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: 12/31/15
Date of Reporting Period: Six months ended 06/30/15
Item 1. Reports to Stockholders
Semi-Annual Shareholder Report
June 30, 2015
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, 2015, the Fund's portfolio composition1 was as follows:
| Security Type | Percentage of
Total Net Assets |
| Corporate Debt Securities | 94.0% |
| Foreign Government Debt Securities | 4.4% |
| Derivative Contracts2 | (0.2)% |
| Other Assets and Liabilities—Net3 | 1.8 |
| TOTAL | 100.0% |
| 1 | See the Fund's Prospectus and Statement of Additional Information for a description of these security types. |
| 2 | 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. |
| 3 | 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, 2015 (unaudited)
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—94.0% | |
| | | Basic Industry - Chemicals—1.2% | |
| $90,000 | | Albemarle Corp., 4.15%, 12/1/2024 | $89,751 |
| 90,000 | | Albemarle Corp., Sr. Unsecd. Note, 5.45%, 12/1/2044 | 90,102 |
| 120,000 | 1,2 | Incitec Pivot Finance LLC, Company Guarantee, Series 144A, 4.00%, 12/7/2015 | 121,328 |
| 85,000 | 1,2 | Incitec Pivot Finance LLC, Company Guarantee, Series 144A, 6.00%, 12/10/2019 | 94,147 |
| 300,000 | | RPM International, Inc., Sr. Unsecd. Note, 5.25%, 6/1/2045 | 285,584 |
| 50,000 | | Valspar Corp., Sr. Unsecd. Note, 3.30%, 2/1/2025 | 48,144 |
| 75,000 | | Valspar Corp., Sr. Unsecd. Note, 4.40%, 2/1/2045 | 68,282 |
| | | TOTAL | 797,338 |
| | | Basic Industry - Metals & Mining—4.9% | |
| 250,000 | | Alcoa, Inc., Note, 5.55%, 2/1/2017 | 262,639 |
| 150,000 | | Alcoa, Inc., Sr. Unsecd. Note, 5.40%, 4/15/2021 | 157,781 |
| 110,000 | | Allegheny Technologies, Inc., Sr. Note, 9.375%, 6/1/2019 | 129,800 |
| 200,000 | 1,2 | Anglo American Capital PLC, Company Guarantee, Series 144A, 2.625%, 4/3/2017 | 201,165 |
| 235,000 | | Anglogold Ashanti Holdings PLC, Sr. Note, 6.50%, 4/15/2040 | 214,023 |
| 90,000 | | Anglogold Ashanti Holdings PLC, Sr. Unsecd. Note, 8.50%, 7/30/2020 | 99,338 |
| 85,000 | | ArcelorMittal SA, Sr. Unsecd. Note, 5.25%, 2/25/2017 | 88,506 |
| 310,000 | | ArcelorMittal SA, Sr. Unsecd. Note, 7.50%, 3/1/2041 | 305,350 |
| 40,000 | | Carpenter Technology Corp., Sr. Unsecd. Note, 4.45%, 3/1/2023 | 39,805 |
| 150,000 | | Carpenter Technology Corp., Sr. Unsecd. Note, 5.20%, 7/15/2021 | 160,356 |
| 130,000 | 1,2 | Gerdau S.A., Company Guarantee, Series 144A, 5.75%, 1/30/2021 | 133,900 |
| 250,000 | 1,2 | Gold Fields Orogen Holding BVI Ltd., Company Guarantee, Series 144A, 4.875%, 10/7/2020 | 230,000 |
| 200,000 | 1,2 | Hyundai Steel Co., Sr. Unsecd. Note, Series 144A, 4.625%, 4/21/2016 | 204,652 |
| 280,000 | 1,2 | Newcrest Finance Property Ltd., Sr. Unsecd. Note, Series 144A, 4.20%, 10/1/2022 | 262,383 |
| 225,000 | | Reliance Steel & Aluminum Co., Sr. Unsecd. Note, 4.50%, 4/15/2023 | 221,430 |
| 250,000 | | Southern Copper Corp., Note, 6.75%, 4/16/2040 | 259,435 |
| 105,000 | | Worthington Industries, Inc., Sr. Unsecd. Note, 4.55%, 4/15/2026 | 107,828 |
| 100,000 | | Worthington Industries, Inc., Sr. Unsecd. Note, 6.50%, 4/15/2020 | 113,245 |
| 100,000 | | Xstrata Canada Corp., 6.00%, 10/15/2015 | 101,310 |
| | | TOTAL | 3,292,946 |
| | | Basic Industry - Paper—0.8% | |
| 150,000 | | Plum Creek Timberlands LP, Sr. Unsecd. Note, 3.25%, 3/15/2023 | 144,582 |
| 140,000 | | Plum Creek Timberlands LP, Sr. Unsecd. Note, 4.70%, 3/15/2021 | 149,912 |
| 100,000 | | Weyerhaeuser Co., Sr. Unsecd. Note, 7.375%, 10/1/2019 | 118,396 |
| 100,000 | | Weyerhaeuser Co., Sr. Unsecd. Note, 7.375%, 3/15/2032 | 125,067 |
| | | TOTAL | 537,957 |
| | | Capital Goods - Aerospace & Defense—1.1% | |
| 160,000 | | Embraer Netherlands BV, Sr. Unsecd. Note, 5.05%, 6/15/2025 | 160,400 |
| 100,000 | | Embraer SA, Sr. Unsecd. Note, 5.15%, 6/15/2022 | 103,650 |
| 136,000 | 1,2 | Textron Financial Corp., Jr. Sub. Note, Series 144A, 6.00%, 2/15/2067 | 110,500 |
| 300,000 | | Textron, Inc., Sr. Unsecd. Note, 3.875%, 3/1/2025 | 295,465 |
| 50,000 | | Textron, Inc., Sr. Unsecd. Note, 4.30%, 3/1/2024 | 51,947 |
| | | TOTAL | 721,962 |
| | | Capital Goods - Building Materials—1.0% | |
| 260,000 | | Masco Corp., Sr. Unsecd. Note, 5.95%, 3/15/2022 | 293,150 |
| 30,000 | | Masco Corp., Sr. Unsecd. Note, 7.125%, 3/15/2020 | 34,950 |
| 275,000 | | Valmont Industries, Inc., 5.25%, 10/1/2054 | 246,553 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Capital Goods - Building Materials—continued | |
| $67,000 | | Valmont Industries, Inc., Sr. Unsecd. Note, 6.625%, 4/20/2020 | $77,334 |
| | | TOTAL | 651,987 |
| | | Capital Goods - Construction Machinery—0.2% | |
| 120,000 | | AGCO Corp., Sr. Unsecd. Note, 5.875%, 12/1/2021 | 134,644 |
| | | Capital Goods - Diversified Manufacturing—0.1% | |
| 100,000 | | Harsco Corp., 5.75%, 5/15/2018 | 103,250 |
| | | Capital Goods - Packaging—1.1% | |
| 180,000 | | Packaging Corp. of America, Sr. Unsecd. Note, 3.65%, 9/15/2024 | 176,471 |
| 65,000 | | Packaging Corp. of America, Sr. Unsecd. Note, 3.90%, 6/15/2022 | 65,768 |
| 80,000 | | Packaging Corp. of America, Sr. Unsecd. Note, 4.50%, 11/1/2023 | 82,537 |
| 120,000 | | Rock-Tenn Co., Sr. Unsecd. Note, 4.00%, 3/1/2023 | 122,037 |
| 40,000 | | Rock-Tenn Co., Sr. Unsecd. Note, 4.45%, 3/1/2019 | 42,468 |
| 220,000 | | Sonoco Products Co., Sr. Unsecd. Note, 5.75%, 11/1/2040 | 237,498 |
| | | TOTAL | 726,779 |
| | | Communications - Cable & Satellite—3.4% | |
| 250,000 | 1,2 | Cox Communications, Inc., Series 144A, 3.25%, 12/15/2022 | 238,412 |
| 245,000 | | DIRECTV Holdings LLC, Company Guarantee, 6.375%, 3/1/2041 | 263,598 |
| 300,000 | | Time Warner Cable, Inc., Company Guarantee, 5.00%, 2/1/2020 | 323,293 |
| 300,000 | | Time Warner Cable, Inc., Company Guarantee, 5.50%, 9/1/2041 | 279,858 |
| 420,000 | | Time Warner Cable, Inc., Company Guarantee, 8.25%, 4/1/2019 | 494,047 |
| 50,000 | | Time Warner Cable, Inc., Company Guarantee, 8.75%, 2/14/2019 | 59,393 |
| 500,000 | | Time Warner Cable, Inc., Sr. Unsecd. Note, 4.00%, 9/1/2021 | 513,463 |
| 100,000 | | Time Warner Cable, Inc., Sr. Unsecd. Note, 5.85%, 5/1/2017 | 106,819 |
| | | TOTAL | 2,278,883 |
| | | Communications - Media & Entertainment—5.9% | |
| 350,000 | | 21st Century Fox America, Inc., 5.65%, 8/15/2020 | 399,824 |
| 100,000 | | 21st Century Fox America, Inc., 6.75%, 1/9/2038 | 122,486 |
| 30,000 | | 21st Century Fox America, Inc., Sr. Unsecd. Note, 4.00%, 10/1/2023 | 30,922 |
| 200,000 | | 21st Century Fox America, Inc., Sr. Unsecd. Note, 5.40%, 10/1/2043 | 213,536 |
| 250,000 | 1,2 | British Sky Broadcasting Group PLC, Series 144A, 3.75%, 9/16/2024 | 244,178 |
| 200,000 | | CBS Corp., 4.90%, 8/15/2044 | 185,622 |
| 250,000 | | Grupo Televisa S.A., 6.625%, 3/18/2025 | 302,840 |
| 200,000 | | Interpublic Group of Cos., Inc., Sr. Unsecd. Note, 2.25%, 11/15/2017 | 201,754 |
| 70,000 | | Interpublic Group of Cos., Inc., Sr. Unsecd. Note, 4.00%, 3/15/2022 | 71,627 |
| 100,000 | 1,2 | McGraw Hill Financial, Inc., Unsecd. Note, Series 144A, 4.00%, 6/15/2025 | 100,032 |
| 305,000 | | Omnicom Group, Inc., Sr. Unsecd. Note, 3.625%, 5/1/2022 | 306,942 |
| 200,000 | 1,2 | Pearson Funding Five PLC, Sr. Unsecd. Note, Series 144A, 3.25%, 5/8/2023 | 191,607 |
| 100,000 | 1,2 | Pearson Funding Two PLC, Sr. Unsecd. Note, Series 144A, 4.00%, 5/17/2016 | 102,370 |
| 440,000 | | Time Warner, Inc., Company Guarantee, 6.20%, 3/15/2040 | 499,963 |
| 225,000 | | Viacom, Inc., Sr. Unsecd. Note, 2.20%, 4/1/2019 | 222,709 |
| 95,000 | | Viacom, Inc., Sr. Unsecd. Note, 2.50%, 12/15/2016 | 96,476 |
| 370,000 | | Viacom, Inc., Sr. Unsecd. Note, 4.25%, 9/1/2023 | 373,080 |
| 280,000 | | WPP Finance 2010, Sr. Unsecd. Note, 5.125%, 9/7/2042 | 279,293 |
| | | TOTAL | 3,945,261 |
| | | Communications - Telecom Wireless—0.8% | |
| 220,000 | | American Tower Corp., Sr. Unsecd. Note, 5.00%, 2/15/2024 | 232,670 |
| 330,000 | | Telefonaktiebolaget LM Ericsson, Sr. Unsecd. Note, 4.125%, 5/15/2022 | 341,950 |
| | | TOTAL | 574,620 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Communications - Telecom Wirelines—9.9% | |
| $1,690,000 | | AT&T, Inc., Sr. Unsecd. Note, 4.75%, 5/15/2046 | $1,535,857 |
| 300,000 | | CenturyLink, Inc., Sr. Note, Series Q, 6.15%, 9/15/2019 | 317,250 |
| 485,000 | | CenturyLink, Inc., Sr. Unsecd. Note, 7.65%, 3/15/2042 | 441,350 |
| 250,000 | | CenturyLink, Inc., Sr. Unsecd. Note, Series S, 6.45%, 6/15/2021 | 253,125 |
| 100,000 | | Rogers Communications, Inc., Company Guarantee, 6.80%, 8/15/2018 | 114,199 |
| 425,000 | | Telefonica Emisiones SAU, Company Guarantee, 5.462%, 2/16/2021 | 470,066 |
| 40,000 | | Telefonica SA, Company Guarantee, 7.045%, 6/20/2036 | 49,135 |
| 300,000 | | Verizon Communications, Inc., Sr. Unsecd. Note, 4.15%, 3/15/2024 | 308,056 |
| 1,500,000 | | Verizon Communications, Inc., Sr. Unsecd. Note, 5.15%, 9/15/2023 | 1,646,259 |
| 22,000 | | Verizon Communications, Inc., Sr. Unsecd. Note, 6.40%, 9/15/2033 | 25,215 |
| 1,000,000 | | Verizon Communications, Inc., Sr. Unsecd. Note, 6.55%, 9/15/2043 | 1,173,264 |
| 360,000 | 1,2 | Verizon Communications, Inc., Sr. Unsecd. Note, Series 144A, 4.522%, 9/15/2048 | 318,384 |
| | | TOTAL | 6,652,160 |
| | | Consumer Cyclical - Automotive—3.0% | |
| 50,000 | 1,2 | American Honda Finance Corp., Series 144A, 7.625%, 10/1/2018 | 59,297 |
| 300,000 | | Ford Motor Co., Sr. Unsecd. Note, 4.75%, 1/15/2043 | 292,931 |
| 200,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 2.375%, 1/16/2018 | 201,890 |
| 470,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 4.25%, 9/20/2022 | 489,660 |
| 200,000 | | General Motors Co., Sr. Unsecd. Note, 4.00%, 4/1/2025 | 197,443 |
| 205,000 | | General Motors Co., Sr. Unsecd. Note, 5.20%, 4/1/2045 | 204,004 |
| 250,000 | 1,2 | Hyundai Capital America, Sr. Unsecd. Note, Series 144A, 2.875%, 8/9/2018 | 255,883 |
| 200,000 | 1,2 | RCI Banque SA, Sr. Unsecd. Note, Series 144A, 3.50%, 4/3/2018 | 207,799 |
| 100,000 | 1,2 | RCI Banque SA, Sr. Unsecd. Note, Series 144A, 4.60%, 4/12/2016 | 102,461 |
| | | TOTAL | 2,011,368 |
| | | Consumer Cyclical - Leisure—0.4% | |
| 240,000 | | Carnival Corp., Sr. Unsecd. Note, 3.95%, 10/15/2020 | 252,046 |
| | | Consumer Cyclical - Lodging—0.8% | |
| 250,000 | | Choice Hotels International, Inc., Company Guarantee, 5.70%, 8/28/2020 | 270,625 |
| 300,000 | | Hyatt Hotels Corp., Sr. Unsecd. Note, 3.375%, 7/15/2023 | 292,256 |
| 1,000 | | Wyndham Worldwide Corp., Sr. Unsecd. Note, 6.00%, 12/1/2016 | 1,055 |
| | | TOTAL | 563,936 |
| | | Consumer Cyclical - Retailers—1.4% | |
| 100,000 | | Advance Auto Parts, Inc., 4.50%, 12/1/2023 | 103,272 |
| 80,000 | | Advance Auto Parts, Inc., Company Guarantee, 4.50%, 1/15/2022 | 84,013 |
| 55,000 | | AutoZone, Inc., Sr. Unsecd. Note, 1.30%, 1/13/2017 | 55,105 |
| 200,000 | | Bed Bath & Beyond, Inc., 5.165%, 8/1/2044 | 198,597 |
| 50,000 | | CVS Health Corp., Sr. Unsecd. Note, 4.00%, 12/5/2023 | 51,671 |
| 335,000 | | O'Reilly Automotive, Inc., Company Guarantee, 4.875%, 1/14/2021 | 367,048 |
| 75,000 | | Tiffany & Co., Sr. Unsecd. Note, 3.80%, 10/1/2024 | 73,760 |
| | | TOTAL | 933,466 |
| | | Consumer Non-Cyclical - Food/Beverage—2.3% | |
| 65,000 | | ConAgra Foods, Inc., Sr. Unsecd. Note, 3.20%, 1/25/2023 | 60,768 |
| 300,000 | 1,2 | Grupo Bimbo SAB de CV, Sr. Unsecd. Note, Series 144A, 4.50%, 1/25/2022 | 315,150 |
| 185,000 | 1,2 | HJ Heinz Co., Sr. Unsecd. Note, Series 144A, 3.95%, 7/15/2025 | 186,417 |
| 275,000 | 1,2 | HJ Heinz Co., Sr. Unsecd. Note, Series 144A, 5.20%, 7/15/2045 | 282,477 |
| 250,000 | 1,2 | Kerry Group Financial Services, Sr. Unsecd. Note, Series 144A, 3.20%, 4/9/2023 | 241,539 |
| 105,000 | | Sysco Corp., Sr. Unsecd. Note, 3.50%, 10/2/2024 | 106,035 |
| 200,000 | | Tyson Foods, Inc., 3.95%, 8/15/2024 | 201,559 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Consumer Non-Cyclical - Food/Beverage—continued | |
| $165,000 | | Tyson Foods, Inc., Sr. Unsecd. Note, 4.50%, 6/15/2022 | $175,364 |
| | | TOTAL | 1,569,309 |
| | | Consumer Non-Cyclical - Health Care—0.9% | |
| 55,000 | | Becton, Dickinson & Co., Sr. Unsecd. Note, 3.734%, 12/15/2024 | 54,841 |
| 60,000 | | Becton, Dickinson & Co., Sr. Unsecd. Note, 4.685%, 12/15/2044 | 58,714 |
| 35,000 | | Becton, Dickinson & Co., Sr. Unsecd. Note, 6.375%, 8/1/2019 | 40,335 |
| 40,000 | | Laboratory Corp. of America Holdings, Sr. Unsecd. Note, 3.75%, 8/23/2022 | 40,471 |
| 125,000 | | Thermo Fisher Scientific, Inc., Sr. Unsecd. Note, 3.30%, 2/15/2022 | 123,567 |
| 265,000 | | Zimmer Biomet Holdings, Inc., Sr. Unsecd. Note, 3.55%, 4/1/2025 | 257,001 |
| | | TOTAL | 574,929 |
| | | Consumer Non-Cyclical - Pharmaceuticals—0.1% | |
| 40,000 | | Dentsply International, Inc., Sr. Unsecd. Note, 2.75%, 8/15/2016 | 40,650 |
| | | Consumer Non-Cyclical - Supermarkets—0.5% | |
| 300,000 | | Kroger Co., Bond, 6.90%, 4/15/2038 | 372,135 |
| | | Consumer Non-Cyclical - Tobacco—1.8% | |
| 140,000 | | Altria Group, Inc., 9.25%, 8/6/2019 | 175,957 |
| 235,000 | | Altria Group, Inc., Sr. Unsecd. Note, 4.00%, 1/31/2024 | 238,742 |
| 150,000 | | Altria Group, Inc., Sr. Unsecd. Note, 5.375%, 1/31/2044 | 159,404 |
| 300,000 | | Lorillard Tobacco Co., Sr. Unsecd. Note, 7.00%, 8/4/2041 | 347,097 |
| 300,000 | | Reynolds American, Inc., Sr. Unsecd. Note, 5.85%, 8/15/2045 | 316,553 |
| | | TOTAL | 1,237,753 |
| | | Energy - Independent—3.2% | |
| 400,000 | | Anadarko Petroleum Corp., Sr. Unsecd. Note, 3.45%, 7/15/2024 | 394,335 |
| 390,000 | | Canadian Natural Resources Ltd., Sr. Unsecd. Note, 3.80%, 4/15/2024 | 385,812 |
| 550,000 | | Petroleos Mexicanos, 6.50%, 6/2/2041 | 578,160 |
| 740,000 | | Petroleos Mexicanos, Company Guarantee, 6.00%, 3/5/2020 | 828,800 |
| | | TOTAL | 2,187,107 |
| | | Energy - Integrated—4.1% | |
| 250,000 | | Hess Corp., Sr. Unsecd. Note, 5.60%, 2/15/2041 | 256,111 |
| 245,000 | | Husky Energy, Inc., Sr. Unsecd. Note, 3.95%, 4/15/2022 | 245,344 |
| 100,000 | | Husky Oil Ltd., Deb., 7.55%, 11/15/2016 | 107,549 |
| 200,000 | | Marathon Oil Corp., Sr. Unsecd. Note, 3.85%, 6/1/2025 | 196,114 |
| 100,000 | | Petro-Canada, Bond, 5.35%, 7/15/2033 | 106,561 |
| 500,000 | | Petrobras Global Finance BV, Sr. Unsecd. Note, 4.375%, 5/20/2023 | 437,100 |
| 1,200,000 | | Petrobras International Finance Co., Sr. Unsecd. Note, 5.75%, 1/20/2020 | 1,192,008 |
| 240,000 | | Phillips 66, Sr. Unsecd. Note, 4.875%, 11/15/2044 | 229,286 |
| | | TOTAL | 2,770,073 |
| | | Energy - Midstream—6.2% | |
| 600,000 | | Energy Transfer Partners LP, Sr. Unsecd. Note, 4.90%, 2/1/2024 | 610,451 |
| 250,000 | | Energy Transfer Partners LP, Sr. Unsecd. Note, 6.125%, 12/15/2045 | 251,476 |
| 250,000 | | Enterprise Products Operating LLC, 3.90%, 2/15/2024 | 251,147 |
| 200,000 | | Enterprise Products Operating LLC, Company Guarantee, 5.25%, 1/31/2020 | 222,179 |
| 500,000 | | Enterprise Products Operating LLC, Sr. Unsecd. Note, 4.85%, 3/15/2044 | 470,349 |
| 40,000 | 1,2 | Florida Gas Transmission Co. LLC, Sr. Unsecd. Note, Series 144A, 5.45%, 7/15/2020 | 44,392 |
| 325,000 | | Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 5.80%, 3/15/2035 | 320,771 |
| 695,000 | | Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 6.375%, 3/1/2041 | 701,352 |
| 240,000 | | Spectra Energy Capital LLC, Company Guarantee, 5.65%, 3/1/2020 | 260,514 |
| 200,000 | 1,2 | Texas Eastern Transmission LP, Sr. Unsecd. Note, Series 144A, 2.80%, 10/15/2022 | 187,258 |
| 120,000 | | Williams Partners LP, 5.25%, 3/15/2020 | 130,707 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Energy - Midstream—continued | |
| $790,000 | | Williams Partners LP, Sr. Unsecd. Note, 3.90%, 1/15/2025 | $742,757 |
| | | TOTAL | 4,193,353 |
| | | Energy - Oil Field Services—1.4% | |
| 35,000 | | Nabors Industries, Inc., Company Guarantee, 5.00%, 9/15/2020 | 36,448 |
| 100,000 | | Nabors Industries, Inc., Sr. Unsecd. Note, 4.625%, 9/15/2021 | 99,376 |
| 200,000 | | Nabors Industries, Inc., Sr. Unsecd. Note, 5.10%, 9/15/2023 | 198,725 |
| 90,000 | | Noble Holding International Ltd., Company Guarantee, 4.90%, 8/1/2020 | 92,552 |
| 100,000 | | Noble Holding International Ltd., Sr. Unsecd. Note, 3.05%, 3/1/2016 | 100,738 |
| 150,000 | | Weatherford International Ltd., 7.00%, 3/15/2038 | 143,399 |
| 165,000 | | Weatherford International Ltd., Sr. Unsecd. Note, 5.95%, 4/15/2042 | 139,500 |
| 150,000 | | Weatherford International Ltd., Sr. Unsecd. Note, 6.75%, 9/15/2040 | 138,725 |
| | | TOTAL | 949,463 |
| | | Energy - Refining—1.3% | |
| 150,000 | | Marathon Petroleum Corp., Sr. Unsecd. Note, 3.625%, 9/15/2024 | 147,569 |
| 150,000 | | Marathon Petroleum Corp., Sr. Unsecd. Note, 6.50%, 3/1/2041 | 170,436 |
| 350,000 | | Valero Energy Corp., 9.375%, 3/15/2019 | 430,815 |
| 100,000 | | Valero Energy Corp., Sr. Unsecd. Note, 3.65%, 3/15/2025 | 97,282 |
| | | TOTAL | 846,102 |
| | | Financial Institution - Banking—8.6% | |
| 200,000 | | Associated Banc-Corp., Sr. Unsecd. Note, 5.125%, 3/28/2016 | 206,014 |
| 210,000 | | Associated Banc-Corp., Sub., 4.25%, 1/15/2025 | 206,998 |
| 200,000 | | Bank of America Corp., Series L, 2.60%, 1/15/2019 | 202,215 |
| 125,000 | | Bank of America Corp., Sr. Unsecd. Note, 2.00%, 1/11/2018 | 125,429 |
| 200,000 | | Bank of America Corp., Sr. Unsecd. Note, Series MTN, 3.30%, 1/11/2023 | 197,046 |
| 550,000 | | Bank of America Corp., Sr. Unsecd. Note, Series MTN, 5.00%, 5/13/2021 | 603,938 |
| 200,000 | | Bank of America Corp., Sub. Note, Series L, 3.95%, 4/21/2025 | 193,273 |
| 100,000 | | Bank of America Corp., Sub. Note, Series MTN, 4.00%, 1/22/2025 | 97,476 |
| 250,000 | | Branch Banking & Trust Co., Sub. Note, 3.80%, 10/30/2026 | 252,381 |
| 250,000 | | Capital One Bank, Sub. Note, 3.375%, 2/15/2023 | 242,943 |
| 200,000 | | Citigroup, Inc., Sr. Note, 5.375%, 8/9/2020 | 223,658 |
| 200,000 | | Citigroup, Inc., Sr. Unsecd. Note, 3.875%, 10/25/2023 | 204,192 |
| 170,000 | | Citigroup, Inc., Sr. Unsecd. Note, 4.50%, 1/14/2022 | 182,622 |
| 400,000 | | Citigroup, Inc., Sub. Note, 3.875%, 3/26/2025 | 383,349 |
| 250,000 | 1,2 | Citizens Financial Group, Inc., Sub. Note, Series 144A, 4.15%, 9/28/2022 | 255,388 |
| 270,000 | | City National Corp., Sr. Unsecd. Note, 5.25%, 9/15/2020 | 305,930 |
| 200,000 | | Comerica, Inc., 3.80%, 7/22/2026 | 194,427 |
| 250,000 | | Compass Bank, Birmingham, Sr. Unsecd. Note, Series BKNT, 2.75%, 9/29/2019 | 248,893 |
| 100,000 | | Fifth Third Bancorp, Sr. Unsecd. Note, 2.30%, 3/1/2019 | 100,116 |
| 480,000 | | Goldman Sachs Group, Inc., Sr. Unsecd. Note, 5.75%, 1/24/2022 | 545,867 |
| 110,000 | | HSBC Holdings PLC, Sr. Unsecd. Note, 5.10%, 4/5/2021 | 122,590 |
| 40,000 | | Huntington Bancshares, Inc., Sub. Note, 7.00%, 12/15/2020 | 47,657 |
| 200,000 | | Morgan Stanley, Sub. Note, 5.00%, 11/24/2025 | 209,475 |
| 175,000 | | Morgan Stanley, Sub. Note, Series MTN, 4.10%, 5/22/2023 | 175,398 |
| 215,000 | | SunTrust Banks, Inc., Sr. Unsecd. Note, 2.50%, 5/1/2019 | 216,251 |
| 50,000 | | Wilmington Trust Corp., Sub. Note, 8.50%, 4/2/2018 | 57,987 |
| | | TOTAL | 5,801,513 |
| | | Financial Institution - Broker/Asset Mgr/Exchange—2.4% | |
| 190,000 | 1,2 | Cantor Fitzgerald LP, Bond, Series 144A, 7.875%, 10/15/2019 | 209,264 |
| 10,000 | | Eaton Vance Corp., Sr. Unsecd. Note, 3.625%, 6/15/2023 | 10,000 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Financial Institution - Broker/Asset Mgr/Exchange—continued | |
| $2,000 | | Eaton Vance Corp., Sr. Unsecd. Note, 6.50%, 10/2/2017 | $2,205 |
| 150,000 | | Janus Capital Group, Inc., Sr. Note, 6.70%, 6/15/2017 | 163,294 |
| 70,000 | | Jefferies Group LLC, Sr. Unsecd. Note, 6.50%, 1/20/2043 | 68,404 |
| 250,000 | | Jefferies Group LLC, Sr. Unsecd. Note, 6.875%, 4/15/2021 | 286,575 |
| 500,000 | | Raymond James Financial, Inc., Sr. Unsecd. Note, 5.625%, 4/1/2024 | 556,437 |
| 100,000 | | Stifel Financial Corp., 4.25%, 7/18/2024 | 98,851 |
| 200,000 | 1,2 | TIAA Asset Management Finance Co. LLC, Sr. Unsecd. Note, Series 144A, 4.125%, 11/1/2024 | 201,526 |
| | | TOTAL | 1,596,556 |
| | | Financial Institution - Finance Companies—0.8% | |
| 300,000 | | Discover Bank, Sub., Series BKNT, 8.70%, 11/18/2019 | 364,970 |
| 100,000 | | HSBC Finance Capital Trust IX, Note, 5.911%, 11/30/2035 | 100,805 |
| 70,000 | 1,2 | Macquarie Group Ltd., Sr. Unsecd. Note, Series 144A, 6.00%, 1/14/2020 | 78,672 |
| | | TOTAL | 544,447 |
| | | Financial Institution - Insurance - Life—4.3% | |
| 75,000 | | AXA-UAP, Sub. Note, 8.60%, 12/15/2030 | 100,887 |
| 255,000 | | American International Group, Inc., Sr. Unsecd. Note, 4.125%, 2/15/2024 | 264,724 |
| 100,000 | | American International Group, Inc., Sr. Unsecd. Note, 4.375%, 1/15/2055 | 89,088 |
| 575,000 | | American International Group, Inc., Sr. Unsecd. Note, 6.40%, 12/15/2020 | 682,267 |
| 120,000 | | Hartford Financial Services Group, Inc., Sr. Unsecd. Note, 5.125%, 4/15/2022 | 133,155 |
| 120,000 | | Hartford Financial Services Group, Inc., Sr. Unsecd. Note, 6.625%, 4/15/2042 | 149,175 |
| 110,000 | | Lincoln National Corp., Sr. Note, 7.00%, 6/15/2040 | 137,997 |
| 200,000 | | Lincoln National Corp., Sr. Unsecd. Note, 6.25%, 2/15/2020 | 231,462 |
| 100,000 | | MetLife, Inc., Jr. Sub. Note, 10.75%, 8/1/2039 | 162,250 |
| 50,000 | 1,2 | Penn Mutual Life Insurance Co., Sr. Note, Series 144A, 7.625%, 6/15/2040 | 66,093 |
| 150,000 | | Prudential Financial, Inc., Sr. Note, Series MTND, 7.375%, 6/15/2019 | 177,883 |
| 650,000 | | Prudential Financial, Inc., Sr. Unsecd. Note, Series MTN, 5.375%, 6/21/2020 | 733,516 |
| | | TOTAL | 2,928,497 |
| | | Financial Institution - Insurance - P&C—2.2% | |
| 500,000 | | CNA Financial Corp., Sr. Unsecd. Note, 5.875%, 8/15/2020 | 569,756 |
| 50,000 | | CNA Financial Corp., Sr. Unsecd. Note, 7.35%, 11/15/2019 | 59,169 |
| 75,000 | | Horace Mann Educators Corp., Sr. Note, 6.85%, 4/15/2016 | 78,290 |
| 60,000 | 1,2 | Liberty Mutual Group, Inc., Company Guarantee, Series 144A, 5.00%, 6/1/2021 | 65,494 |
| 310,000 | 1,2 | Liberty Mutual Group, Inc., Series 144A, 4.95%, 5/1/2022 | 333,434 |
| 55,000 | 1,2 | Liberty Mutual Group, Inc., Sr. Unsecd. Note, Series 144A, 4.25%, 6/15/2023 | 56,585 |
| 195,000 | 1,2 | Nationwide Mutual Insurance Co., Sub. Note, Series 144A, 9.375%, 8/15/2039 | 292,787 |
| | | TOTAL | 1,455,515 |
| | | Financial Institution - REIT - Apartment—1.1% | |
| 300,000 | | Mid-America Apartment Communities LP, Sr. Unsecd. Note, 3.75%, 6/15/2024 | 296,505 |
| 100,000 | | Post Apartment Homes LP, Sr. Unsecd. Note, 3.375%, 12/1/2022 | 96,616 |
| 70,000 | | UDR, Inc., Company Guarantee, 4.625%, 1/10/2022 | 74,806 |
| 250,000 | | UDR, Inc., Series MTN, 3.75%, 7/1/2024 | 248,014 |
| | | TOTAL | 715,941 |
| | | Financial Institution - REIT - Healthcare—0.8% | |
| 100,000 | | Health Care REIT, Inc., Sr. Unsecd. Note, 4.95%, 1/15/2021 | 109,002 |
| 230,000 | | Health Care REIT, Inc., Sr. Unsecd. Note, 6.125%, 4/15/2020 | 262,828 |
| 200,000 | | Healthcare Trust of America, 3.70%, 4/15/2023 | 193,217 |
| | | TOTAL | 565,047 |
| | | Financial Institution - REIT - Office—0.7% | |
| 100,000 | | Alexandria Real Estate Equities, Inc., Sr. Unsecd. Note, 3.90%, 6/15/2023 | 99,624 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Financial Institution - REIT - Office—continued | |
| $60,000 | | Alexandria Real Estate Equities, Inc., Sr. Unsecd. Note, 4.60%, 4/1/2022 | $63,239 |
| 70,000 | | Boston Properties LP, Sr. Unsecd. Note, 3.80%, 2/1/2024 | 70,872 |
| 200,000 | | Boston Properties LP, Sr. Unsecd. Note, 5.875%, 10/15/2019 | 227,116 |
| | | TOTAL | 460,851 |
| | | Financial Institution - REIT - Other—1.3% | |
| 200,000 | | Liberty Property LP, 6.625%, 10/1/2017 | 220,633 |
| 73,000 | | ProLogis Inc., Sr. Unsecd. Note, 6.875%, 3/15/2020 | 84,345 |
| 100,000 | | ProLogis LP, Sr. Unsecd. Note, 3.35%, 2/1/2021 | 102,174 |
| 150,000 | | ProLogis LP, Sr. Unsecd. Note, 4.25%, 8/15/2023 | 153,981 |
| 300,000 | | WP Carey, Inc., Sr. Unsecd. Note, 4.60%, 4/1/2024 | 301,347 |
| | | TOTAL | 862,480 |
| | | Financial Institution - REIT - Retail—0.8% | |
| 325,000 | | Equity One, Inc., Bond, 6.00%, 9/15/2017 | 353,158 |
| 45,000 | | Tanger Properties LP, Sr. Unsecd. Note, 3.875%, 12/1/2023 | 45,470 |
| 110,000 | | Tanger Properties LP, Sr. Unsecd. Note, 6.125%, 6/1/2020 | 125,643 |
| | | TOTAL | 524,271 |
| | | Financial Institution - REITs—0.2% | |
| 165,000 | | Host Hotels & Resorts LP, Sr. Unsecd. Note, Series E, 4.00%, 6/15/2025 | 163,855 |
| | | Technology—2.9% | |
| 120,000 | | Agilent Technologies, Inc., Sr. Unsecd. Note, 3.20%, 10/1/2022 | 116,029 |
| 50,000 | | Agilent Technologies, Inc., Sr. Unsecd. Note, 3.875%, 7/15/2023 | 50,135 |
| 100,000 | | BMC Software, Inc., 7.25%, 6/1/2018 | 92,625 |
| 350,000 | | Fidelity National Information Services, Inc., Sr. Unsecd. Note, 3.50%, 4/15/2023 | 339,864 |
| 350,000 | | Fiserv, Inc., Sr. Unsecd. Note, 3.85%, 6/1/2025 | 350,690 |
| 110,000 | 1,2 | Flextronics International Ltd., Sr. Unsecd. Note, Series 144A, 4.75%, 6/15/2025 | 109,263 |
| 70,000 | | Ingram Micro, Inc., Sr. Unsecd. Note, 4.95%, 12/15/2024 | 71,582 |
| 100,000 | | Ingram Micro, Inc., Sr. Unsecd. Note, 5.00%, 8/10/2022 | 104,854 |
| 250,000 | 1,2 | Keysight Technologies, Inc., Sr. Unsecd. Note, Series 144A, 4.55%, 10/30/2024 | 241,408 |
| 150,000 | 1,2 | Molex Electronics Technologies LLC, Unsecd. Note, Series 144A, 3.90%, 4/15/2025 | 145,414 |
| 220,000 | | Verisk Analytics, Inc., Sr. Unsecd. Note, 4.125%, 9/12/2022 | 224,096 |
| 75,000 | | Verisk Analytics, Inc., Sr. Unsecd. Note, 4.875%, 1/15/2019 | 80,189 |
| | | TOTAL | 1,926,149 |
| | | Transportation - Airlines—0.5% | |
| 75,000 | | Southwest Airlines Co., Deb., 7.375%, 3/1/2027 | 94,854 |
| 220,000 | | Southwest Airlines Co., Sr. Unsecd. Note, 5.125%, 3/1/2017 | 233,500 |
| | | TOTAL | 328,354 |
| | | Transportation - Railroads—1.9% | |
| 300,000 | | Burlington Northern Santa Fe Corp., Deb., 5.75%, 5/1/2040 | 344,307 |
| 200,000 | | Burlington Northern Santa Fe Corp., Sr. Unsecd. Note, 3.05%, 3/15/2022 | 199,690 |
| 145,000 | | Burlington Northern Santa Fe Corp., Sr. Unsecd. Note, 4.15%, 4/1/2045 | 134,209 |
| 200,000 | | Canadian Pacific Railway Co., Sr. Unsecd. Note, 4.45%, 3/15/2023 | 214,855 |
| 100,000 | | Canadian Pacific Railway Co., 7.125%, 10/15/2031 | 127,868 |
| 305,000 | | Kansas City Southern de Mexico SA de CV, Sr. Unsecd. Note, 3.00%, 5/15/2023 | 293,061 |
| | | TOTAL | 1,313,990 |
| | | Transportation - Services—1.0% | |
| 330,000 | 1,2 | Enterprise Rent-A-Car USA Finance Co., Sr. Unsecd. Note, Series 144A, 5.625%, 3/15/2042 | 353,734 |
| 70,000 | | Ryder System, Inc., Sr. Unsecd. Note, Series MTN, 2.45%, 11/15/2018 | 70,396 |
| 150,000 | | Ryder System, Inc., Sr. Unsecd. Note, Series MTN, 2.55%, 6/1/2019 | 150,291 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Transportation - Services—continued | |
| $100,000 | | Ryder System, Inc., Sr. Unsecd. Note, Series MTN, 3.50%, 6/1/2017 | $104,025 |
| | | TOTAL | 678,446 |
| | | Utility - Electric—5.5% | |
| 95,000 | | American Electric Power Co., Inc., Sr. Unsecd. Note, Series F, 2.95%, 12/15/2022 | 92,237 |
| 200,000 | | Appalachian Power Co., Sr. Unsecd. Note, 7.00%, 4/1/2038 | 253,890 |
| 165,000 | | Berkshire Hathaway Energy Co., 3.50%, 2/1/2025 | 164,392 |
| 225,000 | | Cleveland Electric Illuminating Co., Sr. Unsecd. Note, 5.95%, 12/15/2036 | 245,671 |
| 100,000 | | Commonwealth Edison Co., 1st Mtg. Bond, 6.15%, 9/15/2017 | 110,198 |
| 300,000 | 1,2 | Electricite de France SA, Jr. Sub. Note, Series 144A, 5.625%, 12/29/2049 | 306,225 |
| 100,000 | | Exelon Corp., Sr. Unsecd. Note, 3.95%, 6/15/2025 | 100,639 |
| 160,000 | | Exelon Generation Co. LLC, Sr. Unsecd. Note, 5.75%, 10/1/2041 | 166,091 |
| 100,000 | | Exelon Generation Co. LLC, Sr. Unsecd. Note, 6.25%, 10/1/2039 | 110,654 |
| 250,000 | | FirstEnergy Corp., Sr. Unsecd. Note, Series A, 2.75%, 3/15/2018 | 253,721 |
| 26,493 | 1,2 | Great River Energy, 1st Mtg. Note, Series 144A, 5.829%, 7/1/2017 | 27,625 |
| 200,000 | | National Rural Utilities Cooperative Finance Corp., Sr. Unsecd. Note, 10.375%, 11/1/2018 | 254,491 |
| 300,000 | | NextEra Energy Capital Holdings, Inc., Sr. Unsecd. Note, 2.70%, 9/15/2019 | 302,078 |
| 250,000 | | Northeast Utilities, Sr. Unsecd. Note, Series H, 3.15%, 1/15/2025 | 241,674 |
| 200,000 | | PPL Capital Funding, Inc., Sr. Unsecd. Note, 3.95%, 3/15/2024 | 206,892 |
| 200,000 | 1,2 | PPL WEM Holdings PLC, Sr. Unsecd. Note, Series 144A, 5.375%, 5/1/2021 | 221,293 |
| 50,000 | | PSEG Power LLC, Sr. Unsecd. Note, 2.45%, 11/15/2018 | 50,173 |
| 30,000 | | Progress Energy, Inc., 7.05%, 3/15/2019 | 34,874 |
| 80,000 | | TECO Finance, Inc., Company Guarantee, 5.15%, 3/15/2020 | 89,191 |
| 250,000 | | UIL Holdings Corp., Sr. Unsecd. Note, 4.625%, 10/1/2020 | 266,263 |
| 200,000 | | Wisconsin Energy Corp., Sr. Unsecd. Note, 3.55%, 6/15/2025 | 199,574 |
| | | TOTAL | 3,697,846 |
| | | Utility - Natural Gas—1.2% | |
| 100,000 | 1,2 | Columbia Pipeline Group, Inc., Sr. Unsecd. Note, Series 144A, 4.50%, 6/1/2025 | 98,694 |
| 100,000 | 1,2 | Columbia Pipeline Group, Inc., Sr. Unsecd. Note, Series 144A, 5.80%, 6/1/2045 | 98,567 |
| 80,000 | | Enbridge Energy Partners LP, Sr. Unsecd. Note, 5.50%, 9/15/2040 | 76,005 |
| 200,000 | | National Fuel Gas Co., Sr. Unsecd. Note, 3.75%, 3/1/2023 | 185,515 |
| 90,000 | | National Fuel Gas Co., Sr. Unsecd. Note, 4.90%, 12/1/2021 | 93,171 |
| 200,000 | | Sempra Energy, Sr. Unsecd. Note, 3.55%, 6/15/2024 | 199,915 |
| 75,000 | | Sempra Energy, Sr. Unsecd. Note, 6.50%, 6/1/2016 | 78,587 |
| | | TOTAL | 830,454 |
| | | TOTAL CORPORATE BONDS
(IDENTIFIED COST $62,167,406) | 63,313,689 |
| | | FOREIGN GOVERNMENTS/AGENCIES—4.4% | |
| | | Sovereign—4.4% | |
| 600,000 | | Brazil, Government of, Sr. Unsecd. Note, 4.875%, 1/22/2021 | 627,000 |
| 200,000 | | Brazil, Government of, Sr. Unsecd. Note, 6.00%, 1/17/2017 | 213,500 |
| 850,000 | | Colombia, Government of, Sr. Unsecd. Note, 4.375%, 7/12/2021 | 889,100 |
| 300,000 | | Panama, Government of, Sr. Unsecd. Note, 5.20%, 1/30/2020 | 330,600 |
| 190,000 | | Peru, Government of, 6.55%, 3/14/2037 | 236,550 |
| 200,000 | | United Mexican States, 4.75%, 3/8/2044 | 191,000 |
| 206,000 | | United Mexican States, 6.75%, 9/27/2034 | 258,530 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | FOREIGN GOVERNMENTS/AGENCIES—continued | |
| | | Sovereign—continued | |
| 210,000 | | United Mexican States, Note, 5.625%, 1/15/2017 | $223,755 |
| | | TOTAL FOREIGN GOVERNMENTS/AGENCIES
(IDENTIFIED COST $2,874,082) | 2,970,035 |
| | | TOTAL INVESTMENTS—98.4%
(IDENTIFIED COST $65,041,488)3 | 66,283,724 |
| | | OTHER ASSETS AND LIABILITIES - NET—1.6%4 | 1,075,235 |
| | | TOTAL NET ASSETS—100% | $67,358,959 |
At June 30, 2015, the Fund had the following outstanding futures contracts:
| Description | Number of
Contracts | Notional
Value | Expiration
Date | Unrealized
Depreciation |
| 5U.S. Treasury Ultra Bond Long Futures | 24 | $3,697,500 | September 2015 | $(100,140) |
| 5U.S. Treasury Notes 5-Year Short Futures | 75 | $8,944,336 | September 2015 | $(14,145) |
| 5U.S. Treasury Notes 10-Year Short Futures | 70 | $8,832,031 | September 2015 | $(31,251) |
| UNREALIZED DEPRECIATION ON FUTURES CONTRACTS | $(145,536) |
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, 2015, these restricted securities amounted to $7,597,197, which represented 11.3% 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, 2015, these liquid restricted securities amounted to $7,597,197, which represented 11.3% of total net assets. |
| 3 | Also represents cost for federal tax purposes. |
| 4 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 5 | Non-income-producing security. |
Note: The categories of investments are shown as a percentage of total net assets at June 30, 2015.
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.
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, 2015, in valuing the Fund's assets carried at fair value:
| Valuation Inputs |
| | Level 1—
Quoted
Prices | Level 2—
Other Significant
Observable
Inputs | Level 3—
Significant
Unobservable
Inputs | Total |
| Debt Securities: | | | | |
| Corporate Bonds | $— | $63,313,689 | $— | $63,313,689 |
| Foreign Governments/Agencies | — | 2,970,035 | — | 2,970,035 |
| TOTAL SECURITIES | $— | $66,283,724 | $— | $66,283,724 |
| OTHER FINANCIAL INSTRUMENTS* | $(145,536) | $— | $— | $(145,536) |
| * | Other financial instruments include futures contracts. |
The following acronyms are used throughout this portfolio:
| MTN | —Medium Term Note |
| REIT | —Real Estate Investment Trust |
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)
6/30/2015 | Year Ended December 31, |
| 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $11.05 | $10.70 | $11.41 | $10.73 | $10.78 | $10.37 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.24 | 0.49 | 0.50 | 0.54 | 0.57 | 0.57 |
| Net realized and unrealized gain (loss) on investments and futures contracts | (0.36) | 0.37 | (0.62) | 0.73 | 0.18 | 0.41 |
| TOTAL FROM INVESTMENT OPERATIONS | (0.12) | 0.86 | (0.12) | 1.27 | 0.75 | 0.98 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.24) | (0.49) | (0.50) | (0.54) | (0.57) | (0.57) |
| Distributions from net realized gain on investments and futures contracts | — | (0.02) | (0.09) | (0.05) | (0.23) | — |
| TOTAL DISTRIBUTIONS | (0.24) | (0.51) | (0.59) | (0.59) | (0.80) | (0.57) |
| Net Asset Value, End of Period | $10.69 | $11.05 | $10.70 | $11.41 | $10.73 | $10.78 |
| Total Return1 | (1.16)% | 8.08% | (1.02)% | 12.03% | 7.12% | 9.56% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses2 | 0.00%3 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Net investment income | 4.33%3 | 4.39% | 4.57% | 4.81% | 5.19% | 5.28% |
| Expense waiver/reimbursement4 | 0.33%3 | 0.37% | 0.41% | 0.61% | 0.80% | 0.85% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $67,359 | $67,937 | $49,635 | $50,650 | $36,321 | $46,004 |
| Portfolio turnover | 14% | 11% | 31% | 30% | 80% | 31% |
| 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. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
June 30, 2015 (unaudited)
| Assets: | | |
| Total investment in securities, at value (identified cost $65,041,488) | | $66,283,724 |
| Restricted cash (Note 2) | | 89,040 |
| Income receivable | | 868,334 |
| Receivable for investments sold | | 1,212,705 |
| Receivable for shares sold | | 32,255 |
| Receivable for daily variation margin | | 3,617 |
| TOTAL ASSETS | | 68,489,675 |
| Liabilities: | | |
| Payable for investments purchased | $458,670 | |
| Payable for shares redeemed | 28,011 | |
| Bank overdraft | 374,631 | |
| Income distribution payable | 254,336 | |
| Payable to adviser (Note 5) | 1,971 | |
| Accrued expenses (Note 5) | 13,097 | |
| TOTAL LIABILITIES | | 1,130,716 |
| Net assets for 6,303,248 shares outstanding | | $67,358,959 |
| Net Assets Consist of: | | |
| Paid-in capital | | $66,728,369 |
| Net unrealized appreciation of investments and futures contracts | | 1,096,700 |
| Accumulated net realized loss on investments and futures contracts | | (473,928) |
| Undistributed net investment income | | 7,818 |
| TOTAL NET ASSETS | | $67,358,959 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $67,358,959 ÷ 6,303,248 shares outstanding, no par value, unlimited shares authorized | | $10.69 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended June 30, 2015 (unaudited)
| Investment Income: | | |
| Interest | | $1,505,048 |
| Dividends received from an affiliated holding (Note 5) | | 300 |
| TOTAL INCOME | | 1,505,348 |
| Expenses: | | |
| Administrative fee (Note 5) | $27,198 | |
| Custodian fees | 4,525 | |
| Transfer agent fee | 4,445 | |
| Directors'/Trustees' fees (Note 5) | 1,098 | |
| Auditing fees | 13,514 | |
| Legal fees | 4,630 | |
| Portfolio accounting fees | 36,972 | |
| Share registration costs | 10,414 | |
| Printing and postage | 7,558 | |
| Miscellaneous (Note 5) | 5,063 | |
| TOTAL EXPENSES | 115,417 | |
| Reimbursement of other operating expenses (Note 5) | (115,417) | |
| Net expenses | | — |
| Net investment income | | 1,505,348 |
| Realized and Unrealized Gain (Loss) on Investments and Futures Contracts: | | |
| Net realized gain on investments | | 265,978 |
| Net realized loss on futures contracts | | (408,356) |
| Net change in unrealized appreciation of investments | | (2,060,306) |
| Net change in unrealized depreciation of futures contracts | | (144,072) |
| Net realized and unrealized loss on investments and futures contracts | | (2,346,756) |
| Change in net assets resulting from operations | | $(841,408) |
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)
6/30/2015 | Year Ended
12/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $1,505,348 | $2,679,760 |
| Net realized loss on investments and futures contracts | (142,378) | (255,869) |
| Net change in unrealized appreciation/depreciation of investments and futures contracts | (2,204,378) | 2,022,912 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | (841,408) | 4,446,803 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (1,504,379) | (2,678,390) |
| Distributions from net realized gain on investments | — | (104,742) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (1,504,379) | (2,783,132) |
| Share Transactions: | | |
| Proceeds from sale of shares | 6,025,231 | 24,465,794 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 7,961 | 19,156 |
| Cost of shares redeemed | (4,265,339) | (7,847,007) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 1,767,853 | 16,637,943 |
| Change in net assets | (577,934) | 18,301,614 |
| Net Assets: | | |
| Beginning of period | 67,936,893 | 49,635,279 |
| End of period (including undistributed net investment income of $7,818 and $6,849, respectively) | $67,358,959 | $67,936,893 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
June 30, 2015 (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 six 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 and repurchase agreements 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), unless the issuer's creditworthiness is impaired or other factors indicate that amortized cost is not an accurate estimate of the investment's fair value, in which case it would be valued in the same manner as a longer-term security. |
| ■ | Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs. |
| ■ | Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and asked quotations. |
| ■ | 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 last traded or purchase price of the security, information obtained by contacting the issuer or dealers, 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, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions. |
If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth in the Fund's valuation policies and procedures, 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 obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines its NAV per share.
Fair Valuation and Significant Events Procedures
The Trustees have ultimate responsibility for determining the fair value of investments for which market quotations are not readily available. The Trustees have appointed a valuation committee (“Valuation Committee”) comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to assist in determining fair value 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, methods, models 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 any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income securities and any 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 principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts; |
| ■ | Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; |
| ■ | Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry. |
The Trustees have adopted procedures whereby the Valuation Committee uses 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 in accordance with the fair valuation procedures approved by the Trustees. The Trustees have ultimate responsibility for any fair valuations made in response to a significant event.
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 (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, 2015, 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, 2015, tax years 2011 through 2014 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 duration and yield curve risk. 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
Semi-Annual Shareholder Report
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 long and short futures contracts held by the Fund throughout the period was $3,741,152 and $13,513,376, respectively. This is based on amounts held as of each month-end throughout the six-month fiscal 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, like other securities, are priced 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 | $(145,536)* |
| * | 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, 2015
| Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
| | Futures |
| Interest rate contracts | $(408,356) |
| Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
| | Futures |
| Interest rate contracts | $(144,072) |
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. The Fund applies Investment Company accounting and reporting guidance.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| | Six Months Ended
6/30/2015 | Year Ended
12/31/2014 |
| Shares sold | 544,284 | 2,220,574 |
| Shares issued to shareholders in payment of distributions declared | 721 | 1,727 |
| Shares redeemed | (390,936) | (712,050) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 154,069 | 1,510,251 |
Semi-Annual Shareholder Report
4. FEDERAL TAX INFORMATION
At June 30, 2015, the cost of investments for federal tax purposes was $65,041,488. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized depreciation resulting from futures contracts was $1,242,236. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $2,313,914 and net unrealized depreciation from investments for those securities having an excess of cost over value of $1,071,678.
At December 31, 2014, the Fund had a capital loss carryforward of $333,012 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:
| Short-term | Long-Term | Total |
| $211,676 | $121,336 | $333,012 |
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; 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, 2015, the Adviser reimbursed $115,417 of other operating expenses.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Daily Net Assets
of the Investment Complex |
| 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 |
For the six months ended June 30, 2015, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund. For the six months ended June 30, 2015, 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 certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
Transactions Involving Affiliated Holdings
Affiliated holdings are investment companies which are managed by the Adviser or an affiliate of the Adviser. Transactions involving the affiliated holding during the six months ended June 30, 2015, were as follows:
| | Federated
Prime Value
Obligations
Fund,
Institutional
Shares |
| Balance of Shares Held 12/31/2014 | 1,093,113 |
| Purchases/Additions | 10,021,430 |
| Sales/Reductions | (11,114,543) |
| Balance of Shares Held 6/30/2015 | — |
| Value | $— |
| Dividend Income | $300 |
Semi-Annual Shareholder Report
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, 2015, were as follows:
| Purchases | $9,954,542 |
| Sales | $7,920,620 |
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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, 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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, the program was not utilized.
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 other service 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, 2015 to June 30, 2015.
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
1/1/2015 | Ending
Account Value
6/30/2015 | Expenses Paid
During Period1 |
| Actual | $1,000 | $988.40 | $0.00 |
| Hypothetical (assuming a 5% return before expenses) | $1,000 | $1,024.79 | $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 181/365 (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
Evaluation and Approval of Advisory Contract–May 2015
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 2015 meetings the Fund's investment advisory contract for an additional one-year term. 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.
In this connection, 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 of scale exist, whether they have been shared with a fund and its shareholders or the family of funds; 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 of care, conscientiousness and independence with which the Board members perform their duties and their expertise, including whether they are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. The Board noted that SEC disclosure requirements regarding the basis for the Board's approval of the Fund's advisory contract generally track the factors listed above. Consistent with these judicial decisions and SEC disclosure requirements, the Board also considered management fees 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 also 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, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); 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
Semi-Annual Shareholder Report
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 range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
The Fund's ability to deliver competitive 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 was one of the Board's considerations 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, outperformed its benchmark index for the three-year period and underperformed its benchmark index for the 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 in the context of the other factors considered relevant by the Board.
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 waived fees and/or reimbursed 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, adjustment or elimination of these voluntary waivers.
In addition, over the past two years, following discussions regarding the Senior Officer's recommendations, Federated made meaningful reductions to the contractual advisory fees for several Funds. At the Board meeting in May 2015, following previous recommendations of the Senior Officer, Federated proposed, and the Board approved, reductions in the contractual advisory fees of certain other Funds.
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 concluded that Federated's profit margins did not appear to be excessive. The Senior Officer also noted that Federated appeared financially sound, with the resources to fulfill its obligations under its contracts with the Funds.
The Senior Officer noted that, subject to the 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 were reasonable.
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 Report
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
[PAGE INTENTIONALLY LEFT BLANK]
Federated 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 (8/15)
Federated is a registered trademark of Federated Investors, Inc.
2015 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
June 30, 2015
Federated High-Yield Strategy Portfolio
A Portfolio of Federated Managed Pool Series
Not FDIC Insured • May Lose Value • No Bank Guarantee
CONTENTS
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Portfolio of Investments Summary Table (unaudited)
At June 30, 2015, the Fund's index classification1 was as follows:
| Index Classification | Percentage of
Total Net Assets2 |
| Technology | 12.3% |
| Health Care | 9.1% |
| Media Entertainment | 7.6% |
| Independent Energy | 5.8% |
| Midstream | 5.7% |
| Packaging | 5.1% |
| Automotive | 5.0% |
| Cable Satellite | 4.8% |
| Financial Institutions | 4.1% |
| Wireless Communications | 4.0% |
| Food & Beverage | 3.8% |
| Retailers | 3.7% |
| Gaming | 3.4% |
| Pharmaceuticals | 3.1% |
| Chemicals | 2.5% |
| Consumer Products | 2.5% |
| Other3 | 14.9% |
| Cash Equivalents4 | 2.0% |
| Other Assets and Liabilities—Net 5 | 0.6% |
| TOTAL | 100.0% |
| 1 | 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 | As of the date specified above, the Fund owned shares of an affiliated investment company. For purposes of this table, the affiliated investment company 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, 2015 (unaudited)
| Shares | | | Value |
| | | INVESTMENT COMPANY—100.1% | |
| 4,836,910 | 1 | High Yield Bond Portfolio | $30,569,267 |
| | | TOTAL INVESTMENTS—100.1%
(IDENTIFIED COST $32,201,251)2 | 30,569,267 |
| | | OTHER ASSETS AND LIABILITIES - NET—(0.1)%3 | (16,304) |
| | | TOTAL NET ASSETS—100% | $30,552,963 |
| 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, 2015.
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.
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, 2015, all investments of the Fund utilized Level 2 inputs in valuing the Fund's assets carried at fair value. High Yield Bond Portfolio is an affiliated holding offered only to registered investment companies and other accredited investors. Investment in this fund is deemed Level 2 due to the fact that the net asset value (NAV) is not publicly available.
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)
6/30/2015 | Year Ended December 31, |
| 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $13.35 | $13.92 | $14.05 | $13.32 | $13.79 | $14.18 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.44 | 0.93 | 1.06 | 1.22 | 1.22 | 1.40 |
| Net realized and unrealized gain (loss) on investments | (0.02) | (0.44) | 0.001 | 0.76 | (0.41) | 0.62 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.42 | 0.49 | 1.06 | 1.98 | 0.81 | 2.02 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.45) | (0.92) | (1.06) | (1.22) | (1.22) | (1.40) |
| Distributions from net realized gain on investments | (0.13) | (0.14) | (0.13) | (0.03) | (0.06) | (1.01) |
| TOTAL DISTRIBUTIONS | (0.58) | (1.06) | (1.19) | (1.25) | (1.28) | (2.41) |
| Net Asset Value, End of Period | $13.19 | $13.35 | $13.92 | $14.05 | $13.32 | $13.79 |
| Total Return2 | 3.11% | 3.52% | 7.83% | 15.44% | 6.09% | 15.07% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses3 | 0.00%4 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Net investment income | 6.56%4 | 6.76% | 7.41% | 8.89% | 8.98% | 9.68% |
| Expense waiver/reimbursement5 | 0.50%4 | 0.61% | 0.77% | 2.08% | 3.07% | 2.92% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $30,553 | $29,735 | $22,695 | $13,084 | $8,900 | $9,720 |
| Portfolio turnover | 11% | 24% | 20% | 35% | 82% | 125% |
| 1 | Represents less than $0.01. |
| 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, 2015 (unaudited)
| Assets: | | |
| Total investment in an affiliated holding (Note 5) (identified cost $32,201,251) | | $30,569,267 |
| Receivable for investments sold | | 155,000 |
| Receivable for shares sold | | 27,090 |
| TOTAL ASSETS | | 30,751,357 |
| Liabilities: | | |
| Bank overdraft | $7,959 | |
| Income distribution payable | 169,898 | |
| Payable to adviser (Note 5) | 461 | |
| Payable for auditing fees | 12,322 | |
| Accrued expenses (Note 5) | 7,754 | |
| TOTAL LIABILITIES | | 198,394 |
| Net assets for 2,315,625 shares outstanding | | $30,552,963 |
| Net Assets Consist of: | | |
| Paid-in capital | | $32,120,691 |
| Net unrealized depreciation of investments | | (1,631,984) |
| Accumulated net realized gain on investments | | 48,228 |
| Undistributed net investment income | | 16,028 |
| TOTAL NET ASSETS | | $30,552,963 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $30,552,963 ÷ 2,315,625 shares outstanding, no par value, unlimited shares authorized | | $13.19 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended June 30, 2015 (unaudited)
| Investment Income: | | |
| Dividends received from an affiliated holding (Note 5) | | $1,026,913 |
| Expenses: | | |
| Administrative fee (Note 5) | $12,254 | |
| Custodian fees | 2,683 | |
| Transfer agent fee | 2,235 | |
| Directors'/Trustees' fees (Note 5) | 985 | |
| Auditing fees | 12,322 | |
| Legal fees | 4,630 | |
| Portfolio accounting fees | 20,636 | |
| Share registration costs | 11,244 | |
| Printing and postage | 7,918 | |
| Miscellaneous (Note 5) | 3,184 | |
| TOTAL EXPENSES | 78,091 | |
| Reimbursement of other operating expenses (Note 5) | (78,091) | |
| Net expenses | | — |
| Net investment income | | 1,026,913 |
| Realized and Unrealized Gain (Loss) on Investments: | | |
| Net realized gain on investments in an affiliated holding (Note 5) | | 10,036 |
| Realized gain distribution from affiliated investment company shares (Note 5) | | 51,276 |
| Net change in unrealized depreciation of investments | | (115,823) |
| Net realized and unrealized loss on investments | | (54,511) |
| Change in net assets resulting from operations | | $972,402 |
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)
6/30/2015 | Year Ended
12/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $1,026,913 | $1,737,949 |
| Net realized gain on investments | 61,312 | 411,404 |
| Net change in unrealized appreciation/depreciation of investments | (115,823) | (1,382,695) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 972,402 | 766,658 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (1,043,634) | (1,706,567) |
| Distributions from net realized gain on investments | (312,276) | (269,637) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (1,355,910) | (1,976,204) |
| Share Transactions: | | |
| Proceeds from sale of shares | 3,538,111 | 13,321,480 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 10,270 | 14,770 |
| Cost of shares redeemed | (2,347,088) | (5,086,668) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 1,201,293 | 8,249,582 |
| Change in net assets | 817,785 | 7,040,036 |
| Net Assets: | | |
| Beginning of period | 29,735,178 | 22,695,142 |
| End of period (including undistributed net investment income of $16,028 and $32,749, respectively) | $30,552,963 | $29,735,178 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
June 30, 2015 (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 six 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, by investing primarily in a high yield bond mutual fund and in a portfolio of fixed-income securities.
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 or non-exchange-traded investment companies 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 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 and repurchase agreements 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), unless the issuer's creditworthiness is impaired or other factors indicate that amortized cost is not an accurate estimate of the investment's fair value, in which case it would be valued in the same manner as a longer-term security. |
| ■ | Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and asked quotations. |
| ■ | 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 last traded or purchase price of the security, information obtained by contacting the issuer or dealers, 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, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions. |
If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth in the Fund's valuation policies and procedures, 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 obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines its NAV per share.
Fair Valuation and Significant Events Procedures
The Trustees have ultimate responsibility for determining the fair value of investments for which market quotations are not readily available. The Trustees have appointed a valuation committee (“Valuation Committee”) comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to assist in determining fair value 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, methods, models 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 any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income securities and any 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 principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts; |
| ■ | Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; |
| ■ | Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry. |
The Trustees have adopted procedures whereby the Valuation Committee uses 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 in accordance with the fair valuation procedures approved by the Trustees. The Trustees have ultimate responsibility for any fair valuations made in response to a significant event.
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 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, 2015, 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, 2015, tax years 2011 through 2014 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. The Fund applies Investment Company accounting and reporting guidance.
Semi-Annual Shareholder Report
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| | Six Months Ended
6/30/2015 | Year Ended
12/31/2014 |
| Shares sold | 263,259 | 961,007 |
| Shares issued to shareholders in payment of distributions declared | 764 | 1,069 |
| Shares redeemed | (175,468) | (365,558) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 88,555 | 596,518 |
4. FEDERAL TAX INFORMATION
At June 30, 2015, the cost of investments for federal tax purposes was $32,201,251. The net unrealized depreciation of investments for federal tax was $1,631,984. This consists entirely of net unrealized depreciation from investments for those securities having an excess of cost over value of $1,631,984.
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 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, 2015, the Adviser reimbursed $78,091 of other operating expenses.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Daily Net Assets
of the Investment Complex |
| 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 |
For the six months ended June 30, 2015, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund. For the six months ended June 30, 2015, 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 certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
Transactions Involving Affiliated Holdings
Affiliated holdings are investment companies which are managed by the Adviser or an affiliate of the Adviser. Transactions involving the affiliated holding during the six months ended June 30, 2015, were as follows:
| | High Yield
Bond Portfolio |
| Balance of Shares Held 12/31/2014 | 4,698,874 |
| Purchases/Additions | 677,623 |
| Sales/Reductions | (539,587) |
| Balance of Shares Held 6/30/2015 | 4,836,910 |
| Value | $30,569,267 |
| Dividend Income | $1,026,913 |
| Realized Gain Distribution | $51,276 |
Semi-Annual Shareholder Report
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. At June 30, 2015, HYCORE represents 100% of the Fund's total portfolio of investments. Therefore, the performance of the Fund is directly affected by the performance of HYCORE. To illustrate the security holdings, financial condition, results of operations and changes in net assets of HYCORE, its financial statements are included within this report. 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.
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, 2015, were as follows:
| Purchases | $4,331,975 |
| Sales | $3,451,000 |
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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, 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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, the program was not utilized.
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 other service 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, 2015 to June 30, 2015.
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
1/1/2015 | Ending
Account Value
6/30/2015 | Expenses Paid
During Period1 |
| Actual | $1,000 | $1,031.10 | $0.00 |
| Hypothetical (assuming a 5% return before expenses) | $1,000 | $1,024.79 | $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 181/365 (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
Portfolio of Investments Summary Table (unaudited)–High Yield Bond Portfolio
At June 30, 2015, the Fund's index classification1 was as follows:
| Index Classification | Percentage of
Total Net Assets |
| Technology | 12.2% |
| Health Care | 9.0% |
| Media Entertainment | 7.6% |
| Independent Energy | 5.7% |
| Midstream | 5.7% |
| Packaging | 5.1% |
| Automotive | 5.0% |
| Cable Satellite | 4.7% |
| Financial Institutions | 4.1% |
| Wireless Communications | 4.0% |
| Food & Beverage | 3.8% |
| Retailers | 3.7% |
| Gaming | 3.4% |
| Pharmaceuticals | 3.1% |
| Chemicals | 2.5% |
| Other2 | 17.8% |
| Cash Equivalents3 | 2.0% |
| Other Assets and Liabilities—Net4 | 0.6% |
| TOTAL | 100.0% |
| 1 | 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, 2015 (unaudited)
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—97.4% | |
| | | Aerospace/Defense—0.9% | |
| $5,600,000 | 1,2 | KLX, Inc., Sr. Unsecd. Note, Series 144A, 5.875%, 12/1/2022 | $5,683,384 |
| 3,175,000 | | TransDigm, Inc., 5.50%, 10/15/2020 | 3,171,031 |
| 1,000,000 | | TransDigm, Inc., 7.50%, 7/15/2021 | 1,080,000 |
| 7,450,000 | | TransDigm, Inc., Sr. Sub. Note, 6.00%, 7/15/2022 | 7,394,125 |
| 4,475,000 | | TransDigm, Inc., Sr. Sub. Note, 6.50%, 7/15/2024 | 4,441,438 |
| 1,925,000 | 1,2 | TransDigm, Inc., Sr. Sub. Note, Series 144A, 6.50%, 5/15/2025 | 1,912,969 |
| | | TOTAL | 23,682,947 |
| | | Automotive—5.0% | |
| 8,900,000 | | Affinia Group, Inc., Sr. Unsecd. Note, 7.75%, 5/1/2021 | 9,345,000 |
| 4,125,000 | | American Axle & Manufacturing Holdings, Inc., Sr. Note, 6.625%, 10/15/2022 | 4,351,875 |
| 5,000,000 | | American Axle & Manufacturing Holdings, Inc., Sr. Note, 7.75%, 11/15/2019 | 5,675,000 |
| 2,000,000 | | American Axle & Manufacturing Holdings, Inc., Sr. Unsecd. Note, 6.25%, 3/15/2021 | 2,110,000 |
| 10,300,000 | 1,2 | Gates Global LLC, Series 144A, 6.00%, 7/15/2022 | 9,373,000 |
| 5,800,000 | | General Motors Co., Sr. Unsecd. Note, 4.00%, 4/1/2025 | 5,725,859 |
| 1,100,000 | | General Motors Financial Company, Inc., 3.50%, 7/10/2019 | 1,124,347 |
| 825,000 | | General Motors Financial Company, Inc., 4.25%, 5/15/2023 | 835,123 |
| 3,975,000 | | General Motors Financial Company, Inc., 4.375%, 9/25/2021 | 4,130,220 |
| 2,475,000 | | General Motors Financial Company, Inc., Sr. Unsecd. Note, 3.45%, 4/10/2022 | 2,423,592 |
| 7,450,000 | 1,2 | International Automotive Components, Sr. Secd. Note, Series 144A, 9.125%, 6/1/2018 | 7,636,250 |
| 5,675,000 | 1,2 | J.B. Poindexter, Inc., Series 144A, 9.00%, 4/1/2022 | 6,100,625 |
| 3,875,000 | | Lear Corp., 4.75%, 1/15/2023 | 3,836,250 |
| 5,900,000 | | Lear Corp., 5.25%, 1/15/2025 | 5,826,250 |
| 2,725,000 | | Lear Corp., 5.375%, 3/15/2024 | 2,779,500 |
| 9,750,000 | | MPG Holdco I, Inc., Sr. Unsecd. Note, 7.375%, 10/15/2022 | 10,432,500 |
| 3,600,000 | 1,2 | Omega US Sub LLC, Sr. Unsecd. Note, Series 144A, 8.75%, 7/15/2023 | 3,609,000 |
| 3,450,000 | 1,2 | Schaeffler AG, Series 144A, 4.25%, 5/15/2021 | 3,381,000 |
| 750,000 | 1,2 | Schaeffler AG, Series 144A, 6.25%, 11/15/2019 | 793,125 |
| 8,825,000 | 1,2 | Schaeffler AG, Series 144A, 6.75%, 11/15/2022 | 9,564,094 |
| 4,125,000 | 1,2 | Schaeffler AG, Series 144A, 6.875%, 8/15/2018 | 4,279,687 |
| 2,775,000 | 1,2 | Schaeffler Finance BV, Series 144A, 4.75%, 5/15/2023 | 2,719,500 |
| 7,175,000 | 1,2 | Stackpole International, Sr. Secd. Note, Series 144A, 7.75%, 10/15/2021 | 7,103,250 |
| 4,075,000 | | Tenneco, Inc., Company Guarantee, 6.875%, 12/15/2020 | 4,278,750 |
| 3,025,000 | | Tenneco, Inc., Sr. Unsecd. Note, 5.375%, 12/15/2024 | 3,123,312 |
| 10,425,000 | | UCI International, Inc., Company Guarantee, 8.625%, 2/15/2019 | 9,330,375 |
| 800,000 | 1,2 | ZF North America Capital, Inc., Series 144A, 4.50%, 4/29/2022 | 789,000 |
| 3,475,000 | 1,2 | ZF North America Capital, Inc., Series 144A, 4.75%, 4/29/2025 | 3,383,781 |
| | | TOTAL | 134,060,265 |
| | | Building Materials—2.4% | |
| 4,290,000 | | Allegion US Holdings Co., Inc., Sr. Unsecd. Note, 5.75%, 10/1/2021 | 4,450,875 |
| 7,425,000 | 1,2 | American Builders & Contractors Supply Co. Inc., Series 144A, 5.625%, 4/15/2021 | 7,592,062 |
| 5,725,000 | | Anixter International, Inc., 5.125%, 10/1/2021 | 5,846,656 |
| 3,100,000 | | Anixter International, Inc., 5.625%, 5/1/2019 | 3,305,375 |
| 6,425,000 | 1,2 | CPG International, Inc., Series 144A, 8.00%, 10/1/2021 | 6,672,363 |
| 1,000,000 | 1,2 | HD Supply, Inc., Series 144A, 5.25%, 12/15/2021 | 1,017,500 |
| 800,000 | | HD Supply, Inc., Sr. Unsecd. Note, 7.50%, 7/15/2020 | 850,000 |
| 1,675,000 | 1,2 | Masonite International Corp., Sr. Unsecd. Note, Series 144A, 5.625%, 3/15/2023 | 1,710,594 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Building Materials—continued | |
| $4,975,000 | 1,2 | NCI Building System, Inc., Sr. Unsecd. Note, Series 144A, 8.25%, 1/15/2023 | $5,323,250 |
| 9,425,000 | | Nortek, Inc., Sr. Unsecd. Note, 8.50%, 4/15/2021 | 10,108,312 |
| 6,400,000 | 1,2 | RSI Home Products, Inc., Series 144A, 6.50%, 3/15/2023 | 6,480,000 |
| 5,925,000 | 1,2 | Rexel, Inc., Sr. Note, Series 144A, 5.25%, 6/15/2020 | 6,191,625 |
| 2,125,000 | 1,2 | Roofing Supply Group, Series 144A, 10.00%, 6/1/2020 | 2,183,438 |
| 1,925,000 | 1,2 | USG Corp., Sr. Note, Series 144A, 5.875%, 11/1/2021 | 2,021,250 |
| 975,000 | 1,2 | USG Corp., Sr. Unsecd. Note, Series 144A, 5.50%, 3/1/2025 | 975,000 |
| | | TOTAL | 64,728,300 |
| | | Cable Satellite—4.7% | |
| 2,300,000 | 1,2 | Altice Financing SA, Series 144A, 6.625%, 2/15/2023 | 2,289,190 |
| 2,200,000 | | CCO Holdings LLC/Cap Corp., 5.25%, 3/15/2021 | 2,200,000 |
| 5,475,000 | | CCO Holdings LLC/Cap Corp., 5.75%, 9/1/2023 | 5,498,953 |
| 4,450,000 | 1,2 | CCO Holdings LLC/Cap Corp., Series 144A, 5.375%, 5/1/2025 | 4,344,313 |
| 4,050,000 | 1,2 | CCO Holdings LLC/Cap Corp., Sr. Unsecd. Note, Series 144A, 5.875%, 5/1/2027 | 3,963,938 |
| 4,675,000 | 1,2 | Cequel Communications Holdings, Sr. Unsecd. Note, Series 144A, 5.125%, 12/15/2021 | 4,263,016 |
| 2,525,000 | 1,2 | Cequel Communications Holdings, Sr. Unsecd. Note, Series 144A, 5.125%, 12/15/2021 | 2,302,484 |
| 6,175,000 | 1,2 | Cequel Communications Holdings, Sr. Unsecd. Note, Series 144A, 6.375%, 9/15/2020 | 6,156,475 |
| 3,300,000 | | Charter Communications Holdings II, 5.125%, 2/15/2023 | 3,225,750 |
| 2,300,000 | | Charter Communications Holdings II, 5.75%, 1/15/2024 | 2,323,000 |
| 2,150,000 | | Charter Communications Holdings II, 6.625%, 1/31/2022 | 2,246,750 |
| 1,071,000 | | Charter Communications Holdings II, Sr. Note, 7.00%, 1/15/2019 | 1,113,840 |
| 1,625,000 | | DISH DBS Corp., 5.00%, 3/15/2023 | 1,511,250 |
| 14,150,000 | | DISH DBS Corp., 5.875%, 7/15/2022 | 13,902,375 |
| 1,675,000 | | DISH DBS Corp., Sr. Unsecd. Note, 5.875%, 11/15/2024 | 1,613,234 |
| 5,050,000 | | Intelsat (Luxembourg) S.A., 7.75%, 6/1/2021 | 4,235,688 |
| 6,250,000 | | Intelsat (Luxembourg) S.A., Sr. Unsecd. Note, 8.125%, 6/1/2023 | 5,156,250 |
| 7,700,000 | | Intelsat Jackson Holdings S.A., 6.625%, 12/15/2022 | 7,093,625 |
| 7,650,000 | | Intelsat Jackson Holdings S.A., Sr. Unsecd. Note, 5.50%, 8/1/2023 | 6,798,937 |
| 2,350,000 | | Intelsat Jackson Holdings S.A., Sr. Unsecd. Note, 7.50%, 4/1/2021 | 2,332,375 |
| 7,250,000 | 1,2 | Numericable Group SA, Series 144A, 6.00%, 5/15/2022 | 7,163,906 |
| 4,375,000 | 1,2 | Numericable Group SA, Series 144A, 6.25%, 5/15/2024 | 4,314,844 |
| 1,950,000 | 1,2 | Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, Series 144A, 5.00%, 1/15/2025 | 1,940,250 |
| 5,000,000 | 1,2 | Unitymedia Hessen GmbH & Co. KG/Unitymedia NRW GmbH, Series 144A, 5.50%, 1/15/2023 | 5,115,625 |
| 8,075,000 | 1,2 | Unitymedia KabelBW GmbH, Series 144A, 6.125%, 1/15/2025 | 8,458,562 |
| 7,725,000 | 1,2 | Virgin Media Secured Finance PLC, Series 144A, 5.25%, 1/15/2026 | 7,483,594 |
| 5,350,000 | 1,2 | Virgin Media Secured Finance PLC, Series 144A, 6.375%, 4/15/2023 | 5,550,625 |
| 800,000 | 1,2 | Virgin Media, Inc., Sr. Unsecd. Note, Series 144A, 5.75%, 1/15/2025 | 802,000 |
| 2,100,000 | 1,2 | Virgin Media, Inc., Sr. Unsecd. Note, Series 144A, 6.00%, 10/15/2024 | 2,139,375 |
| 2,475,000 | 1,2 | Ziggo Finance BV, Sr. Unsecd. Note, Series 144A, 5.875%, 1/15/2025 | 2,434,781 |
| | | TOTAL | 127,975,005 |
| | | Chemicals—2.5% | |
| 1,500,000 | | Ashland, Inc., 3.875%, 4/15/2018 | 1,546,875 |
| 3,450,000 | | Ashland, Inc., 4.75%, 8/15/2022 | 3,398,250 |
| 4,025,000 | | Celanese US Holdings LLC, 4.625%, 11/15/2022 | 4,004,875 |
| 5,225,000 | 1,2 | Compass Minerals International, Inc., Series 144A, 4.875%, 7/15/2024 | 5,172,750 |
| 10,525,000 | 1,2 | Dupont Performance Coatings, Series 144A, 7.375%, 5/1/2021 | 11,301,219 |
| 4,575,000 | | Eagle Spinco, Inc., Sr. Unsecd. Note, 4.625%, 2/15/2021 | 4,454,906 |
| 5,250,000 | 1,2 | Eco Services Operations LLC, Sr. Unsecd. Note, Series 144A, 8.50%, 11/1/2022 | 5,302,500 |
| 850,000 | | Georgia Gulf Corp., 4.875%, 5/15/2023 | 823,438 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Chemicals—continued | |
| $3,200,000 | | Hexion U.S. Finance Corp., 6.625%, 4/15/2020 | $2,952,000 |
| 8,200,000 | | Hexion U.S. Finance Corp., Sr. Secd. Note, 8.875%, 2/1/2018 | 7,441,500 |
| 1,425,000 | | Huntsman International LLC, Sr. Unsecd. Note, 4.875%, 11/15/2020 | 1,428,562 |
| 5,525,000 | 1,2 | Huntsman International LLC, Sr. Unsecd. Note, Series 144A, 5.125%, 11/15/2022 | 5,455,937 |
| 9,100,000 | 1,2 | Platform Specialty Products Corp., Sr. Unsecd. Note, Series 144A, 6.50%, 2/1/2022 | 9,441,250 |
| 1,775,000 | 1,2 | WR Grace & Co.- Conn., Sr. Unsecd. Note, Series 144A, 5.125%, 10/1/2021 | 1,792,750 |
| 1,800,000 | 1,2 | WR Grace & Co.- Conn., Sr. Unsecd. Note, Series 144A, 5.625%, 10/1/2024 | 1,829,250 |
| | | TOTAL | 66,346,062 |
| | | Construction Machinery—0.8% | |
| 8,825,000 | 1,2 | Jurassic Holdings III, Series 144A, 6.875%, 2/15/2021 | 6,894,531 |
| 462,000 | | RSC Equipment Rental, Inc., Company Guarantee, 8.25%, 2/1/2021 | 494,918 |
| 2,600,000 | | United Rentals, Inc., 4.625%, 7/15/2023 | 2,559,310 |
| 1,375,000 | | United Rentals, Inc., 5.75%, 11/15/2024 | 1,361,250 |
| 925,000 | | United Rentals, Inc., 7.375%, 5/15/2020 | 991,591 |
| 1,175,000 | | United Rentals, Inc., 7.625%, 4/15/2022 | 1,277,813 |
| 7,975,000 | | United Rentals, Inc., Sr. Unsecd. Note, 5.50%, 7/15/2025 | 7,735,750 |
| 1,450,000 | | United Rentals, Inc., Sr. Unsecd. Note, 6.125%, 6/15/2023 | 1,488,062 |
| | | TOTAL | 22,803,225 |
| | | Consumer Cyclical Services—1.6% | |
| 6,425,000 | 1,2 | Garda World Security Corp., Series 144A, 7.25%, 11/15/2021 | 6,200,125 |
| 4,725,000 | 1,2 | Garda World Security Corp., Series 144A, 7.25%, 11/15/2021 | 4,559,625 |
| 11,775,000 | 1,2 | Hearthside Group Holdings LLC, Series 144A, 6.50%, 5/1/2022 | 11,304,000 |
| 3,375,000 | 1,2 | IHS, Inc., Sr. Unsecd. Note, Series 144A, 5.00%, 11/1/2022 | 3,366,562 |
| 4,350,000 | 1,2 | Sabre GLBL, Inc., Series 144A, 5.375%, 4/15/2023 | 4,306,500 |
| 7,765,000 | | ServiceMaster Co., 7.00%, 8/15/2020 | 8,240,606 |
| 2,400,000 | | ServiceMaster Co., Sr. Unsecd. Note, 7.10%, 3/1/2018 | 2,532,000 |
| 1,775,000 | | ServiceMaster Co., Sr. Unsecd. Note, 7.45%, 8/15/2027 | 1,801,625 |
| | | TOTAL | 42,311,043 |
| | | Consumer Products—2.4% | |
| 14,775,000 | 1,2 | AOT Bedding Super Holdings LLC, Series 144A, 8.125%, 10/1/2020 | 15,661,500 |
| 7,550,000 | | FGI Operating Co. LLC/FGI Finance, Inc., 7.875%, 5/1/2020 | 5,813,500 |
| 7,850,000 | 1,2 | First Quality Finance Co., Inc., Series 144A, 4.625%, 5/15/2021 | 7,379,000 |
| 5,525,000 | | Party City Holdings, Inc., Sr. Note, 8.875%, 8/1/2020 | 5,925,562 |
| 3,975,000 | | Prestige Brands Holdings, Inc., 8.125%, 2/1/2020 | 4,263,188 |
| 6,225,000 | 1,2 | Prestige Brands Holdings, Inc., Series 144A, 5.375%, 12/15/2021 | 6,256,125 |
| 300,000 | | Spectrum Brands, Inc., 6.375%, 11/15/2020 | 318,750 |
| 800,000 | | Spectrum Brands, Inc., 6.625%, 11/15/2022 | 856,000 |
| 2,550,000 | 1,2 | Spectrum Brands, Inc., Series 144A, 6.125%, 12/15/2024 | 2,658,375 |
| 6,550,000 | | Spectrum Brands, Inc., Sr. Unsecd. Note, 6.75%, 3/15/2020 | 6,913,525 |
| 4,400,000 | 1,2 | Spectrum Brands, Inc., Sr. Unsecd. Note, Series 144A, 5.75%, 7/15/2025 | 4,488,000 |
| 5,675,000 | | Springs Industries, Inc., 6.25%, 6/1/2021 | 5,575,688 |
| | | TOTAL | 66,109,213 |
| | | Diversified Manufacturing—1.0% | |
| 8,875,000 | 1,2 | Gardner Denver, Inc., Series 144A, 6.875%, 8/15/2021 | 8,131,719 |
| 7,200,000 | 1,2 | Hamilton Sundstrand Corp., Series 144A, 7.75%, 12/15/2020 | 6,696,000 |
| 2,750,000 | 1,2 | Milacron LLC, Series 144A, 7.75%, 2/15/2021 | 2,846,250 |
| 10,275,000 | | WESCO Distribution, Inc., Sr. Unsecd. Note, 5.375%, 12/15/2021 | 10,429,125 |
| | | TOTAL | 28,103,094 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Financial Institutions—4.1% | |
| $5,500,000 | 1,2 | AerCap Ireland Capital Ltd/AerCap Global Aviation Trust, Series 144A, 4.50%, 5/15/2021 | $5,541,250 |
| 1,450,000 | | AerCap Ireland Capital Ltd/AerCap Global Aviation Trust, Sr. Unsecd. Note, 4.625%, 7/1/2022 | 1,453,625 |
| 4,050,000 | 1,2 | AerCap Ireland Capital Ltd/AerCap Global Aviation Trust, Sr. Unsecd. Note, Series 144A, 5.00%, 10/1/2021 | 4,171,500 |
| 5,550,000 | | Ally Financial, Inc., Company Guarantee, 6.25%, 12/1/2017 | 5,938,500 |
| 1,375,000 | | Ally Financial, Inc., Sr. Unsecd. Note, 3.25%, 9/29/2017 | 1,378,438 |
| 5,400,000 | | Ally Financial, Inc., Sr. Unsecd. Note, 3.75%, 11/18/2019 | 5,373,000 |
| 6,800,000 | | Ally Financial, Inc., Sr. Unsecd. Note, 4.125%, 2/13/2022 | 6,545,000 |
| 2,550,000 | | Ally Financial, Inc., Sr. Unsecd. Note, 4.625%, 3/30/2025 | 2,442,900 |
| 1,800,000 | | Ally Financial, Inc., Sr. Unsecd. Note, 4.625%, 5/19/2022 | 1,779,750 |
| 4,700,000 | | Ally Financial, Inc., Sr. Unsecd. Note, 5.125%, 9/30/2024 | 4,729,375 |
| 2,775,000 | | Ally Financial, Inc., Sr. Unsecd. Note, 5.50%, 2/15/2017 | 2,899,875 |
| 5,125,000 | 1,2 | CIT Group Holdings, Inc., Sr. 2nd Priority Note, Series 144A, 6.625%, 4/1/2018 | 5,496,563 |
| 8,925,000 | | CIT Group Holdings, Inc., Sr. Unsecd. Note, 5.25%, 3/15/2018 | 9,248,531 |
| 725,000 | | CIT Group Holdings, Inc., Sr. Unsecd. Note, 5.375%, 5/15/2020 | 757,625 |
| 4,150,000 | | CIT Group, Inc., Sr. Unsecd. Note, 5.00%, 8/1/2023 | 4,098,125 |
| 11,175,000 | 1,2 | Hockey Merger Sub 2, Inc., Sr. Unsecd. Note, Series 144A, 7.875%, 10/1/2021 | 11,426,437 |
| 6,050,000 | 1,2 | Hub Holdlings LLC/Hub Hol, Sr. Unsecd. Note, Series 144A, 8.125%, 7/15/2019 | 6,050,000 |
| 8,625,000 | | International Lease Finance Corp., 4.625%, 4/15/2021 | 8,732,812 |
| 7,275,000 | | International Lease Finance Corp., 5.875%, 8/15/2022 | 7,884,281 |
| 2,475,000 | 1,2 | Neuberger Berman, Inc., Series 144A, 5.875%, 3/15/2022 | 2,654,438 |
| 3,800,000 | 1,2 | Onex York Acquisition Corp., Series 144A, 8.50%, 10/1/2022 | 3,363,000 |
| 9,500,000 | 1,2 | Quicken Loans, Inc., Series 144A, 5.75%, 5/1/2025 | 9,120,000 |
| | | TOTAL | 111,085,025 |
| | | Food & Beverage—3.8% | |
| 15,775,000 | 1,2 | Anna Merger Sub, Inc., Series 144A, 7.75%, 10/1/2022 | 15,932,750 |
| 15,450,000 | | Aramark Corp., Sr. Unsecd. Note, 5.75%, 3/15/2020 | 16,158,768 |
| 3,200,000 | | B&G Foods, Inc., Sr. Note, 4.625%, 6/1/2021 | 3,164,000 |
| 1,775,000 | | Constellation Brands, Inc., Sr. Unsecd. Note, 4.75%, 11/15/2024 | 1,783,875 |
| 6,550,000 | 1,2 | Dean Foods Co., Sr. Unsecd. Note, Series 144A, 6.50%, 3/15/2023 | 6,697,375 |
| 13,300,000 | | HJ Heinz Co., 4.25%, 10/15/2020 | 13,582,625 |
| 3,975,000 | 1,2 | HJ Heinz Co., Series 144A, 4.875%, 2/15/2025 | 4,337,719 |
| 11,000,000 | | Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., 4.875%, 5/1/2021 | 10,862,500 |
| 8,900,000 | | Smithfield Foods, Inc., 6.625%, 8/15/2022 | 9,534,125 |
| 2,225,000 | 1,2 | Smithfield Foods, Inc., Sr. Note, Series 144A, 5.875%, 8/1/2021 | 2,302,875 |
| 700,000 | | TreeHouse Foods, Inc., 4.875%, 3/15/2022 | 707,000 |
| 15,925,000 | | U.S. Foodservice, Inc., Sr. Unsecd. Note, 8.50%, 6/30/2019 | 16,641,625 |
| | | TOTAL | 101,705,237 |
| | | Gaming—3.4% | |
| 3,100,000 | | Affinity Gaming LLC, Sr. Unsecd. Note, 9.00%, 5/15/2018 | 3,100,000 |
| 2,925,000 | | Ameristar Casinos, Inc., Sr. Unsecd. Note, 7.50%, 4/15/2021 | 3,111,469 |
| 4,625,000 | | Boyd Gaming Corp., Sr. Unsecd. Note, 6.875%, 5/15/2023 | 4,763,750 |
| 3,525,000 | 1,2 | Chester Downs & Marina, Series 144A, 9.25%, 2/1/2020 | 2,784,750 |
| 3,425,000 | | Churchill Downs, Inc., 5.375%, 12/15/2021 | 3,527,750 |
| 4,875,000 | | GLP Capital LP/GLP Financing II, Inc., 4.875%, 11/1/2020 | 4,984,687 |
| 3,325,000 | | GLP Capital LP/GLP Financing II, Inc., 5.375%, 11/1/2023 | 3,433,063 |
| 9,025,000 | | MGM Mirage, Inc., 7.75%, 3/15/2022 | 9,972,625 |
| 6,400,000 | | MGM Mirage, Inc., Sr. Unsecd. Note, 6.75%, 10/1/2020 | 6,798,720 |
| 2,850,000 | | MGM Resorts International, 6.00%, 3/15/2023 | 2,892,750 |
| 7,250,000 | | Mohegan Tribal Gaming Authority, 9.75%, 9/1/2021 | 7,630,625 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Gaming—continued | |
| $10,250,000 | | Penn National Gaming, Inc., 5.875%, 11/1/2021 | $10,378,125 |
| 7,275,000 | | Pinnacle Entertainment, Inc., 6.375%, 8/1/2021 | 7,756,969 |
| 2,075,000 | | Pinnacle Entertainment, Inc., 7.75%, 4/1/2022 | 2,287,688 |
| 4,480,000 | 1,2 | Rivers Pittsburgh LP, Sr. Secd. Note, Series 144A, 9.50%, 6/15/2019 | 4,732,000 |
| 4,325,000 | 1,2 | Seminole Tribe of Florida, Bond, Series 144A, 7.804%, 10/1/2020 | 4,638,562 |
| 8,275,000 | | Station Casinos, Inc., Sr. Note, 7.50%, 3/1/2021 | 8,895,625 |
| | | TOTAL | 91,689,158 |
| | | Health Care—9.0% | |
| 6,825,000 | 1,2 | Air Medical Group Holdings, Inc., Sr. Unsecd. Note, Series 144A, 6.375%, 5/15/2023 | 6,449,625 |
| 8,050,000 | | Amsurg Corp., Sr. Unsecd. Note, 5.625%, 7/15/2022 | 8,150,625 |
| 11,500,000 | | CHS/Community Health Systems, Inc., Sr. Unsecd. Note, 6.875%, 2/1/2022 | 12,175,625 |
| 5,425,000 | | CHS/Community Health Systems, Inc., Term Loan—1st Lien, 5.125%, 8/1/2021 | 5,540,281 |
| 2,200,000 | | DaVita HealthCare Partners, Inc., 5.00%, 5/1/2025 | 2,123,000 |
| 3,725,000 | | DaVita HealthCare Partners, Inc., 5.125%, 7/15/2024 | 3,669,125 |
| 5,550,000 | | DaVita HealthCare Partners, Inc., 5.75%, 8/15/2022 | 5,903,813 |
| 10,000,000 | 1,2 | Envision Healthcare Holdings, Inc., Series 144A, 5.125%, 7/1/2022 | 10,100,000 |
| 7,250,000 | | HCA, Inc., 4.75%, 5/1/2023 | 7,358,750 |
| 6,025,000 | | HCA, Inc., 5.00%, 3/15/2024 | 6,145,500 |
| 2,300,000 | | HCA, Inc., 5.875%, 5/1/2023 | 2,449,500 |
| 4,000,000 | | HCA, Inc., Bond, 5.875%, 3/15/2022 | 4,360,000 |
| 7,175,000 | | HCA, Inc., Sr. Secd. Note, 6.50%, 2/15/2020 | 8,036,000 |
| 9,800,000 | | HCA, Inc., Sr. Unsecd. Note, 5.375%, 2/1/2025 | 9,922,500 |
| 10,850,000 | | HCA, Inc., Sr. Unsecd. Note, 7.50%, 2/15/2022 | 12,477,500 |
| 8,200,000 | | HCA, Inc., Term Loan—1st Lien, 5.25%, 4/15/2025 | 8,522,875 |
| 5,100,000 | | Hologic, Inc., 6.25%, 8/1/2020 | 5,278,628 |
| 3,500,000 | 1,2 | Hologic, Inc., Sr. Unsecd. Note, Series 144A, 5.25%, 7/15/2022 | 3,583,125 |
| 8,775,000 | | Iasis Healthcare, Sr. Unsecd. Note, 8.375%, 5/15/2019 | 9,104,062 |
| 7,575,000 | | LifePoint Health, Inc., Sr. Unsecd. Note, 5.50%, 12/1/2021 | 7,840,125 |
| 14,000,000 | 1,2 | MPH Acquisition Holdings LLC, Series 144A, 6.625%, 4/1/2022 | 14,332,500 |
| 2,050,000 | | Omnicare, Inc., Sr. Unsecd. Note, 4.75%, 12/1/2022 | 2,183,250 |
| 1,425,000 | | Omnicare, Inc., Sr. Unsecd. Note, 5.00%, 12/1/2024 | 1,539,000 |
| 17,850,000 | 1,2 | Ortho-Clinical Diagnostics, Inc., Series 144A, 6.625%, 5/15/2022 | 15,797,250 |
| 7,425,000 | 1,2 | Sterigenics-Nordion Holdings LLC, Sr. Unsecd. Note, Series 144A, 6.50%, 5/15/2023 | 7,480,687 |
| 6,100,000 | 1,2 | Surgical Care Affiliates, Inc., Sr. Unsecd. Note, Series 144A, 6.00%, 4/1/2023 | 6,130,500 |
| 4,200,000 | 1,2 | THC Escrow Corp. II, Sr. Unsecd. Note, Series 144A, 6.75%, 6/15/2023 | 4,291,875 |
| 3,225,000 | | Teleflex, Inc., Sr. Unsecd. Note, 5.25%, 6/15/2024 | 3,282,083 |
| 11,825,000 | | Tenet Healthcare Corp., 8.125%, 4/1/2022 | 12,977,937 |
| 6,850,000 | | Tenet Healthcare Corp., Note, Series B, 4.375%, 10/1/2021 | 6,730,125 |
| 5,100,000 | | Tenet Healthcare Corp., Sr. Secd. Note, 4.50%, 4/1/2021 | 5,068,125 |
| 6,525,000 | | United Surgical Partners International, Inc., 9.00%, 4/1/2020 | 6,965,437 |
| 11,125,000 | | VWR Funding, Inc., Sr. Unsecd. Note, 7.25%, 9/15/2017 | 11,528,281 |
| 6,125,000 | | Wolverine Healthcare, Sr. Note, 10.625%, 6/1/2020 | 6,446,563 |
| | | TOTAL | 243,944,272 |
| | | Independent Energy—5.7% | |
| 5,900,000 | | Antero Resources Corp., 6.00%, 12/1/2020 | 5,988,500 |
| 3,125,000 | | Antero Resources Corp., Sr. Unsecd. Note, 5.125%, 12/1/2022 | 2,968,750 |
| 1,475,000 | 1,2 | Antero Resources Corp., Sr. Unsecd. Note, Series 144A, 5.625%, 6/1/2023 | 1,432,594 |
| 2,775,000 | | Antero Resources Finance Corp., 5.375%, 11/1/2021 | 2,705,625 |
| 6,475,000 | | Approach Resources, Inc., 7.00%, 6/15/2021 | 5,859,875 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Independent Energy—continued | |
| $2,525,000 | | BreitBurn Energy Partners L.P., 7.875%, 4/15/2022 | $2,121,000 |
| 1,600,000 | | California Resources Corp., Sr. Unsecd. Note, 5.50%, 9/15/2021 | 1,394,000 |
| 8,425,000 | | California Resources Corp., Sr. Unsecd. Note, 6.00%, 11/15/2024 | 7,277,094 |
| 450,000 | | Carrizo Oil & Gas, Inc., 6.25%, 4/15/2023 | 453,375 |
| 9,125,000 | | Carrizo Oil & Gas, Inc., Sr. Unsecd. Note, 7.50%, 9/15/2020 | 9,649,687 |
| 2,250,000 | | Chaparral Energy, Inc., 7.625%, 11/15/2022 | 1,631,250 |
| 1,075,000 | | Chaparral Energy, Inc., Company Guarantee, 9.875%, 10/1/2020 | 881,500 |
| 3,725,000 | | Chesapeake Energy Corp., 5.75%, 3/15/2023 | 3,389,750 |
| 3,575,000 | | Chesapeake Energy Corp., Sr. Unsecd. Note, 5.375%, 6/15/2021 | 3,253,250 |
| 3,275,000 | | Chesapeake Energy Corp., Sr. Unsecd. Note, 6.625%, 8/15/2020 | 3,209,500 |
| 2,325,000 | | Chesapeake Energy Corp., Sr. Unsecd. Note, 6.875%, 11/15/2020 | 2,278,500 |
| 2,025,000 | 1,2 | Crownrock LP/Crownrock F, Unsecd. Note, Series 144A, 7.75%, 2/15/2023 | 2,166,750 |
| 1,350,000 | | EP Energy LLC/Everest Acquisition Finance, Inc., Sr. Unsecd. Note, 7.75%, 9/1/2022 | 1,424,250 |
| 2,350,000 | 1,2 | EP Energy LLC/Everest Acquisition Finance, Inc., Sr. Unsecd. Note, Series 144A, 6.375%, 6/15/2023 | 2,364,688 |
| 4,350,000 | | EP Energy/EP Finance, Inc., 9.375%, 5/1/2020 | 4,681,687 |
| 2,975,000 | | Energy XXI Gulf Coast, Inc., 7.50%, 12/15/2021 | 981,750 |
| 1,550,000 | | Energy XXI Gulf Coast, Inc., Sr. Unsecd. Note, 6.875%, 3/15/2024 | 511,500 |
| 6,225,000 | | Gulfport Energy Corp., Sr. Unsecd. Note, 7.75%, 11/1/2020 | 6,551,812 |
| 750,000 | 1,2 | Gulfport Energy Corp., Sr. Unsecd. Note, Series 144A, 6.625%, 5/1/2023 | 763,125 |
| 2,600,000 | 1,2 | Halcon Resources Corp., Series 144A, 8.625%, 2/1/2020 | 2,577,250 |
| 2,525,000 | | Laredo Petroleum, 5.625%, 1/15/2022 | 2,512,375 |
| 1,400,000 | | Laredo Petroleum, Sr. Unsecd. Note, 6.25%, 3/15/2023 | 1,431,500 |
| 1,975,000 | | Laredo Petroleum, Sr. Unsecd. Note, 7.375%, 5/1/2022 | 2,088,563 |
| 8,775,000 | | Legacy Reserves, Series 144A, 6.625%, 12/1/2021 | 7,151,625 |
| 550,000 | | Linn Energy LLC, 6.50%, 5/15/2019 | 446,875 |
| 2,025,000 | | Linn Energy LLC, 6.50%, 9/15/2021 | 1,518,750 |
| 2,300,000 | | Linn Energy LLC, Company Guarantee, 7.75%, 2/1/2021 | 1,799,750 |
| 1,925,000 | | Linn Energy LLC, Sr. Unsecd. Note, 6.25%, 11/1/2019 | 1,515,938 |
| 3,525,000 | | Linn Energy LLC, Sr. Unsecd. Note, 8.625%, 4/15/2020 | 2,908,865 |
| 4,675,000 | | Newfield Exploration Co., Sr. Unsecd. Note, 5.625%, 7/1/2024 | 4,745,125 |
| 8,175,000 | | Northern Oil and Gas, Inc., Sr. Note, 8.00%, 6/1/2020 | 7,398,375 |
| 925,000 | 1,2 | Northern Oil and Gas, Inc., Sr. Unsecd. Note, Series 144A, 8.00%, 6/1/2020 | 837,125 |
| 2,550,000 | | Oasis Petroleum, Inc., 6.875%, 1/15/2023 | 2,550,000 |
| 1,300,000 | | Oasis Petroleum, Inc., 6.875%, 3/15/2022 | 1,326,000 |
| 4,525,000 | | Oasis Petroleum, Inc., Company Guarantee, 6.50%, 11/1/2021 | 4,525,000 |
| 3,300,000 | 1,2 | RSP Permian, Inc., Sr. Unsecd. Note, Series 144A, 6.625%, 10/1/2022 | 3,390,750 |
| 1,200,000 | | Range Resources Corp., 5.00%, 8/15/2022 | 1,182,000 |
| 1,625,000 | | Range Resources Corp., Sr. Sub. Note, 5.00%, 3/15/2023 | 1,600,625 |
| 4,978,000 | 1,2 | Range Resources Corp., Sr. Unsecd. Note, Series 144A, 4.875%, 5/15/2025 | 4,854,297 |
| 5,900,000 | | Rice Energy, Inc., Sr. Unsecd. Note, 6.25%, 5/1/2022 | 5,885,250 |
| 775,000 | 1,2 | Rice Energy, Inc., Sr. Unsecd. Note, Series 144A, 7.25%, 5/1/2023 | 798,250 |
| 2,275,000 | | SM Energy Co., Sr. Unsecd. Note, 5.00%, 1/15/2024 | 2,166,938 |
| 2,475,000 | | SM Energy Co., Sr. Unsecd. Note, 5.625%, 6/1/2025 | 2,455,942 |
| 1,550,000 | | Sandridge Energy, Inc., 7.50%, 2/15/2023 | 662,935 |
| 7,575,000 | | Sandridge Energy, Inc., 8.125%, 10/15/2022 | 3,276,187 |
| 6,200,000 | | W&T Offshore, Inc., Sr. Unsecd. Note, 8.50%, 6/15/2019 | 4,392,080 |
| 5,200,000 | 1,2 | Whiting Petroleum Corp., Sr. Unsecd. Note, Series 144A, 6.25%, 4/1/2023 | 5,187,000 |
| | | TOTAL | 155,125,182 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Industrial - Other—2.1% | |
| $3,725,000 | 1,2 | ATS Automation Tooling Systems, Inc., Sr. Unsecd. Note, Series 144A, 6.50%, 6/15/2023 | $3,813,469 |
| 5,550,000 | 1,2 | Belden, Inc., Sr. Sub., Series 144A, 5.25%, 7/15/2024 | 5,411,250 |
| 6,725,000 | 1,2 | Belden, Inc., Sr. Sub., Series 144A, 5.50%, 9/1/2022 | 6,708,187 |
| 5,775,000 | 1,2 | Cleaver-Brooks, Inc., Series 144A, 8.75%, 12/15/2019 | 5,717,250 |
| 2,875,000 | 1,2 | EnerSys, Inc., Sr. Unsecd. Note, Series 144A, 5.00%, 4/30/2023 | 2,857,922 |
| 2,175,000 | | General Cable Corp., Sr. Unsecd. Note, 5.75%, 10/1/2022 | 2,049,938 |
| 7,825,000 | 1,2 | Hillman Group, Inc., Unsecd. Note, Series 144A, 6.375%, 7/15/2022 | 7,433,750 |
| 5,934,000 | | Interline Brands, Inc., Sr. Unsecd. Note, 10.00%, 11/15/2018 | 6,215,865 |
| 9,400,000 | 1,2 | Mirror Bidco/Dematic, Series 144A, 7.75%, 12/15/2020 | 9,799,500 |
| 1,125,000 | 1,2 | Unifrax Investment Corp., Series 144A, 7.50%, 2/15/2019 | 1,136,250 |
| 5,950,000 | 1,2 | Unifrax Investment Corp., Series 144A, 7.50%, 2/15/2019 | 6,009,500 |
| | | TOTAL | 57,152,881 |
| | | Leisure—0.8% | |
| 1,575,000 | 1,2 | Activision Blizzard, Inc., Sr. Unsecd. Note, Series 144A, 5.625%, 9/15/2021 | 1,653,750 |
| 1,075,000 | | Cedar Fair LP, Sr. Unsecd. Note, 5.25%, 3/15/2021 | 1,109,938 |
| 3,600,000 | | Cedar Fair LP, Sr. Unsecd. Note, 5.375%, 6/1/2024 | 3,658,320 |
| 975,000 | | Cinemark USA, Inc., 5.125%, 12/15/2022 | 970,125 |
| 800,000 | | Cinemark USA, Inc., Company Guarantee, 7.375%, 6/15/2021 | 849,000 |
| 2,475,000 | 1,3,4,5,6 | Hard Rock Park Operations LLC, Sr. Secd. Note, Series 144A, 7.40%, 4/1/2012 | 0 |
| 3,750,000 | | Regal Cinemas, Inc., 5.75%, 2/1/2025 | 3,675,000 |
| 1,800,000 | | Regal Entertainment Group, Sr. Unsecd. Note, 5.75%, 3/15/2022 | 1,826,910 |
| 7,100,000 | 1,2 | Six Flags Entertainment Corp., Sr. Note, Series 144A, 5.25%, 1/15/2021 | 7,277,500 |
| | | TOTAL | 21,020,543 |
| | | Lodging—0.4% | |
| 2,600,000 | | Choice Hotels International, Inc., 5.75%, 7/1/2022 | 2,830,750 |
| 2,725,000 | 1,2 | Esh Hospitality, Inc., Series 144A, 5.25%, 5/1/2025 | 2,663,688 |
| 5,175,000 | | Hilton Worldwide Finance LLC, Sr. Unsecd. Note, 5.625%, 10/15/2021 | 5,401,147 |
| 1,175,000 | 1,2 | RHP Hotel Property/RHP Finance Corp., Sr. Unsecd. Note, Series 144A, 5.00%, 4/15/2023 | 1,157,375 |
| | | TOTAL | 12,052,960 |
| | | Media Entertainment—7.6% | |
| 3,575,000 | | AMC Networks, Inc., 7.75%, 7/15/2021 | 3,878,875 |
| 3,125,000 | | AMC Networks, Inc., Sr. Unsecd. Note, 4.75%, 12/15/2022 | 3,136,719 |
| 775,000 | | CBS Outdoor Americas Capital LLC/Corp., Sr. Unsecd. Note, 5.25%, 2/15/2022 | 786,625 |
| 3,225,000 | | CBS Outdoor Americas Capital LLC/Corp., Sr. Unsecd. Note, 5.625%, 2/15/2024 | 3,309,656 |
| 4,225,000 | | CBS Outdoor Americas Capital LLC/Corp., Sr. Unsecd. Note, 5.875%, 3/15/2025 | 4,388,719 |
| 8,525,000 | | Clear Channel Communications, Inc., Company Guarantee, 9.00%, 3/1/2021 | 7,800,375 |
| 2,350,000 | | Clear Channel Worldwide, 6.50%, 11/15/2022 | 2,414,625 |
| 12,325,000 | | Clear Channel Worldwide, Series B, 6.50%, 11/15/2022 | 12,879,625 |
| 9,250,000 | | Crown Media Holdings, Inc., Company Guarantee, 10.50%, 7/15/2019 | 9,781,875 |
| 4,225,000 | | Cumulus Media, Inc., Sr. Unsecd. Note, 7.75%, 5/1/2019 | 3,892,281 |
| 8,775,000 | 1,2 | Emerald Expo Holdings, Inc., Series 144A, 9.00%, 6/15/2021 | 9,126,000 |
| 6,200,000 | | Entercom Radio LLC, Sr. Sub. Note, 10.50%, 12/1/2019 | 6,680,500 |
| 1,800,000 | | Gannett Co., Inc., 5.125%, 10/15/2019 | 1,858,500 |
| 6,650,000 | | Gannett Co., Inc., 6.375%, 10/15/2023 | 6,949,250 |
| 725,000 | 1,2 | Gannett Co., Inc., Sr. Unsecd. Note, Series 144A, 4.875%, 9/15/2021 | 721,375 |
| 725,000 | 1,2 | Gannett Co., Inc., Sr. Unsecd. Note, Series 144A, 5.50%, 9/15/2024 | 719,563 |
| 9,700,000 | | Gray Television, Inc., 7.50%, 10/1/2020 | 10,318,375 |
| 3,750,000 | | Lamar Media Corp., 5.00%, 5/1/2023 | 3,731,250 |
| 1,350,000 | | Lamar Media Corp., 5.875%, 2/1/2022 | 1,404,000 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Media Entertainment—continued | |
| $2,175,000 | | Lamar Media Corp., Sr. Unsecd. Note, 5.375%, 1/15/2024 | $2,215,781 |
| 125,000 | | Lin Television Corp., Sr. Unsecd. Note, 6.375%, 1/15/2021 | 128,281 |
| 3,000,000 | 1,2 | Media General Finance Sub, Inc., Sr. Unsecd. Note, Series 144A, 5.875%, 11/15/2022 | 3,045,000 |
| 7,625,000 | 1,2 | Multi-Color Corp., Series 144A, 6.125%, 12/1/2022 | 7,834,687 |
| 6,025,000 | 1,2 | Nexstar Broadcasting, Inc., Sr. Unsecd. Note, Series 144A, 6.125%, 2/15/2022 | 6,130,437 |
| 6,125,000 | | Nielsen Finance LLC/Nielsen Finance Co., 4.50%, 10/1/2020 | 6,117,344 |
| 8,500,000 | 1,2 | Nielsen Finance LLC/Nielsen Finance Co., Series 144A, 5.00%, 4/15/2022 | 8,383,125 |
| 3,900,000 | 1,2 | Nielsen Finance LLC/Nielsen Finance Co., Series 144A, 5.50%, 10/1/2021 | 3,953,625 |
| 5,800,000 | 1,2 | Radio One, Inc., Series 144A, 7.375%, 4/15/2022 | 5,705,750 |
| 5,825,000 | 1,2 | Radio One, Inc., Series 144A, 9.25%, 2/15/2020 | 5,329,875 |
| 10,875,000 | 1,2 | Sinclair Television Group, Series 144A, 5.625%, 8/1/2024 | 10,671,094 |
| 1,275,000 | 1,2 | Sirius XM Radio, Inc., Series 144A, 4.25%, 5/15/2020 | 1,271,813 |
| 7,325,000 | 1,2 | Sirius XM Radio, Inc., Series 144A, 4.625%, 5/15/2023 | 6,903,812 |
| 3,525,000 | 1,2 | Sirius XM Radio, Inc., Series 144A, 5.875%, 10/1/2020 | 3,621,938 |
| 7,800,000 | 1,2 | Sirius XM Radio, Inc., Series 144A, 6.00%, 7/15/2024 | 7,897,500 |
| 3,250,000 | 1,2 | Sirius XM Radio, Inc., Sr. Unsecd. Note, Series 144A, 5.375%, 4/15/2025 | 3,152,500 |
| 10,575,000 | 1,2 | Southern Graphics Systems, Inc., Series 144A, 8.375%, 10/15/2020 | 10,892,250 |
| 5,300,000 | 1,2 | Time, Inc., Series 144A, 5.75%, 4/15/2022 | 5,141,000 |
| 6,125,000 | 1,2 | Townsquare Media, Inc., Sr. Unsecd. Note, Series 144A, 6.50%, 4/1/2023 | 6,086,719 |
| 7,100,000 | 1,2 | Tribune Media Co., Sr. Unsecd. Note, Series 144A, 5.875%, 7/15/2022 | 7,171,000 |
| | | TOTAL | 205,431,719 |
| | | Metals & Mining—0.6% | |
| 3,525,000 | | ArcelorMittal SA, 6.125%, 6/1/2025 | 3,522,797 |
| 1,800,000 | | Steel Dynamics, Inc., Sr. Unsecd. Note, 5.125%, 10/1/2021 | 1,812,600 |
| 850,000 | | Steel Dynamics, Inc., Sr. Unsecd. Note, 5.25%, 4/15/2023 | 847,875 |
| 3,125,000 | | Steel Dynamics, Inc., Sr. Unsecd. Note, 5.50%, 10/1/2024 | 3,132,812 |
| 2,000,000 | 1,2 | Wise Metals Group LLC, Sr. Secd. Note, Series 144A, 8.75%, 12/15/2018 | 2,122,500 |
| 3,525,000 | 1,2 | Wise Metals Intermediate Holdings LLC/Wise Holdings Finance Corp., Series 144A, 9.75%, 6/15/2019 | 3,767,344 |
| | | TOTAL | 15,205,928 |
| | | Midstream—5.7% | |
| 5,750,000 | | Access Midstream Partners LP, Sr. Note, 4.875%, 5/15/2023 | 5,681,011 |
| 900,000 | | Access Midstream Partners LP, Sr. Unsecd. Note, 4.875%, 3/15/2024 | 885,798 |
| 575,000 | | Atlas Pipeline Partners LP, 5.875%, 8/1/2023 | 586,500 |
| 4,075,000 | 1,2 | Blue Racer Midstream LLC/Blue Racer Finance Corp., Sr. Unsecd. Note, Series 144A, 6.125%, 11/15/2022 | 4,217,625 |
| 2,575,000 | | Chesapeake Midstream Partners L.P., Sr. Unsecd. Note, 6.125%, 7/15/2022 | 2,724,051 |
| 1,650,000 | | Crestwood Midstream Partners LP, Sr. Unsecd. Note, 6.125%, 3/1/2022 | 1,693,725 |
| 3,025,000 | 1,2 | Crestwood Midstream Partners LP, Sr. Unsecd. Note, Series 144A, 6.25%, 4/1/2023 | 3,153,563 |
| 16,650,000 | | Energy Transfer Equity LP, 5.875%, 1/15/2024 | 17,349,300 |
| 4,175,000 | 1,2 | Ferrellgas LP/Ferrellgas Finance Corp., Sr. Unsecd. Note, Series 144A, 6.75%, 6/15/2023 | 4,216,750 |
| 3,275,000 | | Ferrellgas, L.P., Sr. Unsecd. Note, 6.50%, 5/1/2021 | 3,283,188 |
| 6,250,000 | | Ferrellgas, L.P., Sr. Unsecd. Note, 6.75%, 1/15/2022 | 6,296,875 |
| 5,125,000 | 1,2 | Hiland Partners LP, Series 144A, 5.50%, 5/15/2022 | 5,339,609 |
| 3,000,000 | | Holly Energy Partners LP, Sr. Unsecd. Note, 6.50%, 3/1/2020 | 3,007,500 |
| 3,025,000 | | Inergy Midstream LP, Sr. Unsecd. Note, 6.00%, 12/15/2020 | 3,146,000 |
| 5,950,000 | 1,2 | Kinder Morgan, Inc., Sr. Unsecd. Note, Series 144A, 5.625%, 11/15/2023 | 6,331,764 |
| 3,950,000 | | MarkWest Energy Partners LP, 4.875%, 12/1/2024 | 3,880,875 |
| 1,900,000 | | MarkWest Energy Partners LP, 4.875%, 6/1/2025 | 1,862,000 |
| 4,400,000 | | MarkWest Energy Partners LP, 5.50%, 2/15/2023 | 4,554,000 |
| 3,025,000 | | MarkWest Energy Partners LP, Sr. Unsecd. Note, 4.50%, 7/15/2023 | 2,979,625 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Midstream—continued | |
| $1,675,000 | | Regency Energy Partners LP, 4.50%, 11/1/2023 | $1,624,750 |
| 850,000 | | Regency Energy Partners LP, 5.00%, 10/1/2022 | 863,736 |
| 1,600,000 | | Regency Energy Partners LP, 5.50%, 4/15/2023 | 1,636,480 |
| 6,950,000 | | Rose Rock Midstream LP/Rose Rock Finance Corp., Sr. Unsecd. Note, 5.625%, 7/15/2022 | 6,828,375 |
| 3,650,000 | 1,2 | Rose Rock Midstream LP/Rose Rock Finance Corp., Sr. Unsecd. Note, Series 144A, 5.625%, 11/15/2023 | 3,549,625 |
| 12,200,000 | | Sabine Pass LNG LP, 5.625%, 2/1/2021 | 12,505,000 |
| 1,675,000 | | Sabine Pass LNG LP, 5.625%, 4/15/2023 | 1,677,613 |
| 2,150,000 | | Sabine Pass LNG LP, 6.25%, 3/15/2022 | 2,236,000 |
| 6,125,000 | 1,2 | Sabine Pass LNG LP, Series 144A, 5.625%, 3/1/2025 | 6,086,719 |
| 6,200,000 | | Suburban Propane Partners LP, 5.50%, 6/1/2024 | 6,262,000 |
| 4,201,000 | | Suburban Propane Partners LP, 7.375%, 8/1/2021 | 4,505,572 |
| 1,275,000 | | Suburban Propane Partners LP, Sr. Unsecd. Note, 5.75%, 3/1/2025 | 1,278,188 |
| 5,350,000 | | Summit Midstream Holdings LLC, 5.50%, 8/15/2022 | 5,136,000 |
| 650,000 | | Summit Midstream Holdings LLC, Sr. Unsecd. Note, 7.50%, 7/1/2021 | 684,125 |
| 3,525,000 | | Targa Resources Partners LP/Targa Resources Partners Finance Corp., Sr. Unsecd. Note, 5.25%, 5/1/2023 | 3,507,375 |
| 2,550,000 | 1,2 | Targa Resources Partners LP/Targa Resources Partners Finance Corp., Sr. Unsecd. Note, Series 144A, 5.00%, 1/15/2018 | 2,620,125 |
| 2,936,000 | | Tesoro Logistics LP, Sr. Unsecd. Note, 5.875%, 10/1/2020 | 3,031,420 |
| 3,275,000 | | Tesoro Logistics LP, Sr. Unsecd. Note, 6.125%, 10/15/2021 | 3,430,562 |
| 400,000 | 1,2 | Tesoro Logistics LP, Sr. Unsecd. Note, Series 144A, 5.50%, 10/15/2019 | 417,000 |
| 1,050,000 | 1,2 | Tesoro Logistics LP, Sr. Unsecd. Note, Series 144A, 6.25%, 10/15/2022 | 1,092,000 |
| 3,525,000 | 1,2 | Western Refining Logistics LP/WNRL Finance Corp., Sr. Unsecd. Note, Series 144A, 7.50%, 2/15/2023 | 3,648,375 |
| | | TOTAL | 153,810,799 |
| | | Oil Field Services—0.3% | |
| 3,800,000 | | CGG SA, Sr. Unsecd. Note, 6.875%, 1/15/2022 | 3,173,000 |
| 1,025,000 | | Compagnie Generale de Geophysique Veritas, Sr. Unsecd. Note, 6.50%, 6/1/2021 | 855,875 |
| 4,575,000 | 1,2 | FTS International, Inc., Series 144A, 6.25%, 5/1/2022 | 3,385,500 |
| | | TOTAL | 7,414,375 |
| | | Packaging—5.1% | |
| 10,625,000 | 1,2 | Ardagh Packaging Finance PLC, Company Guarantee, Series 144A, 9.125%, 10/15/2020 | 11,262,500 |
| 200,000 | 1,2 | Ardagh Packaging Finance PLC, Series 144A, 3.286%, 12/15/2019 | 195,250 |
| 300,000 | 1,2 | Ardagh Packaging Finance PLC, Series 144A, 6.25%, 1/31/2019 | 306,750 |
| 2,450,000 | 1,2 | Ardagh Packaging Finance PLC, Series 144A, 6.75%, 1/31/2021 | 2,517,375 |
| 436,765 | 1,2 | Ardagh Packaging Finance PLC, Series 144A, 7.00%, 11/15/2020 | 447,684 |
| 2,925,000 | 1,2 | Ardagh Packaging Finance PLC, Sr. Unsecd. Note, Series 144A, 6.00%, 6/30/2021 | 2,946,937 |
| 2,125,000 | 1,2 | Ardagh Packaging Finance PLC, Sr. Unsecd. Note, Series 144A, 9.125%, 10/15/2020 | 2,241,875 |
| 7,400,000 | | Ball Corp., 4.00%, 11/15/2023 | 6,900,500 |
| 450,000 | | Ball Corp., 5.00%, 3/15/2022 | 453,375 |
| 4,900,000 | | Ball Corp., Sr. Unsecd. Note, 5.25%, 7/1/2025 | 4,869,375 |
| 4,925,000 | | Berry Plastics Corp., 5.125%, 7/15/2023 | 4,814,187 |
| 14,975,000 | | Berry Plastics Corp., 5.50%, 5/15/2022 | 15,068,594 |
| 1,100,000 | 1,2 | Beverage Packaging Holdings II, Sr. Sub. Note, Series 144A, 6.00%, 6/15/2017 | 1,104,125 |
| 10,775,000 | 1,2 | Bway Holding Co., Series 144A, 9.125%, 8/15/2021 | 11,152,125 |
| 5,500,000 | | Crown Americas LLC, 4.50%, 1/15/2023 | 5,221,590 |
| 1,000,000 | | Crown Americas LLC, Company Guarantee, 6.25%, 2/1/2021 | 1,047,500 |
| 3,575,000 | | Greif, Inc., Sr. Unsecd. Note, 7.75%, 8/1/2019 | 3,995,062 |
| 7,275,000 | 1,2 | Multi Packaging Solutions, Inc., Series 144A, 8.50%, 8/15/2021 | 7,420,500 |
| 1,200,000 | 1,2 | Owens-Brockway Glass Container, Inc., Series 144A, 5.00%, 1/15/2022 | 1,189,500 |
| 3,550,000 | 1,2 | Owens-Brockway Glass Container, Inc., Series 144A, 5.375%, 1/15/2025 | 3,483,438 |
| 11,550,000 | | Reynolds Group Issuer, Inc./LLC/LU, 5.75%, 10/15/2020 | 11,867,625 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Packaging—continued | |
| $8,775,000 | | Reynolds Group, 8.25%, 2/15/2021 | $9,147,937 |
| 3,026,000 | | Reynolds Group, 9.875%, 8/15/2019 | 3,182,974 |
| 1,675,000 | | Reynolds Group, Sr. Unsecd. Note, 7.95%, 12/15/2025 | 1,666,625 |
| 2,975,000 | 1,2 | Sealed Air Corp., Series 144A, 4.875%, 12/1/2022 | 2,941,531 |
| 1,250,000 | 1,2 | Sealed Air Corp., Series 144A, 5.25%, 4/1/2023 | 1,264,063 |
| 3,775,000 | 1,2 | Sealed Air Corp., Sr. Unsecd. Note, Series 144A, 5.125%, 12/1/2024 | 3,737,250 |
| 4,400,000 | 1,2 | Sealed Air Corp., Sr. Unsecd. Note, Series 144A, 5.50%, 9/15/2025 | 4,444,000 |
| 12,500,000 | 1,2 | Signode Industrial Group, Series 144A, 6.375%, 5/1/2022 | 12,187,500 |
| | | TOTAL | 137,077,747 |
| | | Paper—0.5% | |
| 2,150,000 | | Clearwater Paper Corp., Sr. Note, 4.50%, 2/1/2023 | 2,047,875 |
| 7,700,000 | 1,2 | Clearwater Paper Corp., Sr. Unsecd. Note, Series 144A, 5.375%, 2/1/2025 | 7,565,250 |
| 1,700,000 | | Graphic Packaging International, Inc., 4.75%, 4/15/2021 | 1,725,500 |
| 2,875,000 | | Graphic Packaging International, Inc., Sr. Unsecd. Note, 4.875%, 11/15/2022 | 2,896,563 |
| | | TOTAL | 14,235,188 |
| | | Pharmaceuticals—3.1% | |
| 550,000 | 1,2 | ENDO Finance LLC/ENDO Finco, Inc., Sr. Unsecd. Note, Series 144A, 5.375%, 1/15/2023 | 544,500 |
| 6,950,000 | 1,2 | ENDO Finance LLC/ENDO Finco, Inc., Sr. Unsecd. Note, Series 144A, 6.00%, 2/1/2025 | 7,097,687 |
| 3,475,000 | 1,2 | ENDO Finance LLC/ENDO Finco, Inc., Sr. Unsecd. Note, Series 144A, 6.00%, 7/15/2023 | 3,561,875 |
| 8,600,000 | | Grifols Worldwide Operations Ltd., Sr. Unsecd. Note, 5.25%, 4/1/2022 | 8,643,000 |
| 9,300,000 | 1,2 | Jaguar Holding Co., Series 144A, 9.375%, 10/15/2017 | 9,520,875 |
| 7,775,000 | 1,2 | Jaguar Holding Co., Sr. Note, Series 144A, 9.50%, 12/1/2019 | 8,299,812 |
| 1,250,000 | 1,2 | Mallinckrodt International Finance SA/Mallinckrodt CB LLC, Series 144A, 4.875%, 4/15/2020 | 1,276,625 |
| 2,850,000 | | Mallinckrodt International Finance SA/Mallinckrodt CB LLC, Sr. Unsecd. Note, 4.75%, 4/15/2023 | 2,671,875 |
| 2,425,000 | 1,2 | Mallinckrodt International Finance SA/Mallinckrodt CB LLC, Sr. Unsecd. Note, Series 144A, 5.50%, 4/15/2025 | 2,361,344 |
| 2,825,000 | 1,2 | Quintiles Transnational Corp., Sr. Unsecd. Note, Series 144A, 4.875%, 5/15/2023 | 2,846,188 |
| 3,700,000 | 1,2 | Valeant Pharmaceuticals International, Inc., Series 144A, 5.625%, 12/1/2021 | 3,811,370 |
| 11,225,000 | 1,2 | Valeant Pharmaceuticals International, Inc., Series 144A, 7.50%, 7/15/2021 | 12,165,094 |
| 2,200,000 | 1,2 | Valeant Pharmaceuticals International, Inc., Sr. Unsecd. Note, Series 144A, 5.50%, 3/1/2023 | 2,227,500 |
| 450,000 | 1,2 | Vrx Escrow Corp., Series 144A, 5.375%, 3/15/2020 | 465,750 |
| 9,200,000 | 1,2 | Vrx Escrow Corp., Series 144A, 5.875%, 5/15/2023 | 9,441,500 |
| 9,275,000 | 1,2 | Vrx Escrow Corp., Series 144A, 6.125%, 4/15/2025 | 9,576,437 |
| | | TOTAL | 84,511,432 |
| | | Refining—0.4% | |
| 4,025,000 | | CVR Refining LLC/Coffeyville Finance, Inc., 6.50%, 11/1/2022 | 4,045,125 |
| 6,300,000 | | Tesoro Petroleum Corp., 5.125%, 4/1/2024 | 6,363,000 |
| | | TOTAL | 10,408,125 |
| | | Restaurants—1.5% | |
| 4,850,000 | 1,2 | 1011778 BC Unltd. Liability Co./New Red Finance, Inc., Series 144A, 4.625%, 1/15/2022 | 4,789,375 |
| 14,475,000 | 1,2 | 1011778 BC Unltd. Liability Co./New Red Finance, Inc., Series 144A, 6.00%, 4/1/2022 | 14,909,250 |
| 6,900,000 | | NPC INTL/OPER CO A&B, Inc., 10.50%, 1/15/2020 | 7,262,250 |
| 12,075,000 | 1,2 | Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC, Series 144A, 5.875%, 5/15/2021 | 12,256,125 |
| | | TOTAL | 39,217,000 |
| | | Retailers—3.7% | |
| 10,250,000 | 1,2 | Academy Finance Corp., Series 144A, 8.00%, 6/15/2018 | 10,352,500 |
| 7,000,000 | 1,2 | Academy Finance Corp., Series 144A, 9.25%, 8/1/2019 | 7,389,900 |
| 12,000,000 | 1,2 | Argos Merger Sub, Inc., Sr. Unsecd. Note, Series 144A, 7.125%, 3/15/2023 | 12,600,000 |
| 3,800,000 | 1,2 | Family Tree Escrow LLC, Series 144A, 5.75%, 3/1/2023 | 3,990,000 |
| 775,000 | 1,2 | Family Tree Escrow LLC, Sr. Unsecd. Note, Series 144A, 5.25%, 3/1/2020 | 814,719 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Retailers—continued | |
| $4,250,000 | 1,2 | Jo-Ann Stores, Inc., Series 144A, 9.75%, 10/15/2019 | $3,825,000 |
| 3,075,000 | 1,2 | Jo-Ann Stores, Inc., Sr. Unsecd. Note, Series 144A, 8.125%, 3/15/2019 | 2,909,719 |
| 1,350,000 | | Limited Brands, Inc., 5.625%, 10/15/2023 | 1,424,250 |
| 1,100,000 | | Limited Brands, Inc., Company Guarantee, 7.00%, 5/1/2020 | 1,251,250 |
| 775,000 | | Limited Brands, Inc., Sr. Unsecd. Note, 5.625%, 2/15/2022 | 819,562 |
| 11,800,000 | 1,2 | Michaels Stores, Inc., Series 144A, 5.875%, 12/15/2020 | 12,390,000 |
| 2,375,000 | 1,2 | Neiman-Marcus Group, Inc., Series 144A, 8.00%, 10/15/2021 | 2,517,500 |
| 6,200,000 | 1,2 | Neiman-Marcus Group, Inc., Series 144A, 8.75%, 10/15/2021 | 6,688,250 |
| 7,175,000 | 1,2 | PETCO Animal Supplies, Inc., Series 144A, 8.50%, 10/15/2017 | 7,390,250 |
| 7,875,000 | 1,2 | PETCO Animal Supplies, Inc., Sr. Note, Series 144A, 9.25%, 12/1/2018 | 8,249,062 |
| 1,450,000 | | Phillips Van Heusen Corp., Sr. Note, 4.50%, 12/15/2022 | 1,442,750 |
| 5,625,000 | 1,2 | Rite Aid Corp., Sr. Unsecd. Note, Series 144A, 6.125%, 4/1/2023 | 5,814,844 |
| 725,000 | | Sally Hldgs. LLC/Sally Cap, Inc., 5.75%, 6/1/2022 | 763,063 |
| 5,875,000 | | Sally Hldgs. LLC/Sally Cap, Inc., 6.875%, 11/15/2019 | 6,168,750 |
| 2,050,000 | | Wolverine World Wide, Inc., Sr. Unsecd. Note, 6.125%, 10/15/2020 | 2,183,250 |
| | | TOTAL | 98,984,619 |
| | | Technology—12.2% | |
| 6,150,000 | | Advanced Micro Devices, Inc., 7.00%, 7/1/2024 | 5,227,500 |
| 2,700,000 | | Advanced Micro Devices, Inc., Sr. Unsecd. Note, 7.50%, 8/15/2022 | 2,396,250 |
| 7,425,000 | 1,2 | BMC Software, Inc., Series 144A, 8.125%, 7/15/2021 | 6,042,094 |
| 4,900,000 | 1,2 | Blackboard, Inc., Sr. Unsecd. Note, Series 144A, 7.75%, 11/15/2019 | 4,630,500 |
| 6,675,000 | 1,2 | Blue Coat Systems, Inc., Sr. Unsecd. Note, Series 144A, 8.375%, 6/1/2023 | 6,808,500 |
| 7,875,000 | 1,2 | Boxer Parent Co., Inc., Series 144A, 9.00%, 10/15/2019 | 5,620,781 |
| 3,525,000 | | CDW LLC/CDW Finance, 6.00%, 8/15/2022 | 3,652,781 |
| 5,025,000 | | CDW LLC/CDW Finance, Sr. Unsecd. Note, 5.00%, 9/1/2023 | 4,949,625 |
| 5,500,000 | | CDW LLC/CDW Finance, Sr. Unsecd. Note, 5.50%, 12/1/2024 | 5,458,750 |
| 4,075,000 | 1,2 | CommScope Technologies Finance LLC, Series 144A, 6.00%, 6/15/2025 | 4,069,906 |
| 5,950,000 | 1,2 | CommScope, Inc., Series 144A, 5.50%, 6/15/2024 | 5,808,687 |
| 7,900,000 | 1,2 | CommScope, Inc., Sr. Note, Series 144A, 6.625%, 6/1/2020 | 8,225,875 |
| 6,725,000 | 1 | Compucom System, Inc., Series 144A, 7.00%, 5/1/2021 | 5,144,625 |
| 7,800,000 | | CoreLogic, Inc., Sr. Unsecd. Note, 7.25%, 6/1/2021 | 8,287,500 |
| 2,400,000 | 1,2 | DataTel Inc., Series 144A, 9.625%, 12/1/2018 | 2,439,000 |
| 4,925,000 | | Emdeon, Inc., 11.00%, 12/31/2019 | 5,362,094 |
| 8,475,000 | 1,2 | Entegris, Inc., Series 144A, 6.00%, 4/1/2022 | 8,739,844 |
| 1,750,000 | 1,2 | First Data Corp., Series 144A, 7.375%, 6/15/2019 | 1,823,500 |
| 8,900,000 | 1,2 | First Data Corp., Sr. Secd. 2nd Priority Note, Series 144A, 8.25%, 1/15/2021 | 9,411,750 |
| 21,575,000 | 1,2 | First Data Corp., Sr. Secd. 2nd Priority Note, Series 144A, 8.75%, 1/15/2022 | 22,990,859 |
| 1,294,000 | | Freescale Semiconductor, Inc., Company Guarantee, 10.75%, 8/1/2020 | 1,371,640 |
| 3,700,000 | 1,2 | Freescale Semiconductor, Inc., Sr. Secd. Note, Series 144A, 6.00%, 1/15/2022 | 3,931,250 |
| 8,150,000 | | IAC Interactive Corp., 4.75%, 12/15/2022 | 8,017,562 |
| 1,225,000 | | IAC Interactive Corp., 4.875%, 11/30/2018 | 1,267,875 |
| 9,000,000 | 1,2 | Igloo Holdings Corp., Sr. Note, Series 144A, 8.25%, 12/15/2017 | 9,123,750 |
| 14,650,000 | 1,2 | Infor Software Parent, Inc., Series 144A, 7.125%, 5/1/2021 | 14,759,875 |
| 15,150,000 | 1,2 | Infor US, Inc., Series 144A, 6.50%, 5/15/2022 | 15,490,875 |
| 11,000,000 | 1,2 | Interactive Data Corp., Series 144A, 5.875%, 4/15/2019 | 11,110,000 |
| 800,000 | | Iron Mountain, Inc., 5.75%, 8/15/2024 | 803,500 |
| 4,350,000 | | Iron Mountain, Inc., Sr. Sub. Note, 7.75%, 10/1/2019 | 4,556,625 |
| 6,925,000 | 1,2 | Italics Merger Sub, Inc., Sr. Unsecd. Note, Series 144A, 7.125%, 7/15/2023 | 6,855,750 |
| 2,410,000 | | Lender Processing Services, 5.75%, 4/15/2023 | 2,548,575 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Technology—continued | |
| $1,900,000 | 1,2 | MSCI, Inc., Sr. Unsecd. Note, Series 144A, 5.25%, 11/15/2024 | $1,928,500 |
| 2,325,000 | | MagnaChip Semiconductor S.A., Sr. Unsecd. Note, 6.625%, 7/15/2021 | 1,845,469 |
| 2,050,000 | 1,2 | Micron Technology, Inc., Sr. Unsecd. Note, Series 144A, 5.25%, 1/15/2024 | 1,941,094 |
| 4,850,000 | 1,2 | Micron Technology, Inc., Sr. Unsecd. Note, Series 144A, 5.25%, 8/1/2023 | 4,662,062 |
| 4,100,000 | | NCR Corp., 6.375%, 12/15/2023 | 4,361,375 |
| 4,025,000 | | NCR Corp., Sr. Unsecd. Note, 4.625%, 2/15/2021 | 4,050,156 |
| 3,375,000 | | NCR Corp., Sr. Unsecd. Note, 5.00%, 7/15/2022 | 3,434,063 |
| 1,800,000 | | NCR Corp., Sr. Unsecd. Note, 5.875%, 12/15/2021 | 1,860,750 |
| 1,300,000 | 1,2 | NXP BV/NXP Funding LLC, Series 144A, 3.75%, 6/1/2018 | 1,313,000 |
| 3,100,000 | 1,2 | NXP BV/NXP Funding LLC, Series 144A, 5.75%, 2/15/2021 | 3,235,625 |
| 1,350,000 | 1,2 | NXP BV/NXP Funding LLC, Series 144A, 5.75%, 3/15/2023 | 1,407,375 |
| 10,375,000 | 1,2 | Nuance Communications, Inc., Series 144A, 5.375%, 8/15/2020 | 10,478,750 |
| 5,675,000 | 1,2 | Open Text Corp., Sr. Unsecd. Note, Series 144A, 5.625%, 1/15/2023 | 5,632,437 |
| 2,875,000 | 1,2 | SS&C Technologies Holdings, Inc., Sr. Unsecd. Note, Series 144A, 5.875%, 7/15/2023 | 2,910,938 |
| 1,300,000 | | Seagate HDD Cayman, 4.75%, 6/1/2023 | 1,325,227 |
| 3,200,000 | 1,2 | Seagate Technology HDD Holdings, Series 144A, 4.75%, 1/1/2025 | 3,185,398 |
| 2,625,000 | 1,2 | Sensata Technologies B.V., Series 144A, 5.625%, 11/1/2024 | 2,713,594 |
| 3,725,000 | 1,2 | Sensata Technologies B.V., Sr. Unsecd. Note, Series 144A, 5.00%, 10/1/2025 | 3,636,531 |
| 7,300,000 | 1,2 | Solera Holdings, Inc., Series 144A, 6.00%, 6/15/2021 | 7,528,125 |
| 5,875,000 | 1,2 | Solera Holdings, Inc., Series 144A, 6.125%, 11/1/2023 | 6,058,594 |
| 10,525,000 | | SunGard Data Systems, Inc., 6.625%, 11/1/2019 | 10,906,531 |
| 2,550,000 | | SunGard Data Systems, Inc., Sr. Unsecd. Note, 7.625%, 11/15/2020 | 2,674,313 |
| 9,075,000 | 1 | Syniverse Holdings, Inc., Company Guarantee, 9.125%, 1/15/2019 | 8,031,375 |
| 4,650,000 | | TransUnion Holding Co., Inc., 8.125%, 6/15/2018 | 4,758,112 |
| 10,675,000 | | TransUnion Holding Co., Inc., Sr. Unsecd. Note, 9.625%, 6/15/2018 | 10,718,234 |
| 4,125,000 | | Verisign, Inc., 4.625%, 5/1/2023 | 3,970,313 |
| 1,700,000 | 1,2 | Verisign, Inc., Sr. Unsecd. Note, Series 144A, 5.25%, 4/1/2025 | 1,700,000 |
| 7,250,000 | 1,2 | Zebra Technologies Corp., Sr. Unsecd. Note, Series 144A, 7.25%, 10/15/2022 | 7,866,250 |
| | | TOTAL | 331,061,889 |
| | | Transportation Services—0.5% | |
| 5,775,000 | | HDTFS, Inc., 6.25%, 10/15/2022 | 5,890,500 |
| 4,025,000 | | Hertz Corp., 5.875%, 10/15/2020 | 4,095,438 |
| 2,100,000 | | Hertz Corp., Company Guarantee, 6.75%, 4/15/2019 | 2,172,240 |
| | | TOTAL | 12,158,178 |
| | | Utility - Electric—1.0% | |
| 9,400,000 | | Calpine Corp., 5.75%, 1/15/2025 | 9,176,750 |
| 1,325,000 | 1,2 | Calpine Corp., Bond, Series 144A, 6.00%, 1/15/2022 | 1,407,812 |
| 2,025,000 | 1,2 | Calpine Corp., Series 144A, 5.875%, 1/15/2024 | 2,151,562 |
| 85,284 | 1 | FPL Energy National Wind, Note, Series 144A, 6.125%, 3/25/2019 | 85,924 |
| 625,000 | | NRG Energy, Inc., 6.25%, 5/1/2024 | 623,438 |
| 5,700,000 | | NRG Energy, Inc., Company Guarantee, 7.625%, 1/15/2018 | 6,262,875 |
| 1,675,000 | | NRG Energy, Inc., Company Guarantee, 8.25%, 9/1/2020 | 1,758,750 |
| 2,225,000 | | NRG Energy, Inc., Sr. Unsecd. Note, 6.625%, 3/15/2023 | 2,302,875 |
| 4,350,000 | 1,2 | TerraForm Power Operating LLC, Sr. Unsecd. Note, Series 144A, 5.875%, 2/1/2023 | 4,437,000 |
| | | TOTAL | 28,206,986 |
| | | Wireless Communications—4.0% | |
| 6,875,000 | 1,2 | Altice SA, Series 144A, 7.75%, 5/15/2022 | 6,668,750 |
| 6,575,000 | 1,2 | Altice SA, Sr. Unsecd. Note, Series 144A, 7.625%, 2/15/2025 | 6,196,937 |
| 4,400,000 | 1,2 | Altice US Finance I Corp., Series 144A, 5.375%, 7/15/2023 | 4,290,000 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Wireless Communications—continued | |
| $3,350,000 | 1,2 | Altice US Finance I Corp., Sr. Unsecd. Note, Series 144A, 7.75%, 7/15/2025 | $3,266,250 |
| 5,875,000 | 1,2 | Digicel Ltd., Series 144A, 6.00%, 4/15/2021 | 5,678,893 |
| 10,100,000 | 1,2 | Digicel Ltd., Sr. Unsecd. Note, Series 144A, 8.25%, 9/30/2020 | 10,150,500 |
| 2,200,000 | | MetroPCS Wireless, Inc., 6.125%, 1/15/2022 | 2,277,000 |
| 5,375,000 | | MetroPCS Wireless, Inc., 6.731%, 4/28/2022 | 5,616,875 |
| 6,450,000 | | MetroPCS Wireless, Inc., Sr. Note, 6.625%, 11/15/2020 | 6,724,125 |
| 325,000 | | MetroPCS Wireless, Inc., Sr. Note, 6.633%, 4/28/2021 | 338,000 |
| 300,000 | | MetroPCS Wireless, Inc., Sr. Note, 6.836%, 4/28/2023 | 316,125 |
| 10,725,000 | | Sprint Capital Corp., Company Guarantee, 6.875%, 11/15/2028 | 9,223,500 |
| 10,300,000 | | Sprint Capital Corp., Company Guarantee, 6.90%, 5/1/2019 | 10,531,750 |
| 1,525,000 | 1,2 | Sprint Capital Corp., GTD Note, Series 144A, 9.00%, 11/15/2018 | 1,725,934 |
| 2,650,000 | | Sprint Corp., 7.125%, 6/15/2024 | 2,464,765 |
| 8,575,000 | | Sprint Corp., 7.875%, 9/15/2023 | 8,382,062 |
| 3,425,000 | 1,2 | Sprint Nextel Corp., Series 144A, 7.00%, 3/1/2020 | 3,733,935 |
| 3,900,000 | | Sprint Nextel Corp., Sr. Unsecd. Note, 6.00%, 11/15/2022 | 3,573,375 |
| 3,675,000 | | T-Mobile USA, Inc., 6.25%, 4/1/2021 | 3,776,063 |
| 4,075,000 | | T-Mobile USA, Inc., 6.625%, 4/1/2023 | 4,243,094 |
| 1,625,000 | | T-Mobile USA, Inc., Sr. Unsecd. Note, 6.00%, 3/1/2023 | 1,667,656 |
| 2,275,000 | | T-Mobile USA, Inc., Sr. Unsecd. Note, 6.375%, 3/1/2025 | 2,340,406 |
| 4,225,000 | | T-Mobile USA, Inc., Sr. Unsecd. Note, 6.50%, 1/15/2024 | 4,372,875 |
| | | TOTAL | 107,558,870 |
| | | Wireline Communications—0.6% | |
| 3,350,000 | | Level 3 Communications, Inc., Sr. Unsecd. Note, 5.75%, 12/1/2022 | 3,333,250 |
| 2,275,000 | | Level 3 Financing, Inc., 7.00%, 6/1/2020 | 2,420,031 |
| 4,350,000 | | Level 3 Financing, Inc., 8.625%, 7/15/2020 | 4,659,720 |
| 5,850,000 | 1,2 | Level 3 Financing, Inc., Series 144A, 5.375%, 5/1/2025 | 5,645,250 |
| 1,225,000 | | Level 3 Financing, Inc., Sr. Unsecd. Note, 6.125%, 1/15/2021 | 1,287,721 |
| | | TOTAL | 17,345,972 |
| | | TOTAL CORPORATE BONDS
(IDENTIFIED COST $2,648,770,585) | 2,632,523,239 |
| | | COMMON STOCKS—0.0% | |
| | | Independent Energy—0.0% | |
| 53,011 | 1,3,5 | Lone Pine Resources Canada Ltd. | 0 |
| 53,011 | 3,5 | Lone Pine Resources, Inc. | 96,480 |
| 425,000 | 1,3,5 | Lone Pine Resources, Inc., Escrow Shares | 0 |
| | | TOTAL COMMON STOCKS
(IDENTIFIED COST $420,960) | 96,480 |
| | | INVESTMENT COMPANY—2.0% | |
| 54,017,653 | 7 | Federated Prime Value Obligations Fund, Institutional Shares, 0.12%8
(AT NET ASSET VALUE) | 54,017,653 |
| | | TOTAL INVESTMENTS—99.4%
(IDENTIFIED COST $2,703,209,198)9 | 2,686,637,372 |
| | | OTHER ASSETS AND LIABILITIES - NET—0.6%10 | 16,393,602 |
| | | TOTAL NET ASSETS—100% | $2,703,030,974 |
Semi-Annual Shareholder Report
| 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, 2015, these restricted securities amounted to $1,262,582,776, which represented 46.7% 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, 2015, these liquid restricted securities amounted to $1,249,320,852, which represented 46.2% 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 | Principal amount and interest were not paid upon final maturity. |
| 7 | Affiliated holding. |
| 8 | 7-day net yield. |
| 9 | The cost of investments for federal tax purposes amounts to $2,707,973,758. |
| 10 | 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, 2015.
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.
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, 2015, in valuing the Fund's assets carried at fair value:
| Valuation Inputs |
| | Level 1—
Quoted
Prices | Level 2—
Other
Significant
Observable
Inputs | Level 3—
Significant
Unobservable
Inputs | Total |
| Debt Securities: | | | | |
| Corporate Bonds | $— | $2,632,523,239 | $0 | $2,632,523,239 |
| Equity Securities: | | | | |
| Common Stock | | | | |
| International | — | — | 96,480 | 96,480 |
| Investment Company | 54,017,653 | — | — | 54,017,653 |
| TOTAL SECURITIES | $54,017,653 | $2,632,523,239 | $96,480 | $2,686,637,372 |
The following acronym is used throughout this portfolio:
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)
6/30/2015 | Year Ended December 31, |
| 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $6.34 | $6.62 | $6.68 | $6.35 | $6.55 | $6.27 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.20 | 0.431 | 0.471 | 0.531 | 0.57 | 0.61 |
| Net realized and unrealized gain (loss) on investments | (0.00)2 | (0.19) | 0.04 | 0.41 | (0.19) | 0.29 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.20 | 0.24 | 0.51 | 0.94 | 0.38 | 0.90 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.21) | (0.45) | (0.50) | (0.58) | (0.58) | (0.62) |
| Distributions from net realized gain on investments | (0.01) | (0.07) | (0.07) | (0.03) | — | — |
| TOTAL DISTRIBUTIONS | (0.22) | (0.52) | (0.57) | (0.61) | (0.58) | (0.62) |
| Net Asset Value, End of Period | $6.32 | $6.34 | $6.62 | $6.68 | $6.35 | $6.55 |
| Total Return3 | 3.13% | 3.53% | 7.80% | 15.44% | 6.04% | 15.06% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 0.02%4 | 0.01% | 0.00%5 | 0.00%5 | 0.00%5 | 0.00%5 |
| Net investment income | 6.37%4 | 6.50% | 7.08% | 8.04% | 8.75% | 9.41% |
| Expense waiver/reimbursement6 | — | 0.01% | 0.02% | 0.07% | 0.10% | 0.10% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $2,703,031 | $2,691,244 | $2,425,364 | $2,340,516 | $1,886,499 | $1,995,842 |
| Portfolio turnover | 18% | 29% | 30% | 38% | 34% | 37% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 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 | Computed on an annualized basis. |
| 5 | The Adviser reimbursed all operating expenses incurred by the Fund. |
| 6 | 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, 2015 (unaudited)
| Assets: | | |
| Total investment in securities, at value including $54,017,653 of investment in an affiliated holding (Note 5) (identified cost $2,703,209,198) | | $2,686,637,372 |
| Income receivable | | 42,887,520 |
| Receivable for investments sold | | 1,408,040 |
| TOTAL ASSETS | | 2,730,932,932 |
| Liabilities: | | |
| Payable for investments purchased | $14,188,125 | |
| Payable for shares redeemed | 155,000 | |
| Income distribution payable | 13,494,643 | |
| Accrued expenses (Note 5) | 64,190 | |
| TOTAL LIABILITIES | | 27,901,958 |
| Net assets for 427,672,331 shares outstanding | | $2,703,030,974 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,733,450,875 |
| Net unrealized depreciation of investments | | (16,571,826) |
| Accumulated net realized loss on investments | | (11,375,357) |
| Distributions in excess of net investment income | | (2,472,718) |
| TOTAL NET ASSETS | | $2,703,030,974 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $2,703,030,974 ÷ 427,672,331 shares outstanding, no par value, unlimited shares authorized | | $6.32 |
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, 2015 (unaudited)
| Investment Income: | | |
| Interest | | $86,694,666 |
| Dividends received from an affiliated holding (Note 5) | | 17,649 |
| TOTAL INCOME | | 86,712,315 |
| Expenses: | | |
| Custodian fees | $45,810 | |
| Transfer agent fee | 106,642 | |
| Directors'/Trustees' fees (Note 5) | 8,847 | |
| Auditing fees | 15,992 | |
| Legal fees | 4,596 | |
| Portfolio accounting fees | 109,503 | |
| Printing and postage | 5,153 | |
| Miscellaneous (Note 5) | 8,854 | |
| TOTAL EXPENSES | | 305,397 |
| Net investment income | | 86,406,918 |
| Realized and Unrealized Gain (Loss) on Investments: | | |
| Net realized loss on investments | | (5,607,463) |
| Net change in unrealized depreciation of investments | | 2,193,455 |
| Net realized and unrealized loss on investments | | (3,414,008) |
| Change in net assets resulting from operations | | $82,992,910 |
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)
6/30/2015 | Year Ended
12/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $86,406,918 | $160,684,103 |
| Net realized gain (loss) on investments | (5,607,463) | 37,781,174 |
| Net change in unrealized appreciation/depreciation of investments | 2,193,455 | (116,809,718) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 82,992,910 | 81,655,559 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (88,893,897) | (167,210,812) |
| Distributions from net realized gain on investments | (4,376,535) | (27,795,938) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (93,270,432) | (195,006,750) |
| Share Transactions: | | |
| Proceeds from sale of shares | 78,962,890 | 735,168,301 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 10,633,665 | 34,737,087 |
| Cost of shares redeemed | (67,531,968) | (390,674,544) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 22,064,587 | 379,230,844 |
| Change in net assets | 11,787,065 | 265,879,653 |
| Net Assets: | | |
| Beginning of period | 2,691,243,909 | 2,425,364,256 |
| End of period (including undistributed (distributions in excess of) net investment income of $(2,472,718) and $14,261, respectively) | $2,703,030,974 | $2,691,243,909 |
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, 2015 (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 three 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, as amended (the “1933 Act”).
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 and repurchase agreements 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), unless the issuer's creditworthiness is impaired or other factors indicate that amortized cost is not an accurate estimate of the investment's fair value, in which case it would be valued in the same manner as a longer-term security. |
| ■ | Shares of other mutual funds or non-exchange-traded investment companies 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, except that options are valued at the mean of closing bid and asked quotations. |
| ■ | 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 last traded or purchase price of the security, information obtained by contacting the issuer or dealers, 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, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions. |
If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth in the Fund's valuation policies and procedures, 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 obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines its NAV per share.
Fair Valuation and Significant Events Procedures
The Trustees have ultimate responsibility for determining the fair value of investments for which market quotations are not readily available. The Trustees have appointed a valuation committee (“Valuation Committee”) comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to assist in determining fair value 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, methods, models 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.
Semi-Annual Shareholder Report
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 any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income securities and any 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 principally in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts; |
| ■ | Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; |
| ■ | Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, or a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry. |
The Trustees have adopted procedures whereby the Valuation Committee uses 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 in accordance with the fair valuation procedures approved by the Trustees. The Trustees have ultimate responsibility for any fair valuations made in response to a significant event.
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 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, 2015, 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, 2015, tax years 2011 through 2014 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.
Semi-Annual Shareholder Report
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, like other securities, are priced 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, 2015, is as follows:
| Security | Acquisition Date | Cost | Market Value |
| Compucom System, Inc., Series 144A, 7.00%, 5/1/2021 | 5/2/2013–2/9/2015 | $6,437,000 | $5,144,625 |
| FPL Energy National Wind, Note, Series 144A, 6.125%, 3/25/2019 | 2/16/2005–5/27/2009 | $77,867 | $85,924 |
| Hard Rock Park Operations LLC, Sr. Secd. Note, Series 144A, 7.40%, 4/1/2012 | 3/23/2006–1/2/2008 | $2,334,293 | $0 |
| Lone Pine Resources Canada Ltd. | 1/30/2014 | $0 | $0 |
| Lone Pine Resources, Inc., Escrow Shares | 1/30/2014 | $0 | $0 |
| Syniverse Holdings, Inc., Company Guarantee, 9.125%, 1/15/2019 | 12/16/2010–7/30/2014 | $9,711,750 | $8,031,375 |
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. The Fund applies Investment Company accounting and reporting guidance.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| | Six Months Ended
6/30/2015 | Year Ended
12/31/2014 |
| Shares sold | 12,344,477 | 111,273,463 |
| Shares issued to shareholders in payment of distributions declared | 1,659,587 | 5,377,318 |
| Shares redeemed | (10,534,238) | (58,605,829) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 3,469,826 | 58,044,952 |
4. FEDERAL TAX INFORMATION
At June 30, 2015, the cost of investments for federal tax purposes was $2,707,973,758. The net unrealized depreciation of investments for federal tax purposes was $21,336,386. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $47,573,046 and net unrealized depreciation from investments for those securities having an excess of cost over value of $68,909,432.
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 Fund pays operating expenses associated with the operation and maintenance of the Fund (excluding fees and expenses that may be charged by the Adviser and its affiliates). Although not contractually obligated to do so, the Adviser intends to initially voluntarily reimburse operating expenses (excluding extraordinary expenses and proxy-related expenses paid by the Fund, if any) such that the Fund will only bear such expenses in an amount of up to 0.15% of the Fund's average net assets. The Adviser can modify or terminate this voluntarily reimbursement at any time at its sole discretion.
Administrator
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. FAS does not charge the Fund a fee but is entitled to certain out-of-pocket expenses.
Interfund Transactions
During the six months ended June 30, 2015, the Fund engaged in purchase transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase transactions complied with Rule 17a-7 under the Act and amounted to $312,331.
Semi-Annual Shareholder Report
General
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
Transactions Involving Affiliated Holdings
Affiliated holdings are investment companies which are managed by the Adviser or an affiliate of the Adviser. Transactions involving the affiliated holding during the six months ended June 30, 2015, were as follows:
| | Federated
Prime Value
Obligations Fund,
Institutional
Shares |
| Balance of Shares Held 12/31/2014 | 38,813,882 |
| Purchases/Additions | 336,820,293 |
| Sales/Reductions | (321,616,522) |
| Balance of Shares Held 6/30/2015 | 54,017,653 |
| Value | $54,017,653 |
| Dividend Income | $17,649 |
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, 2015, were as follows:
| Purchases | $490,102,455 |
| Sales | $473,172,208 |
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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, 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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, the program was not utilized.
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 other service 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, 2015 to June 30, 2015.
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
1/1/2015 | Ending
Account Value
6/30/2015 | Expenses Paid
During Period1 |
| Actual | $1,000.00 | $1,031.30 | $0.10 |
| Hypothetical (assuming a 5% return before expenses) | $1,000.00 | $1,024.70 | $0.10 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.02%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half-year period).
|
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2015
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 2015 meetings the Fund's investment advisory contract for an additional one-year term. 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.
In this connection, 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 of scale exist, whether they have been shared with a fund and its shareholders or the family of funds; 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 of care, conscientiousness and independence with which the Board members perform their duties and their expertise, including whether they are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. The Board noted that SEC disclosure requirements regarding the basis for the Board's approval of the Fund's advisory contract generally track the factors listed above. Consistent with these judicial decisions and SEC disclosure requirements, the Board also considered management fees 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 also 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, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); 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
Semi-Annual Shareholder Report
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 range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
The Fund's ability to deliver competitive 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 was one of the Board's considerations 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 outperformed its benchmark index for the one-year period, outperformed its benchmark index for the three-period, and outperformed its benchmark index for the five-year period.
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 waived fees and/or reimbursed 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, adjustment or elimination of these voluntary waivers.
In addition, over the past two years, following discussions regarding the Senior Officer's recommendations, Federated made meaningful reductions to the contractual advisory fees for several Funds. At the Board meeting in May 2015, following previous recommendations of the Senior Officer, Federated proposed, and the Board approved, reductions in the contractual advisory fees of certain other Funds.
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 concluded that Federated's profit margins did not appear to be excessive. The Senior Officer also noted that Federated appeared financially sound, with the resources to fulfill its obligations under its contracts with the Funds.
The Senior Officer noted that, subject to the 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 were reasonable.
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 Report
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
Federated 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 (8/15)
Federated is a registered trademark of Federated Investors, Inc.
2015 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
June 30, 2015
Federated Mortgage Strategy Portfolio
A Portfolio of Federated Managed Pool Series
Not FDIC Insured • May Lose Value • No Bank Guarantee
CONTENTS
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| 4 |
| 5 |
| 6 |
| 7 |
| 11 |
| 12 |
| 12 |
| 13 |
| 17 |
| 18 |
| 19 |
| 20 |
| 21 |
| 25 |
| 26 |
| 28 |
| 28 |
Portfolio of Investments Summary Table (unaudited)
At June 30, 2015, the Fund's portfolio composition1 was as follows:
| Type of Investment | Percentage of
Total Net Assets2 |
| U.S. Government Agency Mortgage-Backed Securities | 77.5% |
| Non-Agency Mortgage-Backed Securities | 10.5% |
| Asset Backed Securities | 4.5% |
| Non-Agency Commercial Mortgage-Backed Securities | 1.7% |
| U.S. Government Agency Commercial Mortgage-Backed Securities | 2.7% |
| Derivative Contracts3,4 | 0.0% |
| Repurchase Agreements—Collateral5 | 18.1% |
| Cash Equivalents6 | 3.0% |
| Other Assets and Liabilities—Net7 | (18.0)% |
| 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 | 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 | Represent less than 0.1%. |
| 5 | Includes repurchase agreements purchased with proceeds received in dollar-roll transactions, as well as cash covering when-issued and delayed delivery transactions. |
| 6 | Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements. |
| 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, 2015 (unaudited)
Shares or
Principal
Amount | | | Value |
| | | INVESTMENT COMPANY—99.8% | |
| 6,991,202 | 1 | Federated Mortgage Core Portfolio
(IDENTIFIED COST $69,312,753) | $69,073,073 |
| | | REPURCHASE AGREEMENT—0.3% | |
| $178,000 | | Interest in $775,000,000 joint repurchase agreement 0.11%, dated 6/30/2015 under which Bank of America, N.A. will repurchase securities provided as collateral for $775,002,368 on 7/1/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to 8/1/2042 and the market value of those underlying securities was $790,502,416. (AT COST) | 178,000 |
| | | TOTAL INVESTMENTS—100.1%
(IDENTIFIED COST $69,490,753)2 | 69,251,073 |
| | | OTHER ASSETS AND LIABILITIES - NET—(0.1)%3 | (23,221) |
| | | TOTAL NET ASSETS—100% | $69,227,852 |
| 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, 2015.
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.
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, 2015, all investments of the Fund utilized Level 2 inputs in valuing the Fund's assets carried at fair value. Federated Mortgage Core Portfolio is an affiliated holding offered only to registered investment companies and other accredited investors. Investment in this fund is deemed Level 2 due to the fact that the net asset value (the NAV) is not publicly available.
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)
6/30/2015 | Year Ended December 31, |
| 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $10.07 | $9.81 | $10.31 | $10.31 | $10.17 | $10.16 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.14 | 0.31 | 0.29 | 0.32 | 0.40 | 0.49 |
| Net realized and unrealized gain (loss) on investments | (0.09) | 0.26 | (0.50) | (0.00)1 | 0.14 | 0.02 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.05 | 0.57 | (0.21) | 0.32 | 0.54 | 0.51 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.14) | (0.31) | (0.29) | (0.32) | (0.40) | (0.49) |
| Distributions from net realized gain on investments | — | — | — | (0.00)1 | (0.00)1 | (0.01) |
| TOTAL DISTRIBUTIONS | (0.14) | (0.31) | (0.29) | (0.32) | (0.40) | (0.50) |
| Net Asset Value, End of Period | $9.98 | $10.07 | $9.81 | $10.31 | $10.31 | $10.17 |
| Total Return2 | 0.52% | 5.85% | (2.09)% | 3.14% | 5.44% | 5.16% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses3 | 0.00%4 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Net investment income | 2.87%4 | 3.07% | 2.86% | 3.06% | 3.90% | 4.62% |
| Expense waiver/reimbursement5 | 0.27%4 | 0.33% | 0.33% | 0.56% | 0.89% | 2.97% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $69,228 | $68,304 | $51,429 | $52,770 | $39,232 | $25,000 |
| Portfolio turnover | 15% | 16% | 37% | 10% | 14% | 83% |
| 1 | Represents less than $0.01. |
| 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, 2015 (unaudited)
| Assets: | | |
| Total investment in securities, at value including $69,073,073 of investment in an affiliated holding (Note 5) (identified cost $69,490,753) | | $69,251,073 |
| Cash | | 359 |
| Receivable for investments sold | | 160,000 |
| Receivable for shares sold | | 52,950 |
| TOTAL ASSETS | | 69,464,382 |
| Liabilities: | | |
| Payable for shares redeemed | $51,177 | |
| Income distribution payable | 164,464 | |
| Payable to adviser (Note 5) | 1,129 | |
| Payable for auditing fees | 12,322 | |
| Accrued expenses (Note 5) | 7,438 | |
| TOTAL LIABILITIES | | 236,530 |
| Net assets for 6,933,517 shares outstanding | | $69,227,852 |
| Net Assets Consist of: | | |
| Paid-in capital | | $70,638,374 |
| Net unrealized depreciation of investments | | (239,680) |
| Accumulated net realized loss on investments | | (1,172,075) |
| Undistributed net investment income | | 1,233 |
| TOTAL NET ASSETS | | $69,227,852 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $69,227,852 ÷ 6,933,517 shares outstanding, no par value, unlimited shares authorized | | $9.98 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended June 30, 2015 (unaudited)
| Investment Income: | | |
| Dividends received from an affiliated holding (Note 5) | | $1,024,161 |
| Interest | | 78 |
| TOTAL INCOME | | 1,024,239 |
| Expenses: | | |
| Administrative fee (Note 5) | $27,918 | |
| Custodian fees | 3,781 | |
| Transfer agent fee | 3,793 | |
| Directors'/Trustees' fees (Note 5) | 1,084 | |
| Auditing fees | 12,323 | |
| Legal fees | 4,596 | |
| Portfolio accounting fees | 20,758 | |
| Share registration costs | 12,199 | |
| Printing and postage | 6,266 | |
| Miscellaneous (Note 5) | 4,112 | |
| TOTAL EXPENSES | 96,830 | |
| Reimbursement of other operating expenses (Note 5) | (96,830) | |
| Net expenses | | — |
| Net investment income | | 1,024,239 |
| Realized and Unrealized Loss on Investments: | | |
| Net realized loss on investments | | (197,724) |
| Net change in unrealized appreciation of investments | | (479,017) |
| Net realized and unrealized loss on investments | | (676,741) |
| Change in net assets resulting from operations | | $347,498 |
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)
6/30/2015 | Year Ended
12/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $1,024,239 | $1,817,327 |
| Net realized loss on investments | (197,724) | (323,484) |
| Net change in unrealized appreciation/depreciation of investments | (479,017) | 1,817,067 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 347,498 | 3,310,910 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (1,024,142) | (1,816,601) |
| Share Transactions: | | |
| Proceeds from sale of shares | 11,570,989 | 24,073,836 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 6,512 | 12,891 |
| Cost of shares redeemed | (9,976,967) | (8,705,576) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 1,600,534 | 15,381,151 |
| Change in net assets | 923,890 | 16,875,460 |
| Net Assets: | | |
| Beginning of period | 68,303,962 | 51,428,502 |
| End of period (including undistributed net investment income of $1,233 and $1,136, respectively) | $69,227,852 | $68,303,962 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
June 30, 2015 (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 six 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 or non-exchange-traded investment companies 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 and repurchase agreements 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), unless the issuer's creditworthiness is impaired or other factors indicate that amortized cost is not an accurate estimate of the investment's fair value, in which case it would be valued in the same manner as a longer-term security. |
| ■ | Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and asked quotations. |
| ■ | 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 last traded or purchase price of the security, information obtained by contacting the issuer or dealers, 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, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions. |
If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth in the Fund's valuation policies and procedures, 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 obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines its NAV per share.
Fair Valuation Procedures
The Trustees have ultimate responsibility for determining the fair value of investments for which market quotations are not readily available. The Trustees have appointed a valuation committee (“Valuation Committee”) comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to assist in determining fair value 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, methods, models 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 any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income securities and any 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
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.
Repurchase agreements are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
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, 2015, 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, 2015, tax years 2011 through 2014 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. The Fund applies Investment Company accounting and reporting guidance.
Semi-Annual Shareholder Report
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| | Six Months
Ended
6/30/2015 | Year Ended
12/31/2014 |
| Shares sold | 1,144,319 | 2,412,911 |
| Shares issued to shareholders in payment of distributions declared | 645 | 1,291 |
| Shares redeemed | (991,223) | (874,808) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 153,741 | 1,539,394 |
4. FEDERAL TAX INFORMATION
At June 30, 2015, the cost of investments for federal tax purposes was $69,490,753. The net unrealized depreciation of investments for federal tax purposes was $239,680. This consists entirely of net unrealized depreciation from investments for those securities having an excess of cost over value of $239,680.
At December 31, 2014, the Fund had a capital loss carryforward of $13,895 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.
The following schedule summarizes the Fund's capital loss carryforwards:
| Short-Term | Long-Term | Total |
| $— | $13,895 | $13,895 |
All of the Fund's capital loss carryforwards were incurred in taxable years beginning after December 22, 2010.
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 free programs, who often pay a single aggregate fee to the wrap program sponsor for all costs and expenses of the wrap-free 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, 2015, the Adviser reimbursed $96,830 of other operating expense.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Daily Net Assets
of the Investment Complex |
| 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 |
For the six months ended June 30, 2015, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund. For the six months ended June 30, 2015, 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 certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
Semi-Annual Shareholder Report
Transactions Involving Affiliated Holdings
Affiliated holdings are investment companies which are managed by the Adviser or an affiliate of the Adviser. Transactions involving the affiliated holding during the six months ended June 30, 2015, were as follows:
| | Federated
Mortgage
Core Portfolio |
| Balance of Shares Held 12/31/2014 | 6,838,079 |
| Purchases/Additions | 1,238,889 |
| Sales/Reductions | (1,085,766) |
| Balance of Shares Held 6/30/2015 | 6,991,202 |
| Value | $69,073,073 |
| Dividend Income | $1,024,161 |
The Fund invests in the 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 99.8% of its net assets at June 30, 2015. The financial statements of Mortgage Core should be read in conjunction with the Fund's financial statements. The valuation of securities held by the 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, 2015, were as follows:
| Purchases | $12,390,179 |
| Sales | $10,820,000 |
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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, 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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, the program was not utilized.
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 other service 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, 2015 to June 30, 2015.
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
1/1/2015 | Ending
Account Value
6/30/2015 | Expenses Paid
During Period1 |
| Actual | $1,000.00 | $1,005.20 | $0.00 |
| Hypothetical (assuming a 5% return before expenses) | $1,000.00 | $1,024.79 | $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 181/365 (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 agreement has no fixed term.
|
Semi-Annual Shareholder Report
Portfolio of Investments Summary Table (unaudited)–Federated Mortgage Core Portfolio
At June 30, 2015, the Fund's portfolio composition1 was as follows:
| Type of Investment | Percentage of
Total Net Assets |
| U.S. Government Agency Mortgage-Backed Securities | 77.5% |
| Non-Agency Mortgage-Backed Securities | 10.5% |
| Asset-Backed Securities | 4.5% |
| U.S. Government Agency Commercial Mortgage-Backed Securities | 2.9% |
| Non-Agency Commercial Mortgage-Backed Securities | 1.8% |
| Derivative Contracts2,3 | 0.0% |
| Cash Equivalent4 | 2.7% |
| Repurchase Agreements—Collateral5 | 18.2% |
| Other Assets and Liabilities—Net6 | (18.1)% |
| TOTAL | 100.0% |
| 1 | See the Fund's Private Offering Memorandum for a description of the principal types of securities in which the Fund invests. |
| 2 | 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. |
| 3 | Represent less than 0.1%. |
| 4 | Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements other than those representing dollar-roll collateral. |
| 5 | Includes repurchase agreements purchased with cash collateral received in dollar-roll transactions, as well as cash covering when-issued and delayed-delivery transactions. |
| 6 | 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, 2015 (unaudited)
Principal
Amount | | | Value |
| | | ADJUSTABLE RATE MORTGAGE—0.9% | |
| | | Federal National Mortgage Association ARM—0.9% | |
| $16,905,689 | | 3.038%, 1/1/2044
(IDENTIFIED COST $17,389,086) | $17,485,464 |
| | | ASSET-BACKED SECURITIES—4.5% | |
| | | Auto Receivables—3.9% | |
| 12,960,000 | | AmeriCredit Automobile Receivables Trust 2015-2, Class D, 3.000%, 6/8/2021 | 12,936,365 |
| 13,322,000 | | Capital Auto Receivables Asset Trust 2015-2, Class D, 3.160%, 11/20/2020 | 13,345,361 |
| 19,940,000 | | Santander Drive Auto Receivables Trust 2015-1, Class D, 3.240%, 4/15/2021 | 20,132,798 |
| 18,140,000 | | Santander Drive Auto Receivables Trust 2015-2, Class D, 3.020%, 4/15/2021 | 18,090,150 |
| 14,580,000 | | Santander Drive Auto Receivables Trust 2015-3, Class D, 3.490%, 5/17/2021 | 14,604,784 |
| | | TOTAL | 79,109,458 |
| | | Single Family Rental Securities—0.6% | |
| 11,300,000 | 1,2 | Invitation Homes Trust 2014-SFR1, Class C, 2.285%, 6/17/2031 | 11,295,680 |
| | | TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $90,261,943) | 90,405,138 |
| | | COMMERCIAL MORTGAGE-BACKED SECURITIES—4.7% | |
| | | Agency Commercial Mortgage-Backed Securities—2.9% | |
| 12,475,000 | 1,2 | FREMF Mortgage Trust 2013-K712, 3.484%, 5/25/2045 | 12,670,068 |
| 7,000,000 | 1,2 | FREMF Mortgage Trust 2014-K714, 3.987%, 1/25/2047 | 7,229,936 |
| 14,180,000 | 1,2 | FREMF Mortgage Trust 2014-K717, 3.754%, 11/25/2047 | 14,324,096 |
| 24,000,000 | | FNMA REMIC 2015-M4 AV2, 2.509%, 7/25/2022 | 24,113,856 |
| | | TOTAL | 58,337,956 |
| | | Non-Agency Commercial Mortgage-Backed Securities—1.8% | |
| 22,300,000 | 1,2 | UBS-Barclays Commercial Mortgage Trust 2013-C6, Class A3FL, 0.975%, 4/10/2046 | 22,259,499 |
| 12,500,000 | 1,2 | Wells Fargo Commercial Mortgage Trust 2013-LC12, Class A3FL, 1.235%, 7/15/2046 | 12,546,181 |
| | | TOTAL | 34,805,680 |
| | | TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $92,733,455) | 93,143,636 |
| | | COLLATERALIZED MORTGAGE OBLIGATIONS—11.5% | |
| | | Government National Mortgage Association—1.0% | |
| 19,493,105 | | REMIC 2013-H20 FA, 0.782%, 8/20/2063 | 19,617,081 |
| | | Non-Agency Mortgage-Backed Securities—10.5% | |
| 1,020,531 | | Chase Mortgage Finance Corp. 2004-S3, Class 1A1, 5.000%, 3/25/2034 | 1,005,631 |
| 2,053,039 | | Countrywide Home Loans 2005-21, Class A2, 5.500%, 10/25/2035 | 1,993,405 |
| 3,473,971 | | Countrywide Home Loans 2007-14, Class A18, 6.000%, 9/25/2037 | 3,172,819 |
| 954,920 | | Credit Suisse Mortgage Trust 2007-4, Class 4A2, 5.500%, 6/25/2037 | 789,256 |
| 6,549,119 | 1,2 | Credit Suisse Mortgage Trust 2012-CIM2, Class A1, 3.000%, 6/25/2042 | 6,552,128 |
| 23,770,461 | 1,2 | Credit Suisse Mortgage Trust 2013-IVR3, Class A2, 3.000%, 5/25/2043 | 23,150,623 |
| 20,189,617 | 1,2 | Credit Suisse Mortgage Trust 2013-TH1, Class A1, 2.130%, 2/25/2043 | 18,604,930 |
| 7,890,065 | 1,2 | Credit Suisse Mortgage Trust 2014-WIN2, Class A2, 3.500%, 10/25/2044 | 7,985,525 |
| 15,468,168 | 1,2 | Credit Suisse Mortgage Trust 2015-WIN1, Class A6, 3.500%, 12/25/2044 | 15,609,343 |
| 2,680,709 | | Lehman Mortgage Trust 2007-9, Class 1A1, 6.000%, 10/25/2037 | 2,501,145 |
| 1,556,112 | | Residential Funding Mortgage Securities I 2005-SA3, Class 3A, 2.780%, 8/25/2035 | 1,418,405 |
| 781,478 | | Sequoia Mortgage Trust 2011-1, Class A1, 4.125%, 2/25/2041 | 780,376 |
| 6,478,175 | | Sequoia Mortgage Trust 2012-1, Class 2A1, 3.474%, 1/25/2042 | 6,510,611 |
| 17,062,713 | | Sequoia Mortgage Trust 2012-6, Class A2, 1.808%, 12/25/2042 | 15,475,986 |
| 16,119,576 | | Sequoia Mortgage Trust 2013-1, Class 2A1, 1.855%, 2/25/2043 | 14,542,975 |
| 27,717,096 | | Sequoia Mortgage Trust 2013-2, Class A, 1.874%, 2/25/2043 | 25,322,442 |
| 18,312,497 | | Sequoia Mortgage Trust 2013-6, Class A2, 3.000%, 5/25/2043 | 18,002,637 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | COLLATERALIZED MORTGAGE OBLIGATIONS—continued | |
| | | Non-Agency Mortgage-Backed Securities—continued | |
| $7,492,054 | 1,2 | Sequoia Mortgage Trust 2014-1, Class 2A5, 4.000%, 4/25/2044 | $7,722,570 |
| 21,740,141 | 1,2 | Sequoia Mortgage Trust 2014-4, Class A5, 3.500%, 11/25/2044 | 21,932,671 |
| 12,150,000 | 1 | Springleaf Mortgage Loan Trust 2012-3A, Class M1, 2.660%, 12/25/2059 | 12,351,047 |
| 5,116,489 | | Structured Asset Securities Corp. 2005-17, Class 5A1, 5.500%, 10/25/2035 | 4,458,890 |
| | | TOTAL | 209,883,415 |
| | | TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $239,025,555) | 229,500,496 |
| | | MORTGAGE-BACKED SECURITIES—75.6% | |
| | | Federal Home Loan Mortgage Corporation—18.9% | |
| 35,000,000 | 3 | 2.500%, 7/1/2030 | 35,358,204 |
| 42,522,319 | | 3.000%, 3/1/2045 | 42,223,336 |
| 85,452,691 | 3 | 3.500%, 6/1/2026 - 7/1/2045 | 88,046,099 |
| 71,830,314 | 3 | 4.000%, 2/1/2020 - 7/1/2045 | 76,275,233 |
| 61,668,664 | | 4.500%, 6/1/2019 - 7/1/2041 | 66,574,464 |
| 40,849,588 | | 5.000%, 7/1/2019 - 5/1/2041 | 44,954,282 |
| 15,067,155 | | 5.500%, 3/1/2021 - 5/1/2040 | 16,780,518 |
| 1,553,287 | | 6.000%, 7/1/2029 - 9/1/2037 | 1,770,276 |
| 2,507,937 | | 6.500%, 9/1/2016 - 4/1/2038 | 2,885,419 |
| 631,667 | | 7.000%, 10/1/2020 - 9/1/2037 | 737,859 |
| 222,662 | | 7.500%, 8/1/2029 - 5/1/2031 | 265,067 |
| 264,817 | | 8.000%, 3/1/2030 - 3/1/2031 | 320,842 |
| 6,574 | | 8.500%, 9/1/2025 | 7,857 |
| 171 | | 9.500%, 4/1/2021 | 184 |
| | | TOTAL | 376,199,640 |
| | | Federal National Mortgage Association—42.5% | |
| 59,621,495 | 3 | 2.500%, 1/1/2030 - 7/1/2030 | 60,304,911 |
| 87,088,676 | 3 | 3.000%, 10/1/2027 - 9/1/2043 | 89,139,987 |
| 268,136,993 | 3 | 3.500%, 11/1/2025 - 7/1/2045 | 276,976,877 |
| 214,205,386 | 3 | 4.000%, 12/1/2025 - 7/1/2045 | 227,998,357 |
| 111,697,652 | | 4.500%, 12/1/2019 - 6/1/2044 | 121,213,420 |
| 29,676,585 | | 5.000%, 5/1/2023 - 10/1/2041 | 32,853,959 |
| 18,478,638 | | 5.500%, 4/1/2016 - 4/1/2041 | 20,805,613 |
| 10,936,117 | | 6.000%, 5/1/2016 - 2/1/2039 | 12,511,386 |
| 3,131,542 | | 6.500%, 11/1/2016 - 10/1/2038 | 3,614,617 |
| 2,417,821 | | 7.000%, 1/1/2016 - 6/1/2037 | 2,823,871 |
| 305,176 | | 7.500%, 12/1/2015 - 6/1/2033 | 359,315 |
| 53,120 | | 8.000%, 7/1/2023 - 3/1/2031 | 63,508 |
| 2,045 | | 9.000%, 11/1/2021 - 6/1/2025 | 2,344 |
| | | TOTAL | 848,668,165 |
| | | Government National Mortgage Association—14.2% | |
| 129,005,217 | 3 | 3.500%, 12/15/2040 - 7/20/2045 | 133,684,237 |
| 70,451,497 | | 4.000%, 9/15/2040 - 12/20/2044 | 74,793,845 |
| 37,559,866 | | 4.500%, 1/15/2039 - 11/15/2043 | 40,818,886 |
| 24,841,771 | | 5.000%, 1/15/2039 - 7/15/2040 | 27,614,574 |
| 3,706,328 | | 5.500%, 12/15/2038 - 2/15/2039 | 4,188,293 |
| 1,239,984 | | 6.000%, 10/15/2028 - 6/15/2037 | 1,416,857 |
| 285,248 | | 6.500%, 10/15/2028 - 2/15/2032 | 331,810 |
| 552,077 | | 7.000%, 11/15/2027 - 12/15/2031 | 649,355 |
| 181,436 | | 7.500%, 7/15/2029 - 1/15/2031 | 217,813 |
| 276,384 | | 8.000%, 1/15/2022 - 11/15/2030 | 333,194 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | MORTGAGE-BACKED SECURITIES—continued | |
| | | Government National Mortgage Association—continued | |
| $13,360 | | 8.500%, 3/15/2022 - 9/15/2029 | $15,351 |
| 1,203 | | 9.500%, 10/15/2020 | 1,387 |
| | | TOTAL | 284,065,602 |
| | | TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $1,480,554,508) | 1,508,933,407 |
| | | REPURCHASE AGREEMENTS—20.9% | |
| 55,321,000 | | Interest in $775,000,000 joint repurchase agreement 0.11%, dated 6/30/2015 under which Bank of America, N.A. will repurchase securities provided as collateral for $775,002,368 on 7/1/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to 8/1/2042 and the market value of those underlying securities was $790,502,416. | 55,321,000 |
| 149,208,000 | 4,5 | Interest in $300,000,000 joint repurchase agreement 0.10%, dated 6/11/2015 under which RBC Capital Markets, LLC will repurchase securities provided as collateral for $300,027,500 on 7/14/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to 10/16/2055 and the market value of those underlying securities was $308,955,743. | 149,208,000 |
| 112,182,000 | 4,5 | Interest in $122,273,000 joint repurchase agreement 0.10%, dated 6/18/2015 under which Royal Bank of Scotland will repurchase securities provided as collateral for $122,283,869 on 7/20/2015. These securities provided as collateral at the end of the period held with JPMorgan Chase as tri-party agent, were U.S. Treasury securities maturing on 4/15/2019 and the market value of those underlying securities was $124,725,660. | 112,182,000 |
| 101,609,000 | 4,5 | Repurchase agreement 0.11%, dated 6/16/2015 under which Royal Bank of Scotland will repurchase securities provided as collateral for $101,618,314 on 7/16/2015. The securities provided as collateral at the end of the period held with JPMorgan Chase as tri-party agent, were U.S. Treasury securities maturing on 4/15/2019 and the market value of those underlying securities was $103,646,707. | 101,609,000 |
| | | TOTAL REPURCHASE AGREEMENTS
(AT COST) | 418,320,000 |
| | | TOTAL INVESTMENTS—118.1%
(IDENTIFIED COST $2,338,284,547)6 | 2,357,788,141 |
| | | OTHER ASSETS AND LIABILITIES - NET—(18.1)%7 | (361,329,554) |
| | | TOTAL NET ASSETS—100% | $1,996,458,587 |
At June 30, 2015, the Fund had the following outstanding futures contracts:
| Description | Number of
Contracts | Notional
Value | Expiration
Date | Unrealized
Appreciation |
| 8U.S. Treasury Notes 10-Year Futures Short | 120 | $15,140,625 | September 2015 | $58,782 |
Unrealized Appreciation 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, 2015, these restricted securities amounted to $194,234,297, which represented 9.7% 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, 2015, these liquid restricted securities amounted to $181,883,250, which represented 9.1% of total net assets. |
| 3 | All or a portion of these To Be Announced Securities (TBAs) are subject to dollar-roll transactions. |
| 4 | All or a portion of these securities are segregated pending settlement of dollar-roll transactions. |
| 5 | 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. |
| 6 | The cost of investments for federal tax purposes amounts to $2,338,963,440. |
| 7 | Assets, other than investments in securities, less liabilities. A significant portion of this balance is the result of dollar-roll transactions as of June 30, 2015. |
| 8 | Non-income-producing security. |
Note: The categories of investments are shown as a percentage of total net assets at June 30, 2015.
Semi-Annual Shareholder Report
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.
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, 2015, in valuing the Fund's assets carried at fair value:
| Valuation Inputs | | | | |
| | Level 1—
Quoted
Prices | Level 2—
Other
Significant
Observable
Inputs | Level 3—
Significant
Unobservable
Inputs | Total |
| Debt Securities: | | | | |
| Adjustable Rate Mortgage | $— | $17,485,464 | $— | $17,485,464 |
| Asset-Backed Securities | — | 90,405,138 | — | 90,405,138 |
| Commercial Mortgage-Backed Securities | — | 93,143,636 | — | 93,143,636 |
| Collateralized Mortgage Obligations | | 229,500,496 | | 229,500,496 |
| Mortgage-Backed Securities | — | 1,508,933,407 | — | 1,508,933,407 |
| Repurchase Agreements | — | 418,320,000 | — | 418,320,000 |
| TOTAL SECURITIES | $— | $2,357,788,141 | $— | $2,357,788,141 |
| OTHER FINANCIAL INSTRUMENTS* | $58,782 | $— | $— | $58,782 |
| * | Other financial instruments include futures contracts. |
The following acronym is used throughout this portfolio:
| 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)
6/30/2015 | Year Ended December 31, |
| 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $9.97 | $9.71 | $10.20 | $10.20 | $10.06 | $10.05 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.121 | 0.271 | 0.241 | 0.261 | 0.331 | 0.441 |
| Net realized and unrealized gain (loss) on investments and futures contracts | (0.07) | 0.29 | (0.45) | 0.06 | 0.21 | 0.06 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.05 | 0.56 | (0.21) | 0.32 | 0.54 | 0.50 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.14) | (0.30) | (0.28) | (0.32) | (0.40) | (0.49) |
| Net Asset Value, End of Period | $9.88 | $9.97 | $9.71 | $10.20 | $10.20 | $10.06 |
| Total Return2 | 0.52% | 5.89% | (2.04)% | 3.14% | 5.45% | 5.04% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 0.03%3 | 0.02% | 0.00%4 | 0.00%4 | 0.00%4 | 0.00%4 |
| Net investment income | 2.34%3 | 2.74% | 2.41% | 2.59% | 3.25% | 4.37% |
| Expense waiver/reimbursement5 | 0.00%3 | 0.01% | 0.03% | 0.08% | 0.10% | 0.10% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $1,996,459 | $1,864,143 | $1,399,693 | $2,480,305 | $3,165,802 | $1,959,812 |
| Portfolio turnover | 161% | 179% | 200% | 257% | 226% | 176% |
| Portfolio turnover (excluding purchases and sales from dollar-roll transactions) | 30% | 40% | 67% | 71% | 52% | 60% |
| 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 had voluntarily agreed to reimburse all operating expenses incurred by the Fund. |
| 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, 2015 (unaudited)
| Assets: | | |
| Investment in repurchase agreements | $418,320,000 | |
| Investment in securities | 1,939,468,141 | |
| Total investment in securities, at value (Note 5) (identified cost $2,338,284,547) | | $2,357,788,141 |
| Cash | | 743,270 |
| Restricted cash (Note 2) | | 295,000 |
| Income receivable | | 5,053,044 |
| Receivable for daily variation margin | | 3,755 |
| TOTAL ASSETS | | 2,363,883,210 |
| Liabilities: | | |
| Payable for investments purchased | 362,906,486 | |
| Payable for shares redeemed | 160,000 | |
| Income distribution payable | 4,271,621 | |
| Payable for Directors'/Trustees' fees (Note 5) | 480 | |
| Accrued expenses (Note 5) | 86,036 | |
| TOTAL LIABILITIES | | 367,424,623 |
| Net assets for 201,995,241 shares outstanding | | $1,996,458,587 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,012,739,702 |
| Net unrealized appreciation of investments and futures contracts | | 19,562,376 |
| Accumulated net realized loss on investments and futures contracts | | (30,602,497) |
| Distributions in excess of net investment income | | (5,240,994) |
| TOTAL NET ASSETS | | $1,996,458,587 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $1,996,458,587 ÷ 201,995,241 shares outstanding, no par value, unlimited shares authorized | | $9.88 |
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, 2015 (unaudited)
| Investment Income: | | |
| Interest | | $24,480,335 |
| Expenses: | | |
| Custodian fees | $45,523 | |
| Transfer agent fee | 80,103 | |
| Directors'/Trustees' fees (Note 5) | 4,556 | |
| Auditing fees | 14,132 | |
| Legal fees | 4,631 | |
| Portfolio accounting fees | 112,668 | |
| Printing and postage | 4,088 | |
| Miscellaneous (Note 5) | 5,594 | |
| TOTAL EXPENSES | 271,295 | |
| Net investment income | | 24,209,040 |
| Realized and Unrealized Gain (Loss) on Investments and Futures Contracts: | | |
| Net realized gain on investments | | 3,862,529 |
| Net realized loss on futures contracts | | (1,783,124) |
| Net change in unrealized appreciation of investments | | (15,367,542) |
| Net change in unrealized depreciation of futures contracts | | 295,642 |
| Net realized and unrealized loss on investments and futures contracts | | (12,992,495) |
| Change in net assets resulting from operations | | $11,216,545 |
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)
6/30/2015 | Year Ended
12/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $24,209,040 | $43,661,707 |
| Net realized gain on investments and futures contracts | 2,079,405 | 4,479,732 |
| Net change in unrealized appreciation/depreciation of investments and futures contracts | (15,071,900) | 40,297,257 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 11,216,545 | 88,438,696 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (29,788,028) | (48,935,477) |
| Share Transactions: | | |
| Proceeds from sale of shares | 440,841,670 | 647,181,016 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 2,750,977 | 5,058,354 |
| Cost of shares redeemed | (292,706,009) | (227,291,841) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 150,886,638 | 424,947,529 |
| Change in net assets | 132,315,155 | 464,450,748 |
| Net Assets: | | |
| Beginning of period | 1,864,143,432 | 1,399,692,684 |
| End of period (including undistributed (distributions in excess of) net investment income of $(5,240,994) and $337,994, respectively) | $1,996,458,587 | $1,864,143,432 |
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, 2015 (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 three 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 Trustees. |
| ■ | Fixed-income securities and repurchase agreements 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), unless the issuer's creditworthiness is impaired or other factors indicate that amortized cost is not an accurate estimate of the investment's fair value, in which case it would be valued in the same manner as a longer-term security. |
| ■ | Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs. |
| ■ | Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and asked quotations. |
| ■ | 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 last traded or purchase price of the security, information obtained by contacting the issuer or dealers, 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, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions. |
If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth in the Fund's valuation policies and procedures, 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 obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines its NAV per share.
Fair Valuation Procedures
The Trustees have ultimate responsibility for determining the fair value of investments for which market quotations are not readily available. The Trustees have appointed a valuation committee (“Valuation Committee”) comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to assist in determining fair value 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, methods, models 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 any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income securities and any 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
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.
Repurchase agreements are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
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, 2015, 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, 2015, tax years 2011 through 2014 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.
Futures Contracts
The Fund purchases and sells financial futures contracts to manage duration and yield curve risk. 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 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.
Semi-Annual Shareholder Report
The average notional value of short futures contracts held by the Fund throughout the period was $121,263,985. This is based on amounts held as of each month-end throughout the six-month fiscal 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, like other securities, are priced 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, 2015, is as follows:
| Security | Acquisition Date | Cost | Market Value |
| Springleaf Mortgage Loan Trust 2012-3A, Class M1, 2.660%, 12/25/2059 | 10/18/2012 | $12,144,992 | $ 12,351,047 |
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 | $58,782* |
| * | Includes cumulative appreciation 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, 2015
| Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
| | Futures |
| Interest rate contracts | $(1,783,124) |
| Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
| | Futures |
| Interest rate contracts | $295,642 |
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. The Fund applies Investment Company accounting and reporting guidance.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| | Six Months
Ended
6/30/2015 | Year Ended
12/31/2014 |
| Shares sold | 44,026,518 | 65,400,945 |
| Shares issued to shareholders in payment of distributions declared | 275,333 | 511,653 |
| Shares redeemed | (29,239,319) | (23,066,141) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 15,062,532 | 42,846,457 |
Semi-Annual Shareholder Report
4. FEDERAL TAX INFORMATION
At June 30, 2015, the cost of investments for federal tax purposes was $2,338,963,440. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation resulting from futures contracts was $18,824,701. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $36,172,057 and net unrealized depreciation from investments for those securities having an excess of cost over value of $17,347,356.
At December 31, 2014, the Fund had a capital loss carryforward of $38,804,459 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 |
| No Expiration | $24,253,044 | $3,273,807 | $27,526,851 |
| 2017 | $11,277,608 | NA | $11,277,608 |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The Adviser, subject to 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. Effective June 1, 2014, the Fund pays operating expenses associated with the operation and maintenance of the Fund (excluding fees and expenses that may be charged by the Adviser and its affiliates). Although not contractually obligated to do so, the Adviser intends to voluntarily reimburse operating expenses (excluding extraordinary expenses and proxy related expenses paid by the Fund, if any) such that the Fund will only bear such expenses in an amount of up to 0.15% of the Fund's average net assets. The Adviser can modify or terminate this voluntary reimbursement at any time at its sole discretion.
Administrator
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. FAS does not charge the Fund a fee but is entitled to certain out-of-pocket expenses.
General
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities, short-term obligations and dollar-roll transactions, for the six months ended June 30, 2015, were as follows:
| Purchases | $135,217,419 |
| Sales | $80,620,616 |
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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, 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, 2015, there were no outstanding loans. During the six months ended June 30, 2015, the program was not utilized.
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 other service 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, 2015 to June 30, 2015.
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
1/1/2015 | Ending
Account Value
6/30/2015 | Expenses Paid
During Period1 |
| Actual | $1,000.00 | $1,005.20 | $0.15 |
| Hypothetical (assuming a 5% return before expenses) | $1,000.00 | $1,024.65 | $0.15 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.03%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half-year period).
|
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2015
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 2015 meetings the Fund's investment advisory contract for an additional one-year term. 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.
In this connection, 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 of scale exist, whether they have been shared with a fund and its shareholders or the family of funds; 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 of care, conscientiousness and independence with which the Board members perform their duties and their expertise, including whether they are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. The Board noted that SEC disclosure requirements regarding the basis for the Board's approval of the Fund's advisory contract generally track the factors listed above. Consistent with these judicial decisions and SEC disclosure requirements, the Board also considered management fees 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 also 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, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); 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
Semi-Annual Shareholder Report
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 range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
The Fund's ability to deliver competitive 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 was one of the Board's considerations 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, underperformed its benchmark index for the three-year period and underperformed its benchmark index for the 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 performance of the Fund in the context of the other factors considered relevant by the Board.
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 waived fees and/or reimbursed 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, adjustment or elimination of these voluntary waivers.
In addition, over the past two years, following discussions regarding the Senior Officer's recommendations, Federated made meaningful reductions to the contractual advisory fees for several Funds. At the Board meeting in May 2015, following previous recommendations of the Senior Officer, Federated proposed, and the Board approved, reductions in the contractual advisory fees of certain other Funds.
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 concluded that Federated's profit margins did not appear to be excessive. The Senior Officer also noted that Federated appeared financially sound, with the resources to fulfill its obligations under its contracts with the Funds.
The Senior Officer noted that, subject to the 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 were reasonable.
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 Report
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
Federated 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 (8/15)
Federated is a registered trademark of Federated Investors, Inc.
2015 ©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
No Changes to Report
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
(a)(1) Code of Ethics- Not Applicable to this 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/ Lori A. Hensler
Lori A. Hensler
Principal Financial Officer
Date August 25, 2015
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 25, 2015
By /S/ Lori A. Hensler
Lori A. Hensler
Principal Financial Officer
Date August 25, 2015
