Federated Investors, Inc.

United States

Securities and Exchange Commission

Washington, D.C. 20549

 

Form N-Q

Quarterly Schedule of Portfolio Holdings 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, PA 15086-7561

(Address of Principal Executive Offices)

 

 

(412) 288-1900

(Registrant's Telephone Number)

 

 

John W. McGonigle, Esquire

Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, Pennsylvania 15222-3779

(Name and Address of Agent for Service)

(Notices should be sent to the Agent for Service)

 

 

 

 

 

 

Date of Fiscal Year End: 11/30/14

 

 

Date of Reporting Period: Quarter ended 02/28/14

 

 

 

 

 

 

 

Item 1. Schedule of Investments

 

Federated Enhanced Treasury Income Fund
Portfolio of Investments
February 28, 2014 (unaudited)
Principal
Amount
    Value
    U.S. TREASURY—99.6%  
$7,000,000   U.S. Treasury Inflation Protected Note, 0.125%, 4/15/2016 $7,641,260
3,000,000   U.S. Treasury Inflation Protected Note, 0.125%, 4/15/2017 3,195,319
5,000,000   United States Treasury Bond, 4.375%, 11/15/2039 5,753,679
4,500,000   United States Treasury Bond, 4.375%, 5/15/2041 5,176,318
10,000,000   United States Treasury Bond, 5.250%, 11/15/2028 12,537,958
5,200,000   United States Treasury Bond, 7.500%, 11/15/2024 7,546,811
14,000,000   United States Treasury Note, 0.375%, 1/31/2016 14,019,503
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 4,964,297
4,000,000   United States Treasury Note, 1.375%, 7/31/2018 4,010,500
9,000,000 1 United States Treasury Note, 1.500%, 7/31/2016 9,221,191
3,500,000   United States Treasury Note, 1.750%, 5/31/2016 3,604,008
7,500,000   United States Treasury Note, 2.500%, 8/15/2023 7,439,474
7,500,000   United States Treasury Note, 2.625%, 8/15/2020 7,794,298
3,500,000   United States Treasury Note, 2.750%, 2/15/2019 3,707,758
11,675,000   United States Treasury Note, 3.500%, 5/15/2020 12,785,708
4,000,000   United States Treasury Note, 4.000%, 2/15/2015 4,146,844
    TOTAL U.S. TREASURY
(IDENTIFIED COST $125,160,150)
128,578,910
    INVESTMENT COMPANY—0.7%  
979,252   2Federated Government Obligations Fund, Institutional Shares, 0.01%
(IDENTIFIED COST $979,252)
979,252
    TOTAL INVESTMENTS—100.03%3
(IDENTIFIED COST $126,139,402)
129,558,162
    OTHER ASSETS AND LIABILITIES - NET—(0.3)%4 (411,771)
    TOTAL NET ASSETS—100% $129,146,391
At February 28, 2014, the Fund had the following outstanding futures contracts:
Description Number of
Contracts
Notional
Value
Expiration
Date
Unrealized
Appreciation/
(Depreciation)
5U.S. Treasury Notes, 10-Year Long Futures 247 $30,759,219 June 2014 $142,129
5U.S. Treasury Notes, 20-Year Short Futures 121 $16,100,563 June 2014 $(188,161)
5U.S. Treasury Notes, 2-Year Long Futures 449 $98,723,875 June 2014 $29,495
5U.S. Treasury Notes, 5-Year Short Futures 100 $11,985,937 June 2014 $(26,011)
NET UNREALIZED DEPRECIATION ON FUTURES CONTRACTS $(42,548)
The average notional value of long and short futures contracts held by the fund throughout the period was $109,899,781 and $19,282,016, respectively. This is based on amounts held as of each month-end throughout the three-month fiscal period.
At February 28, 2014, the Fund had the following outstanding written option contracts:
Security Expiration
Date
Exercise
Price
Contracts Value
5U.S. Treasury Bonds 5-Year Short Calls on Futures April 2014 $120 (500) $(281,250)
5 U.S. Treasury Bonds 10-Year Short Calls on Futures April 2014 $124 (110) $(97,969)
5U.S. Treasury Bonds 20-Year Short Calls on Futures April 2014 $131 (235) $(550,781)
(PREMIUMS RECEIVED $550,286) $(930,000)
The average value of written call option contracts held by the fund throughout the period was a net payable of $602,156. This is based on amounts held as of each month-end throughout the three-month fiscal period.
1

Net Unrealized Depreciation 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 7-day net yield.
3 At February 28, 2014, the cost of investments for federal tax purposes was $126,139,402. 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 $3,418,760. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $3,429,743 and net unrealized depreciation from investments for those securities having an excess of cost over value of $10,983.
4 Assets, other than investments in securities, less liabilities.
5 Non-income-producing security.
Note: The categories of investments are shown as a percentage of total net assets at February 28, 2014.
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 the 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 more than one dealer for an investment within a reasonable period of time as set forth in the Fund's valuation policies and procedures, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation Procedures
The Trustees have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Advisor'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.
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 investments 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.
2

The following is a summary of the inputs used, as of February 28, 2014, 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 $$128,578,910 $— $128,578,910
Investment Company 979,252 979,252
TOTAL SECURITIES 979,252 128,578,910 129,558,162
OTHER FINANCIAL INSTRUMENTS* $(972,548) $$— $ (972,548)
* Other financial instruments include written call option contracts and futures contracts.
3

 

Item 2. Controls and Procedures

 

(a) The registrant’s Principal Executive Officer and Principal Financial Officer 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-Q.

 

(b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Registrant Federated Enhanced Treasury Income Fund

 

By /S/ Lori A. Hensler

 

Lori A. Hensler

Principal Financial Officer

 

Date April 22, 2014

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By /S/ J. Christopher Donahue

 

J. Christopher Donahue

Principal Executive Officer

 

Date April 22, 2014

 

 

By /S/ Lori A. Hensler

 

Lori A. Hensler

Principal Financial Officer

 

Date April 22, 2014