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, 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: 11/30/2013
Date of Reporting Period: Six months ended 05/31/13
Item 1. Reports to Stockholders
Semi-Annual Shareholder
Report
May 31, 2013
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 in the “Products” section of Federated's website at FederatedInvestors.com. To access this information from
the home page, select “All” next to “Asset Classes.” Scroll to “Closed-End Funds” and select a Fund name and share class, if applicable, to go to the “Fund Overview”
page. On the “Fund Overview” page, select the “Distributions and Tax Info” tab, then select a year.
Portfolio of Investments
Summary Table (unaudited)
At May 31, 2013, the Fund's
portfolio composition1 was as follows:
| Security Type | Percentage of Total Net Assets |
| U.S. Treasury Securities | 97.6% |
| Repurchase Agreement | 2.0% |
| Derivative Contracts for U.S. Treasury Securities2 | 0.2% |
| Other Assets and Liabilities—Net3 | 0.2% |
| 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 | Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities. |
Semi-Annual Shareholder Report
1
Portfolio of Investments
May 31, 2013 (unaudited)
| Principal Amount | Value | ||
| U.S. TREASURY—97.6% | |||
| $4,000,000 | U.S. Treasury Inflation-Protected Note, 0.500%, 4/15/2015 | $4,420,410 | |
| 7,000,000 | U.S. Treasury Inflation-Protected Note, 0.625%, 7/15/2021 | 7,853,612 | |
| 5,000,000 | United States Treasury Bond, 4.375%, 11/15/2039 | 6,087,500 | |
| 4,500,000 | United States Treasury Bond, 4.375%, 5/15/2041 | 5,485,840 | |
| 10,000,000 | United States Treasury Bond, 5.250%, 11/15/2028 | 13,169,141 | |
| 5,200,000 | United States Treasury Bond, 7.500%, 11/15/2024 | 7,957,896 | |
| 15,000,000 | United States Treasury Note, 0.375%, 3/15/2015 | 15,024,291 | |
| 4,000,000 | United States Treasury Note, 0.750%, 10/31/2017 | 3,970,703 | |
| 6,000,000 | 1 | United States Treasury Note, 1.500%, 7/31/2016 | 6,174,492 |
| 5,000,000 | United States Treasury Note, 2.000%, 2/15/2022 | 5,035,404 | |
| 19,000,000 | United States Treasury Note, 2.125%, 11/30/2014 | 19,534,109 | |
| 7,500,000 | United States Treasury Note, 2.625%, 8/15/2020 | 8,038,489 | |
| 10,000,000 | United States Treasury Note, 2.750%, 10/31/2013 | 10,108,040 | |
| 3,500,000 | United States Treasury Note, 2.750%, 2/15/2019 | 3,798,863 | |
| 11,675,000 | United States Treasury Note, 3.500%, 5/15/2020 | 13,230,611 | |
| 4,000,000 | United States Treasury Note, 4.000%, 2/15/2015 | 4,252,576 | |
| TOTAL U.S. TREASURY (IDENTIFIED COST $128,088,644) | 134,141,977 | ||
| REPURCHASE AGREEMENT—2.0% | |||
| 2,761,000 | Interest in $750,000,000, joint repurchase agreement 0.09%, dated 5/31/2013 under which Citigroup Global Markets, Inc. will repurchase the
securities provided as collateral for $750,005,625 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency
securities with various maturities to 6/1/2043 and the market value of those underlying securities was $769,805,434. (AT COST) | 2,761,000 | |
| TOTAL INVESTMENTS—99.6% (IDENTIFIED COST $130,849,644)2 | 136,902,977 | ||
| OTHER ASSETS AND LIABILITIES - NET—0.4%3 | 531,990 | ||
| TOTAL NET ASSETS—100% | $137,434,967 |
Semi-Annual Shareholder Report
2
At May 31, 2013, the Fund had the
following open futures contracts:
| Description | Number of Contracts | Notional Value | Expiration Date | Unrealized Appreciation/ Depreciation |
| 4U. S. Treasury Notes, 2-Year Long Futures | 350 | $77,049,219 | September 2013 | $(82,819) |
| 4U. S. Treasury Notes, 5-Year Short Futures | 75 | $9,181,054 | September 2013 | $55,605 |
| 4U. S. Treasury Notes, 10-Year Short Futures | 297 | $38,377,969 | September 2013 | $338,099 |
| 4U. S. Treasury Notes, 15-Year Short Futures | 107 | $14,983,344 | September 2013 | $253,884 |
| NET UNREALIZED APPRECIATION ON FUTURES CONTRACTS | $564,769 | |||
At May 31, 2013, the Fund had the
following outstanding written option contracts:
| Security | Expiration Date | Exercise Price | Contracts | Value |
| 4U. S. Treasury Notes 5-Year Short Calls on Futures | June 2013 | $123 | 501 | $(74,367) |
| 4U. S. Treasury Notes 10-Year Short Calls on Futures | June 2013 | $130 | 122 | $(47,656) |
| 4U. S. Treasury Notes 15-Year Short Calls on Futures | June 2013 | $142 | 232 | $(152,250) |
| (PREMIUMS RECEIVED $531,001) | $(274,273) | |||
Net Unrealized Appreciation on
Futures Contracts and Value of Written Call Option Contracts are included in “Other Assets and Liabilities—Net.”
| 1 | All or portion of this security is pledged as collateral to ensure the Fund is able to satisfy the obligations of its outstanding futures contracts and written call option contracts. |
| 2 | Also represents cost for federal tax purposes. |
| 3 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 4 | Non-income producing security. |
Note: The categories of investments
are shown as a percentage of total net assets at May 31, 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.
Semi-Annual Shareholder Report
3
The following is a summary of the
inputs used, as of May 31, 2013, in valuing the Fund's assets carried at fair value:
| Valuation Inputs | ||||
| Level 1— Quoted Prices and Investments in Mutual Funds | Level 2— Other Significant Observable Inputs | Level 3— Significant Unobservable Inputs | Total | |
| Debt Securities: | ||||
| U.S. Treasury | $— | $134,141,977 | $— | $134,141,977 |
| Repurchase Agreement | — | 2,761,000 | — | 2,761,000 |
| TOTAL SECURITIES | $— | $136,902,977 | $— | $136,902,977 |
| OTHER FINANCIAL INSTRUMENTS* | $290,496 | $— | $— | $290,496 |
| * | Other financial instruments include written call option contracts and futures contracts. |
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
4
Financial Highlights
(For a Share Outstanding
Throughout the Period)
| Six Months Ended (unaudited) 5/31/2013 | Year Ended November 30, | Period Ended 11/30/20101 | ||
| 2012 | 2011 | |||
| Net Asset Value, Beginning of Period | $15.96 | $16.54 | $18.03 | $19.10 |
| Income From Investment Operations: | ||||
| Net investment income2 | 0.05 | 0.15 | 0.21 | 0.15 |
| Net realized and unrealized gain (loss) on investments, futures contracts and written options | (0.38) | 0.10 | (0.68) | (0.10) |
| TOTAL FROM INVESTMENT OPERATIONS | (0.33) | 0.25 | (0.47) | 0.05 |
| Offering costs | — | — | — | (0.04) |
| Less Distributions: | ||||
| Distributions from net investment income | (0.05) | (0.17) | (0.21) | (0.15) |
| Return of capital2 | (0.32)3 | (0.71)4 | (0.81)4 | (0.93)4 |
| TOTAL DISTRIBUTIONS TO SHAREHOLDERS | (0.37) | (0.88) | (1.02) | (1.08) |
| Repurchase of Common Shares | 0.05 | 0.05 | — | — |
| Net Asset Value, End of Period | $15.31 | $15.96 | $16.54 | $18.03 |
| Market Price, End of Period | $13.33 | $14.37 | $14.03 | $16.67 |
| Total Return at Net Asset Value5 | (1.77)% | 1.91% | (2.66)% | 0.10% |
| Total Return at Market Price6 | (4.76)% | 8.82% | (10.12)% | (11.72)% |
| Ratios to Average Net Assets: | ||||
| Net expenses | 1.05%7 | 1.03% | 1.00% | 1.03%7 |
| Net investment income | 0.69%7 | 0.93% | 1.20% | 0.95%7 |
| Expense waiver/reimbursement8 | 0.04%7 | — | — | 0.00%7,9 |
| Supplemental Data: | ||||
| Net assets, end of period (000 omitted) | $137,435 | $147,676 | $158,245 | $172,558 |
| Portfolio turnover | 0% | 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 | These distributions may be deemed a tax return of capital. Actual amounts and sources of distributions cannot be determined until fiscal year end. |
| 4 | Represents a return of capital for federal income tax purposes. |
| 5 | 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. |
| 6 | 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. |
| 7 | Computed on an annualized basis. |
| 8 | This expense decrease is reflected in both the net expense and net investment income ratios shown above. |
| 9 | Represents less than 0.01%. |
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
5
Statement of Assets and Liabilities
May 31, 2013 (unaudited)
| Assets: | ||
| Total investment in securities, at value (identified cost $130,849,644) | $136,902,977 | |
| Cash | 829 | |
| Receivable from MFGI Trustee (Note 7) | 296,246 | |
| Income receivable | 331,807 | |
| Receivable for daily variation margin | 229,031 | |
| TOTAL ASSETS | 137,760,890 | |
| Liabilities: | ||
| Options written, at value (premiums $531,001) | $274,273 | |
| Income distribution payable | 2,314 | |
| Payable for portfolio accounting fees | 36,458 | |
| Payable for Directors'/Trustees' fees (Note 5) | 1,684 | |
| Accrued expenses (Note 5) | 11,194 | |
| TOTAL LIABILITIES | 325,923 | |
| Net assets for 8,976,813 shares outstanding | $137,434,967 | |
| Net Assets Consist of: | ||
| Paid-in capital | $150,212,982 | |
| Net unrealized appreciation of investments, written options and futures contracts | 6,874,830 | |
| Accumulated net realized loss on investments, written options and futures contracts | (16,763,529) | |
| Distributions in excess of net investment income | (2,889,316) | |
| TOTAL NET ASSETS | $137,434,967 | |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | ||
| $137,434,967 ÷ 8,976,813 shares outstanding, $0.01 par value, unlimited shares authorized | $15.31 |
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
6
Statement of Operations
Six Months Ended May 31, 2013
(unaudited)
| Investment Income: | |||
| Interest | $1,234,568 | ||
| Expenses: | |||
| Investment adviser fee (Note 5) | $603,071 | ||
| Administrative fee (Note 5) | 23,437 | ||
| Custodian fees | 5,888 | ||
| Transfer and dividend disbursing agent fees and expenses | 14,180 | ||
| Directors'/Trustees' fees (Note 5) | 2,859 | ||
| Auditing fees | 16,914 | ||
| Legal fees | 4,128 | ||
| Portfolio accounting fees | 54,897 | ||
| Printing and postage | 24,822 | ||
| Insurance premiums (Note 5) | 2,078 | ||
| Miscellaneous (Note 5) | 18,842 | ||
| TOTAL EXPENSES | 771,116 | ||
| Waiver of investment adviser fee (Note 5) | (26,594) | ||
| Net expenses | 744,522 | ||
| Net investment income | 490,046 | ||
| Realized and Unrealized Gain (Loss) on Investments, Futures Contracts and Written Options: | |||
| Net realized gain on investments | 95,528 | ||
| Net realized loss on futures contracts | (562,182) | ||
| Net realized gain on written options | 397,525 | ||
| Net change in unrealized appreciation of investments | (3,998,585) | ||
| Net change in unrealized appreciation of futures contracts | 313,241 | ||
| Net change in unrealized appreciation on written options | 305,376 | ||
| Net realized and unrealized loss on investments, futures contracts and written options | (3,449,097) | ||
| Change in net assets resulting from operations | $(2,959,051) |
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
7
Statement of Changes in Net Assets
| Six Months Ended (unaudited) 5/31/2013 | Year Ended 11/30/2012 | |
| Increase (Decrease) in Net Assets | ||
| Operations: | ||
| Net investment income | $490,046 | $1,406,201 |
| Net realized loss on investments, futures contracts and written options | (69,129) | (1,837,631) |
| Net change in unrealized appreciation/depreciation of investments, futures contracts and written options | (3,379,968) | 2,764,523 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | (2,959,051) | 2,333,093 |
| Distributions to Shareholders: | ||
| Distributions from net investment income (Note 2) | (490,046) | (1,651,224) |
| Return of capital (Note 2) | (2,885,304)1 | (6,686,859) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (3,375,350) | (8,338,083) |
| Share Transactions: | ||
| Cost of shares repurchased (Note 6) | (3,906,368) | (4,564,461) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (3,906,368) | (4,564,461) |
| Change in net assets | (10,240,769) | (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 $(2,889,316) and $(4,012), respectively) | $137,434,967 | $147,675,736 |
| 1 | These distributions may be deemed a tax return of capital at year end. |
See Notes which are an integral part
of the Financial Statements
Semi-Annual Shareholder Report
8
Notes to Financial
Statements
May 31, 2013 (unaudited)
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. 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 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.
Semi-Annual Shareholder Report
9
Fair Valuation and Significant
Events Procedures
The Trustees have appointed a
Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to determine fair value of securities and in
overseeing the calculation of the NAV. The 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.
The Trustees also
have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which
the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will
change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is
traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
| ■ | Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and |
| ■ | Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry. |
The Trustees have approved the use
of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index
futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the
Fund will determine the fair value of the investment using another method approved by the Trustees.
Semi-Annual Shareholder Report
10
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.
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. Actual amounts and sources of distributions cannot be determined until the Fund's fiscal
year end. However, each distribution is accompanied by an estimate of the components. See “Information Regarding Sources of Fund Distributions” included with this report.
Premium and Discount
Amortization
All premiums and discounts on
fixed-income securities are amortized/accreted using the effective-interest-rate method.
Semi-Annual Shareholder Report
11
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 six months ended May 31, 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 May 31, 2013, tax years 2010 through 2012 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.
Futures Contracts
The Fund purchases and sells
financial futures contracts to manage duration and yield curve exposure. 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. 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 $77,524,326 and $48,922,289, respectively. This is based on amounts held as of each month-end throughout the six-month fiscal
period.
Option Contracts
The Fund buys or sells put and call
options to produce income or hedge. 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
Semi-Annual Shareholder Report
12
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.
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 | 5,221 | 3,272,378 |
| Contracts exercised | (822) | (473,184) |
| Contracts bought back | (1,884) | (1,433,841) |
| Contracts expired | (2,580) | (1,096,235) |
| Outstanding at May 31, 2013 | 855 | $531,001 |
Written option contracts outstanding
at period end are listed after the Fund's portfolio of investments.
The average value of
written call option contracts held by the Fund throughout the period was a net payable of $586,251. This is based on amounts held as of each month-end throughout the six-month 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 | $564,769* | Options written, at value | $274,273 |
| * | 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. |
Semi-Annual Shareholder Report
13
The Effect of Derivative
Instruments on the Statement of Operations for the Six Months Ended May 31, 2013
| Amount of Realized Gain (Loss) on Derivatives Recognized in Income | |||
| Futures | Written Option Contracts | Total | |
| Interest rate contracts | $(562,182) | $397,525 | $(164,657) |
| Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income | |||
| Futures | Written Option Contracts | Total | |
| Interest rate contracts | $313,241 | $305,376 | $618,617 |
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:
| Six Months Ended 5/31/2013 | Year Ended 11/30/2012 | |
| Shares repurchased | (276,407) | (315,692) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (276,407) | (315,692) |
4. Federal Tax Information
At May 31, 2013, the cost of
investments for federal tax purposes was $130,849,644. 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 $6,053,333. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $6,136,232 and net unrealized depreciation from
investments for those securities having an excess of cost over value of $82,899.
At November 30, 2012,
the Fund had a capital loss carryforward of $7,215,341 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.
Semi-Annual Shareholder Report
14
The following
schedule summarizes the Fund's capital loss carryforwards and expiration years:
| Expiration Year | Short-Term | Long-Term | Total |
| 2018 | $973,449 | NA | $973,449 |
| 2019 | $6,241,892 | NA | $6,241,892 |
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 six months ended May 31, 2013, the Adviser waived $26,594 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
February 15, 2013, the Fund agreed to pay FAS an annual Administrative Service Charge of $125,000 for compliance and other services related to Commodities Futures Trading Commission Rule 4.5.
Semi-Annual Shareholder Report
15
General
Certain of the 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.
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 six months ended May 31, 2013, the Fund repurchased 276,407 common shares at an
aggregate purchase price of $3,906,368 which reflects a weighted-average discount from net asset value per share of 9.78%. At May 31, 2013, 345,699 common shares remain available to be purchased under the program
extension.
7. TRANSACTIONS with Mf Global
Inc. (mfgi)
On October 31, 2011, the Securities
Investor Protection Corporation (SIPC) filed an application with the United States District Court for the Southern District of New York seeking a declaration that the customers of MFGI were in need of the protections
available under the Securities Investor Protection Act of 1970. MFGI is the U.S. broker-dealer subsidiary of MF Global Holdings, Ltd., which, along with MF Global Finance USA Inc., filed for Chapter 11 bankruptcy
protection on October 31, 2011, in the U.S. Bankruptcy Court for the Southern District of New York. The District Court granted SIPC's petition and referred the matter to the Bankruptcy Court and a trustee was
appointed to oversee the liquidation of MFGI.
At the time of the
initiation of the SIPC proceeding, the Fund held options on U.S. Treasury futures positions, along with related collateral in the form of a $3,325,000 par value U.S. Treasury Note (“T-Note”) with a market
value of $3,756,777, with MFGI. By mid-November 2011, MFGI's liquidation trustee (“MFGI Trustee”) transferred the options and cash totaling $3,019,131, representing approximately 80% of the collateral
value, to R.J. O'Brien, Inc. (RJO), the futures commission merchant selected by the MFGI Trustee. In addition, the MFGI Trustee has indicated that the T-Note has been sold and therefore will not be returned to the
Fund.
Semi-Annual Shareholder Report
16
The Fund filed a
claim with the MFGI Trustee for an amount equal to the value of the T-Note and accrued interest ($53,760) as of October 31, 2011, offset by the cash proceeds transferred by the MFGI Trustee to RJO. Additional cash
proceeds totaling $495,160 have been received by the Fund through May 31, 2013. The remaining net amount of the claim of $296,246 is presented as “Receivable from MFGI Trustee” on the accompanying
Statement of Assets and Liabilities.
The SIPC proceeding
is complicated by what the SEC and Commodity Futures Trading Commission have described as “possible deficiencies in customer segregated futures accounts held at MFGI.” Based on public information provided
by the MFGI Trustee, management believes that the Receivable from MFGI Trustee on the accompanying Statement of Assets and Liabilities is collectible; however, the actual amount of recovery of this claim is unknown at
this time and will be impacted by: (i) the actual claims submitted by MFGI customers and subsequently approved by the MFGI Trustee; (ii) any remaining customer monies retrieved; and (iii) the non-customer assets of
MFGI made available to satisfy customer balances. Management will continue to assess the SIPC proceeding and the impact on the Fund's claim.
Semi-Annual Shareholder Report
17
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.
Semi-Annual Shareholder Report
18
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.
Semi-Annual Shareholder Report
19
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.
Semi-Annual Shareholder Report
20
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)
Semi-Annual Shareholder Report
21
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.
Semi-Annual Shareholder Report
22
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 from Federated's website at FederatedInvestors.com. To access this information from
the home page, select “All” under “Asset Class.” Scroll to “Closed-End Funds” and select a Fund name to go to the Fund Overview page, then select a share class, if applicable. On
the Fund Overview page, select the “Literature” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at
www.sec.gov.
Quarterly Portfolio
Schedule
Each 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 from the “
Products” section of the Federated Investors website at FederatedInvestors.com. From the home page, select “All” under “Asset Class.” Scroll to “Closed-End Funds” and select a
Fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “Literature” tab. At the bottom of that page, select “SEC Filings”
then “N-Q” from the list of filings.
Semi-Annual Shareholder Report
23
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.
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.
Semi-Annual Shareholder Report
24
Federated Enhanced Treasury Income
Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
or call 1-800-341-7400.
CUSIP 314162108
Q450548 (7/13)
Federated is a registered trademark
of Federated Investors, Inc.
2013 ©Federated Investors, Inc.
2013 ©Federated Investors, Inc.
Item 2. Code of Ethics
Not Applicable
Item 3. Audit Committee Financial Expert
Not Applicable
Item 4. Principal Accountant Fees and Services
Not Applicable
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
| (a) | The Registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form. |
| (b) | Not Applicable due to no such divestments during the semi-annual period covered since the previous Form N-CSR filing. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
| Not Applicable |
Item 8. Portfolio Managers of Closed-End Management Investment Companies
No change in any of the Portfolio Managers identified in Item 8(a)(1) in the Registrant’s most recent annual report.
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 (December 1, 2012 – December 31, 2012) |
66,165 | $14.45 | 66,165 | 96,589 |
|
Month #2 (January 1, 2013- January 31, 2013) |
62,805 | $14.35 | 62,805 | 33,784 |
|
Month #3 (February 1, 2013-February 28, 2013) |
33,784 | $14.38 | 33,784 | -0- |
|
Month #4 (March 1, 2013- March 31, 2013) |
36,760 | $14.00 | 36,760 | 422,592 |
|
Month #5 (April 1, 2013- April 30, 2013) |
33,542 | $13.71 | 33,542 | 389,050 |
|
Month #6 (May 1, 2013- May 31, 2013) |
43,351 | $13.57 | 43,351 | 345,699 |
|
TOTAL
|
276,407 | $14.13 | 276,407 | 345,699 |
NOTE:
In February 2013, the Trustees authorized the extension of the share repurchase program, which now allows the registrant 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). The extension began on March 1, 2013.
Item 10. Submission of Matters to a Vote of Security Holders
No changes to report
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have concluded that the
registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
The following exhibits are filed with this report:
(a)(1) Code of Ethics - Not Applicable to this semi-annual 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, Principal Financial Officer
Date July 19, 2013
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 July 19, 2013
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date July 19, 2013