United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of Registered Management Investment Companies
811-4018
(Investment Company Act File Number)
Federated High Yield Trust
_______________________________________________________________
(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: 02/28/11
Date of Reporting Period: Six months ended 08/31/10
Item 1. Reports to Stockholders
Federated High Yield Trust
SEMI-ANNUAL SHAREHOLDER REPORTAugust 31, 2010
Institutional Service Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLE
PORTFOLIO OF INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
STATEMENT OF OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
NOTES TO FINANCIAL STATEMENTS
EVALUATION AND APPROVAL OF ADVISORY CONTRACT
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Financial Highlights - Institutional Service Shares
(For a Share Outstanding Throughout Each Period)
| Six Months
Ended
(unaudited)
8/31/2010 | Year Ended February 28 or 29, |
| 2010 | 2009 | 2008 | 2007 | 2006 |
| Net Asset Value, Beginning of Period | $5.47 | $3.85 | $5.56 | $6.16 | $5.97 | $6.23 |
Income From
Investment Operations: | | | | | | |
| Net investment income | 0.20 | 0.41 | 0.44 | 0.44 | 0.441,2 | 0.44 |
| Net realized and unrealized gain (loss) on investments, options, foreign currency transactions and swap contracts | 0.04 | 1.60 | (1.70) | (0.60) | 0.212 | (0.25) |
TOTAL FROM INVESTMENT
OPERATIONS | 0.24 | 2.01 | (1.26) | (0.16) | 0.65 | 0.19 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.20) | (0.39) | (0.45) | (0.44) | (0.46) | (0.46) |
| Redemption Fees | 0.003 | 0.003 | 0.003 | 0.003 | 0.003 | $0.01 |
Net Asset Value,
End of Period | $5.51 | $5.47 | $3.85 | $5.56 | $6.16 | $5.97 |
| Total Return4 | 4.36% | 53.93% | (23.80)% | (2.83)% | 11.43% | 3.48% |
Ratios to Average
Net Assets: | | | | | | |
| Net expenses | 0.99%5 | 0.99% | 0.99% | 0.99% | 0.96% | 0.97% |
| Net investment income | 6.99%5 | 8.30% | 8.92% | 7.55% | 7.36%2 | 7.45% |
| Expense waiver/reimbursement6 | 0.29%5 | 0.28% | 0.32% | 0.24% | 0.25% | 0.23% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $193,634 | $196,921 | $126,855 | $207,270 | $275,294 | $289,577 |
| Portfolio turnover | 20% | 37% | 20% | 30% | 42% | 28% |
| 1 | Per share number has been calculated using the average shares method. |
| 2 | Due to a misclassification of amounts previously reported, the Fund reclassified discount accretion/premium amortization on long-term debt securities for the year ended February 28, 2007, to allow proper comparison from year to year. Net assets were not affected by this reclassification. |
| 3 | Represents less than $0.01. |
| 4 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 5 | Computed on an annualized basis. |
| 6 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report1
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption/exchange fees; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from March 1, 2010 to August 31, 2010.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as redemption/exchange fees. 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
3/1/2010 | Ending
Account Value
8/31/2010 | Expenses Paid
During Period1 |
| Actual | $1,000 | $1,043.60 | $5.10 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,020.21 | $5.04 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.99%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half-year period). |
Semi-Annual Shareholder Report2
Portfolio of Investments Summary Table (unaudited)
At August 31, 2010, the Fund's index classification1 was as follows:
| Index Classification | Percentage of
Total Net Assets2 |
| Media Non-Cable | 9.2% |
| Technology | 8.3% |
| Health Care | 7.4% |
| Gaming | 6.1% |
| Consumer Products | 5.9% |
| Industrial | 5.8% |
| Utilities | 5.8% |
| Financial Institutions | 4.9% |
| Food & Beverage | 4.9% |
| Energy | 4.8% |
| Retailers | 4.7% |
| Chemicals | 3.7% |
| Wireless Communications | 3.6% |
| Other3 | 23.0% |
| Cash Equivalents4 | 0.1% |
| Other Assets and Liabilities — Net5 | 1.8% |
| TOTAL | 100.0% |
| 1 | Index classifications are based upon, and individual portfolio securities are assigned to, the classifications and sub-classifications of the Barclays Capital U.S. Corporate High Yield 2% Issuer Capped Index (BCHY2%ICI). Individual portfolio securities that are not included in the BCHY2%ICI are assigned to an index classification by the Fund's Adviser. |
| 2 | As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of this table, the affiliated investment company (other than an affiliated money market fund) is not treated as a single portfolio security, but rather the Fund is treated as owning a pro rata portion of each security and each other asset and liability owned by the affiliated investment company. Accordingly, the percentages of total net assets shown in the table will differ from those presented on the Portfolio of Investments. |
| 3 | For purposes of this table, index classifications which constitute less than 3.5% of the Fund's total net assets have been aggregated under the designation “Other.” |
| 4 | Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements. |
| 5 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report3
Portfolio of Investments
August 31, 2010 (unaudited)
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| | Corporate Bonds – 83.4% | |
| | Aerospace/Defense – 1.4% | |
| $450,000 | 1,2 | Altegrity, Inc., Company Guarantee, 10.50%, 11/1/2015 | 443,250 |
| 475,000 | 1,2 | Altegrity, Inc., Company Guarantee, 11.75%, 5/1/2016 | 456,594 |
| 275,000 | | Hawker Beechcraft Acquisition Co. LLC/Hawker Beechcraft Notes, Sr. Sub. Note, Series WI, 9.75%, 4/1/2017 | 158,125 |
| 575,000 | | L-3 Communications Holdings, Inc., Sr. Sub. Note, Series B, 6.375%, 10/15/2015 | 591,531 |
| 200,000 | | ManTech International Corp., Company Guarantee, 7.25%, 4/15/2018 | 205,000 |
| 396,618 | 1,2 | Sequa Corp., Sr. Deb., 13.50%, 12/1/2015 | 422,398 |
| 475,000 | | TransDigm, Inc., Sr. Sub. Note, 7.75%, 7/15/2014 | 491,625 |
| | TOTAL | 2,768,523 |
| | Automotive – 3.4% | |
| 50,000 | 1,2 | Accuride Corp., 1st Priority Sr. Secd. Note, Series 144A, 9.50%, 8/1/2018 | 51,500 |
| 175,000 | 1,2 | Affinia Group, Inc., Sr. Secd. Note, 10.75%, 8/15/2016 | 194,250 |
| 75,000 | 1,2 | American Axle & Manufacturing Holdings, Inc., Sr. Sub. Note, 9.25%, 1/15/2017 | 80,062 |
| 50,000 | | ArvinMeritor, Inc., Company Guarantee, 10.625%, 3/15/2018 | 54,500 |
| 350,000 | 1,2 | Cooper-Standard Automotive, Inc., Sr. Note, Series 144A, 8.50%, 5/1/2018 | 359,625 |
| 250,000 | | Ford Motor Credit Co., Note, 7.50%, 8/1/2012 | 262,566 |
| 500,000 | | Ford Motor Credit Co., Sr. Note, 8.00%, 6/1/2014 | 531,215 |
| 1,500,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 8.00%, 12/15/2016 | 1,631,497 |
| 200,000 | | Ford Motor Credit Co., Sr. Unsecd. Note, 8.125%, 1/15/2020 | 219,260 |
| 1,750,000 | 3,4 | General Motors Corp., Deb., 7.40%, 9/1/2025 | 529,375 |
| 75,000 | | Lear Corp., Company Guarantee, 7.875%, 3/15/2018 | 78,000 |
| 75,000 | | Lear Corp., Company Guarantee, 8.125%, 3/15/2020 | 78,188 |
| 200,000 | | Navistar International Corp., Sr. Note, 8.25%, 11/1/2021 | 210,500 |
| 200,000 | 1,2 | TRW Automotive, Inc., Sr. Note, Series 144A, 8.875%, 12/1/2017 | 214,750 |
| 125,000 | 1,2 | Tenneco Automotive, Inc., Sr. Note, Series 144A, 7.75%, 8/15/2018 | 128,125 |
| 725,000 | | Tenneco Automotive, Inc., Sr. Sub. Note, 8.625%, 11/15/2014 | 746,750 |
| 325,000 | 1,2 | Tower Automotive, Inc., Sr. Secd. Note, Series 144A, 10.625%, 9/1/2017 | 312,000 |
Semi-Annual Shareholder Report4
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $950,000 | | United Components, Inc., Sr. Sub. Note, 9.375%, 6/15/2013 | 966,625 |
| | TOTAL | 6,648,788 |
| | Building Materials – 1.5% | |
| 250,000 | 1,2 | Building Materials Corp. of America, Sr. Note, 7.50%, 3/15/2020 | 248,125 |
| 450,000 | | Goodman Global Holdings, Inc., Company Guarantee, 13.50%, 2/15/2016 | 496,125 |
| 925,000 | | Goodman Global Holdings, Inc., Sr. Disc. Note, 12.481%, 12/15/2014 | 592,000 |
| 575,000 | | Norcraft Cos. LLC, Sr. Secd. Note, Series WI, 10.50%, 12/15/2015 | 596,562 |
| 227,000 | | Norcraft Holdings LP, Sr. Disc. Note, 9.75%, 9/1/2012 | 213,380 |
| 375,555 | | Nortek Holdings, Inc., Sr. Secd. Note, 11.00%, 12/1/2013 | 397,619 |
| 375,000 | | Ply Gem Industries, Inc., Sr. Secd. Note, 11.75%, 6/15/2013 | 388,125 |
| | TOTAL | 2,931,936 |
| | Chemicals – 3.4% | |
| 975,000 | 1,3,4 | Chemtura Corp., Sr. Note, 6.875%, 6/1/2016 | 1,104,188 |
| 250,000 | | Compass Minerals International, Inc., Company Guarantee, 8.00%, 6/1/2019 | 261,250 |
| 75,000 | | Ferro Corp., Sr. Note, 7.875%, 8/15/2018 | 76,875 |
| 675,000 | | Hexion U.S. Finance Corp., Sr. Secd. Note, 8.875%, 2/1/2018 | 627,750 |
| 350,000 | | Hexion U.S. Finance Corp., Sr. Secd. Note, 9.75%, 11/15/2014 | 345,625 |
| 225,000 | | Huntsman International LLC, Company Guarantee, 5.50%, 6/30/2016 | 212,906 |
| 800,000 | 1,2 | Huntsman International LLC, Sr. Sub., Series 144A, 8.625%, 3/15/2020 | 795,000 |
| 325,000 | | Koppers Holdings, Inc., Company Guarantee, Series WI, 7.875%, 12/1/2019 | 334,344 |
| 325,000 | | Nalco Co., Sr. Note, 8.25%, 5/15/2017 | 353,031 |
| 800,000 | | Nalco Co., Sr. Sub. Note, 8.875%, 11/15/2013 | 821,000 |
| 225,000 | 1,2 | Oxea Finance, Sr. Secd. Note, Series 144A, 9.50%, 7/15/2017 | 238,500 |
| 275,000 | | Solutia, Inc., Company Guarantee, 8.75%, 11/1/2017 | 295,625 |
| 350,000 | | Solutia, Inc., Sr. Note, 7.875%, 3/15/2020 | 367,500 |
| 425,000 | | Union Carbide Corp., Deb., 7.50%, 6/1/2025 | 427,006 |
| 300,000 | | Union Carbide Corp., Sr. Deb., 7.875%, 4/1/2023 | 309,617 |
| | TOTAL | 6,570,217 |
| | Construction Machinery – 0.5% | |
| 200,000 | 1,2 | Case New Holland, Sr. Note, 7.875%, 12/1/2017 | 211,500 |
| 325,000 | | Rental Service Corp., Sr. Note, 9.50%, 12/1/2014 | 333,125 |
| 150,000 | | Rental Service Corp., Sr. Note, Series WI, 10.25%, 11/15/2019 | 156,750 |
Semi-Annual Shareholder Report5
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $200,000 | 1,2 | Rental Service Corp., Sr. Secd. Note, 10.00%, 7/15/2017 | 219,000 |
| | TOTAL | 920,375 |
| | Consumer Products – 5.2% | |
| 875,000 | 1,2 | AAC Group Holding Corp., Sr. Disc. Note, 10.25%, 10/1/2012 | 861,875 |
| 436,774 | | AAC Group Holding Corp., Sr. PIK Deb., 16.75%, 10/1/2012 | 433,498 |
| 350,000 | 1,2 | American Achievement Corp., Sr. Sub. Note, 8.25%, 4/1/2012 | 348,687 |
| 725,000 | | Central Garden & Pet Co., Sr. Sub., 8.25%, 3/1/2018 | 734,062 |
| 500,000 | | Diversey Holdings, Inc., Sr. Unsecd. Note, 10.50%, 5/15/2020 | 561,550 |
| 200,000 | | Diversey, Inc., Company Guarantee, 8.25%, 11/15/2019 | 208,000 |
| 500,000 | | Easton Bell Sports Inc., Sr. Secd. Note, 9.75%, 12/1/2016 | 531,250 |
| 900,000 | | Jarden Corp., Sr. Sub. Note, 7.50%, 5/1/2017 | 921,375 |
| 175,000 | | Jarden Corp., Sr. Unsecd. Note, 8.00%, 5/1/2016 | 185,719 |
| 975,000 | | Jostens Holding Corp., Discount Bond, 10.25%, 12/1/2013 | 999,375 |
| 525,000 | | Jostens IH Corp., Sr. Sub. Note, 7.625%, 10/1/2012 | 526,969 |
| 225,000 | 1,2 | Libbey Glass, Inc., Sr. Secd. Note, Series 144A, 10.00%, 2/15/2015 | 240,188 |
| 315,000 | 1,2 | Sealy Mattress Co., Sr. Secd. Note, Series 144A, 10.875%, 4/15/2016 | 352,800 |
| 900,000 | | Sealy Mattress Co., Sr. Sub. Note, 8.25%, 6/15/2014 | 904,500 |
| 803,480 | | Spectrum Brands, Inc., Bond, 12.00%, 8/28/2019 | 865,750 |
| 200,000 | 1,2 | Spectrum Brands, Inc., Sr. Secd. Note, 9.50%, 6/15/2018 | 210,750 |
| 1,075,000 | | Visant Holding Corp., Sr. Note, 8.75%, 12/1/2013 | 1,101,875 |
| | TOTAL | 9,988,223 |
| | Energy – 4.2% | |
| 725,000 | 1,2 | ATP Oil & Gas Corp., Sr. Secd. 2nd Priority Note, 11.875%, 5/1/2015 | 589,062 |
| 550,000 | | Basic Energy Services, Inc., Company Guarantee, 7.125%, 4/15/2016 | 495,000 |
| 525,000 | 1,2 | CVR Energy, Inc., 2nd Priority Sr. Secd. Note, Series 144A, 10.875%, 4/1/2017 | 534,187 |
| 825,000 | | Chesapeake Energy Corp., Sr. Note, 6.875%, 11/15/2020 | 845,625 |
| 425,000 | | Chesapeake Energy Corp., Sr. Note, 9.50%, 2/15/2015 | 480,250 |
| 125,000 | | Cie Generale de Geophysique, Company Guarantee, 9.50%, 5/15/2016 | 132,500 |
| 525,000 | | Cie Generale de Geophysique, Sr. Unsecd. Note, 7.75%, 5/15/2017 | 523,688 |
| 525,000 | | Complete Production Services, Inc., Sr. Note, 8.00%, 12/15/2016 | 534,188 |
| 299,000 | | Denbury Resources, Inc., Sr. Sub., 8.25%, 2/15/2020 | 320,678 |
| 350,000 | | Forest Oil Corp., Sr. Note, 7.25%, 6/15/2019 | 352,188 |
| 625,000 | 1,2 | Hilcorp Energy I LP/Hilcorp Finance Co., Sr. Note, 7.75%, 11/1/2015 | 635,937 |
| 350,000 | | Linn Energy LLC, Company Guarantee, 11.75%, 5/15/2017 | 400,750 |
Semi-Annual Shareholder Report6
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $375,000 | 1,2 | Linn Energy LLC, Sr. Note, Series 144A, 8.625%, 4/15/2020 | 397,500 |
| 725,000 | 1,2 | McJunkin Red Man Corp., Sr. Secd. Note, Series 144A, 9.50%, 12/15/2016 | 643,437 |
| 350,000 | 1,2 | Petrohawk Energy Corp., Company Guarantee, Series 144A, 7.25%, 8/15/2018 | 349,125 |
| 200,000 | | Plains Exploration & Production Co., Sr. Note, 7.00%, 3/15/2017 | 197,500 |
| 625,000 | | Plains Exploration & Production Co., Sr. Note, 7.75%, 6/15/2015 | 637,500 |
| | TOTAL | 8,069,115 |
| | Entertainment – 1.0% | |
| 400,000 | 1,2 | Cedar Fair LP, Sr. Unsecd. Note, 9.125%, 8/1/2018 | 409,000 |
| 625,000 | | Cinemark USA, Inc., Company Guarantee, 8.625%, 6/15/2019 | 657,812 |
| 650,000 | 1,3,4,5 | Hard Rock Park Operations LLC, Sr. Secd. Note, 1.00%, 4/1/2012 | 0 |
| 125,000 | | Regal Cinemas, Inc., Company Guarantee, 8.625%, 7/15/2019 | 129,688 |
| 400,000 | 1,2 | Universal City Development Partners Ltd., Sr. Note, Series 144A, 8.875%, 11/15/2015 | 408,000 |
| 350,000 | 1,2 | Universal City Development Partners Ltd., Sr. Sub. Note, Series 144A, 10.875%, 11/15/2016 | 375,375 |
| | TOTAL | 1,979,875 |
| | Environmental – 0.2% | |
| 250,000 | | Browning-Ferris Industries, Inc., Deb., 9.25%, 5/1/2021 | 298,437 |
| | Financial Institutions – 4.6% | |
| 300,000 | | Ally Financial, Inc., Company Guarantee, 6.875%, 9/15/2011 | 306,750 |
| 617,000 | | Ally Financial, Inc., Company Guarantee, 7.00%, 2/1/2012 | 635,510 |
| 721,000 | | Ally Financial, Inc., Company Guarantee, 8.00%, 11/1/2031 | 713,790 |
| 575,000 | 1,2 | Ally Financial, Inc., Company Guarantee, 8.30%, 2/12/2015 | 599,437 |
| 175,000 | 1,2 | Ally Financial, Inc., Sr. Unsecd. Note, Series 144A, 8.00%, 3/15/2020 | 179,813 |
| 450,000 | | CIT Group, Inc., Sr. Secd. Note, 10.25%, 5/1/2017 | 466,313 |
| 1,800,000 | | CIT Group, Inc., Sr. Secd. Note, 7.00%, 5/1/2017 | 1,701,562 |
| 475,000 | 1,2 | International Lease Finance Corp., Sr. Note, Series 144A, 8.625%, 9/15/2015 | 479,156 |
| 1,425,000 | 1,2 | International Lease Finance Corp., Sr. Note, Series 144A, 8.75%, 3/15/2017 | 1,441,031 |
| 200,000 | | International Lease Finance Corp., Sr. Unsecd. Note, 8.875%, 9/1/2017 | 202,500 |
| 475,000 | | iPayment Holdings, Inc., Sr. Sub. Note, Series WI, 9.75%, 5/15/2014 | 431,656 |
| 375,000 | | Lender Processing Services, Sr. Note, 8.125%, 7/1/2016 | 403,125 |
Semi-Annual Shareholder Report7
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $1,325,000 | | Nuveen Investments, Company Guarantee, 10.50%, 11/15/2015 | 1,265,375 |
| | TOTAL | 8,826,018 |
| | Food & Beverage – 3.6% | |
| 900,000 | | Aramark Corp., Sr. Note, 8.50%, 2/1/2015 | 932,625 |
| 525,000 | | Aramark Services, Inc., Floating Rate Note — Sr. Note, 3.966%, 2/1/2015 | 483,000 |
| 400,000 | | B&G Foods, Inc., Sr. Note, 7.625%, 1/15/2018 | 412,500 |
| 125,000 | 1,2 | Cott Beverages, Inc., Company Guarantee, Series 144A, 8.125%, 9/1/2018 | 128,906 |
| 550,000 | | Dean Foods Co., Company Guarantee, 7.00%, 6/1/2016 | 518,375 |
| 350,000 | 1,2 | Michael Foods, Inc., Sr. Note, Series 144A, 9.75%, 7/15/2018 | 369,250 |
| 675,000 | | Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., Sr. Note, Series WI, 9.25%, 4/1/2015 | 696,094 |
| 500,000 | | Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., Sr. Sub. Note, Series WI, 10.625%, 4/1/2017 | 524,375 |
| 125,000 | 1,2 | Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp., Sr. Unsecd. Note, 9.25%, 4/1/2015 | 128,906 |
| 1,055,000 | 1,2 | Reddy Ice Corp., Sr. Secd. Note, Series 144A, 13.25%, 11/1/2015 | 949,500 |
| 450,000 | 1,2 | Reddy Ice Group, Inc., Sr. Secd. Note, Series 144A, 11.25%, 3/15/2015 | 458,438 |
| 350,000 | | Smithfield Foods, Inc., Note, 7.75%, 5/15/2013 | 353,500 |
| 575,000 | | Smithfield Foods, Inc., Sr. Note, 7.75%, 7/1/2017 | 562,062 |
| 250,000 | 1,2 | Smithfield Foods, Inc., Sr. Unsecd. Note, 10.00%, 7/15/2014 | 280,313 |
| 100,000 | | TreeHouse Foods, Inc., Sr. Unsecd. Note, 7.75%, 3/1/2018 | 106,000 |
| | TOTAL | 6,903,844 |
| | Gaming – 5.2% | |
| 500,000 | | American Casino & Entertainment, Sr. Secd. Note, 11.00%, 6/15/2014 | 490,000 |
| 650,000 | | Ameristar Casinos, Inc., Company Guarantee, 9.25%, 6/1/2014 | 692,250 |
| 250,000 | | Global Cash Access LLC, Sr. Sub. Note, 8.75%, 3/15/2012 | 249,063 |
| 600,000 | 1,2 | Great Canadian Gaming Corp., Company Guarantee, 7.25%, 2/15/2015 | 605,250 |
| 850,000 | | Harrah's Operating Co., Inc., Sr. Secd. Note, 11.25%, 6/1/2017 | 913,750 |
| 925,000 | 3,4,5 | Herbst Gaming, Inc., Sr. Sub. Note, 7.00%, 11/15/2014 | 0 |
| 950,000 | 1,2 | Indianapolis Downs LLC /Indiana Downs Capital Corp., Sr. Secd. Note, 11.00%, 11/1/2012 | 774,250 |
| 217,943 | 1,2 | Indianapolis Downs LLC /Indiana Downs Capital Corp., Sub. PIK Note, 15.50%, 11/1/2013 | 66,473 |
| 900,000 | | Jacobs Entertainment, Inc., Sr. Note, 9.75%, 6/15/2014 | 830,250 |
| 2,525,000 | | MGM Mirage, Inc., Sr. Note, 7.50%, 6/1/2016 | 1,994,750 |
Semi-Annual Shareholder Report8
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $75,000 | | MGM Mirage, Inc., Sr. Secd. Note, 10.375%, 5/15/2014 | 82,125 |
| 150,000 | | MGM Mirage, Inc., Sr. Secd. Note, 11.125%, 11/15/2017 | 168,375 |
| 400,000 | | Peninsula Gaming, LLC, Company Guarantee, 10.75%, 8/15/2017 | 422,000 |
| 375,000 | | Peninsula Gaming, LLC, Sr. Secd. Note, 8.375%, 8/15/2015 | 390,937 |
| 175,000 | | Penn National Gaming, Inc., Sr. Sub., 8.75%, 8/15/2019 | 183,750 |
| 500,000 | 1,2 | San Pasqual Casino Development Group, Inc., Sr. Note, 8.00%, 9/15/2013 | 490,000 |
| 700,000 | 1,2 | Seminole Tribe of Florida, Bond, Series 144A, 7.804%, 10/1/2020 | 657,650 |
| 450,000 | 1,2 | Tunica-Biloxi Gaming Authority, Sr. Unsecd. Note, 9.00%, 11/15/2015 | 404,437 |
| 225,000 | 1,2 | Wynn Las Vegas LLC, 1st Mtg. Note, Series 144A, 7.75%, 8/15/2020 | 228,375 |
| 315,000 | 1,2 | Yonkers Racing Corp., Sr. Secd. Note, 11.375%, 7/15/2016 | 340,200 |
| | TOTAL | 9,983,885 |
| | Health Care – 7.3% | |
| 525,000 | | Accellent, Inc., Sr. Sub., 10.50%, 12/1/2013 | 526,312 |
| 500,000 | | Alere, Inc., Company Guarantee, 9.00%, 5/15/2016 | 507,500 |
| 325,000 | | Alere, Inc., Sr. Note, 7.875%, 2/1/2016 | 320,125 |
| 475,000 | | Bausch & Lomb, Inc., Sr. Unsecd. Note, 9.875%, 11/1/2015 | 495,187 |
| 1,650,000 | | Biomet, Inc., Sr. Sub. Note, Series WI, 11.625%, 10/15/2017 | 1,823,250 |
| 875,000 | | CRC Health Corp., Sr. Sub. Note, 10.75%, 2/1/2016 | 823,594 |
| 775,000 | | HCA, Inc., Sr. Note, 7.50%, 11/6/2033 | 686,844 |
| 1,472,000 | | HCA, Inc., Sr. Secd. 2nd Priority Note, 9.625%, 11/15/2016 | 1,584,240 |
| 900,000 | | HCA, Inc., Sr. Secd. Note, 9.25%, 11/15/2016 | 967,500 |
| 375,000 | | HCA, Inc., Sr. Secd. Note, 9.875%, 2/15/2017 | 411,563 |
| 600,000 | 1,2 | Multiplan, Inc., Company Guarantee, Series 144A, 9.875%, 9/1/2018 | 604,500 |
| 975,000 | | National Mentor Holdings, Inc., Sr. Sub. Note, 11.25%, 7/1/2014 | 971,344 |
| 675,000 | | Omnicare, Inc., Sr. Sub. Note, 6.875%, 12/15/2015 | 671,625 |
| 125,000 | | Omnicare, Inc., Sr. Sub., 7.75%, 6/1/2020 | 125,625 |
| 825,000 | | United Surgical Partners International, Inc., Company Guarantee, 9.25%, 5/1/2017 | 850,781 |
| 650,000 | | Universal Hospital Services, Inc., Sr. Secd. Note, 8.50%, 6/1/2015 | 656,500 |
| 1,346,718 | | VWR Funding, Inc., Company Guarantee, 10.25%, 7/15/2015 | 1,400,587 |
| 425,000 | | Vanguard Health Holdings II, Company Guarantee, 8.00%, 2/1/2018 | 419,156 |
| 275,000 | | Ventas Realty LP, Sr. Note, 6.75%, 4/1/2017 | 287,133 |
| | TOTAL | 14,133,366 |
Semi-Annual Shareholder Report9
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| | Industrial - Other – 5.2% | |
| $700,000 | | ALH Finance LLC/ALH Finance Corp., Sr. Sub. Note, 8.50%, 1/15/2013 | 707,000 |
| 525,000 | 1,2 | American Tire Distributors, Inc., Sr. Secd. Note, 9.75%, 6/1/2017 | 551,250 |
| 225,000 | 1,2 | Amsted Industries, Inc., Sr. Note, Series 144A, 8.125%, 3/15/2018 | 233,156 |
| 250,000 | 1,2 | Aquilex Holdings, Sr. Note, Series 144A, 11.125%, 12/15/2016 | 248,438 |
| 600,000 | 1,2 | Baker & Taylor Acquisition Corp., Sr. Secd. Note, 11.50%, 7/1/2013 | 417,000 |
| 350,000 | | Baldor Electric Co., Sr. Note, 8.625%, 2/15/2017 | 371,875 |
| 400,000 | 1,2 | Belden CDT, Inc., Company Guarantee, 9.25%, 6/15/2019 | 433,500 |
| 400,000 | | Belden CDT, Inc., Sr. Sub. Note, 7.00%, 3/15/2017 | 404,000 |
| 425,000 | 1,2 | Cleaver-Brooks, Inc., Sr. Secd. Note, Series 144A, 12.25%, 5/1/2016 | 439,344 |
| 200,000 | 1,2 | ESCO Corp., Floating Rate Note - Sr. Note, 4.412%, 12/15/2013 | 183,000 |
| 425,000 | 1,2 | ESCO Corp., Sr. Note, 8.625%, 12/15/2013 | 436,156 |
| 150,000 | | General Cable Corp., Sr. Note, 7.125%, 4/1/2017 | 151,875 |
| 450,000 | | Interline Brands, Inc., Sr. Sub. Note, 8.125%, 6/15/2014 | 460,125 |
| 525,000 | 1,2 | International Wire Group, Sr. Secd. Note, Series 144A, 9.75%, 4/15/2015 | 527,625 |
| 1,000,000 | 1,2 | Knowledge Learning Corp., Sr. Sub. Note, 7.75%, 2/1/2015 | 965,000 |
| 425,000 | 1,2 | Maxim Finance Corp., Sr. Secd. Note, Series 144A, 12.25%, 4/15/2015 | 391,531 |
| 100,000 | 1,2 | Mueller Water Products, Inc., Sr. Note, Series 144A, 8.75%, 9/1/2020 | 101,000 |
| 325,000 | | Mueller Water Products, Inc., Sr. Sub. Note, Series WI, 7.375%, 6/1/2017 | 275,438 |
| 550,000 | 1,2 | Reliance Intermediate Holdings LP, Sr. Unsecd. Note, 9.50%, 12/15/2019 | 574,750 |
| 300,000 | | Rexnord, Inc., Company Guarantee, 8.50%, 5/1/2018 | 303,750 |
| 575,000 | | SPX Corp., Sr. Unsecd. Note, 7.625%, 12/15/2014 | 622,437 |
| 650,000 | | Sensus Metering Systems, Inc., Sr. Sub. Note, 8.625%, 12/15/2013 | 653,250 |
| 375,000 | 1,2 | The Hillman Group, Inc., Company Guarantee, Series 144A, 10.875%, 6/1/2018 | 396,094 |
| 125,000 | 1,2 | Thermon Industries, Inc., Sr. Secd. Note, Series 144A, 9.50%, 5/1/2017 | 128,750 |
| | TOTAL | 9,976,344 |
| | Lodging – 0.4% | |
| 400,000 | | Host Marriott LP, Company Guarantee, 6.375%, 3/15/2015 | 404,000 |
| 425,000 | | Host Marriott LP, Note, Series Q, 6.75%, 6/1/2016 | 433,500 |
| | TOTAL | 837,500 |
| | Media - Cable – 1.3% | |
| 125,000 | 1,2 | Charter Communications Holdings II, Company Guarantee, Series 144A, 7.875%, 4/30/2018 | 130,000 |
Semi-Annual Shareholder Report10
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $425,000 | | Charter Communications Holdings II, Sr. Note, 13.50%, 11/30/2016 | 505,750 |
| 75,000 | 1,2 | Charter Communications Holdings II, Sr. Note, 8.125%, 4/30/2020 | 79,312 |
| 275,000 | 1,2 | Insight Communication Co., Sr. Note, Series 144A, 9.375%, 7/15/2018 | 290,125 |
| 800,000 | | Kabel Deutschland GMBH, Company Guarantee, 10.625%, 7/1/2014 | 836,000 |
| 600,000 | | Virgin Media, Inc., Company Guarantee, Series 1, 9.50%, 8/15/2016 | 675,000 |
| | TOTAL | 2,516,187 |
| | Media - Non-Cable – 8.0% | |
| 1,095,251 | 3,4 | Affinity Group Holding, Inc., Sr. Note, 10.875%, 2/15/2012 | 410,719 |
| 400,000 | | Affinity Group, Inc., Sr. Sub. Note, 9.00%, 2/15/2012 | 301,000 |
| 375,000 | | Clear Channel Outdoor Holdings, Inc., Company Guarantee, Series B, 9.25%, 12/15/2017 | 395,156 |
| 100,000 | | Clear Channel Worldwide, Company Guarantee, 9.25%, 12/15/2017 | 104,250 |
| 100,000 | 1,2 | Entravision Communications Corp., 1st Priority Sr. Secd. Note, Series 144A, 8.75%, 8/1/2017 | 100,500 |
| 700,000 | 1,2 | FoxCo Acquisitions, LLC, Sr. Note, 13.375%, 7/15/2016 | 718,375 |
| 1,175,000 | 3 | Idearc, Inc., Company Guarantee, 8.00%, 11/15/2016 | 8,813 |
| 950,000 | | Intelsat Jackson Ltd., Sr. Note, 11.25%, 6/15/2016 | 1,027,187 |
| 2,325,000 | | Intelsat Jackson Ltd., Sr. Unsecd. Note, 9.50%, 2/1/2015 | 2,423,812 |
| 325,000 | | Interpublic Group Cos., Inc., Sr. Unsecd. Note, 10.00%, 7/15/2017 | 375,375 |
| 75,000 | | Lamar Media Corp., Company Guarantee, 9.75%, 4/1/2014 | 84,375 |
| 700,000 | | Lamar Media Corp., Sr. Sub. Note, 6.625%, 8/15/2015 | 696,500 |
| 425,000 | | Lamar Media Corp., Sr. Unsecd. Note, Series C, 6.625%, 8/15/2015 | 422,875 |
| 700,000 | 1,2 | MDC Corporation, Inc., Company Guarantee, Series 144A, 11.00%, 11/1/2016 | 756,000 |
| 1,050,000 | 1,2 | Medimedia USA, Inc., Sr. Sub. Note, 11.375%, 11/15/2014 | 956,813 |
| 281,294 | 1,2 | Nexstar Broadcasting Group, Inc., Company Guarantee, 0.50/7.00%, 1/15/2014 | 260,197 |
| 225,000 | | Nexstar Broadcasting Group, Inc., Company Guarantee, 7.00%, 1/15/2014 | 221,625 |
| 375,000 | 1,2 | Nexstar Broadcasting Group, Inc., Sr. Secd. Note, 8.875%, 4/15/2017 | 382,969 |
| 275,000 | | Nielsen Finance LLC/Nielsen Finance Co., Company Guarantee, 0/12.50%, 8/1/2016 | 273,969 |
| 325,000 | | Nielsen Finance LLC/Nielsen Finance Co., Sr. Note, 11.50%, 5/1/2016 | 366,031 |
| 650,000 | | Nielsen Finance LLC/Nielsen Finance Co., Sr. Note, 11.625%, 2/1/2014 | 732,063 |
| 300,000 | 1,2 | QVC, Inc., Sr. Secd. Note, Series 144A, 7.50%, 10/1/2019 | 307,500 |
| 300,000 | | Quebecor Media, Inc., Sr. Unsecd. Note, Series WI, 7.75%, 3/15/2016 | 307,500 |
Semi-Annual Shareholder Report11
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $600,000 | 1,2 | Rainbow National Services LLC, Sr. Sub. Note, 10.375%, 9/1/2014 | 625,500 |
| 525,000 | 1,2 | Sirius XM Radio, Inc., Sr. Note, Series 144A, 8.75%, 4/1/2015 | 543,375 |
| 1,175,000 | | Southern Graphics Systems, Inc., Sr. Sub. Note, Series WI, 12.00%, 12/15/2013 | 1,222,000 |
| 803,122 | 1,2 | Univision Television Group, Inc., Sr. Note, 9.75%, 3/15/2015 | 726,825 |
| 100,000 | 1,2 | Univision Television Group, Inc., Sr. Secd. Note, 12.00%, 7/1/2014 | 108,875 |
| 550,000 | 1,2 | XM Satellite Radio, Inc., Sr. Note, 13.00%, 8/1/2013 | 625,625 |
| 75,000 | 1,2 | XM Satellite Radio, Inc., Sr. Secd. Note, 11.25%, 6/15/2013 | 82,125 |
| | TOTAL | 15,567,929 |
| | Metals & Mining – 0.0% | |
| 600,000 | 3,4 | Aleris International, Inc., Company Guarantee, 9.00%, 12/15/2014 | 2,700 |
| 500,000 | 3,4 | Aleris International, Inc., Sr. Sub. Note, 10.00%, 12/15/2016 | 1,440 |
| | TOTAL | 4,140 |
| | Packaging – 2.0% | |
| 200,000 | 1,2 | Berry Plastics Corp., Sr. Secd. 2nd Priority Note, Series 144A, 9.50%, 5/15/2018 | 185,000 |
| 1,050,000 | | Berry Plastics Corp., Sr. Secd. Note, 8.875%, 9/15/2014 | 1,005,375 |
| 75,000 | 1,2 | Bway Holding Co., Sr. Note, Series 144A, 10.00%, 6/15/2018 | 79,875 |
| 900,000 | 1,2 | Crown Americas, LLC, Sr. Unsecd. Note, 7.625%, 5/15/2017 | 965,250 |
| 475,000 | 1,2 | Graham Packaging Co., Sr. Note, Series 144A, 8.25%, 1/1/2017 | 471,438 |
| 100,000 | | Greif, Inc., Sr. Unsecd. Note, 7.75%, 8/1/2019 | 105,500 |
| 475,000 | 1,2 | Reynolds Group, Sr. Note, Series 144A, 8.50%, 5/15/2018 | 458,375 |
| 675,000 | 1,2 | Reynolds Group, Sr. Secd. Note, Series 144A, 7.75%, 10/15/2016 | 683,437 |
| | TOTAL | 3,954,250 |
| | Paper – 1.0% | |
| 300,000 | | Boise Paper Holdings, LLC, Company Guarantee, 9.00%, 11/1/2017 | 317,250 |
| 175,000 | | Cascades, Inc., Company Guarantee, Series WI, 7.875%, 1/15/2020 | 180,688 |
| 150,000 | | Clearwater Paper Corp., Sr. Unsecd. Note, 10.625%, 6/15/2016 | 169,500 |
| 50,000 | | Graphic Packaging International Corp., Company Guarantee, 9.50%, 6/15/2017 | 53,500 |
| 477,000 | | Graphic Packaging International Corp., Sr. Sub. Note, 9.50%, 8/15/2013 | 487,732 |
| 225,000 | | NewPage Corp., Sr. Secd. Note, 11.375%, 12/31/2014 | 183,938 |
| 300,000 | | Rock-Tenn Co., Company Guarantee, 9.25%, 3/15/2016 | 330,750 |
| 100,000 | 1,2 | Sappi Paper Holding AG, Sr. Secd. Note, 12.00%, 8/1/2014 | 113,053 |
| | TOTAL | 1,836,411 |
Semi-Annual Shareholder Report12
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| | Restaurants – 0.7% | |
| $925,000 | | NPC International, Inc., Company Guarantee, 9.50%, 5/1/2014 | 938,875 |
| 575,000 | 1,2 | Seminole Hard Rock Entertainment, Inc./Seminole Hard Rock International LLC, Sr. Secd. Note, 3.037%, 3/15/2014 | 504,562 |
| | TOTAL | 1,443,437 |
| | Retailers – 3.7% | |
| 400,000 | | Dollar General Corp., Company Guarantee, 11.875%, 7/15/2017 | 463,000 |
| 175,000 | 1,2 | Express, LLC, Sr. Note, 8.75%, 3/1/2018 | 182,000 |
| 900,000 | | General Nutrition Center, Company Guarantee, 5.75%, 3/15/2014 | 865,125 |
| 225,000 | | Limited Brands, Inc., Company Guarantee, 8.50%, 6/15/2019 | 255,375 |
| 100,000 | | Macy's Retail Holdings, Inc., Company Guarantee, 6.65%, 7/15/2024 | 100,250 |
| 100,000 | | Macy's Retail Holdings, Inc., Company Guarantee, 6.90%, 1/15/2032 | 96,000 |
| 150,000 | | Macy's Retail Holdings, Inc., Company Guarantee, 7.00%, 2/15/2028 | 148,125 |
| 350,000 | | NBC Acquisition Corp., Sr. Disc. Note, 11.00%, 3/15/2013 | 316,750 |
| 450,000 | | Nebraska Book Co., Inc., Sr. Secd. Note, 10.00%, 12/1/2011 | 454,500 |
| 525,000 | | Nebraska Book Co., Inc., Sr. Sub. Note, 8.625%, 3/15/2012 | 496,125 |
| 825,000 | | Sally Beauty Holdings, Inc., 10.50%, 11/15/2016 | 899,250 |
| 1,375,000 | | The Yankee Candle Co., Inc., Sr. Sub. Note, 9.75%, 2/15/2017 | 1,409,375 |
| 850,000 | | Toys 'R' Us, Inc., Company Guarantee, Series WI, 10.75%, 7/15/2017 | 962,625 |
| 500,000 | | United Auto Group, Inc., Sr. Sub. Note, 7.75%, 12/15/2016 | 480,000 |
| | TOTAL | 7,128,500 |
| | Services – 2.5% | |
| 300,000 | 1,2 | Bankrate, Inc., Company Guarantee, Series 144A, 11.75%, 7/15/2015 | 312,000 |
| 550,000 | | Ceridian Corp., Sr. Unsecd. Note, 11.25%, 11/15/2015 | 512,188 |
| 525,000 | 1,2 | Garda World Security Corp., Sr. Unsecd. Note, Series 144A, 9.75%, 3/15/2017 | 544,687 |
| 24,000 | | KAR Holdings, Inc., Company Guarantee, 10.00%, 5/1/2015 | 24,900 |
| 875,000 | 1,2 | SITEL Corp., Sr. Unsecd. Note, Series 144A, 11.50%, 4/1/2018 | 660,625 |
| 350,000 | 1,2 | Trans Union LLC, Company Guarantee, 11.375%, 6/15/2018 | 382,375 |
| 1,250,000 | | West Corp., Company Guarantee, 11.00%, 10/15/2016 | 1,318,750 |
| 1,100,000 | | West Corp., Sr. Note, 9.50%, 10/15/2014 | 1,127,500 |
| | TOTAL | 4,883,025 |
| | Technology – 7.4% | |
| 1,075,000 | | Activant Solutions, Inc., Sr. Sub. Note, 9.50%, 5/1/2016 | 1,026,625 |
| 200,000 | 1,2 | Advanced Micro Devices, Inc., Sr. Note, Series 144A, 7.75%, 8/1/2020 | 199,000 |
Semi-Annual Shareholder Report13
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $200,000 | | Advanced Micro Devices, Inc., Sr. Unsecd. Note, Series WI, 8.125%, 12/15/2017 | 205,500 |
| 600,000 | 1,2 | Aspect Software, Inc., Sr. Note, Series 144A, 10.625%, 5/15/2017 | 618,750 |
| 1,075,000 | 1,2 | Compucom System, Inc., Sr. Sub. Note, 12.50%, 10/1/2015 | 1,135,469 |
| 100,000 | 1,2 | Fidelity National Information Services, Inc., Company Guarantee, Series 144A, 7.625%, 7/15/2017 | 104,750 |
| 75,000 | 1,2 | Fidelity National Information Services, Inc., Company Guarantee, Series 144A, 7.875%, 7/15/2020 | 79,125 |
| 525,000 | | First Data Corp., Company Guarantee, 9.875%, 9/24/2015 | 401,625 |
| 304,935 | | Freescale Semiconductor, Inc., Company Guarantee, 9.125%, 12/15/2014 | 284,352 |
| 200,000 | | Freescale Semiconductor, Inc., Sr. Note, 8.875%, 12/15/2014 | 186,500 |
| 775,000 | 1,2 | Freescale Semiconductor, Inc., Sr. Secd. Note, Series 144A, 9.25%, 4/15/2018 | 780,812 |
| 775,000 | 1,2 | GXS Worldwide, Inc., Sr. Secd. Note, Series 144A, 9.75%, 6/15/2015 | 747,875 |
| 375,000 | 1,2 | Interactive Data Corp., Sr. Note, Series 144A, 10.25%, 8/1/2018 | 390,938 |
| 375,000 | 1,2 | Kemet Corp., Sr. Note, Series 144A, 10.50%, 5/1/2018 | 391,875 |
| 500,000 | 1,2 | MagnaChip Semiconductor S.A., Sr. Note, Series 144A, 10.50%, 4/15/2018 | 518,750 |
| 925,000 | | SERENA Software, Inc., Sr. Sub. Note, 10.375%, 3/15/2016 | 922,687 |
| 582,000 | | SS&C Technologies, Inc., Sr. Sub. Note, 11.75%, 12/1/2013 | 613,283 |
| 525,000 | 1,2 | SSI Investments II Ltd., Sr. Note, Series 144A, 11.125%, 6/1/2018 | 551,250 |
| 825,000 | | Seagate Technology HDD Holdings, Sr. Note, 6.80%, 10/1/2016 | 841,500 |
| 750,000 | | Stream Global Services, Inc., Sr. Secd. Note, 11.25%, 10/1/2014 | 746,250 |
| 850,000 | | SunGard Data Systems, Inc., Sr. Note, Series WI, 9.125%, 8/15/2013 | 872,312 |
| 1,000,000 | | SunGard Data Systems, Inc., Sr. Sub. Note, Series WI, 10.25%, 8/15/2015 | 1,055,000 |
| 775,000 | | Terremark Worldwide, Inc., Sr. Secd. Note, Series WI, 12.00%, 6/15/2017 | 879,625 |
| 300,000 | | Unisys Corp., Sr. Unsecd. Note, 12.50%, 1/15/2016 | 330,000 |
| 475,000 | 1,2 | Viasystems, Inc., Sr. Secd. Note, Series 144A, 12.00%, 1/15/2015 | 518,938 |
| | TOTAL | 14,402,791 |
| | Transportation – 0.9% | |
| 100,000 | | Avis Budget Group, Inc., Company Guarantee, 9.625%, 3/15/2018 | 105,000 |
| 50,000 | 1,2 | CEVA Group PLC, Sr. Secd. Note, Series 144A, 11.625%, 10/1/2016 | 52,688 |
| 550,000 | | Hertz Corp., Sr. Note, 8.875%, 1/1/2014 | 567,875 |
| 225,000 | | Hertz Corp., Sr. Sub. Note, 10.50%, 1/1/2016 | 240,750 |
Semi-Annual Shareholder Report14
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $300,000 | | Kansas City Southern Railway Company, 8.00%, 6/1/2015 | 321,750 |
| 325,000 | | Stena AB, Sr. Note, 7.00%, 12/1/2016 | 314,031 |
| 100,000 | | Teekay Shipping Corp., Sr. Note, 8.50%, 1/15/2020 | 107,250 |
| | TOTAL | 1,709,344 |
| | Utility - Electric – 2.0% | |
| 575,000 | | Dynegy Holdings, Inc., Sr. Note, 7.75%, 6/1/2019 | 373,750 |
| 750,000 | | Edison Mission Energy, Sr. Note, 7.75%, 6/15/2016 | 555,938 |
| 266,539 | 1,2 | FPL Energy National Wind, Note, 6.125%, 3/25/2019 | 253,875 |
| 525,000 | | NRG Energy, Inc., Sr. Note, 7.375%, 1/15/2017 | 530,250 |
| 650,000 | | NRG Energy, Inc., Sr. Note, 7.375%, 2/1/2016 | 656,500 |
| 625,000 | | Sierra Pacific Resources, Sr. Note, Series WI, 6.75%, 8/15/2017 | 648,193 |
| 850,000 | | Texas Competitive Electric Holdings Co. LLC, Company Guarantee, Series WI, 10.25%, 11/1/2015 | 546,125 |
| 625,000 | | Texas Competitive Electric Holdings Co. LLC, Company Guarantee, Series WI-B, 10.25%, 11/1/2015 | 401,563 |
| | TOTAL | 3,966,194 |
| | Utility - Natural Gas – 3.2% | |
| 800,000 | | AmeriGas Partners LP, Sr. Note, 7.125%, 5/20/2016 | 825,000 |
| 450,000 | | Crosstex Energy, Inc., Company Guarantee, 8.875%, 2/15/2018 | 466,875 |
| 600,000 | | Holly Energy Partners LP, Sr. Note, 6.25%, 3/1/2015 | 582,000 |
| 200,000 | | Inergy LP, Company Guarantee, 8.75%, 3/1/2015 | 214,000 |
| 1,050,000 | | Inergy LP, Sr. Note, 6.875%, 12/15/2014 | 1,060,500 |
| 350,000 | | MarkWest Energy Partners LP, Company Guarantee, 6.875%, 11/1/2014 | 354,375 |
| 575,000 | | MarkWest Energy Partners LP, Sr. Note, Series B, 8.75%, 4/15/2018 | 618,125 |
| 675,000 | 1,2 | Niska Gas Storage US, LLC, Sr. Unsecd. Note, Series 144A, 8.875%, 3/15/2018 | 713,812 |
| 552,000 | | Regency Energy Partners LP, Sr. Unsecd. Note, 8.375%, 12/15/2013 | 579,600 |
| 250,000 | 1,2 | Regency Energy Partners LP, Sr. Unsecd. Note, 9.375%, 6/1/2016 | 272,500 |
| 575,000 | | Southern Star Central Corp., Sr. Note, 6.75%, 3/1/2016 | 582,188 |
| | TOTAL | 6,268,975 |
| | Wireless Communications – 3.6% | |
| 350,000 | 1 | Digicel Ltd., Sr. Note, 8.875%, 1/15/2015 | 354,375 |
| 701,734 | 1 | Digicel Ltd., Sr. Note, 9.125%, 1/15/2015 | 712,260 |
| 75,000 | 1 | Digicel Ltd., Sr. Note, 10.50%, 4/15/2018 | 80,813 |
| 350,000 | 1 | Digicel Ltd., Sr. Note, 12.00%, 4/1/2014 | 401,625 |
Semi-Annual Shareholder Report15
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| $400,000 | 1 | Digicel Ltd., Sr. Note, Series 144A, 8.25%, 9/1/2017 | 417,500 |
| 1,225,000 | | MetroPCS Wireless, Inc., Sr. Note, 9.25%, 11/1/2014 | 1,280,125 |
| 50,000 | | MetroPCS Wireless, Inc., Sr. Unsecd. Note, 9.25%, 11/1/2014 | 52,250 |
| 300,000 | | Nextel Communications, Inc., Sr. Note, Series D, 7.375%, 8/1/2015 | 298,500 |
| 900,000 | | Nextel Communications, Inc., Sr. Note, Series E, 6.875%, 10/31/2013 | 902,250 |
| 1,225,000 | | Sprint Capital Corp., Company Guarantee, 6.90%, 5/1/2019 | 1,157,625 |
| 450,000 | | Sprint Nextel Corp., Sr. Unsecd. Note, 8.375%, 8/15/2017 | 466,875 |
| 900,000 | | Sprint Nextel Corp., Unsecd. Note, 6.00%, 12/1/2016 | 844,875 |
| | TOTAL | 6,969,073 |
| | Wireline Communications – 0.0% | |
| 75,000 | | TW Telecom, Inc., Company Guarantee, Series WI, 8.00%, 3/1/2018 | 78,375 |
| | TOTAL CORPORATE BONDS
(IDENTIFIED COST $161,566,349) | 161,565,077 |
| | COMMON STOCKS – 10.9% | |
| | Chemicals – 0.3% | |
| 29,800 | | Koppers Holdings, Inc. | 596,000 |
| | Consumer Products – 0.8% | |
| 106,390 | 3 | Prestige Brands Holdings, Inc. | 787,286 |
| 52,565 | 3 | School Specialty, Inc. | 684,922 |
| | TOTAL | 1,472,208 |
| | Energy – 0.4% | |
| 111,425 | 3 | CVR Energy, Inc. | 793,346 |
| | Food & Beverage – 1.1% | |
| 123,650 | 3 | Cott Corp. | 853,185 |
| 73,375 | | Del Monte Foods Co. | 956,810 |
| 182,200 | 3 | Reddy Ice Group, Inc. | 384,442 |
| | TOTAL | 2,194,437 |
| | Gaming – 0.9% | |
| 28,115 | | Ameristar Casinos, Inc. | 461,367 |
| 102,925 | 3 | Global Cash Access LLC | 372,589 |
| 145,020 | 3 | Great Canadian Gaming Corp. | 960,136 |
| | TOTAL | 1,794,092 |
| | Industrial - Other – 0.6% | |
| 35,500 | 3 | General Cable Corp. | 789,875 |
Semi-Annual Shareholder Report16
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| 7,600 | | SPX Corp. | 426,056 |
| | TOTAL | 1,215,931 |
| | Media - Non-Cable – 1.1% | |
| 10,236 | 3 | Dex One Corp. | 87,211 |
| 124,800 | 3 | Interpublic Group Cos., Inc. | 1,064,544 |
| 89,464 | | MDC Partners, Inc. | 1,044,939 |
| | TOTAL | 2,196,694 |
| | Metals & Mining – 0.0% | |
| 138,395 | 1,3,5 | Royal Oak Mines, Inc. | 3,050 |
| | Multiline Retail – 0.2% | |
| 19,875 | | Macy's, Inc. | 386,370 |
| | Other – 0.0% | |
| 469 | 1,3,5 | CVC Claims Litigation LLC | 0 |
| | Packaging – 0.9% | |
| 67,477 | 3 | Graham Packaging Co. | 754,393 |
| 35,825 | 3 | Owens-Illinois, Inc. | 897,774 |
| | TOTAL | 1,652,167 |
| | Paper – 1.8% | |
| 123,800 | | Cascades, Inc. | 732,572 |
| 13,278 | 3 | Clearwater Paper Corp. | 902,373 |
| 302,290 | 3 | Graphic Packaging Holding Co. | 921,985 |
| 18,235 | | Rock-Tenn Co. | 878,562 |
| | TOTAL | 3,435,492 |
| | Retailers – 0.8% | |
| 35,700 | | Penney (J.C.) Co., Inc. | 714,000 |
| 69,449 | 3 | Susser Holdings Corp. | 806,303 |
| | TOTAL | 1,520,303 |
| | Services – 0.5% | |
| 107,550 | 3 | Willbros. Group, Inc. | 842,117 |
| | Technology – 0.9% | |
| 162,780 | 3 | Smart Modular Technologies (WWH), Inc. | 763,438 |
| 60,404 | 3 | Viasystems Group, Inc. | 861,965 |
| | TOTAL | 1,625,403 |
Semi-Annual Shareholder Report17
Principal
Amount,
Foreign
Currency
Par Amount
or Shares | | | Value in
U.S. Dollars |
| | Transportation – 0.2% | |
| 49,675 | 3 | Hertz Global Holdings, Inc. | 422,734 |
| | Utility - Electric – 0.4% | |
| 41,385 | 3 | NRG Energy, Inc. | 840,943 |
| | TOTAL COMMON STOCKS
(IDENTIFIED COST $26,571,011) | 20,991,287 |
| | PREFERRED STOCK – 0.3% | |
| | Finance - Commercial – 0.3% | |
| 712 | 1,2 | Ally Financial, Inc., Pfd., Series 144A, 7.00%
(IDENTIFIED COST $217,880) | 588,179 |
| | EXCHANGE-TRADED FUND – 0.7% | |
| | Financial Services – 0.7% | |
| 25,975 | | iShares MSCI EAFE Index Fund
(IDENTIFIED COST $1,649,826) | 1,297,451 |
| | MUTUAL FUNDS – 2.9%;6 | |
| 66,906 | | Federated InterContinental Fund, Institutional Shares | 2,713,023 |
| 236,819 | | Federated Max-Cap Index Fund, Institutional Shares | 2,695,000 |
| 261,008 | 7 | Federated Prime Value Obligations Fund, Institutional Shares, 0.26% | 261,008 |
| | TOTAL MUTUAL FUNDS
(IDENTIFIED COST $9,254,767) | 5,669,031 |
| | TOTAL INVESTMENTS — 98.2%
(IDENTIFIED COST $199,259,833)8 | 190,111,025 |
| | OTHER ASSETS AND LIABILITIES - NET — 1.8%9 | 3,522,482 |
| | TOTAL NET ASSETS — 100% | $193,633,507 |
| 1 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At August 31, 2010, these restricted securities amounted to $49,172,271, which represented 25.4% of total net assets. |
| 2 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Trustees (the “Trustees”). At August 31, 2010, these liquid restricted securities amounted to $46,098,460, which represented 23.8% of total net assets. |
| 3 | Non-income producing security. |
| 4 | Issuer in default. |
| 5 | Market quotations and price evaluations are not available. Fair value determined in accordance with procedures established by and under the general supervision of the Trustees. |
| 6 | Affiliated companies. |
Semi-Annual Shareholder Report18
| 7 | 7-Day net yield. |
| 8 | The cost of investments for federal tax purposes amounts to $199,058,804. |
| 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 August 31, 2010.
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.)
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of August 31, 2010, in valuing the Fund's assets carried at fair value:
| Valuation Inputs | | | | |
| Level 1 —
Quoted
Prices and
Investments in
Mutual Funds | Level 2 —
Other
Significant
Observable
Inputs | Level 3 —
Significant
Unobservable
Inputs | Total |
| Debt Securities: | | | | |
| Corporate Bonds | $ — | $161,565,077 | $0 | $161,565,077 |
| Equity Securities: | | | | |
| Common Stock | | | | |
| Domestic | 18,129,977 | — | 0 | 18,129,977 |
| International | 2,858,260 | — | 3,050 | 2,861,310 |
| Preferred Stock | | | | |
| Domestic | — | 588,179 | — | 588,179 |
| Exchange-Traded Fund | 1,297,451 | — | — | 1,297,451 |
| Mutual Funds | 5,669,031 | — | — | 5,669,031 |
| TOTAL SECURITIES | $27,954,719 | $162,153,256 | $3,050 | $190,111,025 |
Semi-Annual Shareholder Report19
Following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value: | Investments
in Corporate
Bond Securities | Investments
in Equity —
International
Securities |
| Balance as of March 1, 2010 | $0 | $3,091 |
| Change in unrealized appreciation/depreciation | 1,120,919 | (41) |
| Transfer in and/or out of Level 3 | 4,6441 | — |
| Realized loss | (1,125,563) | — |
| Balance as of August 31, 2010 | $0 | $3,050 |
| The total change in unrealized appreciation/depreciation included in the Statement of Operations attributable to investments still held at August 31, 2010. | $(4,644) | $(41) |
| 1 | Transferred from Level 2 to Level 3 because fair values were determined using valuation techniques utilizing unobservable market data due to observable market data being unavailable. |
The following acronym is used throughout this portfolio:
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report20
Statement of Assets and Liabilities
August 31, 2010 (unaudited)
| Assets: | | |
| Total investments in securities, at value including $5,669,031 of investments in affiliated issuers (Note 5) (identified cost $199,259,833) | | $190,111,025 |
| Income receivable | | 3,775,551 |
| Receivable for investments sold | | 400,333 |
| Receivable for shares sold | | 217,427 |
| TOTAL ASSETS | | 194,504,336 |
| Liabilities: | | |
| Payable for investments purchased | $204,740 | |
| Payable for shares redeemed | 377,971 | |
| Bank overdraft | 45,566 | |
| Income distribution payable | 184,641 | |
| Payable for Directors'/Trustees' fees | 228 | |
| Payable for shareholder services fee (Note 5) | 37,324 | |
| Accrued expenses | 20,359 | |
| TOTAL LIABILITIES | | 870,829 |
| Net assets for 35,136,100 shares outstanding | | $193,633,507 |
| Net Assets Consist of: | | |
| Paid-in capital | | $383,340,556 |
| Net unrealized depreciation of investments | | (9,148,808) |
| Accumulated net realized loss on investments, options, foreign currency transactions and swap contracts | | (180,949,974) |
| Undistributed net investment income | | 391,733 |
| TOTAL NET ASSETS | | $193,633,507 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| Net asset value and offering price per share ($193,633,507 ÷ 35,136,100 shares outstanding), no par value, unlimited shares authorized | | $5.51 |
| Redemption proceeds per share (98.00/100 of $5.51) | | $5.40 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report21
Statement of Operations
Six Months Ended August 31, 2010 (unaudited)
| Investment Income: | | | |
| Dividends (including $33,604 received from affiliated issuers (Note 5) and net of foreign taxes withheld of $2,999) | | | $164,197 |
| Interest | | | 7,862,023 |
| TOTAL INCOME | | | 8,026,220 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $754,332 | |
| Administrative personnel and services fee (Note 5) | | 78,633 | |
| Custodian fees | | 8,201 | |
| Transfer and dividend disbursing agent fees and expenses | | 94,473 | |
| Directors'/Trustees' fees | | 5,424 | |
| Auditing fees | | 13,929 | |
| Legal fees | | 4,039 | |
| Portfolio accounting fees | | 45,798 | |
| Shareholder services fee (Note 5) | | 237,407 | |
| Account administration fee | | 7,896 | |
| Share registration costs | | 16,744 | |
| Printing and postage | | 18,141 | |
| Insurance premiums | | 2,292 | |
| Miscellaneous | | 4,533 | |
| TOTAL EXPENSES | | 1,291,842 | |
| Waivers and Reimbursement (Note 5): | | | |
| Waiver/reimbursement of investment adviser fee | $(289,106) | | |
| Waiver of administrative personnel and services fee | (2,093) | | |
| TOTAL WAIVERS AND REIMBURSEMENT | | (291,199) | |
| Net expenses | | | 1,000,643 |
| Net investment income | | | 7,025,577 |
| Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions: | | | |
| Net realized loss on investments and foreign currency transactions (including realized gain of $108,339 on sales of investments in affiliated issuers (Note 5)) | | | (1,220,880) |
| Net change in unrealized depreciation of investments | | | 2,752,482 |
| Net realized and unrealized gain on investments and foreign currency transactions | | | 1,531,602 |
| Change in net assets resulting from operations | | | $8,557,179 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report22
Statement of Changes in Net Assets
| Six Months
Ended
(unaudited)
8/31/2010 | Year Ended
2/28/2010 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $7,025,577 | $14,484,068 |
| Net realized loss on investments and foreign currency transactions | (1,220,880) | (18,851,164) |
| Net change in unrealized appreciation/depreciation of investments | 2,752,482 | 75,354,967 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 8,557,179 | 70,987,871 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (7,080,027) | (13,976,738) |
| Share Transactions: | | |
| Proceeds from sale of shares | 16,851,890 | 49,227,119 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 5,952,888 | 11,860,248 |
| Cost of shares redeemed | (27,595,628) | (48,090,242) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (4,790,850) | 12,997,125 |
| Redemption fees | 25,742 | 58,701 |
| Change in net assets | (3,287,956) | 70,066,959 |
| Net Assets: | | |
| Beginning of period | 196,921,463 | 126,854,504 |
| End of period (including undistributed net investment income of $391,733 and $446,183, respectively) | $193,633,507 | $196,921,463 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report23
Notes to Financial Statements
August 31, 2010 (unaudited)
1. ORGANIZATION
Federated High Yield Trust (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified, open-end management investment company. The Fund's investment objective is to seek high current income by investing primarily in a professionally managed, diversified portfolio of fixed-income securities. The Fund's portfolio of investments consists primarily of lower-rated corporate debt obligations. These lower-rated obligations may be more susceptible to real or perceived adverse economic conditions than investment-grade bonds. These lower-rated debt obligations are regarded as predominately speculative with respect to each issuer's continuing ability to make interest and principle payments (i.e., the obligations are subject to the risk of default). The Fund offers one class of shares: Institutional Service Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
- Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Trustees.
- Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium).
- 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 are valued based upon their reported NAVs.
- Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
- Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations, or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation and Significant Events Procedures
The Trustees have authorized the use of pricing services to provide evaluations of the current fair value of certain investments for purposes of calculating the NAV. 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 Semi-Annual Shareholder Report24
the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and agency securities and mortgage-backed securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
- With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures or options contracts;
- With respect to price evaluations of fixed-income securities determined before the close of regular trading on the NYSE, actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets;
- Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
- Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry.
The Trustees have approved the use of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
Repurchase Agreements
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.
Semi-Annual Shareholder Report25
The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.
Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Premium and Discount Amortization
All premiums and discounts on fixed-income securities are amortized/accreted for financial statement purposes.
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 August 31, 2010, 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 August 31, 2010, tax years 2007 through 2010 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.
Semi-Annual Shareholder Report26
Foreign Exchange ContractsThe Fund may enter into foreign exchange contracts for the delayed delivery of securities or foreign currency exchange transactions. The Fund may enter into foreign exchange contracts to protect assets against adverse changes in foreign currency exchange rates or exchange control regulations. Purchased contracts are used to acquire exposure to foreign currencies, whereas contracts to sell are used to hedge the Fund's securities against currency fluctuations. Risks may arise upon entering into these transactions from the potential inability of counterparties to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement date.
At August 31, 2010, the Fund had no outstanding foreign exchange contracts.
Foreign Currency Translation
The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies (FCs) are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year end, resulting from changes in the exchange rate.
Restricted Securities
The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Trustees.
Semi-Annual Shareholder Report27
Additional information on restricted securities, excluding securities purchased under Rule 144A, if applicable, that have been deemed liquid by the Trustees, held at August 31, 2010, is as follows:| Security | Acquisition Date | Acquisition Cost | Market Value |
| Chemtura Corp., Sr. Note, 6.875%, 6/1/2016 | 4/19/2006-4/11/2007 | $963,686 | $1,104,188 |
| CVC Claims Litigation LLC | 3/26/1997-8/19/1997 | $4,646,903 | $0 |
| Digicel Ltd., Sr. Note, 8.875%, 1/15/2015 | 4/20/2009-5/1/2009 | $253,000 | $354,375 |
| Digicel Ltd., Sr. Note, 9.125%, 1/15/2015 | 2/22/2007-5/2/2008 | $688,876 | $712,260 |
| Digicel Ltd., Sr. Note, 10.50%, 4/15/2018 | 3/16/2010 | $75,000 | $80,813 |
| Digicel Ltd., Sr. Note, 12.00%, 4/1/2014 | 3/6/2009-1/5/2010 | $336,503 | $401,625 |
| Digicel Ltd., Sr. Note, Series 144A, 8.25%, 9/1/2017 | 11/23/2009 | $394,500 | $417,500 |
| Hard Rock Park Operations LLC, Sr. Secd. Note, 1.00%, 4/1/2012 | 3/23/2006 | $641,893 | $0 |
| Royal Oak Mines, Inc. | 2/24/1999 | $15,376 | $3,050 |
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
3. SHARES OF BENEFICIAL INTEREST
The following table summarizes share activity:
| Six Months
Ended
8/31/2010 | Year Ended
2/28/2010 |
| Shares sold | 3,021,637 | 10,224,489 |
| Shares issued to shareholders in payment of distributions declared | 1,070,123 | 2,416,095 |
| Shares redeemed | (4,974,455) | (9,593,589) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (882,695) | 3,046,995 |
Redemption Fees
The Fund imposes a 2.00% redemption fee to shareholders of the Fund's Institutional Service Shares who redeem shares held for 90 days or less. Shares acquired by reinvestment of dividends or distributions of the Fund, or purchased pursuant to the Systematic Investment Program or withdrawn pursuant to the Systematic Withdrawal Program, will not be subject to the redemption fee. All redemption fees are recorded by the Fund as additions to paid-in capital. For the six months ended August 31, 2010, the redemption fees for the Fund's Institutional Service Shares amounted to $25,742. For the year ended February 28, 2010, the redemption fees for the Fund's Institutional Service Shares amounted to $58,701.
Semi-Annual Shareholder Report28
4. FEDERAL TAX INFORMATIONAt August 31, 2010, the cost of investments for federal tax purposes was $199,058,804. The net unrealized depreciation of investments for federal tax purposes was $8,947,779. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $11,110,677 and net unrealized depreciation from investments for those securities having an excess of cost over value of $20,058,456.
At February 28, 2010, the Fund had a capital loss carryforward of $163,495,659 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
| Expiration Year | Expiration Amount |
| 2011 | $94,995,842 |
| 2012 | $36,932,748 |
| 2014 | $4,449,545 |
| 2015 | $3,020,106 |
| 2016 | $4,060,589 |
| 2017 | $7,603,250 |
| 2018 | $12,433,579 |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). 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 August 31, 2010, the Adviser voluntarily waived $271,256 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets
of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
Semi-Annual Shareholder Report29
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. 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 August 31, 2010, the net fee paid to FAS was 0.076% of average daily net assets of the Fund. FAS waived $2,093 of its fee.Shareholder Services Fee
The Fund may pay fees (“Service Fees”) up to 0.25% of the average daily net assets of the Fund's Institutional Service Shares to 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 Service Fees. For the six months ended August 31, 2010, FSSC received $16,985 of fees paid by the Fund.
Expense Limitation
The Adviser and its affiliates (which may include FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Institutional Service Shares (after the voluntary waivers and reimbursements) will not exceed 0.99% (the “Fee Limit”), through the later of (the “Termination Date”): (a) April 30, 2011; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its 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.
Interfund Transactions
During the six months ended August 31, 2010, the Fund engaged in sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees and/or common Officers. These sale transactions complied with Rule 17a-7 under the Act and amounted to $412,752.
General
Certain Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.
Semi-Annual Shareholder Report30
Transactions with Affiliated Companies
Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated mutual funds. For the six months ended August 31, 2010, the Adviser reimbursed $17,850. Transactions with affiliated companies during the six months ended August 31, 2010, were as follows:
| Affiliates | Balance of
Shares Held
2/28/2010 | Purchases/
Additions | Sales/
Reductions | Balance of
Shares Held
8/31/2010 | Value | Dividend
Income |
Federated Inter-
Continental Fund, Institutional Shares | 64,572 | 2,334 | — | 66,906 | $2,713,023 | $ — |
| Federated Prime Value Obligations Fund, Institutional Shares | 1,378,025 | 21,120,396 | 22,237,413 | 261,008 | 261,008 | 937 |
| Federated Max-Cap Index Fund, Institutional Shares | 438,493 | 2,684 | 204,358 | 236,819 | 2,695,000 | 32,667 |
TOTAL OF AFFILIATED
TRANSACTIONS | 1,881,090 | 21,125,414 | 22,441,771 | 564,733 | $5,669,031 | $33,604 |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended August 31, 2010, were as follows:
| Purchases | $39,186,105 |
| Sales | $44,856,823 |
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 August 31, 2010, there were no outstanding loans. During the six months ended August 31, 2010, 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 August 31, 2010, there were no outstanding loans. During the six months ended August 31, 2010, the program was not utilized.
Semi-Annual Shareholder Report31
9. Legal ProceedingsSince October 2003, Federated Investors, Inc. and related entities (collectively, “Federated”), and various Federated sponsored mutual funds (“Federated Funds”) have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of certain Federated Funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated without admitting the validity of any claim has reached a preliminary settlement with the Plaintiffs in these cases. Any settlement would have to be approved by the Court. Federated entities have also been named as defendants in several additional lawsuits that are now pending in the United States District Court for the Western District of Pennsylvania. These lawsuits have been consolidated into a single action alleging excessive advisory fees involving one of the Federated Funds. The Board of the Federated Funds retained the law firm of Dickstein Shapiro LLP to represent the Federated Funds in these lawsuits. Federated and the Federated Funds, and their respective counsel, have been defending this litigation, and none of the Federated Funds remains a defendant in any of the lawsuits. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek monetary damages, attorneys' fees and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Federated Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the allegations in these matters will not result in increased redemptions, or reduced sales, of shares of the Federated Funds or other adverse consequences for the Federated Funds.
10. Subsequent events
Management has evaluated subsequent events through the date the financial statements were issued, and determined that no events have occurred that require additional disclosure.
Semi-Annual Shareholder Report32
Evaluation and Approval of Advisory Contract - May 2010
Federated High Yield Trust (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2010. 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 Board considered that evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. 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, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such 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.
Semi-Annual Shareholder Report33
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, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional reports in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board 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 reports covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); 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 and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace. With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report34
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 generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences 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; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed reports 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 are relevant in judging the reasonableness of proposed fees.
For the one-year, three-year and five-year periods covered by the report, the Fund's performance was above the median of the relevant peer group.
The Board also received financial information about Federated, including reports on the compensation and benefits Federated derived from its relationships with the Federated funds. These reports covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The reports also discussed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. 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 reports regarding the institution or elimination of these voluntary waivers.
Semi-Annual Shareholder Report35
Federated furnished reports, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation reports unreliable. The allocation reports were considered in the analysis by the Board but were determined to be of limited use.The Board and the Senior Officer also reviewed a report compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
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 funds, such as personnel and processes for the portfolio management, compliance, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (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 did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the report, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer's evaluation noted his belief that the information and observations contained in his evaluation supported a finding that the proposed management fees are reasonable, and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.
Semi-Annual Shareholder Report36
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 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 Report37
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 from Federated's website at FederatedInvestors.com. To access this information from the “Products” section of the website, click on the “Prospectuses and Regulatory Reports” link under “Related Information,” then select the appropriate link opposite the name of the Fund; or select the name of the Fund and from the Fund's page, click on the “Prospectuses and Regulatory Reports” link. 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 from the “Products” section of Federated's website at FederatedInvestors.com by clicking on “Portfolio Holdings” under “Related Information,” then selecting the appropriate link opposite the name of the Fund; or select the name of the Fund and from the Fund's page, click on the “Portfolio Holdings” link.
Semi-Annual Shareholder Report38
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 DELIVERYIn 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 Report39
Federated High Yield Trust
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 314197104
8092705 (10/10)
Federated is a registered mark of Federated Investors, Inc.
2010 © 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
Not Applicable
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies |
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies |
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers |
Item 10. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have concluded that the
registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Registrant | Federated High Yield Trust |
| | |
| By | /S/ Richard A. Novak |
| | Richard A. Novak |
| | Principal Financial Officer |
| Date | October 20, 2010 |
| | |
| | |
| 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 | October 20, 2010 |
| | |
| | |
| By | /S/ Richard A. Novak |
| | Richard A. Novak |
| | Principal Financial Officer |
| Date | October 20, 2010 |
