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
4000 Ericsson Drive
Warrendale, Pennsylvania 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Date of Fiscal Year End: 09/30/14
Date of Reporting Period: 09/30/14
Item 1. Reports to Stockholders
Annual Shareholder Report
September 30, 2014
| Share Class | Ticker |
| A | FMUUX |
| Institutional | FMUSX |
Federated Municipal Ultrashort Fund
Fund Established 2000
A Portfolio of Federated Fixed Income Securities, Inc.
Dear Valued Shareholder,
I am pleased to present the Annual Shareholder Report for your fund covering the period from October 1, 2013 through September 30, 2014. This report includes Management's Discussion of Fund Performance, a complete listing of your fund's holdings, performance information and financial statements along with other important fund information.
In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. We invite you to register to take full advantage of its capabilities.
Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed.
Sincerely,
J. Christopher Donahue, President
Not FDIC Insured • May Lose Value • No Bank Guarantee
CONTENTS
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Management's Discussion of Fund Performance (unaudited)
The total return of Federated Municipal Ultrashort Fund (the “Fund”), based on net asset value, for the 12-month reporting period ended September 30, 2014, was 0.56% for the Class A Shares and 1.01% for the Institutional Shares. The 1.01% total return for the Institutional Shares for the reporting period consisted of 0.71% of tax-exempt dividend income and price appreciation of 0.30% in the net asset value of the shares.1,2 The total return of the Barclays 1-Year Municipal Bond Index (B1MB),3 the Fund's broad-based securities market index, was 0.74%, and the total return of the Lipper Short Municipal Debt Funds Average (LSMDFA),4 a peer group average of 0 to 3 years duration for the Fund, was 1.29% during the same period. The total return of a 50/50 blend (Blended Index) of the B1MB and the Lipper Tax-Exempt Money Market Funds Average,4 which would approximate the average duration of the Fund, was 0.38% during the same period. The Fund's and the Lipper Averages' total returns for the most recently completed fiscal year reflected actual cash flows, transaction costs and other expenses that were not reflected in the total return of the B1MB.
During the reporting period, the Fund's investment strategy focused on: (a) the effective duration5 of its portfolio (which indicates the portfolio's price sensitivity to interest rates); (b) the selection of securities with different maturities (expressed by a yield curve showing the relative yield of securities with different maturities); (c) the allocation of the portfolio among securities of similar issuers (referred to as “sectors”); and (d) the credit quality and ratings of the portfolio securities (which indicates the risk that securities may default). These were the most significant factors affecting the Fund's performance relative to the B1MB during the reporting period.
The following discussion will focus on the Fund's Institutional Shares.
MARKET OVERVIEW
During the 12-month reporting period, 10-year Treasury yields ended the period at 2.50%, essentially unchanged, but rose to a high of 3.03% in late December 2013 and declined to a low of 2.34% in late August 2014 before rising to end the period. Conversely, 2-year Treasury yields, which started the period at 0.32%, essentially doubled during the period and climbed rapidly over the summer of 2014 from 0.35% in early June to end the period at 0.57%.
Annual Shareholder Report
Over the reporting period, labor market conditions showed modest improvement and the unemployment rate declined from 7.2% to 5.9% as a result of moderate job growth combined with a declining labor force participation rate. Despite the decline in the unemployment rate, the broader view was that poor wage growth and a declining labor participation rate kept optimism muted.
Growth in economic activity as measured by Gross Domestic Product (GDP) started the period strong at 4.5% but slowed sharply during the winter months, declining 2.1% in the first quarter, in part due to adverse weather conditions. GDP growth rebounded sharply in the second quarter to 4.6%. However, housing continued to underperform market expectations, with new home sales consistently below expectations, which was especially troubling because new housing starts, including construction, mortgages and durable purchases, continued to play a large role in the economy during the reporting period.
Over the period, fiscal policy continued to restrain economic growth, although to a diminished extent as compared to previous periods, and longer term inflation expectations remained stable. The Federal Reserve made a measured reduction in the pace of its asset purchases in light of continued progress in labor market conditions. Financial market conditions were influenced over the reporting period by Federal Reserve communications, which indicated somewhat better than expected economic releases and developments in emerging market economies, and financial conditions in the U.S. remained supportive of growth.
During the 12-month reporting period, developments in Europe continued to be a focus for investors, as concerns persisted about the prospects for a durable solution to European fiscal and financial difficulties, which indirectly affected interest rate levels in the tax-exempt municipal bond market. There remained downside risks to growth emanating from the region, given its unresolved imbalances, weak economic growth and continued deflationary risks. Political conditions in the Middle East and the Ukraine continued to destabilize, which resulted in “flight to quality” trades by investors into what were perceived to be safer investments as volatility in the markets increased. This resulted in intervening periods of lower U.S. Treasury yields that pushed municipal yields lower. Also, the amount of municipal bonds being issued during the reporting period was muted, which created a favorable technical environment (supply/ demand imbalance) within the tax-exempt municipal bond market. A significant driver of the muted issuance was that the amount of municipal bonds being refunded lessened as interest rates rose over the reporting period. This reduced the amount of municipal bonds being issued and helped to provide a cushion for municipal bond prices and as a result, absolute performance. However, the muted supply was offset by outflows from bond funds in general and municipal bond funds in particular. Outflows from municipal bond funds stabilized and actually turned positive in the spring of 2014 as their yield remained attractive to investors.
Annual Shareholder Report
The tax-exempt municipal market dealt with several policy-related issues over the course of the reporting period. These included U.S. fiscal policy decisions that resulted in increases in the top marginal tax rates, which were a positive factor for municipal bond prices and increased the value of the municipal tax exemption. Certain states experienced positive fiscal news during the reporting period; and, in some cases, revenues rose enough to enable increases in state government spending and employment. These positive events allowed the spread between “AAA”-rated and “BBB”-rated general obligation debt to narrow during the period. Credit conditions in the municipal bond market generally remained stable, although a few issuers continued to experience substantial strain and for the first time in several years the rating agencies made more upgrades than downgrades to municipal debt. However, Detroit's high profile bankruptcy and the increased erosion in the Puerto Rican economy and its related entities resulted in increased volatility in municipal credit spreads near the end of the reporting period. Also, Illinois continued to be unable to come to political terms over a solution for its underfunded pensions and revenue shortfalls. The risk of additional municipal issuers becoming distressed persisted. The ongoing pressures on public pension plans and their unfunded liabilities continued to receive significant scrutiny. However, many state and local municipal entities took actions to control pension costs and this issue continued to be watched.
DURATION
The Fund is an ultrashort tax-exempt municipal bond fund and pursues a low volatility strategy. As such, the Fund's typical dollar-weighted average duration is constrained by its prospectus to one year or less and a typical operating range is from six months to one year. As determined at the end of the reporting period, the Fund's dollar-weighted average duration was 0.58 years, and the Fund's dollar-weighted average portfolio duration during the reporting period was approximately 0.64 years. The duration of the B1MB (which contains only bonds with maturities from one to two years) was 1.40 years at the end of the reporting period.
Despite short-term municipal interest rates declining over the reporting period, the shorter duration of the Fund did not hurt the Fund's relative performance versus the B1MB. The Fund's allocation of 86% of its assets in the 0-2 year duration range outperformed the 100% allocation of the B1MB, and the Fund's allocation of 14% of assets in the 2-4 year duration range outperformed the B1MB as municipal interest rates declined and the B1MB had no investment allocation in this duration range.
Annual Shareholder Report
MATURITY/YIELD CURVE
During the 12-month reporting period, the municipal yield curve flattened as a result of yields on longer maturity bonds declining more than bonds with shorter maturities. The best performers of the yield curve were the longest maturity bonds. Because the Fund continued to pursue a low volatility, ultrashort duration strategy during the reporting period and in order to provide a high degree of liquidity, the Fund was managed with an intention of maintaining a barbell structure consisting of: (a) 55% to 65% weighting in very short-term maturity securities such as tax-exempt weekly reset municipal variable rate demand notes (MVRDNs), weekly or monthly reset municipal floating rate notes (MFRNs) and 90-day or less municipal commercial paper; and (b) a 35% to 45% weighting in tax-exempt fixed-rate municipal bonds with durations generally from three months to four years.
The B1MB contains only bonds with maturities greater than one but less than two years and does not contain any bonds with less than one year remaining to maturity, nor does it include any MVRDNs or most MFRNs. The Fund's portfolio weighting of 15-20% in liquid 7-day reset MVRDNs detracted from Fund performance relative to the B1MB during the reporting period, as these instruments slightly underperformed the greater income and price return of bonds contained in the B1MB. Conversely, many of the MFRNS with 7-day rate resets, which comprise 40% or more of the Fund, provided above-average tax-exempt income due to credit spread and positive price performance over the reporting period. The Fund's significant investment in MFRNs helped performance versus the B1MB over the period. The Fund also had significant weightings in tax-exempt, municipal bonds maturing from one to two years and two to four years and these holdings helped Fund performance relative to the B1MB during the reporting period.
SECTOR ALLOCATION
During the 12-month reporting period, the Fund maintained a higher portfolio allocation (i.e., was overweight), relative to the B1MB, to securities issued by hospitals, public power authorities, industrial development and pollution control revenue entities (corporate obligors and investor-owned electric and gas utilities), education and transportation. These allocations helped the Fund's performance during the reporting period due to the higher income and price returns within these essential service revenue bond sectors.
Annual Shareholder Report
The Fund's underweight, relative to the B1MB, in highly-rated general obligation bonds issued by states and local governments had a slight positive performance impact during the reporting period as higher-quality municipal general obligation debt underperformed within this narrow maturity range. In addition, the Fund's security selection within the state general obligation debt sector outperformed those of the B1MB during the reporting period.
The Fund was significantly underweight, compared to the B1MB, in pre-refunded bonds (which are bonds for which the principal and interest payments are secured or guaranteed by cash or U.S. Treasury securities held in an escrow account), and since this sector was an underperformer within the B1MB, this positively affected Fund performance relative to the B1MB during the reporting period.
Overall, sector allocation decisions had a positive impact to the Fund's performance relative to the B1MB during the reporting period.
CREDIT QUALITY6
During the 12-month reporting period, headline risk concerning municipal credit quality increased and municipal bond fund outflows increased significantly and then slowed in the first quarter of 2014, before turning positive in the latter half of the reporting period. Despite these negative credit trends, investors in the short maturities of the municipal market had an appetite for risk and a desire for increased yield and credit spread income, reflecting both the low absolute yields on the highest grade securities and reduced issuance of securities rated in the lower rating (higher yielding) categories (tax-exempt municipal bonds rated “A” or “BBB” or unrated bonds of comparable quality).
As a result, bonds rated “A” and “BBB” outperformed those in the higher ratings categories in the B1MB during the reporting period. The Fund had an overweight in these lower-rated medium quality bonds relative to the B1MB, and within these “A” and “BBB” ratings category had higher category returns than the B1MB, both of which helped performance over the reporting period. The Fund had a slight weighting, less than 0.3%, in high-yield (noninvestment-grade) municipal debt, which outperformed during the reporting period and helped the performance of the Fund relative to the B1MB.
Fund management's decision to completely avoid Puerto Rico and the debt of all of its public corporations significantly helped Fund performance as the Fund's allocation to “BBB”-rated debt returned 2.99% while the “BBB” component of the B1MB returned 1.22% partially due to the significant losses and downgrades on several issues of Puerto Rico related debt within the B1MB over the period.
Annual Shareholder Report
| 1 | Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices. The Fund is not a “money market” mutual fund. A money market mutual fund attempts to maintain a stable net asset value through compliance with relevant Securities and Exchange Commission rules. The Fund is not governed by those rules, and its shares will fluctuate in value. |
| 2 | Income may be subject to the federal alternative minimum tax, as well as state and local taxes. |
| 3 | Please see the footnotes to the line graphs under “Fund Performance and Growth of a $10,000 Investment” below for the definition of, and more information about, the B1MB. |
| 4 | Lipper figures represent the average of the total returns reported by all mutual funds designated by Lipper, Inc. as falling into the respective category indicated. They do not reflect sales charges. |
| 5 | Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities with shorter durations. For purposes of this Management's Discussion of Fund Performance, duration is determined using a third-party analytical system. |
| 6 | Investment-grade securities and noninvestment-grade securities may either be: (a) rated by a nationally recognized statistical ratings organization or rating agency; or (b) unrated securities that the Fund's investment adviser (“Adviser”) believes are of comparable quality. The rating agencies that provided the ratings for rated securities include Standard & Poor's, Moody's Investor Services, Inc. and Fitch Rating Service. When ratings vary, the highest rating is used. Credit ratings of “AA” or better are considered to be high credit quality; credit ratings of “A” are considered high or medium/good quality; and credit ratings of “BBB” are considered to be medium/good credit quality, and the lowest category of investment-grade securities; credit ratings of “BB” and below are lower-rated, noninvestment-grade securities or junk bonds; and credit ratings of “CCC” or below are noninvestment-grade securities that have high default risk. Any credit quality breakdown does not give effect to the impact of any credit derivative investments made by the Fund. Credit ratings are an indication of the risk that a security will default. They do not protect a security from credit risk. Lower rated bonds typically offer higher yields to help compensate investors for the increased risk associated with them. Among these risks are lower creditworthiness, greater price volatility, more risk to principal and income than with higher rated securities and increased possibilities of default. |
Annual Shareholder Report
FUND PERFORMANCE AND GROWTH OF A $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,0001 in the Federated Municipal Ultrashort Fund (the “Fund”) from September 30, 2004 to September 30, 2014, compared to the Barclays 1-Year Municipal Bond Index (B1MB),2 the Lipper Short Municipal Debt Funds Average (LSMDFA)3 and a 50/50 blended index (Blended Index) of the B1MB and Lipper Tax-Exempt Money Market Funds Average.2,3 The Average Annual Total Return table below shows returns for each class averaged over the stated periods.
Growth of a $10,000 Investment – class a shares
Growth of $10,000 as of September 30, 2014
| Federated Municipal Ultrashort Fund - | Class A Shares | B1MB | LSMDFA | Blended Index |
| F | I | I | I |
| 9/30/2004 | 9,800 | 10,000 | 10,000 | 10,000 |
| 9/30/2005 | 9,939 | 10,116 | 10,124 | 10,083 |
| 9/30/2006 | 10,227 | 10,399 | 10,428 | 10,270 |
| 9/30/2007 | 10,539 | 10,784 | 10,747 | 10,512 |
| 9/30/2008 | 10,779 | 11,237 | 10,912 | 10,772 |
| 9/30/2009 | 11,125 | 11,766 | 11,438 | 11,029 |
| 9/30/2010 | 11,215 | 11,974 | 11,714 | 11,126 |
| 9/30/2011 | 11,334 | 12,135 | 11,896 | 11,200 |
| 9/30/2012 | 11,400 | 12,249 | 12,132 | 11,253 |
| 9/30/2013 | 11,403 | 12,336 | 12,123 | 11,293 |
| 9/30/2014 | 11,467 | 12,427 | 12,279 | 11,336 |
41 graphic description end -->
| ■ | Total returns shown for Class A include the maximum sales charge of 2.00% ($10,000 Investment minus $200 sales charge = $9,800). |
The Fund offers multiple share classes whose performance may be greater than or less than its other share class(es) due to differences in sales charges and expenses. See the Average Annual Total Return table below for the returns of additional classes not shown in the line graph above.
Annual Shareholder Report
Average Annual Total Returns for the Period Ended 9/30/2014
(returns reflect all applicable sales charges as specified below in footnote #1)
| | 1 Year | 5 Years | 10 Years |
| Class A Shares | -1.41% | 0.21% | 1.37% |
| Institutional Shares | 1.01% | 1.06% | 2.04% |
| B1MB | 0.74% | 1.19% | 2.20% |
| LSMDFA | 1.29% | 1.36% | 2.01% |
| Blended Index | 0.38% | 0.59% | 1.26% |
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call 1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank and are not federally insured.
| 1 | Represents a hypothetical investment of $10,000 in the Fund after deducting applicable sales charge. For Class A Shares, the maximum sales charge of 2.00% ($10,000 investment minus $200 sales charge = $9,800). The Fund's performance assumes the reinvestment of all dividends and distributions. The B1MB, the LSMDFA and the Blended Index have been adjusted to reflect reinvestment of dividends on securities in the index and the average. |
| 2 | The B1MB is the one-year (1-2) component of the Barclays Municipal Bond Index. The Barclays Municipal Bond Index is an unmanaged index of tax-exempt municipal bonds issued after December 31, 1990, with a minimum credit rating of at least Baa3 or BBB-, which have been issued as part of a deal of at least $75 million, have a minimum maturity value of at least $7 million and mature in at least one, but not more than two years. The B1MB also includes both zero coupon bonds and bonds subject to the alternative minimum tax (AMT). The B1MB is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund's performance. The Fund is not a money market fund and is not subject to the special regulatory requirements (including maturity and credit quality constraints) designed to enable money market funds to maintain a stable share price. The B1MB is unmanaged, and unlike the Fund, is not affected by cash flows. It is not possible to invest directly in an index. |
| 3 | Lipper figures represent the average of the total returns reported by all the mutual funds designated by Lipper, Inc. as falling into the respective categories indicated. They do not reflect sales charges. |
Annual Shareholder Report
Portfolio of Investments Summary Table (unaudited)
At September 30, 2014, the Fund's sector composition1 was as follows:
| Sector Composition | Percentage of
Total Net Assets |
| Transportation | 15.3% |
| General Obligation—Local | 14.9% |
| Industrial Development Bond/Pollution Control Revenue | 14.8% |
| General Obligation—State | 13.4% |
| Hospital | 10.1% |
| Electric & Gas | 7.8% |
| Public Power | 5.9% |
| Special Tax | 4.5% |
| Education | 4.1% |
| Water & Sewer | 3.3% |
| Other2 | 6.5% |
| Other Assets and Liabilities—Net3 | (0.6)% |
| TOTAL | 100.0% |
| 1 | Sector classifications, and the assignment of holdings to such sectors, are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. For securities that have been enhanced by a third-party, including bond insurers and banks, sector classifications are based upon the economic sector and/or revenue source of the underlying obligor, as determined by the Fund's Adviser. |
| 2 | For purposes of this table, sector classifications constitute 94.1% of the Fund's total net assets. Remaining sectors have been aggregated under the designation “Other.” |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Annual Shareholder Report
Portfolio of Investments
September 30, 2014
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—83.0% | |
| | | Alabama—1.2% | |
| $1,000,000 | | Alabama 21st Century Authority, Tobacco Settlement Revenue Bonds (Series 2012-A), 4.00%, 6/1/2015 | $1,024,690 |
| 37,325,000 | | Health Care Authority for Baptist Health, AL, Affiliate of UAB Health (Montgomery)(Series B) ARS (Assured Guaranty Corp. INS), 0.410%, 10/3/2014 | 37,325,000 |
| 4,640,000 | | Mobile, AL IDB, PCRBs (Series 2007A), 1.65% TOBs (Alabama Power Co.), Mandatory Tender 3/20/2017 | 4,737,950 |
| | | TOTAL | 43,087,640 |
| | | Alaska—0.1% | |
| 4,000,000 | | Valdez, AK Marine Terminal, Revenue Refunding Bonds (Series 2003B), 5.00% (BP PLC), 1/1/2016 | 4,232,800 |
| | | Arizona—1.3% | |
| 7,000,000 | 1 | Arizona Health Facilities Authority, Variable Rate Revenue Refunding Bonds (Series 2013A-1), 1.89% TOBs (Phoenix Children's Hospital), Mandatory Tender 2/5/2020 | 7,114,450 |
| 5,000,000 | | Arizona State, COPs (Series 2010A), 5.00% (Assured Guaranty Corp. INS), 10/1/2014 | 5,000,700 |
| 2,265,000 | | Navajo County, AZ Pollution Control Corp., Refunding Revenue Bonds (Series 2014A), 0.45% TOBs (Arizona Public Service Co.), Mandatory Tender 11/17/2015 | 2,264,774 |
| 1,000,000 | 2,3 | Yavapai County, AZ IDA Solid Waste Disposal, (Series 2003A-2), 0.625% TOBs (Waste Management, Inc.), Mandatory Tender 3/2/2015 | 999,820 |
| 25,000,000 | 1 | Yavapai County, AZ IDA Solid Waste Disposal, (Series 2010), 0.30% TOBs (Republic Services, Inc.), Mandatory Tender 12/1/2014 | 25,000,750 |
| 4,500,000 | 2,3 | Yavapai County, AZ IDA Solid Waste Disposal, Solid Waste Disposal Revenue Bonds (Series 2002), 2.13% TOBs (Waste Management, Inc.), Mandatory Tender 6/1/2018 | 4,649,760 |
| | | TOTAL | 45,030,254 |
| | | Arkansas—0.2% | |
| 8,000,000 | | Jefferson County, AR, PCR Refunding Bonds (Series 2013), 1.55% (Entergy Arkansas, Inc.), 10/1/2017 | 8,122,960 |
| | | California—8.7% | |
| 12,000,000 | 1 | Bay Area Toll Authority, CA, San Francisco Bay Area Toll Bridge Revenue Bonds (Series 2008D-1 Index Rate), 0.904% TOBs, Mandatory Tender 8/1/2017 | 12,145,440 |
| 24,000,000 | 1 | Bay Area Toll Authority, CA, San Francisco Bay Area Toll Bridge Revenue Bonds (Series 2014B), 1.50% TOBs, Mandatory Tender 4/2/2018 | 24,275,280 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | California—continued | |
| $15,000,000 | 1 | Bay Area Toll Authority, CA, San Francisco Bay Area Toll Bridge Revenue Bonds (SIFMA Index Rate Bonds Series 2007A-1), 0.75% TOBs, Mandatory Tender 10/1/2019 | $15,006,000 |
| 8,965,000 | 1 | California Educational Facilities Authority, Variable Rate Refunding Revenue Bonds (Series 2010B), 0.84% (Loyola Marymount University), 10/1/2015 | 8,972,799 |
| 3,770,000 | | California Health Facilities Financing Authority, Revenue Bonds (Series 2008A), 1.45% TOBs (Lucile Salter Packard Children's Hospital at Stanford), Mandatory Tender 3/15/2017 | 3,848,944 |
| 4,715,000 | | California Health Facilities Financing Authority, Revenue Bonds (Series 2008B), 1.45% TOBs (Lucile Salter Packard Children's Hospital at Stanford), Mandatory Tender 3/15/2017 | 4,813,732 |
| 4,715,000 | | California Health Facilities Financing Authority, Revenue Bonds (Series 2008C), 1.45% TOBs (Lucile Salter Packard Children's Hospital at Stanford), Mandatory Tender 3/15/2017 | 4,813,732 |
| 5,645,000 | | California Health Facilities Financing Authority, Revenue Bonds (Series 2013B), 5.00% TOBs (St. Joseph Health System), Mandatory Tender 10/17/2017 | 6,388,221 |
| 10,000,000 | | California Health Facilities Financing Authority, Variable Rate Refunding Revenue Bonds (Series 2009C), 5.00% TOBs (St. Joseph Health System), Mandatory Tender 10/16/2014 | 10,021,500 |
| 2,700,000 | | California Municipal Finance Authority, Solid Waste Disposal Revenue Bonds (Series 2008A), 1.55% (Waste Management, Inc.), 2/1/2019 | 2,704,914 |
| 2,300,000 | | California PCFA, Solid Waste Disposal Refunding Revenue Bonds (Series 1998A), 1.50% (Waste Management, Inc.), 6/1/2018 | 2,298,344 |
| 3,200,000 | | California PCFA, Solid Waste Disposal Refunding Revenue Bonds (Series 1998B), 3.625% (Waste Management, Inc.), 6/1/2018 | 3,271,520 |
| 5,000,000 | | California PCFA, Solid Waste Disposal Revenue Bonds (Series 2005A), 1.875% TOBs (Waste Management, Inc.), Mandatory Tender 4/1/2015 | 5,027,750 |
| 9,000,000 | | California PCFA, Solid Waste Disposal Revenue Bonds, 0.70% TOBs (Waste Management, Inc.), Mandatory Tender 5/1/2015 | 9,000,450 |
| 3,500,000 | 2 | California PCFA, Solid Waste Disposal Revenue Bonds, 1.65% TOBs (Waste Management, Inc.), Mandatory Tender 5/1/2017 | 3,502,905 |
| 35,000,000 | | California PCFA, Solid Waste Refunding Revenue Bonds (Series 2010A), 0.45% TOBs (Republic Services, Inc.), Mandatory Tender 11/3/2014 | 35,001,400 |
| 10,000,000 | 1 | California State, UT GO Bonds (Index Floating Rate Bonds Series 2013C), 0.60% TOBs, Mandatory Tender 12/1/2016 | 10,048,600 |
| 10,000,000 | 1 | California State, UT GO Bonds (Index Floating Rate Bonds Series 2013D), 0.81% TOBs, Mandatory Tender 12/1/2017 | 10,098,600 |
| 16,665,000 | | California State, UT GO Bonds, 4.00% TOBs, Mandatory Tender 12/1/2017 | 18,083,525 |
| 7,000,000 | 1 | California State, UT GO Refunding Bonds (Series 2012B), 0.79%, 5/1/2017 | 7,072,730 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | California—continued | |
| $9,000,000 | 1 | California State, UT GO Refunding Bonds (Series 2012B), 0.94%, 5/1/2018 | $9,151,470 |
| 11,000,000 | | California State, Various Purpose Refunding GO Bonds, 5.00%, 2/1/2015 | 11,181,060 |
| 10,000,000 | | California State, Various Purpose UT GO Bonds (Series 2013), 5.00%, 10/1/2017 | 11,299,300 |
| 60,000,000 | 1 | California Statewide CDA, Revenue Bonds (Series 2012C), 1.00% TOBs (Kaiser Permanente), Mandatory Tender 5/1/2017 | 60,060,600 |
| 2,800,000 | 1 | East Bay Municipal Utility District, CA Wastewater System, Revenue Refunding Bonds (Series 2011A), 0.36% TOBs, Mandatory Tender 7/8/2015 | 2,798,936 |
| 3,000,000 | | Foothill/Eastern Transportation Corridor Agency, CA, Toll Road Refunding Revenue Bonds (Series 2013B-1), 5.00% TOBs, Mandatory Tender 1/15/2018 | 3,278,370 |
| 2,500,000 | | Foothill/Eastern Transportation Corridor Agency, CA, Toll Road Refunding Revenue Bonds (Series 2013B-2), 5.00% TOBs, Mandatory Tender 1/15/2020 | 2,795,150 |
| 8,400,000 | | Hemet, CA USDT, COPs (Series 2006), 0.69% TOBs, Mandatory Tender 10/1/2016 | 8,400,000 |
| 5,000,000 | | Val Verde, CA USDT, GO BANs (Series 2013), 3.00%, 8/1/2018 | 5,177,850 |
| | | TOTAL | 310,539,122 |
| | | Colorado—0.5% | |
| 4,100,000 | | Colorado Health Facilities Authority, Revenue Bonds (Series 2009B), 5.00% TOBs (Catholic Health Initiatives), Mandatory Tender 11/11/2014 | 4,122,222 |
| 8,250,000 | 1 | E-470 Public Highway Authority, CO, Senior Revenue Bonds (Series 2014A), 1.22% TOBs, Mandatory Tender 8/31/2017 | 8,257,755 |
| 5,790,000 | 1 | E-470 Public Highway Authority, CO, Senior Revenue Bonds (SIFMA Index Series 2007CD-2), 1.79% TOBs (National Public Finance Guarantee Corporation INS), Mandatory Tender 8/31/2017 | 5,831,920 |
| | | TOTAL | 18,211,897 |
| | | Connecticut—3.6% | |
| 15,000,000 | 1 | Connecticut State HEFA, Revenue Bonds (Series 2014B Floating Rate Note), 0.655% TOBs (Yale-New Haven Hospital), Mandatory Tender 7/1/2019 | 15,035,550 |
| 15,585,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2011C), 0.70%, 5/15/2016 | 15,696,744 |
| 4,500,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2012A), 0.44%, 4/15/2015 | 4,508,460 |
| 5,000,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2012A), 0.57%, 4/15/2016 | 5,024,850 |
| 4,000,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2012A), 0.72%, 4/15/2017 | 4,033,240 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Connecticut—continued | |
| $4,500,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2012A), 0.92%, 4/15/2018 | $4,565,340 |
| 3,500,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2012D), 0.34%, 9/15/2015 | 3,504,795 |
| 3,000,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2012D), 0.48%, 9/15/2016 | 3,015,060 |
| 1,875,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2012D), 0.57%, 9/15/2017 | 1,886,588 |
| 2,500,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2012D), 0.82%, 9/15/2018 | 2,533,525 |
| 6,355,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2013A), 0.70%, 3/1/2020 | 6,372,158 |
| 4,000,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2013A), 0.80%, 3/1/2021 | 4,011,760 |
| 3,065,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2013A), 0.89%, 3/1/2022 | 3,076,678 |
| 1,500,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2013A), 0.94%, 3/1/2023 | 1,498,005 |
| 15,000,000 | 1 | Connecticut State, UT GO SIFMA Index Bonds (Series 2013D), 0.93%, 8/15/2019 | 15,205,800 |
| 10,000,000 | 1 | Connecticut State, Variable-Rate Remarketed Obligations (Series A-2), 01/01/2017 | 10,000,000 |
| 10,000,000 | 1 | Connecticut State, Variable-Rate Remarketed Obligations (Series A-3), 07/01/2017 | 10,000,000 |
| 5,000,000 | 1 | Connecticut State, Variable-Rate Remarketed Obligations (Series A-4), 01/01/2018 | 5,000,000 |
| 8,500,000 | | Hamden, CT, (Series 2014A), 1.25% BANs, 8/20/2015 | 8,540,290 |
| 600,000 | | West Haven, CT, UT GO Bonds, 3.00% (AGM Corp. INS), 8/1/2015 | 612,282 |
| 2,000,000 | | West Haven, CT, UT GO Bonds, 4.00% (AGM Corp. INS), 8/1/2017 | 2,154,860 |
| 2,500,000 | | West Haven, CT, UT GO Bonds, 5.00% (AGM Corp. INS), 8/1/2016 | 2,686,600 |
| | | TOTAL | 128,962,585 |
| | | District of Columbia—1.7% | |
| 10,000,000 | 1 | District of Columbia Income Tax Revenue, Income Tax Secured Revenue Refunding Bonds (Series 2011B), 0.64%, 12/1/2015 | 10,038,100 |
| 13,285,000 | 1 | District of Columbia Income Tax Revenue, Income Tax Secured Revenue Refunding Bonds (Series 2011B), 0.79%, 12/1/2017 | 13,435,785 |
| 10,000,000 | 1 | District of Columbia Income Tax Revenue, Income Tax Secured Revenue Refunding Bonds (Series 2011E), 0.64%, 12/1/2015 | 10,038,100 |
| 15,150,000 | 1 | District of Columbia Water & Sewer Authority, Public Utility Subordinate Lien Multimodal Revenue Bonds (Series 2012B-1), 0.52% TOBs, Mandatory Tender 6/1/2015 | 15,160,150 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | District of Columbia—continued | |
| $12,000,000 | 1 | District of Columbia Water & Sewer Authority, Public Utility Subordinate Lien Multimodal Revenue Bonds (Series 2012B-2), 0.62% TOBs, Mandatory Tender 6/1/2016 | $12,029,040 |
| | | TOTAL | 60,701,175 |
| | | Florida—2.4% | |
| 52,116 | 4,5 | Capital Trust Agency, FL, Housing Revenue Notes, 5.95% (Atlantic Housing Foundation Properties), 1/15/2039 | 2,748 |
| 25,000,000 | 1 | Citizens Property Insurance Corp. FL, SIFMA Floating Rate Notes (Series 2012A-3), 1.29% (Citizens Property Insurance PLA/CLA Accounts), 6/1/2015 | 25,149,750 |
| 7,500,000 | | Escambia County, FL Solid Waste Disposal, Revenue Bonds (First Series 2009), 1.35% TOBs (Gulf Power Co.), Mandatory Tender 6/2/2015 | 7,535,625 |
| 6,350,000 | | Escambia County, FL, PCR Refunding Bonds (Series 2003), 1.55% TOBs (Gulf Power Co.), Mandatory Tender 6/15/2016 | 6,463,919 |
| 21,740,000 | 1 | Lakeland, FL Energy Systems, Variable Rate Energy System Refunding Bonds (Series 2012), 0.79%, 10/1/2017 | 21,838,047 |
| 6,250,000 | | Miami-Dade County, FL IDA, Solid Waste Disposal Revenue Bonds (Series 2007), 2.25% TOBs (Waste Management, Inc.), Mandatory Tender 11/3/2014 | 6,259,062 |
| 5,200,000 | | Miami-Dade County, FL School Board, COPs (Series 2011B), 5.00% TOBs, Mandatory Tender 5/1/2016 | 5,551,780 |
| 2,250,000 | | Okeechobee County, FL, 2.25% TOBs (Waste Management, Inc.), Mandatory Tender 7/1/2016 | 2,318,423 |
| 1,500,000 | | Orlando & Orange County Expressway Authority, FL, Refunding Revenue Bonds (Series 2012A), 5.00%, 7/1/2017 | 1,677,720 |
| 9,725,000 | | St. Petersburg, FL HFA, (Series B) ARS (All Children's Hospital)/(AMBAC Financial Group, Inc. INS), 0.490%, 10/3/2014 | 9,725,000 |
| | | TOTAL | 86,522,074 |
| | | Georgia—1.4% | |
| 500,000 | | Atlanta, GA Airport General Revenue, Airport General Revenue Bonds (Series 2010A), 4.00%, 1/1/2015 | 504,915 |
| 1,000,000 | | Atlanta, GA Airport Passenger Facilities Charge Revenue, Subordinate Lien General Revenue Bonds (Series 2010B), 5.00%, 1/1/2015 | 1,012,410 |
| 13,000,000 | | Burke County, GA Development Authority, PCRBs (Second Series 2008), 1.40% TOBs (Georgia Power Co.), Mandatory Tender 4/1/2015 | 13,061,880 |
| 14,250,000 | | Burke County, GA Development Authority, PCRBs (Series 2012), 1.25% TOBs (Georgia Transmission Corporation Vogtle Project), Mandatory Tender 5/1/2015 | 14,315,835 |
| 4,500,000 | | Cobb County, GA Development Authority, Solid Waste Disposal Revenue Bonds (Series 2004A), 2.00% TOBs (Waste Management, Inc.), Mandatory Tender 10/1/2014 | 4,500,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Georgia—continued | |
| $10,000,000 | 1 | Metropolitan Atlanta Rapid Transit Authority, GA, Variable Rate Sales Tax Revenue Bonds (Series 2000B), 0.57% TOBs, Mandatory Tender 7/1/2025 | $9,999,600 |
| 2,425,000 | | Monroe County, GA Development Authority, PCRBs (First Series 1995), 2.00% TOBs (Georgia Power Co.), Mandatory Tender 6/13/2019 | 2,480,848 |
| 2,000,000 | | Municipal Electric Authority of Georgia, General Resolution Senior General Power Revenue Bonds (Series 2012B), 5.00%, 1/1/2017 | 2,199,920 |
| 400,000 | | Municipal Electric Authority of Georgia, Project One Power Revenue Bonds (Series GG), 5.00%, 1/1/2017 | 439,984 |
| 1,000,000 | | Municipal Electric Authority of Georgia, Project One Subordinated Bonds (Series 2011A), 5.00%, 1/1/2015 | 1,012,410 |
| | | TOTAL | 49,527,802 |
| | | Illinois—6.3% | |
| 12,000,000 | 1 | Chicago, IL Board of Education, UT GO Refunding Bonds (Series 2013A-3 SIFMA Index), 0.79% TOBs, Mandatory Tender 6/1/2017 | 11,742,120 |
| 16,000,000 | 1 | Chicago, IL Board of Education, UT GO Refunding Bonds (Series 2013A-3 SIFMA Index), 0.87% TOBs, Mandatory Tender 6/1/2018 | 15,579,040 |
| 10,325,000 | | Chicago, IL Midway Airport, Second Lien Revenue Bonds (Series 2010B), 5.00% TOBs (United States Treasury PRF), Mandatory Tender 1/1/2015 | 10,450,655 |
| 15,980,000 | | Chicago, IL O'Hare International Airport, General Revenue Senior Lien Revenue Refunding Bonds (Series 2012A), 5.00%, 1/1/2015 | 16,173,678 |
| 21,030,000 | | Chicago, IL O'Hare International Airport, General Revenue Senior Lien Revenue Refunding Bonds (Series 2012A), 5.00%, 1/1/2016 | 22,253,946 |
| 18,455,000 | | Chicago, IL O'Hare International Airport, General Revenue Senior Lien Revenue Refunding Bonds (Series 2012A), 5.00%, 1/1/2017 | 20,234,247 |
| 17,585,000 | | Chicago, IL O'Hare International Airport, General Revenue Senior Lien Revenue Refunding Bonds (Series 2012A), 5.00%, 1/1/2018 | 19,800,182 |
| 10,000,000 | | Chicago, IL O'Hare International Airport, General Revenue Senior Lien Revenue Refunding Bonds (Series 2012B), 4.00%, 1/1/2016 | 10,457,100 |
| 10,400,000 | | Chicago, IL O'Hare International Airport, General Revenue Senior Lien Revenue Refunding Bonds (Series 2012B), 4.00%, 1/1/2017 | 11,170,536 |
| 10,815,000 | | Chicago, IL O'Hare International Airport, General Revenue Senior Lien Revenue Refunding Bonds (Series 2012B), 4.00%, 1/1/2018 | 11,832,475 |
| 1,175,000 | | Cook County, IL, Refunding UT GO Bonds (Series 2014A), 5.00%, 11/15/2017 | 1,316,635 |
| 1,260,000 | | Illinois Finance Authority, Revenue Bonds (Series 2011IL), 3.00% (CHE Trinity Healthcare Credit Group), 12/1/2015 | 1,298,846 |
| 1,000,000 | | Illinois Finance Authority, Revenue Bonds (Series 2011IL), 3.00% (CHE Trinity Healthcare Credit Group), 12/1/2016 | 1,051,720 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Illinois—continued | |
| $7,000,000 | | Illinois Finance Authority, Revenue Bonds (Series 2012E), 5.00% TOBs (Ascension Health Alliance Senior Credit Group), Mandatory Tender 5/1/2015 | $7,193,760 |
| 2,000,000 | | Illinois State Unemployment Insurance Fund Building Receipts, Revenue Bonds (Series 2012A), 5.00%, 6/15/2015 | 2,068,980 |
| 2,000,000 | | Illinois State Unemployment Insurance Fund Building Receipts, Revenue Bonds (Series 2012A), 5.00%, 6/15/2016 | 2,157,880 |
| 12,705,000 | | Illinois State, Refunding UT GO Bonds (Series 2010), 5.00%, 1/1/2015 | 12,850,726 |
| 10,000,000 | | Illinois State, Refunding UT GO Bonds (Series 2010), 5.00%, 1/1/2017 | 10,809,300 |
| 4,975,000 | | Illinois State, Refunding UT GO Bonds (Series 2010), 5.00%, 1/1/2018 | 5,478,967 |
| 4,350,000 | | Illinois State, UT GO Bonds (Series March 2012), 4.00%, 3/1/2015 | 4,414,206 |
| 7,000,000 | | Illinois State, UT GO Bonds (Series of February 2014), 3.00%, 2/1/2016 | 7,186,340 |
| 5,000,000 | | Illinois State, UT GO Bonds (Series of February 2014), 3.00%, 2/1/2017 | 5,188,200 |
| 2,000,000 | | Illinois State, UT GO Bonds (Series of February 2014), 4.00%, 2/1/2017 | 2,121,120 |
| 2,825,000 | | Illinois State, UT GO Bonds (Series of February 2014), 4.00%, 2/1/2018 | 3,023,315 |
| 2,300,000 | | Kendall, Kane, & Will Counties, IL Community United School District No. 308, Refunding GO School Bonds (Series 2012), 4.00%, 10/1/2016 | 2,457,343 |
| 5,000,000 | | Kendall, Kane, & Will Counties, IL Community United School District No. 308, Refunding GO School Bonds (Series 2012), 4.00%, 10/1/2017 | 5,475,300 |
| | | TOTAL | 223,786,617 |
| | | Indiana—1.5% | |
| 7,525,000 | | Indiana Health Facility Financing Authority, Revenue Bonds (Series 2005A-10), 4.00% TOBs (Ascension Health Alliance Subordinate Credit Group), Mandatory Tender 6/1/2016 | 7,968,524 |
| 700,000 | | Indiana Municipal Power Agency, Power Supply System Refunding Revenue Bonds (Series 2012A), 5.00%, 1/1/2017 | 769,307 |
| 1,000,000 | | Indiana Municipal Power Agency, Power Supply System Refunding Revenue Bonds (Series 2012A), 5.00%, 1/1/2018 | 1,132,160 |
| 12,000,000 | | Indiana State EDA, (Series A), 0.40% TOBs (Republic Services, Inc.), Mandatory Tender 12/1/2014 | 12,000,000 |
| 10,000,000 | | Indiana State Finance Authority Hospital Revenue, Health Facility Revenue BANs (Series 2013A), 2.20% (Cameron Memorial Community Hospital, Inc.), 2/1/2016 | 10,036,800 |
| 5,000,000 | | Indiana State Finance Authority Water Facilities, Second Lien Water Utility Revenue Bonds (Series 2011B), 3.00% (Citizens Energy Group)/(United States Treasury COL), 10/1/2014 | 5,000,400 |
| 1,500,000 | | Indiana State Finance Authority, Hospital Revenue Bonds (Series 2011N), 4.00% (Indiana University Health Obligated Group), 3/1/2015 | 1,524,285 |
| 15,000,000 | | Whiting, IN Environmental Facilities, Revenue Bonds (Series 2009), 5.00% (BP PLC), 1/1/2016 | 15,873,000 |
| | | TOTAL | 54,304,476 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Kansas—0.4% | |
| $6,500,000 | 1 | Kansas State Department of Transportation, Highway Revenue Refunding Index Bonds (Series 2014B-4), 0.425%, 9/1/2018 | $6,503,055 |
| 6,000,000 | 1 | Kansas State Department of Transportation, Highway Revenue Refunding Index Bonds (Series 2014B-5), 0.505%, 9/1/2019 | 6,002,400 |
| 3,000,000 | | Olathe, KS, Health Facilities Revenue Bonds (Series 2012B), 2.00% TOBs (Olathe Medical Center), Mandatory Tender 3/1/2017 | 3,048,570 |
| | | TOTAL | 15,554,025 |
| | | Kentucky—0.8% | |
| 20,300,000 | | Kentucky Public Transportation Infrastructure Authority, Subordinate Toll Revenue BANs (Series 2013A), 5.00%, 7/1/2017 | 22,446,319 |
| 5,835,000 | | Louisville & Jefferson County, KY Metropolitan Government, PCRBs (Series 2003A), 1.65% TOBs (Louisville Gas & Electric Co.), Mandatory Tender 4/3/2017 | 5,924,917 |
| | | TOTAL | 28,371,236 |
| | | Louisiana—2.5% | |
| 21,000,000 | 1 | Louisiana Local Government Environmental Facilities CDA, Subordinate Lien Revenue Bonds (Series 2013B LIBOR Index), 0.81% TOBs (East Baton Rouge Sewerage Commission), Mandatory Tender 8/1/2018 | 21,150,780 |
| 16,000,000 | 1 | Louisiana State Gas & Fuels Second Lien, Revenue Refunding Bonds (Series 2013B-1 LIBOR Index), 0.58% TOBs, Mandatory Tender 5/1/2017 | 16,019,040 |
| 14,400,000 | 1 | Louisiana State Gas & Fuels Second Lien, Revenue Refunding Bonds (Series 2013B-2 LIBOR Index), 0.66% TOBs, Mandatory Tender 5/1/2018 | 14,457,600 |
| 10,000,000 | | Louisiana State Offshore Terminal Authority, Deepwater Port Revenue Bonds (Series 2007B-2A), 2.125% TOBs (Loop LLC), Mandatory Tender 10/1/2015 | 10,121,000 |
| 21,430,000 | | Louisiana State Offshore Terminal Authority, Deepwater Port Revenue Bonds (Series 2010B-1), 2.20% TOBs (Loop LLC), Mandatory Tender 10/1/2017 | 21,560,294 |
| 2,250,000 | | Tobacco Settlement Financing Corp., LA, Tobacco Settlement Asset-Backed Refunding Bonds (Series 2013A), 5.00%, 5/15/2016 | 2,384,078 |
| 2,000,000 | | Tobacco Settlement Financing Corp., LA, Tobacco Settlement Asset-Backed Refunding Bonds (Series 2013A), 5.00%, 5/15/2017 | 2,181,220 |
| | | TOTAL | 87,874,012 |
| | | Maryland—1.9% | |
| 18,830,000 | 1 | Maryland State Health & Higher Educational Facilities Authority, Revenue Bonds (Series 2011B), 1.255% TOBs (Johns Hopkins Hospital), Mandatory Tender 11/15/2016 | 19,032,611 |
| 23,900,000 | 1 | Maryland State Health & Higher Educational Facilities Authority, Revenue Bonds (Series 2012C), 0.935% TOBs (Johns Hopkins Hospital), Mandatory Tender 11/15/2017 | 24,017,827 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Maryland—continued | |
| $17,000,000 | 1 | Maryland State Health & Higher Educational Facilities Authority, Revenue Bonds (Series 2013A), 0.705% TOBs (Johns Hopkins Hospital), Mandatory Tender 5/15/2018 | $17,002,040 |
| 8,705,000 | 1 | Maryland State Health & Higher Educational Facilities Authority, Revenue Bonds (Series 2013B), 0.685% TOBs (Johns Hopkins Hospital), Mandatory Tender 5/15/2018 | 8,699,864 |
| | | TOTAL | 68,752,342 |
| | | Massachusetts—2.4% | |
| 13,815,000 | 1 | Commonwealth of Massachusetts, Refunding UT GO Bonds (SIFMA Index Bonds) (Series 2012A), 0.44%, 2/1/2015 | 13,817,348 |
| 15,000,000 | 1 | Commonwealth of Massachusetts, Refunding UT GO Bonds (SIFMA Index Bonds) (Series 2012A), 0.52%, 2/1/2016 | 15,003,900 |
| 4,000,000 | 1 | Commonwealth of Massachusetts, Refunding UT GO Bonds (SIFMA Index Bonds) (Series 2012A), 0.56%, 9/1/2016 | 4,014,200 |
| 20,000,000 | 1 | Commonwealth of Massachusetts, UT GO Bonds (Series 2012D), 0.36%, 1/1/2017 | 20,017,400 |
| 10,000,000 | 1 | Commonwealth of Massachusetts, UT GO Bonds (Series 2012D), 0.47%, 1/1/2018 | 10,043,800 |
| 3,500,000 | 1 | Commonwealth of Massachusetts, UT GO Refunding Bonds (Series 2011A), 0.70%, 2/1/2015 | 3,503,815 |
| 10,000,000 | 1 | Commonwealth of Massachusetts, UT GO Refunding Bonds (SIFMA Index Bonds) (Series 2013A), 0.40%, 2/1/2017 | 10,021,900 |
| 1,000,000 | | Massachusetts Municipal Wholesale Electric Co., Power Supply Project Revenue Bonds (Nuclear Project No. 4 Series 2012A), 5.00%, 7/1/2015 | 1,036,080 |
| 3,250,000 | | Massachusetts Municipal Wholesale Electric Co., Power Supply Project Revenue Bonds (Nuclear Project No. 6 Series 2012A), 5.00%, 7/1/2015 | 3,368,300 |
| 1,500,000 | | Massachusetts State Development Finance Agency, Resource Recovery Revenue Bonds (Series 1999B), 2.13% TOBs (Waste Management, Inc.), Mandatory Tender 12/1/2015 | 1,520,790 |
| 3,000,000 | | Massachusetts State Development Finance Agency, Solid Waste Disposal Revenue Bonds (Series 2002), 1.60% TOBs (Waste Management, Inc.), Mandatory Tender 5/1/2017 | 3,005,580 |
| 1,575,000 | | Massachusetts State HFA, Construction Loan Notes (Series 2012F), 0.65%, 12/1/2014 | 1,575,394 |
| | | TOTAL | 86,928,507 |
| | | Michigan—2.6% | |
| 15,500,000 | | Michigan State Hospital Finance Authority, Revenue Bonds (Series 1999B-4), 0.90% TOBs (Ascension Health Alliance Senior Credit Group), Mandatory Tender 3/16/2015 | 15,541,385 |
| 5,000,000 | | Michigan State Hospital Finance Authority, Revenue Bonds (Series 1999B-4), 1.50% TOBs (Ascension Health Alliance Senior Credit Group), Mandatory Tender 3/1/2017 | 5,092,650 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Michigan—continued | |
| $2,000,000 | | Michigan State Hospital Finance Authority, Revenue Bonds (Series 2010B), 5.00% (Ascension Health Alliance Senior Credit Group), 11/15/2015 | $2,104,100 |
| 26,650,000 | | Michigan Strategic Fund, Adjustable Rate Demand LO Refunding Revenue Bonds (Series 1995C), 2.125% TOBs (Detroit Edison Co.), Mandatory Tender 9/1/2016 | 27,156,883 |
| 22,500,000 | 1 | Saline, MI Area Schools, UT GO Refunding Bonds (Series 2012), 0.59% TOBs (Q-SBLF GTD), Mandatory Tender 11/1/2015 | 22,482,900 |
| 20,000,000 | 1 | University of Michigan (The Regents of), General Revenue Bonds (Series 2012F), 0.44% TOBs, Mandatory Tender 4/1/2016 | 20,026,800 |
| | | TOTAL | 92,404,718 |
| | | Minnesota—0.1% | |
| 4,900,000 | | Pipestone County, MN Medical Center, RANs (Series 2014), 0.85%, 5/1/2017 | 4,891,719 |
| | | Mississippi—0.4% | |
| 800,000 | | Mississippi Business Finance Corp., Solid Waste Disposal Revenue Bonds (Series 2002), 1.38% TOBs (Waste Management, Inc.), Mandatory Tender 3/1/2017 | 799,856 |
| 1,000,000 | | Mississippi Business Finance Corp., Solid Waste Disposal Revenue Bonds (Series 2004), 1.125% TOBs (Waste Management, Inc.), Mandatory Tender 9/1/2017 | 1,000,030 |
| 10,715,000 | 1 | Mississippi State, UT GO Refunding Bonds (Series 2012D), 0.57%, 9/1/2017 | 10,720,036 |
| | | TOTAL | 12,519,922 |
| | | Missouri—0.2% | |
| 3,780,000 | | Missouri State Environmental Improvement & Energy Resources Authority, Environmental Improvement Revenue Refunding Bonds (Series 1992), 1.25% (Kansas City Power And Light Co.), 7/1/2017 | 3,835,528 |
| 1,000,000 | | St. Louis, MO Municipal Finance Corp., City Justice Center Leasehold Revenue Refunding Bonds (Series 2011), 5.00% (St. Louis, MO), 2/15/2015 | 1,016,500 |
| 2,000,000 | | St. Louis, MO Municipal Finance Corp., City Justice Center Leasehold Revenue Refunding Bonds (Series 2011), 5.00% (St. Louis, MO), 2/15/2016 | 2,111,660 |
| | | TOTAL | 6,963,688 |
| | | Nebraska—0.1% | |
| 750,000 | | Nebraska Public Power District, General Revenue Bonds (Series 2012A), 3.00%, 1/1/2016 | 775,688 |
| 250,000 | | Nebraska Public Power District, General Revenue Bonds (Series 2012A), 4.00%, 1/1/2015 | 252,470 |
| 500,000 | | Nebraska Public Power District, General Revenue Bonds (Series 2012A), 4.00%, 1/1/2017 | 539,270 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Nebraska—continued | |
| $750,000 | | Nebraska Public Power District, General Revenue Bonds (Series 2012A), 5.00%, 1/1/2017 | $825,682 |
| | | TOTAL | 2,393,110 |
| | | New Hampshire—0.2% | |
| 5,000,000 | | New Hampshire Business Finance Authority, PCR Refunding Bonds (Series 2010A), 4.50% TOBs (United Illuminating Co.), Mandatory Tender 7/1/2015 | 5,111,000 |
| 2,000,000 | | New Hampshire Business Finance Authority, Solid Waste Disposal Revenue Bonds (Series 2003), 2.125% TOBs (Waste Management, Inc.), Mandatory Tender 6/1/2018 | 2,066,560 |
| | | TOTAL | 7,177,560 |
| | | New Jersey—6.1% | |
| 3,250,000 | | Gloucester County, NJ Improvement Authority, Resource Recovery Revenue Refunding Bonds (Series 1999A), 2.13% TOBs (Waste Management, Inc.), Mandatory Tender 12/1/2017 | 3,379,805 |
| 750,000 | | Gloucester County, NJ Improvement Authority, Resource Recovery Revenue Refunding Bonds (Series 1999A), 2.50% TOBs (Waste Management, Inc.), Mandatory Tender 12/1/2017 | 782,730 |
| 5,100,000 | | Logan Township, NJ, (Series 2013A), 1.25% BANs, 10/30/2014 | 5,102,193 |
| 6,126,000 | | Lyndhurst Township, NJ, 1.00% BANs, 3/18/2015 | 6,133,903 |
| 82,100,000 | 1 | New Jersey EDA, School Facilities Construction Refunding SIFMA Index Bonds (Series E), 1.74% (New Jersey State), 2/1/2016 | 82,940,704 |
| 13,000,000 | 1 | New Jersey EDA, School Facilities Construction SIFMA Index Bonds (Series 2012G), 0.62% (New Jersey State), 2/1/2015 | 13,000,650 |
| 18,500,000 | 1 | New Jersey EDA, School Facilities Construction SIFMA Index Bonds (Series 2012H), 0.94% (New Jersey State), 2/1/2017 | 18,548,840 |
| 1,500,000 | | New Jersey Health Care Facilities Financing Authority, Refunding Bonds (Series 2011), 5.00% (Meridian Health System Obligated Group), 7/1/2015 | 1,552,845 |
| 2,000,000 | | New Jersey Health Care Facilities Financing Authority, Refunding Bonds (Series 2011), 5.00% (Meridian Health System Obligated Group), 7/1/2016 | 2,153,920 |
| 2,000,000 | | New Jersey State Transportation Trust Fund Authority, Transportation System Bonds (Series 2011B), 5.00% (New Jersey State), 6/15/2015 | 2,065,040 |
| 6,625,000 | 1 | New Jersey Turnpike Authority, Revenue Bonds (SIFMA Index Bonds Series 2013 D-3), 0.72% TOBs, Mandatory Tender 1/1/2018 | 6,651,367 |
| 7,235,000 | 1 | New Jersey Turnpike Authority, Revenue Bonds (SIFMA Index Bonds Series 2013 E-1), 0.57% TOBs, Mandatory Tender 1/1/2016 | 7,254,245 |
| 5,000,000 | 1 | New Jersey Turnpike Authority, Revenue Bonds (SIFMA Index Bonds Series 2013 E-2), 0.66% TOBs, Mandatory Tender 1/1/2017 | 5,018,850 |
| 10,000,000 | 1 | New Jersey Turnpike Authority, Revenue Bonds (SIFMA Index Bonds Series 2013C), 0.52%, 1/1/2017 | 10,006,100 |
| 10,000,000 | 1 | New Jersey Turnpike Authority, Revenue Bonds (SIFMA Index Bonds Series 2013C), 0.59%, 1/1/2018 | 9,999,800 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | New Jersey—continued | |
| $11,000,000 | 1 | New Jersey Turnpike Authority, Turnpike Revenue Bonds (Series 2014B-3), 0.68% TOBs, Mandatory Tender 1/1/2018 | $11,011,110 |
| 4,853,000 | | Newark, NJ, (Series 2013G), 1.50% RANs, 12/10/2014 | 4,859,115 |
| 15,000,000 | | Newark, NJ, (Series 2014A), 1.75% TANs, 2/20/2015 | 15,014,550 |
| 9,553,000 | | Newark, NJ, (Series 2014B), 1.75% BANs, 6/24/2015 | 9,604,873 |
| 2,000,000 | | Newark, NJ, (Series 2014C), 1.75% BANs, 6/24/2015 | 2,010,860 |
| | | TOTAL | 217,091,500 |
| | | New Mexico—0.6% | |
| 19,350,000 | 1 | New Mexico Municipal Energy Acquisition Authority, Gas Supply Revenue Refunding Bonds (Series 2014B), 0.855% TOBs (Royal Bank of Canada, Montreal GTD), Mandatory Tender 8/1/2019 | 19,480,806 |
| | | New York—12.1% | |
| 11,141,000 | | Colonie, NY, 1.25% BANs, 3/19/2015 | 11,163,728 |
| 3,100,000 | | Croton Falls, NY Fire District, 1.50% BANs, 11/21/2014 | 3,102,232 |
| 2,075,000 | | Long Beach, NY, (Series 2014A), 1.50% RANs, 9/18/2015 | 2,081,536 |
| 1,740,000 | | Long Beach, NY, (Series 2014B), 1.50% RANs, 9/18/2015 | 1,749,239 |
| 10,000,000 | 1 | Metropolitan Transportation Authority, NY, Dedicated Tax Fund Refunding Bonds (Series 2008B-3c) (Floating Rate Tender Notes), 0.72% TOBs (MTA Dedicated Tax Fund), Mandatory Tender 11/1/2014 | 10,001,100 |
| 5,830,000 | | Metropolitan Transportation Authority, NY, Dedicated Tax Fund Refunding Bonds (Series 2011A), 4.00% (MTA Dedicated Tax Fund), 11/15/2014 | 5,858,684 |
| 8,000,000 | 1 | Metropolitan Transportation Authority, NY, Dedicated Tax Fund Variable Rate Bonds (Subseries 2002B-3), 0.79% (MTA Dedicated Tax Fund), 11/1/2017 | 8,034,640 |
| 14,000,000 | 1 | Metropolitan Transportation Authority, NY, Dedicated Tax Fund Variable Rate Bonds (Subseries 2002B-3b), 0.94% (MTA Dedicated Tax Fund), 11/1/2018 | 14,073,780 |
| 15,000,000 | 1 | Metropolitan Transportation Authority, NY, Dedicated Tax Fund Variable Rate Bonds (Subseries 2002B-3c), 0.99% (MTA Dedicated Tax Fund), 11/1/2019 | 15,253,200 |
| 5,000,000 | 1 | Metropolitan Transportation Authority, NY, Transportation Revenue Variable Rate Refunding Bonds (Subseries 2002D-2b), 0.708% TOBs (MTA Transportation Revenue)/(AGM Corp. INS), Mandatory Tender 5/15/2018 | 5,013,650 |
| 3,000,000 | 1 | Metropolitan Transportation Authority, NY, Transportation Revenue Variable Rate Refunding Bonds (Subseries 2002G-1c), 0.795% (MTA Transportation Revenue), 11/1/2016 | 3,023,730 |
| 2,000,000 | 1 | Metropolitan Transportation Authority, NY, Transportation Revenue Variable Rate Refunding Bonds (Subseries 2002G-1d), 0.935% (MTA Transportation Revenue), 11/1/2017 | 2,024,660 |
| 5,000,000 | 1 | Metropolitan Transportation Authority, NY, Transportation Revenue Variable Rate Refunding Bonds (Subseries 2002G-1g), 0.755% TOBs (MTA Transportation Revenue), Mandatory Tender 11/1/2015 | 5,020,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | New York—continued | |
| $5,000,000 | 1 | Metropolitan Transportation Authority, NY, Transportation Revenue Variable Rate Refunding Bonds (Subseries 2002G-1h), 0.955% TOBs (MTA Transportation Revenue), Mandatory Tender 11/1/2016 | $5,056,100 |
| 18,900,000 | 1 | Metropolitan Transportation Authority, NY, Transportation Revenue Variable Rate Refunding Bonds (Subseries 2012G-2), 0.635% TOBs (MTA Transportation Revenue), Mandatory Tender 11/1/2015 | 18,939,879 |
| 24,750,000 | 1 | Metropolitan Transportation Authority, NY, Transportation Revenue Variable Rate Refunding Bonds (Subseries 2012G-3), 0.805% TOBs (MTA Transportation Revenue), Mandatory Tender 11/1/2016 | 24,950,722 |
| 17,770,000 | 1 | Metropolitan Transportation Authority, NY, Transportation Revenue Variable Rate Refunding Bonds (Subseries 2012G-4), 0.945% TOBs (MTA Transportation Revenue), Mandatory Tender 11/1/2017 | 17,967,247 |
| 13,500,000 | | Nassau County, NY, (Series 2014A), 2.00% BANs, 2/2/2015 | 13,578,840 |
| 14,000,000 | 1 | New York City, NY, UT GO Bonds (Series 2008J, Subseries J-4), 0.42%, 8/1/2021 | 14,002,660 |
| 15,000,000 | 1 | New York City, NY, UT GO Bonds (Series 2008J, Subseries J-4), 0.51%, 8/1/2021 | 15,004,350 |
| 12,700,000 | 1 | New York City, NY, UT GO Bonds (Series 2008J, Subseries J-4), 0.59%, 8/1/2025 | 12,700,508 |
| 5,500,000 | | New York City, NY, UT GO Bonds (Series 2012E), 5.00%, 8/1/2015 | 5,722,640 |
| 6,040,000 | | New York City, NY, UT GO Bonds (Series 2012E), 5.00%, 8/1/2016 | 6,550,803 |
| 12,395,000 | | New York City, NY, UT GO Bonds (Series 2012E), 5.00%, 8/1/2017 | 13,886,366 |
| 14,625,000 | | New York City, NY, UT GO Bonds (Series 2012F), 5.00%, 8/1/2016 | 15,861,836 |
| 13,275,000 | | New York State Dormitory Authority, Revenue Bonds (Series 2011A), 5.00% (School District Financing Program), 10/1/2015 | 13,900,651 |
| 2,000,000 | | New York State Environmental Facilities Corp., Revenue Bonds (Series A), 2.75% (Waste Management, Inc.), 7/1/2017 | 2,105,680 |
| 15,500,000 | | New York State Environmental Facilities Corp., Solid Waste Disposal Refunding Revenue Bonds (Series 2012), 0.40% TOBs (Waste Management, Inc.), Mandatory Tender 11/3/2014 | 15,500,155 |
| 5,000,000 | | New York State Thruway Authority, Revenue Bonds (Series 2011A), 5.00% (New York State Personal Income Tax Revenue Bond Fund), 3/15/2015 | 5,111,200 |
| 7,500,000 | 1,2,3 | Nuveen New York AMT-Free Municipal Income Fund, Institutional MuniFund Term Preferred Shares (Series 2017), 0.66%, 10/1/2017 | 7,500,075 |
| 1,000,000 | | Oyster Bay, NY, Public Improvement Refunding Bonds (Series 2014A), 3.00%, 1/15/2016 | 1,029,660 |
| 1,500,000 | | Oyster Bay, NY, Public Improvement Refunding Bonds (Series 2014A), 4.00%, 1/15/2017 | 1,602,465 |
| 2,115,000 | | Oyster Bay, NY, Public Improvement Refunding Bonds (Series 2014A), 4.00%, 1/15/2018 | 2,312,668 |
| 3,980,000 | | Oyster Bay, NY, Public Improvement Refunding Bonds (Series 2014B), 3.00%, 8/15/2016 | 4,141,309 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | New York—continued | |
| $1,600,000 | | Oyster Bay, NY, Public Improvement Refunding Bonds (Series 2014B), 4.00%, 8/15/2017 | $1,738,320 |
| 1,720,000 | | Oyster Bay, NY, Public Improvement Refunding Bonds (Series 2014B), 4.00%, 8/15/2018 | 1,883,159 |
| 8,000,000 | | Rockland County, NY, 2.00% TANs, 3/17/2015 | 8,039,200 |
| 1,825,000 | | Rockland County, NY, LT GO Bonds (Series 2014A), 5.00% (AGM Corp. INS), 3/1/2018 | 2,052,340 |
| 2,250,000 | | Rockland County, NY, LT GO Bonds (Series 2014A), 5.00% (AGM Corp. INS), 3/1/2019 | 2,578,995 |
| 7,000,000 | | Suffolk County, NY, (Series 2014A), 1.50% BANs, 5/1/2015 | 7,039,410 |
| 7,500,000 | | Suffolk County, NY, 1.50% RANs, 3/26/2015 | 7,533,900 |
| 2,500,000 | | Tobacco Settlement Financing Corp., NY, Asset-Backed Revenue Bonds (Series 2013B), 5.00% (New York State), 6/1/2020 | 2,577,850 |
| 3,500,000 | | Tobacco Settlement Financing Corp., NY, Asset-Backed Revenue Bonds (Series 2013B), 5.00% (New York State), 6/1/2020 | 3,763,060 |
| 9,000,000 | | Tobacco Settlement Financing Corp., NY, Asset-Backed Revenue Bonds (Series 2013B), 5.00% (New York State), 6/1/2021 | 9,666,450 |
| 6,750,000 | | Tobacco Settlement Financing Corp., NY, Asset-Backed Revenue Bonds (Series 2013B), 5.00% (New York State), 6/1/2021 | 7,504,245 |
| 10,000,000 | | Triborough Bridge & Tunnel Authority, NY, General Revenue Refunding Bonds (Series 2011A), 5.00%, 1/1/2015 | 10,122,200 |
| 2,190,000 | | Triborough Bridge & Tunnel Authority, NY, General Revenue Refunding Bonds (Series 2011A), 5.00%, 1/1/2016 | 2,318,882 |
| 27,800,000 | 1 | Triborough Bridge & Tunnel Authority, NY, Subordinate Revenue Variable Rate Refunding Bonds (Series 2000ABCD-2), 0.21% (AGM Corp. INS), 1/1/2016 | 27,799,722 |
| 9,150,000 | 1 | Triborough Bridge & Tunnel Authority, NY, Subordinate Revenue Variable Rate Refunding Bonds (Series 2000ABCD-3), 0.29% (AGM Corp. INS), 1/1/2017 | 9,153,569 |
| 11,350,000 | 1 | Triborough Bridge & Tunnel Authority, NY, Subordinate Revenue Variable Rate Refunding Bonds (Series 2000ABCD-4), 0.39% (AGM Corp. INS), 1/1/2018 | 11,357,945 |
| 4,000,000 | 1 | Triborough Bridge & Tunnel Authority, NY, Subordinate Revenue Variable Rate Refunding Bonds (Series 2000ABCD-5), 0.48% (AGM Corp. INS), 1/1/2019 | 4,003,880 |
| 8,472,100 | | Utica, NY, (Series 2014B), 1.25% BANs, 5/7/2015 | 8,488,451 |
| | | TOTAL | 431,447,571 |
| | | North Carolina—1.8% | |
| 10,500,000 | | North Carolina Capital Facilities Finance Agency, (Series 2013), 0.40% TOBs (Republic Services, Inc.), Mandatory Tender 12/15/2014 | 10,500,000 |
| 3,000,000 | | North Carolina Capital Facilities Finance Agency, (Series B), 0.40% TOBs (Republic Services, Inc.), Mandatory Tender 12/1/2014 | 3,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | North Carolina—continued | |
| $5,570,000 | | North Carolina Eastern Municipal Power Agency, Power System Refunding Revenue Bonds (Series 2012B), 5.00%, 1/1/2015 | $5,638,400 |
| 1,500,000 | | North Carolina Eastern Municipal Power Agency, Power System Refunding Revenue Bonds (Series 2012B), 5.00%, 1/1/2016 | 1,586,520 |
| 4,500,000 | | North Carolina Eastern Municipal Power Agency, Power System Refunding Revenue Bonds (Series 2012B), 5.00%, 1/1/2017 | 4,933,845 |
| 2,855,000 | | North Carolina Eastern Municipal Power Agency, Power System Revenue Bonds (Series 2010A), 5.00%, 1/1/2015 | 2,890,059 |
| 2,890,000 | 1 | North Carolina Medical Care Commission, Health Care Facilities Revenue Refunding Bonds (Series 2012C), 0.78% TOBs (Wake Forest Baptist Obligated Group), Mandatory Tender 12/1/2017 | 2,881,677 |
| 20,000,000 | 1 | University of North Carolina at Chapel Hill, General Revenue Bonds (Series 2012A), 0.555% TOBs, Mandatory Tender 12/1/2015 | 20,030,600 |
| 12,750,000 | 1 | University of North Carolina at Chapel Hill, General Revenue Bonds (Series 2012A), 0.855% TOBs, Mandatory Tender 12/1/2017 | 12,897,900 |
| | | TOTAL | 64,359,001 |
| | | Ohio—3.2% | |
| 5,000,000 | | Cleveland, OH Public Power System, Revenue Refunding Bonds (Series 2010), 5.00%, 11/15/2014 | 5,030,250 |
| 40,000,000 | 1 | Lancaster, OH Port Authority, Gas Supply Revenue Refunding Bonds (Series 2014), 0.825% TOBs (Royal Bank of Canada, Montreal GTD), Mandatory Tender 8/1/2019 | 40,159,600 |
| 8,500,000 | | Ohio State Air Quality Development Authority, PCR Refunding Bonds (Series 2006-A), 3.78% TOBs (FirstEnergy Solutions Corp.), Mandatory Tender 12/3/2018 | 8,963,420 |
| 20,000,000 | | Ohio State Air Quality Development Authority, PCR Refunding Bonds (Series 2009D), 2.25% TOBs (FirstEnergy Solutions Corp.), Mandatory Tender 9/15/2016 | 20,278,600 |
| 10,000,000 | | Ohio State Air Quality Development Authority, PCR Refunding Bonds (Series 2009-B), 3.10% TOBs (FirstEnergy Solutions Corp.), Mandatory Tender 3/1/2019 | 10,132,900 |
| 3,000,000 | | Ohio State Higher Educational Facility Commission, Higher Educational Facility Revenue Bonds (Series 2009), 5.00% (Oberlin College), 10/1/2014 | 3,000,420 |
| 13,000,000 | 1 | Ohio State Higher Educational Facility Commission, Revenue Bonds (Series 2011B), 1.29% (University of Dayton), 7/1/2016 | 13,025,350 |
| 2,000,000 | | Ohio Water Development Authority, 2.25% TOBs (Waste Management, Inc.), Mandatory Tender 7/1/2016 | 2,060,820 |
| 8,000,000 | | Ohio Water Development Authority, PCR Refunding Bonds (Series 2010B), 2.20% TOBs (FirstEnergy Solutions Corp.), Mandatory Tender 6/1/2016 | 8,030,640 |
| 1,400,000 | | Richland County, OH, (Series 2014A), 1.60% BANs, 1/7/2015 | 1,402,660 |
| | | TOTAL | 112,084,660 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Oklahoma—1.2% | |
| $750,000 | | Canadian County Educational Facilities Authority, OK, Educational Facilities Lease Revenue Bonds (Series 2012), 3.00% (Mustang Public Schools), 9/1/2016 | $781,312 |
| 3,235,000 | | Canadian County Educational Facilities Authority, OK, Educational Facilities Lease Revenue Bonds (Series 2012), 3.50% (Mustang Public Schools), 9/1/2017 | 3,455,142 |
| 1,390,000 | | Canadian County Educational Facilities Authority, OK, Educational Facilities Lease Revenue Bonds (Series 2012), 4.00% (Mustang Public Schools), 9/1/2018 | 1,524,538 |
| 2,050,000 | | Cleveland County, OK Educational Facilities Authority, Educational Facilities Lease Revenue Bonds (Series 2013), 5.00% (Moore Public Schools), 6/1/2015 | 2,115,436 |
| 1,500,000 | | Oklahoma County, OK Finance Authority, Educational Facilities Lease Revenue Bonds (Series 2012), 2.00% (Midwest City-Del City Public Schools), 3/1/2015 | 1,510,935 |
| 4,390,000 | | Oklahoma County, OK Finance Authority, Educational Facilities Lease Revenue Bonds (Series 2012), 3.00% (Midwest City-Del City Public Schools), 3/1/2017 | 4,613,100 |
| 5,345,000 | | Oklahoma County, OK Finance Authority, Educational Facilities Lease Revenue Bonds (Series 2012), 4.00% (Midwest City-Del City Public Schools), 3/1/2016 | 5,600,170 |
| 13,000,000 | | Oklahoma State Municipal Power Authority, Power Supply System Revenue Bonds (Series 2003A), 1.20% TOBs, Mandatory Tender 1/5/2015 | 13,017,680 |
| 7,595,000 | 1 | Oklahoma State Municipal Power Authority, Power Supply System Revenue Refunding Bonds (Series 2005A), 0.85% TOBs, Mandatory Tender 8/1/2018 | 7,615,203 |
| 3,315,000 | | Tulsa County, OK Industrial Authority, Educational Facilities Lease Revenue Bonds (Series 2011), 4.00% (Broken Arrow Public Schools), 9/1/2015 | 3,429,069 |
| | | TOTAL | 43,662,585 |
| | | Oregon—0.4% | |
| 3,200,000 | | Gilliam County, OR Solid Waste Disposal, Solid Waste Disposal Revenue Bonds (Series 2000-A), 0.75% TOBs (Waste Management, Inc.), Mandatory Tender 5/1/2015 | 3,200,256 |
| 2,500,000 | | Gilliam County, OR Solid Waste Disposal, Solid Waste Disposal Revenue Bonds (Series 2007), 1.50% (Waste Management, Inc.), 10/1/2018 | 2,491,275 |
| 3,000,000 | | Tri-County Metropolitan Transportation District of Oregon, Payroll Tax & Grant Receipt Revenue Bonds (Series 2013), 3.00%, 11/1/2016 | 3,047,100 |
| 3,500,000 | | Tri-County Metropolitan Transportation District of Oregon, Payroll Tax & Grant Receipt Revenue Bonds (Series 2013), 4.00%, 11/1/2017 | 3,696,350 |
| 2,100,000 | | Tri-County Metropolitan Transportation District of Oregon, Payroll Tax & Grant Receipt Revenue Bonds (Series 2013), 5.00%, 11/1/2018 | 2,331,399 |
| | | TOTAL | 14,766,380 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Pennsylvania—4.3% | |
| $4,125,000 | | Allegheny County, PA HDA, Revenue Bonds (Series 2010A), 5.00% (UPMC Health System), 5/15/2015 | $4,249,286 |
| 8,700,000 | | Beaver County, PA IDA, PCR Refunding Bonds (Series 2006-A), 3.50% TOBs (FirstEnergy Solutions Corp.), Mandatory Tender 6/1/2020 | 8,917,674 |
| 10,000,000 | | Beaver County, PA IDA, PCR Refunding Bonds (Series 2006A), 2.20% TOBs (FirstEnergy Solutions Corp.), Mandatory Tender 7/1/2016 | 10,111,900 |
| 1,000,000 | 1 | Bermudian Springs, PA School District, GO Notes (Series 2013), 0.505%, 5/1/2015 | 998,980 |
| 7,500,000 | 1 | Bermudian Springs, PA School District, GO Notes (Series 2013), 0.805% TOBs, Mandatory Tender 5/2/2016 | 7,495,800 |
| 3,000,000 | | Bucks County, PA IDA, Solid Waste Revenue Bonds, 1.38% TOBs (Waste Management, Inc.), Mandatory Tender 2/1/2017 | 3,002,910 |
| 8,700,000 | | Chester County, PA IDA, Student Housing Revenue BANs (Series 2013C-1), 1.60% (University Student Housing LLC), 2/1/2015 | 8,712,093 |
| 5,975,000 | 1 | Downingtown Area School District, PA, UT GO Bonds (Series 2010), 0.41% TOBs, Mandatory Tender 5/1/2016 | 5,960,301 |
| 600,000 | 1 | Manheim Township, PA School District, GO Bonds (Series 2014A) (State Aid Withholding GTD), 0.32%, 5/2/2016 | 600,024 |
| 1,400,000 | 1 | Manheim Township, PA School District, GO Bonds (Series 2014A) (State Aid Withholding GTD), 0.38%, 5/1/2017 | 1,400,070 |
| 15,000,000 | 1 | Manheim Township, PA School District, GO Bonds (Series 2014A), 0.505% TOBs (State Aid Withholding GTD), Mandatory Tender 5/1/2025 | 15,002,700 |
| 16,445,000 | 1 | Middletown, PA Area School District, UT GO Bonds (Series 2013), 0.855% TOBs, Mandatory Tender 6/5/2017 | 16,476,574 |
| 500,000 | | Monroeville, PA Finance Authority, Revenue Bonds (Series 2012), 4.00% (UPMC Health System), 2/15/2015 | 507,185 |
| 625,000 | | Monroeville, PA Finance Authority, Revenue Bonds (Series 2012), 4.00% (UPMC Health System), 2/15/2016 | 655,844 |
| 375,000 | | Monroeville, PA Finance Authority, Revenue Bonds (Series 2012), 4.00% (UPMC Health System), 2/15/2017 | 404,745 |
| 625,000 | | Monroeville, PA Finance Authority, Revenue Bonds (Series 2012), 4.00% (UPMC Health System), 2/15/2018 | 687,944 |
| 8,000,000 | 1 | Northampton County, PA General Purpose Authority, Variable Rate Hospital Revenue Bonds (Series 2013B), 1.44% TOBs (St. Luke's Hospital of Bethlehem), Mandatory Tender 8/15/2043 | 7,926,960 |
| 17,500,000 | | Pennsylvania EDFA, (Series 2013), 0.40% TOBs (Waste Management, Inc.), Mandatory Tender 11/3/2014 | 17,500,700 |
| 5,250,000 | | Pennsylvania EDFA, Exempt Facilities Revenue Bonds (Series 2006A), 2.55% TOBs (FirstEnergy Solutions Corp.), Mandatory Tender 12/3/2018 | 5,296,673 |
| 4,500,000 | | Pennsylvania EDFA, Solid Waste Disposal Revenue Bonds, 1.75% TOBs (Waste Management, Inc.), Mandatory Tender 12/1/2015 | 4,573,935 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Pennsylvania—continued | |
| $10,855,000 | 1 | Pennsylvania State Turnpike Commission, Variable Rate Turnpike Revenue Bonds (Series 2013A), 0.64%, 12/1/2017 | $10,894,946 |
| 11,000,000 | 1 | Pennsylvania State Turnpike Commission, Variable Rate Turnpike Revenue Bonds (Series 2013A), 0.73%, 12/1/2018 | 11,062,590 |
| 6,000,000 | 1 | Pennsylvania State Turnpike Commission, Variable Rate Turnpike Revenue Bonds (SIFMA Index Bonds)(Series 2014B), 0.65%, 12/1/2018 | 6,020,460 |
| 4,000,000 | 1 | Pennsylvania State Turnpike Commission, Variable Rate Turnpike Revenue Bonds (SIFMA Index Bonds)(Series 2014B), 0.93%, 12/1/2020 | 4,025,560 |
| 1,430,000 | 1 | Sayre, PA, Health Care Facilities Authority, Revenue Bonds, 0.807% (Guthrie Healthcare System, PA), 12/1/2017 | 1,419,204 |
| | | TOTAL | 153,905,058 |
| | | Rhode Island—0.3% | |
| 4,585,000 | | Rhode Island State and Providence Plantations, GO Bonds (Series 2011A), 5.00%, 8/1/2015 | 4,770,005 |
| 4,700,000 | | Rhode Island State and Providence Plantations, GO Bonds (Series 2011B), 5.00%, 8/1/2015 | 4,889,645 |
| | | TOTAL | 9,659,650 |
| | | South Carolina—0.6% | |
| 17,470,000 | 1 | Charleston, SC Waterworks and Sewer System, Refunding Revenue Bonds (Series 2007), 0.78% TOBs, Mandatory Tender 1/1/2018 | 17,490,265 |
| 2,000,000 | | South Carolina Jobs-EDA, EDRBs (Series 2008), 2.875% (Waste Management, Inc.), 2/1/2015 | 2,018,260 |
| | | TOTAL | 19,508,525 |
| | | Tennessee—1.3% | |
| 2,500,000 | | Lewisburg, TN IDB, (Series 2012), 0.40% TOBs (Waste Management, Inc.), Mandatory Tender 11/3/2014 | 2,500,000 |
| 20,000,000 | 1 | Metropolitan Government Nashville & Davidson County, TN HEFA, Revenue Refunding Bonds (Series 2012A), 0.44% TOBs (Vanderbilt University), Mandatory Tender 10/1/2015 | 19,990,200 |
| 23,500,000 | 1 | Metropolitan Government Nashville & Davidson County, TN HEFA, Revenue Refunding Bonds (Series 2012B), 0.64% TOBs (Vanderbilt University) 10/1/2017 | 23,600,110 |
| 1,000,000 | | Metropolitan Government Nashville & Davidson County, TN Water & Sewer, Subordinate Lien Water & Sewer Revenue Refunding Bonds (Series 2012), 5.00%, 7/1/2016 | 1,080,440 |
| | | TOTAL | 47,170,750 |
| | | Texas—6.6% | |
| 5,000,000 | | Central Texas Regional Mobility Authority, Senior Lien Revenue Refunding Put Bonds (Series 2013B), 3.00% TOBs, Mandatory Tender 1/4/2016 | 5,071,750 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Texas—continued | |
| $12,890,000 | | Clear Creek, TX ISD, Variable Rate UT School Building Bonds (Series 2013B), 2.00% TOBs (PSFG GTD), Mandatory Tender 8/14/2015 | $13,071,749 |
| 5,625,000 | | Cypress-Fairbanks, TX ISD, Variable Rate UT GO School Building Bonds (Series 2014B-2), 3.00% TOBs (PSFG GTD), Mandatory Tender 8/15/2017 | 5,945,963 |
| 5,000,000 | | Cypress-Fairbanks, TX ISD, Variable Rate UT GO School Building Bonds (Series 2014B-3), 2.00% TOBs (PSFG GTD), Mandatory Tender 8/15/2015 | 5,071,600 |
| 2,780,000 | | Georgetown, TX ISD, 4.75% TOBs, Mandatory Tender 8/1/2015 | 2,880,747 |
| 10,000,000 | 1 | Harris County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Bonds (Series 2014B), 0.63% TOBs (Memorial Hermann Health System), Mandatory Tender 12/1/2019 | 10,003,900 |
| 1,170,000 | 1 | Harris County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Refunding Bonds (Series 2013B), 0.34% (Memorial Hermann Health System), 6/1/2015 | 1,170,468 |
| 1,045,000 | 1 | Harris County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Refunding Bonds (Series 2013B), 0.44% (Memorial Hermann Health System), 6/1/2016 | 1,046,055 |
| 3,600,000 | 1 | Harris County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Refunding Bonds (Series 2013B), 0.54% (Memorial Hermann Health System), 6/1/2017 | 3,606,264 |
| 1,815,000 | 1 | Harris County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Refunding Bonds (Series 2013B), 0.64% (Memorial Hermann Health System), 6/1/2018 | 1,815,980 |
| 2,250,000 | 1 | Harris County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Refunding Bonds (Series 2013B), 0.74% (Memorial Hermann Health System), 6/1/2019 | 2,251,913 |
| 2,000,000 | 1 | Harris County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Refunding Bonds (Series 2013B), 0.79% (Memorial Hermann Health System), 6/1/2020 | 1,998,280 |
| 3,710,000 | 1 | Harris County, TX Cultural Education Facilities Finance Corp., Hospital Revenue Refunding Bonds (Series 2013B), 0.87% (Memorial Hermann Health System), 6/1/2021 | 3,700,428 |
| 1,770,000 | | Harris County, TX Metropolitan Transit Authority, Sales & Tax Contractual Obligations (Series 2011B), 4.00%, 11/1/2014 | 1,775,894 |
| 3,655,000 | | Harris County, TX Metropolitan Transit Authority, Sales & Tax Contractual Obligations (Series 2011B), 4.00%, 11/1/2015 | 3,805,184 |
| 25,000,000 | 1 | Harris County, TX, Revenue Refunding Bonds (Series 2012A), 0.63% TOBs (Harris County, TX Toll Road Authority), Mandatory Tender 2/15/2015 | 25,045,500 |
| 3,750,000 | 1 | Harris County, TX, Revenue Refunding Bonds (Series 2012A), 0.68% TOBs (Harris County, TX Toll Road Authority), Mandatory Tender 2/15/2016 | 3,768,263 |
| 3,000,000 | 1 | Houston, TX Combined Utility System, First Lien Revenue Refunding Bonds (Series 2012A), 0.59% TOBs, Mandatory Tender 6/1/2015 | 3,002,250 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Texas—continued | |
| $10,000,000 | 1 | Houston, TX Combined Utility System, First Lien Revenue Refunding Bonds (Series 2012A), 0.79% TOBs, Mandatory Tender 6/1/2017 | $10,056,400 |
| 15,000,000 | 1 | Houston, TX Combined Utility System, First Lien Revenue Refunding Bonds (Series 2012C), 0.64% TOBs, Mandatory Tender 8/1/2016 | 15,086,250 |
| 2,795,000 | | Houston, TX Convention & Entertainment Facilities Department, Hotel Occupancy Tax & Special Revenue Refunding Bonds (Series 2011A), 5.00%, 9/1/2015 | 2,916,834 |
| 2,600,000 | | Houston, TX Convention & Entertainment Facilities Department, Hotel Occupancy Tax & Special Revenue Refunding Bonds (Series 2011B), 5.00%, 9/1/2015 | 2,713,334 |
| 8,550,000 | 1 | Houston, TX Higher Education Finance Corp., Higher Education Revenue Refunding Bonds (Series 2013B), 0.57% TOBs (Rice University), Mandatory Tender 11/16/2017 | 8,581,891 |
| 10,000,000 | | Houston, TX ISD, Variable Rate LT Refunding Bonds (Series 2012), 2.00% TOBs (PSFG GTD), Mandatory Tender 6/1/2015 | 10,144,500 |
| 15,000,000 | | Lower Colorado River Authority, TX, Refunding Revenue Bonds (Series 2011B), 5.00% (LCRA Transmission Services Corp.), 5/15/2015 | 15,453,150 |
| 1,085,000 | | Lubbock, TX HFDC, Refunding Revenue Bonds (Series 2008B), 5.00% (St. Joseph Health System), 7/1/2015 | 1,122,888 |
| 10,000,000 | 1 | North Texas Tollway Authority, System First Tier Variable Rate Revenue Refunding Bonds (Series 2011A SIFMA Index Floating Rate), 0.84% TOBs, Mandatory Tender 1/1/2019 | 9,999,800 |
| 8,060,000 | | San Antonio, TX Electric & Gas System, Variable Rate Junior Lien Revenue Refunding Bonds (Series 2012A), 2.00% TOBs, Mandatory Tender 12/1/2014 | 8,085,550 |
| 7,000,000 | | San Antonio, TX Electric & Gas System, Variable Rate Junior Lien Revenue Refunding Bonds (Series 2012B), 2.00% TOBs, Mandatory Tender 12/1/2015 | 7,121,660 |
| 7,500,000 | | San Antonio, TX Electric & Gas System, Variable Rate Junior Lien Revenue Refunding Bonds (Series 2012C), 2.00% TOBs, Mandatory Tender 12/1/2016 | 7,730,025 |
| 5,000,000 | | San Antonio, TX ISD, UT GO Bonds (Series 2014B), 2.00% TOBs (PSFG GTD), Mandatory Tender 8/1/2018 | 5,146,900 |
| 15,000,000 | 1 | San Antonio, TX Water System, Variable Rate Junior Lien Revenue Bonds (Series 2013F), 0.72% TOBs, Mandatory Tender 11/1/2016 | 15,102,300 |
| 19,000,000 | | Texas State Transportation Commission, First Tier Revenue Refunding Bonds (Series 2012-A), 1.25% TOBs (Central Texas Turnpike System), Mandatory Tender 2/15/2015 | 19,059,280 |
| | | TOTAL | 233,352,950 |
| | | Utah—0.4% | |
| 3,300,000 | | Box Elder County, UT, PCRBs (Series 1984), 1.65% TOBs (Nucor Corp.), Optional Tender 10/1/2014 | 3,300,000 |
| 9,000,000 | | Utah County, UT IDA, Environmental Improvement Revenue Refunding Bonds (Series 2011), 5.375% (United States Steel Corp.), 11/1/2015 | 9,253,170 |
| | | TOTAL | 12,553,170 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | Virginia—1.2% | |
| $2,650,000 | | Amelia County, VA IDA, (Series 2002), 0.625% TOBs (Waste Management, Inc.), Mandatory Tender 4/1/2015 | $2,653,392 |
| 1,815,000 | | Caroline County, VA IDA, Public Facility Lease Revenue BANs (Series 2011), 4.00%, 8/1/2016 | 1,818,140 |
| 4,800,000 | | Charles City County, VA EDA, Variable Rate Demand Solid Waste Disposal Revenue Bonds (Series 2004A), 3.125% TOBs (Waste Management, Inc.), Mandatory Tender 11/1/2016 | 5,060,640 |
| 2,000,000 | | Charles City County, VA IDA, Tax-Exempt Adjustable Mode Solid Waste Disposal Revenue Bonds (Series 2002), 1.875% TOBs (Waste Management, Inc.), Mandatory Tender 4/1/2015 | 2,017,280 |
| 2,000,000 | | Gloucester County, VA IDA, Variable Rate Demand Solid Waste Disposal Revenue Bonds (Series 2003A), 1.60% TOBs (Waste Management, Inc.), Mandatory Tender 5/1/2017 | 2,003,720 |
| 8,000,000 | | Louisa, VA IDA, PCR Refunding Bonds (Series 2008C), 1.50% TOBs (Virginia Electric & Power Co.), Mandatory Tender 12/1/2014 | 8,009,680 |
| 615,000 | | Roanoke, VA EDA, Hospital Revenue Bonds (Series 2012), 5.00% (Carilion Health System Obligated Group), 7/1/2015 | 637,146 |
| 2,000,000 | | Roanoke, VA EDA, Hospital Revenue Bonds (Series 2012), 5.00% (Carilion Health System Obligated Group), 7/1/2016 | 2,157,940 |
| 2,335,000 | | Roanoke, VA EDA, Hospital Revenue Bonds (Series 2012), 5.00% (Carilion Health System Obligated Group), 7/1/2017 | 2,589,959 |
| 5,440,000 | | Smyth County, VA, GO Literary LANs (Series 2011B), 3.00% (United States Treasury PRF 11/1/2013@100), 5/1/2016 | 5,450,336 |
| 10,000,000 | | Virginia Peninsula Port Authority, Revenue Refunding Bonds (Series 2003), 2.375% TOBs (Dominion Terminal Associates)/(Dominion Resources, Inc. GTD), Mandatory Tender 10/1/2016 | 10,184,900 |
| | | TOTAL | 42,583,133 |
| | | Washington—0.7% | |
| 12,500,000 | | Port of Bellingham, WA Industrial Development Corp., Revenue Refunding Bonds (Series 2003A), 5.00% (BP PLC), 1/1/2016 | 13,227,500 |
| 4,000,000 | | Tobacco Settlement Authority, WA, Tobacco Settlement Revenue Refunding Bonds (Series 2013), 5.00%, 6/1/2015 | 4,126,600 |
| 3,000,000 | | Tobacco Settlement Authority, WA, Tobacco Settlement Revenue Refunding Bonds (Series 2013), 5.00%, 6/1/2016 | 3,215,790 |
| 1,500,000 | | Tobacco Settlement Authority, WA, Tobacco Settlement Revenue Refunding Bonds (Series 2013), 5.00%, 6/1/2017 | 1,661,970 |
| 3,000,000 | 2 | Washington State EDFA, Solid Waste Disposal Revenue Bonds (Series 2005D), 1.25% TOBs (Waste Management, Inc.), Mandatory Tender 11/1/2017 | 2,992,110 |
| | | TOTAL | 25,223,970 |
| | | West Virginia—1.5% | |
| 8,500,000 | | Mason County, WV, PCRBs (Series L), 2.00% TOBs (Appalachian Power Co.), Mandatory Tender 10/1/2014 | 8,500,170 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | MUNICIPAL BONDS—continued | |
| | | West Virginia—continued | |
| $9,000,000 | | Mason County, WV, PCRBs, 1.625% TOBs (Appalachian Power Co.), Mandatory Tender 10/1/2018 | $9,025,920 |
| 10,000,000 | | West Virginia EDA, Solid Waste Disposal Facilities Revenue Bonds (Series 2010A), 3.125% TOBs (Ohio Power Co.), Mandatory Tender 4/1/2015 | 10,121,500 |
| 16,500,000 | | West Virginia EDA, Solid Waste Disposal Facilities Revenue Bonds Series (2011A), 2.00% TOBs (Appalachian Power Co.), Mandatory Tender 9/1/2016 | 16,718,790 |
| 375,000 | | West Virginia University Board of Governors, University Improvement Revenue Bonds (Series 2011B), 4.00% (West Virginia University), 10/1/2015 | 389,228 |
| 800,000 | | West Virginia University Board of Governors, University Improvement Revenue Bonds (Series 2011B), 5.00% (West Virginia University), 10/1/2014 | 800,112 |
| 700,000 | | West Virginia University Board of Governors, University Improvement Revenue Bonds (Series 2011B), 5.00% (West Virginia University), 10/1/2015 | 733,572 |
| 7,000,000 | 1 | West Virginia University Board of Governors, Variable Rate Refunding Revenue Bonds (Series 2014C), 0.57% TOBs (West Virginia University), Mandatory Tender 10/1/2041 | 7,005,110 |
| | | TOTAL | 53,294,402 |
| | | Wisconsin—0.1% | |
| 760,000 | | Wisconsin Health and Education Facilities Authority, Revenue Bonds (Series 2011A), 5.00% (Gundersen Lutheran), 10/15/2014 | 761,528 |
| 3,685,000 | | Wisconsin Health and Education Facilities Authority, Revenue Bonds (Series 2013B-1), 4.00% TOBs (Ascension Health Alliance Senior Credit Group), Mandatory Tender 3/1/2018 | 4,070,672 |
| | | TOTAL | 4,832,200 |
| | | Wyoming—0.1% | |
| 4,200,000 | | Albany County, WY, PCRBs (Series 1985), 1.85% TOBs (Union Pacific Railroad Co.)/(Union Pacific Corp. GTD), Optional Tender 12/1/2014 | 4,201,764 |
| | | TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $2,937,867,569) | 2,956,038,316 |
| | | SHORT-TERM MUNICIPALS—17.6%6 | |
| | | Alabama—0.6% | |
| 730,000 | | Alabama State IDA, (Series 1994) Weekly VRDNs (Homeland Vinyl Products, Inc.)/(Compass Bank, Birmingham LOC), 1.480%, 10/2/2014 | 730,000 |
| 800,000 | | Bessemer, AL IDB, (Series 2002) Weekly VRDNs (Hardwick Co., Inc.)/(Compass Bank, Birmingham LOC), 1.400%, 10/2/2014 | 800,000 |
| 13,985,000 | | Chelsea Park, AL Cooperative District, (Series 2005) Weekly VRDNs (Compass Bank, Birmingham LOC), 1.180%, 10/2/2014 | 13,985,000 |
| 4,500,000 | | Gulf Shores, AL Medical Clinic Board, (Series 2007) Weekly VRDNs (Colonial Pinnacle MOB, LLC)/(Regions Bank, Alabama LOC), 0.450%, 10/2/2014 | 4,500,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued6 | |
| | | Alabama—continued | |
| $375,000 | | Huntsville, AL IDB Weekly VRDNs (Giles & Kendall, Inc.)/(Regions Bank, Alabama LOC), 2.250%, 10/3/2014 | $375,000 |
| | | TOTAL | 20,390,000 |
| | | Arizona—0.2% | |
| 5,975,000 | | Maricopa County, AZ Pollution Control Corp., (Series 2009A) Weekly VRDNs (Arizona Public Service Co.), 0.280%, 10/2/2014 | 5,975,000 |
| | | Colorado—0.1% | |
| 2,000,000 | | Denver (City & County), CO, (Series 2007G-2) Daily VRDNs (Denver, CO City & County Airport Authority)/(Assured Guaranty Corp. INS)/(Morgan Stanley Bank, N.A. LIQ), 0.200%, 10/1/2014 | 2,000,000 |
| | | Connecticut—0.2% | |
| 6,300,000 | | Connecticut Development Authority, (Series 1999), 0.26% CP (New England Power Co.), Mandatory Tender 10/22/2014 | 6,299,937 |
| | | Florida—0.3% | |
| 2,300,000 | | Collier County, FL IDA, (Series 2005) Weekly VRDNs (Ave Maria Utility Company)/(SunTrust Bank LOC), 0.200%, 10/1/2014 | 2,300,000 |
| 6,700,000 | 2,3 | Miami-Dade County, FL Aviation, Austin Floater Certificates (Series 2008-1145) Weekly VRDNs (Assured Guaranty Corp. INS)/(Bank of America N.A. LIQ), 0.360%, 10/2/2014 | 6,700,000 |
| 2,250,000 | | Orange County, FL IDA, (Series 2000) Weekly VRDNs (Central Florida Kidney Centers, Inc.)/(SunTrust Bank LOC), 0.190%, 10/1/2014 | 2,250,000 |
| | | TOTAL | 11,250,000 |
| | | Georgia—0.4% | |
| 5,440,000 | | Bartow County, GA Development Authority, (Series 2002) Weekly VRDNs (Somerset Cove Apartments, LP)/(Compass Bank, Birmingham LOC), 0.990%, 10/2/2014 | 5,440,000 |
| 4,195,000 | | Clayton County, GA Housing Authority, (Series 2006) Weekly VRDNs (Provence Place Apartments)/(Regions Bank, Alabama LOC), 0.500%, 10/2/2014 | 4,195,000 |
| 6,400,000 | | Savannah, GA EDA, (Series B) Weekly VRDNs (Home Depot, Inc.)/(SunTrust Bank LOC), 0.200%, 10/1/2014 | 6,400,000 |
| | | TOTAL | 16,035,000 |
| | | Illinois—0.3% | |
| 9,345,000 | 2,3 | Chicago, IL Board of Education, PUTTERs (Series 2997) Weekly VRDNs (AGM Corp. INS)/(JPMorgan Chase Bank, N.A. LIQ), 0.300%, 10/2/2014 | 9,345,000 |
| | | Indiana—0.6% | |
| 22,250,000 | | Indiana State Finance Authority Environmental, (Series 2006) Weekly VRDNs (Mittal Steel USA, Inc.)/(Banco Bilbao Vizcaya Argentaria SA LOC), 0.520%, 10/1/2014 | 22,250,000 |
| | | Louisiana—0.9% | |
| 31,500,000 | | St. James Parish, LA, (Series 2009) Weekly VRDNs (Louisiana Sugar Refining, LLC)/(Natixis LOC), 0.210%, 10/2/2014 | 31,500,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued6 | |
| | | Maine—0.4% | |
| $15,000,000 | | Maine State Housing Authority, (Series 2004 C-3) Weekly VRDNs (State Street Bank and Trust Co. LIQ), 0.060%, 10/2/2014 | $15,000,000 |
| | | Massachusetts—0.2% | |
| 7,850,000 | | Massachusetts IFA, (Series 1992B), 0.25% CP (New England Power Co.), Mandatory Tender 10/28/2014 | 7,849,922 |
| | | Michigan—0.7% | |
| 11,720,000 | | Michigan State Housing Development Authority, (Series 2007C) Weekly VRDNs (JPMorgan Chase Bank, N.A. LIQ), 0.060%, 10/1/2014 | 11,720,000 |
| 12,400,000 | | Michigan State Housing Development Authority, (Series 2008A) Daily VRDNs (JPMorgan Chase Bank, N.A. LIQ), 0.080%, 10/1/2014 | 12,400,000 |
| | | TOTAL | 24,120,000 |
| | | Mississippi—0.5% | |
| 13,560,000 | | Mississippi Business Finance Corp., (Series 2007) Weekly VRDNs (DDR Gulfport Promenade LLC)/(Regions Bank, Alabama LOC), 0.450%, 10/2/2014 | 13,560,000 |
| 3,185,000 | | Mississippi Business Finance Corp., (Series A) Weekly VRDNs (Mississippi College)/(Regions Bank, Alabama LOC), 0.480%, 10/2/2014 | 3,185,000 |
| | | TOTAL | 16,745,000 |
| | | Multi State—0.6% | |
| 23,050,000 | 2,3 | ROCs Pooled Trust (Multistate AMT) Series 13001CE, ROCs (Series 13001CE) Weekly VRDNs (Citigroup, Inc. GTD)/(Citigroup, Inc. LIQ), 1.000%, 10/2/2014 | 23,050,000 |
| | | Nevada—0.1% | |
| 4,500,000 | | Clark County, NV Airport System, Subordinate Lien Revenue Bonds (Series 2008 D-2A) Weekly VRDNs (Wells Fargo Bank, N.A. LOC), 0.050%, 10/1/2014 | 4,500,000 |
| | | New Hampshire—0.5% | |
| 10,500,000 | | New Hampshire Business Finance Authority, (Series 1990B), 0.42% CP (New England Power Co.), Mandatory Tender 11/12/2014 | 10,500,200 |
| 6,700,000 | | New Hampshire Business Finance Authority, PCRBs (1990 Series A), 0.32% CP (New England Power Co.), Mandatory Tender 10/28/2014 | 6,699,933 |
| | | TOTAL | 17,200,133 |
| | | New Jersey—1.3% | |
| 7,980,000 | | New Jersey EDA, (Series 1998A) Weekly VRDNs (Jewish Home at Rockleigh)/(Valley National Bank, Passaic, NJ LOC), 0.440%, 10/3/2014 | 7,980,000 |
| 7,980,000 | | New Jersey EDA, (Series 1998B) Weekly VRDNs (Jewish Home at Rockleigh)/(Valley National Bank, Passaic, NJ LOC), 0.440%, 10/3/2014 | 7,980,000 |
| 26,200,000 | | New Jersey EDA, (Series 2003B) Weekly VRDNs (Port Newark Container Terminal LLC)/(Santander Bank, N.A. LOC), 0.750%, 10/2/2014 | 26,200,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued6 | |
| | | New Jersey—continued | |
| $2,650,000 | | New Jersey EDA, Weekly VRDNs (Baptist Home Society of New Jersey)/(Valley National Bank, Passaic, NJ LOC), 0.340%, 10/2/2014 | $2,650,000 |
| | | TOTAL | 44,810,000 |
| | | New York—0.3% | |
| 10,000,000 | | New York City, NY TFA, (Fiscal 1998 Series C) Daily VRDNs (Morgan Stanley Bank, N.A. LOC), 0.050%, 10/1/2014 | 10,000,000 |
| | | North Carolina—0.6% | |
| 8,700,000 | | Hertford County, NC Industrial Facilities & PCFA, (Series 2000B) Weekly VRDNs (Nucor Corp.), 0.200%, 10/1/2014 | 8,700,000 |
| 12,820,000 | 2,3 | North Carolina Eastern Municipal Power Agency, P-FLOATs (Series PT-4112) Weekly VRDNs (Dexia Credit Local LIQ)/(Dexia Credit Local LOC), 0.350%, 10/2/2014 | 12,820,000 |
| | | TOTAL | 21,520,000 |
| | | Pennsylvania—2.4% | |
| 36,450,000 | | Emmaus, PA General Authority, (Series 1996) Weekly VRDNs (AGM Corp. INS)/(Wells Fargo Bank, N.A. LIQ), 0.050%, 10/1/2014 | 36,450,000 |
| 50,000,000 | | Luzerne County, PA, (Series A of 2006) Weekly VRDNs (AGM Corp. INS)/(JPMorgan Chase Bank, N.A. LIQ), 0.650%, 10/2/2014 | 50,000,000 |
| | | TOTAL | 86,450,000 |
| | | South Carolina—0.5% | |
| 13,000,000 | | Berkeley County, SC IDB, (Series 1996A) Weekly VRDNs (Nucor Corp.), 0.200%, 10/1/2014 | 13,000,000 |
| 4,000,000 | | Darlington County, SC, (Series 2003A) Weekly VRDNs (Nucor Corp.), 0.200%, 10/1/2014 | 4,000,000 |
| | | TOTAL | 17,000,000 |
| | | Tennessee—0.0% | |
| 1,200,000 | | Jackson, TN IDB, (Series 1999) Weekly VRDNs (Bobrick Washroom Equipment)/(Regions Bank, Alabama LOC), 0.600%, 10/2/2014 | 1,200,000 |
| | | Texas—3.2% | |
| 20,000,000 | | Port of Port Arthur Navigation District of Jefferson County, TX, (Series 2010B) Daily VRDNs (Motiva Enterprises LLC), 0.170%, 10/1/2014 | 20,000,000 |
| 34,100,000 | | Port of Port Arthur Navigation District of Jefferson County, TX, (Series 2010D) Daily VRDNs (Motiva Enterprises LLC), 0.170%, 10/1/2014 | 34,100,000 |
| 33,700,000 | | Port of Port Arthur Navigation District of Jefferson County, TX, (Series 2010E) Daily VRDNs (Motiva Enterprises LLC), 0.170%, 10/1/2014 | 33,700,000 |
| 21,300,000 | | Port of Port Arthur Navigation District of Jefferson County, TX, (Subseries 2009A) Daily VRDNs (Motiva Enterprises LLC), 0.170%, 10/1/2014 | 21,300,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued6 | |
| | | Texas—continued | |
| $4,000,000 | | Port of Port Arthur Navigation District of Jefferson County, TX, (Subseries 2009B) Daily VRDNs (Motiva Enterprises LLC), 0.170%, 10/1/2014 | $4,000,000 |
| 2,000,000 | | Port of Port Arthur Navigation District of Jefferson County, TX, (Subseries 2009C) Daily VRDNs (Motiva Enterprises LLC), 0.170%, 10/1/2014 | 2,000,000 |
| | | TOTAL | 115,100,000 |
| | | Vermont—1.6% | |
| 14,500,000 | | Vermont HFA, SFH Bonds (Series 23) Weekly VRDNs (AGM Corp. INS)/(TD Bank, N.A. LIQ), 0.060%, 10/1/2014 | 14,500,000 |
| 11,065,000 | | Vermont HFA, SFM Bonds (Series 22C) Weekly VRDNs (TD Bank, N.A. LIQ), 0.050%, 10/1/2014 | 11,065,000 |
| 5,000,000 | | Vermont HFA, SFM Bonds (Series 24A) Weekly VRDNs (AGM Corp. INS)/(TD Bank, N.A. LIQ), 0.070%, 10/1/2014 | 5,000,000 |
| 12,945,000 | | Vermont HFA, SFM Bonds (Series 25A) Weekly VRDNs (AGM Corp. INS)/(TD Bank, N.A. LIQ), 0.070%, 10/1/2014 | 12,945,000 |
| 12,950,000 | | Vermont HFA, SFM Bonds (Series 26) Weekly VRDNs (AGM Corp. INS)/(TD Bank, N.A. LIQ), 0.070%, 10/1/2014 | 12,950,000 |
| | | TOTAL | 56,460,000 |
| | | Virginia—0.7% | |
| 24,200,000 | | Halifax, VA IDA, MMMs, PCR (Series 1992), 0.45% CP (Virginia Electric & Power Co.), Mandatory Tender 10/16/2014 | 24,200,000 |
| | | West Virginia—0.1% | |
| 4,200,000 | | Grant County, WV County Commission, PCRBs (Series 1994), 0.26% CP (Virginia Electric & Power Co.), Mandatory Tender 10/22/2014 | 4,199,958 |
| | | Wisconsin—0.3% | |
| 11,920,000 | | Wisconsin Housing & EDA, Housing Revenue (Series 2008G) Weekly VRDNs (JPMorgan Chase Bank, N.A. LIQ), 0.060%, 10/2/2014 | 11,920,000 |
| | | TOTAL SHORT-TERM MUNICIPALS—17.6%
(AT AMORTIZED COST) | 626,369,950 |
| | | TOTAL INVESTMENTS—100.6%
(IDENTIFIED COST $3,564,237,569)7 | 3,582,408,266 |
| | | OTHER ASSETS AND LIABILITIES - NET—(0.6)%8 | (21,082,242) |
| | | TOTAL NET ASSETS—100% | $3,561,326,024 |
Securities that are subject to the federal alternative minimum tax (AMT) represent 15.2% of the Fund's portfolio as calculated based upon total market value (unaudited).
| 1 | Floating rate notes with current rate and maturity or tender date shown. |
| 2 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At September 30, 2014, these restricted securities amounted to $71,559,670, which represented 2.0% of total net assets. |
Annual Shareholder Report
| 3 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors (the “Directors”). At September 30, 2014, these liquid restricted securities amounted to $65,064,655, which represented 1.8% of total net assets. |
| 4 | Non-income-producing security. |
| 5 | Security in default. |
| 6 | Current rate and next reset date shown for Variable Rate Demand Notes. |
| 7 | The cost of investments for federal tax purposes amounts to $3,564,237,569. |
| 8 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at September 30, 2014.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1—quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of September 30, 2014, all investments of the Fund utilized Level 2 inputs in valuing the Fund's assets carried at fair value.
Annual Shareholder Report
The following acronyms are used throughout this portfolio:
| AGM | —Assured Guaranty Municipal |
| AMBAC | —American Municipal Bond Assurance Corporation |
| ARS | —Auction Rate Securities |
| BANs | —Bond Anticipation Notes |
| CDA | —Community Development Authority |
| CHE | —Catholic Health East |
| COL | —Collateralized |
| COPs | —Certificates of Participation |
| CP | —Commercial Paper |
| EDA | —Economic Development Authority |
| EDFA | —Economic Development Finance Authority |
| EDRBs | —Economic Development Revenue Bonds |
| GO | —General Obligation |
| GTD | —Guaranteed |
| HDA | —Hospital Development Authority |
| HFA | —Housing Finance Authority |
| HFDC | —Health Facility Development Corporation |
| IDA | —Industrial Development Authority |
| IDB | —Industrial Development Bond |
| IFA | —Industrial Finance Authority |
| INS | —Insured |
| ISD | —Independent School District |
| LANs | —Loan Anticipation Notes |
| LIBOR | —London Interbank Offered Rates |
| LIQ | —Liquidity Agreement |
| LO | —Limited Obligation |
| LOC | —Letter of Credit |
| LT | —Limited Tax |
| MMMs | —Money Market Municipals |
| PCFA | —Pollution Control Finance Authority |
| PCR | —Pollution Control Revenue |
| PCRBs | —Pollution Control Revenue Bonds |
| P-FLOATs | —Puttable Floating Option Tax-Exempt Receipts |
| PRF | —Pre-refunded |
| PSFG | —Public School Fund Guarantee |
| PUTTERs | —Puttable Tax-Exempt Receipts |
| Q-SBLF | —Qualified School Bond Loan Fund |
| RANs | —Revenue Anticipation Notes |
| ROCs | —Reset Option Certificates |
| SFH | —Single Family Housing |
| SFM | —Single Family Mortgage |
| SIFMA | —Securities Industry and Financial Markets Association |
| TANs | —Tax Anticipation Notes |
| TFA | —Transitional Finance Authority |
| TOBs | —Tender Option Bonds |
| USDT | —Unified School District |
| UT | —Unlimited Tax |
| VRDNs | —Variable Rate Demand Notes |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Financial Highlights–Class A Shares
(For a Share Outstanding Throughout Each Period)
| Year Ended September 30 | 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $10.02 | $10.05 | $10.05 | $10.04 | $10.02 |
| Income from Investment Operations: | | | | | |
| Net investment income | 0.03 | 0.03 | 0.06 | 0.10 | 0.06 |
| Net realized and unrealized gain (loss) on investments | 0.03 | (0.03) | 0.001 | 0.01 | 0.02 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.06 | 0.001 | 0.06 | 0.11 | 0.08 |
| Less Distributions: | | | | | |
| Distributions from net investment income | (0.03) | (0.03) | (0.06) | (0.10) | (0.06) |
| Net Asset Value, End of Period | $10.05 | $10.02 | $10.05 | $10.05 | $10.04 |
| Total Return2 | 0.56% | 0.02% | 0.59% | 1.06% | 0.81% |
| Ratios to Average Net Assets: | | | | | |
| Net expenses | 0.80%3 | 0.80% | 0.79%3 | 0.80% | 0.80% |
| Net investment income | 0.26% | 0.33% | 0.58% | 0.95% | 0.61% |
| Expense waiver/reimbursement4 | 0.22% | 0.38% | 0.44% | 0.41% | 0.42% |
| Supplemental Data: | | | | | |
| Net assets, end of period (000 omitted) | $1,362,615 | $1,731,519 | $2,198,969 | $1,797,275 | $1,982,542 |
| Portfolio turnover | 62% | 54% | 66% | 92% | 37% |
| 1 | Represents less than $0.01. |
| 2 | Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. |
| 3 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 0.80% and 0.79% for the years ended September 30, 2014 and 2012, respectively, after taking into account this expense reduction. |
| 4 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Financial Highlights–Institutional Shares
(For a Share Outstanding Throughout Each Period)
| Year Ended September 30 | 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $10.02 | $10.05 | $10.05 | $10.04 | $10.02 |
| Income from Investment Operations: | | | | | |
| Net investment income | 0.07 | 0.08 | 0.10 | 0.14 | 0.11 |
Net realized and unrealized gain (loss)
on investments | 0.03 | (0.03) | 0.001 | 0.01 | 0.02 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.10 | 0.05 | 0.10 | 0.15 | 0.13 |
| Less Distributions: | | | | | |
| Distributions from net investment income | (0.07) | (0.08) | (0.10) | (0.14) | (0.11) |
| Net Asset Value, End of Period | $10.05 | $10.02 | $10.05 | $10.05 | $10.04 |
| Total Return2 | 1.01% | 0.47% | 1.05% | 1.51% | 1.26% |
| Ratios to Average Net Assets: | | | | | |
| Net expenses | 0.35%3 | 0.35% | 0.34%3 | 0.35% | 0.35% |
| Net investment income | 0.71% | 0.78% | 1.02% | 1.40% | 1.06% |
| Expense waiver/reimbursement4 | 0.17% | 0.32% | 0.40% | 0.36% | 0.37% |
| Supplemental Data: | | | | | |
| Net assets, end of period (000 omitted) | $2,198,711 | $1,827,352 | $1,811,011 | $1,245,370 | $1,195,878 |
| Portfolio turnover | 62% | 54% | 66% | 92% | 37% |
| 1 | Represents less than $0.01. |
| 2 | Based on net asset value. |
| 3 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 0.35% and 0.34% for the years ended September 30, 2014 and 2012, respectively, after taking into account this expense reduction. |
| 4 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Statement of Assets and Liabilities
September 30, 2014
| Assets: | | |
| Total investment in securities, at value (identified cost $3,564,237,569) | | $3,582,408,266 |
| Cash | | 90,747 |
| Receivable for shares sold | | 17,564,618 |
| Income receivable | | 12,705,376 |
| Receivable for investments sold | | 765,000 |
| TOTAL ASSETS | | 3,613,534,007 |
| Liabilities: | | |
| Payable for investments purchased | $34,400,000 | |
| Payable for shares redeemed | 16,639,228 | |
| Income distribution payable | 286,241 | |
| Payable for distribution services fee (Note 5) | 226,022 | |
| Payable for Directors'/Trustees' fees (Note 5) | 212 | |
| Payable for other service fees (Notes 2 and 5) | 302,352 | |
| Accrued expenses (Note 5) | 353,928 | |
| TOTAL LIABILITIES | | 52,207,983 |
| Net assets for 354,505,916 shares outstanding | | $3,561,326,024 |
| Net Assets Consists of: | | |
| Paid-in capital | | $3,546,684,736 |
| Net unrealized appreciation of investments | | 18,170,697 |
| Accumulated net realized loss on investments | | (3,529,562) |
| Undistributed net investment income | | 153 |
| TOTAL NET ASSETS | | $3,561,326,024 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| Class A Shares: | | |
| Net asset value per share ($1,362,615,239 ÷ 135,640,901 shares outstanding) $0.001 par value, 500,000,000 shares authorized | | $10.05 |
| Offering price per share (100/98.00 of $10.05) | | $10.26 |
| Redemption proceeds per share | | $10.05 |
| Institutional Shares: | | |
| Net asset value per share ($2,198,710,785 ÷ 218,865,015 shares outstanding) $0.001 par value, 500,000,000 shares authorized | | $10.05 |
| Offering price per share | | $10.05 |
| Redemption proceeds per share | | $10.05 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Statement of Operations
Year Ended September 30, 2014
| Investment Income: | | | |
| Interest | | | $37,198,031 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $13,992,489 | |
| Administrative fee (Note 5) | | 2,733,770 | |
| Custodian fees | | 113,039 | |
| Transfer agent fees | | 788,336 | |
| Directors'/Trustees' fees (Note 5) | | 24,273 | |
| Auditing fees | | 29,000 | |
| Legal fees | | 13,524 | |
| Distribution services fee (Note 5) | | 3,815,114 | |
| Other service fees (Notes 2 and 5) | | 3,798,885 | |
| Portfolio accounting fees | | 331,169 | |
| Share registration costs | | 131,344 | |
| Printing and postage | | 46,925 | |
| Tax expenses | | 274,620 | |
| Miscellaneous (Note 5) | | 26,959 | |
| TOTAL EXPENSES | | 26,119,447 | |
| Waivers and Reduction: | | | |
| Waiver of investment adviser fee (Note 5) | $(6,090,611) | | |
| Waiver of other operating expenses (Note 5) | (748,294) | | |
| Reduction of custodian fees (Note 6) | (93) | | |
| TOTAL WAIVERS AND REDUCTION | | (6,838,998) | |
| Net expenses | | | 19,280,449 |
| Net investment income | | | 17,917,582 |
| Realized and Unrealized Gain (Loss) on Investments: | | | |
| Net realized loss on investments | | | (244,683) |
| Net change in unrealized appreciation of investments | | | 9,964,113 |
| Net realized and unrealized gain on investments | | | 9,719,430 |
| Change in net assets resulting from operations | | | $27,637,012 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Statement of Changes in Net Assets
| Year Ended September 30 | 2014 | 2013 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $17,917,582 | $20,987,231 |
| Net realized gain (loss) on investments | (244,683) | 594,942 |
| Net change in unrealized appreciation/depreciation of investments | 9,964,113 | (14,622,916) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 27,637,012 | 6,959,257 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | | |
| Class A Shares | (3,967,163) | (6,411,862) |
| Institutional Shares | (13,949,923) | (14,063,778) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (17,917,086) | (20,475,640) |
| Share Transactions: | | |
| Proceeds from sale of shares | 2,360,392,971 | 2,874,505,774 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 13,621,089 | 16,464,417 |
| Cost of shares redeemed | (2,381,278,982) | (3,328,562,615) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (7,264,922) | (437,592,424) |
| Change in net assets | 2,455,004 | (451,108,807) |
| Net Assets: | | |
| Beginning of period | 3,558,871,020 | 4,009,979,827 |
| End of period (including undistributed (distributions in excess of) net investment income of $153 and $(343), respectively) | $3,561,326,024 | $3,558,871,020 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Notes to Financial Statements
September 30, 2014
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 two portfolios. The financial statements included herein are only those of Federated Municipal Ultrashort Fund (the “Fund”), a diversified portfolio. The financial statements of the other portfolio are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The Fund offers two classes of shares: Class A Shares and Institutional Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is to provide current income exempt from federal regular income tax. Interest income from the Fund's investments may be subject to the federal AMT 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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value (NAV), the Fund generally values investments as follows:
| ■ | Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Fund's Directors. |
| ■ | Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their amortized cost (adjusted for the accretion of any discount or amortization of any premium) unless the issuer's creditworthiness is impaired or other factors indicate that amortized cost is not an accurate estimate of the investment's fair value, in which case it would be valued in the same manner as a longer-term security. |
| ■ | Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs. |
| ■ | Derivative contracts listed on exchanges are valued at their reported settlement or closing price. |
| ■ | Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Directors. |
| ■ | For securities that are fair valued in accordance with procedures established by and under the general supervision of the Directors, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers. |
Annual Shareholder Report
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth in the Fund's valuation policies and procedures, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation Procedures
The Directors have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to determine fair value of securities and in overseeing the calculation of the NAV. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Directors.
Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value. Investment income, realized and unrealized gains and losses and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Class A Shares may bear distribution services fees and other service fees unique to that class.
Annual Shareholder Report
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Class A Shares to unaffiliated financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees. In addition, unaffiliated third-party financial intermediaries may waive other service fees. For the year ended September 30, 2014, other service fees for the Fund were as follows:
| | Other Service
Fees Incurred |
| Class A Shares | $3,798,885 |
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 using the effective-interest-rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the year ended September 30, 2014, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of September 30, 2014, tax years 2011 through 2014 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland and the Commonwealth of Pennsylvania.
Other Taxes
As an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of 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.
Annual Shareholder Report
Restricted Securities
The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security has agreed to register such securities for resale, at the issuer's expense, either upon demand by the Fund or in connection with another registered offering of the securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. Restricted securities may be determined to be liquid under criteria established by the Directors. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities, like other securities, are priced in accordance with procedures established by and under the general supervision of the Directors.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Directors, if applicable, held at September 30, 2014, is as follows:
| Security | Acquisition Date | Cost | Market Value |
| California PCFA, Solid Waste Disposal Revenue Bonds, 1.65% TOBs (Waste Management, Inc.), Mandatory Tender 5/1/2017 | 4/30/2014 | $3,500,000 | $3,502,905 |
| Washington State EDFA, Solid Waste Disposal Revenue Bonds (Series 2005D), 1.25% TOBs (Waste Management, Inc.), Mandatory Tender 11/1/2017 | 2/25/2010 | $3,000,000 | $2,992,110 |
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. The Fund applies Investment Company accounting and reporting guidance.
3. CAPITAL STOCK
The following tables summarize capital stock activity:
| Year Ended September 30 | 2014 | 2013 |
| Class A Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 69,396,400 | $696,804,145 | 120,296,329 | $1,209,084,979 |
| Shares issued to shareholders in payment of distributions declared | 380,643 | 3,821,962 | 608,699 | 6,115,111 |
| Shares redeemed | (106,975,398) | (1,074,036,674) | (166,764,461) | (1,675,698,625) |
| NET CHANGE RESULTING FROM CLASS A SHARE TRANSACTIONS | (37,198,355) | $(373,410,567) | (45,859,433) | $(460,498,535) |
Annual Shareholder Report
| Year Ended September 30 | 2014 | 2013 |
| Institutional Shares: | Shares | Amount | Shares | Amount |
| Shares sold | 165,683,469 | $1,663,588,826 | 165,776,757 | $1,665,420,795 |
| Shares issued to shareholders in payment of distributions declared | 975,840 | 9,799,127 | 1,030,245 | 10,349,306 |
| Shares redeemed | (130,203,404) | (1,307,242,308) | (164,512,534) | (1,652,863,990) |
| NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS | 36,455,905 | $366,145,645 | 2,294,468 | $22,906,111 |
| NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS | (742,450) | $(7,264,922) | (43,564,965) | $(437,592,424) |
4. FEDERAL TAX INFORMATION
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are due to differing treatments for expiring capital loss carryforwards.
For the year ended September 30, 2014, permanent differences identified and reclassified among the components of net assets were as follows:
| Increase (Decrease) |
| Paid-In Capital |
| Accumulated
Net Realized
Gain (Loss) |
| $(978,739) | | $978,739 |
Net investment income (loss), net realized gains (losses) and net assets were not affected by the reclassification.
The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended September 30, 2014 and 2013, was as follows:
| | 2014 | 2013 |
| Tax-exempt income | $17,917,086 | $20,475,640 |
As of September 30, 2014, the components of distributable earnings on a tax basis were as follows:
| Undistributed tax-exempt income | $ 20,487 |
| Net unrealized appreciation | $ 18,150,363 |
| Capital loss carryforwards | $ (3,529,562) |
At September 30, 2014, the cost of investments for federal tax purposes was $3,564,237,569. The net unrealized appreciation of investments for federal tax purposes was $18,170,697. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $19,219,524 and net unrealized depreciation from investments for those securities having an excess of cost over value of $1,048,827.
Annual Shareholder Report
At September 30, 2014, the Fund had a capital loss carryforward of $3,529,562 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
The following schedule summarizes the Fund's capital loss carryforwards and expiration years:
| Expiration Year | Short-Term | Long-Term | Total |
| No Expiration | $ 175,020 | $ 19,479 | $ 194,499 |
| 2015 | $ 631,311 | NA | $ 631,311 |
| 2016 | $ 148,172 | NA | $ 148,172 |
| 2017 | $ 1,306,058 | NA | $ 1,306,058 |
| 2018 | $ 1,242,780 | NA | $ 1,242,780 |
| 2019 | $ 6,742 | NA | $ 6,742 |
Capital loss carryforwards of $978,739 expired during the year ended September 30, 2014.
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the year ended September 30, 2014, the Adviser voluntarily waived $6,090,611 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Daily Net Assets
of the Investment Complex |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
Annual Shareholder Report
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the year ended September 30, 2014, the annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Class A Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at 0.25% of average daily net assets annually to compensate FSC.
Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the year ended September 30, 2014, distribution services fees for the Fund were as follows:
| | Distribution
Services Fees
Incurred | Distribution
Services Fees
Waived |
| Class A Shares | $3,815,114 | $(748,294) |
When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares. For the year ended September 30, 2014, FSC retained $1,559,208 of fees paid by the Fund.
Sales Charges
Front-end sales charges and contingent deferred sales charges (CDSC) do not represent expenses of the Fund. They are deducted from the proceeds of sales of Fund shares prior to investment or from redemption proceeds prior to remittance, as applicable. For the year ended September 30, 2014, FSC did not retain any sales charges from the sale of Class A Shares. For the year ended September 30, 2014, FSC retained $972 of CDSC relating to redemptions of Class A shares.
Other Service Fees
For the year ended September 30, 2014, FSSC received $1,329 of the other service fees disclosed in Note 2.
Interfund Transactions
During the year ended September 30, 2014, 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 $262,045,000 and $478,255,000, respectively.
Expense Limitation
The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their own initiative have agreed to waive their respective fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights, excluding extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund's Class A Shares and Institutional Shares (after the voluntary waivers and reimbursements) will not exceed 0.80% and 0.35% (the “Fee Limit”), respectively, up to but not including the later of (the “Termination Date”): (a) December 1, 2015; or (b) the date of the
Annual Shareholder Report
Fund's next effective Prospectus. While the Adviser and its applicable affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Directors.
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.
6. EXPENSE REDUCTION
Through arrangements with the Fund's custodian, net credits realized as a result of uninvested cash balances were used to reduce custody expenses. For the year ended September 30, 2014, the Fund's expenses were reduced by $93 under these arrangements.
7. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the year ended September 30, 2014, were as follows:
| Purchases | $ 928,293,847 |
| Sales | $ 984,648,468 |
8. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of September 30, 2014, there were no outstanding loans. During the year ended September 30, 2014, the Fund did not utilize the LOC.
9. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of September 30, 2014, there were no outstanding loans. During the year ended September 30, 2014, the program was not utilized.
10. Federal tax information (UNAUDITED)
For the fiscal year ended September 30, 2014, 100% of distributions from net investment income is exempt from federal income tax, other than the federal AMT.
Annual Shareholder Report
Report of Independent Registered Public Accounting Firm
TO THE BOARD OF directors OF federated fixed income seCURITIES, inc., AND SHAREHOLDERS OF federated municipal ultrashort fund:
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Federated Municipal Ultrashort Fund (the “Fund”), a portfolio of Federated Fixed Income Securities, Inc., as of September 30, 2014 and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2014, by correspondence with the custodian, transfer agent and brokers, or by other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Federated Municipal Ultrashort Fund as of September 30, 2014 and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
November 24, 2014
Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase or redemption payments; and (2) ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from April 1, 2014 to September 30, 2014.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) on purchase or redemption payments. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
| | Beginning
Account Value
4/1/2014 | Ending
Account Value
9/30/2014 | Expenses Paid
During Period1 |
| Actual: | | | |
| Class A Shares | $1,000.00 | $1,002.20 | $4.02 |
| Institutional Shares | $1,000.00 | $1,004.40 | $1.76 |
Hypothetical (assuming a 5% return
before expenses): | | | |
| Class A Shares | $1,000.00 | $1,021.06 | $4.05 |
| Institutional Shares | $1,000.00 | $1,023.31 | $1.78 |
| 1 | Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half-year period). The annualized net expense ratios are as follows: |
| | |
| Class A Shares | 0.80% |
| Institutional Shares | 0.35% |
Annual Shareholder Report
Board of Directors and Corporation Officers
The Board of Directors is responsible for managing the Corporation business affairs and for exercising all the Corporation powers except those reserved for the shareholders. The following tables give information about each Director and the senior officers of the Fund. Where required, the tables separately list Directors who are “interested persons” of the Fund (i.e., “Interested” Directors) and those who are not (i.e., “Independent” Directors). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Directors listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2013, the Corporation comprised two portfolio(s), and the Federated Fund Family consisted of 42 investment companies (comprising 135 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Director oversees all portfolios in the Federated Fund Family and serves for an indefinite term. The Fund's Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-341-7400.
Interested DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
John F. Donahue*
Birth Date: July 28, 1924
Director
Began serving: October 1991 | Principal Occupations: Director or Trustee of the Federated Fund Family; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Family's Executive Committee.
Previous Positions: Chairman of the Federated Fund Family; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
J. Christopher Donahue*
Birth Date: April 11, 1949
President and Director
Began serving: January 2000 | Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Fund Family; Director or Trustee of the Funds in the Federated Fund Family; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company.
Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd. |
| * | Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries. |
INDEPENDENT DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
John T. Collins
Birth Date: January 24, 1947
Director
Began serving: October 2013 | Principal Occupations: Director or Trustee of the Federated Fund Family; Chairman and CEO, The Collins Group, Inc. (a private equity firm).
Other Directorships Held: Chairman Emeriti, Bentley University; Director, Sterling Suffolk Downs, Inc.; Former Director, National Association of Printers and Lithographers.
Previous Positions: Director and Audit Committee Member, Bank of America Corp.
Qualifications: Business management and director experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Maureen Lally-Green
Birth Date: July 5, 1949
Director
Began serving: August 2009 | Principal Occupations: Director or Trustee of the Federated Fund Family; Associate General Secretary and Director, Office for Church Relations, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne University School of Law; Superior Court of Pennsylvania (service began 1998 and ended July 2009).
Other Directorships Held: Director, Consol Energy (service started June 2013); Director, Auberle (service ended December 2013); Member, Pennsylvania State Board of Education; Director, Saint Vincent College; Director, Ireland Institute of Pittsburgh (service ended December 2013); Director and Chair, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society (service ended December 2013); Director, Our Campaign for the Church Alive!, Inc.; Director, Pennsylvania Bar Institute (2013-present); Director, Cardinal Wuerl North Catholic High School (2013-present).
Previous Position: Professor of Law, Duquesne University School of Law, Pittsburgh (1983-1998).
Qualifications: Legal and director experience. |
Peter E. Madden
Birth Date: March 16, 1942
Director
Began serving: October 1991 | Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Family.
Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
Qualifications: Business management, mutual fund services and director experience. |
Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee of the Federated Fund Family; Management Consultant.
Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President, DVC Group, Inc. (marketing, communications and technology).
Qualifications: Banking, business management, education and director experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Thomas M. O'Neill
Birth Date: June 14, 1951
Director
Began serving: October 2006 | Principal Occupations: Director or Trustee, Vice Chairman of the Audit Committee of the Federated Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College; Board of Directors, Medicines for Humanity; Board of Directors, The Golisano Children's Museum of Naples, Florida.
Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber).
Qualifications: Business management, mutual fund, director and investment experience. |
P. Jerome Richey
Birth Date: February 23, 1949
Director
Began serving: October 2013 | Principal Occupations: Director or Trustee of the Federated Fund Family; General Counsel, University of Pittsburgh.
Other Directorships Held: Board Chairman, Epilepsy Foundation of Western Pennsylvania; Board Member, World Affairs Council of Pittsburgh.
Previous Positions: Chief Legal Officer and Executive Vice President, CONSOL Energy Inc.; Shareholder, Buchanan Ingersoll & Rooney PC (a law firm).
Qualifications: Business management, legal and director experience. |
John S. Walsh
Birth Date: November 28, 1957
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee, Chairman of the Audit Committee of the Federated Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
Previous Position: Vice President, Walsh & Kelly, Inc.
Qualifications: Business management and director experience. |
Annual Shareholder Report
OFFICERS
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT AND SECRETARY
Officer since: November 1991 | Principal Occupations: Executive Vice President and Secretary of the Federated Fund Family; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp. |
Lori A. Hensler
Birth Date: January 6, 1967
TREASURER
Officer since: April 2013 | Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp. and Edgewood Services, Inc.; and Assistant Treasurer, Federated Investors Trust Company. Ms. Hensler has received the Certified Public Accountant designation.
Previous Positions: Controller of Federated Investors, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc. |
Richard B. Fisher
Birth Date: May 17, 1923
VICE CHAIRMAN
Officer since: August 2002 | Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Family; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Family; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated Securities Corp. |
Peter J. Germain
Birth Date: September 3, 1959
CHIEF LEGAL OFFICER
Officer since: January 2005
| Principal Occupations: Mr. Germain is Chief Legal Officer of the Federated Fund Family. He is General Counsel and Vice President, Federated Investors, Inc.; President, Federated Administrative Services and Federated Administrative Services, Inc.; Vice President, Federated Securities Corp.; Secretary, Federated Private Asset Management, Inc.; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated in 1984 and is a member of the Pennsylvania Bar Association.
Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Investors, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Investors, Inc. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
Brian P. Bouda
Birth Date: February 28, 1947
CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
Officer since: August 2004 | Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Family; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of certain of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
Previous Positions: Served in Senior Management positions with a large regional banking organization. |
Deborah A. Cunningham
Birth Date: September 15, 1959
Chief Investment Officer
Officer since: June 2012 | Principal Occupations: Deborah A. Cunningham was named Chief Investment Officer of Federated's money market products in 2004. She joined Federated in 1981 and has been a Senior Portfolio Manager since 1997 and an Executive Vice President of the Fund's Adviser since 2009. Ms. Cunningham has received the Chartered Financial Analyst designation and holds an M.S.B.A. in Finance from Robert Morris College. |
Mary Jo Ochson
Birth Date: September 12, 1953
CHIEF INVESTMENT OFFICER
Officer since: May 2004 | Principal Occupations: Mary Jo Ochson was named Chief Investment Officer of Federated's tax-exempt, fixed-income products in 2004 and Chief Investment Officer of Federated's Tax-Free Money Markets in 2010. She joined Federated in 1982 and has been a Senior Portfolio Manager and a Senior Vice President of the Fund's Adviser since 1996. Ms. Ochson has received the Chartered Financial Analyst designation and holds an M.B.A. in Finance from the University of Pittsburgh. |
Jeff A. Kozemchak
Birth Date: January 15, 1960
VICE PRESIDENT
Officer since: November 1998
Portfolio Manager since:
October 2000 | Principal Occupations: Jeff A. Kozemchak has been the Fund's Portfolio Manager since October 2000. He is Vice President of the Corporation with respect to the Fund. Mr. Kozemchak joined Federated in 1987 and has been a Senior Portfolio Manager since 1996 and a Senior Vice President of the Fund's Adviser since 1999. He was a Portfolio Manager until 1996 and a Vice President of the Fund's Adviser from 1993 to 1998. Mr. Kozemchak has received the Chartered Financial Analyst designation and holds an M.S. in Industrial Administration from Carnegie Mellon University in 1987. |
Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2014
Federated Municipal Ultrashort Fund (the “Fund”)
Following a review and recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2014 meetings the Fund's investment advisory contract for an additional one-year term. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders or the family of funds; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent of care, conscientiousness and independence with which the Board members perform their duties and their expertise, including whether they are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. The Board noted that SEC disclosure requirements regarding the basis for the Board's approval of the Fund's advisory contract generally track the factors listed above. Consistent with these judicial decisions and SEC disclosure requirements, the Board also considered management fees charged to
Annual Shareholder Report
institutional and other clients of the Adviser for what might be viewed as like services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent directors and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in
Annual Shareholder Report
the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a relevant indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
The Board reviewed the contractual advisory fee rate, net advisory fee rate where partially waived and other expenses of the Fund and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted the applicable waivers and reimbursements and that the overall expense structure of the Fund remained competitive. The Board will continue to monitor advisory fees and other expenses borne by the Fund in the context of the other factors considered relevant by the Board.
By contrast, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts and sub-adviser services). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes and portfolio management techniques made necessary by different cash flows and different associated costs; and the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
Annual Shareholder Report
The Fund's ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as a useful indicator of how the Adviser is executing the Fund's investment program, which in turn was one of the Board's considerations in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract.
The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups may be helpful, though not conclusive, in judging the reasonableness of proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group.
For the periods covered by the Evaluation, the Fund's performance for the one-year period was above the median of the relevant peer group, and the Fund's performance fell below the median of the relevant peer group for the three-year and five-year periods. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund in the context of the other factors considered relevant by the Board.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution, adjustment or elimination of these voluntary waivers. In addition, following discussions regarding the Senior Officer's May 2013 recommendations, Federated made meaningful reductions to gross advisory fees for several funds. In this regard, the Senior Officer proposed, and the Board approved, a reduction of 15 basis points in the contractual advisory fee of the Fund. This change more closely aligned the contractual fee with the net fee actually charged after the imposition of applicable voluntary waivers and was believed by both the Senior Officer and the Board to improve the market competitiveness of the Fund. At the Board meeting in May 2014, the Senior Officer proposed, and the Board approved, reductions in the contractual advisory fees of certain other funds.
Annual Shareholder Report
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer concluded that Federated's profit margins did not appear to be excessive.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated family of funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund family as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size.
The Senior Officer noted that, subject to the comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds were reasonable. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having
Annual Shareholder Report
invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Annual Shareholder Report
Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
Annual Shareholder Report
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
Federated Municipal Ultrashort Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 31417P866
CUSIP 31417P858
29303 (11/14)
Federated is a registered trademark of Federated Investors, Inc.
2014 ©Federated Investors, Inc.
Item 2. Code of Ethics
(a) As of the end of the period covered by this report, the registrant has adopted a code of ethics (the "Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers") that applies to the registrant's Principal Executive Officer and Principal Financial Officer; the registrant's Principal Financial Officer also serves as the Principal Accounting Officer.
(c) Not Applicable
(d) Not Applicable
(e) Not Applicable
(f)(3) The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.
Item 3. Audit Committee Financial Expert
The registrant's Board has determined that each of the following members of the Board's Audit Committee is an “audit committee financial expert,” and is "independent," for purposes of this Item: Charles F. Mansfield, Jr., Thomas M. O'Neill and John S. Walsh.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2014 - $59,100
Fiscal year ended 2013 - $56,400
(b) Audit-Related Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2014 - $15
Fiscal year ended 2013 - $36
Fiscal year ended 2014- Travel to Audit Committee Meeting.
Fiscal year ended 2013- Travel to Audit Committee Meeting.
Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(c) Tax Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2014 - $0
Fiscal year ended 2013 - $0
Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(d) All Other Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2014 - $0
Fiscal year ended 2013 - $0
Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(e)(1) Audit Committee Policies regarding Pre-approval of Services.
The Audit Committee is required to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee.
Certain services have the general pre-approval of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will annually review the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval for such services. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent determinations. The Audit Committee will not delegate its responsibilities to pre-approve services performed by the independent auditor to management.
The Audit Committee has delegated pre-approval authority to its Chairman. The Chairman will report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Committee will designate another member with such pre-approval authority when the Chairman is unavailable.
AUDIT SERVICES
The annual Audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee must approve any changes in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.
In addition to the annual Audit services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other Audit Services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved certain Audit services, all other Audit services must be specifically pre-approved by the Audit Committee.
AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor, and has pre-approved certain Audit-related services, all other Audit-related services must be specifically pre-approved by the Audit Committee.
TAX SERVICES
The Audit Committee believes that the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved certain Tax services, all Tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee.
ALL OTHER SERVICES
With respect to the provision of services other than audit, review or attest services the pre-approval requirement is waived if:
| (1) | The aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by the registrant, the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant to its accountant during the fiscal year in which the services are provided; |
| (2) | Such services were not recognized by the registrant, the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant at the time of the engagement to be non-audit services; and |
| (3) | Such services are promptly brought to the attention of the Audit Committee of the issuer and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the Audit Committee. |
The Audit Committee may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, and would not impair the independence of the auditor.
The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of prohibited non-audit services and the applicability of exceptions to certain of the prohibitions.
PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding these levels will require specific pre-approval by the Audit Committee.
PROCEDURES
Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent auditor and the Principal Accounting Officer and/or Internal Auditor, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
(e)(2) Percentage of services identified in items 4(b) through 4(d) that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
4(b)
Fiscal year ended 2014 – 0%
Fiscal year ended 2013 - 0%
Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(c)
Fiscal year ended 2014 – 0%
Fiscal year ended 2013 – 0%
Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(d)
Fiscal year ended 2014 – 0%
Fiscal year ended 2013 – 0%
Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
| (g) | Non-Audit Fees billed to the registrant, the registrant’s investment adviser, and certain entities controlling, controlled by or under common control with the investment adviser: |
Fiscal year ended 2014 - $112,484
Fiscal year ended 2013 - $130,429
(h) The registrant’s Audit Committee has considered that the provision of non-audit services that were rendered to the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the reporting period covered since the previous Form N-CSR filing.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Item 10. Submission of Matters to a Vote of Security Holders
No Changes to Report
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have concluded that the
registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics- Not Applicable to this Report.
(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant Federated Fixed Income Securities, Inc.
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date November 19, 2014
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 November 19, 2014
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date November 19, 2014
