,037 |
Distributions to Shareholders: | | |
Distributions from net investment income | (450,746) | (841,149) |
Distributions from net realized gain on investments | — | (43,729) |
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (450,746) | (884,878) |
Share Transactions: | | |
Proceeds from sale of shares | 2,524,477 | 6,346,928 |
Cost of shares redeemed | (1,207,119) | (6,686,118) |
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 1,317,358 | (339,190) |
Change in net assets | 1,616,135 | (820,031) |
Net Assets: | | |
Beginning of period | 8,900,379 | 9,720,410 |
End of period (including undistributed net investment income of $107 and $0, respectively) | $10,516,514 | $8,900,379 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements
June 30, 2012 (unaudited)
1. ORGANIZATION
Federated Managed Pool Series (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of four portfolios. The financial statements included herein are only those of Federated High-Yield Strategy Portfolio (the “Fund”), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The investment objective of the Fund is to seek high current income.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Shares of other mutual funds are valued based upon their reported NAVs.
- Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market.
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Board of Trustees (the “Trustees”).
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation and Significant Events Procedures
The Trustees have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) or an affiliated adviser, and others to determine fair value of securities and in overseeing the calculation of the NAV. The Trustees have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation).Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures or options contracts;
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
Semi-Annual Shareholder Report- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Trustees have approved the use of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Repurchase Agreements
The Fund may invest in repurchase agreements for short-term liquidity purposes. 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.
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
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. 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 daily and paid monthly.
Premium and Discount Amortization
All premiums and discounts on fixed-income securities are amortized/accreted using the effective interest rate method.
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. As of and during the six months ended June 30, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
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.
Other
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.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| Six Months Ended 6/30/2012 | Year Ended 12/31/2011 |
Shares sold | 185,346 | 467,532 |
Shares redeemed | (88,173) | (504,077) |
NET CHANGE RESULTING FROM SHARE TRANSACTIONS | 97,173 | (36,545) |
4. FEDERAL TAX INFORMATION
At June 30, 2012, the cost of investments for federal tax purposes was $10,544,696. The net unrealized appreciation of investments for federal tax purposes was $13,007. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $13,007.
Semi-Annual Shareholder Report
At December 31, 2011, the Fund had a capital loss carryforward of $88,426 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, thereby reducing 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, a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term and does not expire. All of the Fund's capital loss carryforwards were incurred in taxable years beginning after December 22, 2010.The following schedule summarizes the Fund's capital loss carryforwards and expiration years:
Expiration Year | Short-Term | Long-Term | Total |
No Expiration | $81,432 | $6,994 | $88,426 |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The Adviser provides investment adviser services at no fee, because all eligible investors are: (1) in separately managed or wrap fee programs, who often pay a single aggregate fee to the wrap program sponsor for all costs and expenses of the wrap-fee programs; or (2) in certain other separately managed accounts and discretionary investment accounts. The Adviser has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. For the six months ended June 30, 2012, the Adviser reimbursed $122,764 of other operating expenses.
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:
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 six months ended June 30, 2012, FAS waived $12,383 of its fee. The net fee paid to FAS was 1.250% of average daily net assets of the Fund. The Fund is currently being charged the minimum administrative fee; therefore the fee as a percentage of average daily net assets is greater than the amounts presented in the chart above. For the six months ended June 30, 2012, the Adviser reimbursed the Fund for any fee paid to FAS.
General
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
Transactions Involving Affiliated Holdings
Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. Transactions involving the affiliated holding during the six months ended June 30, 2012, were as follows:
| High Yield Bond Portfolio |
Balance of Shares Held 12/31/2011 | 1,410,233 |
Purchases/Additions | 461,675 |
Sales/Reductions | 260,045 |
Balance of Shares Held 6/30/2012 | 1,611,863 |
Value | $10,557,703 |
Dividend Income | $450,853 |
The Fund invests in High Yield Bond Portfolio (“HYCORE”), a portfolio of Federated Core Trust (“Core Trust”) which is managed by Federated Investment Management Company, the Adviser. Core Trust is an open-end management investment company, registered under the Act, available only to registered investment companies and other institutional investors. The investment objective of HYCORE is to seek high current income. Federated receives no advisory or administrative fees from HYCORE. Income distributions from HYCORE are declared daily and paid monthly. All income distributions are recorded by the Fund as dividend income. Capital gain distributions of HYCORE, if any, are declared and paid annually, and are recorded by the Fund as capital gains received. The performance of the Fund is directly affected by the performance of HYCORE. The financial statements of HYCORE are included within this report to illustrate the security holdings, financial condition, results of operations and changes in net assets of the Portfolio in which the Fund invested 100.4% of its net assets at June 30, 2012. The financial statements of HYCORE should be read in conjunction with the Fund's financial statements. The valuation of securities held by HYCORE is discussed in the notes to its financial statements.
Semi-Annual Shareholder Report
6. Investment TRANSACTIONSPurchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended June 30, 2012, were as follows:
Purchases | $2,977,075 |
Sales | $1,697,500 |
7. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement 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 offered to the Fund by PNC Bank at the time of the borrowing. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012,the Fund did not utilize the LOC.
8. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012, the program was not utilized.
9. SUBSEQUENT eVENTS
On August 15, 2012, the Trustees approved the elimination of minimum administrative personnel and services fees effective September 1, 2012. Prior to this date, the administrative fee received during any fiscal year was at least $150,000 per portfolio and $40,000 per each additional class of Shares.
Management has evaluated subsequent events through the date the financial statements were issued, and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including to the extent applicable, management fees, 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 January 1, 2012 to June 30, 2012.
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. 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.
| Beginning Account Value 1/1/2012 | Ending Account Value 6/30/2012 | Expenses Paid During Period1 |
Actual | $1,000 | $1,078.50 | $0.00 |
Hypothetical (assuming a 5% return before expenses) | $1,000 | $1,024.86 | $0.00 |
1 | Expenses are equal to the Fund's annualized net expense ratio of 0.00%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). The Adviser has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. |
Semi-Annual Shareholder Report High Yield Bond Portfolio
Portfolio of Investments Summary Table (unaudited) – High Yield Bond Portfolio
At June 30, 2012, the Fund's index classification1 was as follows:
Index Classification | Percentage of Total Net Assets |
Technology | 13.5% |
Health Care | 9.1% |
Energy | 8.0% |
Automotive | 7.2% |
Media — Non-Cable | 6.7% |
Financial Institutions | 5.3% |
Gaming | 4.6% |
Retailers | 4.4% |
Food & Beverage | 4.2% |
Packaging | 4.2% |
Industrial — Other | 3.9% |
Consumer Products | 3.8% |
Chemicals | 3.5% |
Wireless Communications | 3.0% |
Building Materials | 2.9% |
Other2 | 13.6% |
Cash Equivalents3 | 1.2% |
Other Assets and Liabilities — Net4 | 0.9% |
TOTAL | 100.0% |
1 | Barclays Capital changed the name of the Index from “Barclays Capital U.S. Corporate High Yield 2% Issuer Capped Index” to “Barclays U.S. Corporate High Yield 2% Issuer Capped Index” (BHY2%ICI). Index classifications are based upon, and individual portfolio securities are assigned to, the classifications and sub-classifications of the Barclays U.S. Corporate High Yield 2% Issuer Capped Index (BHY2%ICI). Individual portfolio securities that are not included in the BHY2%ICI are assigned to an index classification by the Fund's adviser. |
2 | For purposes of this table, index classifications which constitute less than 2.5% of the Fund's total net assets have been aggregated under the designation “Other.” |
3 | Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements. |
4 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report Portfolio of Investments – High Yield Bond Portfolio
June 30, 2012 (unaudited)
Principal Amount or Shares | | | Value |
| | Corporate Bonds – 97.6% | |
| | Aerospace/Defense – 1.2% | |
$3,025,000 | 1 | Altegrity, Inc., Company Guarantee, Series 144A, 11.75%, 5/1/2016 | 2,677,125 |
1,950,000 | | ManTech International Corp., Company Guarantee, 7.25%, 4/15/2018 | 2,057,250 |
5,688,614 | 1,2 | Sequa Corp., Bond, Series 144A, 13.50%, 12/1/2015 | 6,058,374 |
2,975,000 | 1,2 | Sequa Corp., Sr. Note, Series 144A, 11.75%, 12/1/2015 | 3,153,500 |
10,675,000 | | TransDigm, Inc., Company Guarantee, 7.75%, 12/15/2018 | 11,769,187 |
| | TOTAL | 25,715,436 |
| | Automotive – 7.1% | |
5,625,000 | | Affinia Group, Inc., Company Guarantee, 9.00%, 11/30/2014 | 5,702,344 |
1,911,000 | 1,2 | Affinia Group, Inc., Sr. Secd. Note, Series 144A, 10.75%, 8/15/2016 | 2,075,824 |
3,400,000 | 1,2 | Allison Transmission, Inc., Sr. Unsecd. Note, Series 144A, 7.125%, 5/15/2019 | 3,561,500 |
6,875,000 | | American Axle & Manufacturing Holdings, Inc., Sr. Note, 7.75%, 11/15/2019 | 7,304,687 |
2,325,000 | | ArvinMeritor, Inc., Company Guarantee, 10.625%, 3/15/2018 | 2,481,938 |
3,650,000 | | Chrysler Group LLC, Note, Series WI, 8.00%, 6/15/2019 | 3,768,625 |
6,525,000 | | Chrysler Group LLC, Note, Series WI, 8.25%, 6/15/2021 | 6,737,062 |
3,950,000 | | Cooper-Standard Automotive, Inc., Company Guarantee, 8.50%, 5/1/2018 | 4,280,813 |
9,500,000 | | Exide Technologies, Sr. Secd. Note, 8.625%, 2/1/2018 | 7,540,625 |
2,000,000 | | Ford Motor Credit Co., 2.75%, 5/15/2015 | 2,017,884 |
1,775,000 | | Ford Motor Credit Co., 4.25%, 2/3/2017 | 1,863,313 |
2,450,000 | | Ford Motor Credit Co., 5.875%, 8/2/2021 | 2,732,451 |
1,425,000 | | Ford Motor Credit Co., Note, 7.50%, 8/1/2012 | 1,430,724 |
2,900,000 | | Ford Motor Credit Co., Sr. Note, 7.00%, 4/15/2015 | 3,230,249 |
2,625,000 | | Ford Motor Credit Co., Sr. Note, 8.00%, 6/1/2014 | 2,913,464 |
2,250,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 3.875%, 1/15/2015 | 2,318,751 |
1,125,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 5.00%, 5/15/2018 | 1,198,037 |
5,600,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 6.625%, 8/15/2017 | 6,379,654 |
6,600,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 8.00%, 12/15/2016 | 7,825,673 |
3,800,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 8.125%, 1/15/2020 | 4,658,348 |
3,275,000 | 1,2 | IDQ Holdings, Inc., Sr. Secd. Note, Series 144A, 11.50%, 4/1/2017 | 3,422,375 |
8,375,000 | 1,2 | International Automotive Components, Sr. Secd. Note, Series 144A, 9.125%, 6/1/2018 | 7,684,062 |
700,000 | 1,2 | Jaguar Land Rover PLC, Series 144A, 7.75%, 5/15/2018 | 724,500 |
8,700,000 | 1,2 | Jaguar Land Rover PLC, Sr. Unsecd. Note, Series 144A, 8.125%, 5/15/2021 | 9,026,250 |
958,000 | | Navistar International Corp., Sr. Note, 8.25%, 11/1/2021 | 923,273 |
7,175,000 | 1,2 | Pittsburgh Glass Works, LLC, Sr. Secd. Note, Series 144A, 8.50%, 4/15/2016 | 6,636,875 |
1,725,000 | 1,2 | Schaeffler AG, Series 144A, 7.75%, 2/15/2017 | 1,806,938 |
8,075,000 | 1,2 | Schaeffler AG, Series 144A, 8.50%, 2/15/2019 | 8,660,437 |
4,875,000 | 1,2 | Stoneridge, Inc., Sr. Secd. Note, Series 144A, 9.50%, 10/15/2017 | 5,027,344 |
4,350,000 | | Tenneco Automotive, Inc., Company Guarantee, 6.875%, 12/15/2020 | 4,719,750 |
425,000 | | Tenneco Automotive, Inc., Company Guarantee, 7.75%, 8/15/2018 | 463,250 |
5,574,000 | | Tomkins LLC/Tomkins Inc., Term Loan - 2nd Lien, 9.00%, 10/1/2018 | 6,228,945 |
4,525,000 | 1,2 | Tower Automotive, Inc., Sr. Secd. Note, Series 144A, 10.625%, 9/1/2017 | 4,819,125 |
10,075,000 | | United Components, Inc., Company Guarantee, Series WI, 8.625%, 2/15/2019 | 10,188,344 |
| | TOTAL | 150,353,434 |
| | Building Materials – 2.9% | |
3,975,000 | | Anixter International, Inc., 5.625%, 5/1/2019 | 4,124,062 |
3,125,000 | | Associated Materials, Inc., Sr. Secd. Note, 9.125%, 11/1/2017 | 2,804,688 |
1,875,000 | 1,2 | Building Materials Corp. of America, Bond, Series 144A, 6.75%, 5/1/2021 | 2,010,938 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$1,525,000 | 1,2 | Building Materials Corp. of America, Sr. Note, Series 144A, 7.50%, 3/15/2020 | 1,662,250 |
4,000,000 | | Interline Brands, Inc., Company Guarantee, 7.00%, 11/15/2018 | 4,180,000 |
7,250,000 | 1,2 | Masonite International Corp., Sr. Note, Series 144A, 8.25%, 4/15/2021 | 7,503,750 |
8,625,000 | | Norcraft Cos. L.P., Sr. Secd. Note, Series WI, 10.50%, 12/15/2015 | 8,581,875 |
3,725,000 | | Nortek Holdings, Inc., Sr. Unsecd. Note, Series WI, 10.00%, 12/1/2018 | 3,929,875 |
6,950,000 | | Nortek Holdings, Inc., Sr. Unsecd. Note, Series WI, 8.50%, 4/15/2021 | 6,828,375 |
8,325,000 | | Ply Gem Industries, Inc., Sr. Secd. Note, Series WI, 8.25%, 2/15/2018 | 8,200,125 |
7,425,000 | 1,2 | Rexel, Inc., Series 144A, 6.125%, 12/15/2019 | 7,508,531 |
3,525,000 | 1,2 | Roofing Supply Group, Series 144A, 10.00%, 6/1/2020 | 3,701,250 |
| | TOTAL | 61,035,719 |
| | Chemicals – 3.5% | |
5,750,000 | | Compass Minerals International, Inc., Company Guarantee, 8.00%, 6/1/2019 | 6,188,437 |
11,175,000 | | Ferro Corp., Sr. Note, 7.875%, 8/15/2018 | 10,951,500 |
6,125,000 | | Hexion U.S. Finance Corp., Sr. Secd. Note, 8.875%, 2/1/2018 | 6,278,125 |
3,900,000 | | Hexion U.S. Finance Corp., Sr. Secd. Note, Series WI, 9.00%, 11/15/2020 | 3,383,250 |
6,250,000 | | Huntsman International LLC, Company Guarantee, 5.50%, 6/30/2016 | 6,265,625 |
1,925,000 | | Huntsman International LLC, Company Guarantee, 8.625%, 3/15/2021 | 2,180,063 |
3,300,000 | | Huntsman International LLC, Company Guarantee, Series WI, 8.625%, 3/15/2020 | 3,720,750 |
2,550,000 | | Koppers Holdings, Inc., Company Guarantee, Series WI, 7.875%, 12/1/2019 | 2,760,375 |
5,175,000 | 1,2 | Momentive Performance Materials, Inc., Series 144A, 10.00%, 10/15/2020 | 5,213,812 |
4,925,000 | | Momentive Performance Materials, Inc., Sr. Note, Series WI, 9.00%, 1/15/2021 | 3,755,313 |
6,825,000 | | Omnova Solutions, Inc., Company Guarantee, 7.875%, 11/1/2018 | 6,876,187 |
4,656,000 | 1,2 | Oxea Finance, Sr. Secd. Note, Series 144A, 9.50%, 7/15/2017 | 4,970,280 |
6,750,000 | | Solutia, Inc., Company Guarantee, 8.75%, 11/1/2017 | 7,602,187 |
1,375,000 | | Solutia, Inc., Sr. Note, 7.875%, 3/15/2020 | 1,612,188 |
1,100,000 | | Union Carbide Corp., Sr. Deb., 7.875%, 4/1/2023 | 1,362,796 |
| | TOTAL | 73,120,888 |
| | Construction Machinery – 0.7% | |
1,000,000 | | RSC Equipment Rental, Inc., Company Guarantee, Series WI, 8.25%, 2/1/2021 | 1,070,000 |
3,625,000 | | RSC Equipment Rental, Inc., Sr. Note, Series WI, 10.25%, 11/15/2019 | 4,096,250 |
650,000 | 1,2 | United Rentals, Inc., Sr. Secd. Note, Series 144A, 5.75%, 7/15/2018 | 677,625 |
7,300,000 | | United Rentals, Inc., Sr. Sub. Note, 8.375%, 9/15/2020 | 7,719,750 |
925,000 | 1,2 | United Rentals, Inc., Sr. Unsecd. Note, Series 144A, 7.375%, 5/15/2020 | 968,937 |
1,175,000 | 1,2 | United Rentals, Inc., Sr. Unsecd. Note, Series 144A, 7.625%, 4/15/2022 | 1,233,750 |
| | TOTAL | 15,766,312 |
| | Consumer Products – 3.8% | |
5,675,000 | 1,2 | Freedom Group, Inc., Series 144A, 7.875%, 5/1/2020 | 5,930,375 |
8,000,000 | | Jarden Corp., Sr. Sub. Note, 7.50%, 5/1/2017 | 9,000,000 |
1,125,000 | | Jarden Corp., Sr. Unsecd. Note, 8.00%, 5/1/2016 | 1,231,875 |
5,700,000 | 1,2 | Libbey Glass, Inc., Sr. Secd. Note, Series 144A, 6.875%, 5/15/2020 | 5,885,250 |
4,050,000 | | Prestige Brands Holdings, Inc., Company Guarantee, 8.25%, 4/1/2018 | 4,455,000 |
2,025,000 | 1,2 | Prestige Brands Holdings, Inc., Sr. Unsecd. Note, Series 144A, 8.125%, 2/1/2020 | 2,232,563 |
1,884,000 | 1,2 | Sealy Mattress Co., Sr. Secd. Note, Series 144A, 10.875%, 4/15/2016 | 2,048,869 |
11,425,000 | | Sealy Mattress Co., Sr. Sub. Note, 8.25%, 6/15/2014 | 11,310,750 |
2,400,000 | | ServiceMaster Co., Sr. Unsecd. Note, 7.10%, 3/1/2018 | 2,250,000 |
1,300,000 | | ServiceMaster Co., Sr. Unsecd. Note, 7.45%, 8/15/2027 | 1,085,500 |
6,375,000 | | ServiceMaster Co., Sr. Unsecd. Note, 8.00%, 2/15/2020 | 6,972,656 |
8,075,000 | 1,2 | Simmons Co., Company Guarantee, Series 144A, 11.25%, 7/15/2015 | 8,377,893 |
350,000 | 1,2 | Spectrum Brands Holdings, Inc., 9.50%, 6/15/2018 | 397,250 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$5,625,000 | 1,2 | Spectrum Brands Holdings, Inc., Series 144A, 6.75%, 3/15/2020 | 5,828,906 |
950,000 | | Spectrum Brands Holdings, Inc., Sr. Secd. Note, 9.50%, 6/15/2018 | 1,078,250 |
12,900,000 | | Visant Corp., Company Guarantee, Series WI, 10.00%, 10/1/2017 | 12,867,750 |
| | TOTAL | 80,952,887 |
| | Energy – 8.0% | |
5,300,000 | | ATP Oil & Gas Corp., Sr. Secd. 2nd Priority Note, Series WI, 11.875%, 5/1/2015 | 2,491,000 |
6,050,000 | | Basic Energy Services, Inc., Company Guarantee, 7.125%, 4/15/2016 | 6,004,625 |
1,675,000 | | Basic Energy Services, Inc., Company Guarantee, Series WI, 7.75%, 2/15/2019 | 1,616,375 |
4,075,000 | | Berry Petroleum Co., Sr. Unsecd. Note, 6.375%, 9/15/2022 | 4,217,625 |
950,000 | | Berry Petroleum Co., Sr. Unsecd. Note, 6.75%, 11/1/2020 | 997,500 |
4,700,000 | 1,2 | CVR Energy, Inc., 2nd Priority Sr. Secd. Note, Series 144A, 10.875%, 4/1/2017 | 5,264,000 |
6,125,000 | | Chaparral Energy Inc., Company Guarantee, 9.875%, 10/1/2020 | 6,837,031 |
1,825,000 | 1,2 | Chaparral Energy Inc., Series 144A, 7.625%, 11/15/2022 | 1,870,625 |
1,300,000 | | Chesapeake Energy Corp., Sr. Note, 6.875%, 11/15/2020 | 1,287,000 |
4,375,000 | | Chesapeake Energy Corp., Sr. Note, 6.875%, 8/15/2018 | 4,375,000 |
3,275,000 | | Chesapeake Energy Corp., Sr. Unsecd. Note, 6.625%, 8/15/2020 | 3,258,625 |
5,175,000 | | Chesapeake Energy Corp., Sr. Unsecd. Note, 6.775%, 3/15/2019 | 5,052,094 |
3,800,000 | | Chesapeake Midstream Partners L. P., Sr. Unsecd. Note, Series WI, 6.125%, 7/15/2022 | 3,743,000 |
2,575,000 | 1,2 | Chesapeake Oilfield Services Co., Sr. Note, Series 144A, 6.625%, 11/15/2019 | 2,330,375 |
1,750,000 | | Compagnie Generale de Geophysique Veritas, Company Guarantee, 9.50%, 5/15/2016 | 1,920,625 |
1,925,000 | | Compagnie Generale de Geophysique Veritas, Sr. Unsecd. Note, 6.50%, 6/1/2021 | 1,934,625 |
5,825,000 | | Compagnie Generale de Geophysique Veritas, Sr. Unsecd. Note, 7.75%, 5/15/2017 | 6,032,516 |
4,850,000 | | Comstock Resources, Inc., Company Guarantee, 7.75%, 4/1/2019 | 4,486,250 |
2,975,000 | | Comstock Resources, Inc., Sr. Secd. Note, 9.50%, 6/15/2020 | 2,937,812 |
3,525,000 | | Concho Resources, Inc., Sr. Note, 7.00%, 1/15/2021 | 3,789,375 |
4,975,000 | | Copano Energy LLC, Company Guarantee, 7.125%, 4/1/2021 | 5,149,125 |
1,625,000 | | Denbury Resources, Inc., Sr. Sub. Note, 6.375%, 8/15/2021 | 1,698,125 |
1,300,000 | | Denbury Resources, Inc., Sr. Sub. Note, 9.75%, 3/1/2016 | 1,434,875 |
2,142,000 | | Denbury Resources, Inc., Sr. Sub., 8.25%, 2/15/2020 | 2,356,200 |
1,800,000 | 1,2 | EP Energy LLC., Sr. Secd. Note, Series 144A, 6.875%, 5/1/2019 | 1,883,250 |
7,200,000 | 1,2 | EP Energy LLC., Sr. Unsecd. Note, Series 144A, 9.375%, 5/1/2020 | 7,470,000 |
2,275,000 | | EXCO Resources, Inc., Sr. Note, 7.50%, 9/15/2018 | 1,979,250 |
1,525,000 | | Energy XXI Gulf Coast Inc., 7.75%, 6/15/2019 | 1,547,875 |
5,150,000 | | Energy XXI Gulf Coast Inc., 9.25%, 12/15/2017 | 5,536,250 |
6,050,000 | | Forbes Energy Services Ltd., Company Guarantee, Series WI, 9.00%, 6/15/2019 | 5,747,500 |
7,150,000 | | Forest Oil Corp., Sr. Note, 7.25%, 6/15/2019 | 6,595,875 |
2,175,000 | 1,2 | Halcon Resources Corp., Sr. Unsecd. Note, Series 144A, 9.75%, 7/15/2020 | 2,194,031 |
1,375,000 | 1,2 | Laredo Petroleum, Series 144A, 7.375%, 5/1/2022 | 1,433,438 |
3,375,000 | | Linn Energy LLC, Company Guarantee, 7.75%, 2/1/2021 | 3,543,750 |
4,725,000 | | Linn Energy LLC, Sr. Unsecd. Note, 8.625%, 4/15/2020 | 5,114,812 |
1,800,000 | 1,2 | Lone Pine Resources, Inc., Sr. Unsecd. Note, Series 144A, 10.375%, 2/15/2017 | 1,705,500 |
3,150,000 | | Oasis Petroleum Inc., 6.875%, 1/15/2023 | 3,169,687 |
4,850,000 | | Oasis Petroleum Inc., Company Guarantee, 6.50%, 11/1/2021 | 4,825,750 |
5,650,000 | | PHI, Inc., Company Guarantee, Series WI, 8.625%, 10/15/2018 | 5,734,750 |
2,700,000 | | Plains Exploration & Production Co., 6.75%, 2/1/2022 | 2,767,500 |
2,050,000 | | Plains Exploration & Production Co., Sr. Note, 6.125%, 6/15/2019 | 2,070,500 |
2,000,000 | | Plains Exploration & Production Co., Sr. Note, 7.625%, 6/1/2018 | 2,135,000 |
625,000 | | SM Energy Co., Sr. Unsecd. Note, Series WI, 6.50%, 11/15/2021 | 639,063 |
475,000 | | Sandridge Energy, Inc., 7.50%, 3/15/2021 | 471,438 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$5,900,000 | 1,2 | Sandridge Energy, Inc., Series 144A, 8.125%, 10/15/2022 | 5,966,375 |
1,525,000 | | Sesi LLC, Sr. Note, Series WI, 6.375%, 5/1/2019 | 1,605,063 |
1,425,000 | 1,2 | Sesi LLC, Sr. Unsecd. Note, Series 144A, 7.125%, 12/15/2021 | 1,556,813 |
5,525,000 | | Vanguard Natural Resources LLC, Sr. Unsecd. Note, 7.875%, 4/1/2020 | 5,531,906 |
5,825,000 | | W&T Offshore, Inc., Sr. Unsecd. Note, Series WI, 8.50%, 6/15/2019 | 6,043,437 |
| | TOTAL | 168,353,216 |
| | Entertainment – 1.0% | |
7,450,000 | | Cedar Fair LP, Company Guarantee, 9.125%, 8/1/2018 | 8,306,750 |
6,675,000 | | Cinemark USA, Inc., Company Guarantee, 8.625%, 6/15/2019 | 7,425,937 |
800,000 | | Cinemark USA, Inc., Company Guarantee, Series WI, 7.375%, 6/15/2021 | 872,000 |
2,475,000 | 1,3,4,5 | Hard Rock Park Operations LLC, Sr. Secd. Note, Series 144A, 0.00%, 4/1/2012 | 0 |
4,525,000 | | Regal Cinemas, Inc., Company Guarantee, 8.625%, 7/15/2019 | 5,011,438 |
| | TOTAL | 21,616,125 |
| | Financial Institutions – 5.3% | |
5,400,000 | | Ally Financial, Inc., Company Guarantee, 7.50%, 9/15/2020 | 6,088,500 |
2,555,000 | | Ally Financial, Inc., Company Guarantee, 8.00%, 11/1/2031 | 3,008,512 |
3,550,000 | | Ally Financial, Inc., Company Guarantee, 8.00%, 3/15/2020 | 4,100,250 |
10,500,000 | | Ally Financial, Inc., Company Guarantee, 8.30%, 2/12/2015 | 11,471,250 |
3,550,000 | | Ally Financial, Inc., Company Guarantee, Series WI, 6.25%, 12/1/2017 | 3,754,278 |
3,000,000 | | Ally Financial, Inc., Sr. Unsecd. Note, 5.50%, 2/15/2017 | 3,051,534 |
1,825,000 | | CIT Group, Inc., 5.00%, 5/15/2017 | 1,880,891 |
9,625,000 | | CIT Group, Inc., 5.25%, 3/15/2018 | 9,949,844 |
725,000 | | CIT Group, Inc., 5.375%, 5/15/2020 | 739,953 |
1,850,000 | 1,2 | CIT Group, Inc., Series 144A, 4.75%, 2/15/2015 | 1,900,875 |
2,150,000 | 1,2 | CIT Group, Inc., Sr. 2nd Priority Note, Series 144A, 6.625%, 4/1/2018 | 2,332,750 |
14,127,921 | 1,2 | CIT Group, Inc., Sr. Secd. Note, Series 144A, 7.00%, 5/2/2017 | 14,172,070 |
1,900,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 4.875%, 4/1/2015 | 1,910,858 |
1,225,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 5.75%, 5/15/2016 | 1,244,355 |
2,325,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 6.25%, 5/15/2019 | 2,369,175 |
1,100,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 8.25%, 12/15/2020 | 1,263,224 |
4,300,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 8.625%, 9/15/2015 | 4,767,625 |
14,350,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 8.75%, 3/15/2017 | 16,179,625 |
1,025,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 8.875%, 9/1/2017 | 1,160,813 |
2,600,000 | 1,2 | Neuberger Berman, Inc., Series 144A, 5.875%, 3/15/2022 | 2,730,000 |
2,825,000 | 1,2 | Neuberger Berman, Inc., Sr. Note, Series 144A, 5.625%, 3/15/2020 | 2,959,187 |
14,925,000 | | Nuveen Investments, Company Guarantee, 10.50%, 11/15/2015 | 15,223,500 |
| | TOTAL | 112,259,069 |
| | Food & Beverage – 4.2% | |
7,125,000 | 1,2 | Aramark Corp., Series 144A, 8.625%, 5/1/2016 | 7,312,103 |
8,225,000 | | Aramark Corp., Sr. Note, 8.50%, 2/1/2015 | 8,430,707 |
4,100,000 | | B&G Foods, Inc., Sr. Note, 7.625%, 1/15/2018 | 4,428,000 |
925,000 | | Darling International, Inc., Company Guarantee, 8.50%, 12/15/2018 | 1,042,938 |
9,025,000 | | Dean Foods Co., Company Guarantee, 7.00%, 6/1/2016 | 9,634,187 |
6,475,000 | | Dean Foods Co., Sr. Note, Series WI, 9.75%, 12/15/2018 | 7,252,000 |
12,550,000 | | Del Monte Foods Co., Sr. Unsecd. Note, 7.625%, 2/15/2019 | 12,722,562 |
13,750,000 | | Michael Foods, Inc., Company Guarantee, Series WI, 9.75%, 7/15/2018 | 15,159,375 |
375,000 | | Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., Company Guarantee, 8.25%, 9/1/2017 | 398,438 |
6,750,000 | | Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., Company Guarantee, 9.25%, 4/1/2015 | 6,969,375 |
2,825,000 | | Smithfield Foods, Inc., Sr. Note, 7.75%, 7/1/2017 | 3,139,281 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$11,050,000 | 1,2 | U.S. Foodservice, Inc., Sr. Unsecd. Note, Series 144A, 8.50%, 6/30/2019 | 11,271,000 |
| | TOTAL | 87,759,966 |
| | Gaming – 4.6% | |
6,600,000 | 1,2 | Affinity Gaming LLC, Sr. Unsecd. Note, Series 144A, 9.00%, 5/15/2018 | 6,633,000 |
5,991,000 | | American Casino & Entertainment, Sr. Secd. Note, 11.00%, 6/15/2014 | 6,320,505 |
3,425,000 | | Ameristar Casinos, Inc., Sr. Unsecd. Note, Series WI, 7.50%, 4/15/2021 | 3,681,875 |
1,925,000 | 1,2 | Chester Downs & Marina, Series 144A, 9.25%, 2/1/2020 | 2,011,625 |
8,700,000 | 1,2 | Great Canadian Gaming Corp., Company Guarantee, Series 144A, 7.25%, 2/15/2015 | 8,863,125 |
13,150,000 | | Harrah's Operating Co., Inc., Sr. Secd. Note, 11.25%, 6/1/2017 | 14,415,687 |
1,775,000 | 1,2 | Harrah's Operating Co., Inc., Sr. Secd. Note, Series 144A, 8.50%, 2/15/2020 | 1,792,750 |
7,900,000 | | Jacobs Entertainment, Inc., Sr. Note, 9.75%, 6/15/2014 | 7,880,250 |
4,925,000 | | MGM Mirage, Inc., 7.75%, 3/15/2022 | 5,097,375 |
10,425,000 | | MGM Mirage, Inc., Sr. Note, 7.50%, 6/1/2016 | 10,842,000 |
800,000 | | MGM Mirage, Inc., Sr. Secd. Note, 11.125%, 11/15/2017 | 902,000 |
1,000,000 | | MGM Mirage, Inc., Sr. Secd. Note, 9.00%, 3/15/2020 | 1,115,000 |
2,800,000 | 1,2 | MGM Mirage, Inc., Sr. Unsecd. Note, Series 144A, 8.625%, 2/1/2019 | 3,010,000 |
4,050,000 | | Peninsula Gaming, LLC, Company Guarantee, 10.75%, 8/15/2017 | 4,637,250 |
1,200,000 | | Penn National Gaming, Inc., Sr. Sub., 8.75%, 8/15/2019 | 1,335,000 |
4,000,000 | 1,2 | Rivers Pittsburgh LP, Sr. Secd. Note, Series 144A, 9.50%, 6/15/2019 | 4,165,000 |
5,850,000 | 1,2 | Seminole Tribe of Florida, Bond, Series 144A, 7.804%, 10/1/2020 | 5,768,451 |
2,700,000 | 1,2 | Seminole Tribe of Florida, Note, Series 144A, 7.75%, 10/1/2017 | 2,956,500 |
5,650,000 | 1,2 | Sugarhouse HSP Gaming Finance Corp., Sr. Secd. Note, Series 144A, 8.625%, 4/15/2016 | 5,989,000 |
| | TOTAL | 97,416,393 |
| | Health Care – 9.1% | |
4,700,000 | | Alere, Inc., Company Guarantee, 9.00%, 5/15/2016 | 4,805,750 |
5,750,000 | | Bausch & Lomb, Inc., Sr. Unsecd. Note, 9.875%, 11/1/2015 | 6,037,500 |
14,000,000 | | Biomet, Inc., Sr. Sub. Note, Series WI, 11.625%, 10/15/2017 | 15,172,500 |
5,550,000 | | CRC Health Corp., Sr. Sub. Note, 10.75%, 2/1/2016 | 4,911,750 |
7,650,000 | | DJO Finance LLC, Company Guarantee, Series WI, 7.75%, 4/15/2018 | 6,349,500 |
1,825,000 | | DJO Finance LLC, Company Guarantee, Series WI, 9.75%, 10/15/2017 | 1,314,000 |
2,000,000 | 1,2 | DJO Finance LLC, Series 144A, 8.75%, 3/15/2018 | 2,050,000 |
11,350,000 | | Emergency Medical Services Corp., Company Guarantee, Series WI, 8.125%, 6/1/2019 | 11,903,312 |
7,150,000 | | Grifols, Inc., Sr. Note, Series WI, 8.25%, 2/1/2018 | 7,704,125 |
10,850,000 | | HCA Holdings, Inc, Sr. Unsecd. Note, Series WI, 7.75%, 5/15/2021 | 11,690,875 |
4,000,000 | | HCA, Inc., Revolver - 1st Lien, 5.875%, 3/15/2022 | 4,190,000 |
2,925,000 | | HCA, Inc., Sr. Note, 7.50%, 11/6/2033 | 2,756,813 |
1,825,000 | | HCA, Inc., Sr. Secd. Note, 6.50%, 2/15/2020 | 1,982,406 |
22,375,000 | | HCA, Inc., Sr. Unsecd. Note, 7.50%, 2/15/2022 | 24,444,687 |
8,125,000 | | Iasis Healthcare, Sr. Unsecd. Note, 8.375%, 5/15/2019 | 8,084,375 |
5,575,000 | 1,2 | Inventiv Health Inc., Sr. Note, Series 144a, 10.00%, 8/15/2018 | 4,822,375 |
6,700,000 | 1,2 | Jaguar Holding Co., Sr. Note, 9.50%, 12/1/2019 | 7,361,625 |
11,550,000 | 1,2 | Multiplan, Inc., Company Guarantee, Series 144A, 9.875%, 9/1/2018 | 12,705,000 |
4,575,000 | | Omnicare, Inc., Sr. Sub., 7.75%, 6/1/2020 | 5,009,625 |
1,050,000 | 1,2 | PSS World Medical, Inc., Series 144A, 6.375%, 3/1/2022 | 1,081,500 |
4,025,000 | 1,2 | Physiotherapy, Inc., Series 144A, 11.875%, 5/1/2019 | 4,095,438 |
6,025,000 | 1,2 | United Surgical Partners International, Inc., Series 144A, 9.00%, 4/1/2020 | 6,416,625 |
1,775,000 | | Universal Hospital Services, Inc., Floating Rate Note - Sr. Secured Note, 4.111%, 6/1/2015 | 1,695,125 |
8,050,000 | | Universal Hospital Services, Inc., Sr. Secd. Note, 8.50%, 6/1/2015 | 8,246,219 |
12,188,906 | | VWR Funding, Inc., Company Guarantee, Series B, 10.25%, 7/15/2015 | 12,615,518 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$10,975,000 | | Vanguard Health Holdings II, Company Guarantee, 8.00%, 2/1/2018 | 11,276,812 |
3,975,000 | 1,2 | Wolverine Healthcare, Sr. Note, Series 144A, 10.625%, 6/1/2020 | 4,153,875 |
| | TOTAL | 192,877,330 |
| | Industrial - Other – 3.9% | |
1,950,000 | | American Tire Distributors, Inc., Sr. Secd. Note, Series 144A, 9.75%, 6/1/2017 | 2,086,500 |
1,975,000 | 1,2 | Amsted Industries, Inc., Sr. Note, Series 144A, 8.125%, 3/15/2018 | 2,098,438 |
1,925,000 | | Atkore International, Inc., Sr. Secd. Note, Series WI, 9.875%, 1/1/2018 | 1,876,875 |
1,000,000 | | Belden CDT, Inc., Company Guarantee, 9.25%, 6/15/2019 | 1,095,000 |
4,875,000 | | Belden CDT, Inc., Sr. Sub. Note, 7.00%, 3/15/2017 | 5,045,625 |
6,875,000 | 1,2 | Cleaver-Brooks, Inc., Sr. Secd. Note, Series 144A, 12.25%, 5/1/2016 | 7,339,062 |
5,600,000 | 1,2 | Dynacast International LLC, Series 144A, 9.25%, 7/15/2019 | 5,838,000 |
7,475,000 | | General Cable Corp., Sr. Note, 7.125%, 4/1/2017 | 7,699,250 |
4,675,000 | 1,2 | International Wire Group Holdings, Inc., Sr. Secd. Note, Series 144A, 9.75%, 4/15/2015 | 4,932,125 |
5,675,000 | 1,2 | J.B. Poindexter, Inc., Series 144A, 9.00%, 4/1/2022 | 5,703,375 |
8,225,000 | 1,2 | Knowledge Learning Corp., Sr. Sub. Note, Series 144A, 7.75%, 2/1/2015 | 6,662,250 |
1,700,000 | 1,2 | MMI International Ltd., Series 144A, 8.00%, 3/1/2017 | 1,759,500 |
4,175,000 | 1,2 | Maxim Finance Corp., Sr. Secd. Note, Series 144A, 12.25%, 4/15/2015 | 4,133,250 |
2,450,000 | 1,2 | Milacron LLC, Series 144A, 8.375%, 5/15/2019 | 2,437,750 |
3,600,000 | | Mueller Water Products, Inc., Company Guarantee, 8.75%, 9/1/2020 | 4,014,000 |
4,200,000 | | Mueller Water Products, Inc., Sr. Sub. Note, Series WI, 7.375%, 6/1/2017 | 4,221,000 |
6,700,000 | | Rexnord, Inc., Company Guarantee, 8.50%, 5/1/2018 | 7,303,000 |
6,250,000 | | The Hillman Group, Inc., Sr. Unsecd. Note, 10.875%, 6/1/2018 | 6,640,625 |
666,000 | | Thermon Industries, Inc., Sr. Secd. Note, Series WI, 9.50%, 5/1/2017 | 735,930 |
| | TOTAL | 81,621,555 |
| | Lodging – 0.1% | |
1,175,000 | | Choice Hotels International, Inc., 5.75%, 7/1/2022 | 1,231,829 |
| | Media - Cable – 1.2% | |
1,325,000 | 1,2 | Cequel Communications Holdings, Sr. Note, Series 144A, 8.625%, 11/15/2017 | 1,434,313 |
2,175,000 | | Charter Communications Holdings II, 6.625%, 1/31/2022 | 2,338,125 |
1,275,000 | | Charter Communications Holdings II, 7.375%, 6/1/2020 | 1,407,281 |
4,000,000 | | Charter Communications Holdings II, Company Guarantee, 7.25%, 10/30/2017 | 4,380,000 |
1,325,000 | | Charter Communications Holdings II, Company Guarantee, Series WI, 7.875%, 4/30/2018 | 1,447,562 |
800,000 | | Charter Communications Holdings II, Company Guarantee, Series WI, 8.125%, 4/30/2020 | 896,000 |
3,525,000 | | Charter Communications Holdings II, Sr. Note, 7.00%, 1/15/2019 | 3,824,625 |
1,525,000 | 1,2 | DISH DBS Corporation, Series 144A, 4.625%, 7/15/2017 | 1,534,531 |
7,075,000 | 1,2 | DISH DBS Corporation, Series 144A, 5.875%, 7/15/2022 | 7,181,125 |
1,711,000 | | Virgin Media, Inc., Company Guarantee, Series 1, 9.50%, 8/15/2016 | 1,916,320 |
| | TOTAL | 26,359,882 |
| | Media - Non-Cable – 6.7% | |
2,525,000 | 1,2 | AMC Networks, Inc., Sr. Note, Series 144A, 7.75%, 7/15/2021 | 2,796,438 |
9,550,000 | | Clear Channel Communications, Inc., Company Guarantee, 9.00%, 3/1/2021 | 8,356,250 |
7,350,000 | | Clear Channel Outdoor Holdings, Inc., Company Guarantee, Series B, 9.25%, 12/15/2017 | 8,048,250 |
1,150,000 | 1,2 | Clear Channel Worldwide, Sr. Sub. Note, Series 144A, 7.625%, 3/15/2020 | 1,106,875 |
7,375,000 | 1,2 | Clear Channel Worldwide, Sr. Sub. Note, Series 144a, 7.625%, 3/15/2020 | 7,245,937 |
9,675,000 | | Crown Media Holdings, Inc., Company Guarantee, 10.50%, 7/15/2019 | 10,497,375 |
6,975,000 | | Cumulus Media, Inc., Sr. Unsecd. Note, Series WI, 7.75%, 5/1/2019 | 6,608,812 |
6,525,000 | | Entercom Radio LLC, Sr. Sub. Note, Series WI, 10.50%, 12/1/2019 | 7,047,000 |
5,237,000 | | Entravision Communications Corp., Sr. Secd. Note, 8.75%, 8/1/2017 | 5,577,405 |
6,875,000 | 1,2 | FoxCo Acquisitions, LLC, Sr. Note, Series 144A, 13.375%, 7/15/2016 | 7,390,625 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$5,200,000 | 3 | Idearc, Inc., Company Guarantee, (Litigation Trust Interests), 8.00%, 11/15/2016 | 136,500 |
2,875,000 | | Intelsat Bermuda, Ltd., Company Guarantee, 11.50%, 2/4/2017 | 2,979,219 |
5,300,000 | | Intelsat Jackson Holdings S.A., Company Guarantee, 8.50%, 11/1/2019 | 5,883,000 |
2,500,000 | 1,2 | Intelsat Jackson Holdings S.A., Series 144A, 7.25%, 10/15/2020 | 2,637,500 |
9,282,000 | | Intelsat Jackson Holdings S.A., Sr. Note, 11.25%, 6/15/2016 | 9,746,100 |
1,625,000 | | Intelsat Jackson Holdings S.A., Sr. Unsecd. Note, Series WI, 7.25%, 4/1/2019 | 1,714,375 |
2,350,000 | | Intelsat Jackson Holdings S.A., Sr. Unsecd. Note, Series WI, 7.50%, 4/1/2021 | 2,496,875 |
3,900,000 | | Lamar Media Corp., Company Guarantee, 7.875%, 4/15/2018 | 4,309,500 |
1,350,000 | 1,2 | Lamar Media Corp., Series 144A, 5.875%, 2/1/2022 | 1,390,500 |
235,000 | | Nexstar Broadcasting Group, Inc., Company Guarantee, 7.00%, 1/15/2014 | 232,356 |
4,701,808 | | Nexstar Broadcasting Group, Inc., Company Guarantee, Series 1, 7.00%, 1/15/2014 | 4,660,667 |
1,550,000 | | Nexstar Broadcasting Group, Inc., Sr. Secd. Note, Series WI, 8.875%, 4/15/2017 | 1,644,938 |
2,125,000 | | Nielsen Finance LLC/Nielsen Finance Co., Company Guarantee, 7.75%, 10/15/2018 | 2,364,063 |
4,425,000 | 1,2 | ProQuest Co., Company Guarantee, Series 144A, 9.00%, 10/15/2018 | 3,960,375 |
9,125,000 | | SSI Investments II Ltd., Company Guarantee, 11.125%, 6/1/2018 | 10,288,437 |
3,150,000 | 1,2 | Sirius XM Radio Inc., Sr. Note, Series 144A, 8.75%, 4/1/2015 | 3,559,500 |
8,523,000 | | Southern Graphics Systems, Inc., Sr. Sub. Note, Series WI, 12.00%, 12/15/2013 | 8,565,615 |
4,775,000 | 1,2 | Townsquare Radio LLC, Series 144A, 9.00%, 4/1/2019 | 5,013,750 |
4,050,000 | 1,2 | XM Satellite Radio, Inc., Sr. Unsecd. Note, Series 144A, 7.625%, 11/1/2018 | 4,374,000 |
| | TOTAL | 140,632,237 |
| | Metals & Mining – 0.3% | |
1,825,000 | 3,4,5 | Aleris International, Inc., Company Guarantee, 9.00%, 12/15/2014 | 183 |
2,325,000 | 3,4,5 | Aleris International, Inc., Sr. Sub. Note, 10.00%, 12/15/2016 | 0 |
6,175,000 | 1,2 | Penn Virginia Resource Partners LP, Sr. Note, Series 144A, 8.375%, 6/1/2020 | 6,298,500 |
| | TOTAL | 6,298,683 |
| | Packaging – 4.2% | |
7,050,000 | 1,2 | Ardagh Packaging Finance PLC, Company Guarantee, Series 144A, 9.125%, 10/15/2020 | 7,508,250 |
2,125,000 | 1,2 | Ardagh Packaging Finance PLC, Sr. Unsecd. Note, 9.125%, 10/15/2020 | 2,241,875 |
2,725,000 | | Berry Plastics Corp., Sr. Secd. Note, 9.50%, 5/15/2018 | 2,915,750 |
3,325,000 | | Bway Holding Co., Company Guarantee, Series WI, 10.00%, 6/15/2018 | 3,674,125 |
7,287,253 | | Bway Holding Co., Sr. Unsecd. Note, 10.125%, 11/1/2015 | 7,432,998 |
1,000,000 | | Crown Americas, LLC, Company Guarantee, 6.25%, 2/1/2021 | 1,097,500 |
2,075,000 | | Crown Americas, LLC, Company Guarantee, 7.625%, 5/15/2017 | 2,251,375 |
3,575,000 | | Greif, Inc., Sr. Unsecd. Note, 7.75%, 8/1/2019 | 4,093,375 |
6,275,000 | 1,2 | Packaging Dynamics Corp., Sr. Secd. Note, Series 144A, 8.75%, 2/1/2016 | 6,620,125 |
4,500,000 | 1,2 | Reynolds Group, Sr. Note, Series 144A, 8.50%, 5/15/2018 | 4,432,500 |
4,825,000 | 1,2 | Reynolds Group, Sr. Note, Series 144A, 9.00%, 4/15/2019 | 4,837,062 |
6,225,000 | 1,2 | Reynolds Group, Sr. Note, Series 144A, 9.875%, 8/15/2019 | 6,466,219 |
1,850,000 | 1,2 | Reynolds Group, Sr. Secd. Note, Series 144A, 7.125%, 4/15/2019 | 1,947,125 |
2,800,000 | 1,2 | Reynolds Group, Sr. Secd. Note, Series 144A, 7.75%, 10/15/2016 | 2,961,000 |
1,675,000 | | Reynolds Group, Sr. Unsecd. Note, 7.95%, 12/15/2025 | 1,348,375 |
11,500,000 | 1,2 | Reynolds Group, Sr. Unsecd. Note, Series 144a, 8.50%, 2/15/2021 | 10,982,500 |
3,925,000 | 1,2 | Reynolds Group, Sr. Unsecd. Note, Series 144a, 9.875%, 8/15/2019 | 4,077,094 |
11,875,000 | 1,2 | Sealed Air Corp., Sr. Unsecd. Note, Series 144A, 8.375%, 9/15/2021 | 13,478,125 |
| | TOTAL | 88,365,373 |
| | Paper – 0.5% | |
1,850,000 | | Clearwater Paper Corp., Company Guarantee, 7.125%, 11/1/2018 | 1,961,000 |
1,000,000 | | Clearwater Paper Corp., Sr. Unsecd. Note, 10.625%, 6/15/2016 | 1,115,000 |
850,000 | | Graphic Packaging International Corp., Company Guarantee, 9.50%, 6/15/2017 | 939,250 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$1,800,000 | | Graphic Packaging International Corp., Sr. Note, 7.875%, 10/1/2018 | 1,989,000 |
3,495,000 | 1,2 | Longview Fibre Co., Sr. Secd. Note, Series 144A, 8.00%, 6/1/2016 | 3,512,475 |
| | TOTAL | 9,516,725 |
| | Restaurants – 1.5% | |
12,665,000 | | DineEquity Inc., Company Guarantee, Series WI, 9.50%, 10/30/2018 | 13,931,500 |
9,125,000 | | NPC INTL/OPER CO A&B Inc., Series WI, 10.50%, 1/15/2020 | 10,151,562 |
7,200,000 | 1,2 | Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC, Sr. Secd. Note, Series 144A, 2.968%, 3/15/2014 | 7,020,000 |
| | TOTAL | 31,103,062 |
| | Retailers – 4.4% | |
7,000,000 | 1,2 | Academy Finance Corp., Series 144A, 9.25%, 8/1/2019 | 7,630,000 |
3,600,000 | | Express, LLC, Company Guarantee, 8.75%, 3/1/2018 | 3,906,000 |
7,825,000 | | Gymboree Corp., Sr. Unsecd. Note, 9.125%, 12/1/2018 | 7,296,812 |
11,525,000 | 1,2 | Jo-Ann Stores, Inc., Sr. Unsecd. Note, Series 144A, 8.125%, 3/15/2019 | 11,525,000 |
3,950,000 | | Limited Brands, Inc., Company Guarantee, 8.50%, 6/15/2019 | 4,661,000 |
775,000 | | Limited Brands, Inc., Sr. Unsecd. Note, 5.625%, 2/15/2022 | 802,125 |
8,650,000 | | Michaels Stores, Inc., Company Guarantee, 7.75%, 11/1/2018 | 9,169,000 |
9,175,000 | 1,2 | PETCO Animal Supplies, Inc., Sr. Note, Series 144A, 9.25%, 12/1/2018 | 10,069,562 |
2,275,000 | 1,2 | QVC, Inc., Sr. Secd. Note, Series 144A, 7.125%, 4/15/2017 | 2,417,363 |
3,125,000 | 1,2 | QVC, Inc., Sr. Secd. Note, Series 144A, 7.50%, 10/1/2019 | 3,471,269 |
725,000 | | Sally Beauty Holdings, Inc., 5.75%, 6/1/2022 | 762,156 |
6,175,000 | | Sally Hldgs. LLC/Sally Cap Inc., Series WI, 6.875%, 11/15/2019 | 6,746,188 |
11,350,000 | | The Yankee Candle Co., Inc., Sr. Sub. Note, Series B, 9.75%, 2/15/2017 | 11,804,000 |
6,000,000 | | United Auto Group, Inc., Sr. Sub. Note, 7.75%, 12/15/2016 | 6,240,000 |
5,550,000 | | YCC Holdings LLC, Sr. Unsecd. Note, 10.25%, 2/15/2016 | 5,674,875 |
| | TOTAL | 92,175,350 |
| | Services – 1.9% | |
7,125,000 | 1,2 | Carlson Wagonlit Travel, Sr. Secd. Note, Series 144A, 6.875%, 6/15/2019 | 7,338,750 |
7,800,000 | 1,2 | Garda World Security Corp., Sr. Unsecd. Note, Series 144A, 9.75%, 3/15/2017 | 8,326,500 |
4,975,000 | 1,2 | Monitronics International, Inc., Sr. Unsecd. Note, Series 144A, 9.125%, 4/1/2020 | 4,800,875 |
4,150,000 | 1,2 | Reliance Intermediate Holdings LP, Sr. Unsecd. Note, Series 144A, 9.50%, 12/15/2019 | 4,585,750 |
3,000,000 | | Trans Union LLC, Company Guarantee, Series 144A, 11.375%, 6/15/2018 | 3,543,750 |
6,000,000 | | West Corp., Company Guarantee, 11.00%, 10/15/2016 | 6,360,000 |
3,825,000 | | West Corp., Company Guarantee, 7.875%, 1/15/2019 | 4,016,250 |
775,000 | | West Corp., Company Guarantee, 8.625%, 10/1/2018 | 825,375 |
| | TOTAL | 39,797,250 |
| | Technology – 13.5% | |
475,000 | | Advanced Micro Devices, Inc., Sr. Unsecd. Note, 7.75%, 8/1/2020 | 524,875 |
7,000,000 | | Advanced Micro Devices, Inc., Sr. Unsecd. Note, Series WI, 8.125%, 12/15/2017 | 7,630,000 |
8,725,000 | 1,2 | Allen Systems Group, Inc., Sr. Secd. 2nd Priority Note, Series 144A, 10.50%, 11/15/2016 | 7,198,125 |
7,925,000 | | Aspect Software, Inc., Sr. Note, Series WI, 10.625%, 5/15/2017 | 8,440,125 |
5,425,000 | 1,2 | Beagle Acquisition Corp., Sr. Unsecd. Note, Series 144A, 11.00%, 12/31/2019 | 6,103,125 |
3,700,000 | | CDW LLC/ CDW Finance, Company Guarantee, 12.535%, 10/12/2017 | 4,033,000 |
12,875,000 | | CDW LLC/ CDW Finance, Sr. Unsecd. Note, Series WI, 8.50%, 4/1/2019 | 13,776,250 |
950,000 | 1,2 | Ceridian Corp., Series 144A, 8.875%, 7/15/2019 | 985,625 |
10,000,000 | 1,2 | CommScope, Inc., Sr. Note, Series 144A, 8.25%, 1/15/2019 | 10,625,000 |
9,825,000 | 1,2 | Compucom System, Inc., Sr. Sub. Note, Series 144A, 12.50%, 10/1/2015 | 10,254,844 |
8,150,000 | 1,2 | CoreLogic, Inc., Sr. Unsecd. Note, Series 144A, 7.25%, 6/1/2021 | 8,394,500 |
8,775,000 | 1,2 | DataTel Inc., Series 144A, 9.75%, 1/15/2019 | 9,367,312 |
9,250,000 | | Epicor Software Corp., 8.625%, 5/1/2019 | 9,481,250 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
$1,950,000 | | Fidelity National Information Services, Inc., Company Guarantee, Series WI, 7.625%, 7/15/2017 | 2,159,625 |
5,050,000 | | Fidelity National Information Services, Inc., Company Guarantee, Series WI, 7.875%, 7/15/2020 | 5,706,500 |
1,750,000 | 1,2 | First Data Corp., Series 144A, 7.375%, 6/15/2019 | 1,793,750 |
3,900,000 | 1,2 | First Data Corp., Sr. Secd. 2nd Priority Note, Series 144A, 8.25%, 1/15/2021 | 3,919,500 |
11,700,000 | 1,2 | First Data Corp., Sr. Secd. 2nd Priority Note, Series 144A, 8.75%, 1/15/2022 | 11,846,250 |
6,500,000 | | Freescale Semiconductor, Inc., Company Guarantee, 10.75%, 8/1/2020 | 7,020,000 |
6,225,000 | 1,2 | Freescale Semiconductor, Inc., Sr. Secd. Note, Series 144A, 9.25%, 4/15/2018 | 6,691,875 |
8,525,000 | | GXS WORLDWIDE INC., Sr. Secd. Note, 9.75%, 6/15/2015 | 8,546,312 |
6,925,000 | | IGATE Capital Corp., Sr. Unsecd. Note, Series WI, 9.00%, 5/1/2016 | 7,444,375 |
6,250,000 | | Interactive Data Corp., Company Guarantee, 10.25%, 8/1/2018 | 6,984,375 |
3,650,000 | | Iron Mountain, Inc., Sr. Sub. Note, 7.75%, 10/1/2019 | 3,960,250 |
5,900,000 | | Kemet Corp., Sr. Note, 10.50%, 5/1/2018 | 6,106,500 |
1,675,000 | 1,2 | Kemet Corp., Sr. Note, Series 144A, 10.50%, 5/1/2018 | 1,725,250 |
9,725,000 | | Lender Processing Services, Sr. Note, 8.125%, 7/1/2016 | 10,186,937 |
6,575,000 | | MagnaChip Semiconductor S.A., Sr. Note, Series WI, 10.50%, 4/15/2018 | 7,216,063 |
6,462,000 | | SERENA Software, Inc., Sr. Sub. Note, 10.375%, 3/15/2016 | 6,639,705 |
7,425,000 | | SITEL Corp., Sr. Unsecd. Note, 11.50%, 4/1/2018 | 5,327,438 |
2,600,000 | | Seagate Technology HDD Holdings, Company Guarantee, 7.75%, 12/15/2018 | 2,889,250 |
5,750,000 | | Seagate Technology HDD Holdings, Sr. Note, 6.80%, 10/1/2016 | 6,418,438 |
1,875,000 | | Seagate Technology HDD Holdings, Sr. Unsecd. Note, 6.875%, 5/1/2020 | 2,025,000 |
1,550,000 | | Seagate Technology HDD Holdings, Sr. Unsecd. Note, Series WI, 7.00%, 11/1/2021 | 1,677,875 |
10,100,000 | 1,2 | SoftBrands, Inc., Sr. Note, Series 144A, 11.50%, 7/15/2018 | 11,463,500 |
3,350,000 | 1,2 | SoftBrands, Inc., Sr. Note, Series 144A, 9.375%, 4/1/2019 | 3,592,875 |
8,500,000 | 1,2 | Solera Holdings, Inc., Company Guarantee, Series 144A, 6.75%, 6/15/2018 | 8,988,750 |
8,775,000 | | Spansion, Inc., Sr. Unsecd. Note, Series WI, 7.875%, 11/15/2017 | 8,467,875 |
5,050,000 | | Stream Global Services, Inc., Sr. Secd. Note, 11.25%, 10/1/2014 | 5,176,250 |
9,000,000 | | SunGard Data Systems, Inc., Sr. Sub. Note, Series WI, 10.25%, 8/15/2015 | 9,292,500 |
1,850,000 | | SunGard Data Systems, Inc., Sr. Unsecd. Note, 7.625%, 11/15/2020 | 1,979,500 |
8,725,000 | | Syniverse Holdings, Inc., Company Guarantee, 9.125%, 1/15/2019 | 9,510,250 |
7,825,000 | 1,2 | Trans Union LLC, Series 144A, 9.625%, 6/15/2018 | 8,490,125 |
4,950,000 | 1,2 | Viasystems, Inc., Sr. Secd. Note, Series 144A, 7.875%, 5/1/2019 | 4,962,375 |
| | TOTAL | 285,023,299 |
| | Transportation – 0.3% | |
3,600,000 | | Hertz Corp., Company Guarantee, 6.75%, 4/15/2019 | 3,762,000 |
1,500,000 | | Hertz Corp., Company Guarantee, 7.50%, 10/15/2018 | 1,616,250 |
1,425,000 | | Stena AB, Sr. Note, 7.00%, 12/1/2016 | 1,392,938 |
| | TOTAL | 6,771,188 |
| | Utility - Electric – 1.6% | |
9,200,000 | 1,2 | Calpine Corp., Sr. Secd. Note, Series 144A, 7.50%, 2/15/2021 | 9,982,000 |
3,525,000 | | Energy Future Intermediate Holding Company LLC, Sr. Secd. Note, 10.00%, 12/1/2020 | 3,851,062 |
977,264 | 1 | FPL Energy National Wind, Note, Series 144A, 6.125%, 3/25/2019 | 971,607 |
1,675,000 | | NRG Energy, Inc., Company Guarantee, 8.25%, 9/1/2020 | 1,742,000 |
9,425,000 | | NRG Energy, Inc., Company Guarantee, Series WI, 7.625%, 1/15/2018 | 9,802,000 |
1,775,000 | | NRG Energy, Inc., Sr. Unsecd. Note, 7.875%, 5/15/2021 | 1,801,625 |
1,650,000 | | NRG Energy, Inc., Sr. Unsecd. Note, Series WI, 7.625%, 5/15/2019 | 1,678,875 |
2,275,000 | 1,2 | Texas Competitive Electric Holdings Co. LLC, Sr. Secd. 2nd Priority Note, 11.75%, 3/1/2022 | 2,337,563 |
3,025,000 | 1,2 | Texas Competitive Electric Holdings Co. LLC, Sr. Secd. Note, Series 144A, 11.50%, 10/1/2020 | 2,079,688 |
| | TOTAL | 34,246,420 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
| | Utility - Natural Gas – 2.4% | |
$7,825,000 | | Crosstex Energy, Inc., Company Guarantee, 8.875%, 2/15/2018 | 8,279,828 |
5,475,000 | | El Paso Corp., Sr. Unsecd. Note, 6.50%, 9/15/2020 | 6,029,223 |
1,575,000 | | El Paso Corp., Sr. Unsecd. Note, 7.25%, 6/1/2018 | 1,825,504 |
11,575,000 | | Energy Transfer Equity LP, Sr. Unsecd. Note, 7.50%, 10/15/2020 | 12,761,437 |
3,000,000 | 1,2 | Holly Energy Partners LP, Series 144A, 6.50%, 3/1/2020 | 3,030,000 |
6,650,000 | | Inergy LP, Company Guarantee, 6.875%, 8/1/2021 | 6,683,250 |
731,000 | | Regency Energy Partners LP, Company Guarantee, 9.375%, 6/1/2016 | 807,755 |
4,275,000 | | Regency Energy Partners LP, Sr. Note, 6.875%, 12/1/2018 | 4,520,813 |
2,975,000 | | Southern Star Central Corp., Sr. Note, 6.75%, 3/1/2016 | 3,012,188 |
1,525,000 | | Targa Resources, Inc., 6.875%, 2/1/2021 | 1,593,625 |
1,500,000 | 1,2 | Targa Resources, Inc., Sr. Unsecd. Note, Series 144A, 6.375%, 8/1/2022 | 1,503,750 |
| | TOTAL | 50,047,373 |
| | Wireless Communications – 3.0% | |
1,175,000 | 1,2 | Digicel Ltd., Sr. Note, Series 144A, 10.50%, 4/15/2018 | 1,239,625 |
3,475,000 | 1,2 | Digicel Ltd., Sr. Note, Series 144A, 12.00%, 4/1/2014 | 3,874,625 |
2,825,000 | 1,2 | Digicel Ltd., Sr. Note, Series 144A, 8.25%, 9/1/2017 | 2,902,687 |
8,225,000 | 1,2 | Digicel Ltd., Sr. Note, Series 144A, 8.875%, 1/15/2015 | 8,348,375 |
2,475,000 | 1,2 | Digicel Ltd., Sr. Note, Series 144A, 9.125%, 1/15/2015 | 2,512,125 |
1,100,000 | 1,2 | Digicel Ltd., Sr. Unsecd. Note, Series 144A, 7.00%, 2/15/2020 | 1,075,250 |
6,450,000 | | MetroPCS Wireless, Inc., Sr. Note, 6.625%, 11/15/2020 | 6,369,375 |
5,500,000 | | MetroPCS Wireless, Inc., Sr. Note, 7.875%, 9/1/2018 | 5,733,750 |
7,150,000 | | Sprint Capital Corp., Company Guarantee, 6.875%, 11/15/2028 | 5,791,500 |
17,350,000 | | Sprint Capital Corp., Company Guarantee, 6.90%, 5/1/2019 | 16,395,750 |
7,300,000 | 1,2 | Sprint Capital Corp., Gtd. Note, Series 144A, 9.00%, 11/15/2018 | 8,176,000 |
1,850,000 | 1,2 | Sprint Nextel Corp., Series 144A, 7.00%, 3/1/2020 | 1,928,625 |
| | TOTAL | 64,347,687 |
| | Wireline Communications – 0.7% | |
4,350,000 | | Level 3 Financing, Inc., Series WI, 8.625%, 7/15/2020 | 4,589,250 |
5,175,000 | | Level 3 Financing, Inc., Sr. Unsecd. Note, Series WI, 8.125%, 7/1/2019 | 5,336,719 |
4,475,000 | | Windstream Corp., Company Guarantee, 8.125%, 9/1/2018 | 4,833,000 |
| | TOTAL | 14,758,969 |
| | TOTAL CORPORATE BONDS (IDENTIFIED COST $1,981,825,928) | 2,059,523,657 |
| | COMMON STOCKS – 0.1% | |
| | Automotive – 0.1% | |
51,301 | 3 | General Motors Co. | 1,011,655 |
12,700,000 | 1,3,5 | General Motors Co. Escrow Shares | 0 |
12,879 | 3 | Motors Liquidation Co. | 157,768 |
| | TOTAL | 1,169,423 |
| | Metals & Mining – 0.0% | |
57,533 | 1,3,5 | Royal Oak Mines, Inc. | 0 |
| | Other – 0.0% | |
171 | 1,3,5 | CVC Claims Litigation LLC | 0 |
| | TOTAL COMMON STOCKS (IDENTIFIED COST $6,441,659) | 1,169,423 |
| | PREFERRED STOCK – 0.2% | |
| | Finance - Commercial – 0.2% | |
4,300 | 1,2 | Ally Financial, Inc., Pfd., Series 144A, 7.000% (IDENTIFIED COST $1,352,990) | 3,831,166 |
Semi-Annual Shareholder ReportPrincipal Amount or Shares | | | Value |
| | WARRANTS – 0.0% | |
| | Automotive – 0.0% | |
46,637 | 3 | General Motors Co., Warrants | 513,940 |
46,637 | 3 | General Motors Co., Warrants | 316,199 |
| | TOTAL WARRANTS (IDENTIFIED COST $5,097,581) | 830,139 |
| | MUTUAL FUND – 1.2% | |
24,635,099 | 6,7 | Federated Prime Value Obligations Fund, Institutional Shares, 0.22% (AT NET ASSET VALUE) | 24,635,099 |
| | TOTAL INVESTMENTS — 99.1% (IDENTIFIED COST $2,019,353,257)8 | 2,089,989,484 |
| | OTHER ASSETS AND LIABILITIES - NET — 0.9%9 | 19,842,275 |
| | TOTAL NET ASSETS — 100% | $2,109,831,759 |
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 June 30, 2012, these restricted securities amounted to $692,987,744, which represented 32.8% 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 Trustees (the “Trustees”). At June 30, 2012, these liquid restricted securities amounted to $689,339,012, which represented 32.7% of total net assets. |
3 | Non-income producing security. |
4 | Issuer in default. |
5 | Market quotations and price evaluations are not available. Fair value determined in accordance with procedures established by and under the general supervision of the Trustees. |
6 | Affiliated holding. |
7 | 7-Day net yield. |
8 | The cost of investments for federal tax purposes amounts to $2,011,312,087. |
9 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at June 30, 2012.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable. Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost. Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
Semi-Annual Shareholder Report
The following is a summary of the inputs used, as of June 30, 2012, in valuing the Fund's assets carried at fair value:Valuation Inputs |
| Level 1 — Quoted Prices and Investments in Mutual Funds | Level 2 — Other Significant Observable Inputs | Level 3 — Significant Unobservable Inputs | Total |
Debt Securities: | | | | |
Corporate Bonds | $ — | $2,059,386,974 | $136,6831 | $2,059,523,657 |
Equity Securities: | | | | |
Common Stock | | | | |
Domestic | 1,169,423 | — | 01 | 1,169,423 |
International | — | — | 0 | 0 |
Preferred Stock | | | | |
Domestic | — | 3,831,166 | — | 3,831,166 |
Warrants | 830,139 | — | — | 830,139 |
Mutual Fund | 24,635,099 | — | — | 24,635,099 |
TOTAL SECURITIES | $26,634,661 | $2,063,218,140 | $136,683 | $2,089,989,484 |
1 | Includes $58,500 of a corporate bond security and $190,500 of a domestic common stock security transferred from Level 2 to Level 3 because the Adviser determined that these securities more appropriately meet the definition of Level 3. Transfers shown represent the value of the securities at the beginning of the period. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights – High Yield Bond Portfolio
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 6/30/2012 | Year Ended December 31, |
2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $6.35 | $6.55 | $6.27 | $4.57 | $6.61 | $6.88 |
Income From Investment Operations: | | | | | | |
Net investment income | 0.27 | 0.57 | 0.61 | 0.57 | 0.58 | 0.58 |
Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.22 | (0.19) | 0.29 | 1.69 | (2.04) | (0.28) |
TOTAL FROM INVESTMENT OPERATIONS | 0.49 | 0.38 | 0.90 | 2.26 | (1.46) | 0.30 |
Less Distributions: | | | | | | |
Distributions from net investment income | (0.29) | (0.58) | (0.62) | (0.56) | (0.58) | (0.57) |
Net Asset Value, End of Period | $6.55 | $6.35 | $6.55 | $6.27 | $4.57 | $6.61 |
Total Return1 | 7.85% | 6.04% | 15.06% | 51.79% | (23.53)% | 4.48% |
Ratios to Average Net Assets: | | | | | | |
Net expenses | 0.00%2,3 | 0.00%3 | 0.00%3 | 0.00%3 | 0.03% | 0.03% |
Net investment income | 8.47%2 | 8.75% | 9.41% | 11.01% | 10.02% | 8.20% |
Expense waiver/reimbursement4 | 0.10%2 | 0.10% | 0.10% | 0.10% | 0.08% | 0.08% |
Supplemental Data: | | | | | | |
Net assets, end of period (000 omitted) | $2,109,832 | $1,886,499 | $1,995,842 | $1,609,205 | $887,322 | $843,319 |
Portfolio turnover | 20% | 34% | 37% | 20% | 16% | 35% |
1 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
2 | Computed on an annualized basis. |
3 | The Adviser has voluntarily agreed to reimburse all operating expenses incurred by the Fund. This arrangement has no fixed term. |
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
Semi-Annual Shareholder Report Statement of Assets and Liabilities – High Yield Bond Portfolio
June 30, 2012 (unaudited)
Assets: | | |
Total investment in securities, at value including $24,635,099 of investment in an affiliated holding (Note 5) (identified cost $2,019,353,257) | | $2,089,989,484 |
Income receivable | | 41,725,753 |
Receivable for investments sold | | 6,589,908 |
Receivable for shares sold | | 1,250,000 |
TOTAL ASSETS | | 2,139,555,145 |
Liabilities: | | |
Payable for investments purchased | $12,365,276 | |
Payable for shares redeemed | 115,000 | |
Bank overdraft | 570 | |
Income distribution payable | 17,143,583 | |
Payable to adviser (Note 5) | 2,183 | |
Payable for Directors'/Trustees' fees | 2,221 | |
Accrued expenses | 94,553 | |
TOTAL LIABILITIES | | 29,723,386 |
Net assets for 321,942,331 shares outstanding | | $2,109,831,759 |
Net Assets Consist of: | | |
Paid-in capital | | $2,035,123,976 |
Net unrealized appreciation of investments | | 70,636,227 |
Accumulated net realized gain on investments | | 9,604,230 |
Distributions in excess of net investment income | | (5,532,674) |
TOTAL NET ASSETS | | $2,109,831,759 |
Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
$2,109,831,759 ÷ 321,942,331 shares outstanding, no par value, unlimited shares authorized | | $6.55 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations – High Yield Bond Portfolio
Six Months Ended June 30, 2012 (unaudited)
Investment Income: | | | |
Interest | | | $86,013,204 |
Dividends (including $25,752 received from an affiliated holding (Note 5)) | | | 176,252 |
TOTAL INCOME | | | 86,189,456 |
Expenses: | | | |
Administrative fee (Note 5) | | $793,047 | |
Custodian fees | | 35,968 | |
Transfer and dividend disbursing agent fees and expenses | | 76,990 | |
Directors'/Trustees' fees | | 7,622 | |
Auditing fees | | 13,725 | |
Legal fees | | 4,020 | |
Portfolio accounting fees | | 98,674 | |
Printing and postage | | 4,842 | |
Insurance premiums | | 3,214 | |
Miscellaneous | | 1,566 | |
TOTAL EXPENSES | | 1,039,668 | |
Waiver and Reimbursement (Note 5): | | | |
Waiver of administrative fee | $(793,047) | | |
Reimbursement of other operating expenses | (246,621) | | |
TOTAL WAIVER AND REIMBURSEMENT | | (1,039,668) | |
Net expenses | | | — |
Net investment income | | | 86,189,456 |
Realized and Unrealized Gain on Investments: | | | |
Net realized gain on investments | | | 24,729,268 |
Net change in unrealized appreciation of investments | | | 42,808,531 |
Net realized and unrealized gain on investments | | | 67,537,799 |
Change in net assets resulting from operations | | | $153,727,255 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets – High Yield Bond Portfolio
| Six Months Ended (unaudited) 6/30/2012 | Year Ended 12/31/2011 |
Increase (Decrease) in Net Assets | | |
Operations: | | |
Net investment income | $86,189,456 | $168,016,972 |
Net realized gain on investments | 24,729,268 | 50,595,913 |
Net change in unrealized appreciation/depreciation of investments | 42,808,531 | (104,874,354) |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 153,727,255 | 113,738,531 |
Distributions to Shareholders: | | |
Distributions from net investment income | (92,083,023) | (172,505,203) |
Share Transactions: | | |
Proceeds from sale of shares | 302,174,779 | 240,058,657 |
Net asset value of shares issued to shareholders in payment of distributions declared | 3,849,723 | 8,141,279 |
Cost of shares redeemed | (144,336,181) | (298,775,834) |
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 161,688,321 | (50,575,898) |
Change in net assets | 223,332,553 | (109,342,570) |
Net Assets: | | |
Beginning of period | 1,886,499,206 | 1,995,841,776 |
End of period (including undistributed (distributions in excess of) net investment income of $(5,532,674) and $360,893, respectively) | $2,109,831,759 | $1,886,499,206 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements – High Yield Bond Portfolio
June 30, 2012 (unaudited)
1. ORGANIZATION
Federated Core Trust (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. The Trust consists of five diversified portfolios. The financial statements included herein are only those of High Yield Bond Portfolio (the “Fund”). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The investment objective of the Fund is to seek high current income.
The Fund's portfolio consists primarily of lower-rated, corporate debt obligations. These lower-rated debt obligations may be more susceptible to real or perceived adverse economic conditions than investment-grade bonds. These lower-rated debt obligations are regarded as predominately speculative with respect to each issuer's continuing ability to make interest and principal payments (i.e., the obligations are subject to the risk of default). Currently, Shares of the Fund are being offered for investment only to investment companies, insurance company separate accounts, common or commingled trust funds or similar organizations or parties that are “accredited investors” within the meaning of Regulation D of the Securities Act of 1933.
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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Shares of other mutual funds are valued based upon their reported NAVs.
- Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation and Significant Events Procedures
The Trustees have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) or an affiliated adviser, and others to determine fair value of securities and in overseeing the calculation of the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. The Trustees have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
Semi-Annual Shareholder Report
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:- With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures or options contracts;
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Trustees have approved the use of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Repurchase Agreements
The Fund may invest in repurchase agreements for short-term liquidity purposes. 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.
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
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Premium and Discount Amortization
All premiums and discounts on fixed-income securities are amortized/accreted using the effective interest rate method.
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. As of and during the six months ended June 30, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Foreign Currency Translation
The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies (FCs) are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Semi-Annual Shareholder Report
Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year-end, resulting from changes in the exchange rate.Restricted Securities
The Fund may purchase securities which are considered restricted. 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 Trustees. 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 Trustees.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, if applicable, held at June 30, 2012, is as follows:
Security | Acquisition Date | Cost | Market Value |
Altegrity, Inc., Company Guarantee, Series 144A, 11.75%, 5/1/2016 | 10/19/2007 – 2/8/2011 | $2,685,067 | $2,677,125 |
CVS Claims Litigation LLC | 3/26/1997 - 5/20/1998 | $1,676,091 | $0 |
FPL Energy National Wind, Note, Series 144A, 6.125%, 3/25/2019 | 2/16/2005 – 5/27/2009 | $892,275 | $971,607 |
General Motors Co. Escrow Shares | 4/21/2011 | $264,901 | $0 |
Hard Rock Park Operations LLC, Sr. Secd. Note, Series 144A, 0.00%, 4/1/2012 | 3/23/2006 – 1/2/2008 | $2,334,293 | $0 |
Royal Oak Mines, Inc. | 2/24/1999 | $6,392 | $0 |
Other
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.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| Six Months Ended 6/30/2012 | Year Ended 12/31/2011 |
Shares sold | 46,300,782 | 36,857,254 |
Shares issued to shareholders in payment of distributions declared | 588,037 | 1,250,218 |
Shares redeemed | (21,978,159) | (45,874,569) |
NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 24,910,660 | (7,767,097) |
4. FEDERAL TAX INFORMATION
At June 30, 2012, the cost of investments for federal tax purposes was $2,011,312,087. The net unrealized appreciation of investments for federal tax purposes was $78,677,397. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $116,674,659 and net unrealized depreciation from investments for those securities having an excess of cost over value of $37,997,262.
At December 31, 2011, the Fund had a capital loss carryforward of $20,578,054 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, thereby reducing 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, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
The following schedule summarizes the Fund's short-term and long-term capital loss carryforwards and expiration years:
Expiration Year | Short-Term | Long-Term | Total |
2016 | $1,695,355 | NA | $1,695,355 |
2017 | 18,882,699 | NA | 18,882,699 |
Semi-Annual Shareholder Report 5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The Adviser provides investment adviser services at no fee, because all investors in the Fund are other Federated Funds, insurance company separate accounts, common or comingled trust funds or similar organizations or entities that are “accredited investors” within the meaning of Regulation D of the 1933 Act. The Adviser may voluntarily choose to reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary reimbursement at any time at its sole discretion. For the six months ended June 30, 2012, the Adviser voluntarily reimbursed $246,621 of other operating expenses.
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:
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 six months ended June 30, 2012, FAS waived its entire fee of $793,047.
Interfund Transactions
During the six months ended June 30, 2012, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $2,134,031 and $0, respectively.
General
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
Transactions Involving Affiliated Holdings
Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. Transactions involving the affiliated holding during the six months ended June 30, 2012, were as follows:
| Federated Prime Value Obligations Fund, Institutional Shares |
Balance of Shares Held 12/31/2011 | 16,682,856 |
Purchases/Additions | 321,727,380 |
Sales/Reductions | 313,775,137 |
Balance of Shares Held 6/30/2012 | 24,635,099 |
Value | $24,635,099 |
Dividend Income | $25,752 |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended June 30, 2012, were as follows:
Purchases | $554,985,845 |
Sales | $397,106,157 |
7. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement 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 offered to the Fund by PNC Bank at the time of the borrowing. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012,the Fund did not utilize the LOC.
Semi-Annual Shareholder Report
8. INTERFUND LENDINGPursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012, the program was not utilized.
9. SUBSEQUENT EVENTS
On August 15, 2012, the Trustees approved the elimination of minimum administrative personnel and services fees effective September 1, 2012. Prior to this date, the administrative fee received during any fiscal year was at least $150,000 per portfolio and $40,000 per each additional class of Shares.
Management has evaluated subsequent events through the date the financial statements were issued, and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited) – High Yield Bond Portfolio
As a shareholder of the Fund, you incur ongoing costs, including to the extent applicable, management fees, 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 January 1, 2012 to June 30, 2012.
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. 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.
| Beginning Account Value 1/1/2012 | Ending Account Value 6/30/2012 | Expenses Paid During Period1 |
Actual | $1,000.00 | $1,078.50 | $0.00 |
Hypothetical (assuming a 5% return before expenses) | $1,000.00 | $1,024.86 | $0.00 |
1 | Expenses are equal to the Fund's annualized net expense ratio of 0.00%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). The Adviser has voluntarily agreed to reimburse all operating expenses incurred by the Fund. This arrangement has no fixed term. |
Semi-Annual Shareholder Report Evaluation and Approval of Advisory Contract – May 2012
Federated High Yield Strategy Portfolio (the “Fund”)
Following a review and recommendation of approval by the Fund's independent trustees, the Fund's Board reviewed and approved at its May 2012 meetings the Fund's investment advisory contract for an additional one-year period. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements. The Fund is distinctive in that it is used to implement particular investment strategies that are offered to investors in certain separately managed or wrap fee accounts or programs or certain other discretionary investment accounts; and may also be offered to other Federated funds. In addition, the Adviser does not charge an investment advisory fee for its services although it or its affiliates may receive compensation for managing assets invested in the Fund.
The Federated Funds' Board had previously appointed 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 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 (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
As previously noted, the Adviser does not charge an investment advisory fee for its services; however, the Board did consider compensation and benefits received by the Adviser, including 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. The Board is also familiar with and considered 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 to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be 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 independent legal counsel. Throughout the year and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent trustees and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the trustees. 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 information covering such matters as: the Adviser's investment philosophy, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance, and comments on the reasons for performance; the Fund's investment objectives; the Fund's overall expense structure; the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; 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 Semi-Annual Shareholder Report
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.The Fund's performance when compared to its benchmark index was also deemed to be relevant by the Board as 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.
The Board was informed by the Adviser that, for the periods covered by the the Evaluation, the Fund outperformed its benchmark index for the one-year period, and underperformed its benchmark index for the three-year period. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
Because the Adviser does not charge the Fund an investment advisory fee, the Fund's Board does not consider fee comparisons to other mutual funds or other institutional or separate accounts to be relevant.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. Because the Adviser does not charge an investment advisory fee for its services, this information generally covered 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 information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waive non-advisory fees and/or reimburse other expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate advisory and administrative services to the Fund for the fees paid.
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 necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. In particular, due to the unusual nature of the Fund as primarily an internal product with no advisory fee, the Board does not consider the assessment of whether economies of scale would be realized if the Fund were to grow to some sufficient size to be relevant. 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 arrangement.
Semi-Annual Shareholder Report 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, as well as a report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30, are available, without charge and upon request, by calling 1-800-341-7400. These materials are also available at 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.)
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder ReportFederated High-Yield Strategy Portfolio
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31421P209
40940 (8/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| | Semi-Annual Shareholder Report |
| | June 30, 2012 |
|
Federated Mortgage Strategy Portfolio
A Portfolio of Federated Managed Pool Series
Not FDIC Insured
May Lose Value
No Bank Guarantee
Federated Mortgage Strategy Portfolio
Portfolio of Investments Summary Table (unaudited)
At June 30, 2012, the Fund's portfolio composition1 was as follows:
Type of Investment | Percentage of Total Net Assets2 |
U.S. Government Agency Mortgage-Backed Securities | 98.0% |
Non-Agency Mortgage-Backed Securities | 4.8% |
Repurchase Agreements — Collateral3 | 17.8% |
Cash Equivalents4 | 0.2% |
Derivative Contracts5,6 | (0.0)% |
Other Assets and Liabilities — Net7 | (20.8)% |
TOTAL | 100.0% |
1 | See the Fund's Prospectus and Statement of Additional Information for a description of the types of securities in which the Fund invests. |
2 | As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of this table, the affiliated investment company (other than an affiliated money market mutual 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 | Includes repurchase agreements purchased with proceeds received in dollar-roll transactions, as well as cash covering when-issued and delayed delivery transactions. |
4 | Cash equivalents include any investments in money market mutual funds and/or overnight repurchase agreements. |
5 | Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report. |
6 | Represents less than 0.1%. |
7 | Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report Portfolio of Investments
June 30, 2012 (unaudited)
Shares or Principal Amount | | | Value |
| | MUTUAL FUND – 100.0% | |
3,987,931 | 1 | Federated Mortgage Core Portfolio (IDENTIFIED COST $40,260,232) | 40,676,896 |
| | Repurchase Agreement – 0.2% | |
$102,000 | | Interest in $4,100,000,000 joint repurchase agreement 0.18%, dated 6/29/2012 under which Bank of America, N.A. will repurchase securities provided as collateral for $4,100,061,500 on 7/2/2012. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 7/25/2041 and the market value of those underlying securities was $4,205,949,259. (AT COST) | 102,000 |
| | TOTAL INVESTMENTS — 100.2% (IDENTIFIED COST $40,362,232)2 | 40,778,896 |
| | OTHER ASSETS AND LIABILITIES - NET — (0.2)%3 | (93,945) |
| | TOTAL NET ASSETS — 100% | $40,684,951 |
1 | Due to this affiliated holding representing greater than 75% of the Fund's total net assets, a copy of the affiliated holding's most recent semi-annual report is included with this report. |
2 | Also represents cost for federal tax purposes. |
3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at June 30, 2012.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable. Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost. Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of June 30, 2012, in valuing the Fund's assets carried at fair value:
Valuation Inputs |
| Level 1 — Quoted Prices and Investments in Mutual Funds | Level 2 — Other Significant Observable Inputs | Level 3 — Significant Unobservable Inputs | Total |
Mutual Fund | $40,676,896 | $ — | $ — | $40,676,896 |
Repurchase Agreement | — | 102,000 | — | 102,000 |
TOTAL SECURITIES | $40,676,896 | $102,000 | $ — | $40,778,896 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 6/30/2012 | Year Ended December 31, | Period Ended 12/31/20071 |
2011 | 2010 | 2009 | 2008 |
Net Asset Value, Beginning of Period | $10.31 | $10.17 | $10.16 | $10.00 | $10.05 | $10.00 |
Income From Investment Operations: | | | | | | |
Net investment income | 0.17 | 0.40 | 0.49 | 0.53 | 0.55 | 0.02 |
Net realized and unrealized gain (loss) on investments | 0.002 | 0.14 | 0.02 | 0.18 | (0.05) | 0.05 |
TOTAL FROM INVESTMENT OPERATIONS | 0.17 | 0.54 | 0.51 | 0.71 | 0.50 | 0.07 |
Less Distributions: | | | | | | |
Distributions from net investment income | (0.17) | (0.40) | (0.49) | (0.53) | (0.55) | (0.02) |
Distributions from net realized gain on investments | — | (0.00)2 | (0.01) | (0.02) | — | — |
TOTAL DISTRIBUTIONS | (0.17) | (0.40) | (0.50) | (0.55) | (0.55) | (0.02) |
Net Asset Value, End of Period | $10.31 | $10.31 | $10.17 | $10.16 | $10.00 | $10.05 |
Total Return3 | 1.66% | 5.44% | 5.16% | 7.22% | 5.17% | 0.68% |
Ratios to Average Net Assets: | | | | | | |
Net expenses4 | 0.00%5 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00%5 |
Net investment income | 3.32%5 | 3.90% | 4.62% | 5.27% | 5.56% | 4.32%5 |
Expense waiver/reimbursement6 | 0.70%5 | 0.89% | 2.97% | 2.96% | 3.03% | 394.30%5,7 |
Supplemental Data: | | | | | | |
Net assets, end of period (000 omitted) | $40,685 | $39,232 | $25,000 | $8,291 | $10,079 | $40,580 |
Portfolio turnover | 10% | 14% | 83% | 133% | 121% | 0% |
1 | Reflects operations for the period from December 20, 2007 (date of initial public investment) to December 31, 2007. |
2 | Represents less than $0.01. |
3 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
4 | The Adviser has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. |
5 | Computed on an annualized basis. |
6 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
7 | Additional information relating to contractual expense waivers, which has no effect on net expenses, net investment income and net assets previously reported, has been provided to conform to the current year presentation. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Assets and Liabilities
June 30, 2012 (unaudited)
Assets: | | |
Total investment in securities, at value including $40,676,896 of investment in an affiliated holding (Note 5) (identified cost $40,362,232) | | $40,778,896 |
Cash | | 191 |
Receivable for investments sold | | 50,000 |
TOTAL ASSETS | | 40,829,087 |
Liabilities: | | |
Payable for shares redeemed | $349 | |
Income distribution payable | 111,572 | |
Payable to adviser (Note 5) | 1,148 | |
Payable for Directors'/Trustees' fees | 316 | |
Payable for auditing fees | 12,158 | |
Payable for portfolio accounting fees | 6,857 | |
Payable for share registration costs | 9,320 | |
Accrued expenses | 2,416 | |
TOTAL LIABILITIES | | 144,136 |
Net assets for 3,947,042 shares outstanding | | $40,684,951 |
Net Assets Consist of: | | |
Paid-in capital | | $40,342,300 |
Net unrealized appreciation of investments | | 416,664 |
Accumulated net realized loss on investments | | (74,112) |
Undistributed net investment income | | 99 |
TOTAL NET ASSETS | | $40,684,951 |
Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
$40,684,951 ÷ 3,947,042 shares outstanding, no par value, unlimited shares authorized | | $10.31 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations
Six Months Ended June 30, 2012 (unaudited)
Investment Income: | | | |
Dividends received from an affiliated holding (Note 5) | | | $653,010 |
Expenses: | | | |
Administrative fee (Note 5) | | $74,591 | |
Custodian fees | | 3,209 | |
Transfer and dividend disbursing agent fees and expenses | | 2,286 | |
Directors'/Trustees' fees | | 1,177 | |
Auditing fees | | 12,158 | |
Legal fees | | 3,429 | |
Portfolio accounting fees | | 20,941 | |
Share registration costs | | 12,587 | |
Printing and postage | | 5,626 | |
Insurance premiums | | 1,861 | |
Miscellaneous | | 752 | |
TOTAL EXPENSES | | 138,617 | |
Waiver and Reimbursement (Note 5): | | | |
Waiver of administrative fee | $(12,236) | | |
Reimbursement of other operating expenses | (126,381) | | |
TOTAL WAIVER AND REIMBURSEMENT | | (138,617) | |
Net expenses | | | — |
Net investment income | | | 653,010 |
Realized and Unrealized Gain (Loss) on Investments: | | | |
Net realized loss on investment in an affiliated holding (Note 5) | | | (3,196) |
Net change in unrealized appreciation of investments | | | 1,469 |
Net realized and unrealized loss on investments | | | (1,727) |
Change in net assets resulting from operations | | | $651,283 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets
| Six Months Ended (unaudited) 6/30/2012 | Year Ended 12/31/2011 |
Increase (Decrease) in Net Assets | | |
Operations: | | |
Net investment income | $653,010 | $1,282,708 |
Net realized loss on investments | (3,196) | (27,982) |
Net change in unrealized appreciation/depreciation of investments | 1,469 | 502,386 |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 651,283 | 1,757,112 |
Distributions to Shareholders: | | |
Distributions from net investment income | (653,074) | (1,281,574) |
Distributions from net realized gain on investments | — | (3,591) |
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (653,074) | (1,285,165) |
Share Transactions: | | |
Proceeds from sale of shares | 5,764,800 | 17,986,501 |
Cost of shares redeemed | (4,310,198) | (4,226,065) |
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 1,454,602 | 13,760,436 |
Change in net assets | 1,452,811 | 14,232,383 |
Net Assets: | | |
Beginning of period | 39,232,140 | 24,999,757 |
End of period (including undistributed net investment income of $99 and $163, respectively) | $40,684,951 | $39,232,140 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements
June 30, 2012 (unaudited)
1. ORGANIZATION
Federated Managed Pool Series (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified open-end management investment company. The Trust consists of four portfolios. The financial statements included herein are only those of Federated Mortgage Strategy Portfolio (the “Fund”), a non-diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The investment objective of the Fund is to provide total return.
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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Shares of other mutual funds are valued based upon their reported NAVs.
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Fund's Board of Trustees (the “Trustees”).
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation and Significant Events Procedures
The Trustees have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) or an affiliated adviser, and others to determine fair value of securities and in overseeing the calculation of the NAV. The Trustees have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
Semi-Annual Shareholder Report
The Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.Repurchase Agreements
The Fund may invest in repurchase agreements for short-term liquidity purposes. 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.
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
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. 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 daily and paid monthly.
Premium and Discount Amortization/Paydown Gains and Losses
All premiums and discounts on fixed-income securities, other than mortgage-backed securities, are amortized/accreted using the effective interest rate method. 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. As of and during the six months ended June 30, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
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.
Other
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.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| Six Months Ended 6/30/2012 | Year Ended 12/31/2011 |
Shares sold | 558,242 | 1,759,533 |
Shares redeemed | (417,402) | (412,546) |
NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 140,840 | 1,346,987 |
4. FEDERAL TAX INFORMATION
At June 30, 2012, the cost of investments for federal tax purposes was $40,362,232. The net unrealized appreciation of investments for federal tax purposes was $416,664. This consists entirely of net unrealized appreciation from investments for those securities having an excess of value over cost of $416,664.
Semi-Annual Shareholder Report
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATESInvestment Adviser Fee
The Adviser provides investment adviser services at no fee, because all eligible investors are: (1) in separately managed or wrap fee programs, who often pay a single aggregate fee to the wrap program sponsor for all costs and expenses of the wrap-fee programs; or (2) in certain other separately managed accounts and discretionary investment accounts. The Adviser has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. For the six months ended June 30, 2012, the Adviser reimbursed $126,381 of other operating expenses.
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:
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 can modify or terminate this voluntary waiver at any time at its sole discretion. For the six months ended June 30, 2012, FAS waived $12,236 of its fee. The net fee paid to FAS was 0.317% of average daily net assets of the Fund. The Fund is currently being charged the minimum administrative fee; therefore the fee as a percentage of average daily net assets is greater than the amounts presented in the chart above. For the six months ended June 30, 2012, the Adviser reimbursed the Fund for any fee paid to FAS.
General
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
Transactions Involving Affiliated Holdings
Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. Transactions involving an affiliated holding during the six months ended June 30, 2012, were as follows:
| Federated Mortgage Core Portfolio |
Balance of Shares Held 12/31/2011 | 3,849,026 |
Purchases/Additions | 510,475 |
Sales/Reductions | 371,570 |
Balance of Shares Held 6/30/2012 | 3,987,931 |
Value | $40,676,896 |
Dividend Income | $653,010 |
The Fund invests in Federated Mortgage Core Portfolio (“Mortgage Core”), a portfolio of Federated Core Trust (“Core Trust”), which is managed by Federated Investment Management Company, the Adviser. Core Trust is an open-end management investment company, registered under the Act, available only to registered investment companies and other institutional investors. The investment objective of Mortgage Core is to provide total return. Federated receives no advisory or administrative fees from Mortgage Core. Income distributions from Mortgage Core are declared daily and paid monthly. All income distributions are recorded by the Fund as dividend income. Capital gain distributions of Mortgage Core, if any, are declared and paid annually, and are recorded by the Fund as capital gains received. The performance of the Fund is directly affected by the performance of Mortgage Core. The financial statements of Mortgage Core are included within this report to illustrate the security holdings, financial condition, results of operations and changes in net assets of the Portfolio in which the Fund invested 100.0% of its net assets at June 30, 2012.The financial statements of Mortgage Core should be read in conjunction with the Fund's financial statements. The valuation of securities held by Mortgage Core is discussed in the notes to its financial statements.
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended June 30, 2012, were as follows:
Purchases | $5,214,658 |
Sales | $3,806,300 |
Semi-Annual Shareholder Report 7. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement 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 offered to the Fund by PNC Bank at the time of the borrowing. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012, the Fund did not utilize the LOC.
8. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012, the program was not utilized.
9. SUBSEQUENT eVENTS
On August 15, 2012, the Trustees approved the elimination of minimum administrative personnel and services fees effective September 1, 2012. Prior to this date, the administrative fee received during any fiscal year was at least $150,000 per portfolio and $40,000 per each additional class of Shares.
Management has evaluated subsequent events through the date the financial statements were issued, and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including to the extent applicable, management fees, 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 January 1, 2012 to June 30, 2012.
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. 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.
| Beginning Account Value 1/1/2012 | Ending Account Value 6/30/2012 | Expenses Paid During Period1 |
Actual | $1,000.00 | $1,016.60 | $0.00 |
Hypothetical (assuming a 5% return before expenses) | $1,000.00 | $1,024.86 | $0.00 |
1 | Expenses are equal to the Fund's annualized net expense ratio of 0.00%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). The Adviser has contractually agreed to reimburse all operating expenses, excluding extraordinary expenses, incurred by the Fund. This arrangement has no fixed term. |
Semi-Annual Shareholder Report Federated Mortgage Core Portfolio
Portfolio of Investments Summary Table (unaudited) – Federated Mortgage Core Portfolio
At June 30, 2012, the Fund's portfolio composition1 was as follows:
Type of Investment | Percentage of Total Net Assets |
U.S. Government Agency Mortgage-Backed Securities | 98.0% |
Non-Agency Mortgage-Backed Securities | 4.8% |
Repurchase Agreements — Collateral2 | 17.8% |
Derivative Contracts3,4 | (0.0)% |
Other Assets and Liabilities — Net5 | (20.6)% |
TOTAL | 100.0% |
1 | See the Fund's Confidential Private Offering Memorandum for a description of the principal types of securities in which the Fund invests. |
2 | Includes repurchase agreements purchased with cash collateral received in securities lending and/or dollar-roll transactions, as well as cash covering when-issued and delayed delivery transactions. |
3 | Represents less than 0.1%. |
4 | Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value, and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report. |
5 | Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report Portfolio of Investments – Federated Mortgage Core Portfolio
June 30, 2012 (unaudited)
Principal Amount | | | Value |
| | Collateralized Mortgage Obligations – 8.2% | |
| | Federal Home Loan Mortgage Corporation – 1.7% | |
$10,301,912 | 1 | REMIC 3144 FB, 0.592%, 4/15/2036 | 10,324,863 |
5,404,276 | 1 | REMIC 3160 FD, 0.572%, 5/15/2036 | 5,416,472 |
2,207,464 | 1 | REMIC 3175 FE, 0.552%, 6/15/2036 | 2,211,271 |
12,131,989 | 1 | REMIC 3179 FP, 0.622%, 7/15/2036 | 12,166,891 |
1,483,852 | 1 | REMIC 3206 FE, 0.642%, 8/15/2036 | 1,489,947 |
7,093,571 | 1 | REMIC 3260 PF, 0.542%, 1/15/2037 | 7,112,544 |
3,263,605 | 1 | REMIC 3296 YF, 0.642%, 3/15/2037 | 3,268,295 |
| | TOTAL | 41,990,283 |
| | Federal National Mortgage Association – 1.7% | |
1,077,073 | 1 | REMIC 2005-63 FC, 0.495%, 10/25/2031 | 1,074,869 |
7,719,222 | 1 | REMIC 2006-104 FY, 0.585%, 11/25/2036 | 7,737,532 |
10,450,928 | 1 | REMIC 2006-115 EF, 0.605%, 12/25/2036 | 10,485,053 |
2,384,048 | 1 | REMIC 2006-43 FL, 0.645%, 6/25/2036 | 2,394,487 |
4,159,459 | 1 | REMIC 2006-58 FP, 0.545%, 7/25/2036 | 4,166,677 |
8,321,734 | 1 | REMIC 2006-81 FB, 0.595%, 9/25/2036 | 8,353,415 |
7,967,805 | 1 | REMIC 2006-85 PF, 0.625%, 9/25/2036 | 7,989,357 |
| | TOTAL | 42,201,390 |
| | Non-Agency Mortgage – 4.8% | |
2,630,676 | | Chase Mortgage Finance Corp. 2004-S3, Class 1A1, 5.000%, 3/25/2034 | 2,618,106 |
4,146,064 | | Countrywide Home Loans 2005-21, Class A2, 5.500%, 10/25/2035 | 3,776,220 |
7,294,801 | | Countrywide Home Loans 2007-14, Class A18, 6.000%, 9/25/2037 | 6,553,997 |
2,875,795 | | Credit Suisse Mortgage Capital Certificate 2007-4, Class 4A2, 5.500%, 6/25/2037 | 2,395,515 |
36,750,000 | 2,3,4 | Credit Suisse Mortgage Capital Certificate 2012-CIM2, Class A1, 3.000%, 3/25/2042 | 36,841,985 |
6,548,812 | | Lehman Mortgage Trust 2007-9, Class 1A1, 6.000%, 10/25/2037 | 5,901,848 |
2,608,237 | 1 | Residential Funding Mortgage Securities I 2005-SA3, Class 3A, 5.247%, 8/25/2035 | 2,031,086 |
8,711,103 | | Sequoia Mortgage Trust 2011-1, Class A1, 4.125%, 2/25/2041 | 8,757,389 |
18,600,417 | | Sequoia Mortgage Trust 2011-2, Class A1, 3.900%, 9/25/2041 | 18,992,588 |
22,566,947 | | Sequoia Mortgage Trust 2012-1, Class 2A1, 3.474%, 1/25/2042 | 22,617,059 |
9,432,948 | | Structured Asset Securities Corp. 2005-17, Class 5A1, 5.500%, 10/25/2035 | 8,223,891 |
| | TOTAL | 118,709,684 |
| | TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $205,429,799) | 202,901,357 |
| | Mortgage-Backed Securities – 93.4% | |
| | Federal Home Loan Mortgage Corporation – 28.8% | |
75,036,336 | | 3.500%, 8/1/2025 - 7/1/2042 | 78,928,089 |
106,363,998 | 5 | 4.000%, 2/1/2020 - 7/1/2042 | 112,670,118 |
232,738,563 | | 4.500%, 6/1/2019 - 8/1/2041 | 248,444,820 |
147,398,784 | | 5.000%, 7/1/2019 - 5/1/2041 | 158,429,973 |
83,737,548 | | 5.500%, 3/1/2021 - 5/1/2040 | 91,031,531 |
6,147,904 | | 6.000%, 5/1/2014 - 9/1/2037 | 6,732,081 |
8,321,495 | | 6.500%, 7/1/2014 - 4/1/2038 | 9,331,343 |
1,708,930 | | 7.000%, 10/1/2020 - 9/1/2037 | 1,942,842 |
448,168 | | 7.500%, 12/1/2022 - 5/1/2031 | 522,096 |
387,626 | | 8.000%, 3/1/2030 - 3/1/2031 | 455,874 |
9,410 | | 8.500%, 9/1/2025 | 11,162 |
484 | | 9.500%, 4/1/2021 | 530 |
| | TOTAL | 708,500,459 |
Semi-Annual Shareholder ReportPrincipal Amount | | | Value |
| | Federal National Mortgage Association – 48.2% | |
$25,000,000 | 5 | 2.500%, 7/1/2027 | 25,777,355 |
133,000,000 | 5 | 3.000%, 7/1/2027 - 7/1/2042 | 138,258,798 |
232,509,609 | 5 | 3.500%, 10/1/2025 - 7/1/2042 | 245,155,847 |
274,332,361 | 5 | 4.000%, 7/1/2025 - 7/1/2042 | 292,947,634 |
189,634,353 | | 4.500%, 12/1/2019 - 1/1/2042 | 203,898,279 |
74,454,906 | | 5.000%, 5/1/2023 - 10/1/2041 | 80,630,151 |
98,772,862 | | 5.500%, 9/1/2014 - 7/1/2041 | 108,017,691 |
62,572,205 | | 6.000%, 12/1/2013 - 9/1/2039 | 68,827,071 |
12,624,992 | | 6.500%, 8/1/2014 - 10/1/2038 | 14,184,094 |
5,889,827 | | 7.000%, 3/1/2015 - 6/1/2037 | 6,678,059 |
518,749 | | 7.500%, 4/1/2015 - 6/1/2033 | 604,217 |
157,635 | | 8.000%, 7/1/2023 - 3/1/2031 | 184,983 |
5,034 | | 9.000%, 11/1/2021 - 6/1/2025 | 5,669 |
| | TOTAL | 1,185,169,848 |
| | Government National Mortgage Association – 16.4% | |
60,402,530 | 5 | 3.500%, 11/20/2041 - 7/20/2042 | 64,625,698 |
105,705,427 | 5 | 4.000%, 7/20/2040 - 7/20/2042 | 115,523,675 |
107,132,698 | 5 | 4.500%, 2/15/2039 - 7/20/2042 | 117,572,600 |
72,565,581 | | 5.000%, 1/15/2039 - 7/15/2040 | 79,896,030 |
13,160,784 | | 5.500%, 12/15/2038 - 2/15/2039 | 14,594,976 |
6,923,358 | | 6.000%, 10/15/2028 - 3/15/2040 | 7,777,751 |
587,874 | | 6.500%, 10/15/2028 - 2/15/2032 | 674,347 |
911,571 | | 7.000%, 11/15/2027 - 12/15/2031 | 1,054,179 |
395,896 | | 7.500%, 4/15/2029 - 1/15/2031 | 463,042 |
473,383 | | 8.000%, 1/15/2022 - 11/15/2030 | 556,240 |
45,546 | | 8.500%, 3/15/2022 - 9/15/2029 | 53,068 |
1,675 | | 9.500%, 10/15/2020 | 1,870 |
65,924 | | 12.000%, 4/15/2015 - 6/15/2015 | 71,257 |
| | TOTAL | 402,864,733 |
| | TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $2,227,176,187) | 2,296,535,040 |
| | Adjustable Rate Mortgages – 1.2% | |
| | Federal Home Loan Mortgage Corporation ARM – 0.6% | |
13,574,942 | | Federal Home Loan Mortgage Corp. ARM, 2.308%, 7/1/2034 | 14,294,428 |
| | Federal National Mortgage Association ARM – 0.6% | |
14,210,054 | | Federal National Mortgage Association ARM, 2.960%, 8/1/2035 | 15,240,283 |
| | TOTAL ADJUSTABLE RATE MORTGAGES (IDENTIFIED COST $29,283,798) | 29,534,711 |
| | Repurchase Agreements – 17.8% | |
51,755,000 | 1 | Interest in $4,100,000,000 joint repurchase agreement 0.18%, dated 6/29/2012 under which Bank of America, N.A. will repurchase securities provided as collateral for $4,100,061,500 on 7/2/2012. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 7/25/2041 and the market value of those underlying securities was $4,205,949,259. | 51,755,000 |
146,836,000 | 1,6 | Interest in $248,158,000 joint repurchase agreement 0.17%, dated 6/13/2012 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $248,191,984 on 7/12/2012. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 5/20/2042 and the market value of those underlying securities was $253,143,872. | 146,836,000 |
112,474,000 | 1,6 | Interest in $250,732,000 joint repurchase agreement 0.17%, dated 6/18/2012 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $250,766,336 on 7/17/2012. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 6/1/2042 and the market value of those underlying securities was $255,763,548. | 112,474,000 |
Semi-Annual Shareholder ReportPrincipal Amount | | | Value |
$98,356,000 | 1,6 | Interest in $180,000,000 joint repurchase agreement 0.21%, dated 6/20/2012 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $180,030,450 on 7/19/2012. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 12/15/2041 and the market value of those underlying securities was $184,420,568. | 98,356,000 |
27,000,000 | 1,6 | Interest in $100,000,000 joint repurchase agreement 0.18%, dated 6/13/2012 under which Deutsche Bank Securities, Inc. will repurchase securities provided as collateral for $100,014,500 on 7/12/2012. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 6/25/2042 and the market value of those underlying securities was $102,181,458. | 27,000,000 |
| | TOTAL REPURCHASE AGREEMENTS (AT COST) | 436,421,000 |
| | TOTAL INVESTMENTS — 120.6% (IDENTIFIED COST $2,898,310,784)7 | 2,965,392,108 |
| | OTHER ASSETS AND LIABILITIES - NET — (20.6)%8 | (507,031,046) |
| | TOTAL NET ASSETS — 100% | $2,458,361,062 |
At June 30, 2012, the Fund had the following outstanding futures contracts:
Description | Number of Contracts | Notional Value | Expiration Date | Unrealized Depreciation |
9 U.S. Treasury Bond 30-Year Short Futures | 260 | $38,471,875 | September 2012 | $(79,395) |
9 U.S. Treasury Note 10-Year Short Futures | 700 | $93,362,500 | September 2012 | $(411,731) |
UNREALIZED DEPRECIATION ON FUTURES CONTRACTS | $(491,126) |
Unrealized Depreciation on Futures Contracts is included in “Other Assets and Liabilities — Net.”
1 | All or a portion of these securities are segregated pending settlement of dollar-roll transactions. |
2 | 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 June 30, 2012, this restricted security amounted to $36,841,985, which represented 1.5% of total net assets. |
3 | 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 Trustees (the “Trustees”). At June 30, 2012, this liquid restricted security amounted to $36,841,985, which represented 1.5% of total net assets. |
4 | Market quotations and price evaluations are not available. Fair value determined in accordance with procedures established by and under the general supervision of the Trustees. |
5 | All or a portion of these To Be Announced Securities (TBAs) are subject to dollar-roll transactions. |
6 | Although the repurchase date is more than seven days after the date of purchase, the Fund has the right to terminate the repurchase agreement at any time with seven-days' notice. |
7 | The cost of investments for federal tax purposes amounts to $2,886,488,777. |
8 | Assets, other than investment in securities, less liabilities . See Statement of Assets and Liabilities. A significant portion of this balance is the result of dollar-roll transactions as of June 30, 2012. |
9 | Non-income producing security. |
Note: The categories of investments are shown as a percentage of total net assets at June 30, 2012.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable. Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost. Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
Semi-Annual Shareholder Report
The following is a summary of the inputs used, as of June 30, 2012, in valuing the Fund's assets carried at fair value:Valuation Inputs |
| Level 1 — Quoted Prices and Investments in Mutual Funds | Level 2 — Other Significant Observable Inputs | Level 3 — Significant Unobservable Inputs | Total |
Debt Securities: | | | | |
Collateralized Mortgage Obligations | — | $166,059,372 | $36,841,985 | $202,901,357 |
Mortgage-Backed Securities | — | 2,296,535,040 | — | 2,296,535,040 |
Adjustable Rate Mortgages | — | 29,534,711 | — | 29,534,711 |
Repurchase Agreements | — | 436,421,000 | — | 436,421,000 |
TOTAL SECURITIES | — | $2,928,550,123 | $36,841,985 | $2,965,392,108 |
OTHER FINANCIAL INSTRUMENTS* | $(491,126) | $ — | $ — | $(491,126) |
* | Other financial instruments include futures contracts. |
Following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
| Investment in Debt Securities |
Balance as of December 31, 2011 | $ — |
Change in unrealized depreciation | $(45,938) |
Purchases | $36,887,923 |
Balance as of June 30, 2012 | $36,841,985 |
The total change in unrealized depreciation attributable to investments still held at June 30, 2012 | $(45,938) |
The following acronyms are used throughout this portfolio:
ARM | — Adjustable Rate Mortgage |
REMIC | — Real Estate Mortgage Investment Conduit |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights – Federated Mortgage Core Portfolio
(For a Share Outstanding Throughout Each Period)
| Six Months Ended (unaudited) 6/30/2012 | Year Ended December 31, |
2011 | 2010 | 2009 | 2008 | 2007 |
Net Asset Value, Beginning of Period | $10.20 | $10.06 | $10.05 | $9.89 | $9.93 | $9.88 |
Income From Investment Operations: | | | | | | |
Net investment income | 0.14 | 0.331 | 0.441 | 0.53 | 0.55 | 0.57 |
Net realized and unrealized gain (loss) on investments and futures contracts | 0.03 | 0.21 | 0.06 | 0.16 | (0.04) | 0.05 |
TOTAL FROM INVESTMENT OPERATIONS | 0.17 | 0.54 | 0.50 | 0.69 | 0.51 | 0.62 |
Less Distributions: | | | | | | |
Distributions from net investment income | (0.17) | (0.40) | (0.49) | (0.53) | (0.55) | (0.57) |
Net Asset Value, End of Period | $10.20 | $10.20 | $10.06 | $10.05 | $9.89 | $9.93 |
Total Return2 | 1.67% | 5.45% | 5.04% | 7.09% | 5.28% | 6.48% |
Ratios to Average Net Assets: | | | | | | |
Net expenses | 0.00%3,4 | 0.00%4 | 0.00%4 | 0.00%4 | 0.00%4 | 0.02% |
Net investment income | 2.76%3 | 3.25% | 4.37% | 4.86% | 5.22% | 5.66% |
Expense waiver/reimbursement5 | 0.10%3 | 0.10% | 0.10% | 0.10% | 0.10% | 0.08% |
Supplemental Data: | | | | | | |
Net assets, end of period (000 omitted) | $2,458,361 | $3,165,802 | $1,959,812 | $2,034,884 | $1,918,613 | $1,879,760 |
Portfolio turnover | 131% | 226% | 176% | 156% | 186% | 285% |
Portfolio turnover (excluding purchases and sales from dollar-roll transactions) | 29% | 52% | 60% | 50% | 43% | 55% |
1 | Per share numbers have been calculated using the average shares method. |
2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
3 | Computed on an annualized basis. |
4 | The Adviser has voluntarily agreed to reimburse all operating expenses incurred by the Fund. This arrangement has no fixed term. |
5 | 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
Semi-Annual Shareholder Report Statement of Assets and Liabilities – Federated Mortgage Core Portfolio
June 30, 2012 (unaudited)
Assets: | | |
Investment in repurchase agreements | $436,421,000 | |
Investment in securities | 2,528,971,108 | |
Total investment in securities, at value (identified cost $2,898,310,784) | | $2,965,392,108 |
Cash | | 468 |
Restricted cash (Note 2) | | 1,498,000 |
Income receivable | | 7,663,632 |
Receivable for investments sold | | 70,839,444 |
Receivable for daily variation margin | | 870,313 |
Other assets | | 233,953 |
TOTAL ASSETS | | 3,046,497,918 |
Liabilities: | | |
Payable to adviser (Note 5) | 2,958 | |
Payable for investments purchased | 581,990,178 | |
Payable for shares redeemed | 50,000 | |
Income distribution payable | 5,928,739 | |
Accrued expenses | 164,981 | |
TOTAL LIABILITIES | | 588,136,856 |
Net assets for 240,913,027 shares outstanding | | $2,458,361,062 |
Net Assets Consist of: | | |
Paid-in capital | | $2,399,671,252 |
Net unrealized appreciation of investments and futures contracts | | 65,806,964 |
Accumulated net realized gain on investments and futures contracts | | 466,265 |
Distributions in excess of net investment income | | (7,583,419) |
TOTAL NET ASSETS | | $2,458,361,062 |
Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
$2,458,361,062 ÷ 240,913,027 shares outstanding, no par value, unlimited shares authorized | | $10.20 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations – Federated Mortgage Core Portfolio
Six Months Ended June 30, 2012 (unaudited)
Investment Income: | | | |
Interest | | | $39,069,347 |
Expenses: | | | |
Administrative fee (Note 5) | | $1,103,052 | |
Custodian fees | | 59,839 | |
Transfer and dividend disbursing agent fees and expenses | | 119,616 | |
Directors'/Trustees' fees | | 10,225 | |
Auditing fees | | 13,128 | |
Legal fees | | 4,020 | |
Portfolio accounting fees | | 111,709 | |
Printing and postage | | 3,258 | |
Insurance premiums | | 4,260 | |
Miscellaneous | | 468 | |
TOTAL EXPENSES | | 1,429,575 | |
Waiver and Reimbursement (Note 5): | | | |
Waiver of administrative fee | $(1,103,052) | | |
Reimbursement of other operating expenses | (326,523) | | |
TOTAL WAIVER AND REIMBURSEMENT | | (1,429,575) | |
Net expenses | | | — |
Net investment income | | | 39,069,347 |
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts: | | | |
Net realized gain on investments | | | 32,080,026 |
Net realized loss on futures contracts | | | (4,175,445) |
Net change in unrealized appreciation of investments | | | (18,141,995) |
Net change in unrealized depreciation of futures contracts | | | (491,126) |
Net realized and unrealized gain on investments and futures contracts | | | 9,271,460 |
Change in net assets resulting from operations | | | $48,340,807 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets – Federated Mortgage Core Portfolio
| Six Months Ended (unaudited) 6/30/2012 | Year Ended 12/31/2011 |
Increase (Decrease) in Net Assets | | |
Operations: | | |
Net investment income | $39,069,347 | $77,968,625 |
Net realized gain on investments and futures contracts | 27,904,581 | 31,889,919 |
Net change in unrealized appreciation/depreciation of investments and futures contracts | (18,633,121) | 24,516,264 |
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 48,340,807 | 134,374,808 |
Distributions to Shareholders: | | |
Distributions from net investment income | (47,005,438) | (93,323,414) |
Share Transactions: | | |
Proceeds from sale of shares | 144,116,900 | 1,336,805,144 |
Net asset value of shares issued to shareholders in payment of distributions declared | 4,583,105 | 10,532,038 |
Cost of shares redeemed | (857,476,300) | (182,398,976) |
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (708,776,295) | 1,164,938,206 |
Change in net assets | (707,440,926) | 1,205,989,600 |
Net Assets: | | |
Beginning of period | 3,165,801,988 | 1,959,812,388 |
End of period (including undistributed (distributions in excess of) net investment income of $(7,583,419) and $352,672, respectively) | $2,458,361,062 | $3,165,801,988 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements – Federated Mortgage Core Portfolio
June 30, 2012 (unaudited)
1. ORGANIZATION
Federated Core Trust (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Trust consists of five diversified portfolios. The financial statements included herein are only those of Federated Mortgage Core Portfolio (the “Fund”). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund's investment objective is to provide total return. The Fund is an investment vehicle used by other Federated funds that invest some of their assets in mortgage-backed securities. Currently, shares of the Fund are being offered for investment only to investment companies, insurance company separate accounts, common or commingled trust funds or similar organizations or entities that are “accredited investors” within the meaning of Regulation D of the Securities Act of 1933.
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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Board of Trustees (the “Trustees”).
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
- Shares of other mutual funds are valued based upon their reported NAVs.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation and Significant Events Procedures
The Trustees have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) or an affiliated adviser, and others to determine fair value of securities and in overseeing the calculation of the NAV. The Trustees have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid”evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees. The Fund holds a security for which a price was not able to be obtained from an independent source. To establish fair value, the Valuation Committee utilized a market approach incorporating the change in the market for a security of similar average life for the day an independent price could not be obtained. The price realized upon sale may be different than the price used to value the security. The Fund classifies this security as having a Level 3 valuation due to a lack of observable market inputs.
Semi-Annual Shareholder Report
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Repurchase Agreements
The Fund may invest in repurchase agreements for short-term liquidity purposes. 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.
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
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly.
Premium and Discount Amortization/Paydown Gains and Losses
All premiums and discounts on fixed-income securities are amortized/accreted using the effective interest rate method. 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. As of and during the six months ended June 30, 2012, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of June 30, 2012, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
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.
The Fund may transact in To Be Announced Securities (TBAs). As with other delayed delivery transactions, a seller agrees to issue TBAs at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Fund agrees to accept any security that meets specified terms such as issuer, interest rate and terms of underlying mortgages. The Fund records TBAs on the trade date utilizing information associated with the specified terms of the transaction as opposed to the specific mortgages. TBAs are marked to market daily and begin earning interest on the settlement date. Losses may occur due to the fact that the actual underlying mortgages received may be less favorable than those anticipated by the Fund.
Dollar-Roll Transactions
The Fund engages in dollar-roll transactions in which the Fund sells mortgage-backed securities with a commitment to buy similar (same type, coupon and maturity), but not identical mortgage-backed securities on a future date. Both securities involved are TBA mortgage-backed securities. The Fund treats dollar-roll transactions as purchases and sales. Dollar-rolls are subject to interest rate risks and credit risks.
Semi-Annual Shareholder Report
Futures ContractsThe Fund purchases and sells financial futures contracts to manage cash flows, enhance yield and to potentially reduce transaction costs. Upon entering into a 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 which is shown as Restricted Cash in the Statement of Assets and Liabilities. 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. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearing house, as counterparty to all exchange-traded futures, guarantees the futures against default.
Futures contracts outstanding at period end are listed after the Fund's Portfolio of Investments.
The average notional value of short futures contracts held by the Fund throughout the period was $108,969,643. This is based on amounts held as of each month-end throughout the six-month period.
Restricted Securities
The Fund may purchase securities which are considered restricted. 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 Trustees. 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 Trustees.
Additional Disclosure Related to Derivative Instruments
Fair Value of Derivative Instruments |
| Asset |
| Statement of Assets and Liabilities Location | Fair Value |
Derivatives not accounted for as hedging instruments under ASC Topic 815 | | |
Interest rate contracts | Receivable for daily variation margin | $(491,126)* |
* | Includes cumulative depreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities. |
The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended June 30, 2012
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
| Futures |
Interest rate contracts | $(4,175,445) |
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
| Futures |
Interest rate contracts | $(491,126) |
Other
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.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| Six Months Ended 6/30/2012 | Year Ended 12/31/2011 |
Shares sold | 14,096,614 | 132,500,999 |
Shares issued to shareholders in payment of distributions declared | 448,892 | 1,040,560 |
Shares redeemed | (83,986,917) | (18,079,376) |
NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (69,441,411) | 115,462,183 |
Semi-Annual Shareholder Report
4. FEDERAL TAX INFORMATIONAt June 30, 2012, the cost of investments for federal tax purposes was $2,886,488,777. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized depreciation resulting from futures contracts was $78,903,331. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $82,450,914 and net unrealized depreciation from investments for those securities having an excess of cost over value of $3,547,583.
At December 31, 2011, the Fund had a capital loss carryforward of $41,991,450 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, thereby reducing 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, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
The following schedule summarizes the Fund's capital loss carryforwards and expiration years:
Expiration Year | Short-Term | Long-Term | Total |
2013 | $1,956,693 | N/A | $1,956,693 |
2014 | $18,701,202 | N/A | $18,701,202 |
2015 | $6,318,825 | N/A | $6,318,825 |
2017 | $15,014,730 | N/A | $15,014,730 |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The Adviser, subject to the direction of the Trustees, provides investment adviser services at no fee, because all investors in the fund are other Federated funds, insurance company separate accounts, common or commingled trust funds or similar organizations or entities that are “accredited investors” within the meaning of Regulation D of the 1933 Act. The Adviser may voluntarily choose to reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary reimbursement at any time at its sole discretion. For the six months ended June 30, 2012, the Adviser voluntarily reimbursed $326,523 of other operating expenses.
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:
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 six months ended June 30, 2012, FAS waived its entire fee of $1,103,052.
General
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended June 30, 2012, were as follows:
Purchases | $61,387,026 |
Sales | $41,444,448 |
Semi-Annual Shareholder Report
7. LINE OF CREDITThe Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement 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 offered to the Fund by PNC Bank at the time of the borrowing. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012, the Fund did not utilize the LOC.
8. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of June 30, 2012, there were no outstanding loans. During the six months ended June 30, 2012, the program was not utilized.
9. subsequent events
On August 15, 2012, the Trustees approved the elimination of minimum administrative personnel and services fees effective September 1, 2012. Prior to this date, the administrative fee received during any fiscal year was at least $150,000 per portfolio and $40,000 per each additional class of Shares.
Management has evaluated subsequent events through the date the financial statements were issued, and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited) – Federated Mortgage Core Portfolio
As a shareholder of the Fund, you incur ongoing costs, including to the extent applicable, management fees, 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 January 1, 2012 to June 30, 2012.
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. 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.
| Beginning Account Value 1/1/2012 | Ending Account Value 6/30/2012 | Expenses Paid During Period1 |
Actual | $1,000.00 | $1,016.70 | $0.00 |
Hypothetical (assuming a 5% return before expenses) | $1,000.00 | $1,024.86 | $0.00 |
1 | Expenses are equal to the Fund's annualized net expense ratio of 0.00%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half-year period). The Adviser has voluntarily agreed to reimburse all operating expenses incurred by the Fund. This arrangement has no fixed term. |
Semi-Annual Shareholder Report Evaluation and Approval of Advisory Contract – May 2012
Federated Mortgage Strategy Portfolio (the “Fund”)
Following a review and recommendation of approval by the Fund's independent trustees, the Fund's Board reviewed and approved at its May 2012 meetings the Fund's investment advisory contract for an additional one-year period. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements. The Fund is distinctive in that it: is used to impelment particular investment strategies that are offered to invesors in certain separately managed or wrap fee accounts or programs or certain other discretionary investments accounts; and may also be offered to other Federated funds. In addition, the Adviser does not charge an investment advisory fee for its services although it or its affiliates may receive compensation for managing assets invested in the Fund.
The Federated Funds' Board had previously appointed 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 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 (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
As previously noted, the Adviser does not charge an investment advisory fee for its services; however, the Board did consider compensation and benefits received by the Adviser, including 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. The Board is also familiar with and considered 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 to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be 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 independent legal counsel. Throughout the year and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent trustees and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the trustees. 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 information covering such matters as: the Adviser's investment philosophy, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance, and comments on the reasons for performance; the Fund's investment objectives; the Fund's overall expense structure; the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; 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 Semi-Annual Shareholder Report
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.The Fund's performance when compared to its benchmark index was also deemed to be relevant by the Board as 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.
The Board was informed by the Adviser that, for the periods covered by the Evaluation, the Fund underperformed its benchmark index for the one-year period and outperformed its benchmark index for the three-year period. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and performance of the Fund.
Because the Adviser does not charge the Fund an investment advisory fee, the Fund's Board does not consider fee comparisons to other mutual funds or other institutional or separate accounts to be relevant.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. Because the Adviser does not charge an investment advisory fee for its services, this information generally covered 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 information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waive non-advisory fees and/or reimburse other expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate advisory and administrative services to the Fund for the fees paid.
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 necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. In particular, due to the unusual nature of the Fund as primarily an internal product with no advisory fee, the Board does not consider the assessment of whether economies of scale would be realized if the Fund were to grow to some sufficient size to be relevant. 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 arrangement.
Semi-Annual Shareholder Report 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, as well as a report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30, are available, without charge and upon request, by calling 1-800-341-7400. These materials are also available at 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.)
Semi-Annual Shareholder ReportMutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report Notes
Notes NotesFederated Mortgage Strategy Portfolio
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31421P407
38886 (8/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
Item 2. Code of Ethics
Not Applicable
Item 3. Audit Committee Financial Expert
Not Applicable
Item 4. Principal Accountant Fees and Services
Not Applicable
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the reporting period covered since the previous Form N-CSR filing.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
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 second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
The following exhibits are filed with this report:
(a)(1) Code of Ethics- Not Applicable to this Semi-Annual Report.
(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
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 Managed Pool Series
By /S/ Richard A. Novak
Richard A. Novak
Principal Financial Officer
Date August 27, 2012
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 August 27, 2012
By /S/ Richard A. Novak
Richard A. Novak
Principal Financial Officer
Date August 27, 2012