Federated Investors, Inc.
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
811-22098
(Investment Company Act File Number)
Federated Enhanced Treasury Income
Fund
_______________________________________________________________
(Exact Name of Registrant as Specified
in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, Pennsylvania 15086-7561
(Address of Principal Executive Offices)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(412) 288-1900
(Registrant's Telephone Number)
Date of Fiscal Year End: 11/30/2013
Date of Reporting Period: 11/30/2013
Item 1. Reports to Stockholders
Annual Shareholder
Report
November 30, 2013
Federated Enhanced
Treasury Income Fund
Fund Established
2010
Not FDIC Insured • May Lose
Value • No Bank Guarantee
Information Regarding
Sources of Fund Distributions
Federated Enhanced
Treasury Income Fund (the “Fund”), acting pursuant to a Securities and Exchange Commission (SEC) exemptive order and with the approval of the Fund's Board of Trustees (the “Board”), has adopted
a plan, consistent with its investment objectives and policies to support a level distribution of income, capital gains and/or return of capital (the “Plan”). In accordance with the Plan, the Fund will
make monthly cash distributions approximating 4.0% of the Fund's net asset value on an annualized basis.
The
amounts distributed per share are subject to change at the discretion of the Fund's Board. Under its Plan, the Fund will distribute all available investment income to its shareholders, consistent with its primary
investment objectives and as required by the Internal Revenue Code of 1986, as amended (the “Code”). If sufficient investment income is not available on a monthly basis, the Fund will distribute long-term
capital gains and/or return of capital to shareholders in order to maintain a level distribution. Each monthly distribution to shareholders is expected to be at the amount established by the Board, except for
extraordinary distributions and potential distribution rate increases to enable the Fund to comply with the distribution requirements imposed by the Code.
Shareholders should not draw any conclusions about the Fund's investment performance from the amount of these distributions or from the terms of the Plan. The Fund's total return performance at net asset value is
presented in its financial highlights table.
The
Board may amend, suspend or terminate the Fund's Plan without prior notice if it deems such actions to be in the best interests of the Fund or its shareholders. The suspension or termination of the Plan could have the
effect of creating a trading discount (if the Fund's stock is trading at or above net asset value) or widening an existing trading discount. The Fund is subject to risks that could have an adverse impact on its
ability to maintain level distributions. Please refer to the Fund's prospectus for a more complete description of its risks.
Under
the federal securities laws, the Fund is required to provide a notice to shareholders regarding the source of distributions made by the Fund if such distributions are from sources other than ordinary investment
income. In addition, important information regarding the Fund's distributions, if applicable, is available via the link to the Fund and share class name at www.Federatedinvestors.com/FundInformation.
Annual Shareholder Report
CONTENTS
| 1
|
| 2
|
| 5
|
| 6
|
| 7
|
| 8
|
| 9
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| 17
|
| 18
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| 19
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| 25
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| 30
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| 33
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| 37
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| 37
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| 38
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| 39
|
Portfolio of Investments
Summary Table (unaudited)
At November 30, 2013, the
Fund's portfolio composition1 was as follows:
| Security Type
| Percentage of
Total Net Assets
|
| U.S. Treasury Securities
| 97.0%
|
| Investment Company
| 3.3%
|
| Derivative Contracts for U.S. Treasury Securities2,3
| (0.0)%
|
| Other Assets and Liabilities—Net4
| (0.3)%
|
| TOTAL
| 100.0%
|
| 1
| See the Fund's Prospectus for a description of the principal types of securities in which the Fund invests.
|
| 2
| Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract
on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of
the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or
amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report.
|
| 3
| Represents less than 0.1%.
|
| 4
| Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities.
|
Annual Shareholder Report
Portfolio of
Investments
November 30, 2013
Principal
Amount
|
|
| Value
|
|
|
| U.S. TREASURY—97.0%
|
|
| $3,000,000
|
| U.S. Treasury Inflation Protected Note, 0.125%, 4/15/2017
| $$3,191,619
|
| 5,000,000
|
| United States Treasury Bond, 4.375%, 11/15/2039
| 5,564,102
|
| 4,500,000
|
| United States Treasury Bond, 4.375%, 5/15/2041
| 4,996,017
|
| 10,000,000
|
| United States Treasury Bond, 5.250%, 11/15/2028
| 12,308,410
|
| 5,200,000
|
| United States Treasury Bond, 7.500%, 11/15/2024
| 7,508,628
|
| 15,000,000
|
| United States Treasury Note, 0.375%, 3/15/2015
| 15,033,984
|
| 5,000,000
|
| United States Treasury Note, 1.250%, 10/31/2018
| 4,979,199
|
| 4,000,000
|
| United States Treasury Note, 1.375%, 7/31/2018
| 4,023,281
|
| 9,000,000
| 1
| United States Treasury Note, 1.500%, 7/31/2016
| 9,247,500
|
| 3,500,000
|
| United States Treasury Note, 1.750%, 5/31/2016
| 3,616,860
|
| 19,000,000
|
| United States Treasury Note, 2.125%, 11/30/2014
| 19,368,404
|
| 7,500,000
|
| United States Treasury Note, 2.500%, 8/15/2023
| 7,360,108
|
| 7,500,000
|
| United States Treasury Note, 2.625%, 8/15/2020
| 7,808,862
|
| 3,500,000
|
| United States Treasury Note, 2.750%, 2/15/2019
| 3,730,644
|
| 11,675,000
|
| United States Treasury Note, 3.500%, 5/15/2020
| 12,843,299
|
| 4,000,000
|
| United States Treasury Note, 4.000%, 2/15/2015
| 4,182,383
|
|
|
| TOTAL U.S. TREASURY
(IDENTIFIED COST $122,794,808)
| 125,763,300
|
|
|
| INVESTMENT COMPANY—3.3%
|
|
| 4,213,588
|
| Federated Government Obligations Fund, Institutional Shares, 0.01%
(IDENTIFIED COST $4,213,588)
| 4,213,588
|
|
|
| TOTAL INVESTMENTS—100.3%
(IDENTIFIED COST $127,008,396) 2
| 129,976,888
|
|
|
| OTHER ASSETS AND LIABILITIES - NET—(0.3)%3
| (353,043)
|
|
|
| TOTAL NET ASSETS—100%
| $129,623,845
|
Annual Shareholder Report
At November 30, 2013, the Fund had
the following open futures contracts:
| Description
| Number of
Contracts
| Notional
Value
| Expiration
Date
| Unrealized
Appreciation
(Depreciation)
|
| 4U. S. Treasury Notes, 10-Year Long Futures
| 571
| $71,589,125
| March 2014
| $194,997
|
| 4U. S. Treasury Notes, 2-Year Long Futures
| 306
| $67,410,844
| March 2014
| $23,395
|
| 4U.S. Treasury Bonds, 20-Year Short Futures
| 114
| $14,905,500
| March 2014
| $(34,100)
|
| NET UNREALIZED APPRECIATION ON FUTURES CONTRACTS
| $184,292
|
At November 30, 2013, the Fund had
the following outstanding written option contracts:
| Security
| Expiration
Date
| Exercise
Price
| Contracts
| Value
|
| 4U.S. Treasury Bonds 10-Year Short Calls on Futures
| December 2013
| $125
| (109)
| $(109,000)
|
| 4U.S. Treasury Bonds 20-Year Short Calls on Futures
| January 2014
| $130
| (222)
| $(388,500)
|
| 4U.S. Treasury Bonds 5-Year Short Calls on Futures
| January 2014
| $121
| (500)
| $(324,219)
|
| (PREMIUMS RECEIVED $710,340)
| $(821,719)
|
Net Unrealized Appreciation on
Futures Contracts and Value of Written Call Option Contracts is included in “Other Assets and Liabilities—Net.”
| 1
| All or a portion of this security is pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding futures contracts.
|
| 2
| Also represents cost for federal tax purposes.
|
| 3
| Assets, other than investments in securities, less liabilities.
|
| 4
| Non-income-producing security.
|
Note: The categories of investments
are shown as a percentage of total net assets at November 30, 2013.
Various inputs are used in
determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level
1—quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level
2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level
3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for
valuing securities are not an indication of the risk associated with investing in those securities.
Annual Shareholder Report
The following is a summary of the
inputs used, as of November 30, 2013, in valuing the Fund's assets carried at fair value:
| Valuation Inputs
|
|
|
|
|
|
| Level 1—
Quoted
Prices and
Investments in
Investment Companies
| Level 2—
Other
Significant
Observable
Inputs
| Level 3—
Significant
Unobservable
Inputs
| Total
|
| Debt Securities:
|
|
|
|
|
| U.S. Treasury
| $—
| $125,763,300
| $—
| $125,763,300
|
| Investment Company
| 4,213,588
| —
| —
| 4,213,588
|
| TOTAL SECURITIES
| $4,213,588
| $125,763,300
| $—
| $129,976,888
|
| OTHER FINANCIAL INSTRUMENTS*
| $(637,427)
| $—
| $—
| $(637,427)
|
| *
| Other financial instruments include written call option contracts and futures contracts.
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Financial Highlights
(For a Share Outstanding
Throughout Each Period)
|
| Year Ended November 30,
| Period
Ended
11/30/20101
|
| 2013
| 2012
| 2011
|
| Net Asset Value Beginning of Period
| $15.96
| $16.54
| $18.03
| $19.10
|
| Income From Investment Operations:
|
|
|
|
|
| Net investment income2
| 0.12
| 0.15
| 0.21
| 0.15
|
| Net realized and unrealized gain (loss) on investments, futures contracts and written options
| (0.59)
| 0.10
| (0.68)
| (0.10)
|
| TOTAL FROM INVESTMENT OPERATIONS
| (0.47)
| 0.25
| (0.47)
| 0.05
|
| Offering costs
| —
| —
| —
| (0.04)
|
| Less Distributions:
|
|
|
|
|
| Distributions from net investment income
| (0.12)
| (0.17)
| (0.21)
| (0.15)
|
| Return of capital2,3
| (0.55)
| (0.71)
| (0.81)
| (0.93)
|
| TOTAL DISTRIBUTIONS TO SHAREHOLDERS
| (0.67)
| (0.88)
| (1.02)
| (1.08)
|
| Repurchase of Common Shares
| 0.11
| 0.05
| —
| —
|
| Net Asset Value, End of Period
| $14.93
| $15.96
| $16.54
| $18.03
|
| Market Price, End of Period
| $12.80
| $14.37
| $14.03
| $16.67
|
| Total Return at Net Asset Value4
| (2.29)%
| 1.91%
| (2.66)%
| 0.10%
|
| Total Return at Market Price5
| (6.45)%
| 8.82%
| (10.12)%
| (11.72)%
|
| Ratios to Average Net Assets:
|
|
|
|
|
| Net expenses
| 1.05%
| 1.03%
| 1.00%
| 1.03%6
|
| Net investment income
| 0.76%
| 0.93%
| 1.20%
| 0.95%6
|
| Expense waiver/reimbursement7
| 0.08%
| —
| —
| 0.00%6,8
|
| Supplemental Data:
|
|
|
|
|
| Net assets, end of period (000 omitted)
| $129,624
| $147,676
| $158,245
| $172,558
|
| Portfolio turnover
| 52%
| 31%
| 67%
| 156%
|
| 1
| Reflects operations for the period from January 29, 2010 (date of initial investment) to November 30, 2010.
|
| 2
| Per share numbers have been calculated using the average shares method.
|
| 3
| Represents a return of capital for federal income tax purposes.
|
| 4
| Total Return at Net Asset Value is the combination of changes in the Common Share net asset value, reinvested dividend income and reinvested capital gains distributions at net asset value, if any, and does not
reflect the sales charge, if applicable. Total returns for periods of less than one year are not annualized.
|
| 5
| Total Return at Market Price is the combination of changes in the market price per share and the effect of reinvested dividend income and reinvested capital gains distributions, if any, at the average price paid per
share at the time of the reinvestment.
|
| 6
| Computed on an annualized basis.
|
| 7
| This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
|
| 8
| Represents less than $0.01.
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Assets and
Liabilities
November 30, 2013
| Assets:
|
|
|
| Total investment in securities at value (including $4,213,588 of investment in an affiliated holding) (Note 5) (identified cost
$127,008,396)
|
| $129,976,888
|
| Cash
|
| 45,313
|
| Income receivable
|
| 579,953
|
| Receivable from MFGI Trustee (Note 7)
|
| 4,676
|
| TOTAL ASSETS
|
| 130,606,830
|
| Liabilities:
|
|
|
| Options written, at value (premiums received $710,340)
| $821,719
|
|
| Income distribution payable
| 830
|
|
| Payable for daily variation margin
| 62,453
|
|
| Payable for portfolio accounting fees
| 45,833
|
|
| Payable for auditing fees
| 33,250
|
|
| Payable for Directors'/Trustees' fees (Note 5)
| 1,540
|
|
| Accrued expenses (Note 5)
| 17,360
|
|
| TOTAL LIABILITIES
|
| 982,985
|
| Net assets for 8,679,509 shares outstanding
|
| $129,623,845
|
| Net Assets Consists of:
|
|
|
| Paid-in capital
|
| $141,415,905
|
| Net unrealized appreciation of investments, written options and futures contracts
|
| 3,041,405
|
| Accumulated net realized loss on investments, written options and futures contracts
|
| (14,832,635)
|
| Distributions in excess of net investment income
|
| (830)
|
| TOTAL NET ASSETS
|
| $129,623,845
|
| Net Asset Value, Offering Price and Redemption Proceeds Per Share
|
|
|
| $129,623,845 ÷ 8,679,509 shares outstanding, $0.01 par value, unlimited shares authorized
|
| $14.93
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Operations
Year Ended November 30, 2013
| Investment Income:
|
|
|
|
| Interest
|
|
| $2,482,585
|
| Expenses:
|
|
|
|
| Investment adviser fee (Note 5)
|
| $1,166,161
|
|
| Administrative fee (Note 5)
|
| 93,750
|
|
| Custodian fees
|
| 11,824
|
|
| Transfer agent fee
|
| 26,929
|
|
| Directors'/Trustees' fees (Note 5)
|
| 5,733
|
|
| Auditing fees
|
| 34,250
|
|
| Legal fees
|
| 9,056
|
|
| Portfolio accounting fees
|
| 110,406
|
|
| Printing and postage
|
| 50,679
|
|
| Insurance premiums (Note 5)
|
| 4,279
|
|
| Miscellaneous (Note 5)
|
| 40,739
|
|
| TOTAL EXPENSES
|
| 1,553,806
|
|
| Waiver of investment adviser fee (Note 5)
|
| (113,701)
|
|
| Net expenses
|
|
| 1,440,105
|
| Net investment income
|
|
| 1,042,480
|
| Realized and Unrealized Gain (Loss) on Investments, Futures Contracts and Written Options:
|
|
|
|
| Net realized loss on investments
|
|
| (464,003)
|
| Net realized gain on futures contracts
|
|
| 758,458
|
| Net realized gain on written options
|
|
| 1,567,310
|
| Net change in unrealized appreciation of investments
|
|
| (7,083,426)
|
| Net change in unrealized appreciation of futures contracts
|
|
| (67,236)
|
| Net change in unrealized depreciation on written options
|
|
| (62,731)
|
| Net realized and unrealized loss on investments, futures contracts and written options
|
|
| (5,351,628)
|
| Change in net assets resulting from operations
|
|
| $(4,309,148)
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Changes in Net Assets
| Year Ended November 30
| 2013
| 2012
|
| Increase (Decrease) in Net Assets
|
|
|
| Operations:
|
|
|
| Net investment income
| $1,042,480
| $1,406,201
|
| Net realized gain/(loss) on investments, futures contracts and written options
| 1,861,765
| (1,837,631)
|
| Net change in unrealized appreciation/depreciation of investments, futures contracts and written options
| (7,213,393)
| 2,764,523
|
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
| (4,309,148)
| 2,333,093
|
| Distribution to Shareholders:
|
|
|
| Distributions from net investment income (Note 2)
| (1,039,298)
| (1,651,224)
|
| Return of capital (Note 2)
| (4,953,038)
| (6,686,859)
|
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
| (5,992,336)
| (8,338,083)
|
| Share Transactions:
|
|
|
| Cost of shares repurchased (Note 6)
| (7,750,407)
| (4,564,461)
|
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
| (7,750,407)
| (4,564,461)
|
| Change in net assets
| (18,051,891)
| (10,569,451)
|
| Net Assets:
|
|
|
| Beginning of period
| 147,675,736
| 158,245,187
|
| End of period (including distributions in excess of net investment income of $(830) and $(4,012), respectively)
| $129,623,845
| $147,675,736
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Notes to Financial
Statements
November 30, 2013
1. ORGANIZATION
Federated Enhanced Treasury Income
Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”) as a diversified, closed-end management investment company. Due to changes in the Commodity
Futures Trading Commission's interpretation of the Commodity Exchange Act, effective January 1, 2013, Federated Investment Management Company (“Adviser”) became registered as a “commodity pool
operator” with respect to its operation of the Fund. The Fund's investment objectives are to provide current income, with total return as a secondary objective.
2. SIGNIFICANT ACCOUNTING
POLICIES
The following is a summary of
significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value
(NAV), the Fund generally values investments as follows:
| ■
| Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Fund's Board of Trustees (the
“Trustees”).
|
| ■
| Fixed-income securities and repurchase agreements acquired with remaining maturities of 60 days or less are valued at their amortized cost (adjusted for the accretion of any discount or amortization of any premium),
unless the issuer's creditworthiness is impaired or other factors indicate that amortized cost is not an accurate estimate of the investment's fair value, in which case it would be valued in the same manner as a
longer-term security.
|
| ■
| Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs.
|
| ■
| Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
|
| ■
| Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
|
| ■
| For securities that are fair valued in accordance with procedures established by and under general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security,
information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the
movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
|
If the Fund cannot obtain a price or
price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one
or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, or if the Fund cannot obtain price evaluations from a pricing service or from
Annual Shareholder Report
more than one dealer for an investment within a
reasonable period of time as set forth in the Fund's valuation policies and procedures, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no
assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation
The Trustees have appointed a
Valuation Committee comprised of officers of the Fund, the Adviser and certain of the Adviser's affiliated companies to determine fair value of securities and in overseeing the calculation of the NAV.
The Trustees have
also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation
Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and
assumptions), transactional back-testing, comparisons of evaluations of different pricing services and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and
price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review and
approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered
by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions,
indications as to values from dealers, and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation).
Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid
evaluations for U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts.
In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
Repurchase Agreements
The Fund may invest in repurchase
agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a
market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which
the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value
of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be
transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.
Annual Shareholder Report
The insolvency of
the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase
agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter
into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser
and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of
proceeds from any repurchase or other disposition of such securities.
Investment Income, Gains and
Losses, Expenses and Distributions
Investment transactions are
accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Non-cash dividends included in
dividend income, if any, are recorded at fair value. Distributions to shareholders are recorded on the ex-dividend date. Positive or negative inflation adjustments on Treasury Inflation-Protected Securities (TIPS) are
included in interest income.
Beginning on March
1, 2013, the Fund declared and paid monthly distributions approximating 4.0% of the Fund's net asset value on an annualized basis. For the other time periods reflected within the Statement of Changes in Net Assets,
the Fund declared and paid monthly distributions approximating 5.5% of the Fund's net asset value on an annualized basis. GAAP requires that distributions in excess of tax basis earnings and profits be reported in
these financial statements as a return of capital. Distributions in any year may include a substantial return of capital component.
Premium and Discount
Amortization
All premiums and discounts on
fixed-income securities are amortized/accreted using the effective-interest-rate method.
Federal Taxes
It is the Fund's policy to comply
with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is
necessary. As of and during the year ended November 30, 2013, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income
tax expense in the Statement of Operations. As of November 30, 2013, tax years 2010 through 2013 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the
state of Delaware.
When-Issued and Delayed-Delivery
Transactions
The Fund may engage in when-issued
or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market
conditions or the failure of counterparties to perform under the contract.
Annual Shareholder Report
Futures Contracts
The Fund purchases and sells
financial futures contracts to manage duration and yield curve risk. Upon entering into a financial futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or
U.S. government securities which is shown as Restricted Cash in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized gains or losses are recorded in a “variation
margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain
or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty
risk to the Fund since futures are exchange traded and the exchange's clearing house, as counterparty to all exchange traded futures, guarantees the futures against default.
Futures contracts
outstanding at period end are listed after the Fund's portfolio of investments.
The average
notional value of long and short futures contracts held by the Fund throughout the period was $88,705,746 and $38,282,526, respectively. This is based on amounts held as of each month-end throughout the fiscal
period.
Option Contracts
The Fund buys or sells put and call
options to increase yield and income. The seller (writer) of an option receives a payment or premium, from the buyer, which the writer keeps regardless of whether the buyer exercises the option. When the Fund writes a
put or call option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from writing options which
expire are treated as realized gains. The Fund, as a writer of an option, bears the market risk of an unfavorable change in the price of the underlying reference instrument. When the Fund purchases a put or call
option, an amount equal to the premium paid is recorded as an increase to the cost of the investment and subsequently marked to market to reflect the current value of the option purchased. Premiums paid for purchasing
options which expire are treated as realized losses. Premiums received/paid for writing/purchasing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying
reference instrument to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. Options can trade on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price. Most exchanges require investors to maintain margin accounts through their brokers to cover their potential obligations to the exchange. This
protects investors against potential defaults by the counterparty.
Annual Shareholder Report
The following is
a summary of the Fund's written option activity:
| Contracts
| Number of
Contracts
| Premium
|
| Outstanding at November 30, 2012
| 920
| $261,883
|
| Contracts written
| 13,643
| 8,289,139
|
| Contracts exercised
| (823)
| (473,604)
|
| Contracts bought back
| (8,572)
| (5,188,687)
|
| Contracts expired
| (4,337)
| (2,178,391)
|
| Outstanding at November 30, 2013
| 831
| $710,340
|
Written option contracts outstanding
at period end are listed after the Fund's portfolio of investments.
The average
notional amount of written call option contracts held by the Fund throughout the period was a net payable of $683,552. This is based on amounts held as of each month-end throughout the fiscal period.
Additional Disclosure Related to
Derivative Instruments
| Fair Value of Derivative Instruments
|
|
| Asset
| Liability
|
|
| Statement of
Assets and
Liabilities
Location
| Fair Value
| Statement of
Assets and
Liabilities
Location
| Fair Value
|
Derivatives not accounted for as
hedging instruments under
ASC Topic 815
|
|
|
|
|
| Interest rate contracts
| Receivable for daily
variation margin
| $184,292*
| Options written,
at value
| $821,719
|
| *
| Includes cumulative appreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities.
|
The Effect of Derivative
Instruments on the Statement of Operations for the Year Ended November 30, 2013
| Amount of Realized Gain (Loss) on Derivatives Recognized in Income
|
|
| Futures
| Written Option
Contracts
| Total
|
| Interest rate contracts
| $758,458
| $ 1,567,310
| $ 2,325,768
|
| Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income
|
|
| Futures
| Written Option
Contracts
| Total
|
| Interest rate contracts
| $ (67,236)
| $ (62,731)
| $ (129,967)
|
Annual Shareholder Report
Other
The preparation of financial
statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could
differ from those estimated.
3. Common Shares
The following table summarizes share
activity:
| Year Ended November 30
| 2013
| 2012
|
| Shares repurchased
| (573,711)
| (315,692)
|
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS
| (573,711)
| (315,692)
|
4. FEDERAL TAX INFORMATION
The tax character of distributions
as reported on the Statement of Changes in Net Assets for the years ended November 30, 2013 and 2012, was as follows:
|
| 2013
| 2012
|
| Ordinary income
| $1,039,298
| $1,651,224
|
| Return of capital
| $4,953,038
| $6,686,859
|
As of November 30, 2013, the
components of distributable earnings on a tax basis were as follows:
| Distributions payable
| $ (830)
|
| Net unrealized appreciation
| $2,968,492
|
| Capital loss carryforwards and deferrals
| $(14,759,722)
|
At November 30, 2013, the cost of
investments for federal tax purposes was $127,008,396. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation/depreciation resulting from futures contracts and
written call option contracts was $2,968,492. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $2,973,601 and net unrealized depreciation from
investments for those securities having an excess of cost over value of $5,109.
At November 30,
2013, the Fund had a capital loss carryforward of $11,898,678 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby
reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years
beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable
years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
Annual Shareholder Report
The following
schedule summarizes the Fund's capital loss carryforwards and expiration years:
| Expiration Year
| Short-Term
| Long-Term
| Total
|
| No expiration
| $1,997,753
| $2,685,584
| $4,683,337
|
| 2018
| $ 973,449
|
| $ 973,449
|
| 2019
| $ 6,241,892
|
| $ 6,241,892
|
At November 30, 2013, for federal
tax purposes, the Fund had $2,861,044 in straddle loss deferrals.
5. INVESTMENT ADVISER FEE AND
OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the
Fund and the Adviser provides for an annual management fee, equal to 0.85% of the average daily value of the Fund's Managed Assets. For these purposes, “Managed Assets” means the total assets of the Fund
(including assets attributable to any form of investment leverage that the Fund may in the future determine to utilize) minus the sum of accrued liabilities (other than debt representing financial leverage).
In order to reduce
Fund expenses, the Adviser has contractually agreed to waive a portion of its management fee and/or reimburse expenses so that the total annual fund operating expenses paid by the Fund's Common Shares (after the
waivers and/or reimbursements) will not exceed 1.05% (excluding acquired fund fees and expenses, if any). This contractual fee waiver will be in place for the first five years of the Fund's operations and may only be
terminated or revised by the Trustees. For the year ended November 30, 2013, the Adviser waived $113,701 of its fee.
Pursuant to a
sub-advisory agreement between the Adviser and Dix Hills Partners, LLC (the “Sub-Adviser”), the Sub-Adviser receives an annual fee from the Adviser in an amount equal to 0.425% of average daily managed
assets.
Administrative Fee
Federated Administrative Services
(FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. FAS currently receives no compensation for providing administrative services to the Fund. Effective
March 1, 2013, the Fund agreed to pay FAS an annual Administrative Service Charge of $125,000 for compliance and other services related to Commodity Futures Trading Commission Rule 4.5.
General
Certain Officers and Trustees of the
Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees
and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.
Annual Shareholder Report
6. SHARE REPURCHASE PROGRAM
In February 2012, the Trustees
authorized a share repurchase program that allows the Fund to purchase up to 5% of its outstanding common shares over the 12-month period ending February 28, 2013 (based on shares outstanding as of December 31, 2011,
or 478,446 shares). Repurchases are made when the Fund's shares are trading at less than net asset value and in accordance with procedures approved by the Trustees. The Fund completed its purchase of all of the
478,446 shares during the initial program period. In February 2013, the Trustees authorized the extension of the share repurchase program which allows the Fund to purchase up to 5% of its outstanding common shares
over the 12-month period ending February 28, 2014 (based on shares outstanding as of December 31, 2012, or 459,352 shares). During the year ended November 30, 2013, the Fund repurchased 573,711 common shares at an
aggregate purchase price of $7,750,407 which reflects a weighted-average discount from net asset value per share of 11.69%. At November 30, 2013, 48,395 common shares remain available to be purchased under the program
extension.
7. TRANSACTIONS WITH MF GLOBAL
INC. (MFGI)
MFGI filed for chapter 11 bankruptcy
protection on October 31, 2011. At that time, the Fund held options on U.S. Treasury futures positions, along with related collateral in the form of a U.S. Treasury Note (“T-Note”) with a market value of
approximately $3.8 million, with MFGI.
The Fund filed a
claim with the MFGI Trustee for the full amount due to it and has been receiving proceeds since that time. As of November 30, 2013, the remaining net amount of the claim of $4,676 is presented as “Receivable
from MFGI Trustee” on the accompanying Statement of Assets and Liabilities and is deemed collectible; however, the actual amount of recovery of this claim is unknown at this time.
8. Subsequent event
Based on an evaluation of the
performance of the Fund, the Adviser has provided notice of the termination to Dix Hills Partners, LLC, the Sub-Adviser to the Fund, of the Subadvisory Agreement dated January 22, 2010. The Subadvisory Agreement will
terminate effective at the close of business on February 28, 2014. Upon termination, the Adviser will assume the Sub-Adviser's previous responsibilities.
Management has
evaluated subsequent events through the date the financial statements were issued and determined that no additional events have occurred that require disclosure.
Annual Shareholder Report
Report of Independent
Registered Public Accounting Firm
TO THE BOARD OF trustees and
shareholders OF Federated ENHANCED TREASURY INCOME fund:
We have audited the
accompanying statement of assets and liabilities of Federated Enhanced Treasury Income Fund (the “Fund”), including the portfolio of investments, as of November 30, 2013, and the related statement of
operations for the year then ended, the statement of changes in net assets for the two years then ended and the financial highlights for each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned
as of November 30, 2013, by correspondence with the custodian and others. 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 Enhanced Treasury Income Fund, at November 30, 2013, the results of its
operations for the year then ended, the changes in its net assets for the two years then ended and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted
accounting principles.
Boston, Massachusetts
January 27, 2014
Annual Shareholder Report
Last Meeting of Shareholders
(unaudited)
FEDERATED enhanced treasury
INCOME FUND
An Annual Meeting of Fund
shareholders was held on September 13, 2013. On June 28, 2013, the record date for shareholders voting at the meeting, there were 8,958,988 total outstanding shares. The following item was considered by shareholders
and the results of their voting are listed below. Unless otherwise noted, each matter was approved.
ELECTION OF Two CLASS I
TRUSTEES:
1. Thomas M. O'Neill
| For
| Withheld
Authority
to Vote
|
| 6,144,498
| 1,726,411
|
2. John S. Walsh
| For
| Withheld
Authority
to Vote
|
| 6,144,531
| 1,726,378
|
The following Trustees of the Fund
continued their terms as Trustees of the Fund: J. Christopher Donahue, Maureen Lally-Green, Charles F. Mansfield, Jr. and Peter E. Madden.
Annual Shareholder Report
Board of Trustees and Fund Officers
The Board is responsible
for managing the Fund's business affairs and for exercising all the Fund's powers except those reserved for the shareholders. The following tables give information about each Trustee and the senior officers of the
Fund. Where required, the tables separately list Trustees who are “interested persons” of the Fund (i.e., “Interested” Trustees) and those who are not (i.e., “Independent”
Trustees). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Trustees listed is 4000 Ericsson Drive,
Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2013, the Federated Fund Family consisted of 42 investment companies (comprising 135 portfolios). Unless otherwise noted, each Officer is
elected annually. Unless otherwise noted, each Trustee oversees all portfolios in the Federated Fund Complex and serves for an indefinite term.
In Memoriam - John F. Cunningham,
Independent TRUSTEE
With deep sadness,
Federated announces the passing of John F. Cunningham, who served as an independent member of the Board of the Federated Fund Family since 1999. Mr. Cunningham's savvy business acumen and incisive intellect made him a
powerful force on the Federated Fund Board. He was an advocate for shareholders and a respected colleague within the Federated family. Mr. Cunningham enjoyed an outstanding career in technology, having served as
President and in other Senior Executive positions with leading companies in the industry. Federated expresses gratitude to Mr. Cunningham for his fine contributions as a Board member, colleague and friend. He will be
greatly missed.
Annual Shareholder Report
INTERESTED TRUSTEES BACKGROUND
Name
Birth Date
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s)
| Year of
Term
Expiration
|
J. Christopher Donahue*
Birth Date: April 11, 1949
PRESIDENT AND TRUSTEE
Began serving: January 2010
| Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Fund Family; Director or Trustee of the Funds in the Federated Fund Family; President, Chief Executive
Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management
Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated
Services Company.
Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport
Research, Ltd.
| 2015
|
| *
| Reasons for “interested” status: J. Christopher Donahue is “interested” due to his beneficial ownership of shares of Federated Investors, Inc. and the positions he holds with Federated and
its subsidiaries.
|
INDEPENDENT TRUSTEES
BACKGROUND
Name
Birth Date
Address
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
| Year of
Term
Expiration
|
John T. Collins++
Birth Date: January 24, 1947
TRUSTEE
Began serving: January 2014
| Principal Occupations: Director or Trustee of the Federated Fund Family; Chairman and CEO, The Collins Group, Inc. (a private equity firm).
Other Directorships Held: Chairman Emeriti, Bentley University; Director, Sterling Suffolk Downs, Inc.; Former Director, National Association of Printers and Lithographers.
Previous Positions: Director and Audit Committee Member, Bank of America Corp.
Qualifications: Business management and director experience.
| 2014
|
Annual Shareholder Report
Name
Birth Date
Address
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
| Year of
Term
Expiration
|
Maureen Lally-Green**++
Birth Date: July 5, 1949
TRUSTEE
Began serving: January 2010
| Principal Occupations: Director or Trustee of the Federated Fund Family; Associate General Secretary and Director, Office for Church Relations, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne
University School of Law; Superior Court of Pennsylvania (service began 1998 and ended July 2009).
Other Directorships Held: Director, Consol Energy (service started June 2013); Director, Auberle (service ended December 2013); Member, Pennsylvania State Board of Education; Director, Saint Vincent College;
Director, Ireland Institute of Pittsburgh (service ended December 2013); Director and Chair, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania;
Director, Saint Thomas More Society (service ended December 2013); Director, Our Campaign for the Church Alive!, Inc.; Director, Pennsylvania Bar Institute (2013-present); Director, Cardinal Wuerl North Catholic High
School (2013-present).
Previous Positions: Professor of Law, Duquesne University School of Law, Pittsburgh (1983-1998).
Qualifications: Legal and director experience.
| 2014
|
Peter E. Madden+ ++
Birth Date: March 16, 1942
TRUSTEE
Began serving: January 2010
| Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Family.
Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired);
Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
Qualifications: Business management, mutual fund services and director experience.
| 2015
|
Annual Shareholder Report
Name
Birth Date
Address
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
| Year of
Term
Expiration
|
Charles F. Mansfield, Jr.**++
Birth Date: April 10, 1945
TRUSTEE
Began serving: January 2010
| Principal Occupations: Director or Trustee of the Federated Fund Family; Management Consultant.
Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank;
Senior Vice President, HSBC Bank USA (formerly Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President
DVC Group, Inc. (marketing, communications and technology).
Qualifications: Banking, business management, education and director experience.
| 2015
|
Thomas M. O'Neill++ **
Birth Date: June 14, 1951
TRUSTEE
Began serving: January 2010
| Principal Occupations: Director or Trustee, Vice Chairman of the Audit Committee of the Federated Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College; Board of Directors, Medicines for Humanity; Board of Directors, The Golisano
Children's Museum of Naples, Florida.
Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.;
General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software
(investment order management software); and Director, Midway Pacific (lumber).
Qualifications: Business management, mutual fund, director and investment experience.
| 2016
|
P. Jerome Richey++
Birth Date: February 23, 1949
TRUSTEE
Began serving: January 2014
| Principal Occupations: Director or Trustee of the Federated Fund Family; General Counsel, University of Pittsburgh.
Other Directorships Held: Board Chairman, Epilepsy Foundation of Western Pennsylvania; Board Member, World Affairs Council of Pittsburgh.
Previous Positions: Chief Legal Officer and Executive Vice President, CONSOL Energy Inc.; Shareholder, Buchanan Ingersoll & Rooney PC (a law firm).
Qualifications: Business management, legal and director experience.
| 2014
|
Annual Shareholder Report
Name
Birth Date
Address
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
| Year of
Term
Expiration
|
John S. Walsh+**++
Birth Date: November 28, 1957
TRUSTEE
Began serving: January 2010
| Principal Occupations: Director or Trustee, Chairman of the Audit Committee of the Federated Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and
Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
Previous Position: Vice President, Walsh & Kelly, Inc.
Qualifications: Business management and director experience.
| 2016
|
| +
| Member of Executive Committee
|
| **
| Member of Audit Committee
|
| ++
| Member of Nominating Committee
|
OFFICERS
Name
Birth Date
Positions Held with Funds
Date Service Began
| Principal Occupation(s) for Past Five Years
and Previous Position(s)
|
John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT AND SECRETARY
Officer since: January 2010
| Principal Occupations: Executive Vice President and Secretary of the Federated Fund Family; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated
Securities Corp.
|
Lori A. Hensler
Birth Date: January 6, 1967
TREASURER
Officer since: April 2013
| Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated
Securities Corp. and Edgewood Services, Inc.; and Assistant Treasurer, Federated Investors Trust Company. Ms. Hensler has received the Certified Public Accountant designation.
Previous Positions: Controller of Federated Investors, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant
Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of
Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations
Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
|
Annual Shareholder Report
Name
Birth Date
Positions Held with Funds
Date Service Began
| Principal Occupation(s) for Past Five Years
and Previous Position(s)
|
Peter J. Germain
Birth Date: September 3, 1959
CHIEF LEGAL OFFICER
Officer since: January 2005
| Principal Occupations: Mr. Germain is Chief Legal Officer of the Federated Fund Family. He is General Counsel and Vice President, Federated Investors, Inc.; President, Federated Administrative Services and
Federated Administrative Services, Inc.; Vice President, Federated Securities Corp.; Secretary, Federated Private Asset Management, Inc.; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined
Federated in 1984 and is a member of the Pennsylvania Bar Association.
Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Investors, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate
Counsel, Federated Investors, Inc.
|
Richard B. Fisher
Birth Date: May 17, 1923
VICE CHAIRMAN
Officer since: January 2010
| Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Family; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Family; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated
Securities Corp.
|
Brian P. Bouda
Birth Date: February 28, 1947
CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
Officer since: January 2010
| Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Family; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of
certain of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
Previous Positions: Served in Senior Management positions with a large regional banking organization.
|
Robert J. Ostrowski
Birth Date: April 26, 1963
VICE PRESIDENT AND CHIEF INVESTMENT OFFICER
Officer since: January 2010
| Principal Occupations: Robert J. Ostrowski joined Federated in 1987 as an Investment Analyst and became a Portfolio Manager in 1990. He was named Chief Investment Officer of Federated's taxable fixed-income products in 2004 and also serves as a Senior
Portfolio Manager. Mr. Ostrowski became an Executive Vice President of the Fund's Adviser in 2009 and served as a Senior Vice President of the Fund's Adviser from 1997 to 2009. Mr. Ostrowski has received the Chartered
Financial Analyst designation. He received his M.S. in Industrial Administration from Carnegie Mellon University.
|
Donald T. Ellenberger
Birth Date: July 24, 1958
VICE PRESIDENT
Officer since: June 2012
Portfolio Manager since: January 2010
| Principal Occupations: Donald T. Ellenberger has been the Fund's Portfolio Manager since January 2010. He is Vice President of the Fund. He joined Federated in 1996 as a Portfolio Manager and a Vice President
of a Federated advisory subsidiary. He became a Senior Vice President of the Fund's Adviser in January 2005 and served as a Vice President of the Fund's Adviser from 1997 through 2004. From 1986 to 1996, he served as
a Trader/Portfolio Manager for Mellon Bank, N.A. Mr. Ellenberger received his M.B.A. from Stanford University.
|
Annual Shareholder Report
Evaluation and Approval
of Advisory Contract–May 2013
Federated Enhanced Treasury
Income Fund
Following a review and
recommendation of approval by the Fund's independent trustees, the Fund's Board reviewed and approved at its May 2013 meetings the Fund's investment advisory and subadvisory contracts for an additional one-year
period. The Board's decision regarding these contracts reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this
connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund.
The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with
the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the
“Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory and subadvisory contracts.
The
Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with
respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser to a fund and its shareholders, including the performance and expenses of the fund and of comparable
funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as
a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders of the family of funds; any “fall-out financial benefits” that accrue to the Adviser because
of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures,
including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the
Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees charged to institutional and other clients of the Adviser and subadviser for what might be viewed as
like services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory and subadvisory contracts to the extent it considered them to be appropriate and relevant, as discussed
further below.
Annual Shareholder Report
The
Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its
deliberations by independent legal counsel. Throughout the year and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated
organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished
additional substantial information in connection with the May meeting at which the Board's formal review of the advisory and subadvisory contracts occurred. At this May meeting, senior management of the Adviser also
met with the independent trustees and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the trustees. Between regularly scheduled meetings, the Board also
received information on particular matters as the need arose. Thus, the Board's consideration of the advisory and subadvisory contracts included review of the Senior Officer's Evaluation, accompanying data and
additional information covering such matters as: the Adviser's and subadviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and
long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or
other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund,
both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's
portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations
of Fund shareholders; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; the continuing state of competition in the investment company industry and market practices; the range of comparable fees
for similar funds; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any
issues raised therein; and relevant developments in the fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and
the emphasis placed on relevant criteria change in recognition of changing circumstances in the fund marketplace.
Annual Shareholder Report
While
mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other closed-end funds with comparable investment
programs to be relevant. The Board focused on comparisons with other similar funds more heavily than non-fund products or services because it is believed that they are more relevant. For example, other closed-end
funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's
investors. The range of their fees and expenses therefore appears to be a relevant indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
It was
noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was above the median of the relevant
peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser, noting that the overall expense structure of the Fund, after waivers and expense reimbursements, was above the median of the
relevant peer group, but the Board still was satisfied that the overall expense structure of the fund remained competitive. The Board will continue to monitor advisory fees and other expenses borne by the Fund.
By
contrast, the Senior Officer has reviewed Federated's fees for providing advisory services to Federated registered investment companies as well as products outside the Federated family of funds (e.g., institutional
and separate accounts). He concluded that registered investment companies and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted
investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; portfolio management techniques made necessary by such differences;
and the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing different administrative responsibilities,
addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of fund
advisory fees.
The
Fund's ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as a useful indicator of how the Adviser is executing the Fund's investment program, which
in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory and subadvisory
contracts.
Annual Shareholder Report
The
Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other regulated investment companies, noting
his view that comparisons to fund peer groups are relevant, though not conclusive, in judging the reasonableness of proposed fee.
The
Fund's performance fell below the median of the relevant peer group for the one-year period covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the efforts being
undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The
Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not
only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds'
administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board also considered the
fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board
their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution, adjustment or elimination of these voluntary waivers.
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund by fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation
methodologies specified by the Senior Officer. The Senior Officer noted that, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in arbitrarily allocating costs
continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate can dramatically alter the resulting
estimate of cost and/or profitability of a fund. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The
Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted
the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive. The Board agreed with this assessment.
The
Board also considered whether the Fund might benefit from “economies of scale” and noted that, as a “closed-end fund,” which has made an offering of a fixed number of common shares and (other
than the issuance of preferred shares contemplated at the time of the Fund's initial public offering)
Annual Shareholder Report
has not made and does not expect to make
additional offerings to raise more assets, the Fund is unlikely to grow materially in size and, as a consequence, there are no meaningful “economies of scale” to be realized from internal growth.
Accordingly, the Board concluded that this was not a relevant consideration in its overall evaluation.
The
Senior Officer noted that, subject to the comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management
fees for each of the funds were reasonable. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory and subadvisory contracts.
In its
decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a
result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and
reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the
shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the
services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
The
Board based its decision to approve the advisory and subadvisory contracts on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors
and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to
approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Annual Shareholder Report
Dividend Reinvestment Plan
The following description
of the Fund's Dividend Reinvestment Plan (the “Plan”) is furnished to you annually as required by federal securities laws.
Unless
the registered owner of the Fund's common shares elects to receive cash by contacting Computershare Trust Co., N.A. (the “Plan Administrator”), all dividends declared on common shares of the Fund will be
automatically reinvested by the Plan Administrator, as agent for shareholders in the Plan, in additional common shares of the Fund. Common shareholders who elect not to participate in the Plan will receive all
dividends and other distributions in cash. You may elect not to participate in the Plan and to receive all dividends in cash by contacting the Plan Administrator at the address set forth below if your Shares are
registered in your name, or by contacting your bank, broker, or other nominee if your Shares are held in street or other nominee name. Participation in the Plan is completely voluntary and may be terminated or resumed
at any time without penalty by written notice to the Plan Administrator. Such notice will be effective for a dividend if received and processed by the Plan Administrator prior to the dividend record date; otherwise
the notice will be effective with respect to any subsequently declared dividend or other distribution. Some brokers may automatically elect to receive cash on your behalf and may reinvest that cash in additional
common shares of the Fund for you. If you wish for all dividends declared on your common shares to be automatically reinvested pursuant to the Plan, please contact your broker.
The
Plan Administrator will open an account for each common shareholder under the Plan in the same name in which the shareholder's common shares are registered. Whenever the Fund declares a dividend or other distribution
payable in cash (together, a “dividend”), non-participants in the Plan will receive cash, and participants in the Plan will receive the equivalent in common shares. The common shares will be acquired by
the Plan Administrator for the participants' accounts, depending upon the circumstances described below, either: (1) through receipt from the Fund of additional authorized but unissued common shares (“newly
issued common shares”); or (2) by purchase of outstanding common shares on the open market (“open-market purchases”) on the New York Stock Exchange or elsewhere. If, on the payment date for a
dividend, the closing market price plus estimated brokerage commissions per common share is equal to or greater than the net asset value (NAV) per common share, the Plan Administrator will invest the dividend amount
on behalf of the participants in newly issued common shares. The number of newly issued common shares to be credited to each participant's account will be determined by dividing the dollar amount of the dividend by
the NAV per common share on the payment date; provided that, if the NAV is less than or equal to 95% of the closing market value on the payment date, the dollar amount of the dividend will be divided by 95% of the
closing market price per common share on the payment date. If, on the payment date for any dividend,
Annual Shareholder Report
the NAV per common share is greater than
the closing market value plus estimated brokerage commissions, the Plan Administrator will invest the dividend amount in common shares acquired on behalf of the participants in open-market purchases.
In the
event of a market discount on the payment date for any dividend, the Plan Administrator will have until the last business day before the next date on which the common shares trade on an “ex-dividend” basis
or 30 days after the payment date for such dividend, whichever is sooner (the “last purchase date”), to invest the dividend amount in common shares acquired in open-market purchases. It is contemplated
that the Fund will pay monthly income dividends. Therefore, the period during which open-market purchases can be made will exist only from the payment date of each dividend through the day before the next
“ex-dividend” date, which will be approximately ten days. If, before the Plan Administrator has completed its open-market purchases, the market price per common share exceeds the NAV per common share, the
average per share purchase price paid by the Plan Administrator may exceed the NAV of the common shares, resulting in the acquisition of fewer common shares than if the dividend had been paid in newly issued common
shares on the dividend payment date. Because of the foregoing difficulty with respect to open-market purchases, the Plan provides that if the Plan Administrator is unable to invest the full dividend amount in
open-market purchases during the purchase period or if the market discount shifts to a market premium during the purchase period, the Plan Administrator may cease making open-market purchases and may invest the
uninvested portion of the dividend amount in newly issued common shares at the NAV per common share at the close of business on the last purchase date; provided that, if the NAV is less than or equal to 95% of the
then current market price per common share, the dollar amount of the dividend will be divided by 95% of the market price on the payment date.
The
Plan Administrator maintains all shareholders' accounts in the Plan and furnishes written confirmation of all transactions in the accounts, including information needed by shareholders for tax records. Common shares
in the account of each Plan participant will be held by the Plan Administrator on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant to the Plan. The
Plan Administrator will forward all proxy solicitation materials to participants and vote proxies for shares held under the Plan in accordance with the instructions of the participants.
In the
case of record shareholders such as banks, brokers, or nominees which hold common shares for others who are the beneficial owners, the Plan Administrator will administer the Plan on the basis of the number of common
shares certified from time to time by the record holder as held for the account of beneficial owners who participate in the Plan.
Annual Shareholder Report
There
will be no brokerage charges with respect to common shares issued directly by the Fund. However, each participant will pay a pro rata share of brokerage commissions incurred in connection with open-market purchases.
The automatic reinvestment of dividends will not relieve participants of any federal, state, or local income tax that may be payable (or required to be withheld) on such dividends. Participants that request a sale of
shares through the Plan Administrator are subject to a $15.00 sales fee and a $0.12 per share sold brokerage commission.
The
Fund reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the Plan; however, the Fund reserves the right to amend the Plan to include a
service charge payable by the participants.
All
correspondence or questions concerning the Plan should be directed to the Plan Administrator, Computershare Trust Company, N.A., P.O. Box 43011, Providence, RI 02940-3011 or by telephone at (800) 730-6001.
The
address of the principal office of the Fund is 4000 Ericsson Drive, Warrendale, PA 15086-7561.
The
Fund's transfer agent is Computershare Trust Company, N.A., 250 Royall Street, Canton, MA 02021.
Annual Shareholder Report
Disclosure Update
1. The Fund's By-Laws
were amended on November 30, 2013, by inserting the following Section 12 into Article II:
Section 12. NOMINATIONS
(a) Annual Meetings of Shareholders. (1) Nominations of persons for election to the Board and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders: (A) pursuant to the
Trust's notice of meeting given by the Board, as described in Section 4 of this Article of these By-Laws; (B) by or at the direction of the Board; or (C) by any shareholder of the Trust who was a shareholder of record
both at the time of the Trust's notice of meeting and at the time of the annual meeting, who is entitled to vote at the meeting, and who complied with the notice provisions set forth in this Section 12.
(2) For
nominations or other business properly to be brought before an annual meeting by a shareholder pursuant to clause (C) of paragraph (a)(1) of this Section 12, the shareholder must have given timely notice thereof in
writing to the Secretary of the Trust and such other business must be a proper matter for shareholder action. To be timely, a shareholder's notice shall be delivered to the Secretary at the principal executive offices
of the Trust not later than the close of business on the ninetieth day nor earlier than the close of business on the one hundred-twentieth day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is more than thirty days before or more than sixty days after such anniversary date, notice by the shareholder to be timely must be so delivered
not later than the close of business on the later of the ninetieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. In no
event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a shareholder's notice as described above. Such shareholder's notice shall set forth: (A) as to
each person whom the shareholder proposes to nominate for election or reelection as a Trustee: (i) the name, age, business address and residence address of such person; (ii) the class and number of shares of the Trust
that are beneficially owned or owned of record by such person; (iii) the date such shares were acquired and the investment intent of such acquisition; and (iv) all other information relating to such person that is
required to be disclosed in solicitations of proxies for election of trustees in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Trustee if elected); (B) as to any
other business that the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the
Annual Shareholder Report
meeting and any material interest in
such business of such shareholder (including any anticipated benefit to the shareholder therefrom) and of each beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the shareholder giving the
notice and each beneficial owner, if any, on whose behalf the nomination or proposal is made: (i) the name and address of such shareholder, as they appear on the Trust's stock ledger and current name and address, if
different, and of such beneficial owner; and (ii) the class and number of shares of the Trust which are owned beneficially and of record by such shareholder and such beneficial owner.
(b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Trust's notice of meeting. Nominations of persons
for election to the Board may be made at a special meeting at which Trustees are to be elected: (1) pursuant to the Trust's notice of meeting given by the Board; (2) by or at the direction of the Board; or (3)
provided that the Board has determined that Trustees will be elected at such special meeting, by any shareholder of the Trust who was a shareholder of record both at the time of the Trust's notice of meeting and at
the time of the special meeting, who is entitled to vote at the meeting, and who complied with the notice procedures set forth in this Section 12. In the event the Trust calls a special meeting for the purpose of
electing one or more Trustees to the Board, any such shareholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Trust's notice of meeting, if the
shareholder's notice shall be delivered to the Secretary at the principal executive offices of the Trust not earlier than the close of business on the one hundred-twentieth day prior to such special meeting and not
later than the close of business on the later of the ninetieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of
the nominees proposed by the Board to be elected at such special meeting. In no event shall the public announcement or adjournment of a special meeting commence a new time period for the giving of a shareholder's
notice as described above.
A
shareholder's notice shall set forth: (A) as to each person whom the shareholder proposes to nominate for election or reelection as a Trustee; (i) the name, age, business address and residence address of such person;
(ii) the class and number of shares of the Trust that are beneficially owned or owned of record by such person; (iii) the date such shares were acquired and the investment intent of such acquisition; and (iv) all
other information relating to such person that is required to be disclosed in solicitations of proxies for election of trustees in an election contest, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act and Rule 14a-11 thereunder (including such person's written consent to being named in the proxy statement as a nominee and to serving as a Trustee if elected); (B) as to any other business that
the shareholder proposes to bring before the meeting, a brief description of
Annual Shareholder Report
the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder (including any anticipated benefit to the shareholder therefrom) and of each
beneficial owner, if any, on whose behalf the proposal is made; (C) as to the shareholder giving the notice and each beneficial owner, if any, on whose behalf the nomination or proposal is made; (i) the name and
address of such shareholder, as they appear on the Trust's stock ledger and current name and address, if different, and of such beneficial owner; and (ii) the class and number of shares of the Trust which are owned
beneficially and of record by such shareholder and such beneficial owner.
(c)
General. (1) Only such persons who are nominated in accordance with the procedures set forth in this Section 12 shall be eligible to serve as Trustees and only such business shall be conducted at a
meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 12. Except as otherwise provided by law, the Declaration of Trust or these By-Laws, the
Chairman (or such other officer presiding at the meeting) shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case
may be, in accordance with the procedures set forth in this Section 12 and, if any proposed nomination or business is not in compliance with this Section 12, to declare that such defective proposal or nomination shall
be disregarded.
(2) For
purposes of this Section 12, “public announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Trust with the Securities and Exchange
Commission (the “Commission”) pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(3)
Notwithstanding the foregoing provisions of this Section 12, a shareholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters
set forth in this Section 12. Nothing in this Section 12 shall be deemed to affect any rights of: (a) shareholders to request inclusion of proposals in the Trust's proxy statement pursuant to Rule 14a-8 under the
Exchange Act; or (b) the holders of any class of preferred shares of beneficial interest to elect Trustees under specified circumstances.
2. The Fund's By-Laws
were amended on June 1, 2013 by inserting the following Section 2 into Article VII:
Section 2
Delegation of Authority Relating to Dividends. The Trustees or the Executive Committee may delegate to any Officer of Agent of the Trust the ability to authorize the payment of dividends and the ability to fix the amount and other
terms of a dividend regardless of whether or not such dividend has previously been authorized by the Trustees.
Annual Shareholder Report
3. The Fund's Declaration
of Trust was amended on June 1, 2013 by striking Section 2.1 of Article II and replacing it with the following:
2.1
Number and Qualification. Prior to a public offering of Shares there may be a sole Trustee. Thereafter, the number of Trustees shall be determined by a written instrument signed by a majority of the Trustees then
in office, provided that the number of Trustees shall be no less than 3 or more than 25. No reduction in the number of Trustees shall have the effect of removing any Trustee from office prior to the expiration of his
term unless the Trustee is specifically removed pursuant to Section 2.3 of this Article II at the time of decrease. An individual nominated as a Trustee shall be at least 21 years of age at the time of nomination and
not under legal disability. Trustees need not own Shares and may succeed themselves in office.
Annual Shareholder Report
Voting Proxies on Fund Portfolio
Securities
A description of the
policies and procedures that each Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A
report on “Form N-PX” of how the Fund voted any proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share
class name at www.Federatedinvestors.com/FundInformation. Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio
Schedule
The Fund files with the
SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may
be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information via the link to
the Fund and share class name at www.Federatedinvestors.com/FundInformation.
Annual Shareholder Report
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 and those records required to be maintained by the Adviser with respect to the
Registrant in accordance with CFTC regulations are maintained at one of the following locations:
FEDERATED ENHANCED TREASURY
INCOME FUND
Reed Smith LLP
Investment Management
Group (IMG)
Reed Smith Centre
225 Fifth Avenue
Suite 1200
Pittsburgh, PA 15222
(Notices should be sent
to the Agent for Service at above address)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Iron Mountain Information
Management, LLC
745 Atlantic Avenue
Boston, MA 02111
Federated Administrative
Services (“Administrator”)
Federated Investors
Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Federated Investment Management
Company (“Adviser”)
Federated Investors
Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bank of New York Mellon (“Custodian”)
One Wall Street
New York, NY 10286
Computershare Trust Company,
N.A. (“Transfer Agent and Dividend Reinvestment Plan Administrator”)
250 Royall Street
Canton, MA 02021
Annual Shareholder Report
Certification Disclosure
The Fund's reports on
Form N-CSR and Form N-Q filed with the SEC during the past fiscal year, including the annual report for the period ended November 30, 2012, have contained the certifications of the Fund's Chief Executive Officer and
Chief Financial Officer regarding the quality of the Fund's public disclosure required by Section 302 of the Sarbanes-Oxley Act.
IMPORTANT NOTICE
ABOUT FUND DOCUMENT DELIVERY
In an
effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called
“householding”), as permitted by applicable rules. The Fund's “householding” program covers its Semi-Annual and Annual Shareholder Reports and any Proxies or information statements.
Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i)
shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to
“household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt
out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any
time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-730-6001 or email CEinfo@federatedinvestors.com.
Annual Shareholder Report
Closed-end funds are not
bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency. Investment in closed-end funds involves investment risk, including the possible loss of principal.
This Overview and Report
is for shareholder information. This is not a Prospectus intended for use in the sale of Fund Shares. Statements and other information contained in this Overview and Report are as dated and subject to change.
Federated Enhanced Treasury Income
Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
CUSIP 314162108
Q450781 (1/14)
Federated is a registered trademark
of Federated Investors, Inc.
2014 ©Federated Investors, Inc.
Item 2. Code of Ethics
(a) As of the end of the period covered by this report,
the registrant has adopted a code of ethics (the "Section 406 Standards for Investment Companies - Ethical Standards for Principal
Executive and Financial Officers") that applies to the registrant's Principal Executive Officer and Principal Financial Officer;
the registrant's Principal Financial Officer also serves as the Principal Accounting Officer.
(c),(d) There were no amendments to or waivers from
the Section 406 Standards for Investment Companies – Ethical Standards for Principal Executive and Financial Officers during
the period covered by this report.
(f)(3) The registrant hereby undertakes to provide
any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant
at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive
and Financial Officers.
Item 3. Audit Committee Financial
Expert
The
registrant's Board has determined that each of the following members of the Board's Audit Committee is an “audit committee
financial expert,” and is "independent," for purposes of this Item: Charles F. Mansfield, Jr., Thomas
M. O’Neill and John S. Walsh.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees billed to the registrant for the
two most recent fiscal years:
Fiscal year ended 2013 - $34,600
Fiscal year ended 2012 - $33,250
(b) Audit-Related Fees billed to the registrant
for the two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $36*
*Fiscal year 2012 - Attendance
at Audit Committee Meeting.
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(c) Tax Fees billed to the registrant for the
two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(d) All Other Fees billed to the registrant for
the two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(e)(1) Audit Committee Policies regarding Pre-approval
of Services.
The Audit Committee is required
to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such
services do not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has
received general pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved
cost levels will require specific pre-approval by the Audit Committee.
Certain services have the general
pre-approval of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the
Audit Committee specifically provides for a different period. The Audit Committee will annually review the services that may be
provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval
for such services. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent
determinations. The Audit Committee will not delegate its responsibilities to pre-approve services performed by the independent
auditor to management.
The Audit Committee has delegated
pre-approval authority to its Chairman. The Chairman will report any pre-approval decisions to the Audit Committee at its next
scheduled meeting. The Committee will designate another member with such pre-approval authority when the Chairman is unavailable.
AUDIT SERVICES
The annual Audit services engagement
terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee must approve any changes
in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.
In addition to the annual Audit
services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other
Audit Services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved
certain Audit services, all other Audit services must be specifically pre-approved by the Audit Committee.
AUDIT-RELATED SERVICES
Audit-related services are assurance
and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements
or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor, and has pre-approved certain Audit-related services, all other Audit-related
services must be specifically pre-approved by the Audit Committee.
TAX SERVICES
The Audit Committee believes that
the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing
the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection
with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment
of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved certain
Tax services, all Tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee.
ALL OTHER SERVICES
With respect to the provision
of services other than audit, review or attest services the pre-approval requirement is waived if:
| (1) | The aggregate amount of all such services provided constitutes no
more than five percent of the total amount of revenues paid by the registrant, the registrant’s adviser (not including any
sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to
the registrant to its accountant during the fiscal year in which the services are provided; |
| (2) | Such services were not recognized by the registrant, the registrant’s
adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant at the time of the engagement to be non-audit services; and |
| (3) | Such services are promptly brought to the attention of the Audit Committee
of the issuer and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee
who are members of the board of directors to whom authority to grant such approvals has been delegated by the Audit Committee. |
The Audit Committee may grant
general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and
recurring services, and would not impair the independence of the auditor.
The SEC’s rules and relevant
guidance should be consulted to determine the precise definitions of prohibited non-audit services and the applicability of exceptions
to certain of the prohibitions.
PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all
services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding
these levels will require specific pre-approval by the Audit Committee.
PROCEDURES
Requests or applications to provide
services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent
auditor and the Principal Accounting Officer and/or Internal Auditor, and must include a joint statement as to whether, in their
view, the request or application is consistent with the SEC’s rules on auditor independence.
(e)(2) Percentage of services identified in items
4(b) through 4(d) that were approved by the registrant’s audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01
of Regulation S-X:
4(b)
Fiscal year ended 2013 – 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrant’s
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrant’s audit committee pursuant to paragraph (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(c)
Fiscal year ended 2013
– 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrant’s
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrant’s audit committee pursuant to paragraph (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(d)
Fiscal year ended 2013
– 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrant’s
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrant’s audit committee pursuant to paragraph (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
| (g) | Non-Audit Fees billed to the registrant, the registrant’s investment
adviser, and certain entities controlling, controlled by or under common control with the investment adviser: |
Fiscal year ended 2013
- $96,256
Fiscal year ended 2012 - $265,360
(h) The registrant’s Audit Committee has
considered that the provision of non-audit services that were rendered to the registrant’s adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountant’s independence.
Item 5. Audit Committee of Listed Registrants
The registrant has established an Audit
Committee of the Board as described in Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee consists
of the following Board members: Maureen Lally-Green, Charles F. Mansfield, Jr., Thomas M. O’Neill and John S. Walsh.
Item 6. Investments
(a) The registrant’s Schedule of Investments is included
as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the
reporting period covered since the previous Form N-CSR filing.
Item 7. Disclosure of
Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
VOTING PROXIES ON FUND PORTFOLIO
SECURITIES
The Board has delegated to the Adviser authority to
vote proxies on the securities held in the Fund’s portfolio. The Board has also approved the Adviser’s policies and
procedures for voting the proxies, which are described below.
Proxy Voting Policies
The Adviser’s general policy is to cast proxy votes
in favor of proposals that the Adviser anticipates will enhance the long-term value of the securities being voted. Generally, this
will mean voting for proposals that the Adviser believes will: improve the management of a company; increase the rights or preferences
of the voted securities; and/or increase the chance that a premium offer would be made for the company or for the voted securities.
The following examples illustrate how these general policies
may apply to proposals submitted by a company’s board of directors. However, whether the Adviser supports or opposes a proposal
will always depend on the specific circumstances described in the proxy statement and other available information.
On matters of corporate governance, generally the Adviser
will vote for the full slate of directors nominated in an uncontested election; and for proposals to: require a company’s
audit committee to be comprised entirely of independent directors; require independent tabulation of proxies and/or confidential
voting by shareholders; reorganize in another jurisdiction (unless it would reduce the rights or preferences of the securities
being voted); ratify the board’s selection of auditors (unless compensation for non-audit services exceeded 50% of the total
compensation received from the company, or the previous auditor was dismissed because of a disagreement with the company); and
repeal a shareholder rights plan (also known as a “poison pill”). The Adviser will generally vote against the adoption
of such a plan (unless the plan is designed to facilitate, rather than prevent, unsolicited offers for the company).
On matters of capital structure, generally the Adviser will
vote: against proposals to authorize or issue shares that are senior in priority or voting rights to the securities being voted;
and for proposals to: reduce the amount of shares authorized for issuance; authorize a stock repurchase program; and grant preemptive
rights to the securities being voted. The Adviser will generally vote against proposals to eliminate such preemptive rights.
On matters relating to management compensation, generally
the Adviser will vote: for stock incentive plans that align the recipients’ interests with the interests of shareholders
without creating undue dilution; against proposals that would permit the amendment or replacement of outstanding stock incentives
with new stock incentives having more favorable terms; and against executive compensation plans that do not disclose the maximum
amounts of compensation that may be awarded or the criteria for determining awards.
On matters relating to corporate transactions, the Adviser
will vote proxies relating to proposed mergers, capital reorganizations, and similar transactions in accordance with the general
policy, based upon its analysis of the proposed transaction. The Adviser will vote proxies in contested elections of directors
in accordance with the general policy, based upon its analysis of the opposing slates and their respective proposed business strategies.
Some transactions may also involve proposed changes to the company’s corporate governance, capital structure or management
compensation. The Adviser will vote on such changes based on its evaluation of the proposed transaction or contested election.
In these circumstances, the Adviser may vote in a manner contrary to the general practice for similar proposals made outside the
context of such a proposed transaction or change in the board. For example, if the Adviser decides to vote against a proposed transaction,
it may vote for anti-takeover measures reasonably designed to prevent the transaction, even though the Adviser typically votes
against such measures in other contexts.
The Adviser generally votes against proposals submitted
by shareholders without the favorable recommendation of a company’s board. The Adviser believes that a company’s board
should manage its business and policies, and that shareholders who seek specific changes should strive to convince the board of
their merits or seek direct representation on the board.
In addition, the Adviser will not vote if it determines
that the consequences or costs outweigh the potential benefit of voting. For example, if a foreign market requires shareholders
casting proxies to retain the voted shares until the meeting date (thereby rendering the shares “illiquid” for some
period of time), the Adviser will not vote proxies for such shares.
Proxy Voting Procedures
The Adviser has established a Proxy
Voting Committee (Proxy Committee), to exercise all voting discretion granted to the Adviser by the Board in accordance with the
proxy voting policies. The Adviser has hired Glass Lewis & Co. (GL) to obtain, vote, and record proxies in accordance with
the Proxy Committee’s directions. The Proxy Committee has supplied GL with general voting instructions that represent decisions
made by the Proxy Committee in order to vote common proxy proposals; however, the Proxy Committee retains the right to modify these
voting instructions at any time or to vote contrary to the voting instructions at any time in order to cast proxy votes in a manner
that the Proxy Committee believes is consistent with the Adviser’s general policy. GL may vote any proxy as directed in the
voting instructions without further direction from the Proxy Committee and may make any determinations required to implement the
voting instructions. However, if the voting instructions require case-by-case direction for a proposal, GL shall provide the Proxy
Committee with all information that it has obtained regarding the proposal and the Proxy Committee will provide specific
direction to GL.
Conflicts of Interest
The Adviser has adopted procedures to address situations
where a matter on which a proxy is sought may present a potential conflict between the interests of the Fund (and its shareholders)
and those of the Adviser or Distributor. This may occur where a significant business relationship exists between the Adviser (or
its affiliates) and a company involved with a proxy vote. A company that is a proponent, opponent, or the subject of a proxy vote,
and which to the knowledge of the Proxy Committee has this type of significant business relationship, is referred to as an “Interested
Company.”
The Adviser has implemented the following procedures in
order to avoid concerns that the conflicting interests of the Adviser have influenced proxy votes. Any employee of the Adviser
who is contacted by an Interested Company regarding proxies to be voted by the Adviser must refer the Interested Company to a member
of the Proxy Committee, and must inform the Interested Company that the Proxy Committee has exclusive authority to determine how
the Adviser will vote. Any Proxy Committee member contacted by an Interested Company must report
it to the full Proxy Committee and provide a written summary of the communication. Under no circumstances will the Proxy Committee
or any member of the Proxy Committee make a commitment to an Interested Company regarding the voting of proxies or disclose to
an Interested Company how the Proxy Committee has directed such proxies to be voted. If the voting instructions already provide
specific direction on the proposal in question, the Proxy Committee shall not alter or amend such directions. If the voting instructions
require the Proxy Committee to provide further direction, the Proxy Committee shall do so in accordance with the proxy voting policies,
without regard for the interests of the Adviser with respect to the Interested Company. If the Proxy Committee provides
any direction as to the voting of proxies relating to a proposal affecting an Interested Company, it must disclose to the Fund’s
Board information regarding: the significant business relationship; any material communication with the Interested Company; the
matter(s) voted on; and how, and why, the Adviser voted as it did. Alternatively, the Proxy Committee may seek direction from the
Fund’s Board on how a proposal concerning an Interested Company shall be voted, and shall follow any such direction provided
by the Board. In seeking such direction, the Proxy Committee will disclose the reason such company is considered an Interested
Company and may provide a recommendation on how such proposal should be voted and the basis for such recommendation.
If the Fund holds shares of another investment company for
which the Adviser (or an affiliate) acts as an investment adviser, the Proxy Committee will vote the Fund’s proxies in the
same proportion as the votes cast by shareholders who are not clients of the Adviser at any shareholders’ meeting called
by such investment company, unless otherwise directed by the Board.
Proxy Voting Report
A report on "Form N-PX" of how the Fund voted
any proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated
with the Fund and share class name at www.FederatedInvestors.com/FundInformation. Form N-PX filings are also available at the SEC’s
website at www.sec.gov.
Item 8. Portfolio Managers
of Closed-End Management Investment Companies
1. As of the fiscal year-end,
the Portfolio Manager listed below was primarily responsible for managing the Fund’s assets.
Donald T. Ellenberger
Donald T. Ellenberger has been the Fund’s Portfolio
Manager since inception in January 2010. He is a Senior Portfolio Manager and Head of Multi-Sector Strategies and became a Vice
President of the Fund in June 2012. He joined Federated in 1996 as a Portfolio Manager and a Vice President of a Federated advisory
subsidiary. He became a Senior Vice President of the Fund’s Adviser in January 2005 and served as a Vice President of the
Fund’s Adviser from 1997 through 2004. From 1986 to 1996, he served as a Trader/Portfolio Manager for Mellon Bank, N.A. Mr.
Ellenberger received his M.B.A. in Finance from Stanford University.
Portfolio Manager Information
The following information about the Fund’s portfolio
manager is provided as of the end of the fund's most recently completed fiscal year.
|
Other Accounts Managed by Don Ellenberger
|
Total Number of Additional Accounts Managed / Total Assets* |
| Registered Investment Companies |
6 / $7.6 billion |
| Other Pooled Investment Vehicles |
1 / $2.2 billion |
| Other Accounts |
8/ $1.3 billion |
*None of the Accounts has an advisory fee that is based
on the performance of the account.
Dollar value range of shares owned in the Fund: $1 - $10,000.
Don Ellenberger is paid a fixed base salary and a variable
annual incentive. Base salary is determined within a market competitive position-specific salary range, based on the portfolio
manager’s experience and performance. The annual incentive amount is determined based primarily on Investment Product Performance
(IPP) and, to a lesser extent, Financial Success, and may be paid entirely in cash, or in a combination of cash and restricted
stock of Federated Investors, Inc. (Federated). The total combined annual incentive opportunity is intended to be competitive in
the market for this portfolio manager role.
IPP is measured on a rolling one, three and five calendar
year pre-tax gross total return basis vs. the Fund's benchmark (i.e., Barclays Treasury Index). Performance periods are adjusted
if a portfolio manager has been managing an account for less than five years; accounts with less than one-year of performance history
under a portfolio manager may be excluded. As noted above, Mr. Ellenberger is also the portfolio manager for other accounts in
addition to the Fund. Such other accounts may have different benchmarks and performance measures. The performance of certain of
these accounts is excluded when calculating IPP. Within each performance measurement period, IPP is calculated with an equal weighting
of each included account managed by the portfolio manager. In addition, Mr. Ellenberger serves on one or more Investment Teams
that establish guidelines on various performance drivers (e.g., currency, duration, sector, volatility, and/or yield curve) for
taxable fixed income funds. A portion of the IPP score is based on Federated's senior management's assessment of team contributions.
A portion of the bonus tied to the IPP score may be adjusted based on management's assessment of overall contributions to fund
performance and any other factors as deemed relevant.
The Financial Success category is designed to tie the portfolio
manager’s bonus, in part, to Federated’s overall financial results. Funding for the Financial Success category may
be determined on a product or asset class basis, as well as on corporate financial results. Senior Management determines individual
Financial Success bonuses on a discretionary basis, considering overall contributions and any other factors deemed relevant.
As a general matter, certain conflicts of interest may
arise in connection with a portfolio manager’s management of a fund’s investments, on the one hand, and the investments
of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts
managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of
the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible
conflicts could arise in determining how to allocate them. Other potential conflicts might include conflicts created by specific
portfolio manager compensation arrangements, and conflicts relating to selection of brokers or dealers to execute fund portfolio
trades and/or specific uses of commissions from Fund portfolio trades (for example, research, or “soft dollars”). The
Adviser has adopted policies and procedures and has structured the portfolio managers’ compensation in a manner reasonably
designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.
2. As of the date of filing
of the report, the Portfolio Manager listed below is primarily responsible for managing the Fund’s assets.
J. Andrew Kirschler
J. Andrew Kirschler has been the Fund’s Portfolio
Manager since January 2014. Mr. Kirschler joined Federated in 1990 in the Internal Sales department. In 1994 he was an Assistant
Trader, in 1996 a Trader and in 2003 a Senior Trader on the fixed income desk concentrating on government securities. Mr. Kirschler
became a Senior Investment Analyst in 2013. In 2000 he was appointed Asst. Vice President and in 2003 appointed Vice President
of a Federated advisory subsidiary. Mr. Kirschler received his M.B.A. from the University of Pittsburgh.
Portfolio Manager Information
The following information about the Fund’s portfolio
manager is provided as of January 14, 2014.
|
Other Accounts Managed by Andrew Kirschler
|
Total Number of Additional Accounts Managed / Total Assets* |
| Registered Investment Companies |
4 / $1.0 billion |
| Other Pooled Investment Vehicles |
0 / $0 |
| Other Accounts |
0/ $0 |
*None of the Accounts has an advisory fee that is based
on the performance of the account.
Dollar value range of shares owned in the Fund: None.
J. Andrew Kirschler is paid a fixed base salary and a variable
annual incentive. Base salary is determined within a market competitive position-specific salary range, based on the portfolio
manager’s experience and performance. The annual incentive amount is determined based primarily on Investment Product Performance
(IPP) and, to a lesser extent, Financial Success, and may be paid entirely in cash, or in a combination of cash and restricted
stock of Federated Investors, Inc. (Federated). The total combined annual incentive opportunity is intended to be competitive in
the market for this portfolio manager role.
IPP is measured on a rolling one, three and five calendar
year pre-tax gross total return basis vs. the Fund's benchmark (i.e., Barclays Treasury Index). Performance periods are adjusted
if a portfolio manager has been managing an account for less than five years; accounts with less than one-year of performance history
under a portfolio manager may be excluded. As noted above, Mr. Kirschler is also the portfolio manager for other accounts in addition
to the Fund. Such other accounts may have different benchmarks and performance measures. The performance of certain of these accounts
is excluded when calculating IPP. Within each performance measurement period, IPP is calculated with an equal weighting of each
included account managed by the portfolio manager. In addition, Mr. Kirschler serves on one or more Investment Teams that
establish guidelines on various performance drivers (e.g., currency, duration, sector, volatility, and/or yield curve) for taxable
fixed income funds. A portion of the IPP score is based on Federated's senior management's assessment of team contributions.
A portion of the bonus tied to the IPP score may be adjusted based on management's assessment of overall contributions to fund
performance and any other factors as deemed relevant.
The Financial Success category is designed to tie the portfolio
manager’s bonus, in part, to Federated’s overall financial results. Funding for the Financial Success category may
be determined on a product or asset class basis, as well as on corporate financial results. Senior Management determines individual
Financial Success bonuses on a discretionary basis, considering overall contributions and any other factors deemed relevant.
As a general matter, certain conflicts of interest may
arise in connection with a portfolio manager’s management of a fund’s investments, on the one hand, and the investments
of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts
managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of
the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible
conflicts could arise in determining how to allocate them. Other potential conflicts might include conflicts created by specific
portfolio manager compensation arrangements, and conflicts relating to selection of brokers or dealers to execute fund portfolio
trades and/or specific uses of commissions from Fund portfolio trades (for example, research, or “soft dollars”). The
Adviser has adopted policies and procedures and has structured the portfolio managers’ compensation in a manner reasonably
designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.
Item 9. Purchases of Equity
Securities by Closed-End Management Investment Company and Affiliated Purchasers
|
Period |
(a)
Total number of common shares
(or units) purchased |
(b)
Average price paid per common
share (or unit) |
(c)
Total number of common shares
(or units) purchased as part of publicly announced plans or programs |
(d)
Maximum number (or approximate
dollar value) of common shares (or units) that may yet be purchased under the plans or programs |
|
Month #1
(June 1, 2013 –
June 30, 2013) |
28,825 |
$13.26 |
28,825 |
316,874 |
|
Month #2
(July 1, 2013-
July 31, 2013) |
61,607 |
$12.97 |
61,607 |
255,267 |
|
Month #3
(August 1, 2013- August 31, 2013) |
84,840 |
$12.81 |
84,840 |
170,427 |
|
Month #4
(September 1, 2013- September 30, 2013) |
61,917 |
$12.81 |
61,917 |
108,510 |
|
Month #5
(October 1, 2013-
October 31, 2013) |
28,278 |
$13.06 |
28,278 |
80,232 |
|
Month #6
(November 1, 2013-
November 30, 2013) |
31,837 |
$12.99 |
31,837 |
48,395 |
|
TOTAL
|
297,304 |
$12.93 |
297,304 |
48,395 |
Item 10. Submission of Matters to a Vote of Security
Holders
The Fund’s Board of Trustees approved an amendment
to the By-Laws of the Fund, effective November 30, 2013, that added advance notice provisions to clarify the requirements for shareholder
nominations and proposals, to afford the Board sufficient information in order to access, respond to and, if necessary, present
alternatives to any shareholder nominations and proposals, to seek to constrain any potential disruption to the Fund that could
hurt long term shareholders and to bring the Fund’s By-Laws more in line with the By-Laws of many other closed-end funds.
The advance notice provisions will not curtail or otherwise impact a shareholder’s right to make proposals under the federal
securities laws.
Under the advance notice provisions, to be timely, a shareholder’s
notice must be delivered no later than the close of business on the ninetieth day (or the tenth day following the day on which
public announcement is first made of the date of a special meeting) nor earlier than the close of business on the one hundred-twentieth
day prior to a special meeting or the first anniversary of the preceding year’s annual meeting. Such shareholder’s
notice must set forth: (A) as to each person whom the shareholder proposes to nominate for election or reelection as a Trustee,
detailed information regarding the Trustee and his or her share ownership; (B) as to any other business that the shareholder proposes
to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such shareholder and of each beneficial owner, if any,
on whose behalf the proposal is made; and (C) as to the shareholder giving the notice and each beneficial owner, if any, on whose
behalf the nomination or proposal is made, detailed information regarding the shareholder and his or her share ownership.
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have
concluded that the
registrant’s disclosure controls and procedures (as
defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications
required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of
the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal
control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control
over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics- Not Applicable to this Report.
(a)(2) Certifications of Principal Executive Officer and
Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant Federated Enhanced Treasury Income
Fund
By /S/ Lori A. Hensler
Lori A. Hensler, Treasurer and Principal
Financial Officer
Date ___January 24, 2014____
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By /S/ J. Christopher Donahue
J. Christopher Donahue, President
and Principal Executive Officer
Date ___January 24, 2014____
By /S/ Lori A. Hensler
Lori A. Hensler, Treasurer and Principal
Financial Officer
Date ___January 24, 2014____
