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Federated High Yield Trust
SEMI-ANNUAL REPORT TO SHAREHOLDERS
AUGUST 31, 1997
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Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314197104
8092705 (10/97)
PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for
Federated High Yield Trust. The Report covers the six-month period
ended August 31, 1997 and includes an investment review by the fund's
portfolio manager, followed by a complete list of portfolio holdings
and the financial statements.
This mutual fund is managed to pursue the significant opportunities
available in the lower-grade corporate bond market.+ At the end of the
reporting period, its highly diversified portfolio included more than
200 bonds issued by companies that span the business and industrial
spectrum. Each holding is the result of an intensive research process.
During the reporting period ended August 31, 1997, the fund paid
dividends of $0.42 per share and produced a total return of 5.53%.*
Total net assets grew from $938.3 million on the first day of the
reporting period to surpass the $1 billion mark by the last day of the
reporting period.
Thank you for participating in Federated High Yield Trust. As always, we
welcome your questions and comments.
Sincerely,
/s/ Glen R. Johnson
Glen R. Johnson
President
October 15, 1997
+ Lower rated bonds involve a higher degree of risk than investment
grade bonds in return for higher yield potential.
* Performance quoted represents past performance and is not indicative
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.
INVESTMENT REVIEW
The financial markets continued to generate excellent returns for the
six-month period ended August 31, 1997. This strong performance
resulted from an almost ideal economic environment which has existed
for most of 1997. Moderate to strong economic growth coupled with
modest inflation pushed most financial assets higher. The high-yield
market benefited from the good macro-economic environment, rising
equity prices, falling interest rates and strong demand for high-yield
securities. These factors led to high-yield bonds outperforming their
high-quality counterpart as illustrated by the Lehman Brothers High
Yield Bond Index,* which returned 5.68% over the reporting period, and
to high-yield bonds outperforming the Lehman Brothers Aggregate Bond
Index,** a measure of high-quality bond performance, which returned
4.39%.
Federated High Yield Trust, which returned 5.53% over the period,***
performed in line with the Lehman Brothers High Yield Bond Index and
underperformed the Lipper High Current Yield Average+ which returned
6.04%. Several factors impacted the fund's performance during the
period. The fund's telecommunication holdings outperformed the overall
market. Particular standouts were Nextel, a mobile communications
company, which continued to exceed expectations as it rolled out its
network, and competitive local exchange carriers, such as McLeod and
Brooks Fiber, which continued to make inroads in the local
marketplace. The fund's cable holdings also outperformed the overall
market, especially Cablevision Systems, which was upgraded during the
period, and United Kingdom cable TV companies like International Cable
Tel which gained strength on expectation of further consolidation in
the UK market. The fund's Australian cable companies, Australis Media
and UIH Australia/Pacific, rebounded from depressed levels. Several
other issuers delivered excellent relative performance based on
company-specific events. Heritage Media was upgraded to investment
grade when it was acquired by News Corp., while Trism and RBX
rebounded on improved operating performance. On the negative side,
Wireless One, a wireless cable operator underperformed as the market
continued to question the company's strategy and technology. Royal
Oak, an owner of gold mines, underperformed due to lower gold prices,
and Echostar underperformed as its acquisition by News Corp. was
canceled. Relative to the Lipper High Current Yield Average, the fund
was negatively impacted by its higher overall quality profile. During
the reporting period, lower-quality, high-yield bonds outperformed
higher quality, high-yield bonds.
Looking forward, we continue to expect high-yield bonds to generate
attractive relative returns as long as the current economic
environment persists. The operating performance of the underlying
issuers held in the fund should continue to perform in line with or
exceed expectations. From an industry perspective, we continue to
favor companies in the telecommunications, cable, and broadcast
sectors. A combination of deregulation, technological change,
consolidation, and entrepreneurship are driving the return
expectations for companies in these industries.
* Lehman Brothers High Yield Bond Index is an unmanaged index
comprised of all fixed income securities having a maximum quality
rating of Ba1 by Moody's Investors Service, Inc. (including
defaulted issues). All bonds included in this index must be
dollar-denominated, non-convertible, have at least one year
remaining to maturity and have an outstanding par value of at least
$100 million; pay-in-kind bonds and Eurobonds are excluded. Actual
investments cannot be made in an index.
** Lehman Brothers Aggregate Bond Index is a total return index
measuring both the capital price changes and income provided by the
underlying universe of securities, weighted by market value
outstanding. It is comprised of the Lehman Brothers Government Bond
Index, Corporate Bond Index, Mortgage-Backed Securities Index and
the Yankee Bond Index. This Index is unmanaged, and investments
cannot be made in an index.
*** Performance quoted represents past performance and is not
indicative 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.
+ Lipper figures represent the average of the total returns reported
by all of the mutual funds designated by Lipper Analytical Services,
Inc. as falling into the respective categories indicated. These
figures do not reflect sales charges.
PORTFOLIO OF INVESTMENTS
FEDERATED HIGH YIELD TRUST
AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--85.9%
AEROSPACE & DEFENSE--0.2%
$ 2,225,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 3/1/2007 $ 2,291,750
AUTOMOBILE--2.4%
3,563,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 3,972,745
750,000 Aftermarket Technology Co., Sr. Sub. Note, Series D, 12.00%, 8/1/2004 836,250
7,175,000 Collins & Aikman Products Co., Sr. Sub. Note, 11.50%, 4/15/2006 8,179,500
3,000,000 Exide Corp., Sr. Note, 10.00%, 4/15/2005 3,217,500
5,900,000 Lear Corp., Sub. Note, 9.50%, 7/15/2006 6,431,000
2,050,000 (a)Oxford Automotive, Inc., Sr. Sub. Note, 10.125%, 6/15/2007 2,108,938
Total 24,745,933
BANKING--1.2%
11,075,000 First Nationwide Escrow Corp., Sr. Sub. Note, 10.625%, 10/1/2003 12,182,500
BEVERAGE & TOBACCO--0.5%
4,450,000 Dimon, Inc., Sr. Note, 8.875%, 6/1/2006 4,689,187
BROADCAST RADIO & TV--5.6%
3,000,000 (a)Capstar Radio Broadcasting Partners, Inc., Sr. Sub. Note, 9.25%, 7/1/2007 3,090,000
2,450,000 (a)Chancellor Radio Broadcasting Co., Sr. Sub. Note, 8.75%, 6/15/2007 2,483,687
5,000,000 Chancellor Radio Broadcasting Co., Sr. Sub. Note, 9.375%, 10/1/2004 5,225,000
4,000,000 (a)Fox/Liberty Networks, LLC, Sr. Disc. Note, 0/9.75%, 8/15/2007 2,490,000
3,200,000 (a)Fox/Liberty Networks, LLC, Sr. Note, 8.875%, 8/15/2007 3,184,000
8,750,000 Heritage Media Corp., Sr. Sub. Note, 8.75%, 2/15/2006 9,406,250
5,000,000 Lamar Advertising Co., Sr. Sub. Note, 9.625%, 12/1/2006 5,325,000
2,750,000 (a)Outdoor Systems, Inc., Sr. Sub. Note, 8.875%, 6/15/2007 2,818,750
1,400,000 SFX Broadcasting, Inc., Sr. Sub. Note, 10.75%, 5/15/2006 1,568,000
5,550,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 10.00%, 12/15/2003 5,799,750
3,300,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 10.00%, 9/30/2005 3,448,500
2,250,000 (a)Sinclair Broadcast Group, Inc., Sr. Sub. Note, 9.00%, 7/15/2007 2,238,750
750,000 Sullivan Broadcast Holdings Inc., Deb., 13.25%, 12/15/2006 772,500
5,025,000 Sullivan Broadcast Holdings Inc., Sr. Sub. Note, 10.25%, 12/15/2005 5,276,250
2,225,000 Young Broadcasting, Inc., Sr. Sub. Note, 10.125%, 2/15/2005 2,336,250
1,250,000 Young Broadcasting, Inc., Sr. Sub. Note, 11.75%, 11/15/2004 1,403,125
1,425,000 Young Broadcasting, Inc., Sr. Sub. Note, 9.00%, 1/15/2006 1,410,750
Total 58,276,562
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
BUILDING & DEVELOPMENT--0.5%
$ 4,625,000 (a)American Builders & Contractors Supply Co., Inc., Sr. Sub. Note, 10.625%, $ 4,821,562
5/15/2007
BUSINESS EQUIPMENT & SERVICES--1.6%
3,725,000 Electronic Retailing Systems International, Inc., Sr. Disc.
Note, 0/13.25%, 2/1/2004 2,439,875
3,900,000 Knoll Inc., Sr. Sub. Note, 10.875%, 3/15/2006 4,358,250
3,675,000 Outsourcing Solutions, Inc., Sr. Sub. Note, 11.00%, 11/1/2006 4,051,688
5,225,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 5/1/2005 5,943,438
Total 16,793,251
CABLE TELEVISION--11.5%
2,525,000 Australis Holdings Property Ltd., Unit, 0/15.00%, 11/1/2002 2,108,375
34,989 Australis Media Ltd., Sr. Disc. Note, 0/15.75%, 5/15/2003 29,566
3,950,000 Australis Media Ltd., Unit, 0/14.00%, 5/15/2003 3,337,750
4,000,000 Cablevision Systems Corp., Sr. Sub. Deb., 9.875%, 2/15/2013 4,300,000
1,250,000 Cablevision Systems Corp., Sr. Sub. Note, 10.50%, 5/15/2016 1,406,250
3,875,000 Cablevision Systems Corp., Sr. Sub. Note, 9.25%, 11/1/2005 4,030,000
4,300,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 4,611,750
2,000,000 Charter Communications Holdings, Inc., Sr. Disc. Note, 0/14.00%, 3/15/2007 1,430,000
4,750,000 Charter Communications Southeast, LP, Sr. Note, 11.25%, 3/15/2006 5,165,625
6,475,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 6,928,250
10,475,000 Comcast UK Cable, Deb., 0/11.20%, 11/15/2007 8,039,562
12,600,000 Diamond Cable Communications PLC, Sr. Disc. Note, 0/10.75%, 2/15/2007 7,812,000
2,000,000 Diamond Cable Communications PLC, Sr. Disc. Note, 0/13.25%, 9/30/2004 1,692,500
11,250,000 EchoStar Satellite Broadcasting Corp., Sr. Disc. Note, 0/13.125%, 3/15/2004 8,493,750
5,250,000 International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/10.875%, 10/15/2003 4,803,750
3,350,000 International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/11.50%, 2/1/2006 2,479,000
6,375,000 International Cabletel, Inc., Sr. Disc. Note, 0/12.75%, 4/15/2005 5,044,219
1,000,000 Lenfest Communications Inc., Sr. Sub. Note, 10.50%, 6/15/2006 1,090,000
3,300,000 Pegasus Media, Note, 12.50%, 7/1/2005 3,679,500
2,850,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 3,078,000
2,500,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 3/15/2005 2,721,875
5,800,000 Rogers Cablesystems Ltd., Sr. Sub. Gtd. Note, 11.00%, 12/1/2015 6,510,500
3,275,000 Rogers Communications, Inc., Sr. Note, 8.875%, 7/15/2007 3,266,813
3,700,000 TCI Communications, Inc., Sr. Note, 6.875%, 2/15/2006 3,559,659
19,525,000 TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 14,497,313
9,425,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 6,267,625
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CABLE TELEVISION--CONTINUED
$ 3,000,000 Wireless One, Inc., Sr. Note, 13.00%, 10/15/2003 $ 1,230,000
3,000,000 Wireless One, Inc., Unit, 0/13.50%, 8/1/2006 615,000
Total 118,228,632
CHEMICALS & PLASTICS--2.7%
1,550,000 Astor Corp., Sr. Sub. Note, 10.50%, 10/15/2006 1,650,750
750,000 Buckeye Cellulose Corp., Sr. Sub. Note, 8.50%, 12/15/2005 763,125
1,750,000 Crain Industries, Inc., Sr. Sub. Note, 13.50%, 8/15/2005 1,999,375
1,475,000 ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003 1,537,687
3,988,000 ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002 4,257,190
3,200,000 (a)Polymer Group, Inc., Sr. Sub. Note, 9.00%, 7/1/2007 3,224,000
4,900,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 4,226,250
7,950,000 Sterling Chemicals Holdings, Inc., Sr. Disc. Note, 0/13.50%, 8/15/2008 5,465,625
1,350,000 Sterling Chemicals, Inc., Sr. Sub. Note, 11.75%, 8/15/2006 1,481,625
3,400,000 Uniroyal Technology Corp., Sr. Secd. Note, 11.75%, 6/1/2003 3,417,000
Total 28,022,627
CLOTHING & TEXTILES--1.8%
2,375,000 Collins & Aikman Floorcoverings, Inc., Sr. Sub. Note, 10.00%, 1/15/2007 2,434,375
1,000,000 (a)Dyersburg Corp., Sr. Sub. Note, 9.75%, 9/1/2007 1,012,500
2,150,000 GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007 2,187,625
4,450,000 (a)Glenoit Corp., Sr. Sub. Note, 11.00%, 4/15/2007 4,783,750
1,750,000 Pillowtex Corp., Sr. Sub. Note, 10.00%, 11/15/2006 1,855,000
6,075,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 6,363,563
Total 18,636,813
CONSUMER PRODUCTS--3.7%
3,150,000 American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 3,339,000
2,600,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 2,827,500
3,500,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 13.75%, 8/1/2002 3,771,250
5,300,000 ICON Fitness Corp., Sr. Disc. Note, 0/14.00%, 11/15/2006 2,875,250
4,000,000 ICON Health & Fitness, Inc., Sr. Sub. Note, 13.00%, 7/15/2002 4,460,000
6,300,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 6,363,000
1,100,000 (a)Playtex Products, Inc., Sr. Note, 8.875%, 7/15/2004 1,113,750
4,000,000 Renaissance Cosmetics, Inc., Sr. Note, 11.75%, 2/15/2004 4,040,000
2,750,000 Revlon Consumer Products Corp., Sr. Sub. Note, 10.50%, 2/15/2003 2,915,000
4,500,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 4,747,500
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CONSUMER PRODUCTS--CONTINUED
$ 1,950,000 Syratech Corp., Sr. Note, 11.00%, 4/15/2007 $ 2,091,375
Total 38,543,625
CONTAINER & GLASS PRODUCTS--0.0%
1,260,000 (a)(b)Kane Industries, Inc., Sr. Sub. Disc. Note, 2/1/1998 0
ECOLOGICAL SERVICES & EQUIPMENT--2.0%
9,600,000 (a)Allied Waste Industries, Inc., Sr. Disc. Note, 0/11.30%, 6/1/2007 6,528,000
8,375,000 Allied Waste North America, Inc., Company Guarantee, 10.25%, 12/1/2006 9,149,687
2,350,000 ICF Kaiser International, Inc., Sr. Sub. Note, 13.00%, 12/31/2003 2,449,875
5,350,000 (b)Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%, 2/15/2003 2,273,750
Total 20,401,312
ELECTRONICS--1.2%
4,750,000 Advanced Micro Devices, Inc., Sr. Secd. Note, 11.00%, 8/1/2003 5,367,500
3,825,000 Fairchild Semiconductor Corp., Sr. Sub., 10.125%, 3/15/2007 4,111,875
3,175,000 (a) Viasystems, Inc., Sr. Sub. Note, 9.75%, 6/1/2007 3,262,313
Total 12,741,688
FINANCIAL INTERMEDIARIES--0.5%
2,000,000 ContiFinancial Corp., Sr. Note, 8.375%, 8/15/2003 2,065,000
3,200,000 Olympic Financial Ltd., Unit, 11.50%, 3/15/2007 3,224,000
Total 5,289,000
FOOD & DRUG RETAILERS--1.7%
3,650,000 Carr-Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 4,069,750
1,675,000 (a)DiGiorgio Corp., Sr. Note, 10.00%, 6/15/2007 1,666,625
10,375,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 11,295,781
1,000,000 (a)Stater Brothers Holdings, Inc., Sr. Sub. Note, 9.00%, 7/1/2004 1,020,000
Total 18,052,156
FOOD PRODUCTS--2.1%
4,350,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 4,828,500
6,250,000 International Home Foods, Inc., Sr. Sub. Note, 10.375%, 11/1/2006 6,609,375
3,000,000 (a)MBW Foods Inc., Sr. Sub. Note, 9.875%, 2/15/2007 3,060,000
2,400,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 2,550,000
4,050,000 Van de Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 4,515,750
Total 21,563,625
FOOD SERVICES--0.5%
4,500,000 (a)AmeriServe Food Distribution, Inc., Sr. Sub. Note, 10.125%, 7/15/2007 4,657,500
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
FOOD SERVICES--CONTINUED
$ 1,250,000 (a)Nebco Evans Holding Co., Sr. Disc. Note, 0/12.375%, 7/15/2007 $ 756,250
Total 5,413,750
FOREST PRODUCTS--2.8%
4,125,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 4,578,750
5,250,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 5,696,250
5,350,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 12/15/2004 6,005,375
4,975,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 5,329,469
2,000,000 Stone Container Corp., Sr. Note, 12.58%, 8/1/2016 2,180,000
2,000,000 Stone Container Corp., Unit, 12.25%, 4/1/2002 2,080,000
3,575,000 Uniforet Inc., Sr. Note, 11.125%, 10/15/2006 3,405,188
Total 29,275,032
HEALTHCARE--2.9%
5,725,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 6,497,875
4,250,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 9.25%, 10/1/2006 4,388,125
6,350,000 Tenet Healthcare Corp., Sr. Note, 8.00%, 1/15/2005 6,445,250
9,900,000 Tenet Healthcare Corp., Sr. Sub. Note, 10.125%, 3/1/2005 10,890,000
1,650,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 1/15/2007 1,707,750
Total 29,929,000
HOME PRODUCTS & FURNISHINGS--0.1%
1,825,000 (a) Falcon Building Products, Inc., Sr. Sub. Disc. Note, 0/10.50%, 6/15/2007 1,145,187
HOTELS, MOTELS, INNS & CASINOS--0.5%
4,900,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, 2/1/2008 5,316,500
INDUSTRIAL PRODUCTS & EQUIPMENT--4.9%
1,550,000 Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007 1,635,250
4,800,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 5,304,000
3,275,000 (a)Continental Global Group, Inc., Sr. Note, 11.00%, 4/1/2007 3,455,125
5,325,000 Euramax International PLC, Sr. Sub. Note, 11.25%, 10/1/2006 5,844,187
3,700,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 11.375%, 7/1/2001 3,972,875
3,250,000 Hawk Corp., Sr. Note, 10.25%, 12/1/2003 3,412,500
4,100,000 International Knife & Saw, Inc., Sr. Sub. Note, 11.375%, 11/15/2006 4,422,875
1,800,000 Johnstown America Industries, Inc., Sr. Sub. Note, 11.75%, 8/15/2005 1,912,500
1,875,000 (a)Johnstown America Industries, Inc., Sr. Sub. Note, 11.75%, 8/15/2005 1,992,188
5,000,000 (a)MMI Products, Inc., Sr. Sub. Note, 11.25%, 4/15/2007 5,387,500
3,900,000 Mettler-Toledo, Inc., Sr. Sub. Note, 9.75%, 10/1/2006 4,134,000
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
INDUSTRIAL PRODUCTS & EQUIPMENT--CONTINUED
$ 3,500,000 (a)Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 $ 3,745,000
1,250,000 (a)Roller Bearing Co. of America, Inc., Sr. Sub. Note, 9.625%, 6/15/2007 1,281,250
3,450,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 3,588,000
Total 50,087,250
LEISURE & ENTERTAINMENT--5.0%
9,975,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 7,506,187
1,600,000 AMF Group, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 1,774,000
3,550,000 Cobblestone Golf Group, Inc., Sr. Note, 11.50%, 6/1/2003 3,745,250
1,000,000 (a)KSL Recreation Group, Inc., Sr. Sub. Note, 10.25%, 5/1/2007 1,060,000
3,100,000 Premier Parks, Inc., Sr. Note, 12.00%, 8/15/2003 3,472,000
500,000 Premier Parks, Inc., Sr. Note, 9.75%, 1/15/2007 528,125
12,825,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 13,241,813
20,400,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 20,068,500
Total 51,395,875
MACHINERY & EQUIPMENT--1.5%
4,275,000 Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 1/31/2003 4,499,437
5,525,000 Clark Material Handling Corp., Sr. Note, 10.75%, 11/15/2006 5,801,250
4,050,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 4,556,250
Total 14,856,937
METALS & MINING--0.4%
4,350,000 Royal Oak Mines, Inc., Sr. Sub. Note, 11.00%, 8/15/2006 3,980,250
OIL & GAS--4.3%
7,950,000 Abraxas Petroleum Corp., Sr. Note, 11.50%, 11/1/2004 8,745,000
4,150,000 DI Industries, Inc., Sr. Note, 8.875%, 7/1/2007 4,150,000
2,000,000 Falcon Drilling Co., Inc., Sr. Sub. Note, 12.50%, 3/15/2005 2,305,000
4,875,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 8.50%, 2/15/2007 4,850,625
5,250,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 9.50%, 11/1/2006 5,486,250
2,500,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 11/15/2003 2,606,250
1,950,000 (a)Pacalta Resources Ltd., Sr. Note, 10.75%, 6/15/2004 2,010,938
2,000,000 (a)Pogo Producing Co., Sr. Sub. Note, 8.75%, 5/15/2007 2,040,000
2,000,000 Pride Petroleum Services, Inc., Sr. Note, 9.375%, 5/1/2007 2,095,000
4,000,000 United Meridian Corp., Sr. Sub. Note, 10.375%, 10/15/2005 4,370,000
3,175,000 (a)United Refining Co., Sr. Note, 10.75%, 6/15/2007 3,206,750
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
OIL & GAS--CONTINUED
$ 2,650,000 (a)XCL, Ltd., Unit, 13.50%, 5/1/2004 $ 2,689,750
Total 44,555,563
PRINTING & PUBLISHING--2.4%
7,350,000 Affiliated Newspaper Investments, Inc., Sr. Disc. Note, 0/13.25%, 7/1/2006 6,798,750
2,975,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 3,332,000
2,100,000 Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%, 2/1/2006 2,194,500
3,750,000 Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%, 3/15/2007 3,900,000
4,700,000 K-III Communications Corp., Company Guarantee, Series B, 8.50%, 2/1/2006 4,755,366
2,700,000 Petersen Publishing Co., LLC, Sr. Sub. Note, 11.125%, 11/15/2006 3,051,000
1,100,000 (a)Von Hoffmann Press, Inc., Sr. Sub. Note, 10.375%, 5/15/2007 1,166,000
Total 25,197,616
REAL ESTATE--0.4%
3,953,000 Trizec Finance Ltd., Sr. Note, 10.875%, 10/15/2005 4,521,244
RETAILERS--0.8%
5,600,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 5,992,000
2,450,000 (a)Leslie's Poolmart, Inc., Sr. Note, 10.375%, 7/15/2004 2,535,750
Total 8,527,750
SERVICES--1.1%
3,968,000 Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 4,414,400
1,500,000 DecisionOne Corp., 9.75%, 8/1/2007 1,548,750
1,500,000 DecisionOne Holdings Corp., Unit, 0/11.50%, 8/1/2008 963,750
3,600,000 Intertek Finance PLC, Sr. Sub. Note, 10.25%, 11/1/2006 3,780,000
1,100,000 KinderCare Learning Centers, Inc., Sr. Sub. Note, 9.50%, 2/15/2009 1,072,500
Total 11,779,400
STEEL--2.0%
5,400,000 Acme Metals, Inc., Sr. Secd. Disc. Note, 0/13.50%, 8/1/2004 6,075,000
3,000,000 Bayou Steel Corp., 1st Mtg. Note, 10.25%, 3/1/2001 3,105,000
3,600,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 3,582,000
5,900,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 6,416,250
1,225,000 GS Technologies Operating Co., Inc., Sr. Note, 12.25%, 10/1/2005 1,356,687
Total 20,534,937
SURFACE TRANSPORTATION--2.9%
4,400,000 AmeriTruck Distribution Corp., Sr. Sub. Note, 12.25%, 11/15/2005 4,686,000
3,350,000 (a)Chemical Leaman Corp., Sr. Note, 10.375%, 6/15/2005 3,484,000
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
SURFACE TRANSPORTATION--CONTINUED
$ 3,000,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 $ 3,322,500
7,050,000 Statia Terminals International N.V., 1st Mtg. Note, 11.75%, 11/15/2003 7,473,000
6,700,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 7,353,250
3,100,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 3,115,500
Total 29,434,250
TELECOMMUNICATIONS & CELLULAR--11.9%
6,650,000 American Communications Services, Inc., Sr. Disc. Note, 0/12.75%, 4/1/2006 4,039,875
600,000 American Communications Services, Inc., Sr. Disc. Note, 0/13.00%, 11/1/2005 388,500
1,000,000 (a)American Communications Services, Inc., Sr. Note, 13.75%, 7/15/2007 1,072,500
1,750,000 Arch Communications Group, Inc., Sr. Disc. Note, 0/10.875%, 3/15/2008 971,250
9,625,000 Brooks Fiber Properties, Inc., Sr. Disc. Note, 0/10.875%, 3/1/2006 7,074,375
4,650,000 Brooks Fiber Properties, Inc., Sr. Disc. Note, 0/11.875%, 11/1/2006 3,266,625
7,025,000 Cellular Communications International, Inc., Sr. Disc. Note, 13.25% accrual, 5,356,562
8/15/2000
6,750,000 (a)Comcast Cellular Holdings, Inc., Sr. Note, 9.50%, 5/1/2007 7,020,000
2,900,000 (a)Hermes Europe Railtel B.V., Sr. Note, 11.50%, 8/15/2007 3,074,000
4,925,000 (a)Intermedia Communications of Florida, Inc., Sr. Disc. Note, 0/11.25%, 7/15/2007 3,127,375
10,925,000 Intermedia Communications of Florida, Inc., Sr. Disc. Note, 0/12.50%, 5/15/2006 7,947,937
9,600,000 McLeod, Inc., Sr. Disc. Note, 0/10.50%, 3/1/2007 6,384,000
2,000,000 (a)McLeod, Inc., Sr. Note, 9.25%, 7/15/2007 2,035,000
3,550,000 (a)MetroNet Communications, Unit, 12.00%, 8/15/2007 3,834,000
9,275,000 Millicom International Cellular S. A., Sr. Disc. Note, 0/13.50%, 6/1/2006 7,014,219
8,525,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 7,118,375
6,850,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 6,918,500
3,075,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 8/1/2007 3,136,500
2,325,000 PhoneTel Technologies, Inc., Sr. Note, 12.00%, 12/15/2006 2,383,125
5,400,000 Qwest Communications International, Inc., Sr. Note, 10.875%, 4/1/2007 5,994,000
5,850,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 6,142,500
13,100,000 Teleport Communications Group, Inc., Sr. Disc. Note, 0/11.125%, 7/1/2007 9,857,750
1,150,000 Teleport Communications Group, Inc., Sr. Note, 9.875%, 7/1/2006 1,244,875
6,575,000 (a)Telesystem International Wireless, Inc., Sr. Disc. Note, 0/13.25%, 6/30/2007 3,912,125
4,325,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 4,173,625
9,375,000 Vanguard Cellular Systems, Inc., Deb., 9.375%, 4/15/2006 9,703,125
Total 123,190,718
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
UTILITIES--2.3%
$ 2,200,000 CalEnergy Co., Inc., Sr. Note, 9.50%, 9/15/2006 $ 2,359,500
14,075,000 California Energy Co., Inc., Sr. Note, 10.25%, 1/15/2004 15,236,187
4,250,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 5/1/2011 4,670,452
Total 22,266,139
TOTAL CORPORATE BONDS (IDENTIFIED COST $848,759,246) 886,687,621
COMMON STOCKS--0.5%
BROADCAST RADIO & TV--0.0%
12,000 Sullivan Broadcast Holdings Inc., Class B 120,000
BUILDING & DEVELOPMENT--0.0%
3,080 Atlantic Gulf Communities Corp. 17,325
BUSINESS EQUIPMENT AND SERVICES--0.0%
3,725 (a)Electronic Retailing Systems International, Inc., Warrants 149,000
CABLE TELEVISION--0.0%
2,525 Australis Holdings Property Ltd., Warrants 0
68 (a)CS Wireless Systems, Inc. 0
6,994 Pegasus Communications Corp. 93,556
3,450 Pegasus Communications Corp., Warrants 53,475
9,000 Wireless One, Inc., Warrants 0
Total 147,031
CHEMICALS & PLASTICS--0.0%
4,675 Sterling Chemicals Holdings, Inc., Warrants 163,625
27,500 Uniroyal Technology Corp., Warrants 51,563
Total 215,188
CONGLOMERATES--0.3%
181,487 Walter Industries, Inc. 3,300,795
CONSUMER PRODUCTS--0.1%
72,287 Alarmguard Holdings, Inc. 603,235
3,000 Hosiery Corp. of America, Inc. 21,000
5,000 (a)IHF Capital, Inc., Warrants 251,250
Total 875,485
CONTAINER & GLASS PRODUCTS--0.0%
53,400 (a)(b)Kane Industries, Inc., Warrants 0
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
PRINTING & PUBLISHING--0.1%
5,350 Affiliated Newspaper Investments, Inc. $ 537,675
STEEL--0.0%
1,800 (a)Bar Technologies, Inc., Warrants 81,000
TELECOMMUNICATIONS & CELLULAR--0.0%
6,325 Cellular Communications International, Inc., Warrants 126,500
TOTAL COMMON STOCKS (IDENTIFIED COST $9,308,672) 5,572,308
PREFERRED STOCKS--4.2%
BANKING--0.2%
72,000 California Federal Preferred Capital Corp., REIT Perpetual Pfd. Stock, Series A, 1,890,000
$2.28
BROADCAST RADIO & TV--1.9%
37,581 American Radio Systems Corp., PIK Pfd., 11.375% 4,340,842
21,250 (a)Capstar Broadcasting Partners, Inc., Sr. Pfd., $12.00 2,241,875
58,446 (a)Chancellor Broadcasting Co., Exchangeable Pfd. Stock, $12.00 6,633,621
18,250 SFX Broadcasting, Inc., Exchangeable Pfd. Stock, Series E 1,980,125
39,750 Sinclair Broadcast Group, Inc., Pfd., $11.63 4,352,626
Total 19,549,089
CABLE TELEVISION--0.4%
3,639 Pegasus Communications Corp., PIK Pfd., Series A, 12.75% 3,766,365
INDUSTRIAL PRODUCTS & EQUIPMENT--0.2%
2,000 Fairfield Manufacturing Co., Inc., Exchangeable Pfd. Stock 2,110,000
PRINTING & PUBLISHING--0.5%
46,308 K-III Communications Corp., PIK Pfd., Series B, 11.625% 5,093,990
REAL ESTATE--0.1%
30,000 Crown American Realty Trust, Sr. Pfd., Series A, $1.38 1,586,250
TELECOMMUNICATIONS & CELLULAR--0.9%
2,000 (a)IXC Communications, Inc., Jr. Exchangeable Pfd. Stock, 12.50% 2,117,500
2,900 (a)NEXTEL Communications, Inc., Pfd., 13.00% 3,182,750
2,976 PanAmSat Corp., PIK Pfd., 12.75% 3,556,320
Total 8,856,570
TOTAL PREFERRED STOCKS (IDENTIFIED COST $39,754,218) 42,852,264
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY--3.8%
TREASURY NOTES--3.8%
$30,000,000 United States Treasury Note, 5.75%, 8/15/2003 $ 29,233,200
10,000,000 United States Treasury Note, 5.875%, 2/15/2004 9,784,400
TOTAL U.S. TREASURY (IDENTIFIED COST $38,462,500) 39,017,600
(C) REPURCHASE AGREEMENT--4.7%
48,180,000 BT Securities Corporation, 5.58%, dated 8/29/1997, due
9/2/1997 (AT AMORTIZED COST) 48,180,000 TOTAL
INVESTMENTS (IDENTIFIED COST $984,464,636)(D)
$1,022,309,793
</TABLE>
(a) Denotes a private placement security. At August 31, 1997, these
securities amounted to $128,251,809 which represents 12.4% of
total net assets.
(b) Non-income producing security. Mid-American and certain of its
subsidiaries (the "Debtors") filed for relief under the provision
of Chapter 11 Bankruptcy Code on January 21, 1997. The Debtors and
USA Waste Services, Inc. ("USA") and certain of its affiliates
subsequently closed on an Asset Purchase Agreement pursuant to
which USA acquired substantially all the Debtors' assets. A
proposed liquidation plan of reorganization has been filed. In
addition, a group of subordinated bondholders, which includes
various funds managed by Federated, has retained counsel and has
filed suit for legal claims involving fraud, misrepresentations,
and securities law violations regarding Mid-American.
(c) The repurchase agreement is fully collateralized by U.S.
government and/or agency obligations based on market prices at the
date of the portfolio. The investment in the repurchase agreement
is through participation in a joint account with other Federated
funds.
(d) The cost of investments for federal tax purposes amounts to
$984,464,636. The net unrealized appreciation of investments on a
federal tax basis amounts to $37,845,157 which is comprised of
$53,665,515 appreciation and $15,820,358 depreciation at August
31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($1,032,765,056) at August 31, 1997.
The following acronyms are used throughout this portfolio:
GTD --Guaranty
LLC --Limited Liability Corporation
LP --Limited Partnership
PIK --Payment in Kind
PLC --Public Limited Company
REIT --Real Estate Investment Trust
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED HIGH YIELD TRUST
AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities,
at value (identified and tax cost $984,464,636) $1,022,309,793
Income receivable 17,966,293
Receivable for shares sold 11,718,471
Total assets 1,051,994,557
LIABILITIES:
Payable for shares redeemed $ 1,117,849
Income distribution payable 7,558,306
Payable to Bank 10,324,197
Accrued expenses 229,149
Total liabilities 19,229,501
NET ASSETS for 108,742,761 shares outstanding $1,032,765,056
NET ASSETS CONSIST OF:
Paid in capital $1,018,013,568
Net unrealized appreciation of investments 37,845,157
Accumulated net realized loss on investments (22,717,479)
Distributions in excess of net investment income (376,190)
Total Net Assets $1,032,765,056
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$1,032,765,056 / 108,742,761 shares outstanding $9.50
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED HIGH YIELD TRUST
SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,324,488
Interest 44,777,582
Total income 46,102,070
EXPENSES:
Investment advisory fee $ 3,531,638
Administrative personnel and services fee 355,518
Custodian fees 43,473
Transfer and dividend disbursing agent fees and expenses 115,195
Directors'/Trustees' fees 7,544
Auditing fees 10,028
Legal fees 3,496
Portfolio accounting fees 65,058
Shareholder services fee 1,177,213
Share registration costs 47,873
Printing and postage 32,844
Insurance premiums 4,048
Taxes 6,532
Miscellaneous 6,992
Total expenses 5,407,452
Waivers --
Waiver of investment advisory fee $ (1,005,322)
Waiver of shareholder services fee (235,442)
Total waivers (1,240,764)
Net expenses 4,166,688
Net investment income 41,935,382
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (4,590,993)
Net change in unrealized appreciation of investments 15,662,038
Net realized and unrealized gain on investments 11,071,045
Change in net assets resulting from operations $ 53,006,427
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 41,935,382 $ 72,323,180
Net realized gain (loss) on investments ($4,590,993 net
loss and $6,021,942 net gain, respectively, as computed
for federal tax purposes) (4,590,993) 5,800,495
Net change in unrealized appreciation/depreciation 15,662,038 26,326,072
Change in net assets resulting from operations 53,006,427 104,449,747
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (41,603,041) (72,323,180)
Distributions in excess of net investment income -- (520,035)
Change in net assets resulting from distributions to (41,603,041) (72,843,215)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 456,396,460 860,932,809
Net asset value of shares issued to shareholders in 25,265,788 55,383,889
payment of distributions declared
Cost of shares redeemed (398,663,355) (683,339,454)
Change in net assets resulting from share 82,998,893 232,977,244
transactions
Change in net assets 94,402,279 264,583,776
NET ASSETS:
Beginning of period 938,362,777 673,779,001
End of period $ 1,032,765,056 $ 938,362,777
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
AUGUST 31, YEAR ENDED FEBRUARY 28 OR 29,
<S> <C> <C> <C> <C> <C> <C>
1997 1997 1996 1995 1994 1993
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.41 $ 9.09 $ 8.57 $ 9.48 $ 9.10 $ 8.91
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.42 0.85 0.85 0.84 0.84 0.93
Net realized and unrealized gain 0.09 0.33 0.51 (0.90) 0.40 0.19
(loss) on investments
Total from investment operations 0.51 1.18 1.36 (0.06) 1.24 1.12
LESS DISTRIBUTIONS
Distributions from net investment income (0.42) (0.85) (0.84) (0.84) (0.86) (0.93)
Distributions in excess of net -- (0.01) -- (0.01) -- --
investment income(a)
Total distributions (0.42) (0.86) (0.84) (0.85) (0.86) (0.93)
NET ASSET VALUE, END OF PERIOD $ 9.50 $ 9.41 $ 9.09 $ 8.57 $ 9.48 $ 9.10
TOTAL RETURN(B) 5.53% 13.74% 16.47% (0.32)% 14.16% 13.28%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.88%* 0.88% 0.88% 0.85% 0.83% 0.77%
Net investment income 8.91%* 9.45% 9.53% 9.70% 9.17% 10.54%
Expense waiver/reimbursement(c) 0.26%* 0.28% 0.30% 0.22% 0.13% 0.22%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,032,765 $938,363 $673,779 $464,604 $432,045 $354,383
Portfolio turnover 44% 81% 87% 99% 112% 93%
</TABLE>
* Computed on an annualized basis.
(a) Distributions in excess of net investment income for the periods
ended February 28, 1997 and 1995 were a result of certain book and
tax timing differences. These distributions did not represent a
return of capital for federal income tax purposes.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED HIGH YIELD TRUST
AUGUST 31, 1997 (UNAUDITED)
ORGANIZATION
Federated High Yield Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Trust's
investment objective is to seek high current income by investing
primarily in a professionally managed, diversified portfolio of
fixed-income securities. The Trust's portfolio of investments consists
primarily of lower-rated, corporate-debt obligations. These
lower-rated debt obligations may be more susceptible to real or
perceived adverse economic conditions than investment-grade bonds.
These lower-rated debt obligations are regarded as predominately
speculative with respect to each issuer's continuing ability to make
interest and principal payments (i.e., the obligations are subject to
the risk of default).
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Trust in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS
U.S. government securities, listed corporate bonds, other fixed income
and asset-backed securities, and unlisted securities and private
placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service.
Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may
be valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS
It is the policy of the Trust to require the custodian bank to take
possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the
Trust to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of
collateral at least equals the repurchase price to be paid under the
repurchase agreement transaction.
The Trust will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are deemed by the Trust's adviser to be creditworthy pursuant to the
guidelines and/or standards reviewed or established by the Board of
Trustees (the "Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Trust could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and
discount, if applicable, are amortized as required by the Internal
Revenue Code, as amended (the "Code"). Distributions to shareholders
are recorded on the ex-dividend date.
FEDERAL TAXES
It is the Trust's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
At February 28, 1997, the Trust, for federal tax purposes, had a
capital loss carryforward of $17,555,889, which will reduce the
Trust's taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Code, and thus
will reduce the amount of the distributions to shareholders which
would otherwise be necessary to relieve the Trust of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will
expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT
1999 $9,269,587
2000 $6,829,698
2003 $1,456,604
Additionally, net capital losses of $279,762, attributable to security
transactions incurred after October 31, 1996 are treated as arising on
the first day of the Trust's next taxable year (March 1, 1997).
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Trust may engage in when-issued or delayed delivery transactions.
The Trust 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual
results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without
par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997
<S> <C> <C>
Shares sold 49,045,042 94,942,662
Shares issued to shareholders in payment of distributions declared 2,715,293 6,072,728
Shares redeemed (42,769,939) (75,398,302)
Net change resulting from share transactions 8,990,396 25,617,088
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Trust's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to
0.75% of the Trust's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can
modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative
Services Agreement, provides the Trust with administrative personnel
and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received
during the period of the Administrative Services Agreement shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25% of
average daily net assets of the Trust shares for the period. The fee
paid to FSS is used to finance certain services for shareholders and
to maintain shareholder accounts. FSS may voluntarily choose to waive
any portion of its fee. FSS can modify or terminate this voluntary
waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Trust. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Trust's accounting records for which it receives a
fee. The fee is based on the level of the Trust's average daily net
assets for the period, plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the period ended August 31, 1997, were as follows:
PURCHASES $439,211,054
SALES $393,770,942
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Anthony R. Bosch
Assistant Secretary
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
risk, including 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.
NOTES
