1933 Act File No. 2-91091
1940 Act File No. 811-4018
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. ....................
Post-Effective Amendment No. __24____................... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. __20 .................................. X
FEDERATED HIGH YIELD TRUST
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
_x on April 29, 1998,__ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i) __ on
_________________pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii) on _________________
pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED HIGH YIELD TRUST
is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page....................Cover Page.
Item 2. Synopsis......................Summary of Trust Expenses.
Item 3. Condensed Financial
Information...................Financial Highlights; Performance
Information; Financial Statements.
Item 4. General Description of
Registrant General Information; Investment
Information; Investment Objective;
Investment Policies; Investment
Risks; Investment Limitations.
.
Item 5. Management of the Trust Trust Information; Management of the
Trust; Distribution of Trust Shares;
Administration of the Trust.
Item 6. Capital Stock and Other
Securities Dividends; Capital Gains; Retirement
Plans; Shareholder Information; Voting
Rights; Tax Information; Federal
Income Tax; State and Local Taxes.
Item 7. Purchase of Securities
Being Offered Net Asset Value; Investing in
the Trust; Share Purchases; Minimum
Investment Required; What Shares Cost;
Certificates and Confirmations.
Item 8. Redemption or
Repurchase Redeeming Shares; Telephone
Redemption; Written Requests;
Accounts with Low Balances.
Item 9. Pending Legal
Proceedings None.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page Cover Page.
Item 11. Table of Contents Table of Contents.
Item 12. General Information
and History General Information About the Trust;
About Federated Investors.
Item 13. Investment Objectives
and Policies Investment Objective and Policies.
Item 14. Management of the Trust Federated High Yield Trust Management.
Item 15. Control Persons and
Principal Holders of
Securities Trust Ownership.
Item 16. Investment Advisory and
Other Services Investment Advisory Services;
Other Services.
Item 17. Brokerage Allocation Brokerage Transactions.
Item 18. Capital Stock and
Other Securities Massachusetts Partnership Law.
Item 19. Purchase, Redemption
and Pricing of
Securities Being
Offered Purchasing Shares; Determining Net
Asset Value; Redeeming Shares.
Item 20. Tax Status Tax Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of
Performance Data Total Return; Yield; Performance
Comparisons.
Item 23. Financial Statements Filed in Part A.
Federated High Yield Trust
PROSPECTUS
A no-load, open-end, diversified management investment company (a mutual fund)
that seeks high current income by investing primarily in a professionally
managed, diversified portfolio of fixed income securities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Federated High Yield Trust (the "Trust"). Keep this prospectus for
future reference.
THE TRUST MAY INVEST PRIMARILY IN LOWER RATED BONDS, COMMONLY REFERRED TO AS
"JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO A GREATER RISK OF LOSS OF
PRINCIPAL AND INTEREST THAN INVESTMENTS IN HIGHER RATED SECURITIES. PURCHASERS
SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THIS TRUST.
The Trust's investment adviser will endeavor to limit these risks through
diversifying the portfolio and through careful credit analysis of individual
issuers.
The Trust has also filed a Statement of Additional Information dated April 30,
1998, with the Securities and Exchange Commission (the "SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Trust, contact the Trust
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Trust is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated April 30, 1998
TABLE OF CONTENTS
Summary of Trust Expenses 1
Financial Highlights 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
High Yield Securities 6
Investment Limitations 7
Trust Information 7
Management of the Trust 7
Distribution of Trust Shares 8
Administration of the Trust 9
Net Asset Value 9
Investing in the Trust 9
Share Purchases 9
Minimum Investment Required 9
What Shares Cost 9
Confirmations and Account Statements 10
Dividends 10
Capital Gains 10
Retirement Plans 10
Redeeming Shares 10
Telephone Redemption 10
Written Requests 10
Accounts with Low Balances 11
Shareholder Information 11
Voting Rights 11
Tax Information 11
Federal Income Tax 11
State and Local Taxes 11
Performance Information 11
Financial Statements 12
Report of Ernst & Young LLP, Independent Auditors 30
Appendix 31
SUMMARY OF TRUST EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver)(1) 0.53%
12b-1 Fee None
Total Other Expenses 0.35%
Shareholder Services Fee (after waiver)(2) 0.20%
Total Operating Expenses(3) 0.88%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.75%.
(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholders services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole discretion.
The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 1.15% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Trust will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Trust Information" and "Investing in the Trust." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<TABLE>
<S> <C>
1 Year $ 9
3 Years $ 28
5 Years $ 49
10 Years $108
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 30.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $ 9.41 $ 9.09 $ 8.57 $ 9.48 $ 9.10 $ 8.91 $ 6.99 $ 8.02 $ 9.96 $10.21
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.82 0.85 0.85 0.84 0.84 0.93 1.03 1.04 1.30 1.30
Net realized and 0.32 0.33 0.51 (0.90) 0.40 0.19 1.90 (0.92) (1.96) (0.25)
unrealized gain (loss)
on investments
Total from investment 1.14 1.18 1.36 (0.06) 1.24 1.12 2.93 0.12 (0.66) 1.05
operations
LESS DISTRIBUTIONS
Distributions from net (0.82) (0.85) (0.84) (0.84) (0.86) (0.93) (1.01) (1.06) (1.28) (1.30)
investment income
Distributions in -- (0.01) -- (0.01) -- -- -- (0.09) -- --
excess of net investment
income
Total distributions (0.82) (0.86) (0.84) (0.85) (0.86) (0.93) (1.01) (1.15) (1.28) (1.30)
NET ASSET VALUE, END OF $ 9.73 $ 9.41 $ 9.09 $ 8.57 $ 9.48 $ 9.10 $ 8.91 $ 6.99 $ 8.02 $ 9.96
PERIOD
TOTAL RETURN(B) 12.74% 13.74% 16.47% (0.32%) 14.16% 13.28% 44.15% 3.12% (7.50%) 10.92%
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.88% 0.88% 0.88% 0.85% 0.83% 0.77% 0.76% 0.78% 0.76% 0.75%
Net investment income 8.73% 9.45% 9.53% 9.70% 9.17% 10.54% 12.73% 14.82% 13.87% 12.89%
Expense 0.27% 0.28% 0.30% 0.22% 0.13% 0.22% 0.33% 0.49% 0.33% 0.32%
waiver/reimbursement(c)
SUPPLEMENTAL DATA
Net assets, end of $1,199,063 $938,363 $673,779 $464,604 $432,045 $354,383 $222,937 $103,647 $134,242 $235,208
period (000 omitted)
Portfolio turnover 84% 81% 87% 99% 112% 93% 61% 31% 24% 51%
</TABLE>
(a) Distributions in excess of net investment income for the periods ended
February 28, 1997, 1995, and 1991 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.
FURTHER INFORMATION ABOUT THE TRUST'S PERFORMANCE IS CONTAINED IN THE
TRUST'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED FEBRUARY 28, 1998, WHICH CAN
BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated April 17, 1984. The Trust is designed primarily for assets held
by bank customers or by banks in a fiduciary, advisory, agency, custodial
(including Individual Retirement Accounts ("IRAs")), or similar capacity. It is
also designed for funds held by other institutions such as corporations, trusts,
brokers, investment counselors, pension and profit-sharing plans, and insurance
companies. A minimum initial investment of $25,000 over a 90-day period is
required.
Trust shares are currently sold and redeemed at net asset value without a sales
charge imposed by the Trust.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Trust is to seek high current income by
investing primarily in a professionally managed, diversified portfolio of fixed
income securities. While there is no assurance that the Trust will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus. The investment objective stated above cannot be
changed without approval of shareholders.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS
The Trust will invest primarily in fixed income securities. These securities are
expected to be lower-rated corporate debt obligations. This investment policy is
fundamental and cannot be changed without shareholder approval. As a matter of
non-fundamental investment policy, under normal circumstances, the Trust will
invest 65% of its assets in lower-rated fixed income securities. The fixed
income securities in which the Trust invests include, but are not limited to,
the following:
* corporate debt obligations having fixed or floating rates of interest and
which are rated BBB or lower by nationally recognized statistical rating
organizations ("NRSROs");
* commercial paper;
* convertible securities;
* obligations of the United States;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities;
* time and savings deposits (including certificates of deposit) in commercial
or savings banks whose deposits are insured by the Bank Insurance Fund
("BIF") or the Savings Association Insurance Fund ("SAIF"), including
certificates of deposit issued by and other time deposits in foreign
branches of BIF-insured banks;
* bankers' acceptances issued by a BIF-insured bank, or issued by the bank's
Edge Act subsidiary and guaranteed by the bank, with remaining maturities
of nine months or less. The total acceptances of any bank held by the Trust
cannot exceed 0.25% of such bank's total deposits according to the bank's
last published statement of condition preceding the date of the acceptance;
* general obligations of any state, territory, or possession of the United
States, or their political subdivisions, so long as they are either (1)
rated in one of the four highest grades by NRSROs or (2) issued by a public
housing agency and backed by the full faith and credit of the United
States;
* preferred stock.
The corporate debt obligations in which the Trust may invest are generally rated
BBB or lower by Standard & Poor's ("S&P") or Baa or lower by Moody's Investors
Service, Inc. ("Moody's"), or are not rated but are determined by the Trust's
investment adviser to be of comparable quality. (See "High Yield Securities.")
Certain fixed rate obligations in which the Trust invests may involve equity
characteristics. The Trust may, for example, invest in unit offerings that
combine fixed rate securities and common stock or common stock equivalents such
as warrants, rights, and options.
In the aggregate, the Trust may invest up to 10% of the value of its total
assets in equity securities (whether the equity securities are purchased in a
unit offering or not). This limitation does not apply to convertible securities
and preferred stock. This policy may be changed by the Board of Trustees (the
"Trustees") without the approval of shareholders. Shareholders will be notified
before any material change in this policy becomes effective.
CONVERTIBLE SECURITIES
The Trust may invest in convertible securities. Convertible securities include a
spectrum of securities which can be exchanged for or converted into common
stock. Convertible securities may include, but are not limited to: convertible
bonds or debentures; convertible preferred stock; units consisting of usable
bonds and warrants; or securities which cap or otherwise limit returns to the
convertible security holder, such as DECS--(Dividend Enhanced Convertible Stock,
or Debt Exchangeable for Common Stock when issued as a debt security),
LYONS--(Liquid Yield Option Notes, which are corporate bonds that are purchased
at prices below par with no coupons and are convertible into stock),
PERCS--(Preferred Equity Redemption Cumulative Stock (an equity issue that pays
a high cash dividend, has a cap price and mandatory conversion to common stock
at maturity), and PRIDES--(Preferred Redeemable Increased Dividend Securities
(which are essentially the same as DECS; the difference is little more than who
initially underwrites the issue).
Convertible securities are often rated below investment grade or not rated
because they fall below debt obligations and just above common equity in order
of preference or priority on the issuer's balance sheet. Hence, an issuer with
investment grade senior debt may issue convertible securities with ratings less
than investment grade or not rated. Convertible securities rated below
investment grade may be subject to some of the same risks as those inherent in
junk bonds. The Trust does not limit convertible securities by rating, and there
is no minimal acceptance rating for a convertible security to be purchased or
held in the Trust. Therefore, the Trust invests in convertible securities
irrespective of their ratings. This could result in the Trust purchasing and
holding, without limit, convertible securities rated below investment grade by
an NRSRO or in the Trust holding such securities where they have acquired a
rating below investment grade after the Trust has purchased it. (Please see
"High Yield Securities.")
FOREIGN SECURITIES
The Trust may invest without limit in foreign securities, including foreign
securities not publicly traded in the United States, which may include any of
the types of securities described above. (See "Acceptable Investments.")
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investments in domestic issuers. These considerations include the possibility of
expropriation, the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign accounting standards,
less liquidity and more volatility in foreign securities markets, the impact of
political, social, or diplomatic developments, and the difficulty of assessing
economic trends in foreign countries. It may also be more difficult to enforce
contractual obligations abroad than would be the case in the United States
because of differences in the legal systems. Transaction costs in foreign
securities may be higher. The adviser will consider these and other factors
before investing in foreign securities and will not make such investments
unless, in its opinion, such investments will meet the Fund's standards and
objectives.
REAL ESTATE INVESTMENT TRUSTS
The Trust may invest in securities issued by real estate investment trusts which
may include any other types of securities described above. (See "Acceptable
Investments.") Risks associated with real estate investments include the fact
that equity and mortgage real estate investment trusts are dependent upon
management skill and are not diversified, and are, therefore, subject to the
risk of financing single projects or unlimited number of projects. They are also
subject to heavy cash flow dependency, defaults by borrowers, and
self-liquidation. Additionally, equity real estate investment trusts may be
affected by any changes in the value of the underlying property owned by the
trusts, and mortgage real estate investment trusts may be affected by the
quality of any credit extended.
RESTRICTED AND ILLIQUID SECURITIES
The Trust may invest in restricted securities. Restricted securities are any
securities in which the Trust may invest pursuant to its investment objective
and policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Trustees, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Trust will limit their purchase together
with other illiquid securities including repurchase agreements providing for
settlement in more than seven days after notice to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Trust may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Trust purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Trust to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
TEMPORARY INVESTMENTS
The Trust may also invest temporarily in cash and cash items during times of
unusual market conditions for defensive purposes and to maintain liquidity. Cash
items may include, but are not limited to, obligations such as:
* certificates of deposit;
* commercial paper (generally lower-rated);
* short-term notes;
* obligations issued or guaranteed as to principal and interest by the
U.S. government, or any of its agencies, or instrumentalities; and
* repurchase agreements.
REPURCHASE AGREEMENTS
Certain securities in which the Trust invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other securities to the Trust and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent that the
original seller does not repurchase the securities from the Trust, the Trust
could receive less than the repurchase price on any sale of such securities.
PUT AND CALL OPTIONS
The Trust may purchase put options on portfolio securities. The Trust may also
write call options on securities either held in its portfolio or which it has
the right to obtain without payment of further consideration or for which it has
segregated cash in the amount of any additional consideration. The call options
which the Trust writes must be listed on a recognized options exchange.
Purchases of puts or sales of calls by the Trust are intended to protect against
price movements in particular securities in the Trust's portfolio. Sales of
calls also generate income for the Trust. The Trust also reserves the right to
hedge the portfolio by buying financial futures and put options on financial
futures.
RISKS
Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. This requires a secondary
market on an exchange for call or put options which may or may not exist for any
particular call or put option at any specific time. The absence of a liquid
secondary market also may limit the Trust's ability to dispose of the securities
underlying an option. The inability to close options also could have an adverse
impact on the Trust's ability to effectively hedge its portfolio.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Trust may lend its portfolio
securities on a short-term or long-term basis to broker/dealers, banks, or other
institutional borrowers of securities. The Trust will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the Trust's
investment adviser has determined are creditworthy under guidelines established
by the Trustees and will receive collateral equal to at least 100% of the value
of the securities loaned.
There is the risk that when the Trust lends portfolio securities, the securities
may not be available to the Trust on a timely basis and the Trust may,
therefore, lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for bankruptcy
or become insolvent, disposition of the securities may be delayed pending court
action.
PORTFOLIO TURNOVER
While the Trust does not intend to do substantial short-term trading, from time
to time it may sell portfolio securities without considering how long they have
been held. The Trust would do this:
* to take advantage of short-term differentials in yields or market
values;
* to take advantage of new investment opportunities; * to respond to changes
in the creditworthiness of an issuer; or * to try to preserve gains or limit
losses.
Any such trading would increase the Trust's portfolio turnover rate and its
transaction costs. However, the Trust will not attempt to set or meet an
arbitrary turnover rate since turnover is incidental to transactions considered
necessary to achieve the Trust's investment objective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Trust may invest its assets in securities of other investment companies as
an efficient means of carrying out its investment policies. It should be noted
that investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Trust in shares of other investment companies
may be subject to such duplicate expenses.
HIGH YIELD SECURITIES
The prices of fixed income securities fluctuate inversely to the direction of
interest rates.
The corporate debt obligations in which the Trust invests are usually not in the
three highest rating categories of an NRSRO (AAA, AA, or A for S&P and Aaa, Aa,
or A for Moody's) but are in the lower rating categories or are unrated but are
of comparable quality. Securities which are rated below BBB by S&P or Fitch or
Baa by Moody's have speculative characteristics and are commonly referred to as
"junk bonds." There is no minimal acceptable rating for a security to be
purchased or held in the Trust's portfolio, and the Trust may, from time to
time, purchase or hold securities rated in the lowest rating category. A
description of the rating categories is contained in the Appendix to this
prospectus. Lower-rated securities will usually offer higher yields than
higher-rated securities. However, there is more risk associated with these
investments. This is because of reduced creditworthiness and increased risk of
default. Lower-rated securities generally tend to reflect short-term corporate
and market developments to a greater extent than higher-rated securities which
react primarily to fluctuations in the general level of interest rates.
Short-term corporate and market developments affecting the price or liquidity of
lower-rated securities could include adverse news affecting major issuers,
underwriters, or dealers of lower-rated corporate debt obligations. In addition,
since there are fewer investors in lower-rated securities, it may be harder to
sell the securities at an optimum time.
As a result of these factors, lower-rated securities tend to have more price
volatility and carry more risk to principal and income than higher-rated
securities.
An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than they had bargained for at the time such bonds
were purchased. In the event of a restructuring, the Trust may bear additional
legal or administrative expenses in order to maximize recovery from an issuer.
The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds. Adverse publicity and the
perception of investors relating to issuers, underwriters, dealers or underlying
business conditions, whether or not warranted by fundamental analysis, may
affect the price or liquidity of lower-rated bonds. On occasion, therefore, it
may become difficult to price or dispose of a particular security in the
portfolio.
The Trust may, from time to time, own zero coupon bonds or pay-in-kind
securities. A zero coupon bond makes no periodic interest payments and the
entire obligation becomes due only upon maturity. Pay-in-kind securities make
periodic payments in the form of additional securities (as opposed to cash). The
price of zero coupon bonds and pay-in-kind securities are generally more
sensitive to fluctuations in interest rates than are conventional bonds.
Additionally, federal tax law requires that interest on zero coupon bonds and
pay-in-kind securities be reported as income to the Trust even though the Trust
receives no cash interest until the maturity or payment date of such securities.
Many corporate debt obligations, including many lower-rated bonds, permit the
issuers to call the security and thereby redeem their obligations earlier than
the stated maturity dates. Issuers are more likely to call bonds during periods
of declining interest rates. In these cases, if the Trust owns a bond which is
called, the Trust will receive its return of principal earlier than expected and
would likely be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Trust.
The table below shows the weighted average of the ratings of the bonds in the
Trust's portfolio during the Trust's fiscal year ended February 28, 1998. The
credit rating categories are those provided by S&P, which is an NRSRO. The
percentages in the column titled "Rated" reflect the percentage of bonds in the
portfolio which received a rating from at least one NRSRO. The percentages in
the column titled "Not Rated" reflect the percentage of bonds in the portfolio
which are not rated but which the Trust's investment adviser has judged to be
comparable in quality to the corresponding rated bonds.
<TABLE>
<CAPTION>
AS A PERCENTAGE
OF TOTAL MARKET VALUE
OF BOND HOLDINGS
NOT
CREDIT RATING RATED RATED TOTAL
<S> <C> <C> <C>
AAA 3.0% 0.0% 3.0%
BB & BBB 14.8 0.0 14.8
B 71.0 6.3 77.3
CCC 4.9 0.0 4.9
D 0.0 0.0 0.0
93.7% 6.3% 100.0%
</TABLE>
REDUCING RISKS OF LOWER-RATED SECURITIES
The Trust's investment adviser believes that the risks of investing in
lower-rated securities can be reduced. The professional portfolio management
techniques used by the Trust to attempt to reduce these risks include:
CREDIT RESEARCH
The Trust's investment adviser will perform its own credit analysis in addition
to using NRSROs and other sources, including discussions with the issuer's
management, the judgment of other investment analysts, and its own informed
judgment. The Trust's investment adviser's credit analysis will consider the
issuer's financial soundness, its responsiveness to changes in interest rates
and business conditions, and its anticipated cash flow, interest or dividend
coverage and earnings. In evaluating an issuer, the Trust's investment adviser
places special emphasis on the estimated current value of the issuer's assets
rather than historical costs.
DIVERSIFICATION
The Trust invests in securities of many different issuers, industries, and
economic sectors to reduce portfolio risk.
ECONOMIC ANALYSIS
The Trust's investment adviser will analyze current developments and trends in
the economy and in the financial markets. When investing in lower-rated
securities, timing and selection are critical, and analysis of the business
cycle can be important.
INVESTMENT LIMITATIONS
The Trust will not:
* borrow money directly or through reverse repurchase agreements
(arrangements in which the Trust sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) except, under certain circumstances, the Trust may borrow up to
one-third of the value of its net assets; or
* sell securities short except, under strict limitations, the Trust may
maintain open short positions so long as not more than 10% of the value of
its net assets is held as collateral for those positions.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
in this limitation become effective. The Trust will not:
* invest more than 5% of the value of its total assets in securities of one
issuer (except cash and cash items, repurchase agreements, and U.S.
government obligations) or acquire more than 10% of any class of voting
securities of any one issuer.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
Investment decisions for the Trust are made by Federated Management, the Trust's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and supervision for the Trust
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Trust.
ADVISORY FEES
The Trust's Adviser receives an annual investment advisory fee equal to 0.75% of
the Trust's average daily net assets. The Adviser may voluntarily choose to
waive a portion of its fee or reimburse the Trust for certain operating
expenses. This does not include reimbursement to the Trust of any expenses
incurred by shareholders who use the transfer agent's subaccounting facilities.
The Adviser can terminate this voluntary reimbursement of expenses at any time
in its sole discretion.
ADVISER'S BACKGROUND
Federated Management, a Delaware business trust organized on April 11, 1989, is
a registered investment adviser under the Investment Advisers Act of 1940. It is
a subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Federated Management and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.
Mark E. Durbiano has been a portfolio manager of the Trust since August
1984. Mr. Durbiano joined Federated Investors in 1982 and has been a Senior
Vice President of the Trust's Adviser since January 1996. From 1988 through
1995, Mr. Durbiano was a Vice President of the Trust's Adviser. Mr. Durbiano
is a Chartered Financial Analyst and received his M.B.A. in Finance from the
University of Pittsburgh.
Constantine Kartsonas has been a portfolio manager of the Trust since April
1998. Mr. Kartsonas joined Federated Investors in 1994 as an Investment
Analyst and has been an Assistant Vice President of the Trust's Adviser
since January 1997. From 1990 to 1993, he served as an Operations Analyst at
Lehman Brothers. Mr. Kartsonas earned his M.B.A. with a concentration in
economics, from the University of Pittsburgh in 1994.
Both the Trust and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Trust and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Trust's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Trust; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
DISTRIBUTION OF TRUST SHARES
Federated Securities Corp. is the principal distributor for shares of the
Trust. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES
The Trust has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Trust
may make payments up to 0.25% of the average daily net asset value of its
shares, computed at an annual rate, to obtain certain personal services for
shareholders and to maintain shareholder accounts. From time to time and for
such periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Trust and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services Agreement,
Federated Securities Corp. and Federated Shareholder Services, from their own
assets, may pay financial institutions supplemental fees for the performance of
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Trust. Such assistance will be predicated upon the amount of shares the
financial institution sells or may sell, and/or upon the type and nature of
sales or marketing support furnished by the financial institution. Any payments
made by the distributor may be reimbursed by the Trust's Adviser or its
affiliates.
ADMINISTRATION OF THE TRUST
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Trust. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of all funds for which affiliates of Federated Investors serve as
investment adviser and principal underwriter (the "Federated Funds") as
specified below: <TABLE> <CAPTION>
MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
<C> <S>
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.
NET ASSET VALUE
The Trust's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE TRUST
SHARE PURCHASES
Trust shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased either by wire or mail.
To purchase shares of the Trust, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone. The Trust reserves the right to reject any purchase request.
BY WIRE
To purchase shares of the Trust by Federal Reserve wire, call the Trust before
4:00 p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Shareholder Services Company, c/o State Street Bank
and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to:
Federated High Yield Trust; Trust Number (this number can be found on the
account statement or by contacting the Trust); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
BY MAIL
To purchase shares of the Trust by mail, send a check made payable to Federated
High Yield Trust to Federated Shareholder Services Company, c/o State Street
Bank and Trust Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders
by mail are considered received after payment by check is converted by the
transfer agent's bank, State Street Bank and Trust Company, into federal funds.
This is normally the next business day after State Street Bank and Trust Company
receives the check. MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Trust is $25,000 plus any financial
intermediary's fee, if applicable. However, an account may be opened with a
smaller amount as long as the $25,000 minimum is reached within 90 days. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Trust. Accounts established through a financial
intermediary may be subject to a smaller minimum investment.
WHAT SHARES COST
Trust shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Trust. Investors who purchase
Trust shares through a financial intermediary may be charged a service fee by
that financial intermediary. The net asset value is determined as of the
close of trading (normally 4:00 p.m., Eastern time) on the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Trust's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions. In addition,
shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Trust will not issue share certificates.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are declared just prior
to determining net asset value. If an order for shares is placed on the
preceding business day, shares purchased by wire begin earning dividends on the
business day that wire payment is received by the transfer agent. If the order
for shares and payment by wire are received on the same day, shares begin
earning dividends on the next business day. Shares purchased by check begin
earning dividends on the business day after the check is converted, upon
instruction of the transfer agent, into federal funds. Dividends are
automatically reinvested on payment dates in additional shares of the Trust
unless cash payments are requested by contacting the Trust.
CAPITAL GAINS
Capital gains realized by the Trust, if any, will be distributed at least once
every 12 months.
RETIREMENT PLANS
Shares of the Trust can be purchased as an investment for retirement plans or
for IRA accounts. For further details, contact Federated Securities Corp.
and consult a tax adviser.
REDEEMING SHARES
The Trust redeems shares at their net asset value next determined after the
Trust receives the redemption request. Investors who redeem shares through a
financial intermediary may be charged a service fee by that financial
intermediary. Redemptions will be made on days on which the Trust computes its
net asset value. Redemption requests must be received in proper form and can be
made by telephone or in writing. Redemption proceeds will normally be sent the
following day. However, in order to protect shareholders of the Trust from
possible detrimental effects of redemptions, the Adviser may cause a delay of
two to seven days in sending redemption proceeds during certain periods of
market volatility or for certain shareholders. Dividends are paid up to the day
redemption proceeds are sent.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Trust before 4:00 p.m.
(Eastern time). All proceeds will be wired to the shareholder's account at a
domestic commercial bank that is a member of the Federal Reserve System.
Proceeds from redemption requests received on holidays when wire transfers are
restricted will be wired the following business day. Questions about telephone
redemptions on days when wire transfers are restricted should be directed to
your shareholder services representative at the telephone number listed on your
account statement. If, at any time, the Trust shall determine it necessary to
terminate or modify this method of redemption, shareholders would be promptly
notified.
An authorization form permitting the transfer agent to accept telephone requests
must first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Trust, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "Written Requests," should be considered.
WRITTEN REQUESTS
Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail to the address noted above.
The written request should state: the Trust name; the account name as registered
with the Trust; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Redemption proceeds will be sent by check.
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Trust or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company, or savings association whose deposits are
insured by an organization which is administered by the Federal Deposit
Insurance Corporation; a member firm of a domestic stock exchange; or any other
"eligible guarantor institution," as defined in the Securities Exchange Act of
1934. The Trust does not accept signatures guaranteed by a notary public.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Trust's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. As of April 8, 1998, Charles
Schwab & Co., Inc., San Francisco, California, acting in various capacities for
numerous accounts, was the owner of record of approximately 56,342,022 shares
(44.46%) of the Trust, and therefore, may, for certain purposes, be deemed to
control the Trust and be able to affect the outcome of certain matters presented
for a vote of shareholders.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
TAX INFORMATION
FEDERAL INCOME TAX
The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares. No federal
income tax is due on any dividends earned in an IRA or qualified retirement plan
until distributed.
STATE AND LOCAL TAXES
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time, the Trust advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Trust after reinvesting all income and capital
gain distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage. The yield of the Trust is
calculated by dividing the net investment income per share (as defined by the
SEC) earned by the Trust over a thirty-day period by the maximum offering price
per share of the Trust on the last day of the period. This number is then
annualized using semi-annual compounding. The yield does not necessarily reflect
income actually earned by the Trust and, therefore, may not correlate to the
dividends or other distributions paid to shareholders. Trust shares are
sold without any sales charge or other similar non-recurring charges.
From time to time, advertisements for the Trust may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Trust's performance to certain indices.
PORTFOLIO OF INVESTMENTS
FEDERATED HIGH YIELD TRUST
FEBRUARY 28, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--89.6%
AEROSPACE & DEFENSE--0.4%
$ 800,000 (a)Aviation Sales Co., Sr. Sub. Note, 8.125%, $ 809,000
2/15/2008
2,575,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 3/1/2007 2,690,875
1,000,000 (a)United Defense Industries, Inc., Sr. Sub. 1,022,500
Note, 8.75%, 11/15/2007
TOTAL 4,522,375
AUTOMOBILE--2.5%
3,600,000 (a) Accuride Corp., Sr. Sub. Note, 9.25%, 3,618,000
2/1/2008
3,563,000 Aftermarket Technology Co., Sr. Sub. Note, 3,981,652
12.00%, 8/1/2004
750,000 Aftermarket Technology Co., Sr. Sub. Note, 838,125
Series D, 12.00%, 8/1/2004
9,050,000 Collins & Aikman Products Co., Sr. Sub. Note, 10,215,187
11.50%, 4/15/2006
1,000,000 Delco-Remy International, Inc., Sr. Note, 1,035,000
8.625%, 12/15/2007
5,900,000 Lear Corp., Sub. Note, 9.50%, 7/15/2006 6,541,625
1,700,000 OshKosh Truck Corp., Sr. Sub., 8.75%, 3/1/2008 1,725,500
2,050,000 Oxford Automotive, Inc., Sr. Sub. Note, 10.125%, 2,173,000
6/15/2007
TOTAL 30,128,089
BANKING--1.5%
15,700,000 First Nationwide Escrow Corp., Sr. Sub. Note, 17,741,000
10.625%, 10/1/2003
BEVERAGE & TOBACCO--0.4%
5,050,000 Dimon, Inc., Sr. Note, 8.875%, 6/1/2006 5,365,625
BROADCAST RADIO & TV--6.7%
7,250,000 (a)ACME Television, LLC, Sr. Disc. Note, 5,818,125
0/10.875%, 9/30/2004
3,000,000 Capstar Broadcasting Partners, Inc., Sr. Sub. 3,157,500
Note, 9.25%, 7/1/2007
3,000,000 Chancellor Media Corp., Company Guarantee, 3,360,000
10.50%, 1/15/2007
2,450,000 Chancellor Media Corp., Sr. Sub. Note, 8.75%, 2,578,625
6/15/2007
5,000,000 Chancellor Media Corp., Sr. Sub. Note, 9.375%, 5,325,000
10/1/2004
5,825,000 (a)Chancellor Radio Broadcasting Co., Sr. Sub. 5,941,500
Note, 8.125%, 12/15/2007
12,925,000 Fox/Liberty Networks, LLC, Sr. Disc. Note, 8,853,625
0/9.75%, 8/15/2007
3,200,000 Fox/Liberty Networks, LLC, Sr. Note, 8.875%, 3,336,000
8/15/2007
1,175,000 Lamar Advertising Co., Sr. Sub. Note, 8.625%, 1,227,875
9/15/2007
5,000,000 Lamar Advertising Co., Sr. Sub. Note, 9.625%, 5,450,000
12/1/2006
8,550,000 Outdoor Systems, Inc., Sr. Sub. Note, 8.875%, 9,063,000
6/15/2007
1,400,000 SFX Broadcasting, Inc., Sr. Sub. Note, 10.75%, 1,575,000
5/15/2006
3,300,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 3,576,375
10.00%, 9/30/2005
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
BROADCAST RADIO & TV--CONTINUED
$ 7,000,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, $ 7,227,500
8.75%, 12/15/2007
2,250,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 2,351,250
9.00%, 7/15/2007
750,000 Sullivan Broadcast Holdings Inc., Deb., 13.25%, 1,016,250
12/15/2006
5,025,000 Sullivan Broadcast Holdings Inc., Sr. Sub. Note, 5,477,250
10.25%, 12/15/2005
2,225,000 Young Broadcasting, Inc., Sr. Sub. Note, 2,425,250
10.125%, 2/15/2005
1,250,000 Young Broadcasting, Inc., Sr. Sub. Note, 11.75%, 1,387,500
11/15/2004
1,425,000 Young Broadcasting, Inc., Sr. Sub. Note, 9.00%, 1,474,875
1/15/2006
TOTAL 80,622,500
BUILDING & DEVELOPMENT--1.1%
3,350,000 (a)American Architectural Products Corp., Sr. 3,517,500
Note, 11.75%, 12/1/2007
4,625,000 American Builders & Contractors Supply Co., 4,833,125
Inc., Sr. Sub. Note, 10.625%, 5/15/2007
4,625,000 (a)Building Materials Corp. of America, Sr. 4,682,812
Note, 8.00%, 10/15/2007
TOTAL 13,033,437
BUSINESS EQUIPMENT & SERVICES--2.0%
6,725,000 (a)Dialog Corp. PLC, Sr. Sub. Note, 11.00%, 7,363,875
11/15/2007
3,725,000 Electronic Retailing Systems International, 2,439,875
Inc., Sr. Disc. Note, 0/13.25%, 2/1/2004
1,850,000 (a)Fisher Scientific International, Inc., Sr. 1,910,125
Sub. Note, 9.00%, 2/1/2008
3,900,000 Knoll Inc., Sr. Sub. Note, 10.875%, 3/15/2006 4,475,250
3,100,000 Outsourcing Solutions, Inc., Sr. Sub. Note, 3,340,250
11.00%, 11/1/2006
3,483,000 United Stationers Supply Co., Sr. Sub. Note, 4,040,280
12.75%, 5/1/2005
TOTAL 23,569,655
CABLE TELEVISION--11.3%
34,989 Australis Media Ltd., Sr. Disc. Note, 5/15/2003 8,747
3,950,000 Australis Media Ltd., Unit, 0/14.00%, 5/15/2003 987,500
5,000,000 Cablevision Systems Corp., Sr. Note, 7.875%, 5,162,500
12/15/2007
4,000,000 Cablevision Systems Corp., Sr. Sub. Deb., 4,420,000
9.875%, 2/15/2013
2,875,000 Cablevision Systems Corp., Sr. Sub. Note, 9.25%, 3,083,437
11/1/2005
4,300,000 Cablevision Systems Corp., Sr. Sub. Note, 4,740,750
9.875%, 5/15/2006
2,000,000 Charter Communications Holdings, Inc., Sr. Disc. 1,640,000
Note, 0/14.00%, 3/15/2007
4,750,000 Charter Communications Southeast, L.P., Sr. 5,355,625
Note, 11.25%, 3/15/2006
6,475,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 6,944,437
10,475,000 Comcast UK Cable, Deb., 0/11.20%, 11/15/2007 8,641,875
3,850,000 (a)Diamond Cable Communications PLC, 9.125%, 3,869,250
2/1/2008
8,825,000 Diamond Cable Communications PLC, Sr. Disc. 5,956,875
Note, 0/10.75%, 2/15/2007
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CABLE TELEVISION--CONTINUED
$ 4,550,000 (a)Diva Systems Corp., Unit, 0/12.625%, 3/1/2008 $ 2,491,125
11,250,000 EchoStar Satellite Broadcasting Corp., Sr. Disc. 10,054,687
Note, 0/13.125%, 3/15/2004
750,000 FrontierVision Holdings, L.P., Sr. Disc. Note, 583,125
0/11.875%, 9/15/2007
5,250,000 International Cabletel, Inc., Sr. Defd. Cpn. 5,118,750
Note, 0/10.875%, 10/15/2003
6,400,000 International Cabletel, Inc., Sr. Defd. Cpn. 5,168,000
Note, 0/11.50%, 2/1/2006
6,375,000 International Cabletel, Inc., Sr. Disc. Note, 5,466,563
0/12.75%, 4/15/2005
2,250,000 Lenfest Communications Inc., Sr. Note, 8.375%, 2,340,000
11/1/2005
1,000,000 Lenfest Communications Inc., Sr. Sub. Note, 1,140,000
10.50%, 6/15/2006
3,250,000 (a) Lenfest Communications Inc., Sr. Sub. Note, 3,258,125
8.25%, 2/15/2008
2,850,000 (a) Pegasus Communications Corp., Sr. Note, 3,021,000
9.625%, 10/15/2005
3,300,000 Pegasus Media, Note, 12.50%, 7/1/2005 3,795,000
2,850,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority 3,199,125
Note, 10.00%, 12/1/2007
2,500,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority 2,812,500
Note, 10.00%, 3/15/2005
5,800,000 Rogers Cablesystems Ltd., Sr. Sub. Gtd. Note, 6,844,000
11.00%, 12/1/2015
21,825,000 TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 17,569,125
10/1/2007
9,825,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 7,024,875
5/15/2006
8,000,000 (a)United International Holdings, Inc., Sr. 4,880,000
Secd. Disc. Note, 0/10.75%, 2/15/2008
TOTAL 135,576,996
CHEMICALS & PLASTICS--3.1%
750,000 Buckeye Cellulose Corp., Sr. Sub. Note, 8.50%, 779,063
12/15/2005
3,900,000 Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 4,075,500
9/15/2008
1,750,000 Foamex L.P., Sr. Sub. Note, 13.50%, 8/15/2005 2,012,500
3,075,000 ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003 3,236,438
3,988,000 ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002 4,262,175
11,600,000 Polymer Group, Inc., Sr. Sub. Note, 9.00%, 11,890,000
7/1/2007
2,225,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 2,024,750
10/15/2005
6,075,000 Sterling Chemicals Holdings, Inc., Sr. Disc. 3,857,625
Note, 0/13.50%, 8/15/2008
1,350,000 Sterling Chemicals, Inc., Sr. Sub. Note, 11.75%, 1,424,250
8/15/2006
3,400,000 Uniroyal Technology Corp., Sr. Secd. Note, 3,587,000
11.75%, 6/1/2003
TOTAL 37,149,301
CLOTHING & TEXTILES--2.8%
3,125,000 Collins & Aikman Floorcoverings, Inc., Sr. Sub. 3,304,687
Note, 10.00%, 1/15/2007
3,850,000 Dyersburg Corp., Sr. Sub. Note, 9.75%, 9/1/2007 4,071,375
2,150,000 GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007 2,257,500
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CLOTHING & TEXTILES--CONTINUED
$ 4,450,000 (a)Glenoit Corp., Sr. Sub. Note, 11.00%, $ 4,861,625
4/15/2007
4,700,000 Pillowtex Corp., Sr. Sub. Note, 10.00%, 5,170,000
11/15/2006
2,950,000 (a)Pillowtex Corp., Sr. Sub. Note, 9.00%, 3,090,125
12/15/2007
9,850,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 10,441,000
12/15/2005
TOTAL 33,196,312
CONGLOMERATES--0.6%
2,250,000 (a)ClimaChem, Inc., Sr. Note, 10.75%, 12/1/2007 2,379,375
4,850,000 (a)Eagle Picher Industries, Inc., Sr. Sub. Note, 4,898,500
9.375%, 3/1/2008
TOTAL 7,277,875
CONSUMER PRODUCTS--4.3%
3,150,000 American Safety Razor Co., Sr. Note, 9.875%, 3,441,375
8/1/2005
2,000,000 (a) Amscan Holdings, Inc., Sr. Sub. Note, 2,090,000
9.875%, 12/15/2007
2,600,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 2,899,000
8/15/2005
2,400,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 2,652,000
13.75%, 8/1/2002
5,300,000 ICON Fitness Corp., Sr. Disc. Note, 0/14.00%, 2,888,500
11/15/2006
3,450,000 ICON Health & Fitness, Inc., Sr. Sub. Note, 3,777,750
13.00%, 7/15/2002
2,850,000 NBTY, Inc., Sr. Sub. Note, 8.625%, 9/15/2007 2,942,625
6,300,000 Playtex Family Products Corp., Sr. Sub. Note, 6,520,500
9.00%, 12/15/2003
1,100,000 Playtex Products, Inc., Sr. Note, 8.875%, 1,144,000
7/15/2004
1,500,000 (a) Revlon Consumer Products Corp., Sr. Note, 1,496,250
8.125%, 2/1/2006
11,800,000 (a) Revlon Consumer Products Corp., Sr. Sub. 11,770,500
Note, 8.625%, 2/1/2008
1,250,000 (a) Sealy Corporation, Sr. Sub. Note, 9.875%, 1,325,000
12/15/2007
2,000,000 (a) Sealy Mattress Co., Sr. Sub. Disc. Note, 1,317,500
0/10.875%, 12/15/2007
4,500,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 4,888,125
2,950,000 Syratech Corp., Sr. Note, 11.00%, 4/15/2007 2,669,750
TOTAL 51,822,875
CONTAINER & GLASS PRODUCTS--0.4%
1,200,000 (a)Graham Packaging Co., Sr. Sub. Note, 8.75%, 1,215,000
1/15/2008
1,400,000 (a)Graham Packaging Holdings Co., Sr. Disc. 875,000
Note, 0/10.75%, 1/15/2009
2,750,000 (a)Tekni-Plex, Inc., Sr. Sub. Note, 9.25%, 2,791,250
3/1/2008
TOTAL 4,881,250
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
ECOLOGICAL SERVICES & EQUIPMENT--1.6%
$ 10,175,000 Allied Waste Industries, Inc., Sr. Disc. Note, $ 7,415,031
0/11.30%, 6/1/2007
8,375,000 Allied Waste North America, Inc., Company 9,327,656
Guarantee, 10.25%, 12/1/2006
2,350,000 ICF Kaiser International, Inc., Sr. Sub. Note, 2,502,750
13.00%, 12/31/2003
TOTAL 19,245,437
ELECTRONICS--0.8%
2,175,000 Fairchild Semiconductor Corp., Sr. Sub., 2,300,063
10.125%, 3/15/2007
1,225,000 (a)PX Escrow Corp., Sr. Sub. Disc. Note, 863,625
0/9.625%, 2/1/2006
1,875,000 Viasystems, Inc., Sr. Sub. Note, 9.75%, 6/1/2007 1,973,438
4,250,000 (a)Viasystems, Inc., Sr. Sub. Note, 9.75%, 4,473,125
6/1/2007
TOTAL 9,610,251
FINANCIAL INTERMEDIARIES--0.2%
2,000,000 ContiFinancial Corp., Sr. Note, 8.375%, 2,055,000
8/15/2003
FOOD & DRUG RETAILERS--1.1%
3,650,000 Carr-Gottstein Foods Co., Sr. Sub. Note, 12.00%, 4,069,750
11/15/2005
3,150,000 DiGiorgio Corp., Sr. Note, 10.00%, 6/15/2007 3,165,750
4,675,000 Jitney-Jungle Stores of America, Inc., Sr. Sub. 4,815,250
Note, 10.375%, 9/15/2007
1,000,000 Stater Brothers Holdings, Inc., Sr. Sub. Note, 1,065,000
9.00%, 7/1/2004
TOTAL 13,115,750
FOOD PRODUCTS--1.9%
3,600,000 Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 3,870,000
2/15/2007
4,350,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 4,817,625
12.25%, 2/1/2005
1,550,000 (a)Eagle Family Foods, Inc., Sr. Sub. Note, 1,553,875
8.75%, 1/15/2008
7,400,000 International Home Foods, Inc., Sr. Sub. Note, 8,251,000
10.375%, 11/1/2006
4,050,000 Van de Kamp's, Inc., Sr. Sub. Note, 12.00%, 4,556,250
9/15/2005
TOTAL 23,048,750
FOOD SERVICES--1.2%
3,075,000 AmeriServe Food Distribution, Inc., Sr. Note, 3,198,000
8.875%, 10/15/2006
7,900,000 AmeriServe Food Distribution, Inc., Sr. Sub. 8,591,250
Note, 10.125%, 7/15/2007
3,200,000 Nebco Evans Holding Co., Sr. Disc. Note, 2,192,000
0/12.375%, 7/15/2007
TOTAL 13,981,250
FOREST PRODUCTS--2.1%
4,125,000 Container Corp. of America, Sr. Note, 11.25%, 4,516,875
5/1/2004
5,250,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 5,565,000
5,350,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 6,018,750
12/15/2004
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
FOREST PRODUCTS--CONTINUED
$ 4,975,000 Stone Container Corp., Sr. Note, 11.50%, $ 5,329,469
10/1/2004
2,000,000 Stone Container Corp., Sr. Note, 12.58%, 2,175,000
8/1/2016
2,000,000 Stone Container Corp., Unit, 12.25%, 4/1/2002 2,075,000
TOTAL 25,680,094
HEALTHCARE--3.1%
2,550,000 Alliance Imaging, Inc., Sr. Sub. Note, 9.625%, 2,658,375
12/15/2005
5,725,000 Dade International, Inc., Sr. Sub. Note, 6,369,062
11.125%, 5/1/2006
4,925,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 5,146,625
9.25%, 10/1/2006
8,450,000 Tenet Healthcare Corp., Sr. Note, 8.00%, 8,766,875
1/15/2005
10,800,000 Tenet Healthcare Corp., Sr. Sub. Note, 10.125%, 11,934,000
3/1/2005
2,650,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 2,769,250
1/15/2007
TOTAL 37,644,187
HOME PRODUCTS & FURNISHINGS--0.8%
8,825,000 Falcon Building Products, Inc., Sr. Sub. Disc. 6,177,500
Note, 0/10.50%, 6/15/2007
3,550,000 (a)Werner Enterprises, Inc., Sr. Sub. Note, 3,776,313
10.00%, 11/15/2007
TOTAL 9,953,813
HOTELS, MOTELS, INNS & CASINOS--0.5%
4,900,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, 5,439,000
2/1/2008
INDUSTRIAL PRODUCTS & EQUIPMENT--4.5%
3,275,000 Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007 3,569,750
1,750,000 (a)Anchor Lamina, Inc., Sr. Sub. Note, 9.875%, 1,774,062
2/1/2008
4,800,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 5,412,000
12.50%, 7/15/2005
4,725,000 Continental Global Group, Inc., Sr. Note, 5,103,000
11.00%, 4/1/2007
1,000,000 (a)Elgin National Industries, Inc., Sr. Note, 1,065,000
11.00%, 11/1/2007
5,325,000 Euramax International PLC, Sr. Sub. Note, 5,830,875
11.25%, 10/1/2006
3,700,000 Fairfield Manufacturing Co., Inc., Sr. Sub. 3,922,000
Note, 11.375%, 7/1/2001
3,250,000 Hawk Corp., Sr. Note, 10.25%, 12/1/2003 3,558,750
4,100,000 International Knife & Saw, Inc., Sr. Sub. Note, 4,489,500
11.375%, 11/15/2006
1,925,000 (a)International Utility Structures, Inc., Sr. 1,997,188
Sub. Note, 10.75%, 2/1/2008
1,800,000 Johnstown America Industries, Inc., Sr. Sub. 2,016,000
Note, 11.75%, 8/15/2005
1,875,000 Johnstown America Industries, Inc., Sr. Sub. 2,100,000
Note, 11.75%, 8/15/2005
5,000,000 MMI Products, Inc., Sr. Sub. Note, 11.25%, 5,550,000
4/15/2007
3,600,000 Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 4,009,500
3,450,000 Unifrax Investment Corp., Sr. Note, 10.50%, 3,622,500
11/1/2003
TOTAL 54,020,125
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
LEISURE & ENTERTAINMENT--4.4%
$ 6,109,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, $ 4,902,472
3/15/2006
1,600,000 AMF Group, Inc., Sr. Sub. Note, 10.875%, 1,766,000
3/15/2006
3,550,000 Cobblestone Golf Group, Inc., Sr. Note, 11.50%, 3,958,250
6/1/2003
1,000,000 KSL Recreation Group, Inc., Sr. Sub. Note, 1,100,000
10.25%, 5/1/2007
3,100,000 Premier Parks, Inc., Sr. Note, 12.00%, 8/15/2003 3,441,000
500,000 Premier Parks, Inc., Sr. Note, 9.75%, 1/15/2007 538,750
12,825,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 14,171,625
0/12.25%, 6/15/2005
22,400,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 23,016,000
TOTAL 52,894,097
MACHINERY & EQUIPMENT--1.6%
4,275,000 Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 4,563,562
1/31/2003
5,525,000 Clark Material Handling Corp., Sr. Note, 10.75%, 6,008,437
11/15/2006
3,500,000 (a)National Equipment Services, Inc., Sr. Sub. 3,745,000
Note, 10.00%, 11/30/2004
4,050,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 4,596,750
TOTAL 18,913,749
METALS & MINING--0.7%
3,000,000 (a)AEI Holding Co., Inc., Sr. Note, 10.00%, 3,172,500
11/15/2007
1,500,000 (a)Anker Coal Group, Inc., Sr. Note, 9.75%, 1,537,500
10/1/2007
4,350,000 Royal Oak Mines, Inc., Sr. Sub. Note, 11.00%, 3,110,250
8/15/2006
TOTAL 7,820,250
OIL & GAS--4.8%
7,950,000 Abraxas Petroleum Corp., Sr. Note, 11.50%, 8,387,250
11/1/2004
2,000,000 (a)Abraxas Petroleum Corp., Sr. Note, Series C, 2,110,000
11.50%, 11/1/2004
5,225,000 DI Industries, Inc., Sr. Note, 8.875%, 7/1/2007 5,525,437
4,200,000 (a)Dailey Petroleum Services Corp., Sr. Note, 4,284,000
9.50%, 2/15/2008
2,000,000 Falcon Drilling Co., Inc., Sr. Sub. Note, 2,280,000
12.50%, 3/15/2005
5,875,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 5,992,500
8.50%, 2/15/2007
5,250,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 5,617,500
9.50%, 11/1/2006
2,500,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 2,618,750
11/15/2003
3,100,000 KCS Energy, Inc., Sr. Sub. Note, 8.875%, 3,053,500
1/15/2008
1,100,000 (a)Offshore Logistics, Inc., Sr. Note, 7.875%, 1,116,500
1/15/2008
1,950,000 Pacalta Resources Ltd., Sr. Note, 10.75%, 1,969,500
6/15/2004
2,250,000 Pogo Producing Co., Sr. Sub. Note, 8.75%, 2,351,250
5/15/2007
2,200,000 Pride Petroleum Services, Inc., Sr. Note, 2,376,000
9.375%, 5/1/2007
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
OIL & GAS--CONTINUED
$ 4,000,000 United Meridian Corp., Sr. Sub. Note, 10.375%, $ 4,460,000
10/15/2005
1,000,000 (a)Universal Compression Holdings, Inc., Sr. 590,000
Disc. Note, 0/11.375%, 2/15/2009
1,875,000 (a)Universal Compression Holdings, Inc., Sr. 1,181,250
Disc. Note, 0/9.875%, 2/15/2008
2,650,000 (a)XCL, Ltd., Unit, 13.50%, 5/1/2004 3,193,250
TOTAL 57,106,687
PRINTING & PUBLISHING--2.2%
7,350,000 Affiliated Newspaper Investments, Inc., Sr. 7,092,750
Disc. Note, 0/13.25%, 7/1/2006
2,975,000 Garden State Newspapers, Inc., Sr. Sub. Note, 3,376,625
12.00%, 7/1/2004
2,600,000 Garden State Newspapers, Inc., Sr. Sub. Note, 2,691,000
8.75%, 10/1/2009
3,100,000 Hollinger International Publishing, Inc., Sr. 3,286,000
Sub. Note, 9.25%, 2/1/2006
4,200,000 Hollinger International Publishing, Inc., Sr. 4,515,000
Sub. Note, 9.25%, 3/15/2007
4,700,000 K-III Communications Corp., Company Guarantee, 4,926,775
Series B, 8.50%, 2/1/2006
TOTAL 25,888,150
RETAILERS--0.7%
5,600,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 5,992,000
9/1/2003
2,700,000 Leslie's Poolmart, Inc., Sr. Note, 10.375%, 2,821,500
7/15/2004
TOTAL 8,813,500
SERVICES--0.3%
3,618,000 Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 4,070,250
STEEL--1.0%
2,000,000 Bayou Steel Corp., 1st Mtg. Note, 10.25%, 2,075,000
3/1/2001
500,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 515,000
5,900,000 GS Technologies Operating Co., Inc., Sr. Note, 6,512,125
12.00%, 9/1/2004
1,225,000 GS Technologies Operating Co., Inc., Sr. Note, 1,387,313
12.25%, 10/1/2005
1,275,000 Ryerson Tull, Inc., Sr. Note, 9.125%, 7/15/2006 1,377,000
TOTAL 11,866,438
SURFACE TRANSPORTATION--3.3%
2,800,000 Allied Holdings, Inc., Sr. Note, 8.625%, 2,884,000
10/1/2007
4,950,000 AmeriTruck Distribution Corp., Sr. Sub. Note, 4,875,750
12.25%, 11/15/2005
3,350,000 Chemical Leaman Corp., Sr. Note, 10.375%, 3,584,500
6/15/2005
3,000,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 3,296,250
12/1/2004
7,050,000 Statia Terminals International N.V., 1st Mtg. 7,525,875
Note, 11.75%, 11/15/2003
7,700,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 8,498,875
3,675,000 Stena AB, Sr. Note, 8.75%, 6/15/2007 3,817,406
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
SURFACE TRANSPORTATION--CONTINUED
$ 2,775,000 (a)The Holt Group, Inc., Sr. Note, 9.75%, $ 2,816,625
1/15/2006
3,100,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 2,712,500
TOTAL 40,011,781
TELECOMMUNICATIONS & CELLULAR--14.7%
7,125,000 American Communications Services, Inc., Sr. 5,771,250
Disc. Note, 0/12.75%, 4/1/2006
600,000 American Communications Services, Inc., Sr. 519,000
Disc. Note, 0/13.00%, 11/1/2005
1,000,000 American Communications Services, Inc., Sr. 1,210,000
Note, 13.75%, 7/15/2007
1,750,000 Arch Communications Group, Inc., Sr. Disc. Note, 988,750
0/10.875%, 3/15/2008
8,250,000 Call-Net Enterprises, Inc., Sr. Disc. Note, 5,898,750
0/9.27%, 8/15/2007
7,025,000 Cellular Communications International, Inc., Sr. 6,072,410
Disc. Note, 13.25% accrual, 8/15/2000
4,050,000 Comcast Cellular Holdings, Inc., Sr. Note, 4,303,125
9.50%, 5/1/2007
2,850,000 Esprit Telecom Group PLC, Sr. Note, 11.50%, 3,113,625
12/15/2007
1,950,000 (a)FLAG Ltd., Sr. Note, 8.25%, 1/30/2008 1,993,875
4,900,000 Hermes Europe Railtel B.V., Sr. Note, 11.50%, 5,512,500
8/15/2007
2,900,000 HighwayMaster Communications, Inc., Sr. Note, 3,052,250
13.75%, 9/15/2005
4,150,000 Intermedia Communications of Florida, Inc., Sr. 3,060,625
Disc. Note, 0/11.25%, 7/15/2007
10,925,000 Intermedia Communications of Florida, Inc., Sr. 8,903,875
Disc. Note, 0/12.50%, 5/15/2006
3,325,000 Intermedia Communications of Florida, Inc., Sr. 3,503,719
Note, 8.875%, 11/1/2007
9,600,000 McLeod, Inc., Sr. Disc. Note, 0/10.50%, 3/1/2007 7,296,000
1,125,000 McLeod, Inc., Sr. Note, 9.25%, 7/15/2007 1,209,375
2,000,000 MetroNet Communications Corp., Sr. Disc. Note, 1,310,000
0/10.75%, 11/1/2007
4,200,000 MetroNet Communications Corp., Sr. Note, 12.00%, 4,872,000
8/15/2007
10,100,000 Millicom International Cellular S. A., Sr. Disc. 7,802,250
Note, 0/13.50%, 6/1/2006
2,825,000 NEXTEL Communications, Inc., Sr. Disc. Note, 1,843,313
0/10.65%, 9/15/2007
6,325,000 NEXTEL Communications, Inc., Sr. Disc. Note, 6,087,813
0/9.75%, 8/15/2004
12,700,000 (a)NEXTEL Communications, Inc., Sr. Disc. Note, 7,794,625
0/9.95%, 2/15/2008
3,000,000 (a)NEXTLINK Communications, Inc., Sr. Note, 3,030,000
9.00%, 3/15/2008
2,350,000 NEXTLINK Communications, Inc., Sr. Note, 9.625%, 2,467,500
10/1/2007
6,850,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 7,141,125
10/15/2008
3,075,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 3,213,375
8/1/2007
5,000,000 (a)Qwest Communications International, Inc., Sr. 3,312,500
Disc. Note, 0/8.29%, 2/1/2008
6,525,000 (a)Qwest Communications International, Inc., Sr. 4,551,188
Disc. Note, 0/9.47%, 10/15/2007
6,925,000 Qwest Communications International, Inc., Sr. 7,929,125
Note, 10.875%, 4/1/2007
4,700,000 Rogers Cantel Mobile, Inc., Sr. Sub. Note, 4,711,750
8.80%, 10/1/2007
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
TELECOMMUNICATIONS & CELLULAR--CONTINUED
$ 5,850,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, $ 6,552,000
10/1/2006
13,250,000 Teleport Communications Group, Inc., Sr. Disc. 11,428,125
Note, 0/11.125%, 7/1/2007
800,000 Teleport Communications Group, Inc., Sr. Note, 932,000
9.875%, 7/1/2006
3,675,000 (a) Telesystem International Wireless, Inc., Sr. 2,260,125
Disc. Note, 0/10.50%, 11/1/2007
8,350,000 (a) Telesystem International Wireless, Inc., Sr. 5,678,000
Disc. Note, 0/13.25%, 6/30/2007
6,250,000 Teligent, Inc., Sr. Note, 11.50%, 12/1/2007 6,453,125
4,325,000 USA Mobile Communications, Inc., Sr. Note, 4,216,875
9.50%, 2/1/2004
9,375,000 Vanguard Cellular Systems, Inc., Deb., 9.375%, 9,937,500
4/15/2006
TOTAL 175,933,443
UTILITIES--1.0%
2,200,000 CalEnergy Co., Inc., Sr. Note, 9.50%, 9/15/2006 2,395,250
2,900,000 California Energy Co., Inc., Sr. Note, 10.25%, 3,142,875
1/15/2004
5,575,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 6,298,133
5/1/2011
TOTAL 11,836,258
TOTAL CORPORATE BONDS (IDENTIFIED COST $1,015,270,075) 1,073,835,550
COMMON STOCKS--0.2%
BROADCAST RADIO & TV--0.0%
12,000 (b)Sullivan Broadcast Holdings Inc., Class B 366,000
BUILDING & DEVELOPMENT--0.0%
3,080 (b) Atlantic Gulf Communities Corp. 10,780
BUSINESS EQUIPMENT & SERVICES--0.0%
3,725 (a)Electronic Retailing Systems International, 111,750
Inc., Warrants
CABLE TELEVISION--0.0%
2,525 Australis Holdings Property Ltd., Warrants 0
68 (a)(b)CS Wireless Systems, Inc. 0
6,994 (a)(b)Pegasus Communications Corp. 147,329
3,450 Pegasus Communications Corp., Warrants 113,850
9,825 UIH Australia/Pacific, Warrants 40,400
9,000 (a)(b)Wireless One, Inc., Warrants 0
TOTAL 301,579
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
CHEMICALS & PLASTICS--0.0%
4,675 (a)(b)Sterling Chemicals Holdings, Inc., $ 133,238
Warrants
20,500 (a)(b)Uniroyal Technology Corp., Warrants 94,813
TOTAL 228,051
CONSUMER PRODUCTS--0.1%
72,287 (a)(b)Alarmguard Holdings, Inc. 698,003
3,000 (a)(b)Hosiery Corp. of America, Inc. 15,000
5,000 (a)(b)IHF Capital, Inc., Warrants 252,500
TOTAL 965,503
PRINTING & PUBLISHING--0.1%
5,350 (a)(b)Affiliated Newspaper Investments, Inc. 591,175
STEEL--0.0%
1,800 (a)(b)Bar Technologies, Inc., Warrants 108,000
TELECOMMUNICATIONS & CELLULAR--0.0%
6,325 (a)(b)Cellular Communications International, 126,500
Inc., Warrants
2,900 HighwayMaster Communications, Inc., Warrants 29,000
4,200 (a)MetroNet Communications Corp., Warrants 13,650
TOTAL 169,150
TOTAL COMMON STOCKS (IDENTIFIED COST $9,341,860) 2,851,988
PREFERRED STOCKS--5.1%
BANKING--0.2%
72,000 California Federal Preferred Capital Corp., REIT 1,984,500
Perpetual Pfd. Stock, Series A, $2.28
BROADCAST RADIO & TV--2.3%
37,583 American Radio Systems Corp., PIK Pfd., 11.375% 4,378,425
22,624 Capstar Broadcasting Partners, Inc., Sr. Pfd., 2,607,416
$12.00
58,446 Chancellor Media Corp., Exchangeable Pfd. Stock, 7,042,743
$12.00
57,887 SFX Broadcasting, Inc., Exchangeable Pfd. Stock, 6,801,741
Series E
53,125 Sinclair Broadcast Group, Inc., Pfd., $11.63 5,817,188
TOTAL 26,647,513
CABLE TELEVISION--0.5%
1,544 Echostar Communications Corp., Sr. Red. Pfd. 1,729,280
Stk., $12.13
4,215 Pegasus Communications Corp., PIK Pfd., Series 4,762,950
A, 12.75%
TOTAL 6,492,230
FOOD SERVICES--0.2%
25,000 (a)Nebco Evans Holding Co., Exchangeable Pfd. 2,500,000
Stock, $11.25
</TABLE>
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
INDUSTRIAL PRODUCTS & EQUIPMENT--0.2%
$ 2,000 Fairfield Manufacturing Co., Inc., Exchangeable $ 2,200,000
Pfd. Stock
300 (a)International Utility Structures, Inc., Unit, 311,250
$13.00
TOTAL 2,511,250
PRINTING & PUBLISHING--1.1%
68,000 (a) Primedia, Inc., Exchangeable Pfd. Stock, 6,732,000
Series G, $8.63
15,000 Primedia, Inc., Pfd., $9.20 1,488,750
46,308 Primedia, Inc., Pfd., Series B, $11.63 4,943,380
TOTAL 13,164,130
REAL ESTATE--0.1%
30,000 Crown American Realty Trust, Sr. Pfd., Series A, 1,648,140
$1.38
TELECOMMUNICATIONS & CELLULAR--0.5%
1,061 IXC Communications, Inc., Jr. Exchangeable Pfd. 1,289,305
Stock
1,300 (a)NEXTEL Communications, Inc., Exchangeable 1,339,650
Pfd. Stock, Series E, $11.13
3,084 NEXTEL Communications, Inc., Pfd. 3,577,440
TOTAL 6,206,395
TOTAL PREFERRED STOCKS (IDENTIFIED COST $56,193,768) 61,154,158
U.S. TREASURY--2.8%
TREASURY BONDS--2.8%
25,000,000 United States Treasury Bond, 11.625%, 11/15/2004 33,208,000
(identified cost $33,144,531)
(C)REPURCHASE AGREEMENT--0.4%
5,345,000 BT Securities Corp., 5.64%, dated 2/27/1998, due 5,345,000
3/2/1998
TOTAL INVESTMENTS (IDENTIFIED COST $1,119,295,234)(D) $1,176,394,696
</TABLE>
(a) Denotes a private placement security. At February 28, 1998, these securities
amounted to $171,358,046 which represents 14% of total net assets.
(b) Non-income producing security.
(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
investments 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 $1,119,327,369.
The net unrealized appreciation of investments on a federal tax basis amounts to
$57,067,327 which is comprised of $69,268,469 appreciation and $12,201,142
depreciation at February 28, 1998.
Note: The categories of investments are shown as a percentage of net assets
($1,199,062,847) at February 28, 1998.
The following acronyms are used throughout this portfolio:
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
FEBRUARY 28, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $ 1,176,394,696
$1,119,295,234 and tax cost $1,119,327,369)
Income receivable 21,653,856
Receivable for investments sold 17,724,278
Receivable for shares sold 5,281,307
Prepaid expenses 104
Total assets 1,221,054,241
LIABILITIES:
Payable for investments purchased $ 8,243,940
Payable for shares redeemed 7,079,913
Income distribution payable 2,153,004
Payable to Bank 4,227,600
Accrued expenses 286,937
Total liabilities 21,991,394
Net Assets for 123,218,164 shares outstanding $ 1,199,062,847
NET ASSETS CONSIST OF:
Paid in capital $ 1,157,141,096
Net unrealized appreciation of investments 57,099,462
Accumulated net realized loss on investments (15,232,349)
Undistributed net investment income 54,638
Total net assets $ 1,199,062,847
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
$1,199,062,847 / 123,218,164 shares outstanding $9.73
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED HIGH YIELD TRUST
YEAR ENDED FEBRUARY 28, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 3,569,840
Interest 94,681,617
Total income 98,251,457
EXPENSES:
Investment advisory fee $ 7,666,471
Administrative personnel and services fee 771,473
Custodian fees 58,771
Transfer and dividend disbursing agent fees and 215,465
expenses
Directors'/Trustees' fees 22,224
Auditing fees 24,106
Legal fees 5,882
Portfolio accounting fees 132,771
Shareholder services fee 2,555,490
Share registration costs 152,662
Printing and postage 94,193
Insurance premiums 8,101
Taxes 14,400
Miscellaneous 11,520
Total expenses 11,733,529
Waivers and reimbursements--
Waiver of investment advisory fee $ (2,196,440)
Waiver of shareholder services fee (511,098)
Total waivers (2,707,538)
Net expenses 9,025,991
Net investment income 89,225,466
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 2,894,137
Net change in unrealized appreciation of investments 34,916,343
Net realized and unrealized gain on investments 37,810,480
Change in net assets resulting from operations $ 127,035,946
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED HIGH YIELD TRUST
<TABLE>
<CAPTION>
YEAR ENDED
FEBRUARY 28,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 89,225,466 $ 72,323,180
Net realized gain on investments ($4,861,343 and $6,021,942, 2,894,137 5,800,495
respectively, as computed for federal tax purposes)
Net change in unrealized appreciation 34,916,343 26,326,072
Change in net assets resulting from operations 127,035,946 104,449,747
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (88,853,702) (72,323,180)
Distributions in excess of net investment income -- (520,035)
Change in net assets resulting from distributions to (88,853,702) (72,843,215)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 979,282,898 860,932,809
Net asset value of shares issued to shareholders in payment of 65,669,753 55,383,889
distributions declared
Cost of shares redeemed (822,434,825) (683,339,454)
Change in net assets resulting from share transactions 222,517,826 232,977,244
Change in net assets 260,700,070 264,583,776
NET ASSETS:
Beginning of period 938,362,777 673,779,001
End of period (including undistributed net investment income of $ 1,199,062,847 $ 938,362,777
$54,638 and $0, respectively)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED HIGH YIELD TRUST
FEBRUARY 28, 1998
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 predominantly speculative with respect to each issuer's continuing
ability to make interest and principle payments (i.e., the obligations are
subject to the risk of default).
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
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. Listed equity securities are valued at the last sale price reported on
a national securities exchange. 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"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles.
These distributions do not represent a return of capital for federal income tax
purposes.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
and defaulted interest. The following reclassifications have been made to the
financial statements.
INCREASE (DECREASE)
UNDISTRIBUTED NET
PAID-IN CAPITAL INVESTMENT INCOME
$(391,405) $391,405
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
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, 1998, the Trust, for federal tax purposes, had a capital loss
carryforward of $12,694,546, 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 $ 4,408,244
2000 6,829,698
2003 1,456,604
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>
YEAR ENDED
FEBRUARY 28,
1998 1997
<S> <C> <C>
Shares sold 103,170,660 94,942,662
Shares issued to shareholders in payment of distributions 6,907,979 6,072,728
declared
Shares redeemed (86,612,840) (75,398,302)
Net change resulting from share transactions 23,465,799 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 registered transfer and dividend disbursing agent, 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 February 28, 1998, were as follows:
PURCHASES $ 1,024,804,966
SALES $ 817,776,874
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of FEDERATED HIGH YIELD TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated High Yield Trust as of February 28,
1998, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and financial highlights (see page 2 of this prospectus) for the periods
presented therein. These financial statements and financial highlights are the
responsibility of the Trust'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 generally accepted
auditing standards. 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 February 28, 1998, by correspondence with the custodian and brokers
or other appropriate auditing procedures where replies from brokers were not
received. 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 Federated High Yield Trust as of February
28, 1998, and the results of its operations for the year then ended, changes in
its net assets for each of the two years in the period then ended, and financial
highlights for each of the periods presented therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
April 15, 1998
APPENDIX
STANDARD & POOR'S ("S&P") CORPORATE BOND RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB, B, CCC, CC--Debt rated "BB," "B," "CCC," and "CC" is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposures to adverse
conditions.
CI--The rating "CI" is reserved for income bonds on which no interest is being
paid.
D--Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING DEFINITIONS
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated "Baa" are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba--Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
[Graphic]
Federated High Yield Trust
PROSPECTUS
APRIL 30, 1998
An Open-End, Diversified Management Investment Company
FEDERATED HIGH YIELD TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
Federated Securities Corp., Distributor
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Cusip 314197104
8040401A (4/98)
[Graphic]
FEDERATED HIGH YIELD TRUST
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Federated High Yield Trust (the "Trust") dated April 30, 1998. This Statement is
not a prospectus itself. You may request a copy of a prospectus or a paper copy
of this Statement of Additional Information, if you have received it
electronically, free of charge by calling 1-800-341-7400.
FEDERATED HIGH YIELD TRUST
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000
Statement dated April 30, 1998
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314197104
8040401B (4/98)
[Graphic]
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE TRUST 1 INVESTMENT OBJECTIVE AND POLICIES 1
Corporate Debt Obligations 1 Convertible Securities 1 Put and Call Options 1
U.S. Government Obligations 1 Restricted and Illiquid Securities 2 When-Issued
and Delayed Delivery Transactions 2 Repurchase Agreements 2 Lending of
Portfolio Securities 2 Reverse Repurchase Agreements 3 Investing in Securities
of Other Investment Companies 3 Portfolio Turnover 3 Investment Risks 3
Investment Limitations 4 FEDERATED HIGH YIELD TRUST MANAGEMENT 6 Trust
Ownership 10 Trustee Compensation 10 Trustee Liability 10 INVESTMENT ADVISORY
SERVICES 10 Adviser to the Trust 10 Advisory Fees 11 BROKERAGE TRANSACTIONS 11
OTHER SERVICES 11 Trust Administration 11 Custodian and Portfolio Accountant 11
Transfer Agent 11 Independent Auditors 12 PURCHASING SHARES 12 Shareholder
Services 12 Conversion to Federal Funds 12 DETERMINING NET ASSET VALUE 12
Determining Market Value of Securities 12 REDEEMING SHARES 12 Redemption in
Kind 13 MASSACHUSETTS PARTNERSHIP LAW 13 TAX STATUS 13 The Trust's Tax Status
13 Shareholders' Tax Status 13 TOTAL RETURN 14 YIELD 14 PERFORMANCE COMPARISONS
14 Economic and Market Information 15 Duration 15 ABOUT FEDERATED INVESTORS 16
Mutual Fund Market 16 Institutional Clients 16 Bank Marketing 16 Broker/Dealers
and Bank Broker/Dealer Subsidiaries 16
GENERAL INFORMATION ABOUT THE TRUST
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated April 17, 1984.
INVESTMENT OBJECTIVE AND POLICIES
The Trust's investment objective is to seek high current income by investing
primarily in a professionally managed diversified portfolio of fixed income
securities.
CORPORATE DEBT OBLIGATIONS
The corporate debt obligations in which the Trust invests may bear fixed,
floating, floating and contingent, or increasing rates of interest. They may
involve equity features such as conversion or exchange rights, warrants for the
acquisition of common stock of the same or a different issuer, participations
based on revenues, sales or profits, or the purchase of common stock in a unit
transaction.
CONVERTIBLE SECURITIES
DECS, or similar instruments marketed under different names, offer a substantial
dividend advantage with the possibility of unlimited upside potential if the
price of the underlying common stock exceeds a certain level. DECS convert to
common stock at maturity. The amount received is dependent on the price of the
common stock at the time of maturity. DECS contain two call options at different
strike prices. The DECS participate with the common stock up to the first call
price. They are effectively capped at that point unless the common stock rises
above a second price point, at which time they participate with unlimited upside
potential.
PERCS, or similar instruments marketed under different names, offer a
substantial dividend advantage, but capital appreciation potential is limited to
a predetermined level. PERCS are less risky and less volatile than the
underlying common stock because their superior income mitigates declines when
the common stock falls, while the cap price limits gains when the common stock
rises.
PUT AND CALL OPTIONS
The Trust may purchase listed put options on portfolio securities or write
covered call options to protect against price movements in particular securities
in its portfolio and to generate income. A put option gives the Trust, in return
for a premium, the right to sell the underlying security to the writer (seller)
at a specified price during the term of the option. As writer of a call option,
the Trust has the obligation upon exercise of the option during the option
period to deliver the underlying security upon payment of the exercise price.
The Trust may only: (1) buy put options which are listed on a recognized options
exchange and which are on securities held in its portfolio and (2) sell listed
call options either on securities held in its portfolio or on securities which
it has the right to obtain without payment of further consideration (or has
segregated cash in the amount of any such additional consideration). The Trust
will maintain its positions in securities, option rights, and segregated cash
subject to puts and calls until the options are exercised, closed, or expired.
An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Trust's
investment adviser will consider liquidity before entering into option
transactions, there is no assurance that a liquid secondary market on an
exchange will exist for any particular option, or at any particular time.
The Trust reserves the right to hedge the portfolio by buying financial
futures and put options on stock index futures and financial futures.
However, the Trust will not engage in these transactions until (1) an
amendment to its Registration Statement is filed with the Securities and
Exchange Commission (the "SEC") and becomes effective and (2) ten days after
a supplement to the prospectus disclosing this change in policy has been
mailed to the shareholders.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Trust may invest
include, but are not limited to, direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations issued or
guaranteed by U.S. government agencies or instrumentalities. These
securities may be backed by:
* the full faith and credit of the U.S. Treasury;
* the issuer's right to borrow from the U.S. Treasury;
* the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
* the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
* Student Loan Marketing Association; * Federal Home Loan Mortgage
Corporation; * Federal Home Loan Banks; and * Federal National Mortgage
Association.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission staff
position set forth in the adopting release for Rule 144A under the Securities
Act of 1933. The Trustees consider the following criteria in determining the
liquidity of certain restricted securities:
* the frequency of trades and quotes for the security;
* the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
* dealer undertakings to make a market in the security; and * the nature of
the security and the nature of the marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Trust engages in when-issued and delayed delivery transactions only for the
purpose of acquiring portfolio securities consistent with the Trust's investment
objective and policies, and not for investment leverage. These transactions are
made to secure what is considered to be an advantageous price or yield for the
Trust. No fees or other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Trust sufficient to make payment for the
securities to be purchased are segregated on the Trust's records at the trade
date. These assets are marked to market daily and are maintained until the
transaction has been settled. The Trust does not intend to engage in when-issued
and delayed delivery transactions to an extent that would cause the segregation
of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
The Trust requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Trust, the Trust could receive less than the repurchase price on any sale of
such securities. In the event that such a defaulting seller filed for bankruptcy
or became insolvent, disposition of such securities by the Trust might be
delayed pending court action. The Trust believes that under the regular
procedures normally in effect for custody of the Trust's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction would rule
in favor of the Trust and allow retention or disposition of such securities. 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
investment adviser to be creditworthy pursuant to guidelines established by the
Board of Trustees (the "Trustees").
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Trust may lend its portfolio
securities to broker/dealers, banks, or other institutional borrowers of
securities. The Trust will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the Trust's investment
adviser has determined are creditworthy under guidelines established by the
Trustees.
The collateral received when the Trust lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Trust. During the time
portfolio securities are on loan, the borrower pays the Trust any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Trust or the borrower. The Trust may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Trust does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
REVERSE REPURCHASE AGREEMENTS
The Trust may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Trust transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Trust will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Trust to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Trust will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Trust, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled. During the period any
reverse repurchase agreements are outstanding, but only to the extent necessary
to assure completion of the reverse repurchase agreements, the Trust will
restrict the purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase agreements.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Trust may invest in the securities of affiliated money market funds as an
efficient means of managing the Trust's uninvested cash.
PORTFOLIO TURNOVER
The Trust may experience greater portfolio turnover than would be expected with
a portfolio of higher-rated securities. A high portfolio turnover will result in
increased transaction costs to the Trust. The Trust will not attempt to set or
meet a portfolio turnover rate since any turnover would be incidental to
transactions undertaken in an attempt to achieve the Trust's investment
objective. For the fiscal years ended February 28, 1998, and 1997, the portfolio
turnover rates were 84% and 81%, respectively.
INVESTMENT RISKS
ADVERSE LEGISLATION
Federal and state legislatures and regulators may propose laws and regulations
designed to limit the number or type of institutions that may purchase
lower-rated bonds, reduce the tax benefits to the issuers of such bonds, or
otherwise adversely impact the liquidity of such bonds. The Trust cannot predict
the likelihood that any of these proposals will be adopted, or their potential
impact on the liquidity of lower-rated bonds.
FOREIGN SECURITIES
Investments in foreign securities involve special risks that differ from those
associated with investments in domestic securities. The risks associated with
investments in foreign securities relate to political and economic developments
abroad, as well as those that result from the differences between the regulation
of domestic securities and issuers in contrast to foreign securities and
issuers. These risks may include, but are not limited to, expropriation,
confiscatory taxation, currency fluctuations, withholding taxes on interest,
limitations on the use or transfer of Trust assets, political or social
instability and adverse diplomatic developments. Moreover, individual foreign
economies may differ favorably or unfavorably from the domestic economy in such
respects as growth of gross national product, the rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include:
* less publicly available information about foreign issuers; * credit risks
associated with certain foreign governments; * the lack of uniform financial
accounting standards applicable to
foreign issuers;
* less readily available market quotations on foreign issues; * the
likelihood that securities of foreign issuers may be less liquid or
more volatile;
* generally higher foreign brokerage commissions; and * unreliable mail
service between countries.
U.S. GOVERNMENT POLICIES
In the past, U.S. government policies have discouraged or restricted certain
investments abroad by investors such as the Trust. Although the Trust is unaware
of any current restrictions, investors are advised that such policies could be
reinstituted.
CURRENCY RISK
To the extent that debt securities purchased by the Trust are denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the Trust's net asset value, the value of interest earned,
gains and losses realized on the sale of securities, and net investment income
and capital gains, if any, to be distributed to shareholders by the Trust. If
the value of a foreign currency rises against the U.S. dollar, the value of the
Trust assets denominated in that currency will increase; correspondingly, if the
value of a foreign currency declines against the U.S. dollar, the value of Trust
assets denominated in that currency will decrease.
The exchange rates between the U.S. dollar and foreign currencies are a function
of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental intervention, speculation and
other economic and political conditions. Although the Trust values its assets
daily in U.S. dollars, the Trust may not convert its holdings of foreign
currencies to U.S. dollars daily. When the Trust converts its holdings to
another currency, it may incur conversion costs. Foreign exchange dealers may
realize a profit on the difference between the price at which they buy and sell
currencies.
The Trust will engage in foreign currency exchange transactions in connection
with its investments in foreign securities. The Trust will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through forward
contracts to purchase or sell foreign currencies.
INVESTMENT LIMITATIONS
CONCENTRATION OF INVESTMENTS
The Trust will not purchase securities (other than those issued or guaranteed by
the U.S. government) if, as a result of such purchase, more than 25% of the
value of its assets would be invested in any one industry.
However, the Trust may invest more than 25% of the value of its total assets in
cash or cash items (not including certificates of deposit), securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, or
instruments secured by these instruments, such as repurchase agreements.
INVESTING IN COMMODITIES
The Trust will not purchase or sell commodities. The Trust reserves the right to
purchase financial futures and put options on financial futures, not including
stock index futures.
INVESTING IN REAL ESTATE
The Trust will not purchase or sell real estate, although it may invest in
the securities of companies whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or interests
in real estate.
BUYING ON MARGIN
The Trust will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for clearance of transactions and may
make margin payments in connection with buying financial futures and put options
on financial futures, not including stock index futures.
SELLING SHORT
The Trust will not sell securities short unless:
* during the time the short position is open it owns an equal amount of the
securities sold or securities readily and freely convertible into or
exchangeable, without payment of additional consideration, for securities
of the same issue as, and equal in amount to, the securities sold short;
and
* not more than 10% of the Trust's net assets (taken at current value) is
held as collateral for such sales at any one time.
BORROWING MONEY
The Trust will not issue senior securities, except as permitted by the Trust's
investment objective and policies, and except that the Trust may borrow money
and engage in reverse repurchase agreements only in amounts up to one-third of
the value of the Trust's net assets including the amounts borrowed. The Trust
will not borrow money directly or through reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or emergency
measure or to facilitate management of the portfolio by enabling the Trust to
meet redemption requests when the liquidation of portfolio instruments would be
deemed to be inconvenient or disadvantageous. The Trust will not purchase any
securities while any such borrowings (including reverse repurchase agreements)
are outstanding.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets except portfolio securities. This
shall not prevent the purchase or holding of corporate or government bonds,
debentures, notes, certificates of indebtedness, or other debt securities of an
issuer, repurchase agreements, or other transactions which are permitted by the
Trust's investment objective and policies or Declaration of Trust.
UNDERWRITING
The Trust will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities in accordance with its investment objective, policies,
and limitations.
INVESTING IN MINERALS
The Trust will not purchase interests in oil, gas, or other mineral exploration
or development programs, although it may purchase the securities of issuers
which invest in or sponsor such programs. The above limitations cannot be
changed without shareholder approval. The following limitations, however, may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes effective.
INVESTING IN RESTRICTED AND ILLIQUID SECURITIES
The Trust will not invest more than 15% of the value of its net assets in
illiquid securities including certain restricted securities not determined to be
liquid under criteria established by the Trustees and repurchase agreements
providing for settlement in more than seven days after notice.
WRITING COVERED CALL OPTIONS
The Trust will not write call options on securities unless the securities are
held in the Trust's portfolio or unless the Trust is entitled to them in
deliverable form without further payment or after segregating cash in the amount
of any further payment.
DIVERSIFICATION OF INVESTMENTS
The Trust will not purchase the securities of any issuer (other than the U.S.
government, its agencies, or instrumentalities or instruments secured by
securities of such issuers, such as repurchase agreements) if as a result more
than 5% of the value of its total assets would be invested in the securities of
such issuer. For these purposes, the Trust takes all common stock and all
preferred stock of an issuer each as a single class, regardless of priorities,
series, designations, or other differences.
ACQUIRING SECURITIES
The Trust will not purchase securities of a company for the purpose of
exercising control or management.
However, the Trust may invest in up to 10% of the voting securities of any one
issuer and may exercise its voting powers consistent with the best interests of
the Trust. In addition, the Trust, other companies advised by the Trust's
investment adviser, and other affiliated companies may together buy and hold
substantial amounts of voting stock of a company and may vote together in regard
to such company's affairs. In some cases, the Trust and its affiliates might
collectively be considered to be in control of such company. In some such cases,
Trustees and other persons associated with the Trust and its affiliates might
possibly become directors of companies in which the Trust holds stock.
EQUITY SECURITIES
The Trust may invest up to 10% of total assets in equity securities including
common stocks, warrants or rights.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. The Trust did not borrow money, invest in reverse repurchase
agreements, sell securities short, or invest in foreign securities during the
last fiscal year and has no present intent to do so in the coming fiscal year.
For purposes of its policies and limitations, the Trust considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings associations having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment, to be "cash items."
The Trust has no present intention of concentrating in bank instruments.
FEDERATED HIGH YIELD TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated High Yield Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Member of Executive Committee, Children's Hospital of Pittsburgh;
formerly, Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh; Director
or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center--Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation;
President Emeritus, University of Pittsburgh; Founding Chairman, National
Advisory Council for Environmental Policy and Technology, Federal Emergency
Management Advisory Board and Czech Management Center, Prague; Director or
Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary, and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some of
the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board. As used in the table above, "The Funds" and "Funds" mean the
following investment companies: 111 Corcoran Funds; Automated Government Money
Trust; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series
II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal Opportunities
Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds;
Fixed Income Securities, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc.--1999; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds;
The Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; WesMark Funds; WCT Funds; and World Investment Series,
Inc. TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Trust's outstanding shares. As
of April 8, 1998, the following shareholders of record owned 5% or more of the
outstanding shares of the Trust: Charles Schwab & Co., Inc., San Francisco,
California (as record owner holding shares for its clients),
owned approximately 56,342,022 shares (44.46%).
TRUSTEE COMPENSATION
AGGREGATE
NAME, COMPENSATION TOTAL COMPENSATION PAID
POSITION WITH FROM TO THE TRUSTEES
THE TRUST THE TRUST* FROM THE TRUST AND FUND COMPLEX+
John F. Donahue, $0 $0 for the Trust and 56
investment companies
Chairman and Trustee in the Fund Complex
Thomas G. Bigley, $1,708.06 $111,222 for the Trust and 56
investment companies
Trustee in the Fund Complex
John T. Conroy, Jr., $1,879.13 $122,362 for the Trust and 56
investment companies
Trustee in the Fund Complex
William J. Copeland, $1,879.13 $122,362 for the Trust and 56
investment companies
Trustee in the Fund Complex
James E. Dowd, $1,879.13 $122,362 for the Trust and 56
investment companies
Trustee in the Fund Complex
Lawrence D. Ellis, M.D., $1,708.06 $111,222 for the Trust and 56
investment companies
Trustee in the Fund Complex
Edward L. Flaherty, Jr., $1,879.13 $122,362 for the Trust and 56
investment companies
Trustee in the Fund Complex
Peter E. Madden, $1,708.06 $111,222 for the Trust and 56
investment companies
Trustee in the Fund Complex
John E. Murray, Jr., $1,708.06 $111,222 for the Trust and 56
investment companies
Trustee in the Fund Complex
Wesley W. Posvar, $1,708.06 $111,222 for the Trust and 56
investment companies
Trustee in the Fund Complex
Marjorie P. Smuts, $1,708.06 $111,222 for the Trust and 56
investment companies
Trustee in the Fund Complex
* Information is furnished for the fiscal year ended February 28, 1998.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE TRUST
The Trust's investment adviser is Federated Management. It is a subsidiary
of Federated Investors. All of the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his wife,
and his son, J. Christopher Donahue.
The Trust's investment adviser shall not be liable to the Trust or any
shareholder for any losses that may be sustained in the purchase, holding, or
sale of any security, or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
February 28, 1998, February 28, 1997, and February 29, 1996, the Trust's
investment adviser earned $7,666,471, $5,738,180, and $4,223,631, respectively,
which were reduced by $2,196,440, $1,773,042, and $1,340,094, respectively,
because of undertakings to limit the Trust's expenses.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Trust or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Trust and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
years ended February 28, 1998, February 28, 1997, and February 29, 1996, the
Trust paid no brokerage commissions. Although investment decisions for the
Trust are made independently from those of the other accounts managed by the
adviser, investments of the type the Trust may make may also be made by those
other accounts. When the Trust and one or more other accounts managed by the
adviser are prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this procedure
may adversely affect the price paid or received by the Trust or the size of the
position obtained or disposed of by the Trust. In other cases, however, it is
believed that coordination and the ability to participate in volume transactions
will be to the benefit of the Trust.
OTHER SERVICES
TRUST ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Trust for a fee as described in the
prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services, a subsidiary of Federated Investors, served as the Trust's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal years ended
February 28, 1998, February 28, 1997, and February 29, 1996, the Administrators
earned $771,473, $578,155, and $426,149, respectively. CUSTODIAN AND
PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Trust. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Trust's
portfolio investments. The fee paid for this service is based upon the level of
the Trust's average net assets for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Trust are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Trust is explained in the prospectus under "Investing in the Trust."
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are necessary
for the maintenance of shareholder accounts and to encourage personal services
to shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to: providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and to maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Shareholder Services Agreement, the Trustees expect that the
Trust will benefit by: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ended February 28, 1998, the Trust paid shareholder
services fees in the amount of $2,555,490, of which $2,044,392 was paid to
financial institutions.
CONVERSION TO FEDERAL FUNDS
It is the Trust's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from investors must be in
federal funds or be converted into federal funds. Federated Shareholder Services
Company acts as the shareholder's agent in depositing checks and converting them
to federal funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset value is
calculated by the Trust are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Trust's portfolio securities other than options are
determined as follows:
* according to the last sale price in the market in which they are primarily
traded (either a national securities exchange or the over-the-counter
market), if available, and if not available, on the basis of prices
provided by an independent pricing service;
* for most short-term obligations, at the mean between bid and asked
prices, as provided by an independent pricing service; or
* for short-term obligations with remaining maturities of 60 days or less at
the time of purchase, at amortized cost, or at fair value as determined in
good faith by the Trustees.
Options are valued at the market values established by the exchanges at the
close of option trading unless the Trustees determine in good faith that another
method of valuing option positions is necessary.
REDEEMING SHARES
The Trust redeems shares at the next computed net asset value after the Trust
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although Federated Shareholder Services
Company does not charge a fee for telephone redemptions, it reserves the right
to charge a fee for the cost of wire-transferred redemptions of less than
$5,000. REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Trust's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless the
Trustees determine that further payments should be in kind. In such cases, the
Trust will pay all or a portion of the remainder of the redemption in portfolio
instruments valued in the same way as the Trust determines net asset value. The
portfolio instruments will be selected in a manner that the Trustees deem fair
and equitable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell these securities could receive
less than the redemption value and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign on behalf of the Trust.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use its property to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX STATUS
THE TRUST'S TAX STATUS
The Trust will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Trust
must, among other requirements:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* invest in securities within certain statutory limits; and
* distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. Only a nominal portion of any income
dividend paid by the Trust is expected to be eligible for the dividends received
deduction available to corporations. These dividends and any short-term capital
gains are taxable as ordinary income.
CAPITAL GAINS
Fixed income securities offering the high current income sought by the Trust are
often purchased at a discount from par value. Because the total yield on such
securities when held to maturity and retired may include an element of capital
gain, the Trust may achieve capital gains. However, the Trust will not hold
securities to maturity for the purpose of realizing capital gains unless current
yields on those securities remain attractive.
Capital gains or losses may also be realized on the sale of securities. Sales
would generally be made because of:
* the availability of higher relative yields; * differentials in market
values; * new investment opportunities; * changes in creditworthiness of an
issuer; or * an attempt to preserve gains or limit losses.
Distributions of long-term capital gains are taxed as such, whether they are
taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
TOTAL RETURN
The Trust's average annual total returns for the one-year, five-year, and
ten-year periods ended February 28, 1998, were 12.74%, 11.19%, and 11.37%,
respectively. The average annual total return for the Trust is the average
annual compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at the
end of the period by the net asset value per share at the end of the period. The
number of shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, adjusted over the period
by any additional shares, assuming the monthly reinvestment of all dividends and
distributions.
YIELD
The Trust's yield for the thirty-day period ended February 28, 1998, was 7.59%.
The yield for the Trust is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Trust over a thirty-day period by
the maximum offering price per share of the Trust on the last day of the period.
This value is then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Trust because of certain adjustments required by the SEC and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Trust, performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
The Trust's performance depends upon such variables as:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes in
interest rates and market value of portfolio securities; * changes in Trust
expenses; and * various other factors.
The Trust's performance fluctuates on a daily basis largely because net earnings
and maximum offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust's performance. When comparing performance, investors
should consider all relevant factors, such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Trust uses in advertising may include:
* LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues, which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi-federal corporations; and publicly issued,
fixed rate, non-convertible domestic bonds of companies in industry, public
utilities, and finance. The average maturity of these bonds approximates
nine years. Tracked by Lehman Brothers, Inc., the index calculates total
returns for one-month, three-month, twelve-month, and ten-year periods and
year-to-date.
* LEHMAN BROTHERS GOVERNMENT/CORPORATE (LONG-TERM) INDEX is composed of the
same types of issues as defined above. However, the average maturity of the
bonds included on this index approximates 22 years.
* LEHMAN BROTHERS HIGH YIELD INDEX and its subcategory indices cover the
universe of fixed rate, publicly issued, noninvestment grade debt
registered with the SEC. All bonds included in the High Yield Index must be
dollar-denominated and nonconvertible and have at least one year remaining
to maturity and an outstanding par value of at least $100 million.
Generally securities must be rated Ba1 or lower by Moody's Investors
Service, Inc. ("Moody's"), including defaulted issues. If no Moody's rating
is available, bonds must be rated BB+ or lower by Standard & Poor's Ratings
Group ("S&P"); and if no S&P rating is available, bonds must be rated below
investment grade by Fitch Investor's Service. A small number of unrated
bonds is included in the index; to be eligible they must have previously
held a high yield rating or have been associated with a high yield issuer,
and must trade accordingly.
* MERRILL LYNCH 7-10 YEAR TREASURY INDEX is an unmanaged index tracking
U.S. government securities with maturities between 7 and 9.99 years.
The index is produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.
* MERRILL LYNCH 10-15 YEAR TREASURY INDEX is an unmanaged index tracking
U.S. government securities with maturities between 10 and 14.99 years.
The index is produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.
* MERRILL LYNCH HIGH YIELD MASTER INDEX is an unmanaged index comprised of
publicly placed, non-convertible, coupon-bearing domestic debt. Issues in
the index are less than investment grade as rated by Standard & Poor's
Ratings Group or Moody's Investors Service, Inc., and must not be in
default. Issues have a term to maturity of at least one year. The index is
produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.
* LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time. From time to time, the Trust will quote its Lipper ranking in the
"high current yield funds" category in advertising and sales literature.
* SALOMON BROTHERS AAA-AA CORPORATES calculates total returns of
approximately 775 issues which include long-term, high grade domestic
corporate taxable bonds, rated AAA-AA, with maturities of twelve years or
more; it also includes companies in industry, public utilities, and
finance.
* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and other sales literature for the Trust may quote total returns
which are calculated on non- standardized base periods. These total returns also
represent the historic change in the value of an investment in the Trust based
on monthly reinvestment of dividends over a specified period of time.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Trust's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Trust can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Trust may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Trust portfolio managers and their views and analysis on how
such developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
DURATION
Duration is a commonly used measure of the potential volatility in the price of
a bond, or other fixed income security, or in a portfolio of fixed income
securities, prior to maturity. Volatility is the magnitude of the change in the
price of a bond relative to a given change in the market rate of interest. A
bond's price volatility depends on three primary variables: the bond's coupon
rate; maturity date; and the level of market yields of similar fixed income
securities. Generally, bonds with lower coupons or longer maturities will be
more volatile than bonds with higher coupon or shorter maturities. Duration
combines these variables into a single measure.
Duration is calculated by dividing the sum of the time-weighted values of the
cash flows of a bond or bonds, including interest and principal payments, by the
sum of the present values of the cash flow.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making--structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume. In the corporate bond sector, as of December 31,
1997, Federated Investors managed 11 money market funds and 16 bond funds with
assets approximating $17.1 billion and $5.6 billion, respectively. Federated's
corporate bond decision making -- based on intensive, diligent credit analysis
- -- is backed by over 22 years of experience in the corporate bond sector. In
1972, Federated introduced one of the first high-yield bond funds in the
industry. In 1983, Federated was one of the first fund managers to participate
in the asset-backed securities market, a market totaling more than $200 billion.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of approximately 900 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.
* Source: Investment Company Institute.
PART C. OTHER INFORMATION.
ITEM 24. Financial Statements and Exhibits:
(a) Financial Statements (filed in Part A)
(b) Exhibits:
(1) (i) Conformed copy of Declaration of Trust of the
Registrant; (8)
(ii) Conformed copy of Amendment Nos. 1 and 2 to
Declaration of Trust; (8)
(2) (i) Copy of By-Laws of the Registrant; (8)
(ii) Copy of Amendment Nos. 1 through 3 to the
Bylaws; (8)
(iii) Copy of Amendment No. 4 to Bylaws;+
(3) Not applicable;
(4) Conformed copy of Specimen Certificate for Shares of
Beneficial Interest of the Registrant; (8) (5) Conformed copy
of the Investment Advisory Contract of the Registrant; (7)
(6) (i) Conformed copy of the Distributor's Contract of the
Registrant; (7)
(ii) The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds Sales and Service
Agreement; Mutual Funds ........Service Agreement; and
Plan/Trustee Mutual Funds Service Agreement from Item
24(b)(6) of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the Commission on
July 24, 1995. (File Nos. 33- 38550 and 811-6269.)
(7) Not applicable;
(8) (i) Conformed copy of Custodian Agreement of the
Registrant; (8)
(ii) Conformed copy of Domestic Custodian Fee
Schedule;+
(9) (i) Conformed copy of Agreement for Fund
Accounting Services, Administrative Services,
Shareholder Recordkeeping Services, and Custody
Services Procurement; (9)
(ii) The responses described in Item 24(b)(6) are
hereby incorporated by reference.
(iii) The Registrant hereby incorporates by reference
the conformed copy of the Shareholder Services
Sub-Contract between
Fidelity and Federated Shareholder Services from
Item 24(b)(9)(iii) of the Federated GNMA Trust
Registration Statement on Form N-1A, filed with
the Commission on March 25, 1996.
(File Nos. 2-75670 and 811-3375)
(iv) Amended and Restated Shareholder Services
Agreement;+
(10) Conformed copy of the Opinion of Counsel as to
the legality of the shares being registered;(8)
(11) (i) Conformed copy of Consent of Independent
Auditors;+
(ii) Opinion and Consent of Counsel as to Transfer
of Organization Expenses; (8)
- ----------------
+ All exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed February 20, 1990. (File Nos. 2-91091
and 811-4018)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed April 21, 1995. (File Nos. 2-91091 and
811-4018)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed April 29, 1996. (File Nos. 2-91091 and
811-4018)
<PAGE>
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding; (8)
(14) Not applicable;
(15) Not applicable;
(16) Copy of Schedule for Computation of Trust Performance
Data; (9)
(17) Copy of Financial Data Schedule;+
(18) Not applicable;
(19) Conformed copy of Power of Attorney; (10)
- ----------------
+ All exhibits have been filed electronically.
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed April 21, 1995. (File Nos. 2-91091 and
811-4018)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 21 on Form N-1A filed April 29, 1996. (File Nos. 2-91091 and
811-4018)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed April 25, 1997.
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant:
None.
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of April 4, 1998
Shares of Beneficial Interest 18,276
(no par value)
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment adviser, see
the section entitled "INSERT PROSPECTUS HEADING"in Part A. The
affiliations with the Registrant of four of the Trustees and one of the
Officers of the investment adviser are included in Part B of this
Registration Statement under "INSERT SAI HEADING." The remaining
Trustee of the investment adviser, his position with the investment
adviser, and, in parentheses, his principal occupation is: Mark D.
Olson (Partner, Wilson, Halbrook & Bayard), 107 W.
Market Street, Georgetown, Delaware 19947.
The remaining Officers of the investment adviser are:
Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden
Senior Vice Presidents: Joseph M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Sandra L. McInerney
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Randall S. Bauer
David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
- ----------------
1. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1 filed July 9, 1984. (File No. 2-91091)
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Steven Lehman
Marian R. Marinack
Charles A. Ritter
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
Christopher Smith
William F. Stotz
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Assistant Vice Presidents:
Stefanie L. Bachhuber
Arthur J. Barry
Robert E. Cauley
Lee R. Cunningham, II
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
Natalie F. Metz
Joseph M. Natoli
Keith J. Sabol
John Sheehy
Michael W. Sirianni
Gregg S. Tenser
Leonardo A. Vila
Lori A. Wolff
Secretary: Stephen A. Keen
Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. McGonigle
Assistant Treasurer: Richard B. Fisher
The business address of each of the Officers of the investment adviser
is Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779.
These individuals are also officers of a majority of the investment
advisers to the Funds listed in Part B of this Registration Statement.
<PAGE>
Item 29. Principal Underwriters:
(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following
open-end investment companies, including the Registrant:
111 Corcoran Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Obligations Trust II; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus
Funds; The Wachovia Funds; The Wachovia Municipal Funds; Tower Mutual Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Vision Group of Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
<PAGE>
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable.
<PAGE>
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following
locations:
Registrant Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Federated Shareholder P.O. Box 8600
Services Company Boston, MA 02266-8600
("Transfer Agent and
Dividend Disbursing Agent")
Federated Services Company Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Federated Management Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779
State Street Bank and Trust P.O. Box 8600
Company Boston, MA 02266-8600
("Custodian")
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED HIGH YIELD
TRUST,certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
28th day of April, 1998.
FEDERATED HIGH YIELD TRUST
BY: /s/ Anthony R. Bosch
Anthony R. Bosch, Assistant Secretary
Attorney in Fact for John F. Donahue
April 28, 1998
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Anthony R. Bosch Attorney In Fact April 28, 1998
Anthony R. Bosch For the Persons
ASSISTANT SECRETARY Listed Below
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
Glen R. Johnson* President
John W. McGonigle* Treasurer, Executive Vice
President and Secretary
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
EXHIBIT (2III) UNDER FORM N-1A
EXHIBIT 3(II) UNDER ITEM 601/REG. S-K
Federated High Yield Trust
Amendment No. 4
to the By-Laws
Effective November 18, 1997
Delete Article III, Section 7 and replace with the following:
Action by Consent of the Board of Trustees, Executive Committee or Other
Committee. Subject to Article V, Section 2 of these By-Laws, any action required
or permitted to be taken at any meeting of the Trustees, Executive Committee or
any other duly appointed Committee may be taken without a meeting if consents in
writing setting forth such action are signed by all members of the Board or such
committee and such consents are filed with the records of the Trust. In the
event of the death, removal, resignation or incapacity of any Board or committee
member prior to that Trustee signing such consent, the remaining Board or
committee members may re-constitute themselves as the entire Board or committee
until such time as the vacancy is filled in order to fulfill the requirement
that such consents be signed by all members of the Board of committee.
EXHIBIT 8(II) UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
STATE STREET
DOMESTIC CUSTODY
FEE SCHEDULE
FEDERATED FUNDS
I. Custody Services
Maintain custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate
actions.
ANNUAL FEES
ASSET
Per Fund .25 Basis Points
Wire Fees $3.00 per wire
Settlements:
o Each DTC Transaction $5.00
o Each Federal Reserve Book Entry Transaction $3.75
o Each Repo Transaction (All Repo) $3.75
o Each Physical Transaction (NY/Boston, Private Placement) $15.00
o Each Option Written/Exercised/Expired $18.75
Each Book Entry Muni (Sub-custody) Transaction $15.00
o Government Paydowns $5.00
o Maturity Collections $8.00
o PTC Transactions $6.00
II. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
III. Balance Credit
Municipal Funds
A balance credit equal to 75% of the average demand deposit account
balance in the custodian account for the month billed times the 30 day
T-Bill Rate on the last Monday of the month billed, will be applied
against the month's custodian bill.
Transfer Agent
A balance credit equal to 100% of the average balance in the transfer
agent demand deposit accounts, less the reserve requirement and applicable
related expenses, times 75% of the 30 average Fed Funds Rate.
IV. Payment
The above fees will be charged against the funds' custodian checking
account thirty (30) days after the invoice is mailed to the funds' offices.
V. Term of Contract
The parties agree that this fee schedule shall become effective January 1,
1997.
FEDERATED SERVICES COMPANY STATE STREET
BY: /s/ Douglas L. Hein BY: /s/ Michael E. Hagerty
TITLE: Senior Vice President TITLE: Vice President
DATE: April 15, 1997 DATE: April 8, 1997
EXHIBIT 9(IV) UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 601/REG. S-K
AMENDED AND RESTATED
SHAREHOLDER SERVICES AGREEMENT
THIS AGREEMENT, amended and restated as of the first day of September,
1995, (originally made and enterered into as of the first day of March, 1994),
by and between those investment companies listed on Exhibit 1, as may be amended
from time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have approved this
form of Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business trust,
having its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be rendered personal
services to shareholders of the Funds and/or the maintenance of accounts
of shareholders of the Funds ("Services"). In addition to providing
Services directly to shareholders of the Funds, FSS is hereby appointed
the Funds' agent to select, negotiate and subcontract for the performance
of Services. FSS hereby accepts such appointments. FSS agrees to provide
or cause to be provided Services which, in its best judgment (subject to
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable), are necessary or desirable for shareholders of the Funds. FSS
further agrees to provide the Funds, upon request, a written description
of the Services which FSS is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS and FSS agrees
to accept as full compensation for its services rendered hereunder a fee
at an annual rate, calculated daily and payable monthly, up to 0.25% of 1%
of average net assets of each Fund.
For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that this
Agreement is in effect with respect to such Fund during the month.
3. This Agreement shall continue in effect for one year from the date of its
execution, and thereafter for successive periods of one year only if the
form of this Agreement is approved at least annually by the Board of each
Fund, including a majority of the members of the Board of the Fund who are
not interested persons of the Fund ("Independent Board Members") cast in
person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:
(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Fund or by a vote of
a majority of the outstanding voting securities of any Fund as defined
in the Investment Company Act of 1940 on sixty (60) days' written
notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by giving the other party
at least sixty (60) days' written notice of its intention to
terminate.
5. FSS agrees to obtain any taxpayer identification number certification from
each shareholder of the Funds to which it provides Services that is
required under Section 3406 of the Internal Revenue Code, and any
applicable Treasury regulations, and to provide each Fund or its designee
with timely written notice of any failure to obtain such taxpayer
identification number certification in order to enable the implementation
of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement. FSS shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for such Fund) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice. Any person, even though also an officer, trustee, partner,
employee or agent of FSS, who may be or become a member of such Fund's
Board, officer, employee or agent of any Fund, shall be deemed, when
rendering services to such Fund or acting on any business of such Fund
(other than services or business in connection with the duties of FSS
hereunder) to be rendering such services to or acting solely for such Fund
and not as an officer, trustee, partner, employee or agent or one under the
control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the
party against which an enforcement of the change, waiver, discharge or
termination is sought.
8. FSS is expressly put on notice of the limitation of liability as set forth
in the Declaration of Trust of each Fund that is a Massachusetts business
trust and agrees that the obligations assumed by each such Fund pursuant
to this Agreement shall be limited in any case to such Fund and its assets
and that FSS shall not seek satisfaction of any such obligations from the
shareholders of such Fund, the Trustees, Officers, Employees or Agents of
such Fund, or any of them.
9. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as
such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of
them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of FSS, but bind only the trust property of FSS
as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any Fund
and to such Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FSS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
11. This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held
or made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors and shall be governed by Pennsylvania law;
provided, however, that nothing herein shall be construed in a manner
inconsistent with the Investment Company Act of 1940 or any rule or
regulation promulgated by the Securities and Exchange Commission
thereunder.
12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the
same instrument.
13. This Agreement shall not be assigned by any party without the prior
written consent of FSS in the case of assignment by any Fund, or of the
Funds in the case of assignment by FSS, except that any party may assign
to a successor all of or a substantial portion of its business to a party
controlling, controlled by, or under common control with such party.
Nothing in this Section 14 shall prevent FSS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
Attest: Investment Companies (listed on Exhibit 1)
/s/ John W. McGonigle By:/s/ John F. Donahue
John W. McGonigle John F. Donahue
Secretary Chairman
Attest: Federated Shareholder Services
/s/ Joseph M. Huber By: /s/ John W. McGonigle
Joseph M. Huber John W. McGonigle
Secretary President
<PAGE>
EXHIBIT 1
CONTRACT DATE
INVESTMENT COMPANY
Portfolios
Classes
- ---------------------------------------------------------------------------
September 1, 1995 Federated High Yield Trust
Exhibit 11(i) under N-1A
Exhibit 23 under Item 601/Reg SK
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Financial Highlights"
and to the use of our report dated April 15, 1998, with respect to the financial
statements of Federated High Yield Trust, in Post-Effective Amendment Number 24
to the Registration Statement (Form N-1A No. 2-91091) and the related Prospectus
of Federated High Yield Trust dated April 30, 1998.
By: /s/ERNST & YOUNG LLP
Ernst & Young LLP
Pittsburgh, Pennsylvania
April 23, 1998
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated High Yield Trust
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Feb-28-1998
<PERIOD-END> Feb-28-1998
<INVESTMENTS-AT-COST> 1,119,295,234
<INVESTMENTS-AT-VALUE> 1,176,394,696
<RECEIVABLES> 44,659,441
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,221,054,241
<PAYABLE-FOR-SECURITIES> 8,243,940
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 13,747,454
<TOTAL-LIABILITIES> 21,991,394
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,157,141,096
<SHARES-COMMON-STOCK> 123,218,164
<SHARES-COMMON-PRIOR> 108,742,761
<ACCUMULATED-NII-CURRENT> 54,638
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (15,232,349)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 57,099,462
<NET-ASSETS> 1,199,062,847
<DIVIDEND-INCOME> 3,569,840
<INTEREST-INCOME> 94,681,617
<OTHER-INCOME> 0
<EXPENSES-NET> 9,025,991
<NET-INVESTMENT-INCOME> 89,225,466
<REALIZED-GAINS-CURRENT> 2,894,137
<APPREC-INCREASE-CURRENT> 34,916,343
<NET-CHANGE-FROM-OPS> 127,035,946
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 88,853,702
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 103,170,660
<NUMBER-OF-SHARES-REDEEMED> 86,612,840
<SHARES-REINVESTED> 6,907,979
<NET-CHANGE-IN-ASSETS> 260,700,070
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2,271,747)
<OVERDISTRIB-NII-PRIOR> (376,190)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,666,471
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 11,733,529
<AVERAGE-NET-ASSETS> 1,020,433,684
<PER-SHARE-NAV-BEGIN> 9.410
<PER-SHARE-NII> 0.820
<PER-SHARE-GAIN-APPREC> 0.320
<PER-SHARE-DIVIDEND> 0.820
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.730
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
