United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of Registered
Management Investment Companies
811-6447
(Investment Company Act File Number)
Federated Fixed Income Securities, Inc.
---------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(412) 288-1900 (Registrant's
Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Date of Fiscal Year End: 11/30/05
--------
Date of Reporting Period: Six months ended 5/31/05
------------------------
Item 1. Reports to Stockholders
Federated
World-Class Investment Manager
Federated Limited Term Municipal Fund
Established 1993
A Portfolio of Federated Fixed Income Securities, Inc.
12TH SEMI-ANNUAL SHAREHOLDER REPORT
May 31, 2005
Class A Shares
Class F Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
BOARD REVIEW OF ADVISORY CONTRACT
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Financial Highlights - Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended November 30,
|
|
| 5/31/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $9.77 | | | $9.90 | | | $9.83 | | | $9.74 | | | $9.56 | | | $9.60 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.12 | | | 0.21 | | | 0.21 | | | 0.26 | 1 | | 0.34 | | | 0.39 | |
Net realized and unrealized gain (loss) on investments and futures contracts
|
| (0.08
| )
|
| (0.13
| )
|
| 0.08
|
|
| 0.09
| 1
|
| 0.18
|
|
| (0.04
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.04
|
|
| 0.08
|
|
| 0.29
|
|
| 0.35
|
|
| 0.52
|
|
| 0.35
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
|
| (0.12
| )
|
| (0.21
| )
|
| (0.22
| )
|
| (0.26
| )
|
| (0.34
| )
|
| (0.39
| )
|
Net Asset Value, End of Period
|
| $9.69
|
|
| $9.77
|
|
| $9.90
|
|
| $9.83
|
|
| $9.74
|
|
| $9.56
|
|
Total Return 2
|
| 0.40
| %
|
| 0.86
| %
|
| 2.92
| %
|
| 3.59
| %
|
| 5.53
| %
|
| 3.75
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 0.98
| % 3
|
| 0.98
| %
|
| 0.98
| %
|
| 0.98
| %
|
| 0.98
| %
|
| 0.95
| %
|
Net investment income
|
| 2.45
| % 3
|
| 2.16
| %
|
| 2.16
| %
|
| 2.58
| % 1
|
| 3.42
| %
|
| 4.12
| %
|
Expense waiver/reimbursement 4
|
| 0.24
| % 3
|
| 0.15
| %
|
| 0.11
| %
|
| 0.16
| %
|
| 0.28
| %
|
| 0.40
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $108,659
|
| $153,283
|
| $235,512
|
| $225,572
|
| $148,914
|
| $54,995
|
|
Portfolio turnover
|
| 4
| %
|
| 24
| %
|
| 26
| %
|
| 39
| %
|
| 39
| %
|
| 6
| %
|
1 Effective December 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premiums on long-term debt securities. For the year ended November 30, 2002, this effect had no change on the net investment income per share, net realized and unrealized gain (loss) on investments per share, or the ratio of net investment income to average net assets. Per share, ratios and supplemental data for the periods prior to December 1, 2001 have not been restated to reflect this change in presentation.
2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
3 Computed on an annualized basis.
4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights - Class F Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended November 30,
|
|
| 5/31/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $9.77 | | | $9.90 | | | $9.83 | | | $9.74 | | | $9.56 | | | $9.60 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.13 | | | 0.24 | | | 0.24 | | | 0.28 | 1 | | 0.37 | | | 0.42 | |
Net realized and unrealized gain (loss) on investments and futures contracts
|
| (0.08
| )
|
| (0.13
| )
|
| 0.07
|
|
| 0.09
| 1
|
| 0.18
|
|
| (0.04
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.05
|
|
| 0.11
|
|
| 0.31
|
|
| 0.37
|
|
| 0.55
|
|
| 0.38
|
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
|
| (0.13
| )
|
| (0.24
| )
|
| (0.24
| )
|
| (0.28
| )
|
| (0.37
| )
|
| (0.42
| )
|
Net Asset Value, End of Period
|
| $9.69
|
|
| $9.77
|
|
| $9.90
|
|
| $9.83
|
|
| $9.74
|
|
| $9.56
|
|
Total Return 2
|
| 0.52
| %
|
| 1.11
| %
|
| 3.18
| %
|
| 3.85
| %
|
| 5.80
| %
|
| 4.01
| %
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 0.74
| % 3
|
| 0.73
| %
|
| 0.73
| %
|
| 0.73
| %
|
| 0.73
| %
|
| 0.70
| %
|
Net investment income
|
| 2.70
| % 3
|
| 2.41
| %
|
| 2.41
| %
|
| 2.85
| % 1
|
| 3.72
| %
|
| 4.37
| %
|
Expense waiver/reimbursement 4
|
| 0.39
| % 3
|
| 0.30
| %
|
| 0.26
| %
|
| 0.31
| %
|
| 0.43
| %
|
| 0.55
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $21,563
|
|
| $24,385
|
|
| $25,261
|
|
| $17,416
|
|
| $18,955
|
|
| $15,164
|
|
Portfolio turnover
|
| 4
| %
|
| 24
| %
|
| 26
| %
|
| 39
| %
|
| 39
| %
|
| 6
| %
|
1 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premiums on long-term debt securities. For the year ended November 30, 2002, this effect had no change on the net investment income per share, net realized and unrealized gain (loss) on investments per share, or the ratio of net investment income to average net assets. Per share, ratios and supplemental data for the periods prior to December 1, 2001 have not been restated to reflect this change in presentation.
2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
3 Computed on an annualized basis.
4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees; 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 December 1, 2004 to May 31, 2005.
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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 sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
|
| Beginning
Account Value
12/1/2004
|
| Ending
Account Value
5/31/2005
|
| Expenses Paid
During Period 1
|
Actual:
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,004.00
|
| $4.90
|
Class F Shares
|
| $1,000
|
| $1,005.20
|
| $3.70
|
Hypothetical (assuming a 5% return before expenses):
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,020.04
|
| $4.94
|
Class F Shares
|
| $1,000
|
| $1,021.24
|
| $3.73
|
1 Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). The annualized expense ratios are as follows:
Class A Shares
|
| 0.98%
|
Class F Shares
|
| 0.74%
|
Portfolio of Investments Summary Tables
At May 31, 2005, the Fund's credit quality ratings composition 1 was as follows:
S&P Long-Term Ratings as
Percentage of Total Investments 2
| | Moody's Long-Term Ratings as
Percentage of Total Investments 2
|
AAA
|
| 16.6%
| | Aaa
|
| 17.8%
|
AA
|
| 17.1%
| | Aa
|
| 15.9%
|
A
|
| 24.1%
| | A
|
| 28.4%
|
BBB
|
| 20.0%
| | Baa
|
| 14.4%
|
BB
|
| 3.9%
| | Ba
|
| 0.8%
|
B
|
| 0.0%
| | B
|
| 0.0%
|
Not Rated by S&P
|
| 18.3%
| | Not Rated by Moody's
|
| 22.7%
|
TOTAL
|
| 100.0%
| | TOTAL
|
| 100.0%
|
1 These tables depict the long-term, credit-quality ratings assigned to the Fund's portfolio holdings by Standard & Poor's (S&P) and Moody's Investors Service (Moody's), each of which is a nationally recognized statistical rating organization (NRSRO). These credit-quality ratings are shown without regard to gradations within a given rating category. For example, securities rated "A-" have been included in the "A" rated category. Rated securities that have been prerefunded, but not rated again by the NRSRO, have been included in the "Not rated by..." category.
Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit-quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit-quality ratings in the Fund's Statement of Additional Information.
Holdings that are rated only by a different NRSRO than the one identified have been included in the "Not rated by..." category. Of the portfolio's total investments, 3.4% do not have long-term ratings by either of these NRSROs.
2 Percentages are based on total investments, which may differ from the Fund's total net assets used in computing the percentages in the Portfolio of Investments which follows.
Portfolio of Investments
May 31, 2005 (unaudited)
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--98.4% | | | | | | |
| | | Alabama--4.1% | | | | | | |
| $ | 1,000,000 | | Alabama State Public School & College Authority, Revenue Bonds (Series 2002-A), 5.00%, 2/1/2008
| | AA/Aa3 | | $ | 1,053,160 | |
| 2,865,000 | | DCH Health Care Authority, Health Care Facilities Revenue Bonds, 4.00%, 6/1/2007
| | A+/A1 | | | 2,894,538 | |
| 405,000 | | Huntsville, AL Health Care Authority, Revenue Bonds, 5.25% (Huntsville Hospital System), 6/1/2005
| | NR/A2 | | | 405,000 | |
| 945,000 | | Huntsville, AL Health Care Authority, Revenue Bonds, 5.25% (Huntsville Hospital System), 6/1/2006
|
| NR/A2
|
|
| 965,743
|
|
| | | TOTAL
|
|
|
|
| 5,318,441
|
|
| | | Arizona--2.3% | | | | | | |
| 1,000,000 | | Salt River Project, AZ Agricultural Improvement & Power District, Electric System Refunding Revenue Bonds (Series 2002D), 5.00%, 1/1/2007
| | AA/Aa2 | | | 1,033,270 | |
| 1,000,000 | 1,2 | Yavapai, AZ IDA, Solid Waste Disposal Revenue Bonds, 4.45% TOBs (Waste Management, Inc.), Mandatory Tender 3/1/2008
| | BBB/NR | | | 1,011,940 | |
| 1,000,000 | 1,2 | Yavapai, AZ IDA, Solid Waste Disposal Revenue Bonds, 3.65% TOBs (Waste Management, Inc.), Mandatory Tender 3/1/2006
|
| BBB/NR
|
|
| 999,060
|
|
| | | TOTAL
|
|
|
|
| 3,044,270
|
|
| | | Arkansas--2.7% | | | | | | |
| 500,000 | | Arkansas Development Finance Authority, Exempt Facilities Revenue Bonds, 2.85% TOBs (Waste Management, Inc.), Mandatory Tender 8/1/2005
| | BBB/NR | | | 499,255 | |
| 1,475,000 | | Pulaski County, AR, Hospital Refunding Revenue Bonds (Series 2002B), 4.25% (Arkansas Children's Hospital), 3/1/2006
| | A/A2 | | | 1,489,234 | |
| 1,530,000 | | Pulaski County, AR, Hospital Refunding Revenue Bonds (Series 2002B), 4.50% (Arkansas Children's Hospital), 3/1/2007
|
| A/A2
|
|
| 1,568,831
|
|
| | | TOTAL
|
|
|
|
| 3,557,320
|
|
| | | California--4.4% | | | | | | |
| 2,000,000 | | California PCFA, Solid Waste Disposal Revenue Bonds, 2.85% TOBs (Republic Services, Inc.), Mandatory Tender 12/1/2005
| | BBB+/Baa2 | | | 1,992,420 | |
| 1,500,000 | | California State Department of Water Resources Power Supply Program, Power Supply Revenue Bonds (Insured Series), 5.25% (MBIA Insurance Corp. INS), 5/1/2007
| | AAA/Aaa | | | 1,567,560 | |
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | California--continued | | | | | | |
| $ | 2,000,000 | | California State, Refunding UT GO Bonds, 5.00%, 2/1/2008
| | A/A3 | | $ | 2,102,320 | |
| 25,000 | | Delta Counties, CA Home Mortgage Finance Authority, SFM Revenue Bonds (Series 1998A), 4.85% (GNMA Collateralized Home Mortgage Program COL)/(MBIA Insurance Corp. INS), 12/1/2008
|
| AAA/Aaa
|
|
| 25,138
|
|
| | | TOTAL
|
|
|
|
| 5,687,438
|
|
| | | Colorado--4.4% | | | | | | |
| 100,000 | | Beacon Point, CO Metropolitan District, Revenue Bonds (Series 2005B), 4.375% (Compass Bank, Birmingham LOC)/(Original Issue Yield: 4.50%), 12/1/2015
| | A-/NR | | | 100,544 | |
| 55,000 | | Colorado HFA, Single Family Program Senior Bonds (Series 1998C-1), 4.70%, 5/1/2020
| | NR/Aa2 | | | 55,288 | |
| 1,000,000 | | Colorado Health Facilities Authority, Health Facilities Revenue Bonds (Series 2004B), 3.75% TOBs (Evangelical Lutheran Good Samaritan Society), Mandatory Tender 6/1/2009
| | A-/A3 | | | 993,320 | |
| 2,000,000 | | Countrydale, CO Metropolitan District, LT GO Refunding Bonds, 3.50% TOBs (Compass Bank, Birmingham LOC), Mandatory Tender 12/1/2007
| | NR/A1 | | | 1,992,280 | |
| 305,000 | | Denver, CO Health & Hospital Authority, Healthcare Revenue Bonds (Series 2001A), 5.25%, 12/1/2005
| | BBB/Baa3 | | | 307,641 | |
| 140,000 | | Denver, CO Health & Hospital Authority, Healthcare Revenue Bonds (Series 2001A), 5.25%, 12/1/2006
| | BBB/Baa3 | | | 143,255 | |
| 200,000 | | Denver, CO Health & Hospital Authority, Healthcare Revenue Bonds (Series 2001A), 5.25%, 12/1/2007
| | BBB/Baa3 | | | 207,106 | |
| 1,755,000 | | Dove Valley Metropolitan District, CO, Refunding UT GO Bonds, 3.30% TOBs (BNP Paribas SA LOC), Mandatory Tender 11/1/2005
| | AA/NR | | | 1,757,738 | |
| 200,000 | | High Plains, CO Metropolitan District, Revenue Bonds (Series 2005B), 4.375% (Compass Bank, Birmingham LOC)/ (Original Issue Yield: 4.50%), 12/1/2015
|
| A-/NR
|
|
| 201,088
|
|
| | | TOTAL
|
|
|
|
| 5,758,260
|
|
| | | Connecticut--1.3% | | | | | | |
| 1,750,000 | | Connecticut Development Authority, PCR Bonds, 3.35% TOBs (Connecticut Light & Power Co.)/(AMBAC INS), Mandatory Tender 10/1/2008
|
| AAA/Aaa
|
|
| 1,732,798
|
|
| | | Florida--4.0% | | | | | | |
| 1,355,000 | 1,2 | Florida State Department of Corrections, Custodial Receipts, 3.00%, 9/10/2009
| | NR/A3 | | | 1,339,539 | |
| 2,000,000 | | Miami-Dade County, FL, Capital Asset Acquisition Special Obligation Bonds (Series 2002A), 5.00% (AMBAC INS), 4/1/2008
| | AAA/Aaa | | | 2,114,220 | |
| 1,680,000 | | Palm Beach County, FL Health Facilities Authority, Hospital Refunding Revenue Bonds (Series 2001), 5.00% (BRCH Corporation Obligated Group), 12/1/2005
|
| AA-/NR
|
|
| 1,694,834
|
|
| | | TOTAL
|
|
|
|
| 5,148,593
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Georgia--1.9% | | | | | | |
| $ | 935,000 | | Coffee County, GA Hospital Authority, Refunding Revenue Bonds, 5.00% (Coffee Regional Medical Center, Inc.), 12/1/2010
| | BBB+/NR | | $ | 995,130 | |
| 1,505,000 | | Decatur County-Bainbridge, GA IDA, Revenue Bonds, 4.00% TOBs (John B. Sanifilippo & Son)/(Lasalle Bank, N.A. LOC), Mandatory Tender 6/1/2006
|
| A+/NR
|
|
| 1,510,418
|
|
| | | TOTAL
|
|
|
|
| 2,505,548
|
|
| | | Idaho--0.3% | | | | | | |
| 415,000 | | Idaho Housing Agency, SFM Bonds, Series B-2, 4.65%, 7/1/2028
|
| NR/Aaa
|
|
| 415,614
|
|
| | | Illinois--4.3% | | | | | | |
| 30,000 | | Chicago, IL SFM, Collateralized SFM Revenue Bonds (Series 1997B), 5.10% (GNMA Collateralized Home Mortgage Program COL), 9/1/2007
| | NR/Aaa | | | 30,111 | |
| 1,000,000 | | Chicago, IL Transit Authority, Capital Grant Receipts Revenue Bonds (Series B), 4.25% (AMBAC INS), 6/1/2008
| | AAA/Aaa | | | 1,001,090 | |
| 255,000 | 1 | Illinois Development Finance Authority IDB, (Series 1995) Revenue Bonds, 5.80% (Catholic Charities Housing Development Corp.), 1/1/2007
| | NR | | | 259,026 | |
| 140,000 | | Illinois Development Finance Authority IDB, Mortgage Revenue Refunding Bonds, (Series 1997A), 5.20% (MBIA Insurance Corp. INS)/(FHA LOC), 7/1/2008
| | NR/Aaa | | | 143,000 | |
| 2,000,000 | | Illinois Health Facilities Authority, Revenue Bonds, 5.25% (Advocate Health Care Network)/(Original Issue Yield: 5.33%), 11/15/2006
| | AA/Aa3 | | | 2,058,120 | |
| 2,000,000 | | Illinois State, UT GO Bonds (First Series of July 2002), 5.00% (MBIA Insurance Corp. INS), 7/1/2007
|
| AAA/Aaa
|
|
| 2,084,480
|
|
| | | TOTAL
|
|
|
|
| 5,575,827
|
|
| | | Indiana--3.5% | | | | | | |
| 1,000,000 | | Indiana Development Finance Authority, Refunding Revenue Bonds (Series 1998A), 4.75% TOBs (Southern Indiana Gas & Electric Co.), Mandatory Tender 3/1/2006
| | A-/Baa1 | | | 1,008,590 | |
| 500,000 | | Indiana Development Finance Authority, Solid Waste Disposal Revenue Bonds, 2.70% TOBs (Waste Management, Inc.), Mandatory Tender 10/1/2005
| | BBB/NR | | | 498,285 | |
| 1,260,000 | | Indiana Health Facility Financing Authority, Health System Revenue Bonds (Series 2001), 5.00% (Sisters of St. Francis Health Services, Inc.), 11/1/2005
| | NR/Aa3 | | | 1,269,967 | |
| 725,000 | | Indiana Health Facility Financing Authority, Hospital Revenue Bonds (Series 2001A), 5.50% (Community Foundation of Northwest Indiana), 8/1/2005
| | BBB-/NR | | | 727,320 | |
| 1,000,000 | | Lawrenceburg, IN Pollution Control Revenue Board, PCR Revenue Bonds (Series F), 2.625% TOBs (Indiana Michigan Power Co.), Mandatory Tender 10/1/2006
|
| BBB/Baa2
|
|
| 992,410
|
|
| | | TOTAL
|
|
|
|
| 4,496,572
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Kansas--2.3% | | | | | | |
| $ | 1,000,000 | | Burlington, KS, Refunding Revenue Bonds (Series 1998B), 4.75% TOBs (Kansas City Power And Light Co.), Mandatory Tender 10/1/2007
| | BBB/A3 | | $ | 1,027,070 | |
| 1,155,000 | | Kansas Development Finance Authority, Revenue Bonds, 5.50% (Sisters of Charity, Leavenworth)/(MBIA Insurance Corp. INS), 12/1/2005
| | AAA/Aaa | | | 1,170,107 | |
| 785,000 | | Lawrence, KS Hospital Authority, Hospital Revenue Bonds, 4.00% (Lawrence Memorial Hospital), 7/1/2008
| | NR/Baa1 | | | 799,232 | |
| 25,000 | | Sedgwick & Shawnee Counties, KS, SFM Revenue Bonds, Mortgage-Backed Securities Program, (Series 1998 A-1), 5.00% (GNMA Collateralized Home Mortgage Program COL), 6/1/2013
|
| NR/Aaa
|
|
| 25,146
|
|
| | | TOTAL
|
|
|
|
| 3,021,555
|
|
| | | Louisiana--3.9% | | | | | | |
| 1,000,000 | | Calcasieu Parish, LA, IDB, Pollution Control Revenue Refunding Bonds, (Series 2001), 4.80% (Occidental Petroleum Corp.), 12/1/2006
| | BBB+/Baa1 | | | 1,020,500 | |
| 2,000,000 | | Louisiana State Offshore Terminal Authority, Deep Water Port Refunding Revenue Bonds (Series 2003D), 4.00% TOBs (Loop LLC), Mandatory Tender 9/1/2008
| | A/A3 | | | 2,023,500 | |
| 2,000,000 | | St. Charles Parish, LA, PCR Refunding Revenue Bonds (Series 1999A), 4.90% TOBs (Entergy Louisiana, Inc.), Mandatory Tender 6/1/2005
|
| BBB-/Baa2
|
|
| 2,003,400
|
|
| | | TOTAL
|
|
|
|
| 5,047,400
|
|
| | | Maryland--0.7% | | | | | | |
| 850,000 | | Prince Georges County, MD, IDRB (Series 1993), 2.16% TOBs (International Paper Co.), Optional Tender 7/15/2005
|
| BBB/Baa2
|
|
| 849,983
|
|
| | | Massachusetts--0.9% | | | | | | |
| 1,115,000 | | Massachusetts HEFA, Revenue Bonds (Series C), 5.00% (Milton Hospital), 7/1/2005
|
| BBB/NR
|
|
| 1,115,836
|
|
| | | Michigan--4.2% | | | | | | |
| 1,000,000 | | Detroit, MI, Capital Improvement LT GO Bonds (Series 2002A), 5.00% (MBIA Insurance Corp. INS), 4/1/2007
| | AAA/Aaa | | | 1,037,280 | |
| 1,000,000 | | Michigan State Hospital Finance Authority, Hospital Refunding Revenue Bonds (Series 2003A), 5.00% (Henry Ford Health System, MI), 3/1/2008
| | A-/A1 | | | 1,042,630 | |
| 1,000,000 | | Michigan State Strategic Fund, Revenue Bonds (Series 2004), 4.75% (NSF International), 8/1/2009
| | A-/NR | | | 1,049,690 | |
| 1,000,000 | | Michigan State Strategic Fund, Revenue Bonds, 3.75% TOBs (Waste Management, Inc.), Mandatory Tender 8/1/2007
| | BBB/NR | | | 993,490 | |
| 1,285,000 | | Saginaw, MI Hospital Finance Authority, Hospital Revenue Refunding Bonds (Series 2004G), 4.75% (Covenant Medical Center, Inc.), 7/1/2009
|
| A/NR
|
|
| 1,347,078
|
|
| | | TOTAL
|
|
|
|
| 5,470,168
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Minnesota--2.8% | | | | | | |
| $ | 1,030,000 | | Maplewood, MN, Health Care Facility Revenue Bonds (Series 1996), 5.95% (Healtheast, MN), 11/15/2006
| | BB+/Ba1 | | $ | 1,030,793 | |
| 1,530,000 | | Minneapolis, MN Health Care System, Revenue Bonds (Series 2002A), 5.00% (Allina Health System, MN), 11/15/2007
| | A-/A3 | | | 1,592,501 | |
| 750,000 | | Minneapolis/St. Paul, MN Housing & Redevelopment Authority, Health Care Facility Revenue Bonds (Series 2003), 4.50% (HealthPartners Obligated Group), 12/1/2007
| | BBB+/Baa1 | | | 772,193 | |
| 300,000 | | St. Paul, MN Housing & Redevelopment Authority, Health Care Revenue Bonds (Series 2005), 5.00% (Gillette Children's Specialty Healthcare), 2/1/2009
|
| NR
|
|
| 312,510
|
|
| | | TOTAL
|
|
|
|
| 3,707,997
|
|
| | | Missouri--1.2% | | | | | | |
| 960,000 | | Cape Girardeau County, MO IDA, Health Care Facilities Revenue Bonds, (Series A), 5.00% (St. Francis Medical Center, MO), 6/1/2007
| | A/NR | | | 992,054 | |
| 115,000 | | Kansas City, MO IDA, PCR Bonds, 6.05% (General Motors Corp.), 4/1/2006
| | BB/Baa3 | | | 114,995 | |
| 425,000 | | West Plains, MO IDA, Hospital Revenue Bonds, 5.05% (Ozarks Medical Center)/(Original Issue Yield: 5.125%), 11/15/2005
|
| BB+/NR
|
|
| 427,040
|
|
| | | TOTAL
|
|
|
|
| 1,534,089
|
|
| | | Nebraska--0.1% | | | | | | |
| 125,241 | 1 | Energy America, NE, Gas Supply Revenue Bonds (Series 1998B), 5.10% (Nebraska Public Gas Agency), 10/15/2005
|
| NR
|
|
| 124,011
|
|
| | | New Hampshire--1.5% | | | | | | |
| 2,000,000 | | New Hampshire Business Finance Authority, Refunding PCR Bonds, 3.50% TOBs (United Illuminating Co.), Mandatory Tender 2/1/2009
|
| NR/Baa2
|
|
| 1,958,260
|
|
| | | New Jersey--3.2% | | | | | | |
| 850,000 | | Bayonne, NJ Redevelopment Agency, Project Notes (Series 2005A), 5.00%, 4/13/2007
| | NR | | | 863,328 | |
| 1,000,000 | | Bayonne, NJ, 5.00% TANs, 11/15/2005
| | NR | | | 1,004,850 | |
| 500,000 | | New Jersey EDA, Revenue Bonds, (Series 2004), 5.00% (NJ Dedicated Cigarette Excise Tax), 6/15/2008
| | BBB/Baa2 | | | 527,535 | |
| 705,000 | | New Jersey EDA, Revenue Refunding Bonds (Series A), 4.00% (Winchester Gardens at Ward Homestead)/(Original Issue Yield: 4.10%), 11/1/2009
| | BBB- | | | 693,769 | |
| 1,000,000 | | New Jersey State Transportation Corp., Certificates of Participation (Series 2000B), 5.50% (AMBAC INS), 9/15/2007
|
| AAA/Aaa
|
|
| 1,056,330
|
|
| | | TOTAL
|
|
|
|
| 4,145,812
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | New York--9.4% | | | | | | |
| $ | 1,110,000 | | Dutchess County, NY IDA, Revenue Bonds, 4.00% (Marist College), 7/1/2009
| | NR/Baa1 | | $ | 1,122,698 | |
| 1,000,000 | | New York City, NY, UT GO Bonds (Fiscal 2004 Series G), 5.00%, 8/1/2008
| | A+/A1 | | | 1,059,170 | |
| 1,000,000 | | New York City, NY, UT GO Bonds (Series 2001F), 5.00%, 8/1/2007
| | A+/A1 | | | 1,043,070 | |
| 1,000,000 | | New York City, NY, UT GO Bonds (Series D), 5.00%, 8/1/2006
| | A+/A1 | | | 1,024,480 | |
| 1,000,000 | | New York City, NY, UT GO Bonds (Series E), 5.00%, 8/1/2007
| | A+/A1 | | | 1,043,070 | |
| 1,000,000 | | New York City, NY, UT GO Bonds, (Series F), 5.00%, 8/1/2008
| | A+/A1 | | | 1,059,170 | |
| 1,620,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2003), 4.00% (Kateri Residence)/(Allied Irish Banks PLC LOC), 7/1/2008
| | NR/Aa3 | | | 1,665,166 | |
| 2,000,000 | | New York State Thruway Authority, Local Highway & Bridge Service Contract Bonds (Series 2002), 5.00% (New York State), 4/1/2007
| | AA-/A2 | | | 2,072,760 | |
| 1,000,000 | | New York State Urban Development Corp., Revenue Bonds (Series 2003B), 5.00% (New York State Personal Income Tax Revenue Bond Fund), 3/15/2007
| | AA/NR | | | 1,034,840 | |
| 1,025,000 | | United Nations, NY Development Corp., Senior Lien Refunding Revenue Bonds (Series 2004A), 4.00%, 7/1/2007
|
| NR/A3
|
|
| 1,048,975
|
|
| | | TOTAL
|
|
|
|
| 12,173,399
|
|
| | | North Carolina--1.2% | | | | | | |
| 1,500,000 | | North Carolina State, UT GO Bonds (Series 1997A), 5.20% (United States Treasury PRF 3/1/2007 @ 102)/(Original Issue Yield: 5.35%), 3/1/2013
|
| AAA/Aa1
|
|
| 1,588,380
|
|
| | | Ohio--4.7% | | | | | | |
| 1,000,000 | | Mahoning County, OH Hospital Facilities, Adjustable Rate Demand Health Care Facilities Revenue Refunding Bonds (Series 2002), 3.71% TOBs (Copeland Oaks Project)/ (Sky Bank LOC), Mandatory Tender 4/1/2008
| | NR/A3 | | | 1,000,010 | |
| 230,000 | | Ohio HFA, Residential Mortgage Revenue Bonds (Series 1998A-1), 4.90% (GNMA Collateralized Home Mortgage Program COL), 9/1/2025
| | AAA/Aaa | | | 231,971 | |
| 875,000 | | Ohio State Air Quality Development Authority, Refunding Revenue Bonds (Series 2002A), 3.375% TOBs (Pennsylvania Power Co.), Mandatory Tender 7/1/2005
| | BB+/Baa2 | | | 874,055 | |
| 2,000,000 | | Ohio State Revenue, Major New State Infrastructure Revenue Bonds, 5.00%, 6/15/2006
| | AA/Aa3 | | | 2,044,040 | |
| 1,000,000 | | Ohio State Water Development Authority Pollution Control Facilities, Refunding Revenue Bonds (Series 1999B), 4.50% TOBs (Toledo Edison Co.), Mandatory Tender 9/1/2005
| | BB+/Baa3 | | | 1,003,630 | |
| 1,000,000 | | Ohio State Water Development Authority Pollution Control Facilities, Refunding Revenue Bonds (Series B), 3.35% TOBs (Ohio Edison Co.), Mandatory Tender 12/1/2005
|
| BB+/Baa2
|
|
| 1,001,700
|
|
| | | TOTAL
|
|
|
|
| 6,155,406
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Oregon--1.4% | | | | | | |
| $ | 1,000,000 | | Clackamas County, OR Hospital Facilities Authority, Revenue Refunding Bonds (Series 2001), 5.00% (Legacy Health System), 5/1/2006
| | AA/Aa3 | | $ | 1,017,770 | |
| 750,000 | | Port of Portland, OR, 3.25% TOBs (Union Pacific Railroad Co.)/(Union Pacific Corp. GTD), Optional Tender 12/1/2005
|
| BBB/NR
|
|
| 747,278
|
|
| | | TOTAL
|
|
|
|
| 1,765,048
|
|
| | | Pennsylvania--4.6% | | | | | | |
| 1,000,000 | | Commonwealth of Pennsylvania, Refunding UT GO Bonds, 5.125% (AMBAC INS)/(Original Issue Yield: 5.35%), 9/15/2011
| | AAA/Aaa | | | 1,050,330 | |
| 1,020,000 | | Commonwealth of Pennsylvania, UT GO Bonds, 5.25%, 10/15/2006
| | AA/Aa2 | | | 1,052,997 | |
| 840,000 | | Erie, PA Higher Education Building Authority, College Revenue Refunding Bonds (Series 2004A), 3.50% (Mercyhurst College)/(Original Issue Yield: 3.57%), 3/15/2009
| | BBB/NR | | | 834,196 | |
| 215,000 | | Erie, PA Higher Education Building Authority, College Revenue Refunding Bonds (Series 2004B), 3.50% (Mercyhurst College)/(Original Issue Yield: 3.57%), 3/15/2009
| | BBB/NR | | | 213,514 | |
| 1,075,000 | | Lebanon County, PA Health Facilities Authority, Hospital Revenue Bonds, 4.00% (Good Samaritan Hospital), 11/15/2008
| | BBB+/Baa1 | | | 1,082,504 | |
| 530,000 | | Pennsylvania EDFA, Resource Recovery Refunding Revenue Bonds (Series B), 6.75% (Northampton Generating), 1/1/2007
| | BB/NR | | | 541,257 | |
| 1,005,000 | | Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series 2001A), 5.75% (UPMC Health System), 1/15/2008
| | A+/NR | | | 1,065,883 | |
| 115,000 | | Scranton-Lackawanna, PA Health & Welfare Authority, Revenue Bonds, 7.125% (Allied Services Rehabilitation Hospitals, PA), 7/15/2005
|
| BB+
|
|
| 115,223
|
|
| | | TOTAL
|
|
|
|
| 5,955,904
|
|
| | | Rhode Island--1.1% | | | | | | |
| 400,000 | | Rhode Island State Health and Educational Building Corp., Hospital Financing Revenue Bonds (Series 2002), 5.00% (Lifespan Obligated Group), 8/15/2005
| | BBB+/Baa1 | | | 401,504 | |
| 500,000 | | Rhode Island State Health and Educational Building Corp., Hospital Financing Revenue Bonds (Series 2002), 5.25% (Lifespan Obligated Group), 8/15/2006
| | BBB+/Baa1 | | | 511,540 | |
| 510,000 | | Rhode Island State Health and Educational Building Corp., Hospital Financing Revenue Bonds (Series 2002), 5.50% (Lifespan Obligated Group), 8/15/2007
|
| BBB+/Baa1
|
|
| 532,823
|
|
| | | TOTAL
|
|
|
|
| 1,445,867
|
|
| | | South Carolina--1.2% | | | | | | |
| 1,500,000 | | Richland County, SC, Environmental Improvement Revenue Refunding Bonds (Series 2002A), 4.25% (International Paper Co.), 10/1/2007
|
| BBB/Baa2
|
|
| 1,525,380
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | South Dakota--1.0% | | | | | | |
| $ | 1,255,000 | | South Dakota State Health & Educational Authority, Revenue Bonds, 4.50% (Avera Health)/(AMBAC INS), 7/1/2005
|
| AAA/Aaa
|
| $
| 1,256,707
|
|
| | | Tennessee--1.6% | | | | | | |
| 1,000,000 | | Carter County, TN IDB, (Series 1983), 4.15% (Temple-Inland, Inc.), 10/1/2007
| | BBB/NR | | | 1,007,320 | |
| 1,000,000 | | Shelby County, TN Health Education & Housing Facilities Board, Revenue Bonds (Series 2004A R-Floats), 5.00% TOBs (Baptist Memorial Healthcare), Mandatory Tender 10/1/2008
|
| AA/NR
|
|
| 1,046,280
|
|
| | | TOTAL
|
|
|
|
| 2,053,600
|
|
| | | Texas--8.5% | | | | | | |
| 3,000,000 | | Austin, TX Water and Wastewater System, Refunding Revenue Bonds (Series 2002A), 5.25% (AMBAC INS), 11/15/2007
| | AAA/Aaa | | | 3,164,430 | |
| 1,000,000 | | Gulf Coast, TX Waste Disposal Authority, Environmental Facilities Refunding Revenue Bonds, 4.20% (Occidental Petroleum Corp.), 11/1/2006
| | BBB+/Baa1 | | | 1,012,030 | |
| 1,500,000 | | North Central Texas HFDC, Revenue Bonds, 5.50% (Baylor Health Care System), 5/15/2007
| | AA-/Aa3 | | | 1,563,705 | |
| 1,675,000 | | Texas State Public Finance Authority, Revenue Financing System Bonds (Series 2002), 4.50% (Texas Southern University)/(MBIA Insurance Corp. INS), 11/1/2005
| | NR/Aaa | | | 1,686,675 | |
| 2,000,000 | | Texas Turnpike Authority, Second Tier Bond Anticipation Notes (Series 2002), 5.00%, 6/1/2008
| | AA/Aa3 | | | 2,115,600 | |
| 1,500,000 | | Texas Water Development Board, State Revolving Fund Revenue Bonds, (Series B), 5.50%, 7/15/2007
|
| AAA/Aaa
|
|
| 1,579,500
|
|
| | | TOTAL
|
|
|
|
| 11,121,940
|
|
| | | Utah--0.6% | | | | | | |
| 735,000 | | Intermountain Power Agency, UT, Power Supply Revenue Refunding (Series B) Bonds, 6.00% (MBIA Insurance Corp. INS), 7/1/2006
|
| AAA/Aaa
|
|
| 759,542
|
|
| | | Virginia--2.1% | | | | | | |
| 1,000,000 | | Chesterfield County, VA IDA, PCR Bonds, 4.95% (Virginia Electric & Power Co.), 12/1/2007
| | BBB+/A3 | | | 1,013,770 | |
| 1,000,000 | | Hopewell, VA, Public Improvement UT GO Bonds (Series 2004A), 5.00%, 7/15/2009
| | A/A2 | | | 1,032,630 | |
| 750,000 | | Virginia Peninsula Port Authority, Revenue Refunding Bonds (Series 2003), 3.30% TOBs (Dominion Terminal Associates)/(Dominion Resources, Inc. GTD), Mandatory Tender 10/1/2008
|
| BBB+/Baa1
|
|
| 749,393
|
|
| | | TOTAL
|
|
|
|
| 2,795,793
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | MUNICIPAL BONDS--continued | | | | | | |
| | | Washington--1.5% | | | | | | |
| $ | 2,000,000 | | Washington State, Refunding UT GO Bonds, 5.25%, 9/1/2005
|
| AA/Aa1
|
| $
| 2,012,080
|
|
| | | Wisconsin--2.5% | | | | | | |
| 105,000 | | Green Bay, WI Area Public School District, UT GO Bonds, 5.10% (U.S. Treasury PRF 4/1/2006 @ 100), 4/1/2007
| | NR/Aa2 | | | 106,976 | |
| 925,000 | | Green Bay, WI Area Public School District, UT GO Bonds, 5.10%, 4/1/2007
| | NR/Aa2 | | | 941,733 | |
| 965,000 | | Pleasant Prairie, WI Water & Sewer System, Bond Anticipation Notes, 4.00% (U.S. Treasury PRF 10/1/2006 @100), 10/1/2007
| | NR/A3 | | | 979,070 | |
| 1,245,000 | | Wisconsin State HEFA, Refunding Revenue Bonds, 5.00% (Wheaton Franciscan Services), 8/15/2005
|
| A/A2
|
|
| 1,250,142
|
|
| | | TOTAL
|
|
|
|
| 3,277,921
|
|
| | | Wyoming--3.0% | | | | | | |
| 1,500,000 | | Albany County, WY, Pollution Control Revenue Bonds (Series 1985), 3.25% TOBs (Union Pacific Railroad Co.)/ (Union Pacific Corp. GTD), Optional Tender 12/1/2005
| | BBB/NR | | | 1,495,020 | |
| 2,500,000 | | Lincoln County, WY, PCR Refunding Bonds (Series 1991), 3.40% TOBs (Pacificorp), Mandatory Tender 6/1/2010
|
| A-/A3
|
|
| 2,463,800
|
|
| | | TOTAL
|
|
|
|
| 3,958,820
|
|
| | | TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $127,682,339)
|
|
|
|
| 128,061,579
|
|
| | | SHORT-TERM MUNICIPALS--2.4% | | | | | | |
| | | Indiana--1.1% | | | | | | |
| 1,500,000 | | Indiana Health Facility Financing Authority, (Series 2000B) Daily VRDNs (Clarian Health Partners, Inc.)/(J.P. Morgan Chase Bank, N.A. LIQ)
|
| A-1+/VMIG1
|
|
| 1,500,000
|
|
Principal
Amount
|
|
|
| Credit
Rating
|
|
| Value
|
|
| | | SHORT-TERM MUNICIPALS--continued | | | | | | |
| | | North Carolina--0.7% | | | | | | |
| $ | 860,000 | | Brunswick County, NC Industrial Facilities and PCFA, (Series 1998) Weekly VRDNs (Turnage Properties LLC)/ (RBC Centura Bank LOC)
|
| NR/VMIG1
|
| $
| 860,000
|
|
| | | Tennessee--0.6% | | | | | | |
| 795,000 | | Sevier County, TN Public Building Authority, (Series IV-C-4) Daily VRDNs (Cleveland, TN)/(FSA INS)/(J.P. Morgan Chase Bank, N.A. LIQ)
|
| NR/VMIG1
|
|
| 795,000
|
|
| | | TOTAL SHORT-TERM MUNICIPALS
(AT AMORTIZED COST)
|
|
|
|
| 3,155,000
|
|
| | | TOTAL MUNICIPAL INVESTMENTS--100.8%
(IDENTIFIED COST $130,837,339) 3
|
|
|
|
| 131,216,579
|
|
| | | OTHER ASSETS AND LIABILITIES - NET--(0.8)%
|
|
|
|
| (994,214
| )
|
| | | TOTAL NET ASSETS--100%
|
|
|
| $
| 130,222,365
|
|
Securities that are subject to the federal alternative minimum tax (AMT) represent 11.7% of the portfolio as calculated based upon total portfolio market value.
1 Denotes a restricted security, including securities purchased under Rule 144A of the Securities Act of 1933. These securities, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. At May 31, 2005, these securities amounted to $3,733,576 which represents 2.9% of total net assets.
2 Denotes a restricted security, including securities purchased under Rule 144A that have been deemed liquid by criteria approved by the Fund's Board of Directors. At May 31, 2005, these securities amounted to $3,350,539 which represents 2.6% of total net assets.
3 The cost of investments for federal tax purposes amounts to $130,837,328.
Note: The categories of investments are shown as a percentage of total net assets at May 31, 2005.
The following acronyms are used throughout this portfolio:
| AMBAC | - --American Municipal Bond Assurance Corporation |
| COL | - --Collateralized |
| EDA | - --Economic Development Authority |
| EDFA | - --Economic Development Financing Authority |
| FHA | - --Federal Housing Administration |
| FSA | - --Financial Security Assurance |
| GNMA | - --Government National Mortgage Association |
| GO | - --General Obligation |
| GTD | - --Guaranty |
| HEFA | - --Health and Education Facilities Authority |
| HFA | - --Housing Finance Authority |
| HFDC | - --Health Facility Development Corporation |
| IDA | - --Industrial Development Authority |
| IDB | - --Industrial Development Bond |
| IDRB | - --Industrial Development Revenue Bond |
| INS | - --Insured |
| LIQ | - --Liquidity Agreement |
| LOC | - --Letter of Credit |
| LT | - --Limited Tax |
| PCR | - --Pollution Control Revenue |
| PCFA | - --Pollution Control Finance Authority |
| PRF | - --Prerefunded |
| SFM | - --Single Family Mortgage |
| TANs | - --Tax Anticipation Notes |
| TOBs | - --Tender Option Bonds |
| UT | - --Unlimited Tax |
| VRDNs | - --Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
May 31, 2005 (unaudited)
Assets:
| | | | | | | |
Total investments in securities, at value (identified cost $130,837,339)
| | | | | $ | 131,216,579 | |
Cash
| | | | | | 8,651 | |
Income receivable
| | | | | | 1,732,281 | |
Receivable for investments sold
| | | | | | 90,000 | |
Receivable for shares sold
|
|
|
|
|
| 14,838
|
|
TOTAL ASSETS
|
|
|
|
|
| 133,062,349
|
|
Liabilities:
| | | | | | | |
Payable for shares redeemed
| | $ | 2,674,317 | | | | |
Income distribution payable
| | | 85,793 | | | | |
Payable for distribution services fee (Note 5)
| | | 23,890 | | | | |
Payable for shareholder services fee (Note 5)
| | | 28,473 | | | | |
Accrued expenses
|
|
| 27,511
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
| 2,839,984
|
|
Net assets for 13,443,411 shares outstanding
|
|
|
|
| $
| 130,222,365
|
|
Net Assets Consist of:
| | | | | | | |
Paid-in capital
| | | | | $ | 133,850,821 | |
Net unrealized appreciation of investments
| | | | | | 379,240 | |
Accumulated net realized loss on investments
| | | | | | (4,005,197 | ) |
Distributions in excess of net investment income
|
|
|
|
|
| (2,499
| )
|
TOTAL NET ASSETS
|
|
|
|
|
| 130,222,365
|
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share
| | | | | | | |
Class A Shares:
| | | | | | | |
Net asset value per share ($108,659,121 ÷ 11,217,446 shares outstanding), no par value, unlimited shares authorized
|
|
|
|
|
| $9.69
|
|
Offering price per share (100.00/99.00 of $9.69) 1
|
|
|
|
|
| $9.79
|
|
Redemption proceeds per share
|
|
|
|
|
| $9.69
|
|
Class F Shares:
| | | | | | | |
Net asset value per share ($21,563,244 ÷ 2,225,965 shares outstanding), no par value, unlimited shares authorized
|
|
|
|
|
| $9.69
|
|
Offering price per share
|
|
|
|
|
| $9.69
|
|
Redemption proceeds per share (99.00/100.00 of $9.69) 1
|
|
|
|
|
| $9.59
|
|
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended May 31, 2005 (unaudited)
Investment Income:
| | | | | | | | | | | | |
Interest
|
|
|
|
|
|
|
|
|
| $
| 2,583,082
|
|
Expenses:
| | | | | | | | | | | | |
Investment adviser fee (Note 5)
| | | | | | $ | 301,103 | | | | | |
Administrative personnel and services fee (Note 5)
| | | | | | | 94,740 | | | | | |
Custodian fees
| | | | | | | 4,575 | | | | | |
Transfer and dividend disbursing agent fees and expenses
| | | | | | | 46,280 | | | | | |
Directors'/Trustees' fees
| | | | | | | 2,484 | | | | | |
Auditing fees
| | | | | | | 8,912 | | | | | |
Legal fees
| | | | | | | 3,674 | | | | | |
Portfolio accounting fees
| | | | | | | 38,581 | | | | | |
Distribution services fee--Class F Shares (Note 5)
| | | | | | | 17,282 | | | | | |
Distribution services fee--Class A Shares (Note 5)
| | | | | | | 159,386 | | | | | |
Shareholder services fee--Class F Shares (Note 5)
| | | | | | | 28,803 | | | | | |
Shareholder services fee--Class A Shares (Note 5)
| | | | | | | 157,727 | | | | | |
Share registration costs
| | | | | | | 20,088 | | | | | |
Printing and postage
| | | | | | | 14,096 | | | | | |
Insurance premiums
| | | | | | | 6,900 | | | | | |
Taxes
| | | | | | | 7,998 | | | | | |
Miscellaneous
|
|
|
|
|
|
| 1,298
|
|
|
|
|
|
TOTAL EXPENSES
|
|
|
|
|
|
| 913,927
|
|
|
|
|
|
Waivers (Note 5):
| | | | | | | | | | | | |
Waiver of investment adviser fee
| | $ | (167,049 | ) | | | | | | | | |
Waiver of administrative personnel and services fee
| | | (16,699 | ) | | | | | | | | |
Waiver of distribution services fee--Class F Shares
|
|
| (17,282
| )
|
|
|
|
|
|
|
|
|
TOTAL WAIVERS
|
|
|
|
|
|
| (201,030
| )
|
|
|
|
|
Net expenses
|
|
|
|
|
|
|
|
|
|
| 712,897
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
| 1,870,185
|
|
Realized and Unrealized Gain (Loss) on Investments:
| | | | | | | | | | | | |
Net realized loss on investments
| | | | | | | | | | | (127,576 | ) |
Net change in unrealized appreciation of investments
|
|
|
|
|
|
|
|
|
|
| (1,081,197
| )
|
Net realized and unrealized loss on investments
|
|
|
|
|
|
|
|
|
|
| (1,208,773
| )
|
Change in net assets resulting from operations
|
|
|
|
|
|
|
|
|
| $
| 661,412
|
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
|
| Six Months
Ended
(unaudited)
5/31/2005
|
|
| Year Ended
11/30/2004
| |
Increase (Decrease) in Net Assets
| | | | | | | | |
Operations:
| | | | | | | | |
Net investment income
| | $ | 1,870,185 | | | $ | 4,730,317 | |
Net realized loss on investments
| | | (127,576 | ) | | | (380,611 | ) |
Net change in unrealized appreciation/depreciation of investments
|
|
| (1,081,197
| )
|
|
| (2,646,422
| )
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
| 661,412
|
|
|
| 1,703,284
|
|
Distributions to Shareholders:
| | | | | | | | |
Distributions from net investment income
| | | | | | | | |
Class A Shares
| | | (1,561,929 | ) | | | (4,148,018 | ) |
Class F Shares
|
|
| (310,519
| )
|
|
| (618,602
| )
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
|
|
| (1,872,448
| )
|
|
| (4,766,620
| )
|
Share Transactions:
| | | | | | | | |
Proceeds from sale of shares
| | | 6,046,710 | | | | 74,823,031 | |
Net asset value of shares issued to shareholders in payment of distributions declared
| | | 1,319,394 | | | | 3,374,965 | |
Cost of shares redeemed
|
|
| (53,599,963
| )
|
|
| (158,240,448
| )
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
|
|
| (46,233,859
| )
|
|
| (80,042,452
| )
|
Change in net assets
|
|
| (47,444,895
| )
|
|
| (83,105,788
| )
|
Net Assets:
| | | | | | | | |
Beginning of period
|
|
| 177,667,260
|
|
|
| 260,773,048
|
|
End of period (including distributions in excess of net investment income of $(2,499) and $(236), respectively)
|
| $
| 130,222,365
|
|
| $
| 177,667,260
|
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
May 31, 2005 (unaudited)
1. ORGANIZATION
Federated Fixed Income Securities, Inc. (the "Corporation") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Corporation consists of three portfolios. The financial statements included herein are only those of Federated Limited Term Municipal Fund (the "Fund"), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Class A Shares and Class F Shares. The investment objective of the Fund is to provide a high level of current income which is exempt from federal regular income tax consistent with preservation of principal. Interest income from the Fund's investments may be subject to the federal alternative minimum tax for individuals and corporations and state and local taxes.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Municipal bonds are valued by an independent pricing service, taking into consideration yield, liquidity, risk, credit quality, coupon, maturity, type of issue, and any other factors or market data the pricing service deems relevant. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Directors (the "Directors").
Investment Income, Gains and Losses, Expenses, and Distributions
Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that each class bears certain expenses unique to that class such as distribution fees. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Premium and Discount Amortization
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.
Other Taxes
As an open-end management investment company incorporated in the state of Maryland but domiciled in Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Futures Contracts
The Fund periodically may sell bond interest rate futures contracts to manage duration, and to potentially reduce transaction costs. Upon entering into a bond interest rate futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities. Futures contracts are valued daily and unrealized gains or losses are recorded in a "variation margin" account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. For the six months ended May 31, 2005, the Fund had no realized gains or losses on futures contracts. At May 31, 2005, the Fund had no open futures contracts.
Restricted Securities
Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Directors.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Directors, held at May 31, 2005, is as follows:
Security
|
| Acquisition Date
|
| Acquisition Cost
|
Energy America, NE, Gas Supply Revenue Bonds (Series 1998B), 5.10% (Nebraska Public Gas Agency), 10/15/2005
|
| 3/18/1998
|
| $ 125,241
|
Florida State Department of Corrections, Custodial Receipts, 3.00%, 9/10/2009
|
| 2/27/2004
|
| $1,355,000
|
Illinois Development Finance Authority IDB, (Series 1995) Revenue Bonds, 5.80% (Catholic Charities Housing Development Corp.), 1/1/2007
|
| 11/9/1995
|
| $ 255,000
|
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses, and revenues reported in the financial statements. Actual results could differ from those estimated.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
3. CAPITAL STOCK
The following tables summarize capital stock activity:
|
| Six Months Ended
5/31/2005
|
| Year Ended
11/30/2004
|
Class A Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 562,436 | | | $ | 5,476,163 | | | 7,188,379 | | | $ | 70,980,674 | |
Shares issued to shareholders in payment of distributions declared
|
|
122,632 |
|
| |
1,192,423 |
|
|
316,154 |
|
| |
3,111,343 |
|
Shares redeemed
|
| (5,163,237
| )
|
|
| (50,270,076
| )
|
| (15,587,471
| )
|
|
| (153,617,047
| )
|
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS
|
|
(4,478,169
| )
|
|
$
|
(43,601,490
| )
|
|
(8,082,938
| )
|
|
$
|
(79,525,030
| )
|
| | | | | | | | | | | | | | |
|
| Six Months
Ended 5/31/2005
|
| Year Ended
11/30/2004
|
Class F Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 58,612 | | | $ | 570,547 | | | 388,447 | | | $ | 3,842,357 | |
Shares issued to shareholders in payment of distributions declared
|
|
13,060 |
|
|
|
126,971 |
|
|
26,792 |
|
|
|
263,622 |
|
Shares redeemed
|
| (342,615
| )
|
|
| (3,329,887
| )
|
| (468,752
| )
|
|
| (4,623,401
| )
|
NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS
|
|
(270,943
| )
|
|
$
|
(2,632,369
| )
|
|
(53,513
| )
|
|
$
|
(517,422
| )
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
|
|
(4,749,112
| )
|
|
$
|
(46,233,859
| )
|
|
(8,136,451
| )
|
|
$
|
(80,042,452
| )
|
4. FEDERAL TAX INFORMATION
At May 31, 2005, the cost of investments for federal tax purposes was $130,837,328. The net unrealized appreciation of investments for federal tax purposes was $379,251. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $641,823 and net unrealized depreciation from investments for those securities having an excess of cost over value of $262,572.
At November 30, 2004, the Fund had a capital loss carryforward of $3,877,669 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 tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
Expiration Year
|
| Expiration Amount
|
2007
|
| $2,004,917
|
2008
|
| $ 938,717
|
2009
|
| $ 162,953
|
2010
|
| $ 379,104
|
2011
|
| $ 11,425
|
2012
|
| $ 380,553
|
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of all Federated funds as specified below:
Maximum
Administrative Fee
|
| Average Aggregate Daily Net Assets
of the Federated Funds
|
0.150%
|
| on the first $5 billion
|
0.125%
|
| on the next $5 billion
|
0.100%
|
| on the next $10 billion
|
0.075%
|
| on assets in excess of $20 billion
|
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares and Class F Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC:
Share Class Name
|
| Percentage of Average Daily
Net Assets of Class
|
Class A Shares
|
| 0.25%
|
Class F Shares
|
| 0.15%
|
FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended May 31, 2005, FSC retained $5,644 of fees paid by the Fund.
Sales Charges
For the six months ended May 31, 2005, FSC retained $594 in sales charges from the sale of Class A Shares. FSC also retained $1,214 of contingent deferred sales charges relating to redemptions of Class F Shares. See "What Do Shares Cost?" in the Prospectus.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's Class A Shares and Class F Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended May 31, 2005, FSSC retained $23,567 of fees paid by the Fund.
Interfund Transactions
During the six months ended May 31, 2005, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $29,860,000 and $41,565,250, respectively.
General
Certain of the Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
6. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended May 31, 2005, were as follows:
Purchases
|
| $
| 6,043,095
|
Sales
|
| $
| 49,608,660
|
7. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated (Funds) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
8. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
On May 20, 2005, the Fund's Board of Directors (the "Directors"), upon the recommendation of the Audit Committee, appointed Ernst & Young LLP as the Fund's independent registered public accountant. The previous reports issued by Deloitte & Touche LLP (D&T) on the Fund's financial statements for the fiscal years ended November 30, 2003 and November 30, 2004, contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the Fund's fiscal years ended November 30, 2003 and November 30, 2004: (i) there were no disagreements with D&T on any matter of accounting principles or practices, financial statement disclosure or audit scope or procedure, which disagreements, if not resolved to the satisfaction of D&T, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a) (1) (v) of Regulation S-K under the Securities Exchange Act of 1934, as amended.
As indicated above, the Fund has appointed Ernst & Young LLP (E&Y) as the independent registered public accountant to audit the Fund's financial statements for the fiscal year ending November 30, 2005. During the Fund's fiscal years ended November 30, 2003 and November 30, 2004 and the interim period commencing December 1, 2004 and ending May 20, 2005, neither the Fund nor anyone on its behalf has consulted E&Y on items which: (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements; or (ii) concerned the subject of a disagreement (as defined in paragraph (a) (1) (iv) of Item 304 of Regulations S-K) or reportable events (as described in paragraph (a) (1) (v) of said Item 304).
Board Review of Advisory Contract
As required by the 1940 Act, the Fund's Board has reviewed the Fund's investment advisory contract. The Board's decision to approve the contract reflects the exercise of its business judgment on whether to continue the existing arrangements. During its review of the contract, the Board considers many factors, among the most material of which are: the Fund's investment objectives; the Adviser's management philosophy, personnel, processes, and investment and operating strategies; long-term performance; the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry; the range of comparable fees for similar funds in the mutual fund industry; the range and quality of services provided to the Fund and its shareholders by the Federated organization in addition to investment advisory services; and the Fund's relationship to the Federated family of funds.
In its decision to appoint or renew an Adviser, the Board is 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 recognizes that most shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and in the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's "selection" or approval of the Adviser must reflect the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board also considers the compensation and benefits received by the Adviser. This includes fees received for services provided to the Fund by other entities in the Federated organization and research services received by the Adviser from brokers that execute fund trades, as well as advisory fees. In this regard, the Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions 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 the Fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with the Fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts bearing on the Adviser's service and fee. The Fund's Board is aware of these factors and is guided by them in its review of the Fund's advisory contract to the extent they are appropriate and relevant, as discussed further below.
The Board considers and weighs 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 is assisted in its deliberations by the advice of independent legal counsel. In this regard, the Board requests and receives substantial and detailed information about the Fund and the Federated organization. Federated provides much of this information at each regular meeting of the Board, and furnishes additional reports in connection with the particular meeting at which the Board's formal review of the advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board's evaluation of an advisory contract is informed by reports covering such matters as: the Adviser's investment philosophy, personnel, and processes; 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 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; the nature and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates; 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 evaluation process is evolutionary, reflecting continually developing considerations. 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 particularly useful, given the high degree of competition in the mutual fund business. The Board focuses on comparisons with other similar mutual funds (rather than non-mutual fund products or services) because, simply put, 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 already chosen 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 may be a useful indicator of how the Adviser is executing on the Fund's investment program, which would in turn assist the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services are such as to warrant continuation of the advisory contract.
The Board also receives financial information about Federated, including reports on the compensation and benefits Federated derives from its relationships with the Federated funds. These reports cover 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 discuss any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades as well as waivers of fees and/or reimbursements of expenses. In order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waive fees and/or reimburse expenses. Although the Board considers the profitability of the Federated organization as a whole, it does not evaluate, on a fund-by-fund basis, Federated's "profitability" and/or "costs" (which would include an assessment as to whether "economies of scale" would be realized if the fund were to grow to some sufficient size). In the Board's view, the cost of performing advisory services on a fund-specific basis is both difficult to estimate satisfactorily and a relatively minor consideration in its overall evaluation. Analyzing isolated funds would require constructed allocations of the costs of shared resources and operations based on artificial assumptions that are inconsistent with the existing relationships within a large and diversified family of funds that receive advisory and other services from the same organization. Although the Board is always eager to discover any genuine "economies of scale," its experience has been that such "economies" are likely to arise only when a fund grows dramatically, and becomes and remains very large in size. Even in these instances, purchase and redemption activity, as well as the presence of expense limitations (if any), may offset any perceived economies. As suggested above, the Board considers the information it receives about the Fund's performance and expenses as compared to an appropriate set of similar competing funds to be more relevant.
The Board bases its decision to approve an 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 are relevant to every Federated fund, nor does the Board consider any one of them to be determinative. With respect to the factors that are relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provide a satisfactory basis to support the decision to continue the existing arrangements.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. 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 through Federated's website. Go to FederatedInvestors.com, select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on 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" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus, which contains facts concerning its objective and policies, management fees, expenses, and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called "householding"), as permitted by applicable rules. The Fund's "householding" program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the "householding" program. The Fund is also permitted to treat a shareholder as having given consent ("implied consent") if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to "household" at least sixty (60) days before it begins "householding" and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to "opt out" of "householding." Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of "householding" at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Federated
World-Class Investment Manager
Federated Limited Term Municipal Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 31417P304
Cusip 31417P403
G00278-01 (7/05)
Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.
Federated
World-Class Investment Manager
Federated Strategic Income Fund
Established 1994
A Portfolio of Federated Fixed Income Securities, Inc.
11TH SEMI-ANNUAL SHAREHOLDER REPORT
May 31, 2005
Class A Shares
Class B Shares
Class C Shares
Class F Shares
FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
FINANCIAL STATEMENTS
BOARD REVIEW OF ADVISORY CONTRACT
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE
Not FDIC Insured * May Lose Value * No Bank Guarantee
Financial Highlights - Class A Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended November 30,
|
|
| 5/31/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $8.80 | | | $8.57 | | | $7.57 | | | $8.00 | | | $8.10 | | | $9.19 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.26 | 1 | | 0.53 | 1 | | 0.615 | | | 0.69 | 1,2 | | 0.81 | | | 0.84 | |
Net realized and unrealized gain (loss) on investments, options, and foreign currency transactions
|
| (0.11
| )
|
| 0.27
|
|
| 1.015
|
|
| (0.42
| ) 2
|
| (0.12
| )
|
| (1.12
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.15
|
|
| 0.80
|
|
| 1.630
|
|
| 0.27
|
|
| 0.69
|
|
| (0.28
| )
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
| | (0.29 | ) | | (0.57 | ) | | (0.629 | ) | | (0.70 | ) | | (0.76 | ) | | (0.81 | ) |
Distributions from paid-in capital 3
|
| - --
|
|
| - --
|
|
| (0.001
| )
|
| - --
|
|
| (0.03
| )
|
| - --
|
|
TOTAL DISTRIBUTIONS
|
| (0.29
| )
|
| (0.57
| )
|
| (0.630
| )
|
| (0.70
| )
|
| (0.79
| )
|
| (0.81
| )
|
Net Asset Value, End of Period
|
| $8.66
|
|
| $8.80
|
|
| $8.57
|
|
| $7.57
|
|
| $8.00
|
|
| $8.10
|
|
Total Return 4
|
| 1.66
| %
|
| 9.75
| %
|
| 22.29
| %
|
| 3.48
| %
|
| 8.77
| %
|
| (3.37
| )%
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 1.27
| % 5
|
| 1.26
| %
|
| 1.27
| %
|
| 1.26
| %
|
| 1.23
| %
|
| 1.19
| %
|
Net investment income
|
| 5.90
| % 5
|
| 6.18
| %
|
| 7.14
| %
|
| 8.83
| % 1
|
| 9.93
| %
|
| 9.44
| %
|
Expense waiver/reimbursement 6
|
| 0.07
| % 5
|
| 0.07
| %
|
| 0.06
| %
|
| 0.07
| %
|
| 0.13
| %
|
| 0.19
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $381,102
|
| $354,272
|
| $279,461
|
| $167,387
|
| $138,295
|
| $127,397
|
|
Portfolio turnover
|
| 24
| %
|
| 26
| %
|
| 38
| %
|
| 50
| %
|
| 58
| %
|
| 60
| %
|
1 Based on average shares outstanding.
2 Effective December 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended November 30, 2002 was to decrease net investment income per share by $0.03, increase net realized and unrealized gain/loss per share by $0.03, and decrease the ratio of net investment income to average net assets from 9.31% to 8.83%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.
3 Represents a return of capital for federal income tax purposes.
4 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
5 Computed on an annualized basis.
6 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class B Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended November 30,
|
|
| 5/31/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $8.79 | | | $8.57 | | | $7.57 | | | $8.00 | | | $8.10 | | | $9.19 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.23 | 1 | | 0.47 | 1 | | 0.562 | | | 0.63 | 1,2 | | 0.76 | | | 0.77 | |
Net realized and unrealized gain (loss) on investments, options, and foreign currency transactions
|
| (0.12
| )
|
| 0.26
|
|
| 1.008
|
|
| (0.42
| ) 2
|
| (0.13
| )
|
| (1.12
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.11
|
|
| 0.73
|
|
| 1.570
|
|
| 0.21
|
|
| 0.63
|
|
| (0.35
| )
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
| | (0.25 | ) | | (0.51 | ) | | (0.569 | ) | | (0.64 | ) | | (0.71 | ) | | (0.74 | ) |
Distributions from paid-in capital 3
|
| - --
|
|
| - --
|
|
| (0.001
| )
|
| - --
|
|
| (0.02
| )
|
| - --
|
|
TOTAL DISTRIBUTIONS
|
| (0.25
| )
|
| (0.51
| )
|
| (0.570
| )
|
| (0.64
| )
|
| (0.73
| )
|
| (0.74
| )
|
Net Asset Value, End of Period
|
| $8.65
|
|
| $8.79
|
|
| $8.57
|
|
| $7.57
|
|
| $8.00
|
|
| $8.10
|
|
Total Return 4
|
| 1.28
| %
|
| 8.80
| %
|
| 21.40
| %
|
| 2.70
| %
|
| 7.97
| %
|
| (4.10
| )%
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 2.02
| % 5
|
| 2.01
| %
|
| 2.02
| %
|
| 2.01
| %
|
| 1.98
| %
|
| 1.94
| %
|
Net investment income
|
| 5.15
| % 5
|
| 5.44
| %
|
| 6.42
| %
|
| 8.08
| % 1
|
| 9.18
| %
|
| 8.70
| %
|
Expense waiver/reimbursement 6
|
| 0.07
| % 5
|
| 0.07
| %
|
| 0.06
| %
|
| 0.07
| %
|
| 0.13
| %
|
| 0.19
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $569,195
|
| $614,079
|
| $669,571
|
| $550,731
|
| $592,565
|
| $581,077
|
|
Portfolio turnover
|
| 24
| %
|
| 26
| %
|
| 38
| %
|
| 50
| %
|
| 58
| %
|
| 60
| %
|
1 Based on average shares outstanding.
2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended November 30, 2002 was to decrease net investment income per share by $0.04, increase net realized and unrealized gain/loss per share by $0.04, and decrease the ratio of net investment income to average net assets from 8.55% to 8.08%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.
3 Represents a return of capital for federal income tax purposes.
4 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
5 Computed on an annualized basis.
6 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights - Class C Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended November 30,
|
|
| 5/31/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $8.80 | | | $8.57 | | | $7.57 | | | $8.00 | | | $8.10 | | | $9.19 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.23 | 1 | | 0.47 | 1 | | 0.550 | | | 0.63 | 1,2 | | 0.76 | | | 0.77 | |
Net realized and unrealized gain (loss) on investments, options, and foreign currency transactions
|
| (0.13
| )
|
| 0.27
|
|
| 1.018
|
|
| (0.42
| ) 2
|
| (0.13
| )
|
| (1.12
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.10
|
|
| 0.74
|
|
| 1.568
|
|
| 0.21
|
|
| 0.63
|
|
| (0.35
| )
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
| | (0.25 | ) | | (0.51 | ) | | (0.567 | ) | | (0.64 | ) | | (0.71 | ) | | (0.74 | ) |
Distributions from paid-in capital 3
|
| - --
|
|
| - --
|
|
| (0.001
| )
|
| - --
|
|
| (0.02
| )
|
| - --
|
|
TOTAL DISTRIBUTIONS
|
| (0.25
| )
|
| (0.51
| )
|
| (0.568
| )
|
| (0.64
| )
|
| (0.73
| )
|
| (0.74
| )
|
Net Asset Value, End of Period
|
| $8.65
|
|
| $8.80
|
|
| $8.57
|
|
| $7.57
|
|
| $8.00
|
|
| $8.10
|
|
Total Return 4
|
| 1.16
| %
|
| 8.94
| %
|
| 21.37
| %
|
| 2.70
| %
|
| 7.97
| %
|
| (4.10
| )%
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 2.02
| % 5
|
| 2.01
| %
|
| 2.02
| %
|
| 2.01
| %
|
| 1.98
| %
|
| 1.94
| %
|
Net investment income
|
| 5.15
| % 5
|
| 5.44
| %
|
| 6.42
| %
|
| 8.08
| % 1
|
| 9.18
| %
|
| 8.66
| %
|
Expense waiver/reimbursement 6
|
| 0.07
| % 5
|
| 0.07
| %
|
| 0.06
| %
|
| 0.07
| %
|
| 0.13
| %
|
| 0.19
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $108,642
|
| $96,957
|
| $87,344
|
| $52,300
|
| $52,146
|
| $52,697
|
|
Portfolio turnover
|
| 24
| %
|
| 26
| %
|
| 38
| %
|
| 50
| %
|
| 58
| %
|
| 60
| %
|
1 Based on average shares outstanding.
2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended November 30, 2002 was to decrease net investment income per share by $0.04, increase net realized and unrealized gain/loss per share by $0.04, and decrease the ratio of net investment income to average net assets from 8.56% to 8.08%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.
3 Represents a return of capital for federal income tax purposes.
4 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
5 Computed on an annualized basis.
6 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Class F Shares
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited) | | | Year Ended November 30,
|
|
| 5/31/2005
|
|
| 2004
|
|
| 2003
|
|
| 2002
|
|
| 2001
|
|
| 2000
|
|
Net Asset Value, Beginning of Period
| | $8.77 | | | $8.55 | | | $7.55 | | | $7.99 | | | $8.09 | | | $9.18 | |
Income From Investment Operations:
| | | | | | | | | | | | | | | | | | |
Net investment income
| | 0.26 | | | 0.53 | 1 | | 0.613 | | | 0.69 | 1,2 | | 0.82 | | | 0.84 | |
Net realized and unrealized gain (loss) on investments, options, and foreign currency transactions
|
| (0.11
| )
|
| 0.26
|
|
| 1.017
|
|
| (0.43
| ) 2
|
| (0.13
| )
|
| (1.12
| )
|
TOTAL FROM INVESTMENT OPERATIONS
|
| 0.15
|
|
| 0.79
|
|
| 1.630
|
|
| 0.26
|
|
| 0.69
|
|
| (0.28
| )
|
Less Distributions:
| | | | | | | | | | | | | | | | | | |
Distributions from net investment income
| | (0.29 | ) | | (0.57 | ) | | (0.629 | ) | | (0.70 | ) | | (0.76 | ) | | (0.81 | ) |
Distributions from paid-in capital 3
|
| - --
|
|
| - --
|
|
| (0.001
| )
|
| - --
|
|
| (0.03
| )
|
| - --
|
|
TOTAL DISTRIBUTIONS
|
| (0.29
| )
|
| (0.57
| )
|
| (0.630
| )
|
| (0.70
| )
|
| (0.79
| )
|
| (0.81
| )
|
Net Asset Value, End of Period
|
| $8.63
|
|
| $8.77
|
|
| $8.55
|
|
| $7.55
|
|
| $7.99
|
|
| $8.09
|
|
Total Return 4
|
| 1.67
| %
|
| 9.65
| %
|
| 22.35
| %
|
| 3.36
| %
|
| 8.78
| %
|
| (3.38
| )%
|
| | | | | | | | | | | | | | | | | | |
Ratios to Average Net Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
| 1.27
| % 5
|
| 1.26
| %
|
| 1.27
| %
|
| 1.26
| %
|
| 1.23
| %
|
| 1.19
| %
|
Net investment income
|
| 5.90
| % 5
|
| 6.20
| %
|
| 7.17
| %
|
| 8.83
| % 1
|
| 9.93
| %
|
| 9.42
| %
|
Expense waiver/reimbursement 6
|
| 0.57
| % 5
|
| 0.57
| %
|
| 0.56
| %
|
| 0.57
| %
|
| 0.63
| %
|
| 0.69
| %
|
Supplemental Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
| $26,290
|
| $24,735
|
| $23,423
|
| $20,569
|
| $24,885
|
| $27,560
|
|
Portfolio turnover
|
| 24
| %
|
| 26
| %
|
| 38
| %
|
| 50
| %
|
| 58
| %
|
| 60
| %
|
1 Based on average shares outstanding.
2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended November 30, 2002 was to decrease net investment income per share by $0.03, increase net realized and unrealized gain/loss per share by $0.03, and decrease the ratio of net investment income to average net assets from 9.30% to 8.83%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.
3 Represents a return of capital for federal income tax purposes.
4 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.
5 Computed on an annualized basis.
6 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees; 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 December 1, 2004 to May 31, 2005.
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 provided to enable you to compare the ongoing costs of investing in the Fund and 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 sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
|
| Beginning
Account Value
12/1/2004
|
| Ending
Account Value
5/31/2005
|
| Expenses Paid
During Period 1
|
Actual:
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,016.60
|
| $ 6.39
|
Class B Shares
|
| $1,000
|
| $1,012.80
|
| $ 10.14
|
Class C Shares
|
| $1,000
|
| $1,011.60
|
| $ 10.13
|
Class F Shares
|
| $1,000
|
| $1,016.70
|
| $ 6.39
|
Hypothetical (assuming a 5% return before expenses):
|
|
|
|
|
|
|
Class A Shares
|
| $1,000
|
| $1,018.60
|
| $ 6.39
|
Class B Shares
|
| $1,000
|
| $1,014.86
|
| $10.15
|
Class C Shares
|
| $1,000
|
| $1,014.86
|
| $10.15
|
Class F Shares
|
| $1,000
|
| $1,018.60
|
| $ 6.39
|
1 Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half-year period). The annualized expense ratios are as follows:
Class A Shares
|
| 1.27%
|
Class B Shares
|
| 2.02%
|
Class C Shares
|
| 2.02%
|
Class F Shares
|
| 1.27%
|
Portfolio of Investments Summary Tables
At May 31, 2005, the Fund's credit-quality ratings composition 1 was as follows:
S&P Long-Term Ratings as
Percentage of Total Net Assets 2
|
| | Moody's Long-Term Ratings as
Percentage of Total Net Assets 2
|
|
AAA
|
| 22.2
| %
| | Aaa
|
| 22.7
| %
|
AA
|
| 1.1
| %
| | Aa
|
| 1.5
| %
|
A
|
| 1.6
| %
| | A
|
| 0.8
| %
|
BBB
|
| 5.4
| %
| | Baa
|
| 11.0
| %
|
BB
|
| 27.7
| %
| | Ba
|
| 16.2
| %
|
B
|
| 27.2
| %
| | B
|
| 30.2
| %
|
CCC
|
| 5.1
| %
| | Caa
|
| 8.3
| %
|
CC
|
| 0.0
| %
| | Ca
|
| 0.4
| %
|
C
|
| 0.0
| %
| | C
|
| 0.0
| %
|
D
|
| 0.0
| %
| | D
|
| 0.0
| %
|
Not Rated by S&P 3
|
| 3.6
| %
| | Not Rated by Moody's 3
|
| 2.8
| %
|
Other Securities 4
|
| 0.2
| %
| | Other Securities 4
|
| 0.2
| %
|
Securities Lending Collateral 5
|
| 0.6
| %
| | Securities Lending Collateral 5
|
| 0.6
| %
|
Cash Equivalents 6
|
| 6.3
| %
| | Cash Equivalents 6
|
| 6.3
| %
|
Other Assets and Liabilities--Net
|
| (1.0
| )%
| | Other Assets and Liabilities--Net
|
| (1.0
| )%
|
TOTAL
|
| 100.0
| %
| | TOTAL
|
| 100.0
| %
|
1 These tables depict the long-term, credit-quality ratings assigned to the Fund's portfolio holdings by Standard & Poor's (S&P) and Moody's Investors Service (Moody's), each of which is a nationally recognized statistical rating organization (NRSRO). These credit quality ratings are shown without regard to gradations within a given rating category. For example, securities rated "A-" have been included in the "A" rated category.
Rated securities include a security with an obligor and/or credit enhancer that has received a rating from an NRSRO with respect to a class of debt obligations that is comparable in priority and security with the security held by the Fund. Credit-quality ratings are an assessment of the risk that a security will default in payment and do not address other risks presented by the security. Please see the descriptions of credit-quality ratings in the Fund's Statement of Additional Information.
2 As of the date specified above, the Fund owned shares of one or more affiliated investment companies. For purposes of these tables, 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 other assets and liabilities owned by the affiliated investment company.
3 Holdings that are rated only by a different NRSRO than the one identified have been included in this category. Of the portfolio's total net assets, 0.8% are fixed-income securities (excluding cash equivalents) that do not have long-term, credit-quality ratings by either of these NRSROs.
4 Other Securities includes common stock, warrants, and options that do not qualify for credit ratings from an NRSRO.
5 Cash collateral received from lending portfolio securities which is invested in short-term investments such as repurchase agreements or money market mutual funds.
6 Cash Equivalents includes any investments in money market mutual funds and/or overnight repurchase agreements.
At May 31, 2005 the Fund's portfolio composition 7 was as follows:
Security Type
|
| Percentage of
Total Net Assets 2
|
Corporate Debt Securities
|
| 54.8
| %
|
U.S. Treasury and Agency Securities 8
|
| 16.6
| %
|
Mortgage-Backed Securities 9
|
| 12.4
| %
|
Foreign Government Securities
|
| 9.3
| %
|
Securities Lending Collateral 5
|
| 0.6
| %
|
Asset-Backed Securities
|
| 0.4
| %
|
Municipal Securities 10
|
| 0.0
| %
|
Other Security Types 11
|
| 0.6
| %
|
Cash Equivalents 6
|
| 6.3
| %
|
Other Assets and Liabilities--Net
|
| (1.0
| )%
|
TOTAL
|
| 100.0
| %
|
7 See the Fund's Prospectus and Statement of Additional Information for a description of these security types.
8 For purposes of this table, U.S. Treasury and Agency Securities does not include mortgage-backed securities guaranteed by GSEs.
9 For purposes of this table, mortgage-backed securities includes mortgage-backed securities guaranteed by Government Sponsored Entities (GSEs) and adjustable-rate, mortgage-backed securities.
10 Constitutes less than 0.1% of the Fund's net assets.
11 Other Security Types consists of common stock, preferred stock, warrants, and options.
Portfolio of Investments
May 31, 2005 (unaudited)
Principal
Amount
|
|
|
|
| Value in
U.S. Dollars
|
| | | U.S. CORPORATE BONDS--5.9% | | | |
| | | Basic Industry - Chemicals--0.2% | | | |
| $ | 1,450,000 | 1,2 | Fertinitro Finance, Company Guarantee, 8.290%, 4/01/2020
| | $ | 1,268,615 |
| 1,250,000 | 1,2 | Reliance Industries Ltd., Bond, 8.250%, 1/15/2027
|
|
| 1,321,745
|
| | | TOTAL
|
|
| 2,590,360
|
| | | Basic Industry - Metals & Mining--0.3% | | | |
| 3,000,000 | | Placer Dome, Inc., Bond, 8.50%, 12/31/2045
|
|
| 3,174,897
|
| | | Basic Industry - Paper--0.5% | | | |
| 4,360,000 | | Louisiana-Pacific Corp., 8.875%, 8/15/2010
| | | 4,952,999 |
| 250,000 | | Pope & Talbot, Inc., 8.375%, 6/1/2013
| | | 258,750 |
| 450,000 | | Westvaco Corp., Sr. Deb., 7.500%, 6/15/2027
|
|
| 528,665
|
| | | TOTAL
|
|
| 5,740,414
|
| | | Capital Goods - Diversified Manufacturing--0.2% | | | |
| 2,020,000 | 1,2 | Tyco International Group, 4.436%, 6/15/2007
|
|
| 2,029,334
|
| | | Capital Goods - Environmental--0.3% | | | |
| 2,700,000 | | Waste Management, Inc., Deb., 8.750%, 5/01/2018
|
|
| 3,012,633
|
| | | Communications - Media & Cable--0.9% | | | |
| 2,500,000 | | CF Cable TV, Note, 9.125%, 7/15/2007
| | | 2,515,600 |
| 3,800,000 | | Continental Cablevision, Sr. Deb., 8.875%, 9/15/2005
| | | 3,855,480 |
| 2,000,000 | | Continental Cablevision, Sr. Deb., 9.500%, 8/1/2013
| | | 2,124,280 |
| 1,000,000 | | Lenfest Communications, Inc., Sr. Sub. Note, 10.500%, 6/15/2006
|
|
| 1,068,870
|
| | | TOTAL
|
|
| 9,564,230
|
| | | Communications - Media Noncable--0.7% | | | |
| 2,535,000 | | British Sky Broadcasting Group PLC, 8.200%, 7/15/2009
| | | 2,862,578 |
| 1,187,000 | | British Sky Broadcasting Group PLC, Note, 6.875%, 2/23/2009
| | | 1,275,031 |
| 1,000,000 | | News America Holdings, Note, 8.150%, 10/17/2036
| | | 1,279,637 |
| 2,000,000 | | Univision Communications, Inc., 7.850%, 7/15/2011
|
|
| 2,259,980
|
| | | TOTAL
|
|
| 7,677,226
|
| | | Communications - Telecom Wirelines--0.1% | | | |
| 1,000,000 | | Telecom de Puerto Rico, Note, 6.650%, 5/15/2006
|
|
| 1,022,400
|
Principal
Amount
|
|
|
|
| Value in
U.S. Dollars
|
| | | U.S. CORPORATE BONDS--continued | | | |
| | | Consumer Cyclical - Automotive--0.3% | | | |
| $ | 1,850,000 | | General Motors Acceptance, 4.500%, 7/15/2006
| | $ | 1,815,174 |
| 1,000,000 | | General Motors Acceptance, 8.000%, 11/01/2031
| | | 838,558 |
| 775,000 | | General Motors Corp., Note, 9.450%, 11/01/2011
|
|
| 719,981
|
| | | TOTAL
|
|
| 3,373,713
|
| | | Consumer Cyclical - Entertainment--0.1% | | | |
| 940,000 | | Time Warner, Inc., Deb., 8.110%, 8/15/2006
|
|
| 984,453
|
| | | Consumer Cyclical - Retailers--0.2% | | | |
| 2,300,000 | | Shopko Stores, Sr. Note, 9.250%, 3/15/2022
|
|
| 2,466,750
|
| | | Energy - Integrated--0.1% | | | |
| 1,500,000 | | Husky Oil Ltd., Company Guarantee, 8.900%, 8/15/2028
|
|
| 1,659,418
|
| | | Financial Institution - Banking--0.8% | | | |
| 3,000,000 | | Firstbank Puerto Rico, Sub. Note, 7.625%, 12/20/2005
| | | 3,029,955 |
| 2,150,000 | 1,2 | Regional Diversified Funding, 9.250%, 3/15/2030
| | | 2,637,555 |
| 1,000,000 | 1,2 | Swedbank, Sub., 7.500%, 11/29/2049
| | | 1,045,598 |
| 2,000,000 | | Washington Mutual Finance, Sr. Note, 8.250%, 6/15/2005
|
|
| 2,003,340
|
| | | TOTAL
|
|
| 8,716,448
|
| | | Financial Institution - Finance Noncaptive--0.1% | | | |
| 500,000 | | Susa Partnership LP, 8.200%, 6/01/2017
|
|
| 641,650
|
| | | Financial Institution - Insurance - Life--0.3% | | | |
| 750,000 | | Delphi Funding, 9.310%, 3/25/2027
| | | 823,125 |
| 2,000,000 | 1,2 | Life Re Capital Trust I, Company Guarantee, 8.720%, 6/15/2027
| | | 2,304,800 |
| 500,000 | 1,2 | Union Central Life Insurance Co., Note, 8.200%, 11/1/2026
|
|
| 586,940
|
| | | TOTAL
|
|
| 3,714,865
|
| | | Financial Institution - Insurance - P&C--0.5% | | | |
| 1,000,000 | 1,2 | Liberty Mutual Insurance Co., Sub. Note, 8.200%, 5/04/2007
| | | 1,065,110 |
| 2,800,000 | 1,2 | MBIA Global Funding LLC, 2.875%, 11/30/2006
| | | 2,746,044 |
| 500,000 | 1,2 | USF&G Cap, 8.312%, 7/1/2046
| | | 614,564 |
| 500,000 | | USF&G Corp., Company Guarantee, 8.470%, 1/10/2027
|
|
| 551,309
|
| | | TOTAL
|
|
| 4,977,027
|
| | | Technology--0.2% | | | |
| 1,650,000 | | Unisys Corp., 8.125%, 6/01/2006
|
|
| 1,699,500
|
| | | Transportation - Services--0.1% | | | |
| 875,000 | | Hertz Corp., 4.700%, 10/02/2006
|
|
| 871,392
|
| | | TOTAL U.S. CORPORATE BONDS (IDENTIFIED COST $58,959,154)
|
|
| 63,916,710
|
Principal
Amount
|
|
|
|
| Value in
U.S. Dollars
|
| | | INTERNATIONAL BONDS--6.0% | | | |
| | | AUSTRALIAN DOLLAR--0.0% | | | |
| | | State/Provincial--0.0% | | | |
| $ | 700,000 | | West Aust Treasury Corp., Local Gov't. Guarantee, Series 07, 8.000%, 10/15/2007
|
| $
| 559,336
|
| | | JAPANESE YEN--2.6% | | | |
| | | Banking--1.5% | | | |
| 400,000,000 | | Bk Nederlandse Gemeenten, Sr. Unsub., 8.000%, 9/22/2008
| | | 3,761,552 |
| 500,000,000 | | KFW International Finance, 1.750%, 3/23/2010
| | | 4,911,780 |
| 400,000,000 | | OEK Oest. Kontrollbank, Gilt, 1.800%, 3/22/2010
| | | 3,937,532 |
| 400,000,000 | | Pfandbrief Ost Land Hypo, Sr. Unsub., Series EMTN, 1.600%, 2/15/2011
|
|
| 3,899,940
|
| | | TOTAL
|
|
| 16,510,804
|
| | | Finance--0.2% | | | |
| 250,000,000 | | General Electric Capital, Sr. Unsub., 100%, 12/20/2005
|
|
| 2,303,296
|
| | | Financial Intermediaries--0.4% | | | |
| 400,000,000 | | Eksportfinans, Bond, 1.800%, 6/21/2010
|
|
| 3,930,161
|
| | | Supranational--0.5% | | | |
| 500,000,000 | | Interamer Dev Bk, 1.900%, 7/08/2009
|
|
| 4,922,606
|
| | | TOTAL JAPANESE YEN
|
|
| 27,666,867
|
| | | U.S. DOLLAR--3.4% | | | |
| | | Cable & Wireless Television--0.4% | | | |
| 8,000,000 | | Satelites Mexicanos SA, Sr. Note, 10.125%, 1/31/2006
|
|
| 4,280,000
|
| | | Container & Glass Products--0.4% | | | |
| 700,000 | | Vicap SA, Sr. Note, Series EXCH, 11.375%, 5/15/2007
| | | 659,750 |
| 4,000,000 | 1,2 | Vitro SA, Note, Series 144A, 11.750%, 11/01/2013
|
|
| 3,430,000
|
| | | TOTAL
|
|
| 4,089,750
|
| | | Oil & Gas--1.3% | | | |
| 3,600,000 | | Bluewater Finance Ltd., Company Guarantee, 10.250%, 2/15/2012
| | | 3,780,000 |
| 3,675,000 | 1,2 | Companhia Petrolifera Marlim, 12.250%, Series 144A, 9/26/2008
| | | 4,138,969 |
| 3,175,000 | 1,2 | Gaz Capital SA, Note, Series 144A, 8.625%, 4/28/2034
| | | 3,833,813 |
| 3,030,000 | 1,2 | Petrozuata Finance Inc., Company Guarantee, Series 144A, 8.220%, 4/01/2017
|
|
| 2,848,200
|
| | | TOTAL
|
|
| 14,600,982
|
| | | Sovereign--0.6% | | | |
| 5,500,000 | 1,2 | Aries Vermogensverwaltng, Note, Series 144A, 9.600%, 10/25/2014
|
|
| 7,074,375
|
Principal
Amount
|
|
|
|
| Value in
U.S. Dollars
|
| | | INTERNATIONAL BONDS--continued | | | |
| | | U.S. DOLLAR--continued | | | |
| | | Steel--0.4% | | | |
| $ | 3,700,000 | 1,2 | CSN Islands VIII Corp., Company Guarantee, Series 144A, 9.750%, 12/16/2013
|
| $
| 3,959,000
|
| | | Telecommunications & Cellular--0.2% | | | |
| 2,000,000 | 1,2 | Mobile Telesystems, 8.375%, Series 144A, 10/14/2010
|
|
| 2,060,000
|
| | | Utilities--0.1% | | | |
| 1,200,000 | 1,2 | CIA Saneamento Basico, Note, Series 144A, 12.000%, 6/20/2008
|
|
| 1,350,000
|
| | | TOTAL U.S. DOLLAR
|
|
| 37,414,107
|
| | | TOTAL INTERNATIONAL BONDS (IDENTIFIED COST $63,649,923)
|
|
| 65,640,310
|
| | | GOVERNMENTS/AGENCIES--15.2% | | | |
| | | AUSTRALIAN DOLLAR--0.2% | | | |
| | | Sovereign--0.2% | | | |
| 2,000,000 | | Australia, Government of, Series 808, 8.750%, 8/15/2008
|
|
| 1,668,775
|
| | | State/Provincial--0.0% | | | |
| 550,000 | | Victoria, State of, Local Government Guarantee, 10.250%, 11/15/2006
|
|
| 443,859
|
| | | TOTAL AUSTRALIAN DOLLAR
|
|
| 2,112,634
|
| | | BRITISH POUND--0.7% | | | |
| | | Sovereign--0.7% | | | |
| 2,500,000 | | United Kingdom, Government of, Bond, 5.750%, 12/07/2009
| | | 4,821,679 |
| 1,450,000 | | United Kingdom, Government of, Bond, 5.000%, 3/07/2008
|
|
| 2,688,020
|
| | | TOTAL BRITISH POUND
|
|
| 7,509,699
|
| | | CANADIAN DOLLAR--0.5% | | | |
| | | Sovereign--0.5% | | | |
| 3,950,000 | | Canada, Government of, 5.250%, 6/01/2012
| | | 3,433,246 |
| 2,700,000 | | Canada, Government of, 5.000%, 6/01/2014
|
|
| 2,325,287
|
| | | TOTAL CANADIAN DOLLAR
|
|
| 5,758,533
|
| | | EURO--5.5% | | | |
| | | Sovereign--5.5% | | | |
| 2,250,000 | | Austria, Government of, Bond, Series 97 5, 5.625%, 7/15/2007
| | | 2,958,104 |
| 2,800,000 | | Bundesschatzanweisungen, Note, 2.500%, 3/23/2007
| | | 3,467,935 |
| 3,000,000 | | Buoni Poliennali Del Tes, 3.500%, 9/15/2008
| | | 3,814,950 |
| 3,000,000 | | Buoni Poliennali Del Tes, 4.250%, 8/01/2013
| | | 3,968,522 |
| 1,400,000 | | Colombia, Government of, Unsub., Series EMTN, 11.375%, 1/31/2008
| | | 2,018,483 |
Principal
Amount
|
|
|
|
| Value in
U.S. Dollars
|
| | | GOVERNMENTS/AGENCIES--continued | | | |
| | | EURO--continued | | | |
| | | Sovereign--continued | | | |
| $ | 3,800,000 | | France, Government of, Bond, 4.250%, 4/25/2019
| | $ | 5,048,483 |
| 4,300,000 | | Germany, Government of, 4.750%, 7/04/2028
| | | 6,062,590 |
| 5,500,000 | | Germany, Government of, 5.250%, 1/04/2008
| | | 7,266,305 |
| 6,000,000 | | Germany, Government of, Bond, 3.750%, 1/04/2009
| | | 7,712,711 |
| 4,700,000 | | Germany, Government of, Bond, Series 0301, 4.750%, 7/04/2034
| | | 6,717,054 |
| 3,600,000 | | Germany, Government of, Series 0303, 4.250%, 1/04/2014
| | | 4,796,338 |
| 680,670 | | Netherlands, Government of, Bond, Series 1&2A, 8.250%, 2/15/2007
| | | 922,096 |
| 2,000,000 | | Republic of Peru, 7.500%, 10/14/2014
| | | 2,725,667 |
| 1,456,065 | | Ukraine, Government of, Sr. Note, Series REGS, 10.000%, 3/15/2007
|
|
| 1,932,772
|
| | | TOTAL EURO
|
|
| 59,412,010
|
| | | JAPANESE YEN--1.0% | | | |
| | | Banking--0.2% | | | |
| 215,000,000 | | Asian Development Bank, 3.125%, 6/29/2005
|
|
| 1,985,583
|
| | | Sovereign--0.8% | | | |
| 220,000,000 | | Canada, Government of, Note,.700%, 3/20/2006
| | | 2,036,563 |
| 400,000,000 | | Italy, Government of, Bond, 1.800%, 2/23/2010
| | | 3,934,030 |
| 306,000,000 | | Italy, Series INTL,.650%, 3/20/2009
|
|
| 2,868,001
|
| | | TOTAL
|
|
| 8,838,594
|
| | | TOTAL JAPANESE YEN
|
|
| 10,824,177
|
| | | MEXICAN PESO--0.8% | | | |
| | | Sovereign--0.8% | | | |
| 80,248,900 | | Mexican Fixed Rate Bonds, Series M 20, 8.000%, 12/07/2023
| | | 6,160,033 |
| 34,189,400 | | Mexico Fixed Rate Bonds, Bond, Series MI10, 8.000%, 12/19/2013
|
|
| 2,839,287
|
| | | TOTAL MEXICAN PESO
|
|
| 8,999,320
|
| | | SWEDISH KRONA--0.2% | | | |
| | | Sovereign--0.2% | | | |
| 10,500,000 | | Sweden, Government of, Bond, 8.000%, 8/15/2007
| | | 1,587,217 |
| 7,000,000 | | Sweden, Kingdom of, Deb., Series 1040, 6.50%, 5/05/2008
|
|
| 1,049,800
|
| | | TOTAL SWEDISH KRONA
|
|
| 2,637,017
|
| | | TURKISH LIRA--0.9% | | | |
| | | Sovereign--0.9% | | | |
| 7,200,000 | | Turkey, Government of, Bond, 25.000%, 11/16/2005
| | | 5,545,768 |
| 5,260,000 | | Turkey, Government of, Bond, 8/24/2005
|
|
| 3,735,699
|
| | | TOTAL TURKISH LIRA
|
|
| 9,281,467
|
Principal
Amount
or Shares
|
|
|
|
| Value in
U.S. Dollars
|
| | | GOVERNMENTS/AGENCIES--continued | | | |
| | | U.S. DOLLAR--5.4% | | | |
| | | Sovereign--5.4% | | | |
| $ | 2,758,859 | | Brazil, Government of, Brady DCB, 4/15/2012
| | $ | 2,648,505 |
| 3,600,000 | | Brazil, Government of, Note, 12.000%, 4/15/2010
| | | 4,392,000 |
| 1,200,000 | | Colombia, Government of, 10.000%, 1/23/2012
| | | 1,378,200 |
| 3,000,000 | | Peru, Government of, Note, 9.875%, 2/06/2015
| | | 3,663,000 |
| 1,000,000 | | Philippines, Government, Note, 8.250%, 1/15/2014
| | | 1,022,500 |
| 1,328,000 | | Philippines, Government, Note, 8.375%, 2/15/2011
| | | 1,377,800 |
| 10,600,000 | | Russia, Government of, Series REGS, 8.250%, 3/31/2010
| | | 11,587,390 |
| 5,550,000 | | Russia, Government of, Unsub., Series REGS, 12.750%, 6/24/2028
| | | 9,869,010 |
| 12,450,000 | | Russia, Government of, Unsub., Series REGS, 3/31/2030
| | | 13,679,437 |
| 2,050,000 | | Turkey, Government of, 11.000%, 1/14/2013
| | | 2,558,400 |
| 3,320,000 | | Venezuela, Government of, 10.750%, 9/19/2013
| | | 3,784,800 |
| 2,000,000 | | Venezuela, Government of, 8.500%, 10/08/2014
|
|
| 2,015,000
|
| | | TOTAL U.S. DOLLAR
|
|
| 57,976,042
|
| | | TOTAL GOVERNMENTS/AGENCIES (IDENTIFIED COST $150,931,941)
|
|
| 164,510,899
|
| | | ASSET-BACKED SECURITIES--0.2% | | | |
| | | Home Equity Loan--0.1% | | | |
| 396,419 | 1,2 | 125 Home Loan Owner Trust 1998-1A B1, 9.260%, 02/15/2029
| | $ | 400,384 |
| 145,216 | | New Century Home Equity Loan Trust 1997-NC5 M2, 7.240%, 10/25/2028
|
|
| 145,193
|
| | | TOTAL
|
|
| 545,577
|
| | | Manufactured Housing--0.1% | | | |
| 2,000,000 | | Green Tree Financial Corp. 1993-4 B2, 8.550%, 01/15/2019
|
|
| 1,463,080
|
| | | TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $2,558,985)
|
|
| 2,008,657
|
| | | COLLATERALIZED MORTGAGE OBLIGATIONS--0.0% | | | |
| | | Non-Agency Mortgage--0.0% | | | |
| 22,185 | 1 | SMFC Trust Asset-Backed Certificates, 1997-A B1-4, 1/28/2027 (IDENTIFIED COST $20,277)
|
|
| 17,492
|
| | | COMMON STOCKS--0.0% | | | |
| | | Options--0.0% | | | |
| 8,700,000 | | MXN PUT/USD CALL (PUT-Option) Strike Price:11.255; Expiration Date:10-Jun-2005
|
|
| 261
|
| | | Financial Institution - Insurance - Life--0.0% | | | |
| 790 | 3 | Conseco, Inc.
| | | 15,800 |
| 3,160 | 3 | Conseco, Inc. - Warrants
|
|
| 7,426
|
| | | TOTAL
|
|
| 23,226
|
Shares or Principal
Amount
|
|
|
|
| Value in
U.S. Dollars
|
| | | COMMON STOCKS--continued | | | |
| | | Sovereign--0.0% | | | |
| 250 | 3 | Nigeria, Government of, Warrants 11/15/2020
|
| $
| 0
|
| | | Finance--0.0% | | | |
| 2,013 | 3 | Arcadia Financial Ltd. - Warrants
|
|
| 0
|
| | | TOTAL COMMON STOCKS (IDENTIFIED COST $1,066,545)
|
|
| 23,487
|
| | | MORTGAGE-BACKED SECURITIES--0.0% | | | |
| | | Government National Mortgage Association--0.0% | | | |
| $ | 125,750 | | Government National Mortgage Association Pool 780360, 11.000%, 30 Year, 9/15/2015 (IDENTIFIED COST $141,312)
|
|
| 139,023
|
| | | MUNICIPAL BOND--0.0% | | | |
| | | Municipal Services--0.0% | | | |
| 250,000 | | McKeesport, PA, Taxable G.O. Series B 1997, 7.300%, (MBIA Insurance Corp. INS), 03/01/2020 (IDENTIFIED COST $249,413)
|
|
| 271,187
|
| | | MUTUAL FUNDS--68.0% 4 | | | |
| 9,474,622 | | Emerging Markets Fixed Income Core Fund
| | | 160,284,923 |
| 13,392,288 | | Federated Mortgage Core Portfolio
| | | 135,797,795 |
| 65,598,779 | | High Yield Bond Portfolio
|
|
| 442,135,770
|
| | | TOTAL MUTUAL FUNDS (IDENTIFIED COST $860,456,746)
|
|
| 738,218,488
|
| | | PREFERRED STOCKS--0.2% | | | |
| | | Financial Institution - Brokerage--0.2% | | | |
| 40,000 | | Lehman Brothers Holdings, Pfd. 5.670%, $2.84, Annual Dividend
|
|
| 1,997,500
|
| | | Financial Institution - REITs--0.0% | | | |
| 9,900 | | Prologis Trust, REIT Perpetual Pfd. Stock, Series C, $4.27, Annual Dividend
|
|
| 632,362
|
| | | TOTAL PREFERRED STOCKS (IDENTIFIED COST $2,146,407)
|
|
| 2,629,862
|
| | | U.S. TREASURY--1.5% | | | |
| | | Treasury Securities--1.5% | | | |
| 8,600,000 | | United States Treasury Bond, 10.750%, 8/15/2005
| | | 8,738,718 |
| 1,025,000 | | United States Treasury Bond, 12.750%, 11/15/2010
| | | 1,068,726 |
| 6,000,000 | 5 | United States Treasury Note, 3.500%, 2/15/2010
|
|
| 5,936,220
|
| | | TOTAL U.S. TREASURY (IDENTIFIED COST $17,511,145)
|
|
| 15,743,664
|
Principal
Amount
|
|
|
|
| Value in
U.S. Dollars
|
| | | REPURCHASE AGREEMENTS--2.4% | | | |
| $ | 19,524,000 | | Interest in $3,070,000,000 joint repurchase agreement with Barclays Capital, Inc., 3.080%, dated 5/31/2005 to be repurchased at $19,525,670 on 6/1/2005, collateralized by U.S. Government Agency Obligations with various maturities to 5/5/2008, collateral market value $3,131,400,678
|
|
| 19,524,000
|
| 6,082,000 | | Interest in $1,000,000,000 joint repurchase agreement with Goldman Sachs and Co., 3.080%, dated 5/31/2005 to be repurchased at $6,082,520 on 6/1/2005, collateralized by U.S. Government Agency Obligations with various maturities to 4/1/2035, collateral market value $1,029,693,799 (held as collateral for securities lending)
|
|
| 6,082,000
|
| | | TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST)
|
|
| 25,606,000
|
| | | TOTAL INVESTMENTS--99.4%
(IDENTIFIED COST $1,183,297,848) 6
|
|
| 1,078,725,779
|
| | | OTHER ASSETS AND LIABILITIES - NET--0.6%
|
|
| 6,503,620
|
| | | TOTAL NET ASSETS--100%
|
| $
| 1,085,229,399
|
1 Denotes a restricted security, including securities purchased under Rule 144A of the Securities Act 1933. These securities, unless registered under the Act or exempted from registration, may only be sold to qualified institutional investors. At May 31, 2005, these securities amounted to $44,732,538 which represents 4.1% of total net assets.
2 Denotes a restricted security, including securities purchased under Rule 144A that have been deemed liquid by criteria approved by the Fund's Board of Directors. At May 31, 2005, these securities amounted to $44,715,046 which represents 4.1% of total net assets.
3 Non-income producing security.
4 Affiliated companies.
5 Certain principal amounts are temporarily on loan to unaffiliated broker/dealers.
6 The cost of investments for federal tax purposes amounts to $1,188,468,615.
Note: The categories of investments are shown as a percentage of total net assets at May 31, 2005.
The following acronyms are used throughout this portfolio:
| INS | - --Insured |
| MXN | - --Mexican Peso |
| REIT | - --Real Estate Investment Trust |
| USD | - --United States Dollar |
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
May 31, 2005 (unaudited)
Assets:
| | | | | | | |
Total investments in securities, at value including $738,218,488 of investments in affiliated issuers (Note 5) and $6,010,423 of securities loaned (identified cost $1,183,297,848)
| | | | | $ | 1,078,725,779 | |
Cash
| | | | | | 60,976 | |
Cash denominated in foreign currency (identified cost $4,052,665)
| | | | | | 3,983,652 | |
Income receivable
| | | | | | 5,926,318 | |
Receivable for shares sold
|
|
|
|
|
| 5,419,094
|
|
TOTAL ASSETS
|
|
|
|
|
| 1,094,115,819
|
|
Liabilities:
| | | | | | | |
Payable for shares redeemed
| | $ | 1,748,391 | | | | |
Payable for distribution services fee (Note 5)
| | | 430,531 | | | | |
Payable for shareholder services fee (Note 5)
| | | 226,582 | | | | |
Payable for collateral due to broker
| | | 6,082,000 | | | | |
Accrued expenses
|
|
| 398,916
|
|
|
|
|
TOTAL LIABILITIES
|
|
|
|
|
| 8,886,420
|
|
Net assets for 125,410,884 shares outstanding
|
|
|
|
| $
| 1,085,229,399
|
|
Net Assets Consist of:
| | | | | | | |
Paid-in capital
| | | | | $ | 1,226,138,667 | |
Net unrealized depreciation of investments and translation of assets and liabilities in foreign currency
| | | | | |
(104,713,112 | ) |
Accumulated net realized loss on investments and foreign currency transactions
| | | | | | (29,914,077 | ) |
Distributions in excess of net investment income
|
|
|
|
|
| (6,282,079
| )
|
TOTAL NET ASSETS
|
|
|
|
| $
| 1,085,229,399
|
|
Statement of Assets and Liabilities-continued
May 31, 2005 (unaudited)
Net Asset Value, Offering Price and Redemption Proceeds Per Share
| | | | | | | |
Class A Shares:
| | | | | | | |
Net asset value per share ($381,101,718 ÷ 44,019,668 shares outstanding), $0.001 par value, 1,000,000,000 shares authorized
|
|
|
|
|
| $8.66
|
|
Offering price per share (100/95.50 of $8.66) 1
|
|
|
|
|
| $9.07
|
|
Redemption proceeds per share
|
|
|
|
|
| $8.66
|
|
Class B Shares:
| | | | | | | |
Net asset value per share ($569,194,868 ÷ 65,791,644 shares outstanding), $0.001 par value, 2,000,000,000 shares authorized
|
|
|
|
|
| $8.65
|
|
Offering price per share
|
|
|
|
|
| $8.65
|
|
Redemption proceeds per share (94.50/100 of $8.65) 1
|
|
|
|
|
| $8.17
|
|
Class C Shares:
| | | | | | | |
Net asset value per share ($108,642,453 ÷ 12,553,682 shares outstanding), $0.001 par value, 1,000,000,000 shares authorized
|
|
|
|
|
| $8.65
|
|
Offering price per share (100/99.00 of $8.65) 1
|
|
|
|
|
| $8.74
|
|
Redemption proceeds per share (99.00/100 of $8.65) 1
|
|
|
|
|
| $8.56
|
|
Class F Shares:
| | | | | | | |
Net asset value per share ($26,290,360 ÷ 3,045,890 shares outstanding), $0.001 par value, 1,000,000,000 shares authorized
|
|
|
|
|
| $8.63
|
|
Offering price per share (100/99.00 of $8.63) 1
|
|
|
|
|
| $8.72
|
|
Redemption proceeds per share (99.00/100 of $8.63) 1
|
|
|
|
|
| $8.54
|
|
1 See "What Do Shares Cost?" in the Prospectus.
See Notes which are an integral part of the Financial Statements
Statement of Operations
Six Months Ended May 31, 2005 (unaudited)
Investment Income:
| | | | | | | | | | | | |
Dividends (including $22,577,096 received from affiliated issuers) (Note 5)
| | | | | | | | | | $ | 22,662,430 | |
Interest (net of foreign taxes withheld of $9,087 and including stock loan income of $17,962)
| | | | | | | | | | | 12,429,389 | |
Investment income allocated from partnership (Note 5)
|
|
|
|
|
|
|
|
|
|
| 3,936,806
|
|
TOTAL INCOME
|
|
|
|
|
|
|
|
|
|
| 39,028,625
|
|
Expenses:
| | | | | | | | | | | | |
Investment adviser fee (Note 5)
| | | | | | $ | 4,627,791 | | | | | |
Administrative personnel and services fee (Note 5)
| | | | | | | 437,549 | | | | | |
Custodian fees
| | | | | | | 63,432 | | | | | |
Transfer and dividend disbursing agent fees and expenses
| | | | | | | 525,281 | | | | | |
Directors'/Trustees' fees
| | | | | | | 5,622 | | | | | |
Auditing fees
| | | | | | | 9,491 | | | | | |
Legal fees
| | | | | | | 4,068 | | | | | |
Portfolio accounting fees
| | | | | | | 86,663 | | | | | |
Distribution services fee--Class B Shares (Note 5)
| | | | | | | 2,229,894 | | | | | |
Distribution services fee--Class C Shares (Note 5)
| | | | | | | 386,739 | | | | | |
Distribution services fee--Class F Shares (Note 5)
| | | | | | | 64,563 | | | | | |
Shareholder services fee--Class A Shares (Note 5)
| | | | | | | 450,902 | | | | | |
Shareholder services fee--Class B Shares (Note 5)
| | | | | | | 743,298 | | | | | |
Shareholder services fee--Class C Shares (Note 5)
| | | | | | | 128,826 | | | | | |
Shareholder services fee--Class F Shares (Note 5)
| | | | | | | 31,813 | | | | | |
Share registration costs
| | | | | | | 45,232 | | | | | |
Printing and postage
| | | | | | | 66,047 | | | | | |
Insurance premiums
| | | | | | | 7,639 | | | | | |
Taxes
| | | | | | | 41,266 | | | | | |
Miscellaneous
|
|
|
|
|
|
| 4,195
|
|
|
|
|
|
EXPENSES BEFORE ALLOCATION
|
|
|
|
|
|
| 9,960,311
|
|
|
|
|
|
Expenses allocated from partnership (Note 5)
|
|
|
|
|
|
| 27,977
|
|
|
|
|
|
TOTAL EXPENSES
|
|
|
|
|
|
| 9,988,288
|
|
|
|
|
|
Statement of Operations-continued
Six Months Ended May 31, 2005 (unaudited)
Waivers (Note 5):
| | | | | | | | | | | | |
Waiver of investment adviser fee
| | $ | (376,298 | ) | | | | | | | | |
Waiver of administrative personnel and services fee
| | | (22,681 | ) | | | | | | | | |
Waiver of distribution services fee--Class F Shares
| | | (64,563 | ) | | | | | | | | |
TOTAL WAIVERS
|
|
|
|
|
| $
| (463,542
| )
|
|
|
|
|
Net expenses
|
|
|
|
|
|
|
|
|
| $
| 9,524,746
|
|
Net investment income
|
|
|
|
|
|
|
|
|
|
| 29,503,879
|
|
Realized and Unrealized Gain (Loss) on Investments, Options and Foreign Currency Transactions:
| | | | | | | | | | | | |
Net realized gain on investments, options, and foreign currency transactions (net of foreign taxes withheld of $122,053 and including realized $4,663,957 on sales of investments in affiliated issuers (Note 5))
| | | | | | | | | | | 21,088,053 | |
Net realized gain from partnerships
| | | | | | | | | | | 1,844,692 | |
Net change in unrealized depreciation of investments, options, and translation of assets and liabilities in foreign currency
|
|
|
|
|
|
|
|
|
|
| (37,464,408
| )
|
Net realized and unrealized loss on investments, options, and foreign currency transactions
|
|
|
|
|
|
|
|
|
|
| (14,531,663
| )
|
Change in net assets resulting from operations
|
|
|
|
|
|
|
|
|
| $
| 14,972,216
|
|
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
|
|
| Six Months
Ended
(unaudited)
5/31/2005
|
|
|
|
Year Ended
11/30/2004
| |
Increase (Decrease) in Net Assets
| | | | | | | | |
Operations:
| | | | | | | | |
Net investment income
| | $ | 29,503,879 | | | $ | 61,031,304 | |
Net realized gain on investments including allocation from partnership, options, and foreign currency transactions
| | | 22,932,745 | | | | 16,171,949 | |
Net change in unrealized appreciation/depreciation of investments, options, and translation of assets and liabilities in foreign currency
|
|
| (37,464,408
| )
|
|
| 15,243,083
|
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
| 14,972,216
|
|
|
| 92,446,336
|
|
Distributions to Shareholders:
| | | | | | | | |
Distributions from net investment income
| | | | | | | | |
Class A Shares
| | | (11,900,625 | ) | | | (21,111,034 | ) |
Class B Shares
| | | (17,076,699 | ) | | | (37,794,388 | ) |
Class C Shares
| | | (2,980,393 | ) | | | (5,466,483 | ) |
Class F Shares
|
|
| (844,315
| )
|
|
| (1,572,076
| )
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
|
|
| (32,802,032
| )
|
|
| (65,943,981
| )
|
Share Transactions:
| | | | | | | | |
Proceeds from sale of shares
| | | 156,811,364 | | | | 296,148,336 | |
Net asset value of shares issued to shareholders in payment of distributions declared
| | | 20,544,895 | | | | 40,033,040 | |
Cost of shares redeemed
|
|
| (164,341,523
| )
|
|
| (332,438,051
| )
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
|
|
| 13,014,736
|
|
|
| 3,743,325
|
|
Change in net assets
|
|
| (4,815,080
| )
|
|
| 30,245,680
|
|
Net Assets:
| | | | | | | | |
Beginning of period
|
|
| 1,090,044,479
|
|
|
| 1,059,798,799
|
|
End of period (including distributions in excess of net investment income of $(6,282,079) and $(2,983,926), respectively)
|
| $
| 1,085,229,399
|
|
| $
| 1,090,044,479
|
|
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
May 31, 2005 (unaudited)
1. ORGANIZATION
Federated Fixed Income Securities, Inc. (the "Corporation") is registered under the Investment Company Act of 1940, as amended (the "Act"), as open-end management investment company. The Corporation consists of three portfolios. The financial statements included herein are only those of Federated Strategic Income Fund (the "Fund") a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers four classes of shares: Class A Shares, Class B Shares, Class C Shares, and Class F Shares. The investment objective of the Fund is to seek a high level of current income.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.
Investment Valuation
Domestic and foreign equity securities are valued at the last sale price or official closing price reported in the market in which they are primarily traded (either a national securities exchange or the over-the-counter market), if available. If unavailable, the security is generally valued at the mean between the last closing bid and asked prices. With respect to valuation of foreign securities, trading in foreign cities may be completed at times which vary from the closing of the New York Stock Exchange (NYSE). Therefore, foreign securities are valued at the latest closing price on the exchange on which they are traded immediately prior to the closing of the NYSE. Foreign securities quoted in foreign currencies are translated in U.S. dollars at the foreign exchange rate in effect at 4:00 p.m., Eastern time, on the day the value of the foreign security is determined. Mortgage-backed security values furnished by an independent pricing service are based on the aggregate investment value of the projected cash flows to be generated by the security. Fixed-income, listed corporate bonds, unlisted securities, and private placement securities are generally valued at the mean of the latest bid and ask price as furnished by an independent pricing service. Short-term securities are valued at the prices provided by an independent pricing service. However, short-term securities with remaining maturities of 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Investments in other open-end regulated investment companies are valued at net asset value. Securities for which no quotations are readily available or whose values have been affected by a significant event occurring between the close of their primary markets and the closing of the NYSE are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Directors (the "Directors").
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund may invest in Federated Core Trust (Core Trust), which is managed by Federated Investment Management Company, the Fund's adviser. Core Trust is an open-end management company, registered under the Act, available only to registered investment companies and other institutional investors. The investment objective of High Yield Bond Portfolio, a series of Core Trust, is to seek high current income by investing primarily in a diversified portfolio of lower-rated, fixed-income securities. The investment objective of Federated Mortgage Core Portfolio, a series of Core Trust, is to achieve total return on assets. Federated receives no advisory or administrative fees on behalf of Core Trust. Income distributions from Core Trust are declared daily and paid monthly, and are recorded by the Fund as dividend income. Capital gain distributions, if any, from Core Trust are declared and paid annually, and are recorded by the Fund as capital gains. The performance of the Fund is directly affected by the performance of the Core Trust. A copy of the Core Trust's financial statements is available on the Edgar Database on the SEC's website www.sec.gov, at the Commission's public reference room in Washington, DC or upon request from the Fund by calling 1-800-341-7400.
The Fund may also invest in Federated Core Trust II (Core Trust II), pursuant to a separate Exemptive Order issued by the SEC. Core Trust II is independently managed by Federated Investment Counseling. Core Trust II is a limited partnership established under the laws of the state of Delaware on November 13, 2000, registered under the Act, and offered only to registered investment companies and other accredited investors. The investment objective of Emerging Markets Fixed Income Core Fund (EMCORE), a series of Core Trust II, is to achieve total return on its assets. Federated receives no advisory or administrative fees on behalf of Core Trust II. The Fund records daily its proportionate share of income, expenses, unrealized gains, and losses from EMCORE. The performance of the Fund is directly affected by the performance of the portfolio. A copy of EMCORE's financial statements is available on the database on the SEC's website www.sec.gov at the Commission's public reference room in Washington, DC or upon request from the Fund by calling 1-800-341-7400.
Repurchase Agreements
It is the policy of the Fund to require the custodian bank or broker for reverse repos to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase and reverse repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of the collateral at least equals the repurchase price to be paid under the repurchase agreement.
The Fund is permitted to enter into reverse repurchase agreements, in which the Fund sells U.S. government securities to financial institutions and agrees to repurchase the securities at an agreed-upon price and date.
The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Directors. Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.
Investment Income, Gains and Losses, Expenses, and Distributions
Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that each class bears certain expenses unique to that class such as distribution and shareholder services fees. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Premium and Discount Amortization/Paydown Gains and Losses
All premiums and discounts on fixed-income securities, other than mortgage-backed securities, are amortized/accreted for financial statement purposes. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses) are classified as part of investment income.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the "Code") and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.
Withholding taxes on foreign interest, dividends, and capital gains have been provided for in accordance with the applicable country's tax rules and rates.
Other Taxes
As an open-end management investment company incorporated in the state of Maryland but domiciled in Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Foreign Currency Translation
The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies (FC) 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 period end, resulting from changes in the exchange rate.
Securities Lending
The Fund participates in a securities lending program providing for the lending of corporate bonds, equity, and government securities to qualified brokers. Collateral for securities loaned is invested in an affiliated money market fund or invested in short-term securities, including repurchase agreements. Collateral is maintained at a minimum level of 102% of the market value of investments loaned, plus interest, if applicable. Earnings on collateral are allocated between the securities lending agent, as a fee for its services under the program, and the Fund, according to agreed-upon rates.
As of May 31, 2005, securities subject to this type of arrangement and related collateral were as follows:
Market Value
of Securities Loaned
|
| Market Value
of Collateral
|
$6,010,423
|
| $6,082,000
|
Restricted Securities
Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer's expense either upon demand by the Fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under general supervision of the Directors.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Directors, held at May 31, 2005 is as follows:
Security
|
| Acquisition
Date
|
| Acquisition
Cost
|
SMFC Trust Asset-Backed Certificates, Series 1997-A B1-4 1/28/2027
|
| 2/4/1998
|
| $20,277
|
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses, and revenues reported in the financial statements. Actual results could differ from those estimated.
Other
Investment transactions are accounted for on a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.
4. CAPITAL STOCK
The following table summarizes capital stock activity:
|
| Six Months Ended
5/31/2005
|
|
| Year Ended
11/31/2004
|
Class A Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 11,094,425 | | | $ | 97,365,408 | | | 21,769,656 | | | $ | 187,444,388 | |
Shares issued to shareholders in payment of distributions declared
|
| 1,029,644 |
|
| | 8,999,334 |
|
| 1,861,972 |
|
| | 16,027,679 |
|
Shares redeemed
|
| (8,366,944
| )
|
|
| (73,395,599
| )
|
| (15,978,022
| )
|
|
| (136,592,245
| )
|
NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS
|
| 3,757,125
|
|
|
$
| 32,969,143
|
|
| 7,653,606
|
|
|
$
| 66,879,822
|
|
| | | | | | | | | | | | | | |
|
| Six Months Ended
5/31/2005
|
| Year Ended
11/31/2004
|
Class B Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 3,569,731 | | | $ | 31,358,884 | | | 7,746,505 | | | $ | 66,858,778 | |
Shares issued to shareholders in payment of distributions declared
|
| 1,064,836 |
|
|
| 9,304,365 |
|
|
2,312,088 |
|
|
|
19,887,862 |
|
Shares redeemed
|
| (8,676,418
| )
|
|
| (76,075,818
| )
|
| (18,392,324
| )
|
|
| (157,992,987
| )
|
NET CHANGE RESULTING FROM CLASS B SHARE TRANSACTIONS
|
| (4,041,851
| )
|
|
$
| (35,412,569
| )
|
|
(8,333,731
| )
|
|
$
|
(71,246,347
| )
|
| | | | | | | | | | | | | | |
|
| Six Months Ended
5/31/2005
|
| Year Ended
11/31/2004
|
Class C Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 2,777,991 | | | $ | 24,405,359 | | | 4,511,385 | | | $ | 38,925,807 | |
Shares issued to shareholders in payment of distributions declared
|
| 211,070 |
|
|
| 1,843,824 |
|
|
396,191 |
|
| |
3,408,182 |
|
Shares redeemed
|
| (1,458,427
| )
|
|
| (12,776,976
| )
|
| (4,076,785
| )
|
|
| (34,907,040
| )
|
NET CHANGE RESULTING FROM CLASS C SHARE TRANSACTIONS
|
| 1,530,634
|
|
|
$
| 13,472,207
|
|
|
830,791
|
|
|
$
|
7,426,949
|
|
| | | | | | | | | | | | | | |
|
| Six Months Ended
5/31/2005
|
| Year Ended
11/31/2004
|
Class F Shares:
|
| Shares
|
|
|
| Amount
|
|
| Shares
|
|
|
| Amount
|
|
Shares sold
| | 420,670 | | | $ | 3,681,713 | | | 339,988 | | | $ | 2,919,363 | |
Shares issued to shareholders in payment of distributions declared
|
| 45,619 |
|
|
| 397,372 |
|
|
82,668 |
|
|
|
709,317 |
|
Shares redeemed
|
| (239,605
| )
|
|
| (2,093,130
| )
|
| (343,474
| )
|
|
| (2,945,779
| )
|
NET CHANGE RESULTING FROM CLASS F SHARE TRANSACTIONS
|
| 226,684
|
|
|
$
| 1,985,955
|
|
|
79,182
|
|
|
$
|
682,901
|
|
NET CHANGE RESULTING FROM SHARE TRANSACTIONS
|
| 1,472,592
|
|
|
$
| 13,014,736
|
|
|
229,848
|
|
|
$
|
3,743,325
|
|
5. FEDERAL TAX INFORMATION
At May 31, 2005, the cost of investments for federal tax purposes was $1,188,468,615. The net unrealized depreciation of investments for federal tax purposes excluding any unrealized depreciation resulting from changes in foreign currency exchange rates was $109,742,836. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $29,770,648 and net unrealized depreciation from investments for those securities having an excess of cost over value of $139,513,484.
At November 30, 2004, the Fund had a capital loss carryforward of $43,504,358 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 tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
Expiration Year
|
| Expiration Amount
|
2007
|
| $14,712,489
|
2008
|
| $ 7,257,665
|
2009
|
| $ 15,741,297
|
2010
|
| $ 5,329,211
|
2012
|
| $ 463,696
|
6. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.85% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.
Pursuant to an Exemptive Order issued by the SEC, the Fund may invest in other funds which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of these transactions. Income earned from investments in these funds are recorded as income in the accompanying financial statements and are listed below:
Emerging Markets Fixed Income Core Fund
|
| $
| 3,936,806
|
Federated Mortgage Core Portfolio
|
| $
| 2,768,252
|
High Yield Bond Portfolio
|
| $
| 19,808,804
|
Prime Value Obligations Fund
|
| $
| 40
|
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of all Federated funds as specified below:
Maximum
Administrative Fee
|
| Average Aggregate Daily Net Assets
of the Federated Funds
|
0.150%
|
| on the first $5 billion
|
0.125%
|
| on the next $5 billion
|
0.100%
|
| on the next $10 billion
|
0.075%
|
| on assets in excess of $20 billion
|
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class B Shares, Class C Shares, and Class F Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC:
Share Class Name
|
| Percentage of Average Daily
Net Assets of Class
|
Class B Shares
|
| 0.75%
|
Class C Shares
|
| 0.75%
|
Class F Shares
|
| 0.50%
|
FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended May 31, 2005, FSC retained $11,362 of fees paid by the Fund.
Sales Charges
For the six months ended May 31, 2005, FSC retained $187,589 in sales charges from the sale of Class A Shares. FSC also retained $7,261 of contingent deferred sales charges relating to redemptions of Class C Shares and $347 relating to redemptions of Class F Shares. See "What Do Shares Cost?" in the Prospectus.
Shareholder Services Fee
Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's Class A Shares, Class B Shares, Class C Shares, and Class F Shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended May 31, 2005, FSSC did not retain any fees paid by the Fund.
General
Certain of the Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
8. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations (and in-kind contributions), for the six months ended May 31, 2005 were as follows:
Purchases
|
| $
| 229,364,098
|
Sales
|
| $
| 228,592,506
|
9. CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. The political or economic developments within a particular country or region may have an adverse effect on the ability of domiciled issuers to meet their obligations. Additionally, political or economic developments may have an effect on the liquidity and volatility of portfolio securities and currency holdings.
10. LEGAL PROCEEDINGS
Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated (Funds) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.
11. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
On May 20, 2005, the Fund's Board of Directors (the "Directors"), upon the recommendation of the Audit Committee, appointed Ernst & Young LLP as the Fund's independent registered public accountant. The pervious reports issued by Deloitte & Touche LLP (D&T) on the Fund's financial statements for the fiscal years ended November 30, 2003 and November 30, 2004, contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope, or accounting principals. During the Fund's fiscal years ended November 30, 2003 and November 30, 2004: (i) there were no disagreements with D&T on any matter of accounting principals or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of D&T, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a) (1) (v) of Regulation S-K under the Securities Exchange Act of 1934, as amended.
As indicated above, the Fund has appointed Ernst & Young LLP (E&Y) as the independent registered public accountant to audit the Fund's financial statements for the fiscal year ending November 30, 2005. During the Fund's fiscal years ended November 30, 2003 and November 30, 2004 and the interim period commencing December 1, 2004 and ending May 20, 2005, neither the Fund nor anyone on its behalf has consulted E&Y on items which: (i) concerned application of accounting principals to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements; or (ii) concerned the subject of a disagreement (as defined in paragraph (a) (1) (iv) of item 304 of Regulation S-K) or reportable events (as described in paragraph (a) (1) (v) of said Item 304).
Board Review of Advisory Contract
As required by the 1940 Act, the Fund's Board has reviewed the Fund's investment advisory contract. The Board's decision to approve the contract reflects the exercise of its business judgment on whether to continue the existing arrangements. During its review of these contracts, the Board considers many factors, among the most material of which are: the Fund's investment objectives; the Adviser's management philosophy, personnel, processes, and investment and operating strategies; long-term performance; the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry; the range of comparable fees for similar funds in the mutual fund industry; the range and quality of services provided to the Fund and its shareholders by the Federated organization in addition to investment advisory services; and the Fund's relationship to the Federated family of funds.
In its decision to appoint or renew an Adviser, the Board is 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 recognizes that most shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and in the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's "selection" or approval of the Adviser must reflect the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board also considers the compensation and benefits received by the Adviser. This includes fees received for services provided to the Fund by other entities in the Federated organization and research services received by the Adviser from brokers that execute fund trades, as well as advisory fees. In this regard, the Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions 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 the Fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with the Fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts bearing on the Adviser's service and fee. The Fund's Board is aware of these factors and is guided by them in its review of the Fund's advisory contract to the extent they are appropriate and relevant, as discussed further below.
The Board considers and weighs 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 is assisted in its deliberations by the advice of independent legal counsel. In this regard, the Board requests and receives substantial and detailed information about the Fund and the Federated organization. Federated provides much of this information at each regular meeting of the Board, and furnishes additional reports in connection with the particular meeting at which the Board's formal review of the advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board's evaluation of an advisory contract is informed by reports covering such matters as: the Adviser's investment philosophy, personnel, and processes; 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 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; the nature and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates; 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 evaluation process is evolutionary, reflecting continually developing considerations. 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 particularly useful, given the high degree of competition in the mutual fund business. The Board focuses on comparisons with other similar mutual funds (rather than non-mutual fund products or services) because, simply put, 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 already chosen 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 may be a useful indicator of how the Adviser is executing on the Fund's investment program, which would in turn assist the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services are such as to warrant continuation of the advisory contract.
The Board also receives financial information about Federated, including reports on the compensation and benefits Federated derives from its relationships with the Federated funds. These reports cover 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 discuss any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades as well as waivers of fees and/or reimbursements of expenses. In order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waive fees and/or reimburse expenses. Although the Board considers the profitability of the Federated organization as a whole, it does not evaluate, on a fund-by-fund basis, Federated's "profitability" and/or "costs" (which would include an assessment as to whether "economies of scale" would be realized if the fund were to grow to some sufficient size). In the Board's view, the cost of performing advisory services on a fund-specific basis is both difficult to estimate satisfactorily and a relatively minor consideration in its overall evaluation. Analyzing isolated funds would require constructed allocations of the costs of shared resources and operations based on artificial assumptions that are inconsistent with the existing relationships within a large and diversified family of funds that receive advisory and other services from the same organization. Although the Board is always eager to discover any genuine "economies of scale," its experience has been that such "economies" are likely to arise only when a fund grows dramatically, and becomes and remains very large in size. Even in these instances, purchase and redemption activity, as well as the presence of expense limitations (if any), may offset any perceived economies. As suggested above, the Board considers the information it receives about the Fund's performance and expenses as compared to an appropriate set of similar competing funds to be more relevant.
The Board bases its decision to approve an 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 are relevant to every Federated fund, nor does the Board consider any one of them to be determinative. With respect to the factors that are relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provide a satisfactory basis to support the decision to continue the existing arrangements.
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. 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 through Federated's website. Go to FederatedInvestors.com, select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on 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" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus, which contains facts concerning its objective and policies, management fees, expenses, and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called "householding"), as permitted by applicable rules. The Fund's "householding" program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the "householding" program. The Fund is also permitted to treat a shareholder as having given consent ("implied consent") if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to "household" at least sixty (60) days before it begins "householding" and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to "opt out" of "householding." Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of "householding" at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Federated
World-Class Investment Manager
Federated Strategic Income Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 31417P502
Cusip 31417P601
Cusip 31417P700
Cusip 31417P809
G00324-01 (7/05)
Federated is a registered mark of Federated Investors, Inc. 2005 (c)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
Not Applicable
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not Applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated
Purchasers
Not Applicable
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 Fixed Income Securities, Inc.
By /S/Richard J. Thomas
Richard J. Thomas, Principal Financial Officer
Date July 15, 2005
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 July 15, 2005
By /S/Richard J. Thomas
Richard J. Thomas, Principal Financial Officer
Date July 15, 2005
