United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of Registered Management Investment Companies
811-21904
(Investment Company Act File Number)
Federated MDT 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: 07/31/16
Date of Reporting Period: Six months ended 01/31/16
Item 1. Reports to Stockholders
Semi-Annual Shareholder Report
January 31, 2016
| Share Class | Ticker |
| A | QAACX |
| C | QCACX |
| R | QKACX |
| Institutional | QIACX |
Federated MDT All Cap Core Fund
Fund Established 2002
A Portfolio of Federated MDT Series
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from August 1, 2015 through January 31, 2016. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
Not FDIC Insured • May Lose Value • No Bank Guarantee
Portfolio of Investments Summary Table (unaudited)
At January 31, 2016, the Fund's industry composition1 was as follows:
| Industry Composition | Percentage of
Total Net Assets |
| Internet Services | 4.8% |
| Department Stores | 4.7% |
| Oil Refiner | 4.7% |
| Money Center Bank | 3.9% |
| Property Liability Insurance | 3.8% |
| Services to Medical Professionals | 3.5% |
| Biotechnology | 3.3% |
| Life Insurance | 3.3% |
| Regional Banks | 3.3% |
| Medical Supplies | 3.2% |
| AT&T Divestiture | 2.7% |
| Computers—Low End | 2.7% |
| Computers—High End | 2.4% |
| Software Packaged/Custom | 2.4% |
| Ethical Drugs | 2.3% |
| Commodity Chemicals | 2.1% |
| Grocery Chain | 2.1% |
| Electric Utility | 2.0% |
| Computers—Midrange | 1.9% |
| Computer Stores | 1.7% |
| Specialty Retailing | 1.7% |
| Airline—Regional | 1.6% |
| Diversified Tobacco | 1.6% |
| Construction Machinery | 1.4% |
| Hospitals | 1.4% |
| Soft Drinks | 1.4% |
| Cable TV | 1.2% |
| Airline—National | 1.1% |
| Semiconductor Distribution | 1.1% |
| Telephone Utility | 1.1% |
| Auto Original Equipment Manufacturers | 1.0% |
| Clothing Stores | 1.0% |
| Multi-Line Insurance | 1.0% |
| Personal Loans | 1.0% |
| Other2 | 19.8% |
Semi-Annual Shareholder Report
| Industry Composition | Percentage of
Total Net Assets |
| Cash Equivalents3 | 1.7% |
| Other Assets and Liabilities—Net4 | 0.1% |
| TOTAL | 100.0% |
| 1 | Except for Cash Equivalents and Other Assets and Liabilities, industry classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS. |
| 2 | For purposes of this table, industry classifications which constitute less than 1.0% 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
January 31, 2016 (unaudited)
| Shares | | | Value |
| | | COMMON STOCKS—98.2% | |
| | | Agricultural Chemicals—0.7% | |
| 9,000 | | Bunge Ltd. | $558,090 |
| 13,993 | | Mosaic Co./The | 337,231 |
| | | TOTAL | 895,321 |
| | | Agricultural Machinery—0.3% | |
| 9,100 | | AGCO Corp. | 443,807 |
| | | Airline - National—1.1% | |
| 4,639 | 1 | Atlas Air Worldwide Holdings, Inc. | 170,391 |
| 21,800 | 1 | Jet Blue Airways Corp. | 464,558 |
| 17,100 | 1 | United Continental Holdings, Inc. | 825,588 |
| | | TOTAL | 1,460,537 |
| | | Airline - Regional—1.6% | |
| 10,759 | | Alaska Air Group, Inc. | 757,433 |
| 39,085 | | Southwest Airlines Co. | 1,470,378 |
| | | TOTAL | 2,227,811 |
| | | Airlines—0.4% | |
| 2,963 | | Copa Holdings SA, Class A | 139,557 |
| 10,479 | | Delta Air Lines, Inc. | 464,115 |
| | | TOTAL | 603,672 |
| | | Apparel—0.4% | |
| 4,466 | 1 | Iconix Brand Group, Inc. | 29,654 |
| 7,800 | | PVH Corp. | 572,364 |
| | | TOTAL | 602,018 |
| | | AT&T Divestiture—2.7% | |
| 71,971 | | Verizon Communications, Inc. | 3,596,391 |
| | | Auto Manufacturing—0.7% | |
| 35,900 | | Ford Motor Co. | 428,646 |
| 17,386 | | General Motors Co. | 515,321 |
| | | TOTAL | 943,967 |
| | | Auto Original Equipment Manufacturers—1.0% | |
| 5,500 | | Lear Corp. | 571,065 |
| 2,869 | 1 | O'Reilly Automotive, Inc. | 748,522 |
| | | TOTAL | 1,319,587 |
| | | Auto Rentals—0.2% | |
| 7,800 | 1 | Avis Budget Group, Inc. | 204,906 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Biotechnology—3.3% | |
| 16,691 | | Amgen, Inc. | $2,549,216 |
| 22,636 | | Gilead Sciences, Inc. | 1,878,788 |
| 3,045 | 1 | Repligen Corp. | 67,447 |
| | | TOTAL | 4,495,451 |
| | | Cable TV—1.2% | |
| 36,984 | | Viacom, Inc., Class B | 1,687,950 |
| | | Capital Markets—0.3% | |
| 11,629 | | Bank of New York Mellon Corp. | 421,202 |
| | | Clothing Stores—1.0% | |
| 9,671 | 1 | Fossil, Inc. | 315,275 |
| 33,449 | | Gap (The), Inc. | 826,859 |
| 3,816 | 1 | Michael Kors Holdings Ltd. | 152,258 |
| | | TOTAL | 1,294,392 |
| | | Commodity Chemicals—2.1% | |
| 36,950 | | LyondellBasell Investment LLC, Class A | 2,880,992 |
| | | Communications Equipment—0.2% | |
| 1,780 | 1 | Palo Alto Networks, Inc. | 266,092 |
| | | Computer Networking—0.6% | |
| 31,818 | | Juniper Networks, Inc. | 750,905 |
| | | Computer Peripherals—0.3% | |
| 19,800 | | NetApp, Inc. | 434,214 |
| | | Computer Services—0.2% | |
| 3,888 | 1 | Salesforce.com, Inc. | 264,617 |
| | | Computer Stores—1.7% | |
| 10,800 | | GameStop Corp. | 283,068 |
| 42,649 | | Ingram Micro, Inc., Class A | 1,202,702 |
| 13,862 | 1 | Tech Data Corp. | 864,989 |
| | | TOTAL | 2,350,759 |
| | | Computers - High End—2.4% | |
| 25,751 | | IBM Corp. | 3,213,467 |
| | | Computers - Low End—2.7% | |
| 37,001 | | Apple, Inc. | 3,601,677 |
| | | Computers - Midrange—1.9% | |
| 270,378 | 1 | Hewlett-Packard Co. | 2,625,370 |
| | | Construction Machinery—1.4% | |
| 5,920 | | Caterpillar, Inc. | 368,461 |
| 81,239 | | Joy Global, Inc. | 809,953 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Construction Machinery—continued | |
| 35,600 | | Trinity Industries, Inc. | $762,552 |
| | | TOTAL | 1,940,966 |
| | | Consumer Finance—0.2% | |
| 25,900 | | Navient Corp. | 247,604 |
| | | Contracting—0.2% | |
| 8,300 | 1 | Jacobs Engineering Group, Inc. | 325,609 |
| | | Cosmetics & Toiletries—0.3% | |
| 21,400 | | Avon Products, Inc. | 72,546 |
| 3,481 | 1 | Helen of Troy Ltd. | 311,097 |
| | | TOTAL | 383,643 |
| | | Crude Oil & Gas Production—0.1% | |
| 22,200 | | Chesapeake Energy Corp. | 75,258 |
| | | Dairy Products—0.3% | |
| 5,515 | | Cal-Maine Foods, Inc. | 278,342 |
| 8,425 | | Dean Foods Co. | 168,332 |
| | | TOTAL | 446,674 |
| | | Defense Aerospace—0.8% | |
| 4,907 | | General Dynamics Corp. | 656,409 |
| 11,239 | 1 | Spirit Aerosystems Holdings, Inc., Class A | 476,534 |
| | | TOTAL | 1,132,943 |
| | | Department Stores—4.7% | |
| 5,980 | | Dillards, Inc., Class A | 421,052 |
| 20,551 | | Kohl's Corp. | 1,022,412 |
| 38,446 | | Macy's, Inc. | 1,553,603 |
| 46,686 | | Target Corp. | 3,381,000 |
| | | TOTAL | 6,378,067 |
| | | Discount Department Stores—0.3% | |
| 5,400 | | Foot Locker, Inc. | 364,824 |
| | | Diversified Tobacco—1.6% | |
| 35,790 | | Altria Group, Inc. | 2,187,127 |
| | | Education & Training Services—0.1% | |
| 11,000 | 1 | Apollo Group, Inc., Class A | 87,340 |
| 2,100 | | DeVry Education Group, Inc. | 41,790 |
| | | TOTAL | 129,130 |
| | | Electric Utility—2.0% | |
| 24,600 | | AES Corp. | 233,700 |
| 8,083 | | Entergy Corp. | 570,498 |
| 83,976 | | NiSource, Inc. | 1,764,336 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Electric Utility—continued | |
| 3,495 | | Public Service Enterprises Group, Inc. | $144,344 |
| | | TOTAL | 2,712,878 |
| | | Electrical Equipment—0.5% | |
| 7,785 | | Emerson Electric Co. | 357,954 |
| 4,200 | 1 | Sanmina Corp. | 78,708 |
| 29,400 | | Xerox Corp. | 286,650 |
| | | TOTAL | 723,312 |
| | | Electronics Stores—0.3% | |
| 16,800 | | Best Buy Co., Inc. | 469,224 |
| | | Energy Equipment & Services—0.1% | |
| 11,813 | | Noble Corp. PLC | 92,023 |
| | | Entertainment—0.5% | |
| 38,331 | 1 | MSG Networks, Inc., Class A | 670,409 |
| | | Ethical Drugs—2.3% | |
| 78,872 | | Pfizer, Inc. | 2,404,807 |
| 6,195 | 1 | United Therapeutics Corp. | 763,100 |
| | | TOTAL | 3,167,907 |
| | | Financial Services—0.9% | |
| 28,700 | 1 | Ally Financial, Inc. | 454,895 |
| 5,086 | | Deluxe Corp. | 284,308 |
| 4,846 | 1 | Synchrony Financial | 137,723 |
| 18,900 | | Western Union Co. | 337,176 |
| | | TOTAL | 1,214,102 |
| | | Grocery Chain—2.1% | |
| 69,326 | | Kroger Co. | 2,690,542 |
| 5,103 | | Whole Foods Market, Inc. | 149,569 |
| | | TOTAL | 2,840,111 |
| | | Health Care Equipment & Supplies—0.0% | |
| 1,779 | 1 | Inogen, Inc. | 59,134 |
| | | Health Care Providers & Services—0.2% | |
| 3,504 | 1 | Quintiles Transnational Holdings, Inc. | 213,148 |
| | | Home Products—0.3% | |
| 7,554 | | Tupperware Brands Corp. | 350,732 |
| | | Hospitals—1.4% | |
| 19,485 | 1 | Community Health Systems, Inc. | 418,538 |
| 17,656 | 1 | HCA, Inc. | 1,228,504 |
| 2,276 | | Universal Health Services, Inc., Class B | 256,369 |
| | | TOTAL | 1,903,411 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Hotels—0.2% | |
| 5,200 | | Wyndham Worldwide Corp. | $337,480 |
| | | Industrial Machinery—0.6% | |
| 9,600 | | Dover Corp. | 561,120 |
| 4,200 | | Eaton Corp. PLC | 212,142 |
| | | TOTAL | 773,262 |
| | | Internet Services—4.8% | |
| 4,111 | 1 | Amazon.com, Inc. | 2,413,157 |
| 126,065 | 1 | eBay, Inc. | 2,957,485 |
| 7,910 | 1 | Facebook, Inc., Class A | 887,581 |
| 6,100 | | IAC Interactive Corp. | 316,834 |
| | | TOTAL | 6,575,057 |
| | | Life Insurance—3.3% | |
| 20,871 | | Aflac, Inc. | 1,209,683 |
| 47,089 | | Prudential Financial, Inc. | 3,299,997 |
| | | TOTAL | 4,509,680 |
| | | Major Steel Producer—0.1% | |
| 16,400 | | United States Steel Corp. | 114,800 |
| | | Medical Supplies—3.2% | |
| 91,807 | | Baxter International, Inc. | 3,360,136 |
| 5,572 | | Cardinal Health, Inc. | 453,394 |
| 11,584 | 1 | Hologic, Inc. | 393,161 |
| 1,633 | 1 | Orthofix International NV | 64,454 |
| | | TOTAL | 4,271,145 |
| | | Medical Technology—0.2% | |
| 2,873 | 1 | Abiomed, Inc. | 245,153 |
| | | Miscellaneous Components—0.2% | |
| 27,428 | | Vishay Intertechnology, Inc. | 314,325 |
| | | Miscellaneous Food Products—0.8% | |
| 3,659 | | Archer-Daniels-Midland Co. | 129,346 |
| 7,300 | | Fresh Del Monte Produce, Inc. | 297,913 |
| 5,900 | | Ingredion, Inc. | 594,248 |
| | | TOTAL | 1,021,507 |
| | | Miscellaneous Machinery—0.5% | |
| 26,403 | 1 | Colfax Corp. | 584,563 |
| 7,321 | | SPX Corp. | 68,085 |
| | | TOTAL | 652,648 |
| | | Money Center Bank—3.9% | |
| 19,891 | | Bank of America Corp. | 281,259 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Money Center Bank—continued | |
| 32,741 | | Citigroup, Inc. | $1,394,112 |
| 60,257 | | JPMorgan Chase & Co. | 3,585,291 |
| | | TOTAL | 5,260,662 |
| | | Multi-Industry Capital Goods—0.2% | |
| 1,259 | | Acuity Brands, Inc. | 254,859 |
| | | Multi-Line Insurance—1.0% | |
| 6,507 | | Allstate Corp. | 394,324 |
| 11,851 | | American International Group, Inc. | 669,345 |
| 8,300 | | Hartford Financial Services Group, Inc. | 333,494 |
| | | TOTAL | 1,397,163 |
| | | Office Equipment—0.2% | |
| 14,800 | | Pitney Bowes, Inc. | 289,784 |
| | | Office Supplies—0.0% | |
| 2,386 | | Ennis Business Forms, Inc. | 47,649 |
| | | Offshore Driller—0.1% | |
| 15,800 | | Nabors Industries Ltd. | 116,288 |
| | | Oil Gas & Consumable Fuels—0.4% | |
| 6,104 | | Phillips 66 | 489,236 |
| | | Oil Refiner—4.7% | |
| 15,598 | | HollyFrontier Corp. | 545,462 |
| 42,182 | | Marathon Petroleum Corp. | 1,762,786 |
| 8,624 | | Tesoro Petroleum Corp. | 752,444 |
| 48,934 | | Valero Energy Corp. | 3,321,151 |
| | | TOTAL | 6,381,843 |
| | | Oil Well Supply—0.6% | |
| 21,445 | | National Oilwell Varco, Inc. | 697,820 |
| 8,200 | | Superior Energy Services, Inc. | 84,542 |
| | | TOTAL | 782,362 |
| | | Outpatient Clinics—0.2% | |
| 3,838 | 1 | Amsurg Corp. | 280,903 |
| | | Paper Products—0.1% | |
| 5,600 | | Domtar, Corp. | 180,600 |
| | | Personal & Household—0.1% | |
| 5,800 | | Nu Skin Enterprises, Inc., Class A | 183,570 |
| | | Personal Loans—1.0% | |
| 20,091 | | Capital One Financial Corp. | 1,318,372 |
| | | Personal Products—0.3% | |
| 4,693 | 1 | Edgewell Personal Care Co. | 347,329 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Poultry Products—0.5% | |
| 16,900 | | Pilgrim's Pride Corp. | $374,842 |
| 4,000 | | Sanderson Farms, Inc. | 324,880 |
| | | TOTAL | 699,722 |
| | | Printed Circuit Boards—0.2% | |
| 15,800 | | Jabil Circuit, Inc. | 314,578 |
| | | Printing—0.1% | |
| 9,700 | | Donnelley (R.R.) & Sons Co. | 135,509 |
| | | Property Liability Insurance—3.8% | |
| 21,412 | | Assured Guaranty Ltd. | 509,177 |
| 6,354 | | Everest Re Group Ltd. | 1,136,985 |
| 32,865 | | The Travelers Cos., Inc. | 3,517,870 |
| | | TOTAL | 5,164,032 |
| | | Recreational Goods—0.1% | |
| 4,970 | 1 | Smith & Wesson Holding Corp. | 107,153 |
| | | Regional Banks—3.3% | |
| 4,342 | | Comerica, Inc. | 148,930 |
| 29,600 | | Fifth Third Bancorp | 467,680 |
| 17,200 | | Huntington Bancshares, Inc. | 147,576 |
| 30,200 | | KeyCorp | 337,032 |
| 8,926 | | PNC Financial Services Group | 773,438 |
| 9,100 | | Popular, Inc. | 228,774 |
| 47,638 | | Wells Fargo & Co. | 2,392,857 |
| | | TOTAL | 4,496,287 |
| | | Restaurants—0.4% | |
| 3,686 | | Cracker Barrel Old Country Store, Inc. | 483,714 |
| | | Rubber—0.3% | |
| 15,017 | | Goodyear Tire & Rubber Co. | 426,633 |
| | | Semiconductor Distribution—1.1% | |
| 16,316 | 1 | Arrow Electronics, Inc. | 841,905 |
| 14,515 | | Avnet, Inc. | 579,439 |
| 866 | 1 | Tyler Technologies, Inc. | 136,014 |
| | | TOTAL | 1,557,358 |
| | | Semiconductor Manufacturing—0.9% | |
| 34,400 | | Intel Corp. | 1,067,088 |
| 10,790 | 1 | Micron Technology, Inc. | 119,014 |
| | | TOTAL | 1,186,102 |
| | | Services to Medical Professionals—3.5% | |
| 3,243 | | Aetna, Inc. | 330,267 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Services to Medical Professionals—continued | |
| 11,502 | | Anthem, Inc. | $1,500,896 |
| 24,143 | 1 | Express Scripts Holding Co. | 1,735,157 |
| 3,753 | 1 | Molina Healthcare, Inc. | 206,077 |
| 14,271 | | Quest Diagnostics, Inc. | 937,177 |
| | | TOTAL | 4,709,574 |
| | | Shipbuilding—0.9% | |
| 9,357 | | Huntington Ingalls Industries, Inc. | 1,196,573 |
| | | Shoes—0.2% | |
| 8,631 | 1 | Skechers USA, Inc., Class A | 243,308 |
| | | Soft Drinks—1.4% | |
| 14,400 | | Coca-Cola Enterprises, Inc. | 668,448 |
| 13,800 | | Dr. Pepper Snapple Group, Inc. | 1,294,992 |
| | | TOTAL | 1,963,440 |
| | | Software Packaged/Custom—2.4% | |
| 19,200 | | CA, Inc. | 551,616 |
| 15,100 | | CDW Corp. | 580,595 |
| 50,864 | | Computer Sciences Corp. | 1,631,208 |
| 6,686 | 1 | Electronic Arts, Inc. | 431,548 |
| | | TOTAL | 3,194,967 |
| | | Specialty Retailing—1.7% | |
| 8,000 | | Abercrombie & Fitch Co., Class A | 209,920 |
| 4,700 | 1 | AutoNation, Inc. | 203,275 |
| 13,353 | 1 | Bed Bath & Beyond, Inc. | 576,449 |
| 2,900 | | Big Lots, Inc. | 112,462 |
| 1,700 | | Children's Place, Inc./The | 110,670 |
| 3,800 | | GNC Holdings, Inc. | 106,438 |
| 5,159 | | Outerwall, Inc. | 174,374 |
| 16,300 | | Staples, Inc. | 145,396 |
| 3,697 | 1 | Ulta Salon Cosmetics & Fragrance, Inc. | 669,786 |
| | | TOTAL | 2,308,770 |
| | | Telecommunication Equipment & Services—0.8% | |
| 22,607 | | Cisco Systems, Inc. | 537,820 |
| 15,431 | | Corning, Inc. | 287,171 |
| 4,365 | 1 | Dycom Industries, Inc. | 289,225 |
| | | TOTAL | 1,114,216 |
| | | Telephone Utility—1.1% | |
| 58,167 | | CenturyLink, Inc. | 1,478,605 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Truck Manufacturing—0.9% | |
| 8,589 | | Cummins, Inc. | $772,065 |
| 6,600 | | OshKosh Truck Corp. | 217,338 |
| 4,633 | | PACCAR, Inc. | 227,342 |
| | | TOTAL | 1,216,745 |
| | | Undesignated Consumer Cyclicals—0.3% | |
| 8,300 | 1 | Herbalife Ltd. | 383,543 |
| | | TOTAL COMMON STOCKS
(IDENTIFIED COST $143,251,796) | 133,139,847 |
| | | INVESTMENT COMPANY—1.7% | |
| 2,330,676 | 2 | Federated Prime Value Obligations Fund, Institutional Shares, 0.35%3
(AT NET ASSET VALUE) | 2,330,676 |
| | | TOTAL INVESTMENTS—99.9%
(IDENTIFIED COST $145,582,472)4 | 135,470,523 |
| | | OTHER ASSETS AND LIABILITIES - NET—0.1%5 | 127,165 |
| | | TOTAL NET ASSETS—100% | $135,597,688 |
| 1 | Non-income-producing security. |
| 2 | Affiliated holding. |
| 3 | 7-day net yield. |
| 4 | The cost of investments for federal tax purposes amounts to $145,582,472. |
| 5 | 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 January 31, 2016.
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 January 31, 2016, all investments of the Fund utilized Level 1 inputs in valuing the Fund's assets carried at fair value.
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $22.10 | $20.47 | $17.26 | $12.73 | $12.48 | $10.54 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.091 | 0.111 | 0.081 | 0.091 | 0.061 | 0.031 |
| Net realized and unrealized gain (loss) on investments | (2.88) | 1.55 | 3.23 | 4.49 | 0.19 | 1.96 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.79) | 1.66 | 3.31 | 4.58 | 0.25 | 1.99 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.19) | (0.03) | (0.10) | (0.05) | — | (0.05) |
| Net Asset Value, End of Period | $19.12 | $22.10 | $20.47 | $17.26 | $12.73 | $12.48 |
| Total Return2 | (12.71)% | 8.10% | 19.21% | 36.10% | 2.00% | 18.87% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.35%3 | 1.35% | 1.35% | 1.35% | 1.35% | 1.34% |
| Net investment income | 0.90%3 | 0.51% | 0.41% | 0.59% | 0.48% | 0.21% |
| Expense waiver/reimbursement4 | 0.02%3 | 0.00%5 | 0.08% | 0.16% | 0.40% | 0.31% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $33,704 | $40,433 | $44,678 | $34,092 | $29,365 | $40,227 |
| Portfolio turnover | 32% | 76% | 31% | 99% | 164% | 154% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
| 5 | Represents less than 0.01%. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class C Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $21.00 | $19.57 | $16.55 | $12.26 | $12.12 | $10.27 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | 0.011 | (0.05)1 | (0.07)1 | (0.03)1 | (0.04)1 | (0.07)1 |
| Net realized and unrealized gain (loss) on investments | (2.75) | 1.48 | 3.09 | 4.32 | 0.18 | 1.92 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.74) | 1.43 | 3.02 | 4.29 | 0.14 | 1.85 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.04) | — | — | — | — | — |
| Net Asset Value, End of Period | $18.22 | $21.00 | $19.57 | $16.55 | $12.26 | $12.12 |
| Total Return2 | (13.07)% | 7.31% | 18.25% | 34.99% | 1.16% | 18.01% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 2.14%3 | 2.11% | 2.15% | 2.15% | 2.15% | 2.13% |
| Net investment income (loss) | 0.11%3 | (0.26)% | (0.38)% | (0.21)% | (0.32)% | (0.59)% |
| Expense waiver/reimbursement4 | 0.00%3,5 | 0.00%5 | 0.06% | 0.11% | 0.36% | 0.29% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $34,669 | $41,509 | $35,052 | $27,674 | $24,440 | $31,129 |
| Portfolio turnover | 32% | 76% | 31% | 99% | 164% | 154% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
| 5 | Represents less than 0.01%. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class R Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $21.80 | $20.25 | $17.09 | $12.62 | $12.44 | $10.52 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | 0.051 | 0.021 | (0.01)1 | 0.021 | (0.00)1,2 | (0.04)1 |
| Net realized and unrealized gain (loss) on investments | (2.85) | 1.53 | 3.20 | 4.45 | 0.18 | 1.97 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.80) | 1.55 | 3.19 | 4.47 | 0.18 | 1.93 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.11) | — | (0.03) | — | — | (0.01) |
| Net Asset Value, End of Period | $18.89 | $21.80 | $20.25 | $17.09 | $12.62 | $12.44 |
| Total Return3 | (12.90)% | 7.65% | 18.68% | 35.42% | 1.45% | 18.33% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.80%4 | 1.76% | 1.81% | 1.83% | 1.85% | 1.83% |
| Net investment income (loss) | 0.46%4 | 0.09% | (0.05)% | 0.11% | (0.02)% | (0.31)% |
| Expense waiver/reimbursement5 | 0.00%4,6 | 0.00%6 | 0.00%6 | 0.02% | 0.25% | 0.19% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $5,282 | $6,300 | $5,467 | $4,089 | $2,718 | $2,973 |
| Portfolio turnover | 32% | 76% | 31% | 99% | 164% | 154% |
| 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 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
| 6 | Represents less than 0.01%. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Institutional Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $22.37 | $20.71 | $17.45 | $12.87 | $12.61 | $10.66 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.121 | 0.181 | 0.131 | 0.121 | 0.091 | 0.051 |
| Net realized and unrealized gain (loss) on investments | (2.92) | 1.57 | 3.27 | 4.55 | 0.19 | 1.99 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.80) | 1.75 | 3.40 | 4.67 | 0.28 | 2.04 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.26) | (0.09) | (0.14) | (0.09) | (0.02) | (0.09) |
| Net Asset Value, End of Period | $19.31 | $22.37 | $20.71 | $17.45 | $12.87 | $12.61 |
| Total Return2 | (12.61)% | 8.45% | 19.54% | 36.46% | 2.23% | 19.14% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.07%3 | 1.05% | 1.10% | 1.10% | 1.10% | 1.08% |
| Net investment income | 1.18%3 | 0.80% | 0.65% | 0.84% | 0.73% | 0.45% |
| Expense waiver/reimbursement4 | 0.00%3,5 | 0.00%5 | 0.00%5 | 0.05% | 0.27% | 0.19% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $61,943 | $76,242 | $62,770 | $39,932 | $39,101 | $43,197 |
| Portfolio turnover | 32% | 76% | 31% | 99% | 164% | 154% |
| 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 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
| 5 | Represents less than 0.01%. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
January 31, 2016 (unaudited)
| Assets: | | |
| Total investment in securities, at value including $2,330,676 of investment in affiliated holding (Note 5) (identified cost $145,582,472) | | $135,470,523 |
| Income receivable | | 116,256 |
| Receivable for investments sold | | 2,439,089 |
| Receivable for shares sold | | 70,265 |
| TOTAL ASSETS | | 138,096,133 |
| Liabilities: | | |
| Payable for investments purchased | $2,089,891 | |
| Payable for shares redeemed | 280,682 | |
| Payable to adviser (Note 5) | 8,124 | |
| Payable for distribution services fee (Note 5) | 24,750 | |
| Payable for other service fees (Notes 2 and 5) | 20,103 | |
| Accrued expenses (Note 5) | 74,895 | |
| TOTAL LIABILITIES | | 2,498,445 |
| Net assets for 7,152,186 shares outstanding | | $135,597,688 |
| Net Assets Consist of: | | |
| Paid-in capital | | $217,663,867 |
| Net unrealized depreciation of investments | | (10,111,949) |
| Accumulated net realized loss on investments | | (71,990,219) |
| Undistributed net investment income | | 35,989 |
| TOTAL NET ASSETS | | $135,597,688 |
Semi-Annual Shareholder Report
Statement of Assets and Liabilities–continued
| Net Asset Value, Offering Price and Redemption Proceeds Per Share | | |
| Class A Shares: | | |
| Net asset value per share ($33,703,736 ÷ 1,762,740 shares outstanding), no par value, unlimited shares authorized | | $19.12 |
| Offering price per share (100/94.50 of $19.12) | | $20.23 |
| Redemption proceeds per share | | $19.12 |
| Class C Shares: | | |
| Net asset value per share ($34,668,506 ÷ 1,902,588 shares outstanding), no par value, unlimited shares authorized | | $18.22 |
| Offering price per share | | $18.22 |
| Redemption proceeds per share (99.00/100 of $18.22) | | $18.04 |
| Class R Shares: | | |
| Net asset value per share ($5,282,097 ÷ 279,588 shares outstanding), no par value, unlimited shares authorized | | $18.89 |
| Offering price per share | | $18.89 |
| Redemption proceeds per share | | $18.89 |
| Institutional Shares: | | |
| Net asset value per share ($61,943,349 ÷ 3,207,270 shares outstanding), no par value, unlimited shares authorized | | $19.31 |
| Offering price per share | | $19.31 |
| Redemption proceeds per share | | $19.31 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended January 31, 2016 (unaudited)
| Investment Income: | | | |
| Dividends (including $2,609 received from an affiliated holding (Note 5) and net of foreign taxes withheld of $273) | | | $1,717,095 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $571,271 | |
| Administrative fee (Note 5) | | 59,603 | |
| Custodian fees | | 9,397 | |
| Transfer agent fee (Note 2) | | 101,022 | |
| Directors'/Trustees' fees (Note 5) | | 1,478 | |
| Auditing fees | | 12,300 | |
| Legal fees | | 4,047 | |
| Portfolio accounting fees | | 40,694 | |
| Distribution services fee (Note 5) | | 159,976 | |
| Other service fees (Notes 2 and 5) | | 95,730 | |
| Share registration costs | | 26,681 | |
| Printing and postage | | 14,611 | |
| Miscellaneous (Note 5) | | 7,031 | |
| TOTAL EXPENSES | | 1,103,841 | |
| Reimbursements: | | | |
| Reimbursement of investment adviser fee (Note 5) | $(1,615) | | |
| Reimbursement of other operating expenses (Notes 2 and 5) | (4,224) | | |
| TOTAL REIMBURSEMENTS | | (5,839) | |
| Net expenses | | | 1,098,002 |
| Net investment income | | | 619,093 |
| Realized and Unrealized Gain (Loss) on Investments: | | | |
| Net realized gain on investments | | | 6,503,386 |
| Net change in unrealized appreciation of investments | | | (27,662,807) |
| Net realized and unrealized loss on investments | | | (21,159,421) |
| Change in net assets resulting from operations | | | $(20,540,328) |
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)
1/31/2016 | Year Ended
7/31/2015 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $619,093 | $688,318 |
| Net realized gain on investments | 6,503,386 | 23,954,092 |
| Net change in unrealized appreciation/depreciation of investments | (27,662,807) | (12,475,569) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | (20,540,328) | 12,166,841 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | | |
| Class A Shares | (331,676) | (54,414) |
| Class C Shares | (74,346) | — |
| Class R Shares | (30,147) | — |
| Institutional Shares | (834,843) | (280,741) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (1,271,012) | (335,155) |
| Share Transactions: | | |
| Proceeds from sale of shares | 10,849,142 | 46,770,875 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 1,208,182 | 324,870 |
| Cost of shares redeemed | (19,131,691) | (42,409,715) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (7,074,367) | 4,686,030 |
| Change in net assets | (28,885,707) | 16,517,716 |
| Net Assets: | | |
| Beginning of period | 164,483,395 | 147,965,679 |
| End of period (including undistributed net investment income of $35,989 and $687,908, respectively) | $135,597,688 | $164,483,395 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
January 31, 2016 (unaudited)
1. ORGANIZATION
Federated MDT 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 five portfolios. The financial statements included herein are only those of Federated MDT All Cap Core Fund (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 Fund offers four classes of shares: Class A Shares, Class C Shares, Class R Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is long-term capital appreciation.
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:
| ■ | 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. |
| ■ | 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 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. |
Semi-Annual Shareholder Report
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 MDTA LLC (“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.
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
Semi-Annual Shareholder Report
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 and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares, Class C Shares, Class R Shares and Institutional Shares may bear distribution services fees, other service fees and transfer agent fees unique to those classes. The detail of the total fund expense reimbursements of $5,839 is disclosed in various locations in this Note 2 and Note 5. For the six months ended January 31, 2016, transfer agent fees for the Fund were as follows:
| | Transfer
Agent Fees
Incurred | Transfer
Agent Fees
Reimbursed |
| Class A Shares | $27,842 | $(3,838) |
| Class C Shares | 31,464 | (386) |
| Class R Shares | 9,290 | — |
| Institutional Shares | 32,426 | — |
| TOTAL | $101,022 | $(4,224) |
Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Semi-Annual Shareholder Report
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class C Shares to unaffiliated financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. For the six months ended January 31, 2016, other service fees for the Fund were as follows:
| | Other
Service Fees
Incurred |
| Class A Shares | $47,284 |
| Class C Shares | 48,446 |
| TOTAL | $95,730 |
Premium and Discount Amortization
All premiums and discounts on fixed-income securities are amortized/accreted using the effective-interest-rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended January 31, 2016, 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 January 31, 2016, tax years 2012 through 2015 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.
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 tables summarize share activity:
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 165,705 | $3,480,874 | 495,711 | $10,691,452 |
| Shares issued to shareholders in payment of distributions declared | 15,315 | 317,790 | 2,376 | 52,057 |
| Shares redeemed | (247,929) | (5,109,968) | (851,485) | (18,382,289) |
NET CHANGE RESULTING FROM
CLASS A SHARE TRANSACTIONS | (66,909) | $(1,311,304) | (353,398) | $(7,638,780) |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class C Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 135,513 | $2,670,162 | 612,017 | $12,394,286 |
| Shares issued to shareholders in payment of distributions declared | 3,342 | 66,135 | — | — |
| Shares redeemed | (213,259) | (4,107,740) | (426,212) | (8,772,133) |
NET CHANGE RESULTING FROM
CLASS C SHARE TRANSACTIONS | (74,404) | $(1,371,443) | 185,805 | $3,622,153 |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class R Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 38,133 | $768,461 | 127,210 | $2,715,467 |
| Shares issued to shareholders in payment of distributions declared | 1,465 | 30,064 | — | — |
| Shares redeemed | (48,986) | (991,527) | (108,214) | (2,323,679) |
NET CHANGE RESULTING FROM
CLASS R SHARE TRANSACTIONS | (9,388) | $(193,002) | 18,996 | $391,788 |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Institutional Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 187,287 | $3,929,645 | 963,004 | $20,969,670 |
| Shares issued to shareholders in payment of distributions declared | 37,891 | 794,193 | 12,322 | 272,813 |
| Shares redeemed | (426,810) | (8,922,456) | (597,814) | (12,931,614) |
NET CHANGE RESULTING
FROM INSTITUTIONAL SHARE TRANSACTIONS | (201,632) | $(4,198,618) | 377,512 | $8,310,869 |
NET CHANGE RESULTING FROM
TOTAL FUND SHARE TRANSACTIONS | (352,333) | $(7,074,367) | 288,915 | $4,686,030 |
Semi-Annual Shareholder Report
4. FEDERAL TAX INFORMATION
At January 31, 2016, the cost of investments for federal tax purposes was $145,582,472. The net unrealized depreciation of investments for federal tax purposes was $10,111,949. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $9,315,628 and net unrealized depreciation from investments for those securities having an excess of cost over value of $19,427,577.
At July 31, 2015, the Fund had a capital loss carryforward of $78,383,536 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 |
| 2017 | $8,792,655 | NA | $8,792,655 |
| 2018 | $69,590,881 | NA | $69,590,881 |
As a result of the March 2010 tax-free transfer of assets from Federated MDT Tax Aware/All Cap Core Fund, the use of certain capital loss carryforwards listed above may be limited.
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.75% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. For the six months ended January 31, 2016, the Adviser voluntarily reimbursed $4,224 of transfer agent fees.
Semi-Annual Shareholder Report
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 |
FAS may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares, Class C Shares and Class R Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:
| Share Class Name | Percentage of Average Daily
Net Assets of Class |
| Class A Shares | 0.05% |
| Class C Shares | 0.75% |
| Class R Shares | 0.50% |
FSC may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, distribution services fees for the Fund were as follows:
| | Distribution
Services Fees
Incurred |
| Class C Shares | $145,340 |
| Class R Shares | 14,636 |
| TOTAL | $159,976 |
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended January 31, 2016, FSC retained $17,120 of fees paid by the Fund. For the six months ended January 31, 2016, the Fund's Class A Shares did not incur a distribution services fee; however, it may begin to incur this fee upon approval of the Trustees.
Semi-Annual Shareholder Report
Other Service Fees
For the six months ended January 31, 2016, FSSC received $1,923 of the other service fees disclosed in Note 2.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended January 31, 2016, FSC retained $2,843 in sales charges from the sale of Class A Shares. FSC also retained $217 of CDSC relating to redemptions of Class A Shares and $1,321 of Class C Shares.
General
Certain Officers and Trustees of the Trust 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. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the six months ended January 31, 2016, the Adviser reimbursed $1,615. Transactions involving the affiliated holding during the six months ended January 31, 2016, were as follows:
| | Federated
Prime Value
Obligations Fund,
Institutional Shares |
| Balance of Shares Held 7/31/2015 | 3,340,032 |
| Purchases/Additions | 10,457,411 |
| Sales/Reductions | (11,466,767) |
| Balance of Shares Held 1/31/2016 | 2,330,676 |
| Value | $2,330,676 |
| Dividend Income | $2,609 |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended January 31, 2016, were as follows:
| Purchases | $47,203,583 |
| Sales | $54,130,997 |
Semi-Annual Shareholder Report
7. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, 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 January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, the program was not utilized.
9. SUBSEQUENT EVENT
On February 10, 2016, the Trustees approved the redesignation of R Shares to R6 Shares. The redesignation is expected to occur no later than the fourth quarter of 2016.
Management has evaluated subsequent events through the date the financial statements were issued and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, 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 August 1, 2015 to January 31, 2016.
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.
Semi-Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| | Beginning
Account Value
8/1/2015 | Ending
Account Value
1/31/2016 | Expenses Paid
During Period1 |
| Actual: | | | |
| Class A Shares | $1,000 | $872.90 | $6.36 |
| Class C Shares | $1,000 | $869.30 | $10.06 |
| Class R Shares | $1,000 | $871.00 | $8.47 |
| Institutional Shares | $1,000 | $873.90 | $5.04 |
Hypothetical (assuming a 5% return
before expenses): | | | |
| Class A Shares | $1,000 | $1,018.35 | $6.85 |
| Class C Shares | $1,000 | $1,014.38 | $10.84 |
| Class R Shares | $1,000 | $1,016.09 | $9.12 |
| Institutional Shares | $1,000 | $1,019.76 | $5.43 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| | |
| Class A Shares | 1.35% |
| Class C Shares | 2.14% |
| Class R Shares | 1.80% |
| Institutional Shares | 1.07% |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2015
Federated MDT All Cap Core Fund (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.
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.
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
Semi-Annual Shareholder Report
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 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
Semi-Annual Shareholder Report
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.
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a relevant indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
The Board reviewed the contractual advisory fee rate and other expenses of the Fund and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted the applicable waivers and reimbursements and that the overall expense structure of the Fund remained competitive. In this regard, the Board had been previously advised that, while comparisons to fund peer groups are relevant in judging the reasonableness of advisory fees, the Fund's quantitative focus makes fee and expense comparisons particularly difficult. Although the Fund's advisory fee was above the median of the peer range, the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers. The Board will continue to monitor advisory fees and other expenses borne by the Fund.
By contrast, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts and sub-adviser services). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; and the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing
Semi-Annual Shareholder Report
different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Senior Officer noted that the services, administrative responsibilities and risks associated with such relationships are quite different than serving as primary adviser to a fund.
The Fund's ability to deliver competitive performance when compared to its peer group 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 Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups may be helpful, though not conclusive, in judging the reasonableness of the proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group, and that the Senior Officer had specifically noted that the Fund's quantitative focus makes fee and expense comparisons particularly difficult as the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers.
For the one-year, three-year and five-year periods covered by the Evaluation, the Fund's performance was above the median of the relevant peer group. In addition, the Board was informed by the Adviser that, for the same periods, the Fund outperformed 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.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The 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
Semi-Annual Shareholder Report
competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed 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.
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated family of funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies of scale, should they exist) were likely to be enjoyed by the fund family as a whole. Federated, as it does throughout the year, and again in connection with the Board's review, furnished information relative to revenue sharing or adviser paid fees. Federated and the Senior Officer noted that this information should be viewed to determine if there was an incentive to either not apply breakpoints or to apply breakpoints at higher levels and should not be viewed to determining the appropriateness of advisory fees, because it would represent marketing and distribution expenses. Finally, the Board also noted the absence of any applicable regulatory or industry
Semi-Annual Shareholder Report
guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size.
The Senior Officer 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. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
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. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
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 is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. Form N-PX filings 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.) You may also access this information via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
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 MDT All Cap Core Fund
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 31421R106
CUSIP 31421R205
CUSIP 31421R718
CUSIP 31421R304
36361 (3/16)
Federated is a registered trademark of Federated Investors, Inc.
2016 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
January 31, 2016
| Share Class | Ticker |
| A | QABGX |
| C | QCBGX |
| R | QKBGX |
| Institutional | QIBGX |
Federated MDT Balanced Fund
Fund Established 2002
A Portfolio of Federated MDT Series
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from August 1, 2015 through January 31, 2016. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
Not FDIC Insured • May Lose Value • No Bank Guarantee
Portfolio of Investments Summary Tables (unaudited)
At January 31, 2016, the Fund's portfolio composition1 was as follows:
| Security Type | Percentage of
Total Net Assets |
| Domestic Equity Securities | 48.2% |
| Corporate Debt Securities | 16.7% |
| International Equity Securities (including International Exchange-Traded Fund) | 9.1% |
| Mortgage-Backed Securities2 | 7.3% |
| Collateralized Mortgage Obligations | 3.6% |
| U.S. Treasury Securities3 | 2.6% |
| Asset-Backed Securities | 1.6% |
| Trade Finance Agreements | 1.6% |
| Floating Rate Loan | 1.2% |
| Commercial Mortgage-Backed Securities | 0.8% |
| Foreign Debt Securities | 0.4% |
| Municipal Bond | 0.1% |
| Derivative Contracts4 | (0.1)% |
| Other Security Types5,6 | 0.0% |
| Cash Equivalents7 | 6.9% |
| Other Assets and Liabilities—Net5,8 | 0.0% |
| TOTAL | 100.0% |
| 1 | See the Fund's Prospectus for a description of the principal types of securities in which the Fund invests. As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of 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. |
| 2 | For purposes of this table, Mortgage-Backed Securities include mortgage-backed securities guaranteed by Government Sponsored Entities and adjustable rate mortgage-backed securities. |
| 3 | Also includes $169,711 held in U.S. Treasuries pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding futures contracts. |
| 4 | Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report. |
| 5 | Represents less than 0.1%. |
| 6 | Other Security Types consist of a domestic exchange-traded fund and purchased put options. |
| 7 | Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements. |
| 8 | Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report
At January 31, 2016, the Fund's industry composition8 for its equity securities (excluding exchange-traded funds) was as follows:
| Industry Composition | Percentage of
Equity Securities |
| Real Estate Investment Trusts | 8.5% |
| Insurance | 7.6% |
| Technology Hardware Storage & Peripherals | 6.7% |
| Banks | 6.1% |
| Oil Gas & Consumable Fuels | 5.0% |
| Health Care Providers & Services | 4.9% |
| Multiline Retail | 4.8% |
| Specialty Retail | 4.0% |
| Biotechnology | 3.6% |
| Diversified Telecommunication Services | 3.6% |
| Machinery | 3.4% |
| Airlines | 2.8% |
| Chemicals | 2.7% |
| Electronic Equipment Instruments & Components | 2.7% |
| Health Care Equipment & Supplies | 2.7% |
| Food & Staples Retailing | 2.3% |
| Internet Software & Services | 2.3% |
| Pharmaceuticals | 2.1% |
| Food Products | 1.9% |
| Consumer Finance | 1.8% |
| IT Services | 1.8% |
| Media | 1.7% |
| Internet & Catalog Retail | 1.6% |
| Software | 1.5% |
| Aerospace & Defense | 1.4% |
| Multi-Utilities | 1.4% |
| Communications Equipment | 1.3% |
| Beverages | 1.1% |
| Other9 | 8.7% |
| TOTAL | 100.0% |
| 8 | Industry classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS. |
| 9 | For purposes of this table, industry classifications which constitute less than 1.0% of the Fund's equity securities have been aggregated under the designation “Other.” |
Semi-Annual Shareholder Report
Portfolio of Investments
January 31, 2016 (unaudited)
Shares or
Principal
Amount | | | Value |
| | | COMMON STOCKS—50.5% | |
| | | Aerospace & Defense—0.7% | |
| 2,148 | | General Dynamics Corp. | $287,338 |
| 3,466 | | Huntington Ingalls Industries, Inc. | 443,232 |
| 5,308 | 1 | Spirit Aerosystems Holdings, Inc., Class A | 225,059 |
| | | TOTAL | 955,629 |
| | | Air Freight & Logistics—0.1% | |
| 2,035 | 1 | Atlas Air Worldwide Holdings, Inc. | 74,746 |
| | | Airlines—1.4% | |
| 5,706 | | Alaska Air Group, Inc. | 401,702 |
| 10,647 | | Delta Air Lines, Inc. | 471,556 |
| 3,004 | 1 | Jet Blue Airways Corp. | 64,015 |
| 14,845 | | Southwest Airlines Co. | 558,469 |
| 7,181 | 1 | United Continental Holdings, Inc. | 346,699 |
| | | TOTAL | 1,842,441 |
| | | Auto Components—0.5% | |
| 13,840 | | Goodyear Tire & Rubber Co. | 393,194 |
| 2,119 | | Lear Corp. | 220,016 |
| | | TOTAL | 613,210 |
| | | Automobiles—0.3% | |
| 24,635 | | Ford Motor Co. | 294,142 |
| 5,314 | | General Motors Co. | 157,507 |
| | | TOTAL | 451,649 |
| | | Banks—3.1% | |
| 11,267 | | Bank of America Corp. | 159,315 |
| 12,369 | | Citigroup, Inc. | 526,672 |
| 1,979 | | Comerica, Inc. | 67,880 |
| 20,900 | | Fifth Third Bancorp | 330,220 |
| 13,300 | | Huntington Bancshares, Inc. | 114,114 |
| 26,363 | | JPMorgan Chase & Co. | 1,568,598 |
| 16,358 | | KeyCorp | 182,555 |
| 6,300 | | Popular, Inc. | 158,382 |
| 18,481 | | Wells Fargo & Co. | 928,301 |
| | | TOTAL | 4,036,037 |
| | | Beverages—0.6% | |
| 6,058 | | Coca-Cola Enterprises, Inc. | 281,212 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | COMMON STOCKS—continued | |
| | | Beverages—continued | |
| 5,157 | | Dr. Pepper Snapple Group, Inc. | $483,933 |
| | | TOTAL | 765,145 |
| | | Biotechnology—1.8% | |
| 7,398 | | Amgen, Inc. | 1,129,897 |
| 9,772 | | Gilead Sciences, Inc. | 811,076 |
| 3,678 | 1 | United Therapeutics Corp. | 453,056 |
| | | TOTAL | 2,394,029 |
| | | Capital Markets—0.1% | |
| 634 | | Ameriprise Financial, Inc. | 57,472 |
| 3,625 | | The Bank of New York Mellon Corp. | 131,298 |
| | | TOTAL | 188,770 |
| | | Chemicals—1.4% | |
| 5,832 | | Axiall Corp. | 104,568 |
| 1,151 | | Celanese Corp. | 73,284 |
| 18,808 | | LyondellBasell Industries NV – Class A | 1,466,459 |
| 6,208 | | Mosaic Co./The | 149,613 |
| | | TOTAL | 1,793,924 |
| | | Commercial Services—0.3% | |
| 1,162 | | Deluxe Corp. | 64,956 |
| 7,600 | | Donnelley (R.R.) & Sons Co. | 106,172 |
| 1,032 | | Ennis Business Forms, Inc. | 20,609 |
| 10,000 | | Pitney Bowes, Inc. | 195,800 |
| | | TOTAL | 387,537 |
| | | Communications Equipment—0.6% | |
| 7,152 | | Cisco Systems, Inc. | 170,146 |
| 23,286 | | Juniper Networks, Inc. | 549,550 |
| 770 | 1 | Palo Alto Networks, Inc. | 115,107 |
| | | TOTAL | 834,803 |
| | | Construction & Engineering—0.2% | |
| 1,991 | 1 | Dycom Industries, Inc. | 131,924 |
| 4,000 | 1 | Jacobs Engineering Group, Inc. | 156,920 |
| | | TOTAL | 288,844 |
| | | Consumer Finance—0.9% | |
| 8,000 | 1 | Ally Financial, Inc. | 126,800 |
| 11,160 | | Capital One Financial Corp. | 732,319 |
| 17,976 | | Navient Corp. | 171,850 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | COMMON STOCKS—continued | |
| | | Consumer Finance—continued | |
| 6,104 | 1 | Synchrony Financial | $173,476 |
| | | TOTAL | 1,204,445 |
| | | Diversified Consumer Services—0.1% | |
| 8,100 | 1 | Apollo Education Group, Inc. | 64,314 |
| 1,500 | | DeVry Education Group, Inc. | 29,850 |
| | | TOTAL | 94,164 |
| | | Diversified Telecommunication Services—1.8% | |
| 33,189 | | CenturyLink, Inc. | 843,664 |
| 30,670 | | Verizon Communications | 1,532,580 |
| | | TOTAL | 2,376,244 |
| | | Electric Utilities—0.1% | |
| 981 | | Entergy Corp. | 69,239 |
| | | Electrical Equipment—0.2% | |
| 1,227 | | Acuity Brands, Inc., Holding Company | 248,382 |
| 1,307 | | Eaton Corp PLC | 66,016 |
| | | TOTAL | 314,398 |
| | | Electronic Equipment Instruments & Components—1.4% | |
| 7,100 | | Avnet, Inc. | 283,432 |
| 5,300 | | CDW Corp. | 203,785 |
| 1,900 | 1 | Insight Enterprises, Inc. | 44,897 |
| 9,200 | | Jabil Circuit, Inc. | 183,172 |
| 7,000 | 1 | Sanmina Corp. | 131,180 |
| 11,300 | 1 | Tech Data Corp. | 705,120 |
| 22,000 | | Vishay Intertechnology, Inc. | 252,120 |
| | | TOTAL | 1,803,706 |
| | | Energy Equipment & Services—0.2% | |
| 4,395 | | Ensco PLC | 42,983 |
| 3,838 | | National Oilwell Varco, Inc. | 124,889 |
| 10,600 | | Noble Corp. PLC | 82,574 |
| | | TOTAL | 250,446 |
| | | Food & Staples Retailing—1.1% | |
| 36,694 | | Kroger Co. | 1,424,094 |
| 2,439 | | Whole Foods Market, Inc. | 71,487 |
| | | TOTAL | 1,495,581 |
| | | Food Products—0.9% | |
| 2,017 | | Bunge Ltd. | 125,074 |
| 2,708 | | Cal-Maine Foods, Inc. | 136,673 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | COMMON STOCKS—continued | |
| | | Food Products—continued | |
| 3,483 | | Dean Foods Co. | $69,590 |
| 4,289 | | Fresh Del Monte Produce, Inc. | 175,034 |
| 3,700 | | Ingredion, Inc. | 372,664 |
| 8,300 | | Pilgrims Pride Corp. | 184,094 |
| 2,100 | | Sanderson Farms, Inc. | 170,562 |
| | | TOTAL | 1,233,691 |
| | | Health Care Equipment & Supplies—1.4% | |
| 1,081 | 1 | Abiomed, Inc. | 92,242 |
| 41,199 | | Baxter International, Inc. | 1,507,883 |
| 5,137 | 1 | Hologic, Inc. | 174,350 |
| | | TOTAL | 1,774,475 |
| | | Health Care Providers & Services—2.5% | |
| 1,599 | | Aetna, Inc. | 162,842 |
| 5,668 | | Anthem, Inc. | 739,617 |
| 5,358 | | Cardinal Health, Inc. | 435,981 |
| 15,524 | 1 | Community Health Systems, Inc. | 333,456 |
| 10,023 | 1 | Express Scripts Holding Co. | 720,353 |
| 6,902 | 1 | HCA Holdings, Inc. | 480,241 |
| 5,493 | | Quest Diagnostics, Inc. | 360,725 |
| | | TOTAL | 3,233,215 |
| | | Hotels Restaurants & Leisure—0.2% | |
| 943 | | Cracker Barrel Old Country Store, Inc. | 123,750 |
| 1,824 | | Wyndham Worldwide Corp. | 118,377 |
| | | TOTAL | 242,127 |
| | | Household Durables—0.3% | |
| 2,483 | | D. R. Horton, Inc. | 68,307 |
| 745 | 1 | Helen of Troy Ltd. | 66,581 |
| 5,423 | | Tupperware Brands Corp. | 251,790 |
| | | TOTAL | 386,678 |
| | | Independent Power and Renewable Electricity Producers—0.1% | |
| 15,600 | | AES Corp. | 148,200 |
| | | Insurance—3.8% | |
| 11,975 | | Aflac, Inc. | 694,071 |
| 4,177 | | Allstate Corp. | 253,126 |
| 13,907 | | Assured Guaranty Ltd. | 330,708 |
| 2,571 | | Everest Re Group Ltd. | 460,055 |
| 23,485 | | Prudential Financial | 1,645,829 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | COMMON STOCKS—continued | |
| | | Insurance—continued | |
| 15,467 | | The Travelers Cos, Inc. | $1,655,588 |
| | | TOTAL | 5,039,377 |
| | | Internet & Catalog Retail—0.8% | |
| 1,794 | 1 | Amazon.com, Inc. | 1,053,078 |
| | | Internet Software & Services—1.2% | |
| 56,917 | 1 | eBay, Inc. | 1,335,273 |
| 1,180 | 1 | Facebook, Inc., Class A | 132,408 |
| 1,389 | | IAC Interactive Corp. | 72,144 |
| | | TOTAL | 1,539,825 |
| | | IT Services—0.9% | |
| 22,773 | | Computer Sciences Corp. | 730,330 |
| 1,081 | | Global Payments, Inc. | 63,725 |
| 1,457 | 1 | Vantiv, Inc. | 68,552 |
| 10,000 | | Western Union Co. | 178,400 |
| 14,300 | | Xerox Corp. | 139,425 |
| | | TOTAL | 1,180,432 |
| | | Machinery—1.7% | |
| 4,100 | | AGCO Corp. | 199,957 |
| 2,547 | | Allison Transmission Holdings, Inc. | 60,593 |
| 15,401 | 1 | Colfax Corp. | 340,978 |
| 6,583 | | Cummins, Inc. | 591,746 |
| 2,525 | | Dover Corp. | 147,586 |
| 38,281 | | Joy Global, Inc. | 381,662 |
| 3,100 | | OshKosh Truck Corp. | 102,083 |
| 10,666 | | SPX Corp. | 99,194 |
| 15,300 | | Trinity Industries, Inc. | 327,726 |
| | | TOTAL | 2,251,525 |
| | | Media—0.9% | |
| 28,128 | 1 | MSG Networks, Inc., Class A | 491,959 |
| 14,600 | | Viacom, Inc., Class B - New | 666,344 |
| | | TOTAL | 1,158,303 |
| | | Metals & Mining—0.0% | |
| 7,500 | | United States Steel Corp. | 52,500 |
| | | Multi-Utilities—0.7% | |
| 35,274 | | NiSource, Inc. | 741,106 |
| 3,776 | | Public Service Enterprises Group, Inc. | 155,949 |
| | | TOTAL | 897,055 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | COMMON STOCKS—continued | |
| | | Multiline Retail—2.4% | |
| 2,400 | | Big Lots, Inc. | $93,072 |
| 2,169 | | Dillards, Inc., Class A | 152,719 |
| 13,170 | | Kohl's Corp. | 655,208 |
| 16,834 | | Macy's, Inc. | 680,262 |
| 22,314 | | Target Corp. | 1,615,980 |
| | | TOTAL | 3,197,241 |
| | | Oil Gas & Consumable Fuels—2.5% | |
| 8,120 | | HollyFrontier Corp. | 283,956 |
| 18,920 | | Marathon Petroleum Corp. | 790,667 |
| 3,019 | | Phillips 66 | 241,973 |
| 5,184 | | Tesoro Petroleum Corp. | 452,304 |
| 23,000 | | Valero Energy Corp. | 1,561,010 |
| | | TOTAL | 3,329,910 |
| | | Paper & Forest Products—0.1% | |
| 3,600 | | Domtar Corp. | 116,100 |
| | | Personal Products—0.4% | |
| 9,700 | | Avon Products, Inc. | 32,883 |
| 3,103 | 1 | Edgewell Personal Care Co. | 229,653 |
| 4,055 | 1 | Herbalife Ltd. | 187,381 |
| 3,147 | | Nu Skin Enterprises, Inc. | 99,603 |
| | | TOTAL | 549,520 |
| | | Pharmaceuticals—1.1% | |
| 2,200 | 1 | Lannett Co., Inc. | 56,122 |
| 1,760 | | Merck & Co., Inc. | 89,179 |
| 41,365 | | Pfizer, Inc. | 1,261,219 |
| | | TOTAL | 1,406,520 |
| | | Real Estate Investment Trusts—4.3% | |
| 6,300 | | Acadia Realty Trust | 214,830 |
| 8,500 | | American Campus Communities, Inc. | 358,700 |
| 2,900 | | Avalonbay Communities, Inc. | 497,321 |
| 1,200 | | Boston Properties, Inc. | 139,452 |
| 9,100 | | Coresite Realty Corp. - REIT | 583,674 |
| 16,600 | | CubeSmart, REIT | 519,414 |
| 3,900 | | DCT Industrial Trust, Inc. | 139,581 |
| 17,500 | | DDR Corp. | 299,425 |
| 1,400 | | Equity Lifestyle Properties, Inc. | 92,288 |
| 700 | | Essex Property Trust, Inc. | 149,177 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | COMMON STOCKS—continued | |
| | | Real Estate Investment Trusts—continued | |
| 7,000 | | Extra Space Storage, Inc. | $634,830 |
| 5,000 | | Hudson Pacific Properties, Inc. | 127,050 |
| 5,150 | | Mid-American Apartment Communities, Inc. | 483,173 |
| 43,500 | | New Residential Investment Corp. | 495,465 |
| 4,000 | | ProLogis, Inc. | 157,880 |
| 1,800 | | Simon Property Group, Inc. | 335,304 |
| 8,000 | | UDR, Inc. | 284,720 |
| 5,000 | | Urban Edge Properties | 121,500 |
| | | TOTAL | 5,633,784 |
| | | Road & Rail—0.0% | |
| 1,429 | 1 | Avis Budget Group, Inc. | 37,540 |
| | | Semiconductors & Semiconductor Equipment—0.4% | |
| 12,322 | | Intel Corp. | 382,228 |
| 8,223 | 1 | Micron Technology, Inc. | 90,700 |
| 2,213 | | NVIDIA Corp. | 64,819 |
| | | TOTAL | 537,747 |
| | | Software—0.8% | |
| 14,300 | | CA, Inc. | 410,839 |
| 890 | 1 | Citrix Systems, Inc. | 62,709 |
| 2,079 | 1 | Electronic Arts, Inc. | 134,189 |
| 4,307 | 1 | Nuance Communications, Inc. | 75,932 |
| 1,365 | 1 | Salesforce.com, Inc. | 92,902 |
| 1,278 | 1 | Tyler Technologies, Inc. | 200,723 |
| | | TOTAL | 977,294 |
| | | Specialty Retail—2.0% | |
| 5,200 | | Abercrombie & Fitch Co., Class A | 136,448 |
| 5,828 | 1 | Bed Bath & Beyond, Inc. | 251,595 |
| 7,100 | | Best Buy Co., Inc. | 198,303 |
| 1,200 | | Children's Place, Inc./The | 78,120 |
| 1,847 | | Foot Locker, Inc. | 124,783 |
| 2,703 | | GNC Holdings, Inc. | 75,711 |
| 7,400 | | GameStop Corp. | 193,954 |
| 15,027 | | Gap (The), Inc. | 371,468 |
| 3,800 | | Guess ?, Inc. | 70,452 |
| 1,917 | 1 | O'Reilly Automotive, Inc. | 500,145 |
| 1,474 | | Outerwall, Inc. | 49,821 |
| 2,300 | | Rent-A-Center, Inc. | 31,326 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | COMMON STOCKS—continued | |
| | | Specialty Retail—continued | |
| 3,900 | 1 | Sally Beauty Holdings, Inc. | $107,484 |
| 13,300 | | Staples, Inc. | 118,636 |
| 1,917 | 1 | Ulta Salon Cosmetics & Fragrance, Inc. | 347,303 |
| 1,135 | 1 | Zumiez, Inc. | 20,555 |
| | | TOTAL | 2,676,104 |
| | | Technology Hardware Storage & Peripherals—3.4% | |
| 12,968 | | Apple, Inc. | 1,262,305 |
| 143,736 | 1 | HP, Inc. | 1,395,677 |
| 12,569 | | International Business Machines Corp. | 1,568,486 |
| 10,850 | | NetApp, Inc. | 237,940 |
| | | TOTAL | 4,464,408 |
| | | Textiles Apparel & Luxury Goods—0.4% | |
| 2,073 | 1 | Fossil Group, Inc. | 67,580 |
| 3,200 | | PVH Corp. | 234,816 |
| 7,184 | 1 | Skechers USA, Inc., Class A | 202,517 |
| | | TOTAL | 504,913 |
| | | Tobacco—0.4% | |
| 8,546 | | Altria Group, Inc. | 522,246 |
| | | TOTAL COMMON STOCKS
(IDENTIFIED COST $71,322,953) | 66,378,795 |
| | | ASSET-BACKED SECURITIES—1.0% | |
| | | Auto Receivables—0.3% | |
| $300,000 | | BMW Vehicle Trust 2014-1, A4, 0.990%, 08/21/2017 | 299,868 |
| 23,588 | | CS First Boston Mortgage Securities Corp. 2002-HE4, AF, 5.510%, 08/25/2032 | 27,167 |
| 100,000 | | Navient Student Loan Trust 2014-1, A2, 0.736%, 03/27/2023 | 98,921 |
| 25,000 | | Santander Drive Auto Receivables Trust 2013-1, D, 2.270%, 01/15/2019 | 25,045 |
| | | TOTAL | 451,001 |
| | | Credit Card—0.7% | |
| 350,000 | | Capital One Multi-Asset Execution Trust 2004-B3, B3, 1.156%, 01/18/2022 | 349,448 |
| 250,000 | | Citibank Credit Card Issuance Trust 2014-A2, A2, 1.02%, 02/22/2019 | 249,915 |
| 300,000 | 2,3 | Penarth Master Issuer 2015-1A, A1, 0.826%, 03/18/2019 | 299,492 |
| | | TOTAL | 898,855 |
| | | TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $1,349,963) | 1,349,856 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | COLLATERALIZED MORTGAGE OBLIGATIONS—2.4% | |
| | | Commercial Mortgage—2.4% | |
| $829 | 4 | Bear Stearns Mortgage Securities, Inc. 1997-6 1A, 6.333%, 3/25/2031 | $851 |
| 200,000 | | Citigroup Commercial Mortgage Trust 2013-GC11 B, 3.732%, 4/10/2046 | 199,051 |
| 350,000 | | Citigroup Commercial Mortgage Trust 2015-GC33 AS, 4.114%, 9/10/2058 | 360,228 |
| 70,000 | | Commercial Mortgage Pass-Through Certificates 2012-CR1 AM, 3.912%, 5/15/2045 | 73,578 |
| 125,000 | | Commercial Mortgage Pass-Through Certificates 2012-CR1 B, 4.612%, 5/15/2045 | 135,181 |
| 200,000 | 2,3 | Commercial Mortgage Trust 2013-CR8 B, 4.098%, 6/10/2046 | 204,103 |
| 200,000 | | Commercial Mortgage Trust 2014-LC17 B, 4.490%, 10/10/2047 | 209,042 |
| 300,000 | | Commercial Mortgage Trust 2015-DC1 AM, 3.724%, 2/10/2048 | 300,318 |
| 200,000 | 2,3 | FREMF Mortgage Trust 2013-K25, B, 3.743%, 11/25/2045 | 198,316 |
| 2,468 | | Federal Home Loan Mortgage Corp. REMIC 1311 K, 7.000%, 7/15/2022 | 2,684 |
| 4,942 | | Federal Home Loan Mortgage Corp. REMIC 1384 D, 7.000%, 9/15/2022 | 5,455 |
| 8,665 | | Federal Home Loan Mortgage Corp. REMIC 2497 JH, 6.000%, 9/15/2032 | 9,838 |
| 300,000 | | Federal Home Loan Mortgage Corp., 2.724%, 9/25/2020 | 309,590 |
| 10,907 | | Federal National Mortgage Association REMIC 1993-113 SB, 9.749%, 7/25/2023 | 12,110 |
| 35 | | Federal National Mortgage Association REMIC 2001-37 GA, 8.000%, 7/25/2016 | 35 |
| 2,121 | | Federal National Mortgage Association REMIC 2003-35 UC, 3.750%, 5/25/2033 | 2,225 |
| 100,000 | | GS Mortgage Securities Corp. II 2012-GCJ7 AS, 4.085%, 5/10/2045 | 105,738 |
| 135,000 | | GS Mortgage Securities Corp. II 2012-GCJ7 B, 4.74%, 5/10/2045 | 144,534 |
| 8,556 | | Government National Mortgage Association REMIC 2002-17 B, 6.000%, 3/20/2032 | 9,656 |
| 100,000 | | Merrill Lynch Mortgage Trust 2008-C1 AM, 6.475%, 2/12/2051 | 107,192 |
| 50,000 | | Morgan Stanley Capital I 2007-IQ16 AM, 6.258%, 12/12/2049 | 52,556 |
| 100,000 | | Morgan Stanley Capital I 2012-C4 AS, 3.773%, 3/15/2045 | 104,153 |
| 150,000 | 2,3 | UBS-Barclays Commercial Mortgage Trust 2013-C6 B, 3.875%, 4/10/2046 | 150,817 |
| 25,000 | | WF-RBS Commercial Mortgage Trust 2012-C6 B, 4.697%, 4/15/2045 | 26,676 |
| 300,000 | | WF-RBS Commercial Mortgage Trust 2014-C25 AS, 3.984%, 11/15/2047 | 306,937 |
| 150,000 | | WF-RBS Commercial Mortgage Trust 2014-C25 B, 4.236%, 11/15/2047 | 152,463 |
| | | TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $3,186,172) | 3,183,327 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—12.9% | |
| | | Basic Industry - Chemicals—0.1% | |
| $35,000 | 2,3 | Incitec Pivot Finance LLC, Company Guarantee, Series 144A, 6.000%, 12/10/2019 | $37,908 |
| 70,000 | | RPM International, Inc., 6.500%, 02/15/2018 | 75,007 |
| 20,000 | | RPM International, Inc., Sr. Unsecd. Note, 6.125%, 10/15/2019 | 22,217 |
| 22,000 | | Rohm & Haas Co., 6.000%, 09/15/2017 | 23,407 |
| | | TOTAL | 158,539 |
| | | Basic Industry - Metals & Mining—0.7% | |
| 100,000 | | Alcoa, Inc., 5.870%, 02/23/2022 | 88,937 |
| 80,000 | | Allegheny Technologies, Inc., Sr. Note, 9.375%, 06/01/2019 | 59,440 |
| 15,000 | | Anglogold Ashanti Holdings PLC, Sr. Note, 6.500%, 04/15/2040 | 10,463 |
| 100,000 | | Anglogold Ashanti Holdings PLC, Sr. Unsecd. Note, 5.125%, 08/01/2022 | 80,875 |
| 62,000 | | Carpenter Technology Corp., Sr. Unsecd. Note, 4.450%, 03/01/2023 | 60,210 |
| 40,000 | | Carpenter Technology Corp., Sr. Unsecd. Note, 5.200%, 07/15/2021 | 40,938 |
| 20,000 | 2,3 | Newcrest Finance Property Ltd., Sr. Unsecd. Note, Series 144A, 4.200%, 10/01/2022 | 17,146 |
| 100,000 | | Reliance Steel & Aluminum Co., Sr. Unsecd. Note, 4.500%, 04/15/2023 | 93,581 |
| 85,000 | | Rio Tinto Finance USA Ltd., Company Guarantee, 6.500%, 07/15/2018 | 91,384 |
| 150,000 | | Rio Tinto Finance USA Ltd., Sr. Unsecd. Note, 2.250%, 12/14/2018 | 145,537 |
| 20,000 | | Southern Copper Corp., Note, 6.750%, 04/16/2040 | 16,959 |
| 160,000 | | Worthington Industries, Inc., Sr. Unsecd. Note, 6.500%, 04/15/2020 | 180,008 |
| | | TOTAL | 885,478 |
| | | Basic Industry - Paper—0.0% | |
| 10,000 | | Plum Creek Timberlands LP, Sr. Unsecd. Note, 3.250%, 03/15/2023 | 9,793 |
| 20,000 | | Plum Creek Timberlands LP, Sr. Unsecd. Note, 4.700%, 03/15/2021 | 21,643 |
| | | TOTAL | 31,436 |
| | | Capital Goods - Aerospace & Defense—0.2% | |
| 211,000 | 2,3 | Embraer Overseas Ltd., Sr. Unsecd. Note, Series 144A, 5.696%, 09/16/2023 | 205,461 |
| 20,000 | | Raytheon Co., Sr. Note, 4.400%, 02/15/2020 | 22,157 |
| 10,000 | | Rockwell Collins, Inc., Sr. Unsecd. Note, 3.100%, 11/15/2021 | 10,347 |
| 40,000 | 2,3 | Textron Financial Corp., Jr. Sub. Note, Series 144A, 6.000%, 2/15/2067 | 28,500 |
| 50,000 | | Textron Inc., Sr. Unsecd. Note, 4.300%, 03/01/2024 | 51,399 |
| | | TOTAL | 317,864 |
| | | Capital Goods - Construction Machinery—0.0% | |
| 40,000 | | AGCO Corp., Sr. Unsecd. Note, 5.875%, 12/01/2021 | 43,983 |
| | | Capital Goods - Diversified Manufacturing—0.3% | |
| 15,000 | | Avery Dennison Corp., Sr. Unsecd. Note, 5.375%, 04/15/2020 | 16,335 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Capital Goods - Diversified Manufacturing—continued | |
| $60,000 | | Dover Corp., Note, 5.450%, 03/15/2018 | $64,824 |
| 200,000 | | General Electric Co., Sr. Unsecd. Note, 4.125%, 10/09/2042 | 197,586 |
| 80,000 | | Hubbell, Inc., 5.950%, 06/01/2018 | 87,254 |
| 50,000 | | Pentair, Ltd., Company Guarantee, 5.000%, 05/15/2021 | 53,393 |
| 15,000 | | Thomas & Betts Corp., Sr. Unsecd. Note, 5.625%, 11/15/2021 | 17,269 |
| 14,000 | | Valmont Industries, Inc., Sr. Unsecd. Note, 6.625%, 04/20/2020 | 15,724 |
| | | TOTAL | 452,385 |
| | | Capital Goods - Environmental—0.1% | |
| 85,000 | | Republic Services, Inc., Company Guarantee, 5.500%, 9/15/2019 | 93,985 |
| | | Capital Goods - Packaging—0.1% | |
| 45,000 | | Packaging Corp. of America, Sr. Unsecd. Note, 3.900%, 06/15/2022 | 46,771 |
| 10,000 | | Rock-Tenn Co., Sr. Unsecd. Note, 4.000%, 03/01/2023 | 10,182 |
| 10,000 | | Rock-Tenn Co., Sr. Unsecd. Note, 4.450%, 03/01/2019 | 10,514 |
| | | TOTAL | 67,467 |
| | | Communications - Cable & Satellite—0.3% | |
| 200,000 | 2,3 | CCO Safari II LLC, Series 144A, 4.908%, 7/23/2025 | 200,317 |
| 90,000 | | NBC Universal, Inc., Sr. Unsecd. Note, 5.150%, 04/30/2020 | 101,185 |
| 30,000 | | Time Warner Cable, Inc., Company Guarantee, 8.250%, 04/01/2019 | 34,574 |
| | | TOTAL | 336,076 |
| | | Communications - Media & Entertainment—0.5% | |
| 75,000 | | 21st Century Fox America, 8.000%, 10/17/2016 | 78,382 |
| 75,000 | | 21st Century Fox America, Inc., Sr. Unsecd. Note, 5.400%, 10/01/2043 | 75,449 |
| 30,000 | | Grupo Televisa S.A., Sr. Unsecd. Note, 6.125%, 01/31/2046 | 29,809 |
| 30,000 | | Interpublic Group of Cos., Inc., Sr. Unsecd. Note, 2.250%, 11/15/2017 | 29,972 |
| 25,000 | | Moody's Corp., Sr. Unsecd. Note, 5.500%, 09/01/2020 | 27,892 |
| 20,000 | | Omnicom Group, Inc., Sr. Unsecd. Note, 3.625%, 05/01/2022 | 20,583 |
| 100,000 | 2,3 | Pearson Funding Two PLC, Sr. Unsecd. Note, Series 144A, 4.000%, 05/17/2016 | 100,783 |
| 30,000 | | Viacom, Inc., 2.500%, 09/01/2018 | 29,846 |
| 25,000 | | Viacom, Inc., Sr. Unsecd. Note, 2.500%, 12/15/2016 | 25,118 |
| 100,000 | | Viacom, Inc., Sr. Unsecd. Note, 3.875%, 04/01/2024 | 91,582 |
| 150,000 | | WPP Finance 2010, Sr. Unsecd. Note, 5.625%, 11/15/2043 | 150,755 |
| | | TOTAL | 660,171 |
| | | Communications - Telecom Wireless—0.3% | |
| 100,000 | | American Tower Corp., Sr. Unsecd. Note, 3.400%, 02/15/2019 | 102,535 |
| 50,000 | | American Tower Corp., Sr. Unsecd. Note, 4.500%, 01/15/2018 | 52,195 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Communications - Telecom Wireless—continued | |
| $100,000 | 2,3 | Crown Castle Towers LLC, Sr. Secd. Note, Series 144A, 5.495%, 01/15/2017 | $101,792 |
| 30,000 | 2,3 | SBA Tower Trust, Series 144A, 5.101%, 04/17/2017 | 30,474 |
| 90,000 | | Telefonaktiebolaget LM Ericsson, Sr. Unsecd. Note, 4.125%, 05/15/2022 | 93,970 |
| | | TOTAL | 380,966 |
| | | Communications - Telecom Wirelines—0.3% | |
| 10,000 | | CenturyLink, Inc., Sr. Unsecd. Note, 7.650%, 3/15/2042 | 7,550 |
| 90,000 | | Verizon Communications, Inc., Sr. Unsecd. Note, 4.150%, 03/15/2024 | 93,692 |
| 175,000 | | Verizon Communications, Inc., Sr. Unsecd. Note, 5.150%, 09/15/2023 | 193,958 |
| 60,000 | | Verizon Communications, Inc., Sr. Unsecd. Note, 6.350%, 04/01/2019 | 67,820 |
| | | TOTAL | 363,020 |
| | | Consumer Cyclical - Automotive—0.6% | |
| 175,000 | | American Honda Finance Co, Series MTN, 0.794%, 07/14/2017 | 174,604 |
| 175,000 | | American Honda Finance Co, Unsecd. Deb., Series MTN, 2.250%, 8/15/2019 | 177,842 |
| 10,000 | | DaimlerChrysler North America Holding Corp., Company Guarantee, 8.500%, 01/18/2031 | 14,767 |
| 100,000 | | Ford Motor Co., Sr. Unsecd. Note, 4.750%, 01/15/2043 | 91,794 |
| 150,000 | | General Motors Financial Company, Inc., Sr. Unsecd. Note, 3.100%, 01/15/2019 | 148,842 |
| 20,000 | 2,3 | Harley-Davidson Financial Services, Inc., Company Guarantee, Series 144A, 3.875%, 03/15/2016 | 20,076 |
| 10,000 | 2,3 | Harley-Davidson Financial Services, Inc., Sr. Unsecd. Note, Series 144A, 2.700%, 03/15/2017 | 10,151 |
| 100,000 | 2,3 | Hyundai Capital America, Sr. Unsecd. Note, Series 144A, 2.875%, 08/09/2018 | 101,766 |
| 65,000 | 2,3 | RCI Banque SA, Sr. Unsecd. Note, Series 144A, 3.500%, 4/03/2018 | 65,177 |
| 20,000 | 2,3 | RCI Banque SA, Sr. Unsecd. Note, Series 144A, 4.600%, 04/12/2016 | 20,086 |
| | | TOTAL | 825,105 |
| | | Consumer Cyclical - Leisure—0.2% | |
| 200,000 | 2 | Football Trust V, Pass Thru Cert., Series 144A, 5.350%, 10/05/2020 | 221,557 |
| | | Consumer Cyclical - Lodging—0.1% | |
| 30,000 | | Hyatt Hotels Corp., Sr. Unsecd. Note, 3.375%, 07/15/2023 | 28,727 |
| 50,000 | | Marriott International, Inc., Sr. Unsecd. Note, 3.000%, 03/01/2019 | 51,070 |
| | | TOTAL | 79,797 |
| | | Consumer Cyclical - Retailers—0.6% | |
| 50,000 | | Advance Auto Parts, Inc., 4.500%, 12/01/2023 | 51,318 |
| 250,000 | | AutoZone, Inc., Sr. Unsecd. Note, 3.250%, 04/15/2025 | 245,219 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Consumer Cyclical - Retailers—continued | |
| $160,000 | | Dollar General Corp., Sr. Unsecd. Note, 4.150%, 11/01/2025 | $163,924 |
| 10,000 | | O'Reilly Automotive, Inc., Company Guarantee, 4.875%, 01/14/2021 | 10,983 |
| 35,000 | | Wal-Mart Stores, Inc., Sr. Unsecd. Note, 3.300%, 04/22/2024 | 36,730 |
| 300,000 | | Wal-Mart Stores, Inc., Sr. Unsecd. Note, 4.300%, 04/22/2044 | 312,030 |
| | | TOTAL | 820,204 |
| | | Consumer Cyclical - Services—0.1% | |
| 65,000 | | Expedia, Inc., Company Guarantee, 5.950%, 08/15/2020 | 71,103 |
| 10,000 | | University of Southern California, Sr. Unsecd. Note, 5.250%, 10/01/2111 | 11,908 |
| 70,000 | | Visa, Inc., Sr. Unsecd. Note, 3.150%, 12/14/2025 | 71,272 |
| | | TOTAL | 154,283 |
| | | Consumer Non-Cyclical - Food/Beverage—0.4% | |
| 100,000 | | Bottling Group LLC, Note, 5.500%, 04/01/2016 | 100,827 |
| 200,000 | 2,3 | Kerry Group Financial Services, Sr. Unsecd. Note, Series 144A, 3.200%, 04/09/2023 | 193,877 |
| 50,000 | | Mead Johnson Nutrition Co., Sr. Unsecd. Note, 4.125%, 11/15/2025 | 51,374 |
| 150,000 | | PepsiCo, Inc., 2.750%, 4/30/2025 | 149,171 |
| 30,000 | | The Coca-Cola Co., Sr. Unsecd. Note, 1.800%, 9/01/2016 | 30,184 |
| 35,000 | | Tyson Foods, Inc., Sr. Unsecd. Note, 4.500%, 06/15/2022 | 37,609 |
| | | TOTAL | 563,042 |
| | | Consumer Non-Cyclical - Health Care—0.0% | |
| 15,000 | | Agilent Technologies, Inc., Sr. Unsecd. Note, 3.200%, 10/01/2022 | 14,902 |
| 10,000 | | Laboratory Corp. of America Holdings, Sr. Unsecd. Note, 3.750%, 08/23/2022 | 10,140 |
| 10,000 | | Zimmer Holdings, Inc., Sr. Note, 5.750%, 11/30/2039 | 11,157 |
| | | TOTAL | 36,199 |
| | | Consumer Non-Cyclical - Pharmaceuticals—0.3% | |
| 10,000 | | Dentsply International, Inc., Sr. Unsecd. Note, 2.750%, 08/15/2016 | 10,074 |
| 300,000 | | Eli Lilly & Co., 3.700%, 03/01/2045 | 291,413 |
| 30,000 | | Pfizer, Inc., Sr. Unsecd. Note, 6.200%, 03/15/2019 | 33,942 |
| | | TOTAL | 335,429 |
| | | Consumer Non-Cyclical - Tobacco—0.0% | |
| 24,000 | | Altria Group, Inc., 9.250%, 08/06/2019 | 29,396 |
| 30,000 | | Philip Morris International, Inc., 5.650%, 05/16/2018 | 32,775 |
| | | TOTAL | 62,171 |
| | | Energy - Independent—0.2% | |
| 30,000 | | EOG Resources, Inc., Note, 5.625%, 06/01/2019 | 32,442 |
| 75,000 | | XTO Energy, Inc., 6.375%, 06/15/2038 | 100,731 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Energy - Independent—continued | |
| $60,000 | | XTO Energy, Inc., 6.750%, 08/01/2037 | $84,487 |
| | | TOTAL | 217,660 |
| | | Energy - Integrated—0.2% | |
| 30,000 | | BP Capital Markets America, Inc., Company Guarantee, 4.200%, 06/15/2018 | 31,189 |
| 75,000 | | Husky Energy, Inc., 4.000%, 04/15/2024 | 60,845 |
| 100,000 | | Husky Oil Ltd., Deb., 7.550%, 11/15/2016 | 102,041 |
| 90,000 | | Petrobras Global Finance BV, Sr. Unsecd. Note, 4.375%, 05/20/2023 | 59,507 |
| 50,000 | | Petrobras International Finance Co., Sr. Unsecd. Note, 5.375%, 01/27/2021 | 37,687 |
| 25,000 | | Petroleos Mexicanos, Sr. Unsecd. Note, 4.875%, 1/18/2024 | 22,685 |
| | | TOTAL | 313,954 |
| | | Energy - Midstream—0.4% | |
| 100,000 | | Energy Transfer Partners , Sr. Unsecd. Note, 4.050%, 3/15/2025 | 82,108 |
| 75,000 | | Energy Transfer Partners LP, Sr. Unsecd. Note, 4.900%, 02/01/2024 | 63,852 |
| 10,000 | 2,3 | Florida Gas Transmission Co. LLC, Sr. Unsecd. Note, Series 144A, 5.450%, 07/15/2020 | 10,774 |
| 150,000 | | Kinder Morgan Energy Partners LP, Sr. Unsecd. Note, 5.000%, 03/01/2043 | 108,493 |
| 100,000 | | Kinder Morgan, Inc., 5.050%, 2/15/2046 | 73,152 |
| 20,000 | 2,3 | Texas Eastern Transmission LP, Sr. Unsecd. Note, Series 144A, 2.800%, 10/15/2022 | 18,112 |
| 200,000 | | Williams Partners LP, 5.100%, 09/15/2045 | 130,086 |
| 40,000 | | Williams Partners LP, 5.250%, 03/15/2020 | 33,351 |
| 30,000 | | Williams Partners LP, Sr. Unsecd. Note, 4.125%, 11/15/2020 | 23,273 |
| | | TOTAL | 543,201 |
| | | Energy - Oil Field Services—0.1% | |
| 15,000 | | Nabors Industries, Inc., Company Guarantee, 5.000%, 09/15/2020 | 12,049 |
| 20,000 | | Nabors Industries, Inc., Sr. Unsecd. Note, 4.625%, 09/15/2021 | 14,891 |
| 50,000 | | Nabors Industries, Inc., Sr. Unsecd. Note, 5.100%, 09/15/2023 | 35,335 |
| 15,000 | | Noble Holding International Ltd., Company Guarantee, 4.900%, 08/01/2020 | 9,046 |
| | | TOTAL | 71,321 |
| | | Energy - Refining—0.2% | |
| 10,000 | | Marathon Petroleum Corp., Sr. Unsecd. Note, 6.500%, 03/01/2041 | 9,263 |
| 50,000 | | Phillips 66, Sr. Unsecd. Note, 4.300%, 04/01/2022 | 51,195 |
| 30,000 | | Valero Energy Corp., 7.500%, 04/15/2032 | 32,473 |
| 10,000 | | Valero Energy Corp., 9.375%, 03/15/2019 | 11,753 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Energy - Refining—continued | |
| $95,000 | | Valero Energy Corp., Sr. Unsecd. Note, 6.625%, 06/15/2037 | $92,558 |
| | | TOTAL | 197,242 |
| | | Financial Institution - Banking—3.1% | |
| 74,000 | | American Express Co., 2.650%, 12/02/2022 | 72,192 |
| 50,000 | | American Express Credit Corp., Sr. Unsecd. Note, Series MTN, 2.800%, 09/19/2016 | 50,570 |
| 40,000 | | Associated Banc-Corp., Sr. Unsecd. Note, 5.125%, 03/28/2016 | 40,109 |
| 50,000 | | BB&T Corp., Sr. Unsecd. Note, Series MTN, 2.250%, 02/01/2019 | 50,590 |
| 100,000 | | Bank of America Corp., Sr. Unsecd. Note, Series MTN, 5.000%, 5/13/2021 | 109,684 |
| 200,000 | | Bank of America Corp., Sub. Note, Series L, 3.950%, 4/21/2025 | 195,427 |
| 50,000 | | Bank of Montreal, Sr. Unsecd. Note, Series MTN, 1.450%, 04/09/2018 | 49,821 |
| 250,000 | | Branch Banking & Trust Co., Sub. Note, 3.800%, 10/30/2026 | 258,655 |
| 120,000 | | Capital One Financial Corp., Sr. Sub., 4.200%, 10/29/2025 | 120,479 |
| 250,000 | | Citigroup, Inc., Sr. Unsecd. Note, 3.300%, 04/27/2025 | 244,540 |
| 100,000 | | Citigroup, Inc., Sub. Note, 4.450%, 09/29/2027 | 99,158 |
| 25,000 | | City National Corp., Sr. Unsecd. Note, 5.250%, 09/15/2020 | 27,897 |
| 30,000 | | Comerica, Inc., 3.800%, 7/22/2026 | 30,253 |
| 200,000 | | Fifth Third Bancorp, Sr. Unsecd. Note, 1.350%, 06/01/2017 | 199,766 |
| 80,000 | | Fifth Third Bancorp, Sr. Unsecd. Note, 2.875%, 7/27/2020 | 81,002 |
| 275,000 | | Goldman Sachs Group, Inc., Sr. Unsecd. Note, 3.625%, 01/22/2023 | 278,989 |
| 25,000 | | Goldman Sachs Group, Inc., Sr. Unsecd. Note, 6.125%, 02/15/2033 | 29,069 |
| 30,000 | | Goldman Sachs Group, Inc., Sr. Unsecd. Note, 6.150%, 04/01/2018 | 32,506 |
| 150,000 | | Goldman Sachs Group, Inc., Sr. Unsecd. Note, 6.250%, 02/01/2041 | 177,545 |
| 50,000 | | HSBC Holdings PLC, Sr. Unsecd. Note, 5.100%, 04/05/2021 | 55,683 |
| 250,000 | | Huntington National Bank, Sr. Unsecd. Note, 2.200%, 04/01/2019 | 249,109 |
| 175,000 | | JPMorgan Chase & Co., Sr. Unsecd. Note, 4.850%, 02/01/2044 | 186,592 |
| 400,000 | | JPMorgan Chase & Co., Sub. Note, 3.375%, 05/01/2023 | 389,917 |
| 250,000 | | Manufacturers & Traders T, Sr. Unsecd. Note, Series BKNT, 0.919%, 07/25/2017 | 248,671 |
| 65,000 | | Morgan Stanley, Sr. Unsecd. Note, 4.750%, 03/22/2017 | 67,340 |
| 150,000 | | Morgan Stanley, Sr. Unsecd. Note, 6.375%, 07/24/2042 | 185,009 |
| 175,000 | | Morgan Stanley, Sub. Note, Series MTN, 4.100%, 5/22/2023 | 177,474 |
| 20,000 | | Murray Street Investment Trust I, Sr. Unsecd. Note, 4.647%, 03/09/2017 | 20,553 |
| 30,000 | | Wachovia Corp., Sr. Unsecd. Note, Series MTN, 5.750%, 2/01/2018 | 32,396 |
| 85,000 | | Wells Fargo & Co., Sub. Note, Series GMTN, 4.900%, 11/17/2045 | 86,036 |
| 70,000 | | Westpac Banking Corp., Sr. Unsecd. Note, 4.875%, 11/19/2019 | 76,943 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Financial Institution - Banking—continued | |
| $100,000 | | Wilmington Trust Corp., Sub. Note, 8.500%, 04/02/2018 | $112,870 |
| | | TOTAL | 4,036,845 |
| | | Financial Institution - Broker/Asset Mgr/Exchange—0.2% | |
| 80,000 | | Invesco Finance PLC, Sr. Unsecd. Note, 3.750%, 1/15/2026 | 81,843 |
| 40,000 | | Jefferies Group LLC, Sr. Unsecd. Note, 6.500%, 01/20/2043 | 37,222 |
| 125,000 | | Jefferies Group LLC, Sr. Unsecd. Note, 6.875%, 04/15/2021 | 141,077 |
| 13,000 | | Raymond James Financial, Inc., Sr. Unsecd. Note, 5.625%, 04/01/2024 | 14,640 |
| | | TOTAL | 274,782 |
| | | Financial Institution - Finance Companies—0.0% | |
| 30,000 | | General Electric Capital, Sr. Unsecd. Note, Series GMTN, 3.100%, 01/09/2023 | 31,170 |
| | | Financial Institution - Insurance - Health—0.1% | |
| 45,000 | | UnitedHealth Group, Inc., Sr. Unsecd. Note, 4.750%, 07/15/2045 | 48,379 |
| 50,000 | | Wellpoint, Inc., 5.850%, 01/15/2036 | 56,666 |
| | | TOTAL | 105,045 |
| | | Financial Institution - Insurance - Life—0.8% | |
| 200,000 | | Aflac, Inc., Sr. Unsecd. Note, 3.625%, 06/15/2023 | 208,139 |
| 10,000 | | Aflac, Inc., Sr. Unsecd. Note, 6.900%, 12/17/2039 | 13,066 |
| 25,000 | | American International Group, Inc., 4.500%, 7/16/2044 | 21,887 |
| 35,000 | | American International Group, Inc., Sr. Unsecd. Note, 4.125%, 02/15/2024 | 35,059 |
| 10,000 | | Lincoln National Corp., Sr. Unsecd. Note, 4.200%, 03/15/2022 | 10,461 |
| 10,000 | | MetLife, Inc., Jr. Sub. Note, 10.750%, 8/01/2039 | 15,380 |
| 250,000 | | MetLife, Inc., Sr. Unsecd. Note, 3.600%, 04/10/2024 | 254,294 |
| 250,000 | | MetLife, Inc., Sr. Unsecd. Note, 4.050%, 03/01/2045 | 225,795 |
| 15,000 | 2,3 | Penn Mutual Life Insurance Co., Sr. Note, Series 144A, 7.625%, 06/15/2040 | 20,240 |
| 10,000 | | Principal Financial Group, Inc., Sr. Unsecd. Note, 3.125%, 05/15/2023 | 9,926 |
| 10,000 | | Principal Financial Group, Inc., Sr. Unsecd. Note, 3.300%, 09/15/2022 | 10,198 |
| 150,000 | | Prudential Financial, Inc., Sr. Unsecd. Note, Series MTN, 5.625%, 05/12/2041 | 164,929 |
| 50,000 | | Prudential Financial, Inc., Sr. Unsecd. Note, Series MTN, 6.200%, 11/15/2040 | 58,787 |
| | | TOTAL | 1,048,161 |
| | | Financial Institution - Insurance - P&C—0.3% | |
| 1,000 | | ACE INA Holdings, Inc., Sr. Note, 5.700%, 02/15/2017 | 1,044 |
| 75,000 | | CNA Financial Corp., 6.500%, 08/15/2016 | 76,969 |
| 30,000 | | CNA Financial Corp., Sr. Unsecd. Note, 7.350%, 11/15/2019 | 34,605 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Financial Institution - Insurance - P&C—continued | |
| $20,000 | | Chubb Corp., Sr. Note, 5.750%, 05/15/2018 | $21,889 |
| 100,000 | 2,3 | Liberty Mutual Group, Inc., 4.850%, Series 144A, 8/01/2044 | 95,366 |
| 65,000 | 2,3 | Nationwide Mutual Insurance Co., Sub. Note, Series 144A, 9.375%, 08/15/2039 | 96,766 |
| | | TOTAL | 326,639 |
| | | Financial Institution - REIT - Apartment—0.0% | |
| 20,000 | | Post Apartment Homes LP, Sr. Unsecd. Note, 3.375%, 12/01/2022 | 20,059 |
| 10,000 | | UDR, Inc., Company Guarantee, 4.625%, 01/10/2022 | 10,887 |
| | | TOTAL | 30,946 |
| | | Financial Institution - REIT - Healthcare—0.1% | |
| 40,000 | | Health Care REIT, Inc., Sr. Unsecd. Note, 6.125%, 04/15/2020 | 45,301 |
| 50,000 | | Healthcare Trust of America, 3.700%, 04/15/2023 | 49,596 |
| | | TOTAL | 94,897 |
| | | Financial Institution - REIT - Office—0.1% | |
| 50,000 | | Alexandria Real Estate Equities, Inc., Sr. Unsecd. Note, 3.900%, 06/15/2023 | 50,461 |
| 50,000 | | Alexandria Real Estate Equities, Inc., Sr. Unsecd. Note, 4.600%, 04/01/2022 | 53,484 |
| 55,000 | | Boston Properties LP, Sr. Unsecd. Note, 5.875%, 10/15/2019 | 61,446 |
| | | TOTAL | 165,391 |
| | | Financial Institution - REIT - Other—0.2% | |
| 75,000 | | Liberty Property LP, 6.625%, 10/01/2017 | 80,180 |
| 50,000 | | ProLogis LP, Sr. Unsecd. Note, 3.350%, 02/01/2021 | 51,156 |
| 75,000 | | WP Carey, Inc., Sr. Unsecd. Note, 4.600%, 04/01/2024 | 75,319 |
| | | TOTAL | 206,655 |
| | | Financial Institution - REIT - Retail—0.1% | |
| 20,000 | | Equity One, Inc., Bond, 6.000%, 09/15/2017 | 21,182 |
| 50,000 | | Kimco Realty Corp., Sr. Unsecd. Note, 3.400%, 11/01/2022 | 50,658 |
| 20,000 | | Regency Centers LP, Company Guarantee, 4.800%, 04/15/2021 | 21,788 |
| 30,000 | | Tanger Properties LP, Sr. Unsecd. Note, 6.125%, 06/01/2020 | 34,391 |
| | | TOTAL | 128,019 |
| | | Sovereign—0.0% | |
| 30,000 | | Corp Andina De Fomento, Sr. Unsecd. Note, 4.375%, 06/15/2022 | 32,805 |
| | | Technology—0.7% | |
| 45,000 | | Apple, Inc., Sr. Unsecd. Note, 1.000%, 05/03/2018 | 44,793 |
| 30,000 | | Apple, Inc., Sr. Unsecd. Note, 2.400%, 05/03/2023 | 29,479 |
| 115,000 | | Autodesk, Inc., Sr. Unsecd. Note, 4.375%, 6/15/2025 | 115,514 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Technology—continued | |
| $140,000 | | Automatic Data Processing, Inc., 3.375%, 9/15/2025 | $145,407 |
| 60,000 | | Cisco Systems, Inc., Sr. Unsecd. Note, 5.500%, 02/22/2016 | 60,184 |
| 20,000 | | Corning, Inc., Unsecd. Note, 4.750%, 03/15/2042 | 19,473 |
| 180,000 | | Fidelity National Informa, Sr. Unsecd. Note, 5.000%, 10/15/2025 | 188,262 |
| 100,000 | | Fidelity National Information Services, Inc., Sr. Unsecd. Note, 3.500%, 04/15/2023 | 96,771 |
| 70,000 | 2,3 | Hewlett Packard Enterprise Co., Sr. Unsecd. Note, Series 144A, 3.600%, 10/15/2020 | 70,259 |
| 20,000 | | Ingram Micro, Inc., Sr. Unsecd. Note, 5.000%, 08/10/2022 | 20,275 |
| 30,000 | | Intel Corp., Sr. Unsecd. Note, 4.900%, 7/29/2045 | 31,159 |
| 10,000 | | Verisk Analytics, Inc., Sr. Unsecd. Note, 4.125%, 09/12/2022 | 10,304 |
| 25,000 | | Verisk Analytics, Inc., Sr. Unsecd. Note, 4.875%, 01/15/2019 | 26,365 |
| 50,000 | | Verisk Analytics, Inc., Sr. Unsecd. Note, 5.500%, 6/15/2045 | 47,992 |
| 20,000 | | Xerox Corp., Sr. Unsecd. Note, 2.950%, 03/15/2017 | 20,056 |
| | | TOTAL | 926,293 |
| | | Transportation - Airlines—0.1% | |
| 130,000 | | Southwest Airlines Co., Sr. Unsecd. Note, 5.125%, 03/01/2017 | 134,839 |
| | | Transportation - Railroads—0.1% | |
| 50,000 | | Burlington Northern Santa Fe Corp., Deb., 5.750%, 05/01/2040 | 57,374 |
| 30,000 | 2,3 | Kansas City Southern Industries, Inc., Sr. Unsecd. Note, Series 144A, 3.000%, 5/15/2023 | 29,157 |
| | | TOTAL | 86,531 |
| | | Transportation - Services—0.1% | |
| 90,000 | 2,3 | Enterprise Rent-A-Car USA Finance Co., Series 144A, 6.375%, 10/15/2017 | 96,380 |
| 50,000 | | Ryder System, Inc., Sr. Unsecd. Note, Series MTN, 2.450%, 11/15/2018 | 50,232 |
| 30,000 | | United Parcel Service, Inc., Sr. Unsecd. Note, 3.125%, 01/15/2021 | 31,569 |
| | | TOTAL | 178,181 |
| | | Utility - Electric—0.4% | |
| 5,000 | | Consolidated Edison Co., Sr. Unsecd. Note, 6.650%, 04/01/2019 | 5,702 |
| 70,000 | 2,3 | Electricite de France SA, Note, Series 144A, 5.600%, 01/27/2040 | 77,501 |
| 100,000 | | Exelon Generation Co. LLC, Sr. Unsecd. Note, 4.250%, 06/15/2022 | 97,219 |
| 10,000 | | Great Plains Energy, Inc., Note, 4.850%, 06/01/2021 | 10,911 |
| 9,600 | 2,3 | Great River Energy, 1st Mtg. Note, Series 144A, 5.829%, 7/01/2017 | 9,834 |
| 25,000 | | National Rural Utilities, Sr. Unsecd. Note, Series MTNC, 8.000%, 3/01/2032 | 35,312 |
| 50,000 | | NextEra Energy Capital Holdings, Inc., Sr. Unsecd. Note, 2.700%, 09/15/2019 | 50,186 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | CORPORATE BONDS—continued | |
| | | Utility - Electric—continued | |
| $80,000 | | Northern States Power Co., MN, 1st Mtg. Bond, 5.250%, 03/01/2018 | $86,273 |
| 75,000 | | PSI Energy, Inc., Bond, 6.050%, 06/15/2016 | 76,441 |
| 50,000 | | Progress Energy, Inc., 7.050%, 03/15/2019 | 57,118 |
| 10,000 | | TECO Finance, Inc., Company Guarantee, 5.150%, 03/15/2020 | 10,842 |
| 40,000 | | UIL Holdings Corp., Sr. Unsecd. Note, 4.625%, 10/01/2020 | 42,788 |
| | | TOTAL | 560,127 |
| | | Utility - Natural Gas—0.2% | |
| 20,000 | | Atmos Energy Corp., 8.500%, 03/15/2019 | 23,514 |
| 100,000 | | Atmos Energy Corp., Sr. Unsecd. Note, 4.125%, 10/15/2044 | 99,745 |
| 50,000 | | Enbridge Energy Partners LP, Sr. Unsecd. Note, 4.200%, 09/15/2021 | 47,925 |
| 40,000 | | Enbridge, Inc., Sr. Note, 5.600%, 04/01/2017 | 41,203 |
| 65,000 | | National Fuel Gas Co., Sr. Unsecd. Note, 3.750%, 03/01/2023 | 55,318 |
| 55,000 | | Sempra Energy, Sr. Unsecd. Note, 6.500%, 06/01/2016 | 55,974 |
| | | TOTAL | 323,679 |
| | | TOTAL CORPORATE BONDS
(IDENTIFIED COST $16,896,984) | 16,923,540 |
| | | MORTGAGE-BACKED SECURITY—0.0% | |
| | | Federal National Mortgage Association—0.0% | |
| 1,108 | | Federal National Mortgage Association Pool 609554,
7.500%, 10/1/2016
(IDENTIFIED COST $1,149) | 1,128 |
| | | MUNICIPAL BOND—0.1% | |
| | | Municipal Services—0.1% | |
| 70,000 | | Chicago, IL Metropolitan Water Reclamation District, Direct Payment Taxable Limited GO Build America Bonds, 5.720%, 12/01/2038
(IDENTIFIED COST $70,000) | 83,535 |
| | | U.S. TREASURY—2.6% | |
| 850,000 | | United States Treasury Note, 1.000%, 12/31/2017 | 853,400 |
| 550,000 | | United States Treasury Note, 1.375%, 10/31/2020 | 551,479 |
| 50,000 | | United States Treasury Note, 1.625%, 12/31/2019 | 50,821 |
| 10,000 | | United States Treasury Note, 2.250%, 11/15/2024 | 10,302 |
| 600,000 | | United States Treasury Note, 2.250%, 11/15/2025 | 617,344 |
| 300,000 | | United States Treasury Bond, 3.000%, 11/15/2045 | 315,445 |
| 25,198 | | U.S. Treasury Inflation-Protected Bond, 0.750%, 2/15/2045 | 22,656 |
| 359,502 | | U.S. Treasury Inflation-Protected Bond, Series TIPS of, 1.375%, 2/15/2044 | 376,820 |
| 250,220 | | U.S. Treasury Inflation-Protected Note, 0.375%, 7/15/2025 | 247,178 |
| 157,302 | | U.S. Treasury Inflation-Protected Note, Series A-2022, 0.125%, 1/15/2022 | 155,496 |
Semi-Annual Shareholder Report
Shares or
Principal
Amount | | | Value |
| | | U.S. TREASURY—continued | |
| $174,932 | 5 | U.S. Treasury Inflation-Protected Note, Series D-2024, 0.125%, 7/15/2024 | $169,711 |
| | | TOTAL U.S. TREASURY
(IDENTIFIED COST $3,366,338) | 3,370,652 |
| | | EXCHANGE-TRADED FUNDS—6.8% | |
| 111,500 | | iShares Currency Hedged MSCI EAFE ETF | 2,712,795 |
| 113,000 | | iShares MSCI EAFE ETF | 6,269,240 |
| | | TOTAL EXCHANGE-TRADED FUNDS
(IDENTIFIED COST $10,837,195) | 8,982,035 |
| | | INVESTMENT COMPANIES—22.3%6 | |
| 38,253 | | Emerging Markets Fixed Income Core Fund | 1,288,916 |
| 157,625 | | Federated Bank Loan Core Fund | 1,521,084 |
| 1,337,026 | | Federated Mortgage Core Portfolio | 13,316,782 |
| 6,416,038 | | Federated Prime Value Obligations Fund, Institutional Shares, 0.35%7 | 6,416,038 |
| 261,401 | | Federated Project and Trade Finance Core Fund | 2,444,102 |
| 737,926 | | High Yield Bond Portfolio | 4,228,314 |
| | | TOTAL INVESTMENT COMPANIES
(IDENTIFIED COST $30,393,937) | 29,215,236 |
| | | TOTAL INVESTMENTS—98.6%
(IDENTIFIED COST $137,424,691)8 | 129,488,104 |
| | | OTHER ASSETS AND LIABILITIES - NET—1.4%9 | 1,869,415 |
| | | TOTAL NET ASSETS—100% | $131,357,519 |
At January 31, 2016, the Fund had the following outstanding futures contracts:
| Description | Number of
Contracts | Notional
Value | Expiration
Date | Unrealized
Appreciation
(Depreciation) |
| 1United States Treasury Note 2-Year Long Futures | 70 | $15,303,750 | March 2016 | $70,308 |
| 1United States Treasury Ultra Bond Long Futures | 8 | $1,329,500 | March 2016 | $61,629 |
| 1United States Treasury Note 5-Year Short Futures | 43 | $5,188,891 | March 2016 | $(88,452) |
| 1United States Treasury Note 10-Year Short Futures | 37 | $4,794,391 | March 2016 | $(123,399) |
| 1United States Treasury Long Bond Short Futures | 2 | $322,062 | March 2016 | $(14,755) |
| NET UNREALIZED DEPRECIATION ON FUTURES CONTRACTS | $(94,669) |
Net Unrealized Depreciation on Futures Contracts is included in “Other Assets and Liabilities—Net.”
Semi-Annual Shareholder Report
| 1 | Non-income-producing security. |
| 2 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At January 31, 2016, these restricted securities amounted to $2,732,188, which represented 2.1% of total net assets. |
| 3 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Trustees (the “Trustees”). At January 31, 2016, these liquid restricted securities amounted to $2,510,631, which represented 1.9% of total net assets. |
| 4 | JPMorgan Chase & Co. has fully and unconditionally guaranteed Bear Stearns' outstanding registered debt securities. |
| 5 | All or a portion of this security is pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding futures contracts. |
| 6 | Affiliated holdings. |
| 7 | 7-day net yield. |
| 8 | The cost of investments for federal tax purposes amounts to $137,424,475. |
| 9 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at January 31, 2016.
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.
Semi-Annual Shareholder Report
The following is a summary of the inputs used, as of January 31, 2016, 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 |
| Equity Securities: | | | | |
| Common Stocks | | | | |
| Domestic | $63,409,203 | $— | $— | $63,409,203 |
| International | 2,969,592 | — | — | 2,969,592 |
| Debt Securities: | | | | |
| Asset-Backed Securities | — | 1,349,856 | — | 1,349,856 |
| Collateralized Mortgage Obligations | — | 3,183,327 | — | 3,183,327 |
| Corporate Bonds | — | 16,923,540 | — | 16,923,540 |
| Mortgage-Backed Security | — | 1,128 | — | 1,128 |
| Municipal Bond | — | 83,535 | — | 83,535 |
| U.S. Treasury | — | 3,370,652 | — | 3,370,652 |
| Exchange-Traded Funds | 8,982,035 | — | — | 8,982,035 |
| Investment Companies1 | 6,416,038 | 22,799,198 | — | 29,215,236 |
| TOTAL SECURITIES | $81,776,868 | $47,711,236 | $— | $129,488,104 |
| Other Financial Instruments2 | | | | |
| Assets | $— | $— | $— | $— |
| Liabilities | (94,669) | — | — | (94,669) |
| TOTAL OTHER FINANCIAL INSTRUMENTS | $(94,669) | $— | $— | $(94,669) |
| 1 | Emerging Markets Fixed Income Core Fund, Federated Mortgage Core Portfolio, Federated Project and Trade Finance Core Fund and High Yield Bond Portfolio are affiliated holdings offered only to registered investment companies and other accredited investors. Investments in these funds are deemed Level 2 due to the fact that the net asset value (the NAV) is not publicly available and, with respect to Federated Project and Trade Finance Core Fund, due to the fact that the price of shares redeemed may be determined as of the closing NAV of the fund up to twenty-four days after receipt of a shareholder redemption request. |
| 2 | Other financial instruments include futures contracts. |
The following acronyms are used throughout this portfolio:
| GO | —General Obligation |
| MTN | —Medium Term Note |
| REMIC | —Real Estate Mortgage Investment Conduit |
| REIT | —Real Estate Investment Trust |
| TIPS | —Treasury Inflation Protected Notes |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $16.83 | $16.07 | $14.35 | $12.20 | $12.17 | $10.86 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.121 | 0.201 | 0.171 | 0.141 | 0.171 | 0.151 |
| Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions | (1.57) | 0.74 | 1.70 | 2.19 | 0.02 | 1.33 |
| TOTAL FROM INVESTMENT OPERATIONS | (1.45) | 0.94 | 1.87 | 2.33 | 0.19 | 1.48 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.24) | (0.18) | (0.15) | (0.18) | (0.16) | (0.17) |
| Net Asset Value, End of Period | $15.14 | $16.83 | $16.07 | $14.35 | $12.20 | $12.17 |
| Total Return2 | (8.69)% | 5.89% | 13.06% | 19.28% | 1.65% | 13.67% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.31%3 | 1.30% | 1.30% | 1.30% | 1.30% | 1.28% |
| Net investment income | 1.45%3 | 1.21% | 1.10% | 1.10% | 1.43% | 1.27% |
| Expense waiver/reimbursement4 | 0.11%3 | 0.09% | 0.10% | 0.11% | 0.28% | 0.23% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $56,523 | $62,555 | $55,634 | $50,340 | $48,774 | $57,358 |
| Portfolio turnover | 51% | 89% | 34% | 105% | 149% | 139% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | 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
Financial Highlights–Class C Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $16.59 | $15.84 | $14.16 | $12.03 | $11.99 | $10.70 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.061 | 0.071 | 0.051 | 0.041 | 0.081 | 0.061 |
| Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions | (1.56) | 0.74 | 1.67 | 2.16 | 0.03 | 1.31 |
| TOTAL FROM INVESTMENT OPERATIONS | (1.50) | 0.81 | 1.72 | 2.20 | 0.11 | 1.37 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.10) | (0.06) | (0.04) | (0.07) | (0.07) | (0.08) |
| Net Asset Value, End of Period | $14.99 | $16.59 | $15.84 | $14.16 | $12.03 | $11.99 |
| Total Return2 | (9.05)% | 5.12% | 12.14% | 18.41% | 0.93% | 12.85% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 2.06%3 | 2.05% | 2.05% | 2.05% | 2.05% | 2.04% |
| Net investment income | 0.70%3 | 0.45% | 0.34% | 0.36% | 0.68% | 0.52% |
| Expense waiver/reimbursement4 | 0.08%3 | 0.06% | 0.07% | 0.08% | 0.24% | 0.19% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $28,313 | $31,571 | $34,522 | $35,450 | $34,193 | $45,512 |
| Portfolio turnover | 51% | 89% | 34% | 105% | 149% | 139% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | 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
Financial Highlights–Class R Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $16.80 | $16.05 | $14.33 | $12.17 | $12.12 | $10.83 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.101 | 0.161 | 0.131 | 0.091 | 0.111 | 0.091 |
| Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions | (1.57) | 0.74 | 1.69 | 2.19 | 0.03 | 1.32 |
| TOTAL FROM INVESTMENT OPERATIONS | (1.47) | 0.90 | 1.82 | 2.28 | 0.14 | 1.41 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.20) | (0.15) | (0.10) | (0.12) | (0.09) | (0.12) |
| Net Asset Value, End of Period | $15.13 | $16.80 | $16.05 | $14.33 | $12.17 | $12.12 |
| Total Return2 | (8.79)% | 5.61% | 12.72% | 18.84% | 1.19% | 13.08% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.56%3 | 1.56% | 1.57% | 1.69% | 1.80% | 1.79% |
| Net investment income | 1.21%3 | 0.96% | 0.84% | 0.70% | 0.93% | 0.77% |
| Expense waiver/reimbursement4 | 0.04%3 | 0.03% | 0.05% | 0.06% | 0.22% | 0.17% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $558 | $532 | $464 | $417 | $526 | $665 |
| Portfolio turnover | 51% | 89% | 34% | 105% | 149% | 139% |
| 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 | 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
Financial Highlights–Institutional Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $16.87 | $16.11 | $14.39 | $12.23 | $12.21 | $10.90 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.141 | 0.241 | 0.211 | 0.181 | 0.201 | 0.181 |
| Net realized and unrealized gain (loss) on investments, futures contracts, swap contracts and foreign currency transactions | (1.57) | 0.74 | 1.69 | 2.19 | 0.02 | 1.34 |
| TOTAL FROM INVESTMENT OPERATIONS | (1.43) | 0.98 | 1.90 | 2.37 | 0.22 | 1.52 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.28) | (0.22) | (0.18) | (0.21) | (0.20) | (0.21) |
| Net Asset Value, End of Period | $15.16 | $16.87 | $16.11 | $14.39 | $12.23 | $12.21 |
| Total Return2 | (8.57)% | 6.13% | 13.30% | 19.63% | 1.87% | 13.99% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.06%3 | 1.05% | 1.05% | 1.05% | 1.05% | 1.04% |
| Net investment income | 1.70%3 | 1.46% | 1.35% | 1.35% | 1.69% | 1.52% |
| Expense waiver/reimbursement4 | 0.06%3 | 0.04% | 0.06% | 0.07% | 0.23% | 0.18% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $45,963 | $53,291 | $49,667 | $46,365 | $43,341 | $47,473 |
| Portfolio turnover | 51% | 89% | 34% | 105% | 149% | 139% |
| 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 | 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
January 31, 2016 (unaudited)
| Assets: | | |
| Total investment in securities, at value including $29,215,236 of investment in affiliated holdings (Note 5) (identified cost $137,424,691) | | $129,488,104 |
| Income receivable | | 293,028 |
| Receivable for investments sold | | 2,267,190 |
| Receivable for shares sold | | 179,275 |
| TOTAL ASSETS | | 132,227,597 |
| Liabilities: | | |
| Payable for investments purchased | $570,481 | |
| Payable for shares redeemed | 119,189 | |
| Bank overdraft | 7,234 | |
| Payable for daily variation margin on futures contracts | 14,244 | |
| Payable to adviser (Note 5) | 7,316 | |
| Payable for transfer agent fee | 25,842 | |
| Payable for portfolio accounting fees | 37,141 | |
| Payable for distribution services fee (Note 5) | 18,587 | |
| Payable for other service fees (Notes 2 and 5) | 46,835 | |
| Accrued expenses (Note 5) | 23,209 | |
| TOTAL LIABILITIES | | 870,078 |
| Net assets for 8,690,955 shares outstanding | | $131,357,519 |
| Net Assets Consist of: | | |
| Paid-in capital | | $151,400,015 |
| Net unrealized depreciation of investments and futures contracts | | (8,031,256) |
| Accumulated net realized loss on investments and futures contracts | | (12,141,962) |
| Undistributed net investment income | | 130,722 |
| TOTAL NET ASSETS | | $131,357,519 |
Semi-Annual Shareholder Report
Statement of Assets and Liabilities–continued
| Net Asset Value, Offering Price and Redemption Proceeds Per Share | | |
| Class A Shares: | | |
| Net asset value per share ($56,522,529 ÷ 3,733,969 shares outstanding), no par value, unlimited shares authorized | | $15.14 |
| Offering price per share (100/94.50 of $15.14) | | $16.02 |
| Redemption proceeds per share | | $15.14 |
| Class C Shares: | | |
| Net asset value per share ($28,313,426 ÷ 1,888,805 shares outstanding), no par value, unlimited shares authorized | | $14.99 |
| Offering price per share | | $14.99 |
| Redemption proceeds per share (99.00/100 of $14.99) | | $14.84 |
| Class R Shares: | | |
| Net asset value per share ($558,340 ÷ 36,903 shares outstanding), no par value, unlimited shares authorized | | $15.13 |
| Offering price per share | | $15.13 |
| Redemption proceeds per share | | $15.13 |
| Institutional Shares: | | |
| Net asset value per share ($45,963,224 ÷ 3,031,278 shares outstanding), no par value, unlimited shares authorized | | $15.16 |
| Offering price per share | | $15.16 |
| Redemption proceeds per share | | $15.16 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended January 31, 2016 (unaudited)
| Investment Income: | | | |
| Dividends (including $416,553 received from affiliated holdings (Note 5) and net of foreign taxes withheld of $189) | | | $1,464,745 |
| Interest | | | 461,602 |
| Investment income allocated from affiliated partnership (Note 5) | | | 31,631 |
| TOTAL INCOME | | | 1,957,978 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $533,045 | |
| Administrative fee (Note 5) | | 55,615 | |
| Custodian fees | | 23,280 | |
| Transfer agent fee (Note 2) | | 74,434 | |
| Directors'/Trustees' fees (Note 5) | | 1,341 | |
| Auditing fees | | 15,231 | |
| Legal fees | | 3,915 | |
| Portfolio accounting fees | | 55,318 | |
| Distribution services fee (Note 5) | | 115,699 | |
| Other service fees (Notes 2 and 5) | | 111,478 | |
| Share registration costs | | 29,162 | |
| Printing and postage | | 15,285 | |
| Miscellaneous (Note 5) | | 7,786 | |
| EXPENSES BEFORE ALLOCATION | | 1,041,589 | |
Expenses allocated from affiliated partnership
(Note 2) | | 365 | |
| TOTAL EXPENSES | | 1,041,954 | |
Semi-Annual Shareholder Report
Statement of Operations–continued
| Waiver and Reimbursements: | | | |
| Waiver/reimbursement of investment adviser fee (Note 5) | $(31,065) | | |
Reimbursement of other operating expenses
(Notes 2 and 5) | (30,912) | | |
| TOTAL WAIVER AND REIMBURSEMENTS | | $(61,977) | |
| Net expenses | | | $979,977 |
| Net investment income | | | 978,001 |
| Realized and Unrealized Gain (Loss) on Investments and Futures Contracts: | | | |
| Net realized gain on investments (including realized gain of $167,502 on sales of investments in affiliated holdings (Note 5)) | | | 2,149,706 |
| Net realized loss on futures contracts | | | (109,600) |
| Net realized loss on investments, swap contracts and foreign currency transactions allocated from affiliated partnership (Note 5) | | | (53,228) |
| Net change in unrealized appreciation of investments | | | (15,832,617) |
| Net change in unrealized depreciation of futures contracts | | | (41,574) |
| Net realized and unrealized loss on investments and futures contracts | | | (13,887,313) |
| Change in net assets resulting from operations | | | $(12,909,312) |
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)
1/31/2016 | Year Ended
7/31/2015 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $978,001 | $1,631,758 |
| Net realized gain on investments including allocations from partnership and futures contracts | 1,986,878 | 18,811,985 |
| Net change in unrealized appreciation/depreciation of investments and futures contracts | (15,874,191) | (12,482,552) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | (12,909,312) | 7,961,191 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | | |
| Class A Shares | (912,021) | (627,231) |
| Class C Shares | (200,679) | (120,251) |
| Class R Shares | (7,400) | (4,641) |
| Institutional Shares | (830,257) | (724,945) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (1,950,357) | (1,477,068) |
| Share Transactions: | | |
| Proceeds from sale of shares | 11,491,426 | 27,367,111 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 1,804,806 | 1,374,214 |
| Cost of shares redeemed | (15,028,993) | (27,563,013) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (1,732,761) | 1,178,312 |
| Change in net assets | (16,592,430) | 7,662,435 |
| Net Assets: | | |
| Beginning of period | 147,949,949 | 140,287,514 |
| End of period (including undistributed net investment income of $130,722 and $1,103,078, respectively) | $131,357,519 | $147,949,949 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
January 31, 2016 (unaudited)
1. ORGANIZATION
Federated MDT 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 five portfolios. The financial statements included herein are only those of Federated MDT Balanced Fund (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 Fund offers four classes of shares: Class A Shares, Class C Shares, Class R Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is the possibility of long-term growth of capital and income.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
| ■ | Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market. |
| ■ | Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the 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. |
Semi-Annual Shareholder Report
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 MDTA LLC (“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.
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; |
Semi-Annual Shareholder Report
| ■ | Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; |
| ■ | 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. Positive or negative inflation adjustments on Treasury Inflation-Protected Securities (TIPS) are included in interest income. Distributions of net investment income are declared and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Fund may also invest in Emerging Markets Fixed
Semi-Annual Shareholder Report
Income Core Fund (EMCORE), a portfolio of Federated Core Trust II, L.P. which is a limited partnership established under the laws of the state of Delaware. The Fund records daily its proportionate share of income, expenses, realized and unrealized gains and losses from EMCORE.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares, Class C Shares, Class R Shares and Institutional Shares may bear distribution services fees, other service fees and certain transfer agent fees unique to those classes. The detail of total fund expense waivers and reimbursements of $61,977 is disclosed in various locations in this Note 2 and Note 5. For the six months ended January 31, 2016, transfer agent fees for the Fund were as follows:
| | Transfer
Agent Fees
Incurred | Transfer
Agent Fees
Reimbursed |
| Class A Shares | $39,995 | $(20,189) |
| Class C Shares | 15,286 | (6,161) |
| Class R Shares | 160 | — |
| Institutional Shares | 18,993 | (4,562) |
| TOTAL | $74,434 | $(30,912) |
Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class C Shares to unaffiliated financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees. For the six months ended January 31, 2016, other service fees for the Fund were as follows:
| | Other Service
Fees
Incurred |
| Class A Shares | $73,748 |
| Class C Shares | 37,730 |
| TOTAL | $111,478 |
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.
Semi-Annual Shareholder Report
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 January 31, 2016, 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 January 31, 2016, tax years 2012 through 2015 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 risks. Upon entering into a financial futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearing house, as counterparty to all exchange traded futures, guarantees the futures against default.
Futures contracts outstanding at period end are listed after the Fund's Portfolio of Investments.
The average notional value of long and short futures contracts held by the Fund throughout the period was $19,586,145 and $9,705,045, 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.
Semi-Annual Shareholder Report
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Trustees, if applicable, held at January 31, 2016, is as follows:
| Security | Acquisition Date | Cost | Market Value |
| Football Trust V, Pass Thru Cert., Series 144A, 5.350%, 10/05/2020 | 3/24/2010 | $200,000 | $221,557 |
Additional Disclosure Related to Derivative Instruments
| Fair Value of Derivative Instruments |
| | Liability |
| | Statement of
Assets and
Liabilities
Location | Fair
Value |
| Derivatives not accounted for as hedging instruments under ASC Topic 815 | | |
| Interest rate contracts | Payable for daily
variation margin on
futures contracts | $94,669* |
| * | 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 January 31, 2016
| Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
| | Futures Contracts |
| Interest rate contracts | $(109,600) |
| Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
| | Futures Contracts |
| Interest rate contracts | $(41,574) |
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 tables summarize share activity:
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 371,548 | $5,980,217 | 877,364 | $14,585,649 |
| Shares issued to shareholders in payment of distribution declared | 51,346 | 816,911 | 33,893 | 561,953 |
| Shares redeemed | (406,528) | (6,400,980) | (656,048) | (10,848,975) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | 16,366 | $396,148 | 255,209 | $4,298,627 |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class C Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 227,747 | $3,616,575 | 291,257 | $4,780,270 |
| Shares issued to shareholders in payment of distribution declared | 11,610 | 182,981 | 6,665 | 109,378 |
| Shares redeemed | (253,780) | (3,981,617) | (573,519) | (9,319,128) |
| NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS | (14,423) | $(182,061) | (275,597) | $(4,429,480) |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class R Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 6,011 | $96,508 | 5,140 | $84,844 |
| Shares issued to shareholders in payment of distribution declared | 401 | 6,380 | 276 | 4,573 |
| Shares redeemed | (1,158) | (18,312) | (2,687) | (44,528) |
| NET CHANGE RESULTING FROM CLASS R SHARE TRANSACTIONS | 5,254 | $84,576 | 2,729 | $44,889 |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Institutional Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 111,974 | $1,798,126 | 476,302 | $7,916,348 |
| Shares issued to shareholders in payment of distribution declared | 50,128 | 798,534 | 42,067 | 698,310 |
| Shares redeemed | (288,856) | (4,628,084) | (442,803) | (7,350,382) |
| NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS | (126,754) | $(2,031,424) | 75,566 | $1,264,276 |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | (119,557) | $(1,732,761) | 57,907 | $1,178,312 |
Semi-Annual Shareholder Report
4. FEDERAL TAX INFORMATION
At January 31, 2016, the cost of investments for federal tax purposes was $137,424,475. The net unrealized depreciation of investments for federal tax purposes excluding any unrealized appreciation/ depreciation resulting from futures contracts was $7,936,371. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $4,610,995 and net unrealized depreciation from investments for those securities having an excess of cost over value of $12,547,366.
At July 31, 2015, the Fund had a capital loss carryforward of $14,348,949 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 |
| 2018 | $14,348,949 | NA | $14,348,949 |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.75% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the Adviser voluntarily waived $27,433 of its fee and voluntarily reimbursed $30,912 of transfer agent fees.
Certain of the Fund's assets are managed by Federated Investment Management Company (the “Sub-Adviser”). Under the terms of a sub-advisory agreement between the Adviser and the Sub-Adviser, the Sub-Adviser receives an allocable portion of the Fund's adviser fee. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense. For the six months ended January 31, 2016, the Sub-Adviser earned a fee of $63,635.
Semi-Annual Shareholder Report
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 |
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares, Class C Shares and Class R Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:
| Share Class Name | Percentage of Average Daily
Net Assets of Class |
| Class A Shares | 0.05% |
| Class C Shares | 0.75% |
| Class R Shares | 0.50% |
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, distribution services fees for the Fund were as follows:
| | Distribution Services
Fees Incurred |
| Class C Shares | $114,308 |
| Class R Shares | 1,391 |
| TOTAL | $115,699 |
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended January 31, 2016, FSC retained $21,041 of fees paid by the Fund. For the six months ended January 31, 2016, the Fund's Class A Shares did not incur a distribution services fee; however, it may begin to incur this fee upon approval of the Trustees.
Semi-Annual Shareholder Report
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended January 31, 2016, FSC retained $7,864 in sales charges from the sale of Class A Shares. FSC also retained $2,368 of CDSC relating to redemptions of Class C Shares.
Other Service Fees
For the six months ended January 31, 2016, FSSC received $5,697 of the other service fees disclosed in Note 2.
Expense Limitation
The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. The total annual fund operating expenses (as shown in the financial highlights, excluding expenses allocated from affiliated partnerships, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund's Class A Shares, Class C Shares and Institutional Shares (after the voluntary waivers and/or reimbursements) will not exceed 1.30%, 2.05% and 1.05% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) October 1, 2016; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
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. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the six months ended January 31, 2016, the Adviser reimbursed $3,632. Transactions involving the affiliated holding during the six months ended January 31, 2016, were as follows:
| | Emerging
Markets
Fixed
Income
Core Fund | Federated
Bank Loan
Core Fund | Federated
Mortgage
Core
Portfolio | Federated
Prime Value
Obligations
Fund,
Institutional
Shares | Federated
Project
and Trade
Finance
Core Fund | High
Yield
Bond
Portfolio | Total of
Affiliated
Transactions |
Balance of
Shares
Held
7/31/2015 | 33,683 | 117,879 | 1,325,624 | 5,521,116 | 241,956 | 811,201 | 8,051,459 |
Purchases/
Additions | 8,140 | 39,746 | 315,319 | 27,173,637 | 19,445 | 207,865 | 27,764,152 |
Sales/
Reductions | (3,570) | — | (303,917) | (26,278,715) | — | (281,140) | (26,867,342) |
Balance of
Shares
Held
1/31/2016 | 38,253 | 157,625 | 1,337,026 | 6,416,038 | 261,401 | 737,926 | 8,948,269 |
| Value | $1,288,916 | $1,521,084 | $13,316,782 | $6,416,038 | $2,444,102 | $4,228,314 | $29,215,236 |
Dividend Income/
Allocated
Investment
Income | $31,631 | $32,118 | $173,475 | $5,783 | $45,649 | $159,528 | $448,184 |
Realized
Gain
Distribution/
Allocated
Net
Realized
Gain (Loss) | $(53,228) | $— | $— | $— | $— | $— | $(53,228) |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended January 31, 2016, were as follows:
| Purchases | $62,701,117 |
| Sales | $69,221,941 |
Semi-Annual Shareholder Report
7. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, 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 January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, the program was not utilized.
9. SUBSEQUENT EVENTS
On February 10, 2016, the Trustees approved the redesignation of R Shares to R6 Shares. The redesignation is expected to occur no later than the fourth quarter of 2016.
Management has evaluated subsequent events through the date the financial statements were issued and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, 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 August 1, 2015 to January 31, 2016.
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.
Semi-Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| | Beginning
Account Value
8/1/2015 | Ending
Account Value
1/31/2016 | Expenses Paid
During Period1 |
| Actual: | | | |
| Class A Shares | $1,000 | $913.10 | $6.30 |
| Class C Shares | $1,000 | $909.50 | $9.89 |
| Class R Shares | $1,000 | $912.10 | $7.50 |
| Institutional Shares | $1,000 | $914.30 | $5.10 |
Hypothetical (assuming a 5% return
before expenses): | | | |
| Class A Shares | $1,000 | $1,018.55 | $6.65 |
| Class C Shares | $1,000 | $1,014.78 | $10.43 |
| Class R Shares | $1,000 | $1,017.29 | $7.91 |
| Institutional Shares | $1,000 | $1,019.81 | $5.38 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| | |
| Class A Shares | 1.31% |
| Class C Shares | 2.06% |
| Class R Shares | 1.56% |
| Institutional Shares | 1.06% |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2015
Federated MDT Balanced Fund (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 and subadvisory contracts for an additional one-year term. The Board's decision regarding these contracts reflects the exercise of its business judgment on whether to continue the existing arrangements.
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 and subadvisory contracts.
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 and subadviser for what
Semi-Annual Shareholder Report
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 and subadvisory contracts 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 and subadvisory contracts 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 and subadvisory contracts included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's and subadviser'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 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;
Semi-Annual Shareholder Report
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.
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a relevant indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
The Board reviewed the contractual advisory fee rate, net advisory fee rate where partially waived and other expenses of the Fund and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted the applicable waivers and reimbursements and that the overall expense structure of the Fund remained competitive. In this regard, the Board had been previously advised that, while comparisons to fund peer groups are relevant in judging the reasonableness of advisory fees, the Fund's quantitative focus makes fee and expense comparisons particularly difficult. Although the Fund's advisory fee was above the median of the peer range, the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers. The Board will continue to monitor advisory fees and other expenses borne by the Fund.
By contrast, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts and sub-adviser services). . He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; and the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing
Semi-Annual Shareholder Report
different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Fund's ability to deliver competitive performance when compared to its peer group 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 and subadvisory contracts.
The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups may be helpful, though not conclusive, in judging the reasonableness of the proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group, and that the Senior Officer had specifically noted that the Fund's quantitative focus makes fee and expense comparisons particularly difficult as the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers.
For the periods covered by the Evaluation, the Fund's performance for both the one-year and three-year periods was above the median of the relevant peer group, and the Fund's performance fell below the median of the relevant peer group 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 also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The 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 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.
Semi-Annual Shareholder Report
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.
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated family of funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies of scale, should they exist) were likely to be enjoyed by the fund family as a whole. Federated, as it does throughout the year, and again in connection with the Board's review, furnished information relative to revenue sharing or adviser paid fees. Federated and the Senior Officer noted that this information should be viewed to determine if there was an incentive to either not apply breakpoints or to apply breakpoints at higher levels and should not be viewed to determining the appropriateness of advisory fees, because it would represent marketing and distribution expenses. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size.
Semi-Annual Shareholder Report
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. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory and subadvisory contracts.
In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
The Board based its decision to approve the advisory and subadvisory contracts 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. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
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 is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. Form N-PX filings 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.) You may also access this information via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
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 MDT Balanced Fund
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 31421R841
CUSIP 31421R833
CUSIP 31421R692
CUSIP 31421R825
36354 (3/16)
Federated is a registered trademark of Federated Investors, Inc.
2016 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
January 31, 2016
| Share Class | Ticker |
| A | QALGX |
| B | QBLGX |
| C | QCLGX |
| Institutional | QILGX |
Federated MDT Large Cap Growth Fund
Fund Established 2005
A Portfolio of Federated MDT Series
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from August 1, 2015 through January 31, 2016. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
Not FDIC Insured • May Lose Value • No Bank Guarantee
Portfolio of Investments Summary Table (unaudited)
At January 31, 2016, the Fund's industry composition1 was as follows:
| Industry Composition | Percentage of
Total Net Assets |
| Internet Services | 7.0% |
| Biotechnology | 5.9% |
| Computers–Low End | 5.8% |
| Medical Supplies | 5.3% |
| Software Packaged/Custom | 4.6% |
| Department Stores | 3.7% |
| Financial Services | 3.4% |
| Specialty Retailing | 3.1% |
| Auto Original Equipment Manufacturers | 2.8% |
| Grocery Chain | 2.7% |
| AT&T Divestiture | 2.6% |
| Cable TV | 2.6% |
| Computers–High End | 2.6% |
| Commodity Chemicals | 2.5% |
| Services to Medical Professionals | 2.5% |
| Airline–Regional | 2.4% |
| Ethical Drugs | 2.4% |
| Soft Drinks | 2.2% |
| Shipbuilding | 2.1% |
| Clothing Stores | 2.0% |
| Computer Services | 1.7% |
| Entertainment | 1.7% |
| Diversified Tobacco | 1.6% |
| Hotels and Motels | 1.4% |
| Oil Refiner | 1.4% |
| Airline–National | 1.3% |
Semi-Annual Shareholder Report
| Industry Composition | Percentage of
Total Net Assets |
| Defense Aerospace | 1.1% |
| Life Insurance | 1.1% |
| Semiconductor Manufacturing | 1.1% |
| Property Liability Insurance | 1.0% |
| Other2 | 16.6% |
| Other Assets and Liabilities – Net3 | 1.8% |
| TOTAL | 100.0% |
| 1 | Except for Cash Equivalents and Other Assets and Liabilities, industry classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS. |
| 2 | For purposes of this table, industry classifications which constitute less than 1.0% of the Fund's total net assets have been aggregated under the designation “Other.” |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report
Portfolio of Investments
January 31, 2016 (unaudited)
| Shares | | | Value |
| | | COMMON STOCKS—98.2% | |
| | | Agricultural Chemicals—0.4% | |
| 4,580 | | Scotts Miracle-Gro Co. | $314,554 |
| | | Airline - National—1.3% | |
| 13,961 | 1 | Jet Blue Airways Corp. | 297,509 |
| 14,100 | 1 | United Continental Holdings, Inc. | 680,748 |
| | | TOTAL | 978,257 |
| | | Airline - Regional—2.4% | |
| 8,976 | | Alaska Air Group, Inc. | 631,910 |
| 30,542 | | Southwest Airlines Co. | 1,148,990 |
| | | TOTAL | 1,780,900 |
| | | Airlines—0.5% | |
| 7,987 | | Delta Air Lines, Inc. | 353,744 |
| | | Apparel—0.7% | |
| 6,900 | | PVH Corp. | 506,322 |
| | | AT&T Divestiture—2.6% | |
| 39,057 | | Verizon Communications, Inc. | 1,951,678 |
| | | Auto Manufacturing—0.5% | |
| 3,145 | | Allison Transmission Holdings, Inc. | 74,820 |
| 25,317 | | Ford Motor Co. | 302,285 |
| | | TOTAL | 377,105 |
| | | Auto Original Equipment Manufacturers—2.8% | |
| 4,181 | | Lear Corp. | 434,113 |
| 6,517 | 1 | O'Reilly Automotive, Inc. | 1,700,286 |
| | | TOTAL | 2,134,399 |
| | | Auto Rentals—0.4% | |
| 7,400 | 1 | Avis Budget Group, Inc. | 194,398 |
| 1,678 | 1 | United Rentals, Inc. | 80,393 |
| | | TOTAL | 274,791 |
| | | Baking—0.3% | |
| 12,348 | | Flowers Foods, Inc. | 253,628 |
| | | Biotechnology—5.9% | |
| 12,526 | | Amgen, Inc. | 1,913,096 |
| 21,881 | | Gilead Sciences, Inc. | 1,816,123 |
| 3,637 | 1 | Myriad Genetics, Inc. | 141,734 |
| 1,418 | 1 | Regeneron Pharmaceuticals, Inc. | 595,687 |
| | | TOTAL | 4,466,640 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Broadcasting—0.5% | |
| 1,248 | 1 | AMC Networks, Inc. | $90,842 |
| 9,100 | 1 | Discovery Communications, Inc. | 251,069 |
| | | TOTAL | 341,911 |
| | | Building Supply Stores—0.6% | |
| 6,324 | | Lowe's Cos., Inc. | 453,178 |
| | | Cable TV—2.6% | |
| 42,104 | | Viacom, Inc., Class B | 1,921,627 |
| | | Clothing Stores—2.0% | |
| 7,887 | 1 | Fossil, Inc. | 257,116 |
| 38,363 | | Gap (The), Inc. | 948,334 |
| 7,040 | 1 | Michael Kors Holdings Ltd. | 280,896 |
| | | TOTAL | 1,486,346 |
| | | Commodity Chemicals—2.5% | |
| 23,683 | | LyondellBasell Investment LLC | 1,846,564 |
| | | Communications Equipment—0.6% | |
| 2,775 | 1 | Palo Alto Networks, Inc. | 414,835 |
| | | Computer Peripherals—0.5% | |
| 16,792 | | NetApp, Inc. | 368,249 |
| | | Computer Services—1.7% | |
| 7,190 | | Global Payments, Inc. | 423,851 |
| 12,507 | 1 | Salesforce.com, Inc. | 851,226 |
| | | TOTAL | 1,275,077 |
| | | Computers - High End—2.6% | |
| 15,412 | | IBM Corp. | 1,923,263 |
| | | Computers - Low End—5.8% | |
| 45,160 | | Apple, Inc. | 4,395,874 |
| | | Construction Machinery—0.1% | |
| 8,900 | | Joy Global, Inc. | 88,733 |
| | | Contracting—0.3% | |
| 5,300 | | Chicago Bridge & Iron Co., N.V. | 205,746 |
| | | Cosmetics & Toiletries—0.3% | |
| 15,906 | | Avon Products, Inc. | 53,921 |
| 5,600 | 1 | Sally Beauty Holdings, Inc. | 154,336 |
| | | TOTAL | 208,257 |
| | | Defense Aerospace—1.1% | |
| 1,420 | | Boeing Co. | 170,584 |
| 15,012 | 1 | Spirit Aerosystems Holdings, Inc., Class A | 636,509 |
| | | TOTAL | 807,093 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Department Stores—3.7% | |
| 2,873 | | Dillards, Inc., Class A | $202,288 |
| 46,431 | | Macy's, Inc. | 1,876,277 |
| 9,900 | | Target Corp. | 716,958 |
| | | TOTAL | 2,795,523 |
| | | Discount Department Stores—0.6% | |
| 5,707 | | Foot Locker, Inc. | 385,565 |
| 1,494 | | Wal-Mart Stores, Inc. | 99,142 |
| | | TOTAL | 484,707 |
| | | Distillers—0.7% | |
| 3,590 | | Constellation Brands, Inc., Class A | 547,403 |
| | | Diversified Consumer Services—0.2% | |
| 2,697 | 1 | ServiceMaster Global Holdings, Inc. | 113,840 |
| | | Diversified Tobacco—1.6% | |
| 19,561 | | Altria Group, Inc. | 1,195,373 |
| | | Education & Training Services—0.1% | |
| 5,400 | 1 | Apollo Group, Inc., Class A | 42,876 |
| | | Entertainment—1.7% | |
| 73,976 | 1 | MSG Networks, Inc., Class A | 1,293,840 |
| | | Ethical Drugs—2.4% | |
| 10,809 | | Bristol-Myers Squibb Co. | 671,887 |
| 9,258 | 1 | United Therapeutics Corp. | 1,140,401 |
| | | TOTAL | 1,812,288 |
| | | Financial Services—3.4% | |
| 14,400 | 1 | Ally Financial, Inc. | 228,240 |
| 13,188 | | Ameriprise Financial, Inc. | 1,195,492 |
| 8,340 | | Total System Services, Inc. | 334,934 |
| 44,090 | | Western Union Co. | 786,566 |
| | | TOTAL | 2,545,232 |
| | | Grocery Chain—2.7% | |
| 49,399 | | Kroger Co. | 1,917,175 |
| 3,415 | | Whole Foods Market, Inc. | 100,094 |
| | | TOTAL | 2,017,269 |
| | | Home Building—0.5% | |
| 8,721 | | D. R. Horton, Inc. | 239,915 |
| 100 | 1 | NVR, Inc. | 165,100 |
| | | TOTAL | 405,015 |
| | | Home Products—0.6% | |
| 9,449 | | Tupperware Brands Corp. | 438,717 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Hospitals—0.5% | |
| 5,000 | 1 | HCA, Inc. | $347,900 |
| | | Hotels and Motels—1.4% | |
| 16,495 | | Wyndham Worldwide Corp. | 1,070,525 |
| | | Industrial Machinery—0.2% | |
| 1,100 | | Valmont Industries, Inc. | 117,249 |
| | | Internet Services—7.0% | |
| 2,961 | 1 | Amazon.com, Inc. | 1,738,107 |
| 70,713 | 1 | eBay, Inc. | 1,658,927 |
| 9,339 | 1 | Facebook, Inc., Class A | 1,047,929 |
| 16,209 | | IAC Interactive Corp. | 841,896 |
| | | TOTAL | 5,286,859 |
| | | IT Services—0.7% | |
| 3,016 | | Booz Allen Hamilton Holding Corp. | 85,323 |
| 4,349 | 1 | Teradata Corp. | 105,855 |
| 7,030 | 1 | Vantiv, Inc. | 330,761 |
| | | TOTAL | 521,939 |
| | | Life Insurance—1.1% | |
| 12,000 | | Prudential Financial, Inc. | 840,960 |
| | | Medical Supplies—5.3% | |
| 3,540 | | AmerisourceBergen Corp. | 317,042 |
| 53,408 | | Baxter International, Inc. | 1,954,733 |
| 13,731 | | Cardinal Health, Inc. | 1,117,292 |
| 17,263 | 1 | Hologic, Inc. | 585,906 |
| | | TOTAL | 3,974,973 |
| | | Multi-Industry Capital Goods—0.4% | |
| 1,041 | | Acuity Brands, Inc. | 210,730 |
| 3,915 | 1 | HD Supply, Inc. | 102,847 |
| | | TOTAL | 313,577 |
| | | Mutual Fund Adviser—0.1% | |
| 2,300 | | Waddell & Reed Financial, Inc., Class A | 63,112 |
| | | Office Equipment—0.7% | |
| 28,428 | | Pitney Bowes, Inc. | 556,620 |
| | | Office Supplies—0.1% | |
| 1,525 | | Avery Dennison Corp. | 92,857 |
| | | Oil Refiner—1.4% | |
| 25,767 | | Marathon Petroleum Corp. | 1,076,803 |
| | | Other Communications Equipment—0.3% | |
| 3,251 | | Skyworks Solutions, Inc. | 224,059 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Packaged Foods—0.1% | |
| 1,647 | | Campbell Soup Co. | $92,907 |
| | | Paper Products—0.1% | |
| 2,988 | | International Paper Co. | 102,219 |
| | | Personal & Household—0.2% | |
| 5,300 | | Nu Skin Enterprises, Inc., Class A | 167,745 |
| | | Personal Loans—0.5% | |
| 2,260 | 1 | Credit Acceptance Corp. | 404,450 |
| | | Pharmaceuticals—0.2% | |
| 2,969 | 1 | Mallinckrodt PLC | 172,469 |
| | | Plastic Containers—0.2% | |
| 3,897 | | Sealed Air Corp. | 157,945 |
| | | Printing—0.2% | |
| 11,646 | | Donnelley (R.R.) & Sons Co. | 162,695 |
| | | Property Liability Insurance—1.0% | |
| 6,906 | | The Travelers Cos., Inc. | 739,218 |
| | | Rubber—0.6% | |
| 14,600 | | Goodyear Tire & Rubber Co. | 414,786 |
| | | Semiconductor Manufacturing—1.1% | |
| 18,872 | | Intel Corp. | 585,409 |
| 20,600 | 1 | Micron Technology, Inc. | 227,218 |
| | | TOTAL | 812,627 |
| | | Services to Medical Professionals—2.5% | |
| 19,583 | 1 | Express Scripts Holding Co. | 1,407,430 |
| 3,818 | | UnitedHealth Group, Inc. | 439,681 |
| | | TOTAL | 1,847,111 |
| | | Shipbuilding—2.1% | |
| 12,312 | | Huntington Ingalls Industries, Inc. | 1,574,459 |
| | | Shoes—0.6% | |
| 3,800 | 1 | Deckers Outdoor Corp. | 187,948 |
| 9,198 | 1 | Skechers USA, Inc., Class A | 259,292 |
| | | TOTAL | 447,240 |
| | | Soft Drinks—2.2% | |
| 10,542 | | Coca-Cola Enterprises, Inc. | 489,360 |
| 12,774 | | Dr. Pepper Snapple Group, Inc. | 1,198,712 |
| | | TOTAL | 1,688,072 |
| | | Software Packaged/Custom—4.6% | |
| 35,613 | | CA, Inc. | 1,023,162 |
| 8,520 | | CDW Corp. | 327,594 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Software Packaged/Custom—continued | |
| 4,407 | 1 | Citrix Systems, Inc. | $310,517 |
| 13,859 | 1 | Electronic Arts, Inc. | 894,529 |
| 1,001 | 1 | ServiceNow, Inc. | 62,272 |
| 27,652 | | Symantec Corp. | 548,616 |
| 1,814 | 1 | Ultimate Software Group, Inc. | 318,593 |
| | | TOTAL | 3,485,283 |
| | | Specialty Retailing—3.1% | |
| 21,733 | 1 | Bed Bath & Beyond, Inc. | 938,214 |
| 5,900 | | Big Lots, Inc. | 228,802 |
| 862 | | Expedia, Inc. | 87,096 |
| 4,516 | | GNC Holdings, Inc. | 126,493 |
| 1,560 | | Nordstrom, Inc. | 76,596 |
| 4,870 | 1 | Ulta Salon Cosmetics & Fragrance, Inc. | 882,298 |
| | | TOTAL | 2,339,499 |
| | | Textiles Apparel & Luxury Goods—0.4% | |
| 2,767 | | Ralph Lauren Corp. | 311,287 |
| | | Truck Manufacturing—0.9% | |
| 7,745 | | Cummins, Inc. | 696,198 |
| | | Undesignated Consumer Cyclicals—0.4% | |
| 6,300 | 1 | Herbalife Ltd. | 291,123 |
| 3,300 | | Weight Watchers International, Inc. | 41,877 |
| | | TOTAL | 333,000 |
| | | Uniforms—0.8% | |
| 7,329 | | Cintas Corp. | 629,708 |
| | | TOTAL INVESTMENTS—98.2%
(IDENTIFIED COST $78,121,259)2 | 73,887,205 |
| | | OTHER ASSETS AND LIABILITIES - NET—1.8%3 | 1,372,803 |
| | | TOTAL NET ASSETS—100% | $75,260,008 |
| 1 | Non-income-producing security. |
| 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 January 31, 2016.
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.
As of January 31, 2016, all investments of the Fund utilized Level 1 inputs in valuing the Fund's assets carried at fair value.
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $17.64 | $16.15 | $13.58 | $10.59 | $10.50 | $8.45 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss)1 | 0.02 | 0.02 | 0.03 | 0.04 | (0.02) | (0.03) |
| Net realized and unrealized gain (loss) on investments | (2.17) | 1.47 | 2.54 | 2.95 | 0.11 | 2.08 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.15) | 1.49 | 2.57 | 2.99 | 0.09 | 2.05 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (1.80) | — | — | — | — | — |
| Net Asset Value, End of Period | $13.69 | $17.64 | $16.15 | $13.58 | $10.59 | $10.50 |
| Total Return2 | (13.08)% | 9.23% | 18.92% | 28.23% | 0.86% | 24.26% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.50%3 | 1.50% | 1.50% | 1.50% | 1.50% | 1.50% |
| Net investment income (loss) | 0.19%3 | 0.13% | 0.17% | 0.34% | (0.23)% | (0.28)% |
| Expense waiver/reimbursement4 | 0.07%3 | 0.03% | 0.11% | 0.27% | 0.78% | 0.74% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $45,565 | $55,033 | $54,573 | $49,018 | $40,676 | $44,762 |
| Portfolio turnover | 39% | 91% | 51% | 135% | 258% | 208% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class B Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $16.71 | $15.41 | $13.05 | $10.25 | $10.24 | $8.30 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss)1 | (0.04) | (0.11) | (0.09) | (0.05) | (0.10) | (0.10) |
| Net realized and unrealized gain (loss) on investments | (2.05) | 1.41 | 2.45 | 2.85 | 0.11 | 2.04 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.09) | 1.30 | 2.36 | 2.80 | 0.01 | 1.94 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (1.80) | — | — | — | — | — |
| Net Asset Value, End of Period | $12.82 | $16.71 | $15.41 | $13.05 | $10.25 | $10.24 |
| Total Return2 | (13.46)% | 8.44% | 18.08% | 27.32% | 0.10% | 23.37% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 2.25%3 | 2.25% | 2.25% | 2.25% | 2.25% | 2.25% |
| Net investment income (loss) | (0.57)%3 | (0.65)% | (0.59)% | (0.44)% | (0.98)% | (1.04)% |
| Expense waiver/reimbursement4 | 0.07%3 | 0.03% | 0.11% | 0.26% | 0.78% | 0.74% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $13,234 | $16,175 | $10,519 | $7,428 | $4,932 | $6,680 |
| Portfolio turnover | 39% | 91% | 51% | 135% | 258% | 208% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class C Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $16.34 | $15.07 | $12.76 | $10.03 | $10.02 | $8.12 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss)1 | (0.04) | (0.10) | (0.08) | (0.05) | (0.09) | (0.10) |
| Net realized and unrealized gain (loss) on investments | (2.00) | 1.37 | 2.39 | 2.78 | 0.10 | 2.00 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.04) | 1.27 | 2.31 | 2.73 | 0.01 | 1.90 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (1.80) | — | — | — | — | — |
| Net Asset Value, End of Period | $12.50 | $16.34 | $15.07 | $12.76 | $10.03 | $10.02 |
| Total Return2 | (13.46)% | 8.43% | 18.10% | 27.22% | 0.10% | 23.40% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 2.25%3 | 2.25% | 2.25% | 2.25% | 2.25% | 2.25% |
| Net investment income (loss) | (0.55)%3 | (0.63)% | (0.59)% | (0.43)% | (0.98)% | (1.05)% |
| Expense waiver/reimbursement4 | 0.07%3 | 0.03% | 0.11% | 0.27% | 0.78% | 0.74% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $10,188 | $12,904 | $11,991 | $9,830 | $7,001 | $7,564 |
| Portfolio turnover | 39% | 91% | 51% | 135% | 258% | 208% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Institutional Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $18.13 | $16.55 | $13.88 | $10.80 | $10.68 | $8.57 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss)1 | 0.04 | 0.07 | 0.06 | 0.07 | 0.002 | (0.00)2 |
| Net realized and unrealized gain (loss) on investments | (2.24) | 1.51 | 2.61 | 3.01 | 0.12 | 2.11 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.20) | 1.58 | 2.67 | 3.08 | 0.12 | 2.11 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (1.80) | — | — | — | — | — |
| Net Asset Value, End of Period | $14.13 | $18.13 | $16.55 | $13.88 | $10.80 | $10.68 |
| Total Return3 | (13.00)% | 9.55% | 19.24% | 28.52% | 1.12% | 24.62% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.25%4 | 1.25% | 1.25% | 1.25% | 1.25% | 1.25% |
| Net investment income (loss) | 0.45%4 | 0.37% | 0.40% | 0.58% | 0.02% | (0.05)% |
| Expense waiver/reimbursement5 | 0.07%4 | 0.03% | 0.10% | 0.27% | 0.78% | 0.74% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $6,272 | $7,888 | $7,502 | $5,002 | $3,774 | $4,565 |
| Portfolio turnover | 39% | 91% | 51% | 135% | 258% | 208% |
| 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 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
January 31, 2016 (unaudited)
| Assets: | | |
| Total investment in securities, at value (identified cost $78,121,259) | | $73,887,205 |
| Income receivable | | 45,948 |
| Receivable for investments sold | | 2,673,570 |
| Receivable for shares sold | | 138,583 |
| TOTAL ASSETS | | 76,745,306 |
| Liabilities: | | |
| Payable for investments purchased | $1,200,904 | |
| Payable for shares redeemed | 63,100 | |
| Bank overdraft | 93,272 | |
| Payable to adviser (Note 5) | 3,724 | |
| Payable for transfer agent fee | 32,333 | |
| Payable for distribution services fee (Note 5) | 15,955 | |
| Payable for other service fees (Notes 2 and 5) | 28,581 | |
| Accrued expenses (Note 5) | 47,429 | |
| TOTAL LIABILITIES | | 1,485,298 |
| Net assets for 5,620,164 shares outstanding | | $75,260,008 |
| Net Assets Consist of: | | |
| Paid-in capital | | $79,166,536 |
| Net unrealized depreciation of investments | | (4,234,054) |
| Accumulated net realized gain on investments | | 399,663 |
| Accumulated net investment income (loss) | | (72,137) |
| TOTAL NET ASSETS | | $75,260,008 |
Semi-Annual Shareholder Report
Statement of Assets and Liabilities–continued
| Net Asset Value, Offering Price and Redemption Proceeds Per Share | | |
| Class A Shares: | | |
| Net asset value per share ($45,565,257 ÷ 3,328,732 shares outstanding), no par value, unlimited shares authorized | | $13.69 |
| Offering price per share (100/94.50 of $13.69) | | $14.49 |
| Redemption proceeds per share | | $13.69 |
| Class B Shares: | | |
| Net asset value per share ($13,234,204 ÷ 1,032,577 shares outstanding), no par value, unlimited shares authorized | | $12.82 |
| Offering price per share | | $12.82 |
| Redemption proceeds per share (94.50/100 of $12.82) | | $12.11 |
| Class C Shares: | | |
| Net asset value per share ($10,188,183 ÷ 814,841 shares outstanding), no par value, unlimited shares authorized | | $12.50 |
| Offering price per share | | $12.50 |
| Redemption proceeds per share (99.00/100 of $12.50) | | $12.38 |
| Institutional Shares: | | |
| Net asset value per share ($6,272,364 ÷ 444,014 shares outstanding), no par value, unlimited shares authorized | | $14.13 |
| Offering price per share | | $14.13 |
| Redemption proceeds per share | | $14.13 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended January 31, 2016 (unaudited)
| Investment Income: | | |
| Dividends (including $1,489 received from an affiliated holding (Note 5) and net of foreign taxes withheld of $111) | | $726,024 |
| Expenses: | | |
| Investment adviser fee (Note 5) | $321,238 | |
| Administrative fee (Note 5) | 33,516 | |
| Custodian fees | 7,815 | |
| Transfer agent fee | 96,023 | |
| Directors'/Trustees' fees (Note 5) | 1,120 | |
| Auditing fees | 12,301 | |
| Legal fees | 4,047 | |
| Portfolio accounting fees | 39,437 | |
| Distribution services fee (Note 5) | 101,519 | |
| Other service fees (Notes 2 and 5) | 97,433 | |
| Share registration costs | 28,055 | |
| Printing and postage | 15,869 | |
| Miscellaneous (Note 5) | 6,258 | |
| TOTAL EXPENSES | 764,631 | |
| Waiver/reimbursement of investment adviser fee (Note 5) | (28,184) | |
| Net expenses | | 736,447 |
| Net investment income (loss) | | (10,423) |
| Realized and Unrealized Gain (Loss) on Investments: | | |
| Net realized gain on investments | | 391,632 |
| Net change in unrealized appreciation of investments | | (12,387,261) |
| Net realized and unrealized loss on investments | | (11,995,629) |
| Change in net assets resulting from operations | | $(12,006,052) |
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)
1/31/2016 | Year Ended
7/31/2015 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income (loss) | $(10,423) | $(66,686) |
| Net realized gain on investments | 391,632 | 13,523,659 |
| Net change in unrealized appreciation/depreciation of investments | (12,387,261) | (5,876,894) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | (12,006,052) | 7,580,079 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | | |
| Class A Shares | (5,502,857) | — |
| Class B Shares | (1,867,474) | — |
| Class C Shares | (1,323,955) | — |
| Institutional Shares | (798,673) | — |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (9,492,959) | — |
| Share Transactions: | | |
| Proceeds from sale of shares | 8,223,933 | 19,436,379 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 8,568,103 | — |
| Cost of shares redeemed | (12,033,580) | (19,601,538) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 4,758,456 | (165,159) |
| Change in net assets | (16,740,555) | 7,414,920 |
| Net Assets: | | |
| Beginning of period | 92,000,563 | 84,585,643 |
| End of period (including accumulated net investment income (loss) of $(72,137) and $(61,714), respectively) | $75,260,008 | $92,000,563 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
January 31, 2016 (unaudited)
1. ORGANIZATION
Federated MDT 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 five portfolios. The financial statements included herein are only those of Federated MDT Large Cap Growth Fund (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 Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is long-term capital appreciation.
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:
| ■ | 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. |
| ■ | 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 Board of Trustees (the “Trustees”). |
| ■ | 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. |
| ■ | 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. |
Semi-Annual Shareholder Report
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 MDTA LLC (“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.
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
Semi-Annual Shareholder Report
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, if any, are declared and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares, Class B Shares and Class C Shares may bear distribution services fees and other service fees unique to those classes. The detail of total fund expense waivers of $28,184 is disclosed in Note 5.
Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares and Class C Shares to unaffiliated financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees.
Semi-Annual Shareholder Report
For the six months ended January 31, 2016, other service fees for the Fund were as follows:
| | Other
Service Fees
Incurred |
| Class A Shares | $63,624 |
| Class B Shares | 19,322 |
| Class C Shares | 14,487 |
| TOTAL | $97,433 |
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 January 31, 2016, 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 January 31, 2016, tax years 2012 through 2015 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.
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.
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3. SHARES OF BENEFICIAL INTEREST
The following tables summarize share activity:
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 188,382 | $3,026,465 | 437,475 | $7,550,573 |
| Shares issued to shareholders in payment of distributions declared | 332,140 | 4,972,137 | — | — |
| Shares redeemed | (310,842) | (4,898,720) | (697,690) | (11,932,507) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | 209,680 | $3,099,882 | (260,215) | $(4,381,934) |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class B Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 207,958 | $3,177,420 | 435,608 | $7,148,957 |
| Shares issued to shareholders in payment of distributions declared | 130,599 | 1,832,304 | — | — |
| Shares redeemed | (274,236) | (3,815,737) | (150,183) | (2,470,360) |
| NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS | 64,321 | $1,193,987 | 285,425 | $4,678,597 |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class C Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 100,883 | $1,494,694 | 195,222 | $3,120,016 |
| Shares issued to shareholders in payment of distributions declared | 85,418 | 1,169,370 | | |
| Shares redeemed | (161,162) | (2,388,448) | (201,285) | (3,220,353) |
| NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS | 25,139 | $275,616 | (6,063) | $(100,337) |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Institutional Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 31,153 | $525,354 | 93,199 | $1,616,833 |
| Shares issued to shareholders in payment of distributions declared | 38,466 | 594,292 | | |
| Shares redeemed | (60,772) | (930,675) | (111,365) | (1,978,318) |
| NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS | 8,847 | $188,971 | (18,166) | $(361,485) |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | 307,987 | $4,758,456 | 981 | $(165,159) |
Semi-Annual Shareholder Report
4. FEDERAL TAX INFORMATION
At January 31, 2016, the cost of investments for federal tax purposes was $78,121,259. The net unrealized depreciation of investments for federal tax purposes was $4,234,054. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $5,873,238 and net unrealized depreciation from investments for those securities having an excess of cost over value of $10,107,292.
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.75% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the Adviser voluntarily waived $27,233 of its fee.
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 |
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares, Class B Shares and Class C Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:
| Share Class Name | Percentage of Average Daily
Net Assets of Class |
| Class A Shares | 0.05% |
| Class B Shares | 0.75% |
| Class C Shares | 0.75% |
Semi-Annual Shareholder Report
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, distribution services fees for the Fund were as follows:
| | Distribution
Services Fees
Incurred |
| Class B Shares | $58,056 |
| Class C Shares | 43,463 |
| TOTAL | $101,519 |
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended January 31, 2016, FSC retained $42,701 of fees paid by the Fund. For the six months ended January 31, 2016, the Fund's Class A Shares did not incur a distribution services fee; however, it may begin to incur this fee upon approval of the Trustees.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended January 31, 2016, FSC retained $1,103 in sales charges from the sale of Class A Shares. FSC also retained $30,793 of CDSC relating to redemptions of Class B Shares and $508 relating to redemption of Class C Shares.
Other Service Fees
For the six months ended January 31, 2016, FSSC received $17,432 of the other service fees disclosed in Note 2.
Expense Limitation
The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding expenses allocated from affiliated partnerships, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund's Class A Shares, Class B Shares, Class C Shares and Institutional Shares (after the voluntary waivers and/or reimbursements) will not exceed 1.50%, 2.25%, 2.25% and 1.25% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) October 1, 2016; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
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. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the six months ended January 31, 2016, the Adviser reimbursed $951. Transactions involving the affiliated holding during the six months ended January 31, 2016, were as follows:
| | Federated
Prime Value
Obligations Fund,
Institutional Shares |
| Balance of Shares Held 7/31/2015 | 1,864,649 |
| Purchases/Additions | 7,557,653 |
| Sales/Reductions | (9,422,302) |
| Balance of Shares Held 1/31/2016 | — |
| Value | $— |
| Dividend Income | $1,489 |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended January 31, 2016, were as follows:
| Purchases | $32,007,868 |
| Sales | $36,436,506 |
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 January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, 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 January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, the program was not utilized.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, 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 August 1, 2015 to January 31, 2016.
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.
Semi-Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| | Beginning
Account Value
8/1/2015 | Ending
Account Value
1/31/2016 | Expenses Paid
During Period1 |
| Actual: | | | |
| Class A Shares | $1,000 | $869.20 | $7.05 |
| Class B Shares | $1,000 | $865.40 | $10.55 |
| Class C Shares | $1,000 | $865.40 | $10.55 |
| Institutional Shares | $1,000 | $870.00 | $5.88 |
Hypothetical (assuming a 5% return
before expenses): | | | |
| Class A Shares | $1,000 | $1,017.60 | $7.61 |
| Class B Shares | $1,000 | $1,013.83 | $11.39 |
| Class C Shares | $1,000 | $1,013.83 | $11.39 |
| Institutional Shares | $1,000 | $1,018.85 | $6.34 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| | |
| Class A Shares | 1.50% |
| Class B Shares | 2.25% |
| Class C Shares | 2.25% |
| Institutional Shares | 1.25% |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2015
Federated MDT Large Cap Growth Fund (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.
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.
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
Semi-Annual Shareholder Report
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 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
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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.
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a relevant indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
The Board reviewed the contractual advisory fee rate, net advisory fee rate where partially waived and other expenses of the Fund and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted the applicable waivers and reimbursements and that the overall expense structure of the Fund remained competitive. In this regard, the Board had been previously advised that, while comparisons to fund peer groups are relevant in judging the reasonableness of advisory fees, the Fund's quantitative focus makes fee and expense comparisons particularly difficult. Although the Fund's advisory fee was above the median of the peer range, the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers. The Board will continue to monitor advisory fees and other expenses borne by the Fund.
By contrast, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts and sub-adviser services). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; and the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing
Semi-Annual Shareholder Report
different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Senior Officer noted that the services, administrative responsibiliities and risks associated with such relationships are quite different than serving as a primary adviser to a fund.
The Fund's ability to deliver competitive performance when compared to its peer group 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 Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups may be helpful, though not conclusive, in judging the reasonableness of the proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group, and that the Senior Officer had specifically noted that the Fund's quantitative focus makes fee and expense comparisons particularly difficult as the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers.
For the one-year, three-year and five-year periods covered by the Evaluation, the Fund's performance was above the median of the relevant peer group In addition, the Board was informed by the Adviser that, for the same periods, 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.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The 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
Semi-Annual Shareholder Report
competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed 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.
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated family of funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies of scale, should they exist) were likely to be enjoyed by the fund family as a whole. Federated, as it does throughout the year, and again in connection with the Board's review, furnished information relative to revenue sharing or adviser paid fees. Federated and the Senior Officer noted that this information should be viewed to determine if there was an incentive to either not apply breakpoints or to apply breakpoints at higher levels and should not be viewed to determining the appropriateness of advisory fees, because it would represent marketing and distribution expenses. Finally, the Board also noted the absence of any applicable regulatory or industry
Semi-Annual Shareholder Report
guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size.
The Senior Officer 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. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
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. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
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 is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. Form N-PX filings 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.) You may also access this information via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
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 MDT Large Cap Growth Fund
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 31421R700
CUSIP 31421R684
CUSIP 31421R809
CUSIP 31421R882
36353 (3/16)
Federated is a registered trademark of Federated Investors, Inc.
2016 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
January 31, 2016
| Share Class | Ticker |
| A | QASCX |
| C | QCSCX |
| Institutional | QISCX |
Federated MDT Small Cap Core Fund
Fund Established 2005
A Portfolio of Federated MDT Series
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from August 1, 2015 through January 31, 2016. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
Not FDIC Insured • May Lose Value • No Bank Guarantee
Portfolio of Investments Summary Table (unaudited)
At January 31, 2016, the Fund's industry composition1 was as follows:
| Industry Composition | Percentage of
Total Net Assets |
| Regional Banks | 8.2% |
| Specialty Retailing | 3.8% |
| Financial Services | 2.9% |
| Property Liability Insurance | 2.8% |
| Commodity Chemicals | 2.6% |
| Apparel | 2.3% |
| Home Health Care | 2.3% |
| Telecommunication Equipment & Services | 2.3% |
| Dairy Products | 2.1% |
| Miscellaneous Communications | 2.1% |
| Software Packaged/Custom | 2.0% |
| Computer Networking | 1.9% |
| Savings & Loan | 1.9% |
| Undesignated Consumer Cyclicals | 1.9% |
| Auto Original Equipment Manufacturers | 1.8% |
| Biotechnology | 1.8% |
| Clothing Stores | 1.8% |
| Health Care Equipment & Supplies | 1.8% |
| Airline—Regional | 1.7% |
| Education & Training Services | 1.6% |
| Semiconductor Manufacturing | 1.6% |
| Computer Stores | 1.4% |
| Printing | 1.4% |
| Defense Aerospace | 1.3% |
| Undesignated Consumer Staples | 1.3% |
| Food Wholesaling | 1.2% |
| Health Care Providers & Services | 1.2% |
| Mortgage Banks | 1.2% |
| Offshore Driller | 1.2% |
| Airline—National | 1.1% |
| Computer Services | 1.1% |
| Internet Services | 1.1% |
| Medical Supplies | 1.1% |
| Personal Loans | 1.1% |
| Rubber | 1.1% |
| Semiconductor Distribution | 1.1% |
| Truck Manufacturing | 1.1% |
Semi-Annual Shareholder Report
| Industry Composition | Percentage of
Total Net Assets |
| Aluminum | 1.0% |
| Consumer Finance | 1.0% |
| Life Insurance | 1.0% |
| Office Supplies | 1.0% |
| Oil Service, Explore & Drill | 1.0% |
| Semiconductor Manufacturing Equipment | 1.0% |
| Specialty Chemicals | 1.0% |
| Telecommunication Services | 1.0% |
| Other2 | 19.9% |
| Cash Equivalents3 | 1.7% |
| Other Assets and Liabilities—Net4 | 0.2% |
| TOTAL | 100.0% |
| 1 | Except for Cash Equivalents and Other Assets and Liabilities, industry classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS. |
| 2 | For purposes of this table, industry classifications which constitute less than 1.0% 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
January 31, 2016 (unaudited)
| Shares | | | Value |
| | | COMMON STOCKS—98.1% | |
| | | Airline - National—1.1% | |
| 4,747 | 1 | Atlas Air Worldwide Holdings, Inc. | $174,357 |
| 5,632 | 1 | Jet Blue Airways Corp. | 120,018 |
| | | TOTAL | 294,375 |
| | | Airline - Regional—1.7% | |
| 10,954 | 1 | Hawaiian Holdings, Inc. | 385,690 |
| 2,882 | 1 | Virgin America, Inc. | 88,910 |
| | | TOTAL | 474,600 |
| | | Aluminum—1.0% | |
| 57,932 | 1 | Century Aluminum Co. | 273,439 |
| | | Apparel—2.3% | |
| 11,570 | 1 | Express, Inc. | 196,227 |
| 30,631 | 1 | Iconix Brand Group, Inc. | 203,390 |
| 5,854 | 1 | Perry Ellis International, Inc. | 111,285 |
| 7,023 | 1 | Zumiez, Inc. | 127,186 |
| | | TOTAL | 638,088 |
| | | Auto Original Equipment Manufacturers—1.8% | |
| 7,938 | 1 | American Axle & Manufacturing Holdings, Inc. | 101,765 |
| 2,113 | 1 | Cooper-Standard Holding, Inc. | 146,347 |
| 4,570 | | Dana Holding Corp. | 54,337 |
| 14,000 | 1 | Meritor, Inc. | 95,620 |
| 3,652 | | Tower International, Inc. | 84,069 |
| | | TOTAL | 482,138 |
| | | Biotechnology—1.8% | |
| 1,597 | 1 | Cambrex Corp. | 55,320 |
| 14,034 | 1 | Geron Corp. | 42,804 |
| 129,177 | | PDL BioPharma, Inc. | 405,616 |
| | | TOTAL | 503,740 |
| | | Carpets—0.4% | |
| 6,137 | | Interface, Inc. | 103,654 |
| | | Clothing Stores—1.8% | |
| 6,533 | | American Eagle Outfitters, Inc. | 95,643 |
| 28,469 | | Mens Wearhouse, Inc. | 390,310 |
| | | TOTAL | 485,953 |
| | | Commodity Chemicals—2.6% | |
| 33,381 | | Axiall Corp. | 598,522 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Commodity Chemicals—continued | |
| 5,180 | 1 | Trinseo SA | $123,232 |
| | | TOTAL | 721,754 |
| | | Computer Networking—1.9% | |
| 45,426 | | Black Box Corp. | 346,146 |
| 1,872 | 1 | Cray, Inc. | 73,738 |
| 33,310 | 1 | Extreme Networks, Inc. | 91,936 |
| | | TOTAL | 511,820 |
| | | Computer Peripherals—0.5% | |
| 15,895 | 1 | Zagg, Inc. | 146,552 |
| | | Computer Services—1.1% | |
| 2,727 | 1 | CACI International, Inc., Class A | 226,532 |
| 1,032 | | Synnex Corp. | 86,636 |
| | | TOTAL | 313,168 |
| | | Computer Stores—1.4% | |
| 1,709 | 1 | Insight Enterprises, Inc. | 40,384 |
| 5,160 | 1 | PC Connections, Inc. | 116,461 |
| 3,851 | 1 | Tech Data Corp. | 240,302 |
| | | TOTAL | 397,147 |
| | | Construction & Engineering—0.1% | |
| 2,017 | 1 | Aegion Corp. | 36,367 |
| | | Consumer Finance—1.0% | |
| 49,046 | 1 | Enova International, Inc. | 273,186 |
| | | Contracting—0.4% | |
| 4,341 | | Comfort Systems USA, Inc. | 123,024 |
| | | Cosmetics & Toiletries—0.6% | |
| 1,923 | 1 | Helen of Troy Ltd. | 171,858 |
| | | Crude Oil & Gas Production—0.5% | |
| 57,456 | 1 | Ultra Petroleum Corp. | 129,851 |
| | | Dairy Products—2.1% | |
| 4,947 | | Cal-Maine Foods, Inc. | 249,675 |
| 15,864 | | Dean Foods Co. | 316,963 |
| | | TOTAL | 566,638 |
| | | Defense Aerospace—1.3% | |
| 19,636 | 1 | DigitalGlobe, Inc. | 257,232 |
| 2,818 | 1 | Ducommun, Inc. | 41,706 |
| 991 | 1 | MOOG, Inc., Class A | 45,913 |
| | | TOTAL | 344,851 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Discount Department Stores—0.4% | |
| 20,526 | 1 | Tuesday Morning Corp. | $114,330 |
| | | Diversified Leisure—0.4% | |
| 7,940 | 1 | Isle of Capri Casinos, Inc. | 100,520 |
| | | Education & Training Services—1.6% | |
| 53,673 | 1 | Apollo Group, Inc., Class A | 426,164 |
| | | Electric & Electronic Original Equipment Manufacturers—0.3% | |
| 6,341 | | General Cable Corp. | 74,317 |
| | | Electronic Equipment Instruments & Components—0.5% | |
| 7,443 | 1 | Sanmina Corp. | 139,482 |
| | | Electronic Instruments—0.5% | |
| 14,442 | 1 | Ixia | 138,210 |
| | | Electronic Test/Measuring Equipment—0.3% | |
| 7,185 | | Cohu, Inc. | 87,010 |
| | | Financial Services—2.9% | |
| 4,934 | 1 | America's Car-Mart, Inc. | 115,752 |
| 1,402 | | Deluxe Corp. | 78,372 |
| 2,409 | 1 | Encore Capital Group, Inc. | 55,214 |
| 3,475 | | Fidelity Southern Corp. | 54,905 |
| 1,200 | | First Financial Corp. | 39,660 |
| 9,058 | | MainSource Financial Group, Inc. | 200,906 |
| 7,790 | | Nelnet, Inc., Class A | 252,941 |
| | | TOTAL | 797,750 |
| | | Food & Staples Retailing—0.2% | |
| 2,431 | | SpartanNash Co. | 49,884 |
| | | Food Wholesaling—1.2% | |
| 1,076 | | Core-Mark Holding Co., Inc. | 87,468 |
| 7,831 | 1 | Omega Protein Corp. | 176,902 |
| 13,753 | 1 | SUPERVALU, Inc. | 62,576 |
| | | TOTAL | 326,946 |
| | | Furniture—0.6% | |
| 1,502 | 1 | American Woodmark Corp. | 103,638 |
| 966 | | Bassett Furniture Industries, Inc. | 28,893 |
| 1,925 | 1 | Select Comfort Corp. | 40,541 |
| | | TOTAL | 173,072 |
| | | Generic Drugs—0.5% | |
| 7,363 | 1 | Cytokinetics, Inc. | 56,695 |
| 3,436 | 1 | Lannett Co., Inc. | 87,652 |
| | | TOTAL | 144,347 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Grocery Chain—0.4% | |
| 291 | | Casey's General Stores, Inc. | $35,136 |
| 2,120 | | Ingles Markets, Inc., Class A | 81,323 |
| | | TOTAL | 116,459 |
| | | Health Care Equipment & Supplies—1.8% | |
| 2,056 | 1 | Cardiovascular Systems, Inc. | 17,373 |
| 13,357 | | LeMaitre Vascular, Inc. | 195,012 |
| 7,351 | 1 | Masimo Corp. | 270,150 |
| | | TOTAL | 482,535 |
| | | Health Care Providers & Services—1.2% | |
| 3,366 | 1 | PRA Health Sciences, Inc. | 145,008 |
| 4,851 | 1 | PharMerica Corp. | 144,026 |
| 6,040 | 1 | Radnet, Inc. | 36,119 |
| | | TOTAL | 325,153 |
| | | Home Building—0.2% | |
| 2,062 | | M.D.C. Holdings, Inc. | 44,869 |
| | | Home Health Care—2.3% | |
| 6,418 | 1 | Amedisys, Inc. | 229,444 |
| 11,517 | 1 | Cross Country Healthcare, Inc. | 165,845 |
| 5,884 | 1 | LHC Group, Inc. | 223,121 |
| | | TOTAL | 618,410 |
| | | Hotels and Motels—0.4% | |
| 5,823 | 1 | Boyd Gaming Corp. | 103,708 |
| | | Industrial Machinery—0.1% | |
| 1,794 | 1 | Rexnord Corp. | 29,368 |
| | | Insurance—0.3% | |
| 3,739 | | Employers Holdings, Inc. | 93,138 |
| | | International Bank—0.3% | |
| 2,800 | | Preferred Bank Los Angeles, CA | 91,000 |
| | | Internet & Catalog Retail—0.1% | |
| 3,843 | 1 | RetailMeNot, Inc. | 34,971 |
| | | Internet Services—1.1% | |
| 21,830 | | EarthLink Network, Inc. | 129,233 |
| 8,842 | 1 | Web.com Group, Inc. | 166,495 |
| | | TOTAL | 295,728 |
| | | Internet Software & Services—0.2% | |
| 962 | 1 | LogMeIn, Inc. | 50,255 |
| | | IT Services—0.3% | |
| 1,211 | 1 | Luxoft Holding, Inc. | 90,922 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Life Insurance—1.0% | |
| 8,557 | | American Equity Investment Life Holding Co. | $155,652 |
| 2,508 | | Primerica, Inc. | 112,885 |
| | | TOTAL | 268,537 |
| | | Life Sciences Tools & Services—0.1% | |
| 3,865 | 1 | Fluidigm Corp. | 25,934 |
| | | Machined Parts Original Equipment Manufacturers—0.4% | |
| 38,558 | | Titan International, Inc. | 115,674 |
| | | Maritime—0.2% | |
| 11,820 | | DHT Maritime, Inc. | 68,320 |
| | | Medical Supplies—1.1% | |
| 1,597 | 1 | ICU Medical, Inc. | 153,711 |
| 2,463 | 1 | Merit Medical Systems, Inc. | 40,763 |
| 2,806 | 1 | Orthofix International NV | 110,753 |
| | | TOTAL | 305,227 |
| | | Medical Technology—0.9% | |
| 773 | 1 | Abiomed, Inc. | 65,960 |
| 5,260 | 1 | Natus Medical, Inc. | 185,573 |
| | | TOTAL | 251,533 |
| | | Metal Fabrication—0.8% | |
| 25,247 | | Timken Co. | 227,475 |
| | | Metals & Mining—0.5% | |
| 87,932 | 1 | Cloud Peak Energy, Inc. | 131,898 |
| | | Mini-Mill Producer—0.2% | |
| 4,197 | | Commercial Metals Corp. | 58,422 |
| | | Miscellaneous Communications—2.1% | |
| 11,280 | 1 | FairPoint Communications, Inc. | 169,200 |
| 23,150 | | West Corp. | 419,246 |
| | | TOTAL | 588,446 |
| | | Miscellaneous Components—0.3% | |
| 5,610 | 1 | Qlogic Corp. | 71,920 |
| | | Mortgage and Title—0.3% | |
| 13,315 | 1 | MGIC Investment Corp. | 88,145 |
| | | Mortgage Banks—1.2% | |
| 3,616 | 1 | Altisource Portfolio Solutions S.A. | 104,502 |
| 3,229 | 1 | LendingTree, Inc. | 237,945 |
| | | TOTAL | 342,447 |
| | | Multi-Industry Capital Goods—0.6% | |
| 2,753 | 1 | DXP Enterprises, Inc. | 43,167 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Multi-Industry Capital Goods—continued | |
| 4,289 | 1 | Lydall, Inc. | $121,164 |
| | | TOTAL | 164,331 |
| | | Office Furniture—0.6% | |
| 6,311 | | Miller Herman, Inc. | 161,688 |
| | | Office Supplies—1.0% | |
| 20,158 | 1 | Acco Brands Corp. | 122,359 |
| 7,615 | | Ennis Business Forms, Inc. | 152,072 |
| | | TOTAL | 274,431 |
| | | Offshore Driller—1.2% | |
| 40,362 | | Atwood Oceanics, Inc. | 247,419 |
| 13,234 | | Tidewater, Inc. | 70,273 |
| | | TOTAL | 317,692 |
| | | Oil Refiner—0.4% | |
| 3,127 | | Alon USA Energy, Inc. | 39,338 |
| 1,837 | | Western Refining, Inc. | 60,437 |
| | | TOTAL | 99,775 |
| | | Oil Service, Explore & Drill—1.0% | |
| 12,662 | 1 | Archrock, Inc. | 75,972 |
| 44,273 | 1 | Gulfmark Offshore, Inc. | 167,795 |
| 29,879 | 1 | Pioneer Energy Services Corp. | 40,934 |
| | | TOTAL | 284,701 |
| | | Other Communications Equipment—0.8% | |
| 5,607 | 1 | Netgear, Inc. | 209,534 |
| | | Other Tobacco Products—0.5% | |
| 3,153 | | Schweitzer-Mauduit International, Inc. | 132,426 |
| | | Outpatient Clinics—0.9% | |
| 3,538 | 1 | Amsurg Corp. | 258,946 |
| | | Personal Loans—1.1% | |
| 5,787 | | Cash America International, Inc. | 173,263 |
| 4,373 | 1 | Ezcorp, Inc., Class A | 13,294 |
| 4,369 | 1 | World Acceptance Corp. | 126,439 |
| | | TOTAL | 312,996 |
| | | Personnel Agency—0.7% | |
| 6,478 | 1 | AMN Healthcare Services, Inc. | 182,485 |
| | | Pharmaceuticals—0.2% | |
| 5,197 | 1 | Sucampo Pharmaceuticals, Inc., Class A | 65,742 |
| | | Printed Circuit Boards—0.2% | |
| 8,930 | 1 | Sigma Designs, Inc. | 59,206 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Printing—1.4% | |
| 37,639 | | Quad Graphics, Inc. | $379,401 |
| | | Property Liability Insurance—2.8% | |
| 2,022 | | Federated National Holding Co. | 50,024 |
| 3,791 | | HCI Group, Inc. | 126,051 |
| 7,640 | | Heritage Insurance Holdings, Inc. | 151,425 |
| 7,056 | | Selective Insurance Group, Inc. | 220,923 |
| 11,393 | | Universal Insurance Holdings, Inc. | 213,505 |
| | | TOTAL | 761,928 |
| | | Recreational Goods—0.4% | |
| 4,729 | 1 | Smith & Wesson Holding Corp. | 101,957 |
| | | Recreational Vehicles—0.3% | |
| 7,431 | | Arctic Cat, Inc. | 91,476 |
| | | Regional Banks—8.2% | |
| 2,992 | | 1st Source Corp. | 90,418 |
| 2,080 | | Arrow Financial Corp. | 57,242 |
| 1,719 | | CNB Financial Corp. | 31,269 |
| 1,388 | | Central Pacific Financial Corp. | 29,079 |
| 1,739 | | Community Trust Bancorp, Inc. | 60,587 |
| 6,156 | | Enterprise Financial Services Corp. | 174,769 |
| 825 | 1 | FCB Financial Holdings, Inc. | 27,736 |
| 2,099 | | Financial Institutions, Inc. | 57,617 |
| 19,248 | 1 | First BanCorp | 50,045 |
| 1,200 | | First Business Financial Services, Inc. | 27,552 |
| 1,718 | | Flushing Financial Corp. | 37,796 |
| 4,674 | | Great Southern Bancorp, Inc. | 185,418 |
| 8,076 | | Great Western Bancorp, Inc. | 210,945 |
| 8,694 | | Hancock Holding Co. | 208,308 |
| 8,594 | | Heartland Financial USA, Inc. | 257,390 |
| 3,017 | | Mercantile Bancorporation, Inc. | 67,430 |
| 4,200 | | MidSouth Bancorp, Inc. | 32,298 |
| 54,062 | | OFG Bancorp. | 303,828 |
| 6,758 | | Old National Bancorp | 83,258 |
| 2,981 | | Sandy Spring Bancorp, Inc. | 79,295 |
| 5,246 | | Trustmark Corp. | 113,523 |
| 5,316 | | Umpqua Holdings Corp. | 76,976 |
| | | TOTAL | 2,262,779 |
| | | Rubber—1.1% | |
| 8,539 | | Cooper Tire & Rubber Co. | 311,332 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Savings & Loan—1.9% | |
| 1,818 | | Berkshire Hills Bancorp, Inc. | $50,504 |
| 3,620 | 1 | BofI Holding, Inc. | 62,119 |
| 4,505 | | First Defiance Financial Corp. | 175,380 |
| 3,368 | | WSFS Financial Corp. | 97,874 |
| 6,514 | | Washington Federal, Inc. | 139,074 |
| | | TOTAL | 524,951 |
| | | Securities Brokerage—0.1% | |
| 797 | 1 | Piper Jaffray Cos., Inc. | 27,098 |
| | | Semiconductor Distribution—1.1% | |
| 1,923 | 1 | Tyler Technologies, Inc. | 302,026 |
| | | Semiconductor Manufacturing—1.6% | |
| 2,828 | 1 | Cirrus Logic, Inc. | 98,188 |
| 12,967 | 1 | Integrated Device Technology, Inc. | 330,399 |
| | | TOTAL | 428,587 |
| | | Semiconductor Manufacturing Equipment—1.0% | |
| 16,386 | 1 | Photronics, Inc. | 195,649 |
| 2,646 | | Tessera Technologies, Inc. | 76,258 |
| | | TOTAL | 271,907 |
| | | Services to Medical Professionals—0.3% | |
| 1,400 | 1 | Molina Healthcare, Inc. | 76,874 |
| | | Shoes—0.9% | |
| 14,030 | | Wolverine World Wide, Inc. | 237,247 |
| | | Software Packaged/Custom—2.0% | |
| 2,852 | | CSG Systems International, Inc. | 99,649 |
| 3,231 | | Ebix, Inc. | 110,242 |
| 2,913 | 1 | Fleetmatics Group PLC | 126,453 |
| 2,288 | 1 | Paylocity Corp. | 71,202 |
| 3,989 | 1 | RealPage, Inc. | 76,948 |
| 3,243 | 1 | Rovi Corp. | 63,109 |
| | | TOTAL | 547,603 |
| | | Specialty Chemicals—1.0% | |
| 885 | | Chemed Corp. | 124,183 |
| 2,711 | | KMG Chemicals, Inc. | 62,516 |
| 14,086 | | Rayonier Advanced Materials, Inc. | 98,602 |
| | | TOTAL | 285,301 |
| | | Specialty Retailing—3.8% | |
| 7,920 | 1 | Build-A-Bear Workshop, Inc. | 103,594 |
| 6,583 | | Outerwall, Inc. | 222,505 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Specialty Retailing—continued | |
| 71,238 | | Pier 1 Imports, Inc. | $286,377 |
| 31,864 | | Stage Stores, Inc. | 264,471 |
| 1,176 | 1 | Stamps.com, Inc. | 110,332 |
| 5,093 | 1 | Wesco Aircraft Holdings, Inc. | 57,500 |
| | | TOTAL | 1,044,779 |
| | | Telecommunication Equipment & Services—2.3% | |
| 2,672 | 1 | Dycom Industries, Inc. | 177,047 |
| 2,780 | 1 | Gigamon, Inc. | 72,697 |
| 13,601 | 1 | NeuStar, Inc., Class A | 334,313 |
| 5,324 | 1 | Polycom, Inc. | 54,251 |
| | | TOTAL | 638,308 |
| | | Telecommunication Services—1.0% | |
| 82,553 | 1 | Intelsat SA | 275,727 |
| | | Telephone Utility—0.2% | |
| 8,507 | 1 | Cincinnati Bell, Inc. | 27,563 |
| 5,400 | 1 | Windstream Holdings, Inc. | 31,158 |
| | | TOTAL | 58,721 |
| | | Textiles Apparel & Luxury Goods—0.6% | |
| 34,096 | 1 | Vince Holding Corp. | 176,276 |
| | | Truck Manufacturing—1.1% | |
| 20,266 | 1 | Navistar International Corp. | 147,334 |
| 14,288 | 1 | Wabash National Corp. | 158,025 |
| | | TOTAL | 305,359 |
| | | Undesignated Consumer Cyclicals—1.9% | |
| 1,629 | | Convergys Corp. | 39,813 |
| 1,813 | 1 | Euronet Worldwide, Inc. | 144,623 |
| 20,869 | | Rent-A-Center, Inc. | 284,236 |
| 4,928 | | Weight Watchers International, Inc. | 62,536 |
| | | TOTAL | 531,208 |
| | | Undesignated Consumer Staples—1.3% | |
| 7,467 | | Medifast, Inc. | 216,767 |
| 1,028 | 1 | USANA, Inc. | 130,453 |
| | | TOTAL | 347,220 |
| | | TOTAL COMMON STOCKS
(IDENTIFIED COST $32,352,223) | 26,996,747 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | INVESTMENT COMPANY—1.7% | |
| 458,984 | 2 | Federated Prime Value Obligations Fund, Institutional Shares, 0.35%3
(AT NET ASSET VALUE) | $458,984 |
| | | TOTAL INVESTMENTS—99.8%
(IDENTIFIED COST $32,811,207)4 | 27,455,731 |
| | | OTHER ASSETS AND LIABILITIES - NET—0.2%5 | 46,175 |
| | | TOTAL NET ASSETS—100% | $27,501,906 |
| 1 | Non-income-producing security. |
| 2 | Affiliated holding. |
| 3 | 7-day net yield. |
| 4 | Also represents cost for federal tax purposes. |
| 5 | 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 January 31, 2016.
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 January 31, 2016, all investments of the Fund utilized Level 1 inputs in valuing the Fund's assets carried at fair value.
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $15.66 | $15.07 | $13.70 | $9.52 | $9.88 | $7.55 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | 0.011 | (0.05)1 | (0.12)1 | (0.01)1 | (0.06)1 | (0.09)1 |
| Net realized and unrealized gain (loss) on investments | (2.01) | 1.57 | 1.49 | 4.19 | (0.30) | 2.42 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.00) | 1.52 | 1.37 | 4.18 | (0.36) | 2.33 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (1.63) | (0.93) | — | — | — | — |
| Net Asset Value, End of Period | $12.03 | $15.66 | $15.07 | $13.70 | $9.52 | $9.88 |
| Total Return2 | (13.92)% | 10.22% | 10.00% | 43.91% | (3.64)% | 30.86% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.13%3 | 1.48% | 1.70% | 1.70% | 1.71% | 1.75% |
| Net investment income (loss) | 0.11%3 | (0.35)% | (0.77)% | (0.05)% | (0.65)% | (0.96)% |
| Expense waiver/reimbursement4 | 1.14%3 | 0.76% | 0.52% | 1.09% | 4.24% | 3.75% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $7,499 | $7,160 | $5,346 | $3,694 | $2,550 | $3,469 |
| Portfolio turnover | 90% | 166% | 174% | 184% | 200% | 210% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class C Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $14.48 | $14.10 | $12.91 | $9.04 | $9.45 | $7.28 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | (0.04)1 | (0.16)1 | (0.21)1 | (0.09)1 | (0.12)1 | (0.15)1 |
| Net realized and unrealized gain (loss) on investments | (1.85) | 1.47 | 1.40 | 3.96 | (0.29) | 2.32 |
| TOTAL FROM INVESTMENT OPERATIONS | (1.89) | 1.31 | 1.19 | 3.87 | (0.41) | 2.17 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (1.63) | (0.93) | — | — | — | — |
| Net Asset Value, End of Period | $10.96 | $14.48 | $14.10 | $12.91 | $9.04 | $9.45 |
| Total Return2 | (14.30)% | 9.41% | 9.22% | 42.81% | (4.34)% | 29.81% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.88%3 | 2.28% | 2.45% | 2.45% | 2.46% | 2.50% |
| Net investment income (loss) | (0.64)%3 | (1.11)% | (1.50)% | (0.81)% | (1.41)% | (1.70)% |
| Expense waiver/reimbursement4 | 1.14%3 | 0.72% | 0.54% | 1.11% | 4.24% | 3.78% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $2,642 | $3,031 | $3,338 | $2,636 | $2,358 | $2,978 |
| Portfolio turnover | 90% | 166% | 174% | 184% | 200% | 210% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Institutional Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $16.04 | $15.38 | $13.94 | $9.67 | $10.00 | $7.63 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | 0.031 | (0.02)1 | (0.08)1 | 0.031 | (0.04)1 | (0.06)1 |
| Net realized and unrealized gain (loss) on investments | (2.07) | 1.61 | 1.52 | 4.24 | (0.29) | 2.43 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.04) | 1.59 | 1.44 | 4.27 | (0.33) | 2.37 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (1.63) | (0.93) | — | — | — | — |
| Net Asset Value, End of Period | $12.37 | $16.04 | $15.38 | $13.94 | $9.67 | $10.00 |
| Total Return2 | (13.84)% | 10.48% | 10.33% | 44.16% | (3.30)% | 31.06% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 0.88%3 | 1.26% | 1.45% | 1.45% | 1.46% | 1.50% |
| Net investment income (loss) | 0.36%3 | (0.11)% | (0.51)% | 0.23% | (0.44)% | (0.71)% |
| Expense waiver/reimbursement4 | 1.14%3 | 0.74% | 0.52% | 1.10% | 3.77% | 3.79% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $17,361 | $20,504 | $21,486 | $14,084 | $11,650 | $4,836 |
| Portfolio turnover | 90% | 166% | 174% | 184% | 200% | 210% |
| 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 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
January 31, 2016 (unaudited)
| Assets: | | |
| Total investment in securities, at value including $458,984 of investment in an affiliated holding (Note 5) (identified cost $32,811,207) | | $27,455,731 |
| Income receivable | | 16,402 |
| Receivable for investments sold | | 423,366 |
| Receivable for shares sold | | 56,557 |
| TOTAL ASSETS | | 27,952,056 |
| Liabilities: | | |
| Payable for investments purchased | $362,641 | |
| Payable for shares redeemed | 33,379 | |
| Payable to adviser (Note 5) | 454 | |
| Payable for portfolio accounting fees | 22,773 | |
| Payable for distribution services fee (Note 5) | 1,684 | |
| Payable for other service fees (Notes 2 and 5) | 5,491 | |
| Payable for share registration costs | 14,144 | |
| Accrued expenses (Note 5) | 9,584 | |
| TOTAL LIABILITIES | | 450,150 |
| Net assets for 2,267,522 shares outstanding | | $27,501,906 |
| Net Assets Consist of: | | |
| Paid-in capital | | $35,356,122 |
| Net unrealized depreciation of investments | | (5,355,476) |
| Accumulated net realized loss on investments | | (2,529,470) |
| Undistributed net investment income | | 30,730 |
| TOTAL NET ASSETS | | $27,501,906 |
Semi-Annual Shareholder Report
Statement of Assets and Liabilities–continued
| Net Asset Value, Offering Price and Redemption Proceeds Per Share | | |
| Class A Shares: | | |
| Net asset value per share ($7,498,873 ÷ 623,500 shares outstanding), no par value, unlimited shares authorized | | $12.03 |
| Offering price per share (100/94.50 of $12.03) | | $12.73 |
| Redemption proceeds per share | | $12.03 |
| Class C Shares: | | |
| Net asset value per share ($2,641,684 ÷ 240,922 shares outstanding), no par value, unlimited shares authorized | | $10.96 |
| Offering price per share | | $10.96 |
| Redemption proceeds per share (99/100 of $10.96) | | $10.85 |
| Institutional Shares: | | |
| Net asset value per share ($17,361,349 ÷ 1,403,100 shares outstanding), no par value, unlimited shares authorized | | $12.37 |
| Offering price per share | | $12.37 |
| Redemption proceeds per share | | $12.37 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended January 31, 2016 (unaudited)
| Investment Income: | | |
| Dividends (including $576 received from an affiliated holding (Note 5) and net of foreign taxes withheld of $968) | | $187,861 |
| Expenses: | | |
| Investment adviser fee (Note 5) | $172,911 | |
| Administrative fee (Note 5) | 11,765 | |
| Custodian fees | 11,658 | |
| Transfer agent fee | 20,787 | |
| Directors'/Trustees' fees (Note 5) | 863 | |
| Auditing fees | 12,300 | |
| Legal fees | 4,047 | |
| Portfolio accounting fees | 33,805 | |
| Distribution services fee (Note 5) | 10,926 | |
| Other service fees (Notes 2 and 5) | 13,155 | |
| Share registration costs | 20,611 | |
| Printing and postage | 9,664 | |
| Miscellaneous (Note 5) | 5,738 | |
| TOTAL EXPENSES | 328,230 | |
| Waiver/reimbursement of investment adviser fee (Note 5) | (171,099) | |
| Net expenses | | 157,131 |
| Net investment income | | 30,730 |
| Realized and Unrealized Gain (Loss) on Investments: | | |
| Net realized gain on investments | | 1,229,694 |
| Net change in unrealized appreciation of investments | | (5,768,253) |
| Net realized and unrealized loss on investments | | (4,538,559) |
| Change in net assets resulting from operations | | $(4,507,829) |
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)
1/31/2016 | Year Ended
7/31/2015 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income (loss) | $30,730 | $(79,268) |
| Net realized gain on investments | 1,229,694 | 3,442,659 |
| Net change in unrealized appreciation/depreciation of investments | (5,768,253) | (418,792) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | (4,507,829) | 2,944,599 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | | |
| Class A Shares | (924,111) | (330,893) |
| Class C Shares | (354,574) | (208,105) |
| Institutional Shares | (2,077,286) | (1,153,048) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (3,355,971) | (1,692,046) |
| Share Transactions: | | |
| Proceeds from sale of shares | 7,362,530 | 6,991,073 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 3,230,590 | 1,610,014 |
| Cost of shares redeemed | (5,922,286) | (9,329,278) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 4,670,834 | (728,191) |
| Change in net assets | (3,192,966) | 524,362 |
| Net Assets: | | |
| Beginning of period | 30,694,872 | 30,170,510 |
| End of period (including undistributed net investment income of $30,730 and $0, respectively) | $27,501,906 | $30,694,872 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
January 31, 2016 (unaudited)
1. ORGANIZATION
Federated MDT 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 five portfolios. The financial statements included herein are only those of Federated MDT Small Cap Core Fund (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 Fund offers three classes of shares: Class A Shares, Class C Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is long-term capital appreciation.
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:
| ■ | 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. |
| ■ | 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. |
Semi-Annual Shareholder Report
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 MDTA LLC (“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.
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
Semi-Annual Shareholder Report
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, if any, are declared and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares and Class C Shares may bear distribution services fees and other service fees unique to those classes. The detail of total fund expense waivers of $171,099 is disclosed in Note 5.
Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class C Shares to unaffiliated financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees. For the six months ended January 31, 2016, other service fees for the Fund were as follows:
| | Other
Service Fees
Incurred |
| Class A Shares | $9,513 |
| Class C Shares | 3,642 |
| TOTAL | $13,155 |
Semi-Annual Shareholder Report
Premium and Discount Amortization
All premiums and discounts on fixed-income securities are amortized/accreted using the effective-interest-rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended January 31, 2016, 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 January 31, 2016, tax years 2012 through 2015 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts.
The Fund may be subject to taxes imposed by governments of countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or gains are earned.
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.
3. SHARES OF BENEFICIAL INTEREST
The following tables summarize share activity:
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 189,513 | $2,790,748 | 195,981 | $3,035,389 |
| Shares issued to shareholders in payment of distributions declared | 67,053 | 904,542 | 20,829 | 317,649 |
| Shares redeemed | (90,293) | (1,208,560) | (114,348) | (1,754,885) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | 166,273 | $2,486,730 | 102,462 | $1,598,153 |
Semi-Annual Shareholder Report
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class C Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 48,934 | $665,286 | 42,094 | $604,168 |
| Shares issued to shareholders in payment of distributions declared | 22,980 | 282,655 | 11,327 | 160,392 |
| Shares redeemed | (40,309) | (537,642) | (80,851) | (1,175,191) |
| NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS | 31,605 | $410,299 | (27,430) | $(410,631) |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Institutional Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 261,030 | $3,906,496 | 212,197 | $3,351,516 |
| Shares issued to shareholders in payment of distributions declared | 147,325 | 2,043,393 | 72,562 | 1,131,973 |
| Shares redeemed | (283,335) | (4,176,084) | (403,797) | (6,399,202) |
| NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS | 125,020 | $1,773,805 | (119,038) | $(1,915,713) |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | 322,898 | $4,670,834 | (44,006) | $(728,191) |
4. FEDERAL TAX INFORMATION
At January 31, 2016, the cost of investments for federal tax purposes was $32,811,207. The net unrealized depreciation of investments for federal tax purposes was $5,355,476. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $1,440,417 and net unrealized depreciation from investments for those securities having an excess of cost over value of $6,795,893.
At July 31, 2015, the Fund had a capital loss carryforward of $805,911 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 |
| 2018 | $805,911 | NA | $805,911 |
Semi-Annual Shareholder Report
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 1.15% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the Adviser voluntarily waived $170,736 of its fee.
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 |
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares and Class C Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:
| Share Class Name | Percentage of Average Daily
Net Assets of Class |
| Class A Shares | 0.05% |
| Class C Shares | 0.75% |
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, distribution services fees for the Fund were as follows:
| | Distribution
Services Fees
Incurred |
| Class C Shares | $10,926 |
Semi-Annual Shareholder Report
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended January 31, 2016, FSC retained $1,117 of fees paid by the Fund. For the six months ended January 31, 2016, the Fund's Class A Shares did not incur a distribution services fee; however, it may begin to incur this upon approval of the Trustees.
Other Service Fees
For the six months ended January 31, 2016, FSSC received $120 of the other service fees disclosed in Note 2.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended January 31, 2016, FSC retained $841 in sales charges from the sale of Class A Shares. FSC also retained $340 of CDSC relating to redemptions of Class C Shares.
Expense Limitation
The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding expenses allocated from affiliated partnerships, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund's Class A Shares, Class C Shares and Institutional Shares (after the voluntary waivers and/or reimbursements) will not exceed 1.13%, 1.88% and 0.88% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) October 1, 2016; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
General
Certain Officers and Trustees of the Trust 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. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the six months ended January 31, 2016, the Adviser reimbursed $363. Transactions involving the affiliated holding during the six months ended January 31, 2016, were as follows:
| | Federated
Prime Value
Obligations Fund,
Institutional Shares |
| Balance of Shares Held 7/31/2015 | 630,062 |
| Purchases/Additions | 7,105,357 |
| Sales/Reductions | (7,276,435) |
| Balance of Shares Held 1/31/2016 | 458,984 |
| Value | $458,984 |
| Dividend Income | $576 |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended January 31, 2016, were as follows:
| Purchases | $27,783,080 |
| Sales | $26,343,080 |
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 January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, 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 January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, the program was not utilized.
9. SUBSEQUENT EVENTS
On February 10, 2016, the Trustees approved adding Class R6 Shares to the Fund which is expected to become effective the second quarter of 2016.
Management has evaluated subsequent events through the date the financial statements were issued and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, 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 August 1, 2015 to January 31, 2016.
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.
Semi-Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| | Beginning
Account Value
8/1/2015 | Ending
Account Value
1/31/2016 | Expenses Paid
During Period1 |
| Actual: | | | |
| Class A Shares | $1,000 | $860.80 | $5.29 |
| Class C Shares | $1,000 | $857.00 | $8.78 |
| Institutional Shares | $1,000 | $861.60 | $4.12 |
Hypothetical (assuming a 5% return
before expenses): | | | |
| Class A Shares | $1,000 | $1,019.46 | $5.74 |
| Class C Shares | $1,000 | $1,015.69 | $9.53 |
| Institutional Shares | $1,000 | $1,020.71 | $4.47 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| | |
| Class A Shares | 1.13% |
| Class C Shares | 1.88% |
| Institutional Shares | 0.88% |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2015
Federated MDT Small Cap Core Fund (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.
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.
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
Semi-Annual Shareholder Report
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 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
Semi-Annual Shareholder Report
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.
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a relevant indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
The Board reviewed the contractual advisory fee rate, net advisory fee rate where partially waived and other expenses of the Fund and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted the applicable waivers and reimbursements and that the overall expense structure of the Fund remained competitive. In this regard, the Board had been previously advised that, while comparisons to fund peer groups are relevant in judging the reasonableness of advisory fees, the Fund's quantitative focus makes fee and expense comparisons particularly difficult. Although the Fund's advisory fee was above the median of the peer range, the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers. The Board will continue to monitor advisory fees and other expenses borne by the Fund.
By contrast, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts and sub-adviser services). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; and the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing
Semi-Annual Shareholder Report
different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Senior Officer noted that the services, administrative responsibilities and risks associated with such relationships are quite different than serving as a primary adviser to a fund.
The Fund's ability to deliver competitive performance when compared to its peer group 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 Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups may be helpful, though not conclusive, in judging the reasonableness of the proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group, and that the Senior Officer had specifically noted that the Fund's quantitative focus makes fee and expense comparisons particularly difficult as the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers.
For the periods covered by the Evaluation, the Fund's performance for the three-year and five-year periods was above the median of the relevant peer group and the Fund's performance fell below the median of the relevant peer group for the one-year period. In addition, the Board was informed by the Adviser that, for the same periods, the Fund underperformed its benchmark index for the one-year period, outperformed its benchmark index for the three-year period and outperformed 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.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In
Semi-Annual Shareholder Report
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 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.
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated family of funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies of scale, should they exist) were likely to be enjoyed by the fund family as a whole. Federated, as it does throughout the year, and again in connection with the Board's review, furnished information relative to revenue sharing or adviser paid fees. Federated and the Senior Officer noted that this information should be viewed to determine if there was an incentive to either not apply breakpoints or to apply breakpoints at higher levels and should not be viewed to determining the appropriateness of advisory fees, because it would represent marketing and distribution expenses. Finally, the Board also noted the absence of any applicable regulatory or industry
Semi-Annual Shareholder Report
guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size.
The Senior Officer 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. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
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. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
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 is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. Form N-PX filings 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.) You may also access this information via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
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 MDT Small Cap Core Fund
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 31421R817
CUSIP 31421R791
CUSIP 31421R783
36359 (3/16)
Federated is a registered trademark of Federated Investors, Inc.
2016 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
January 31, 2016
| Share Class | Ticker |
| A | QASGX |
| B | QBSGX |
| C | QCSGX |
| Institutional | QISGX |
Federated MDT Small Cap Growth Fund
Fund Established 2005
A Portfolio of Federated MDT Series
Dear Valued Shareholder,
I am pleased to present the Semi-Annual Shareholder Report for your fund covering the period from August 1, 2015 through January 31, 2016. This report includes a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
Not FDIC Insured • May Lose Value • No Bank Guarantee
Portfolio of Investments Summary Table (unaudited)
At January 31, 2016, the Fund's industry composition1 was as follows:
| Industry Composition | Percentage of
Total Net Assets |
| Software Packaged/Custom | 5.7% |
| Biotechnology | 4.9% |
| Specialty Retailing | 4.3% |
| Health Care Equipment & Supplies | 4.0% |
| Telecommunication Equipment & Services | 3.4% |
| Specialty Chemicals | 3.1% |
| Semiconductor Manufacturing | 2.9% |
| Clothing Stores | 2.7% |
| Airline - Regional | 2.4% |
| Home Health Care | 2.4% |
| Auto Original Equipment Manufacturers | 2.3% |
| Apparel | 2.2% |
| Internet Services | 2.0% |
| Property Liability Insurance | 2.0% |
| Undesignated Consumer Cyclicals | 2.0% |
| Dairy Products | 1.9% |
| Life Sciences Tools & Services | 1.9% |
| Undesignated Consumer Staples | 1.9% |
| Home Products | 1.8% |
| IT Services | 1.7% |
| Semiconductor Distribution | 1.6% |
| Building Materials | 1.5% |
| Medical Technology | 1.5% |
| Shoes | 1.4% |
| Diversified Leisure | 1.3% |
| Resorts | 1.3% |
| Services to Medical Professionals | 1.3% |
| Consumer Finance | 1.2% |
| Medical Supplies | 1.2% |
| Personnel Agency | 1.2% |
| Textiles Apparel & Luxury Goods | 1.2% |
| Financial Services | 1.1% |
| Generic Drugs | 1.1% |
| Hotels and Motels | 1.0% |
Semi-Annual Shareholder Report
| Industry Composition | Percentage of
Total Net Assets |
| Pharmaceuticals | 1.0% |
| Recreational Goods | 1.0% |
| Other2 | 23.4% |
| Cash Equivalents3 | 2.3% |
| Other Assets and Liabilities—Net4 | (1.1)% |
| TOTAL | 100.0% |
| 1 | Except for Cash Equivalents and Other Assets and Liabilities, industry classifications are based upon, and individual portfolio securities are assigned to, the classifications of the Global Industry Classification Standard (GICS) except that the Adviser assigns a classification to securities not classified by the GICS and to securities for which the Adviser does not have access to the classification made by the GICS. |
| 2 | For purposes of this table, industry classifications which constitute less than 1.0% 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
January 31, 2016 (unaudited)
| Shares | | | Value |
| | | COMMON STOCKS—98.8% | |
| | | Airline - Regional—2.4% | |
| 2,856 | | Alaska Air Group, Inc. | $201,062 |
| 549 | | Allegiant Travel Co. | 88,098 |
| 28,008 | 1 | Hawaiian Holdings, Inc. | 986,162 |
| 10,236 | 1 | Virgin America, Inc. | 315,781 |
| | | TOTAL | 1,591,103 |
| | | Apparel—2.2% | |
| 38,822 | 1 | Express, Inc. | 658,421 |
| 11,000 | 1 | Iconix Brand Group, Inc. | 73,040 |
| 3,175 | | Oxford Industries, Inc. | 221,806 |
| 30,022 | 1 | Zumiez, Inc. | 543,698 |
| | | TOTAL | 1,496,965 |
| | | Auto Original Equipment Manufacturers—2.3% | |
| 24,043 | 1 | American Axle & Manufacturing Holdings, Inc. | 308,231 |
| 77,507 | 1 | Commercial Vehicle Group, Inc. | 240,272 |
| 13,328 | | Dana Holding Corp. | 158,470 |
| 48,059 | 1 | Meritor, Inc. | 328,243 |
| 5,904 | 1 | Stoneridge, Inc. | 66,774 |
| 3,257 | 1 | Tenneco, Inc. | 124,450 |
| 13,943 | | Tower International, Inc. | 320,968 |
| | | TOTAL | 1,547,408 |
| | | Biotechnology—4.9% | |
| 6,418 | 1 | Acorda Therapeutics, Inc. | 236,311 |
| 66,124 | 1 | Aegerion Pharmaceuticals, Inc. | 468,158 |
| 6,141 | 1 | Anika Therapeutics, Inc. | 231,024 |
| 10,548 | 1 | Cambrex Corp. | 365,383 |
| 1,012 | 1 | Eagle Pharmaceuticals, Inc. | 72,763 |
| 9,266 | 1 | Emergent Biosolutions, Inc. | 339,136 |
| 65,334 | 1 | Geron Corp. | 199,269 |
| 4,285 | 1 | Heska Corp. | 160,088 |
| 10,863 | 1 | INSYS Therapeutics, Inc. | 188,473 |
| 4,313 | 1 | Luminex Corp. | 82,766 |
| 9,162 | 1 | Myriad Genetics, Inc. | 357,043 |
| 1,958 | 1 | Neurocrine Biosciences, Inc. | 83,313 |
| 64,851 | 1 | Orexigen Therapeutics, Inc. | 118,677 |
| 84,021 | | PDL BioPharma, Inc. | 263,829 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Biotechnology—continued | |
| 18,162 | 1 | Sangamo BioSciences, Inc. | $109,880 |
| | | TOTAL | 3,276,113 |
| | | Broadcasting—0.5% | |
| 9,284 | | Sinclair Broadcast Group, Inc. | 306,372 |
| | | Building Materials—1.5% | |
| 25,175 | 1 | Nortek, Inc. | 981,573 |
| | | Carpets—0.5% | |
| 19,808 | | Interface, Inc. | 334,557 |
| | | Clothing Stores—2.7% | |
| 28,732 | | American Eagle Outfitters, Inc. | 420,636 |
| 2,390 | | Buckle, Inc. | 67,924 |
| 25,384 | | Chicos Fas, Inc. | 263,740 |
| 78,527 | | Mens Wearhouse, Inc. | 1,076,605 |
| | | TOTAL | 1,828,905 |
| | | Cogeneration—0.0% | |
| 4,028 | 1 | Rentech, Inc. | 7,855 |
| | | Computer Networking—0.7% | |
| 11,688 | 1 | Cray, Inc. | 460,390 |
| | | Computer Peripherals—0.6% | |
| 46,281 | 1 | Zagg, Inc. | 426,711 |
| | | Computer Services—0.3% | |
| 3,784 | 1 | Manhattan Associates, Inc. | 218,148 |
| | | Computer Stores—0.2% | |
| 6,322 | 1 | Insight Enterprises, Inc. | 149,389 |
| | | Consumer Finance—1.2% | |
| 129,724 | 1 | Enova International, Inc. | 722,563 |
| 2,179 | 1 | PRA Group, Inc. | 64,825 |
| | | TOTAL | 787,388 |
| | | Contracting—0.3% | |
| 7,422 | | Comfort Systems USA, Inc. | 210,339 |
| | | Cosmetics & Toiletries—0.4% | |
| 3,224 | 1 | Helen of Troy Ltd. | 288,129 |
| | | Crude Oil & Gas Production—0.7% | |
| 218,674 | 1 | Ultra Petroleum Corp. | 494,203 |
| | | Dairy Products—1.9% | |
| 10,776 | | Cal-Maine Foods, Inc. | 543,865 |
| 35,493 | | Dean Foods Co. | 709,150 |
| | | TOTAL | 1,253,015 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Defense Aerospace—0.2% | |
| 7,587 | 1 | Ducommun, Inc. | $112,288 |
| | | Discount Department Stores—0.8% | |
| 100,435 | 1 | Tuesday Morning Corp. | 559,423 |
| | | Diversified Leisure—1.3% | |
| 32,072 | 1 | Isle of Capri Casinos, Inc. | 406,032 |
| 15,378 | 1 | Pinnacle Entertainment, Inc. | 469,644 |
| | | TOTAL | 875,676 |
| | | Education & Training Services—0.1% | |
| 3,960 | 1 | American Public Education, Inc. | 62,489 |
| | | Electric & Electronic Original Equipment Manufacturers—0.8% | |
| 7,563 | 1 | Generac Holdings, Inc. | 214,940 |
| 28,630 | | General Cable Corp. | 335,544 |
| | | TOTAL | 550,484 |
| | | Electronic Instruments—0.7% | |
| 48,954 | 1 | Ixia | 468,490 |
| | | Electronics Stores—0.3% | |
| 3,840 | 1 | REX American Resources Corp. | 205,171 |
| | | Energy Equipment & Services—0.3% | |
| 81,470 | 1 | FMSA Holdings, Inc. | 199,601 |
| | | Financial Services—1.1% | |
| 11,216 | | Deluxe Corp. | 626,974 |
| 3,490 | 1 | Encore Capital Group, Inc. | 79,991 |
| | | TOTAL | 706,965 |
| | | Food Wholesaling—0.2% | |
| 1,900 | | Core-Mark Holding Co., Inc. | 154,451 |
| | | Furniture—0.9% | |
| 4,839 | 1 | American Woodmark Corp. | 333,891 |
| 6,897 | | Bassett Furniture Industries, Inc. | 206,289 |
| 2,730 | | Ethan Allen Interiors, Inc. | 72,891 |
| | | TOTAL | 613,071 |
| | | Generic Drugs—1.1% | |
| 44,122 | 1 | Cytokinetics, Inc. | 339,740 |
| 16,483 | 1 | Lannett Co., Inc. | 420,481 |
| | | TOTAL | 760,221 |
| | | Grocery Chain—0.3% | |
| 1,404 | | Casey's General Stores, Inc. | 169,519 |
| | | Health Care Equipment & Supplies—4.0% | |
| 32,218 | 1 | Cardiovascular Systems, Inc. | 272,242 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Health Care Equipment & Supplies—continued | |
| 3,700 | 1 | Globus Medical, Inc. | $92,315 |
| 4,587 | 1 | Inogen, Inc. | 152,472 |
| 5,897 | 1 | Insulet Corp. | 195,663 |
| 16,815 | 1 | iRadimed Corp. | 327,052 |
| 11,907 | 1 | Lantheus Holdings, Inc. | 25,838 |
| 31,107 | | LeMaitre Vascular, Inc. | 454,162 |
| 26,028 | 1 | Masimo Corp. | 956,529 |
| 36,232 | 1 | RTI Surgical, Inc. | 116,305 |
| 4,642 | 1 | Zeltiq Aesthetics, Inc. | 107,787 |
| | | TOTAL | 2,700,365 |
| | | Health Care Providers & Services—0.7% | |
| 10,368 | 1 | PRA Health Sciences, Inc. | 446,653 |
| | | Home Health Care—2.4% | |
| 21,536 | 1 | Amedisys, Inc. | 769,912 |
| 42,759 | 1 | Cross Country Healthcare, Inc. | 615,729 |
| 3,205 | 1 | Wellcare Health Plans, Inc. | 243,516 |
| | | TOTAL | 1,629,157 |
| | | Home Products—1.8% | |
| 57,834 | | Libbey, Inc. | 925,344 |
| 6,149 | | Tupperware Brands Corp. | 285,498 |
| | | TOTAL | 1,210,842 |
| | | Hotels and Motels—1.0% | |
| 37,602 | 1 | Boyd Gaming Corp. | 669,692 |
| | | Hotels Restaurants & Leisure—0.6% | |
| 3,850 | 1 | Dave & Buster's Entertainment, Inc. | 139,640 |
| 14,860 | 1 | Diamond Resorts International, Inc. | 273,721 |
| | | TOTAL | 413,361 |
| | | Industrial Machinery—0.3% | |
| 8,733 | 1 | Rexnord Corp. | 142,959 |
| 3,542 | | Twin Disc, Inc. | 40,521 |
| | | TOTAL | 183,480 |
| | | Internet Services—2.0% | |
| 71,612 | | EarthLink Network, Inc. | 423,943 |
| 3,825 | | j2 Global, Inc. | 277,351 |
| 32,784 | 1 | Web.com Group, Inc. | 617,323 |
| | | TOTAL | 1,318,617 |
| | | Internet Software & Services—0.9% | |
| 11,095 | 1 | Cornerstone OnDemand, Inc. | 340,505 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Internet Software & Services—continued | |
| 5,336 | 1 | LogMeIn, Inc. | $278,753 |
| | | TOTAL | 619,258 |
| | | IT Services—1.7% | |
| 4,448 | 1 | Cardtronics, Inc. | 137,043 |
| 7,854 | 1 | Globant SA | 238,919 |
| 19,503 | | Hackett Group, Inc. | 288,059 |
| 5,088 | 1 | Luxoft Holding, Inc. | 382,007 |
| 5,720 | | Travelport Worldwide Ltd. | 62,291 |
| | | TOTAL | 1,108,319 |
| | | Jewelry Stores—0.4% | |
| 10,436 | | Movado Group, Inc. | 268,205 |
| | | Life Sciences Tools & Services—1.9% | |
| 65,365 | 1 | Fluidigm Corp. | 438,599 |
| 20,123 | 1 | INC Research Holdings, Inc. | 847,782 |
| | | TOTAL | 1,286,381 |
| | | Machinery—0.6% | |
| 20,482 | | Global Brass & Copper Holdings, Inc. | 424,182 |
| | | Medical Supplies—1.2% | |
| 4,896 | 1 | ICU Medical, Inc. | 471,240 |
| 18,013 | 1 | NxStage Medical, Inc. | 340,806 |
| | | TOTAL | 812,046 |
| | | Medical Technology—1.5% | |
| 3,817 | 1 | Abiomed, Inc. | 325,705 |
| 20,140 | 1 | Natus Medical, Inc. | 710,539 |
| | | TOTAL | 1,036,244 |
| | | Metal Fabrication—0.1% | |
| 3,191 | | Worthington Industries, Inc. | 97,613 |
| | | Metals & Mining—0.1% | |
| 16,880 | | SunCoke Energy, Inc. | 63,806 |
| | | Miscellaneous Communications—0.9% | |
| 13,743 | 1 | FairPoint Communications, Inc. | 206,145 |
| 22,828 | | West Corp. | 413,415 |
| | | TOTAL | 619,560 |
| | | Miscellaneous Components—0.4% | |
| 9,018 | 1 | Microsemi Corp. | 285,871 |
| | | Miscellaneous Machinery—0.3% | |
| 4,479 | | John Bean Technologies Corp. | 205,183 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Mortgage and Title—0.3% | |
| 30,798 | 1 | MGIC Investment Corp. | $203,883 |
| | | Mortgage Banks—0.8% | |
| 7,537 | 1 | LendingTree, Inc. | 555,402 |
| | | Multi-Industry Capital Goods—0.2% | |
| 7,258 | 1 | DXP Enterprises, Inc. | 113,805 |
| | | Mutual Fund Adviser—0.4% | |
| 9,100 | | GAMCO Investors, Inc., Class A | 264,628 |
| | | Office Furniture—0.9% | |
| 10,520 | | Knoll, Inc. | 193,042 |
| 14,110 | | Miller Herman, Inc. | 361,498 |
| 3,849 | | Steelcase, Inc., Class A | 49,113 |
| | | TOTAL | 603,653 |
| | | Office Supplies—0.1% | |
| 2,312 | | Essendant, Inc. | 69,036 |
| | | Oil Refiner—0.3% | |
| 5,280 | | Western Refining, Inc. | 173,712 |
| | | Oil Service, Explore & Drill—0.2% | |
| 41,498 | 1 | PetroQuest Energy, Inc. | 19,504 |
| 58,262 | 1 | Pioneer Energy Services Corp. | 79,819 |
| | | TOTAL | 99,323 |
| | | Optical Reading Equipment—0.3% | |
| 11,149 | 1 | Newport Corp. | 169,799 |
| | | Other Communications Equipment—0.5% | |
| 8,124 | 1 | Netgear, Inc. | 303,594 |
| | | Packaged Foods—0.2% | |
| 3,866 | 1 | United Natural Foods, Inc. | 135,387 |
| | | Paper Products—0.1% | |
| 1,733 | 1 | Clearwater Paper Corp. | 67,864 |
| | | Personal Loans—0.6% | |
| 5,177 | | Cash America International, Inc. | 154,999 |
| 9,565 | 1 | World Acceptance Corp. | 276,811 |
| | | TOTAL | 431,810 |
| | | Personnel Agency—1.2% | |
| 23,323 | 1 | AMN Healthcare Services, Inc. | 657,009 |
| 4,337 | | Korn/Ferry International | 133,623 |
| | | TOTAL | 790,632 |
| | | Pharmaceuticals—1.0% | |
| 3,441 | 1 | Anacor Pharmaceuticals, Inc. | 258,522 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Pharmaceuticals—continued | |
| 11,380 | 1 | Innoviva, Inc. | $114,028 |
| 22,624 | 1 | Sucampo Pharmaceuticals, Inc., Class A | 286,194 |
| | | TOTAL | 658,744 |
| | | Property Liability Insurance—2.0% | |
| 3,255 | | Employers Holdings, Inc. | 81,082 |
| 11,307 | | HCI Group, Inc. | 375,958 |
| 14,649 | | Heritage Insurance Holdings, Inc. | 290,343 |
| 29,997 | | Universal Insurance Holdings, Inc. | 562,144 |
| | | TOTAL | 1,309,527 |
| | | Railroad—0.2% | |
| 6,396 | | Greenbrier Cos., Inc. | 165,401 |
| | | Real Estate Management & Development—0.7% | |
| 15,919 | 1 | Altisource Portfolio Solutions S.A. | 460,059 |
| | | Recreational Goods—1.0% | |
| 10,225 | 1 | Nautilus, Inc. | 199,183 |
| 21,204 | 1 | Smith & Wesson Holding Corp. | 457,158 |
| | | TOTAL | 656,341 |
| | | Recreational Vehicles—0.4% | |
| 23,097 | | Arctic Cat, Inc. | 284,324 |
| | | Resorts—1.3% | |
| 6,671 | | Marriott Vacations Worldwide Corp. | 329,481 |
| 4,151 | | Vail Resorts, Inc. | 518,875 |
| | | TOTAL | 848,356 |
| | | Road & Rail—0.6% | |
| 51,143 | 1 | Roadrunner Transportation Systems, Inc. | 405,053 |
| | | Semiconductor Distribution—1.6% | |
| 6,823 | 1 | Tyler Technologies, Inc. | 1,071,620 |
| | | Semiconductor Manufacturing—2.9% | |
| 16,046 | 1 | Cirrus Logic, Inc. | 557,117 |
| 45,749 | 1 | Integrated Device Technology, Inc. | 1,165,685 |
| 3,597 | | Monolithic Power Systems | 225,064 |
| | | TOTAL | 1,947,866 |
| | | Semiconductor Manufacturing Equipment—0.6% | |
| 12,095 | | Tessera Technologies, Inc. | 348,578 |
| 7,155 | 1 | Xcerra Corp. | 39,209 |
| | | TOTAL | 387,787 |
| | | Services to Medical Professionals—1.3% | |
| 8,546 | 1 | Molina Healthcare, Inc. | 469,261 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Services to Medical Professionals—continued | |
| 7,624 | 1 | WebMD Health Corp., Class A | $389,662 |
| | | TOTAL | 858,923 |
| | | Shoes—1.4% | |
| 56,130 | | Wolverine World Wide, Inc. | 949,158 |
| | | Software Packaged/Custom—5.7% | |
| 61,442 | 1 | Barracuda Networks, Inc. | 650,056 |
| 13,225 | | CSG Systems International, Inc. | 462,082 |
| 11,114 | | Ebix, Inc. | 379,210 |
| 1,636 | 1 | Ellie Mae, Inc. | 114,242 |
| 11,930 | 1 | Fleetmatics Group PLC | 517,881 |
| 4,848 | 1 | Imperva, Inc. | 249,963 |
| 392 | 1 | MicroStrategy, Inc., Class A | 67,624 |
| 9,534 | 1 | Paylocity Corp. | 296,698 |
| 6,336 | | Pegasystems, Inc. | 148,896 |
| 4,449 | 1 | Perficient, Inc. | 84,753 |
| 20,904 | 1 | RealPage, Inc. | 403,238 |
| 13,344 | 1 | Sapiens International Corp. NV | 134,241 |
| 13,168 | 1 | VASCO Data Security International, Inc. | 204,104 |
| 3,510 | 1 | Verint Systems, Inc. | 128,501 |
| | | TOTAL | 3,841,489 |
| | | Specialty Chemicals—3.1% | |
| 3,655 | | Chemed Corp. | 512,870 |
| 24,480 | | KMG Chemicals, Inc. | 564,509 |
| 3,530 | 1 | Koppers Holdings, Inc. | 59,763 |
| 37,843 | 1 | LSB Industries, Inc. | 211,921 |
| 5,079 | | Minerals Technologies, Inc. | 208,188 |
| 20,531 | 1 | Trinseo SA | 488,432 |
| | | TOTAL | 2,045,683 |
| | | Specialty Retailing—4.3% | |
| 5,846 | | Big Lots, Inc. | 226,708 |
| 23,375 | 1 | Build-A-Bear Workshop, Inc. | 305,745 |
| 42,580 | 1 | Container Store Group, Inc. | 183,946 |
| 9,938 | 1 | Hibbett Sports, Inc. | 319,606 |
| 17,708 | 1 | Kirkland's, Inc. | 209,486 |
| 20,412 | | Outerwall, Inc. | 689,925 |
| 236,752 | | Pier 1 Imports, Inc. | 951,743 |
| | | TOTAL | 2,887,159 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | COMMON STOCKS—continued | |
| | | Telecommunication Equipment & Services—3.4% | |
| 10,864 | 1 | Dycom Industries, Inc. | $719,849 |
| 18,348 | 1 | Gigamon, Inc. | 479,800 |
| 31,608 | 1 | NeuStar, Inc., Class A | 776,924 |
| 24,668 | 1 | Polycom, Inc. | 251,367 |
| 13,827 | 1 | Sonus Networks, Inc. | 82,962 |
| | | TOTAL | 2,310,902 |
| | | Telephone Utility—0.1% | |
| 15,033 | 1 | Windstream Holdings, Inc. | 86,740 |
| | | Textiles Apparel & Luxury Goods—1.2% | |
| 152,063 | 1 | Vince Holding Corp. | 786,166 |
| | | Thrifts & Mortgage Finance—0.3% | |
| 13,584 | 1 | BofI Holding, Inc. | 233,101 |
| | | Truck Manufacturing—0.7% | |
| 39,862 | 1 | Wabash National Corp. | 440,874 |
| | | Trucking—0.3% | |
| 8,544 | 1 | Saia, Inc. | 182,756 |
| | | Undesignated Consumer Cyclicals—2.0% | |
| 6,868 | 1 | Euronet Worldwide, Inc. | 547,860 |
| 7,980 | 1 | Parexel International Corp. | 510,401 |
| 23,090 | | Weight Watchers International, Inc. | 293,012 |
| | | TOTAL | 1,351,273 |
| | | Undesignated Consumer Staples—1.9% | |
| 18,778 | 1 | Array BioPharma, Inc. | 58,024 |
| 23,609 | | Medifast, Inc. | 685,369 |
| 10,164 | | Nutri/System, Inc. | 201,349 |
| 2,784 | 1 | USANA, Inc. | 353,290 |
| | | TOTAL | 1,298,032 |
| | | Wireless Communications—0.3% | |
| 4,657 | | InterDigital, Inc. | 209,751 |
| | | Wireless Telecommunication Services—0.2% | |
| 6,251 | 1 | RingCentral, Inc. | 136,397 |
| | | TOTAL COMMON STOCKS
(IDENTIFIED COST $76,903,883) | 66,291,257 |
Semi-Annual Shareholder Report
| Shares | | | Value |
| | | INVESTMENT COMPANY—2.3% | |
| 1,568,081 | 2 | Federated Prime Value Obligations Fund, Institutional Shares, 0.35%3
(AT NET ASSET VALUE) | $1,568,081 |
| | | TOTAL INVESTMENTS—101.1%
(IDENTIFIED COST $78,471,964)4 | 67,859,338 |
| | | OTHER ASSETS AND LIABILITIES - NET—(1.1)%5 | (762,822) |
| | | TOTAL NET ASSETS—100% | $67,096,516 |
| 1 | Non-income-producing security. |
| 2 | Affiliated holding. |
| 3 | 7-day net yield. |
| 4 | Also represents cost for federal tax purposes. |
| 5 | 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 January 31, 2016.
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 January 31, 2016, all investments of the Fund utilized Level 1 inputs in valuing the Fund's assets carried at fair value.
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $20.49 | $17.39 | $16.12 | $11.93 | $12.12 | $8.74 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | (0.03)1 | (0.12)1 | (0.18)1 | (0.07)1 | (0.09)1 | (0.13)1 |
| Net realized and unrealized gain (loss) on investments | (2.85) | 3.22 | 1.45 | 4.26 | (0.10) | 3.51 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.88) | 3.10 | 1.27 | 4.19 | (0.19) | 3.38 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (3.09) | — | — | — | — | — |
| Net Asset Value, End of Period | $14.52 | $20.49 | $17.39 | $16.12 | $11.93 | $12.12 |
| Total Return2 | (15.89)% | 17.83% | 7.88% | 35.12% | (1.57)% | 38.67% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.13%3 | 1.54% | 1.75% | 1.75% | 1.75% | 1.75% |
| Net investment income (loss) | (0.37)%3 | (0.66)% | (1.05)% | (0.49)% | (0.79)% | (1.18)% |
| Expense waiver/reimbursement4 | 1.01%3 | 0.61% | 0.43% | 0.59% | 1.04% | 1.14% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $27,838 | $32,136 | $29,690 | $30,187 | $22,718 | $25,634 |
| Portfolio turnover | 89% | 121% | 61% | 88% | 69% | 154% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class B Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $19.51 | $16.69 | $15.58 | $11.62 | $11.90 | $8.65 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | (0.10)1 | (0.25)1 | (0.30)1 | (0.17)1 | (0.17)1 | (0.21)1 |
| Net realized and unrealized gain (loss) on investments | (2.69) | 3.07 | 1.41 | 4.13 | (0.11) | 3.46 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.79) | 2.82 | 1.11 | 3.96 | (0.28) | 3.25 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (3.09) | — | — | — | — | — |
| Net Asset Value, End of Period | $13.63 | $19.51 | $16.69 | $15.58 | $11.62 | $11.90 |
| Total Return2 | (16.24)% | 16.90% | 7.12% | 34.08% | (2.35)% | 37.57% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.88%3 | 2.27% | 2.50% | 2.50% | 2.50% | 2.50% |
| Net investment income (loss) | (1.12)%3 | (1.38)% | (1.79)% | (1.25)% | (1.55)% | (1.93)% |
| Expense waiver/reimbursement4 | 1.01%3 | 0.63% | 0.43% | 0.59% | 1.06% | 1.15% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $1,802 | $2,327 | $1,842 | $2,016 | $1,640 | $2,541 |
| Portfolio turnover | 89% | 121% | 61% | 88% | 69% | 154% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Class C Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $19.03 | $16.27 | $15.19 | $11.33 | $11.60 | $8.43 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | (0.10)1 | (0.25)1 | (0.30)1 | (0.16)1 | (0.17)1 | (0.21)1 |
| Net realized and unrealized gain (loss) on investments | (2.61) | 3.01 | 1.38 | 4.02 | (0.10) | 3.38 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.71) | 2.76 | 1.08 | 3.86 | (0.27) | 3.17 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (3.09) | — | — | — | — | — |
| Net Asset Value, End of Period | $13.23 | $19.03 | $16.27 | $15.19 | $11.33 | $11.60 |
| Total Return2 | (16.23)% | 16.96% | 7.11% | 34.07% | (2.33)% | 37.60% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 1.88%3 | 2.31% | 2.50% | 2.50% | 2.50% | 2.50% |
| Net investment income (loss) | (1.12)%3 | (1.44)% | (1.79)% | (1.24)% | (1.54)% | (1.94)% |
| Expense waiver/reimbursement4 | 1.01%3 | 0.59% | 0.43% | 0.59% | 1.04% | 1.13% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $3,243 | $3,571 | $4,608 | $4,912 | $4,223 | $4,663 |
| Portfolio turnover | 89% | 121% | 61% | 88% | 69% | 154% |
| 1 | Per share numbers have been calculated using the average shares method. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights–Institutional Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
1/31/2016 | Year Ended July 31, |
| | 2015 | 2014 | 2013 | 2012 | 2011 |
| Net Asset Value, Beginning of Period | $21.01 | $17.79 | $16.44 | $12.14 | $12.31 | $8.85 |
| Income From Investment Operations: | | | | | | |
| Net investment income (loss) | (0.01)1 | (0.08)1 | (0.14)1 | (0.03)1 | (0.06)1 | (0.10)1 |
| Net realized and unrealized gain (loss) on investments | (2.93) | 3.30 | 1.49 | 4.33 | (0.11) | 3.56 |
| TOTAL FROM INVESTMENT OPERATIONS | (2.94) | 3.22 | 1.35 | 4.30 | (0.17) | 3.46 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (3.09) | — | — | — | — | — |
| Net Asset Value, End of Period | $14.98 | $21.01 | $17.79 | $16.44 | $12.14 | $12.31 |
| Total Return2 | (15.77)% | 18.10% | 8.21% | 35.42% | (1.38)% | 39.10% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 0.88%3 | 1.30% | 1.50% | 1.50% | 1.50% | 1.50% |
| Net investment income (loss) | (0.12)%3 | (0.43)% | (0.80)% | (0.24)% | (0.54)% | (0.92)% |
| Expense waiver/reimbursement4 | 1.01%3 | 0.60% | 0.43% | 0.59% | 1.05% | 1.15% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $34,214 | $36,706 | $37,253 | $31,179 | $26,233 | $29,395 |
| Portfolio turnover | 89% | 121% | 61% | 88% | 69% | 154% |
| 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 | This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
January 31, 2016 (unaudited)
| Assets: | | |
| Total investment in securities, at value including $1,568,081 of investment in an affiliated holding (Note 5) (identified cost $78,471,964) | | $67,859,338 |
| Cash | | 68,074 |
| Income receivable | | 39,478 |
| Receivable for investments sold | | 1,197,151 |
| Receivable for shares sold | | 133,571 |
| TOTAL ASSETS | | 69,297,612 |
| Liabilities: | | |
| Payable for investments purchased | $1,721,958 | |
| Payable for shares redeemed | 376,075 | |
| Payable to adviser (Note 5) | 270 | |
| Payable for distribution services fee (Note 5) | 3,254 | |
| Payable for other service fees (Notes 2 and 5) | 17,430 | |
| Accrued expenses (Note 5) | 82,109 | |
| TOTAL LIABILITIES | | 2,201,096 |
| Net assets for 4,579,229 shares outstanding | | $67,096,516 |
| Net Assets Consist of: | | |
| Paid-in capital | | $75,062,577 |
| Net unrealized depreciation of investments | | (10,612,626) |
| Accumulated net realized gain on investments | | 2,892,984 |
| Accumulated net investment income (loss) | | (246,419) |
| TOTAL NET ASSETS | | $67,096,516 |
Semi-Annual Shareholder Report
Statement of Assets and Liabilities–continued
| Net Asset Value, Offering Price and Redemption Proceeds Per Share | | |
| Class A Shares: | | |
| Net asset value per share ($27,838,406 ÷ 1,917,334 shares outstanding), no par value, unlimited shares authorized | | $14.52 |
| Offering price per share (100/94.50 of $14.52) | | $15.37 |
| Redemption proceeds per share | | $14.52 |
| Class B Shares: | | |
| Net asset value per share ($1,801,649 ÷ 132,135 shares outstanding), no par value, unlimited shares authorized | | $13.63 |
| Offering price per share | | $13.63 |
| Redemption proceeds per share (94.50/100 of $13.63) | | $12.88 |
| Class C Shares: | | |
| Net asset value per share ($3,242,854 ÷ 245,159 shares outstanding), no par value, unlimited shares authorized | | $13.23 |
| Offering price per share | | $13.23 |
| Redemption proceeds per share (99.00/100 of $13.23) | | $13.10 |
| Institutional Shares: | | |
| Net asset value per share ($34,213,607 ÷ 2,284,601 shares outstanding), no par value, unlimited shares authorized | | $14.98 |
| Offering price per share | | $14.98 |
| Redemption proceeds per share | | $14.98 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended January 31, 2016 (unaudited)
| Investment Income: | | |
| Dividends (including $1,428 received from an affiliated holding (Note 5) | | $285,596 |
| Interest | | 611 |
| TOTAL INCOME | | 286,207 |
| Expenses: | | |
| Investment adviser fee (Note 5) | $428,904 | |
| Administrative fee (Note 5) | 29,184 | |
| Custodian fees | 13,566 | |
| Transfer agent fee | 126,219 | |
| Directors'/Trustees' fees (Note 5) | 1,044 | |
| Auditing fees | 12,301 | |
| Legal fees | 4,047 | |
| Portfolio accounting fees | 39,544 | |
| Distribution services fee (Note 5) | 21,500 | |
| Other service fees (Notes 2 and 5) | 45,354 | |
| Share registration costs | 27,358 | |
| Printing and postage | 17,812 | |
| Miscellaneous (Note 5) | 6,863 | |
| TOTAL EXPENSES | 773,696 | |
| Waiver/reimbursement of investment adviser fee (Note 5) | (376,809) | |
| Net expenses | | 396,887 |
| Net investment income (loss) | | (110,680) |
| Realized and Unrealized Gain (Loss) on Investments: | | |
| Net realized gain on investments | | 2,892,984 |
| Net change in unrealized appreciation of investments | | (14,975,478) |
| Net realized and unrealized loss on investments | | (12,082,494) |
| Change in net assets resulting from operations | | $(12,193,174) |
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)
1/31/2016 | Year Ended
7/31/2015 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income (loss) | $(110,680) | $(436,245) |
| Net realized gain on investments | 2,892,984 | 15,656,300 |
| Net change in unrealized appreciation/depreciation of investments | (14,975,478) | (3,269,613) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | (12,193,174) | 11,950,442 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | | |
| Class A Shares | (5,047,941) | — |
| Class B Shares | (351,767) | — |
| Class C Shares | (643,484) | — |
| Institutional Shares | (6,264,901) | — |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (12,308,093) | — |
| Share Transactions: | | |
| Proceeds from sale of shares | 18,997,158 | 16,906,335 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 11,779,980 | — |
| Cost of shares redeemed | (13,920,057) | (27,508,694) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 16,857,081 | (10,602,359) |
| Change in net assets | (7,644,186) | 1,348,083 |
| Net Assets: | | |
| Beginning of period | 74,740,702 | 73,392,619 |
| End of period (including accumulated net investment income (loss) of $(246,419) and $(135,739), respectively) | $67,096,516 | $74,740,702 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
January 31, 2016 (unaudited)
1. ORGANIZATION
Federated MDT 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 five portfolios. The financial statements included herein are only those of Federated MDT Small Cap Growth Fund (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 Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. On June 1, 2015, Class B Shares were closed to new accounts/investors. The investment objective of the Fund is long-term capital appreciation.
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:
| ■ | 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. |
| ■ | 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. |
Semi-Annual Shareholder Report
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 MDTA LLC (“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.
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
Semi-Annual Shareholder Report
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 and paid annually. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares, Class B Shares and Class C Shares may bear distribution services fees and other service fees unique to those classes. The detail of total fund expense waivers of $376,809 is disclosed in Note 5.
Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares and Class C Shares to unaffiliated financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees. For the six months ended January 31, 2016, other service fees for the Fund were as follows:
| | Other
Service Fees
Incurred |
| Class A Shares | $38,194 |
| Class B Shares | 2,660 |
| Class C Shares | 4,500 |
| TOTAL | $45,354 |
Semi-Annual Shareholder Report
Premium and Discount Amortization
All premiums and discounts on fixed-income securities are amortized/accreted using the effective-interest-rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended January 31, 2016, 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 January 31, 2016, tax years 2012 through 2015 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.
3. SHARES OF BENEFICIAL INTEREST
The following tables summarize share activity:
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 258,785 | $4,714,800 | 205,032 | $4,007,524 |
| Shares issued to shareholders in payment of distributions declared | 280,540 | 4,637,343 | — | — |
| Shares redeemed | (190,076) | (3,430,417) | (343,865) | (6,518,418) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | 349,249 | $5,921,726 | (138,833) | $(2,510,894) |
Semi-Annual Shareholder Report
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class B Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 629 | $9,758 | 36,818 | $665,769 |
| Shares issued to shareholders in payment of distributions declared | 21,942 | 340,760 | — | — |
| Shares redeemed | (9,708) | (164,301) | (27,927) | (501,164) |
| NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS | 12,863 | $186,217 | 8,891 | $164,605 |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Class C Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 49,809 | $843,087 | 28,731 | $508,470 |
| Shares issued to shareholders in payment of distributions declared | 37,877 | 570,799 | — | — |
| Shares redeemed | (30,186) | (479,045) | (124,257) | (2,140,893) |
| NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS | 57,500 | $934,841 | (95,526) | $(1,632,423) |
| | Six Months Ended
1/31/2016 | Year Ended
7/31/2015 |
| Institutional Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 728,339 | $13,429,513 | 616,792 | $11,724,572 |
| Shares issued to shareholders in payment of distributions declared | 365,674 | 6,231,078 | — | — |
| Shares redeemed | (556,338) | (9,846,294) | (963,982) | (18,348,219) |
| NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS | 537,675 | $9,814,297 | (347,190) | $(6,623,647) |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | 957,287 | $16,857,081 | (572,658) | $(10,602,359) |
4. FEDERAL TAX INFORMATION
At January 31, 2016, the cost of investments for federal tax purposes was $78,471,964. The net unrealized depreciation of investments for federal tax purposes was $10,612,626. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $4,120,059 and net unrealized depreciation from investments for those securities having an excess of cost over value of $14,732,685.
Under current tax rules, a late-year ordinary loss may be deferred, in whole or in part, and treated as occurring on the first day of the following fiscal year. As of July 31, 2015, for federal income tax purposes, a late year ordinary loss of $135,739 was deferred to August 1, 2015.
Semi-Annual Shareholder Report
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 1.15% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the Adviser voluntarily waived $375,896 of its fee.
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 |
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares, Class B Shares and Class C Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at the following percentages of average daily net assets annually, to compensate FSC:
| Share Class Name | Percentage of Average Daily
Net Assets of Class |
| Class A Shares | 0.05% |
| Class B Shares | 0.75% |
| Class C Shares | 0.75% |
Semi-Annual Shareholder Report
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended January 31, 2016, distribution services fees for the Fund were as follows:
| | Distribution
Services Fees
Incurred |
| Class B Shares | $7,981 |
| Class C Shares | 13,519 |
| TOTAL | $21,500 |
For the six months ended January 31, 2016, FSC retained $6,747 of fees paid by the Fund.
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the six months ended January 31, 2016, the Fund's Class A Shares did not incur a distribution services fee; however, it may begin to incur this fee upon approval of the Trustees.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the six months ended January 31, 2016, FSC retained $2,394 in sales charges from the sale of Class A Shares. FSC also retained $2,557 of CDSC relating to redemptions of Class B Shares.
Other Service Fees
For the six months ended January 31, 2016, FSSC received $4,562 of the other service fees disclosed in Note 2.
Expense Limitation
The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive certain amounts of their respective fees and/or reimburse expenses. Total annual fund operating expenses (as shown in the financial highlights, excluding expenses allocated from partnerships, extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund's Class A Shares, Class B Shares, Class C Shares and Institutional Shares (after the voluntary waivers and/or reimbursements) will not exceed 1.13%, 1.88%, 1.88% and 0.88% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) October 1, 2016; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
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 Company Holdings
Affiliated holdings are investment companies which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the six months ended January 31, 2016, the Adviser reimbursed $913. Transactions involving the affiliated holding during the six months ended January 31, 2016, were as follows:
| | Federated
Prime Value
Obligations Fund,
Institutional Shares |
| Balance of Shares Held 7/31/2015 | 1,422,241 |
| Purchases/Additions | 14,625,023 |
| Sales/Reductions | (14,479,183) |
| Balance of Shares Held 1/31/2016 | 1,568,081 |
| Value | $1,568,081 |
| Dividend Income | $1,428 |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended January 31, 2016, were as follows:
| Purchases | $69,866,388 |
| Sales | $63,978,646 |
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 January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, 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 January 31, 2016, there were no outstanding loans. During the six months ended January 31, 2016, the program was not utilized.
9. Subsequent events
On February 10, 2016, the Trustees approved adding Class R6 Shares to the Fund which is expected to be effective by the second quarter of 2016.
Management has evaluated subsequent events through the date the financial statements were issued, and determined that no additional events have occurred that require disclosure.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, 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 August 1, 2015 to January 31, 2016.
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.
Semi-Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| | Beginning
Account Value
8/1/2015 | Ending
Account Value
1/31/2016 | Expenses Paid
During Period1 |
| Actual: | | | |
| Class A Shares | $1,000 | $841.10 | $5.23 |
| Class B Shares | $1,000 | $837.60 | $8.68 |
| Class C Shares | $1,000 | $837.70 | $8.68 |
| Institutional Shares | $1,000 | $842.30 | $4.08 |
Hypothetical (assuming a 5% return
before expenses): | | | |
| Class A Shares | $1,000 | $1,019.46 | $5.74 |
| Class B Shares | $1,000 | $1,015.69 | $9.53 |
| Class C Shares | $1,000 | $1,015.69 | $9.53 |
| Institutional Shares | $1,000 | $1,020.71 | $4.47 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| | |
| Class A Shares | 1.13% |
| Class B Shares | 1.88% |
| Class C Shares | 1.88% |
| Institutional Shares | 0.88% |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2015
Federated MDT Small Cap Growth Fund (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.
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.
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
Semi-Annual Shareholder Report
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 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
Semi-Annual Shareholder Report
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.
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a relevant indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
The Board reviewed the contractual advisory fee rate, net advisory fee rate where partially waived and other expenses of the Fund and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted the applicable waivers and reimbursements and that the overall expense structure of the Fund remained competitive. In this regard, the Board had been previously advised that, while comparisons to fund peer groups are relevant in judging the reasonableness of advisory fees, the Fund's quantitative focus makes fee and expense comparisons particularly difficult. Although the Fund's advisory fee was above the median of the peer range, the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers. The Board will continue to monitor advisory fees and other expenses borne by the Fund.
By contrast, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts and sub-adviser services). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; and the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing
Semi-Annual Shareholder Report
different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Senior Officer noted that the services, administrative responsibilities and risks associated with such relationships is quite different than serving as a primary adviser to a fund.
The Fund's ability to deliver competitive performance when compared to its peer group 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 Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups may be helpful, though not conclusive, in judging the reasonableness of the proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group, and that the Senior Officer had specifically noted that the Fund's quantitative focus makes fee and expense comparisons particularly difficult as the peer group of funds varied widely in their complexity, and the management of the Fund is among the more complex relative to its peers.
For the periods covered by the Evaluation, the Fund's performance for the three-year and five-year periods was above the median of the relevant peer group and the Fund's performance fell below the median of the relevant peer group for the one-year period. In addition, the Board was informed by the Adviser that, for the same periods, the Fund underperformed its benchmark index for the one-year period, underperformed its benchmark index for the three-year period and outperformed 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.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In
Semi-Annual Shareholder Report
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 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.
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated family of funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies of scale, should they exist) were likely to be enjoyed by the fund family as a whole. Federated, as it does throughout the year, and again in connection with the Board's review, furnished information relative to revenue sharing or adviser paid fees. Federated and the Senior Officer noted that this information should be viewed to determine if there was an incentive to either not apply breakpoints or to apply breakpoints at higher levels and should not be viewed to determining the appropriateness of advisory fees, because it would represent marketing and distribution expenses. Finally, the Board also noted the absence of any applicable regulatory or industry
Semi-Annual Shareholder Report
guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size.
The Senior Officer 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. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
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. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
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 is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. Form N-PX filings 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.) You may also access this information via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
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 MDT Small Cap Growth Fund
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 31421R775
CUSIP 31421R676
CUSIP 31421R767
CUSIP 31421R759
36367 (3/16)
Federated is a registered trademark of Federated Investors, Inc.
2016 ©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 MDT Series
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date March 24, 2016
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 March 24, 2016
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date March 24, 2016
