United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of Registered Management Investment Companies
811-6447
(Investment Company Act File Number)
Federated Hermes Fixed Income Securities, Inc.
_______________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, Pennsylvania 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
Peter J. Germain, Esquire
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: 09/30/20
Date of Reporting Period: 09/30/20
| Item 1. | Reports to Stockholders |
Annual
Shareholder Report
September 30, 2020
|
Share Class | Ticker
|
A | FMUUX
|
Institutional | FMUSX
|
R6 | FMULX
|
|
Federated Hermes Municipal Ultrashort Fund
(formerly, Federated Municipal Ultrashort Fund)
Fund Established 2000
A Portfolio of Federated Hermes Fixed Income Securities, Inc.
(formerly, Federated Fixed Income Securities, Inc.)
IMPORTANT NOTICE REGARDING REPORT DELIVERY
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities
and Exchange Commission, paper copies of the Fund’s shareholder reports like this one
will no longer be sent by mail, unless you specifically request paper copies of the reports
from the Fund or from your financial intermediary, such as a broker-dealer or bank.
Instead, the reports will be made available on a website, and you will be notified by
mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be
affected by this change and you need not take any action. You may elect to receive
shareholder reports and other communications from the Fund or your financial
intermediary electronically by contacting your financial intermediary (such as a
broker-dealer or bank); other shareholders may call the Fund at
1-800-341-7400, Option 4.
You may elect to receive all future reports in paper free of charge. You can
inform the Fund or your financial intermediary that you wish to continue receiving
paper copies of your shareholder reports by contacting your financial intermediary
(such as a broker-dealer or bank); other shareholders may call the Fund at
1-800-341-7400, Option 4. Your election to receive reports in paper will apply to all
funds held with the Fund complex or your financial intermediary.
Not FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee
J. Christopher
Donahue
Donahue
President
Federated Hermes
Municipal
Ultrashort Fund
Letter from the President
Dear Valued Shareholder,
I am pleased to present the Annual Shareholder
Report for your fund covering the period from
October 1, 2019 through September 30, 2020.
As we all confront the unprecedented effects of the
coronavirus and the challenges it presents to our families,
communities, businesses and the financial markets,
I want you to know that everyone at Federated Hermes is
dedicated to helping you successfully navigate the
markets ahead. You can count on us for the insights,
investment management knowledge and client service
that you have come to expect. Please refer to our website,
FederatedInvestors.com, for timely updates on this and
other economic and market matters.
Thank you for investing with us. I hope you find this
information useful and look forward to keeping
you informed.
Sincerely,
J. Christopher Donahue, President
Management’s Discussion of Fund
Performance (unaudited)
The total return of Federated Hermes Municipal Ultrashort Fund (the
“Fund”), based on net asset value for the 12-month reporting period ended
September 30, 2020, was 1.14% for the Class A Shares, 1.35% for the
Institutional Shares and 1.37% for the Class R6 Shares. The 1.37% total return
for the Class R6 Shares for the reporting period consisted of 1.17% of
tax-exempt dividend income and price appreciation of 0.20% in the net asset
value of the shares.1,2 The total return of the Bloomberg Barclays 1-Year
U.S. Municipal Bond Index (BB1MBI),3 the Fund’s broad-based securities
market index, was 2.24% and the total return of the Lipper Short Municipal
Debt Funds Average (LSMDFA),4 a peer group average of short-term bond
funds with durations of less than three years, was 1.84% during the same
period. The total return of a 50/50 blend (Blended Index)5 of the BB1MBI
and the Lipper Tax-Exempt Money Market Funds Average, which would
approximate a 0.75 year average duration, was 1.39% during the same period.
The Fund’s and the LSMDFA’s total returns for the most recently completed
fiscal year reflected actual cash flows, transaction costs and other expenses that
were not reflected in the total return of the BB1MBI.
During the reporting period, the Fund’s investment strategy focused on:
(a) the effective duration6 of its portfolio (which indicates the portfolio’s
price sensitivity to interest rates); (b) the selection of securities with different
maturities (expressed by a yield curve showing the relative yield of securities
with different maturities); (c) the allocation of the portfolio among securities of
similar issuers (referred to as “sectors”); and (d) the credit quality7 and ratings
of the portfolio securities (which indicate the risk that securities may default).
These were the most significant factors affecting the Fund’s performance
relative to the BB1MBI during the reporting period.
The following discussion will focus on the performance of the Fund’s
Class R6 Shares relative to the BB1MBI.
MARKET OVERVIEW
During the reporting period, the 10-year U.S. Treasury yield decreased from
a high of 1.94% in November 2019 to a low of 0.51% in August 2020 and
averaged 1.12%. The 10-year yield ended the period at 0.69%.
During most of the period, economic activity in the U.S. expanded at a
moderate pace. The slope of the U.S. Treasury curve was unusually flat by
historical standards, which in the past has often been associated with a
deterioration in future macroeconomic performance. Inflation was showing
signs of picking up during the reporting period; however, it continued to run
below the 2% target inflation rate of the Federal Reserve (the “Fed”). Inflation
readings had been held down in 2019 due to factors such as the decline in oil
prices, softer inflation abroad and appreciation in the dollar despite
strengthening labor market conditions and rising input costs for industry.
Annual Shareholder Report
1
The Fed’s decision to cut the federal funds target rate (FFTR) three times by
¼ of a percent each time during 2019 was mostly anticipated by the markets. In
determining the size and timing of changes in the FFTR, changes in the Federal
Open Market Committee’s (FOMC) indicators of maximum employment and a
2% inflation target were essential. The Fed reaffirmed that adjustments to the
policy path would depend on assessments of how the economic outlook and
risks to the outlook were evolving. Then, on March 3, 2020, with an
unscheduled rate decision, the Fed reduced the FFTR by 1∕2 of a percent to a
range of 1.0% to 1.25% and then again on March 16, 2020 by a full 1% to the
lower bound of 0% to 0.25% in reaction to global developments concerning
the Coronavirus (Covid-19) pandemic and its potential impacts on the
economic outlook. The FOMC’s recent meeting minutes stated that the
Coronavirus outbreak has harmed communities and disrupted economic
activity in many countries, including in the U.S. Global financial conditions
have also been significantly affected. The Fed has remained at the 0% lower
FFTR boundary through September 2020.
The Fed made a substantial announcement in August when Chair Jerome
Powell unveiled a significant change in monetary policy: a modification of
its “Statement on Longer-Run Goals and Monetary Policy Strategy.” This
document explains the Fed’s framework for its policy actions and is not
updated often—the last major shift happened in 2012. The new framework puts
an increased emphasis on fostering employment, one of the Fed’s two
Congressional mandates. The other is to corral inflation, which the Fed has
defined as 2%. Policymakers now say they will tolerate a temporary rise above
that level if it is caused by a strong labor market. Expressed in their rate policy,
they will refrain from raising the FFTR from the current target range of 0% to
0.25% until economic conditions are not just good, but robust.
Available economic data showed that the U.S. economy came into this
challenging period on a strong footing. Given the sizeable downward revision
for 2020 Gross Domestic Product (GDP) growth, Fund management is more
cautious overall now on municipal credit for the intermediate-term. That is
based on an expectation that these issuers–many already facing liquidity
constraints and other financial issues–may face increased pressure over the
coming months. Fund management believes that high-grade municipals7
should fare better, but will still likely be affected by such a sizeable GDP
reduction, as it will factor into funding sources for most issuers in the
municipal market.
Annual Shareholder Report
2
Fund management believes that state and local governments will experience
sizeable tax collection declines–especially from sales and income taxes–and
at the same time will see increased spending, particularly on public health.
Some analysts expect state tax collections to decline on the order of 16%. We
believe that revenues beyond taxes will decline in nearly all sectors for nearly
all issuers. Of all the outstanding municipal securities, approximately 30% are
general obligation (GO) bonds and 70% are revenue bonds. We believe that
total funding shortfalls could be far higher than for general obligation issuers
alone as many revenue sectors have experienced increased pandemic costs and
revenue declines due to economic closure.
State and local governments, hospitals, airports and mass transit agencies
were among the entities that received some $400 billion of funding under the
CARES Act signed into law by President Trump. We believe that still more
funding may be needed–somewhere on the order of $150 billion to
$300 billion for municipal market issuers to help weather the effects of
economic shutdown and closure of operations. The $150 billion that state and
local governments are specifically set to receive from the CARES Act’s
Coronavirus Relief Fund is meant to be largely used for Coronavirus expense
reimbursement rather than for budget gap purposes.
Some municipal issuers have also benefited from the $454 billion economic
stabilization fund–anticipated to be leveraged by the Fed–established under
the CARES Act. Under these provisions, the Fed is allowed, though not
required, to purchase municipal debt directly from issuers, in the secondary
market, or to make direct loans or loan guarantees. The Fed is not authorized to
provide free, direct funding to municipal issuers. We believe, absent further
direct aid for the municipal debt market, that state and local government
budgets would be further stressed at the most inopportune time, particularly as
revenues decline as a result of business closures and rising unemployment.
During the reporting period, credit was generally stable and the municipal
bond market’s technical (net supply and demand) position was mostly
favorable. The issuance of municipal debt in 2019 had been relatively
comparable to previous periods, even though the ability to advance refund
existing debt became disallowed. Flows from investors into short, intermediate,
long and high-yield municipal bond funds were positive for a significant
portion of the period but turned sharply negative in March and April once the
Coronavirus and its impact on the world economy became apparent. Flows
have since rebounded from May through September as investor confidence
returned due to the various governmental responses.
Annual Shareholder Report
3
As a result of the Coronavirus pandemic, municipal credit quality is
expected to be negatively impacted within every sector of the municipal bond
market by the federal and state governments’ decisions to bring the
U.S. economy to a virtual halt. State and local governments’ income and sales
tax revenues will likely be reduced as a result of the layoffs and business
closures throughout the country. Municipal transportation, health care, higher
education and dedicated tax debt may be impaired to varying degrees by the
virus’ impacts. We believe that a large number of credit downgrades can be
expected within the municipal market. However, credit defaults are not
anticipated to occur to any significant degree as social distancing
recommendations and business closures are expected to be curtailed as the
Coronavirus subsides.
Over the reporting period, the municipal yield curve declined significantly
and steepened as yields for short maturity securities (1 to 5 years) fell more
than those on intermediate and longer maturities (5 to 30 years). Short-term
high grade (“AAA”-rated) municipal yields (1-to-5-year maturities) decreased
meaningfully over the first six months of the reporting period amid multiple
Fed eases in 2019, reaching a low of 0.50% in early March 2020 before the
Covid-19 shutdown began. In March, high grade short-term municipal yields
spiked from 0.50% to 2.80% in 10 trading days amid liquidity constraints,
heavy shareholder redemptions, and the uncertainty of the impact of the
shutdown on the economy and many municipal credit sectors. As the market
began to stabilize in early April, yields then began to fall rapidly in April and
May and stabilized to end the period at lows of 0.15% to 0.30%.
DURATION
The Fund is an ultrashort tax-exempt municipal bond fund and pursues a
low price volatility strategy. As such, the Fund’s typical dollar-weighted
average duration is constrained by its prospectus to one year or less with the
typical operating range from four months to one year. As determined at the end
of the reporting period, the Fund’s dollar-weighted duration was 0.87 years.
The duration of the BB1MBI (which contains only bonds with maturities from
one to two years) was 1.38 years at the end of the reporting period.
The seven-day SIFMA rate, a proxy for weekly municipal variable-rate
demand note (MVRDN) yields held in the Fund and the base coupon index for
many municipal floating-rate notes (MFRNs) held in the Fund, averaged
0.83% over the reporting period but ranged from 0.08% to 5.20%. The
1-month ICE LIBOR Index, a base index for some of the MFRNs in the Fund,
averaged 0.94% over the reporting period but moved from 2.01% at the start to
0.15% at the end.
Annual Shareholder Report
4
Amid all of the volatility in the market in March and into April, Fund
management focused primarily on maintaining liquidity during that brief
period. However, with short-term interest rates sharply declining over the
reporting period and considering the Fed’s actions, we opportunistically
lengthened the Fund’s duration from 0.74 years at the end of March to 0.87
years at the end of the period in order to seek to capture more total return
performance and lock in higher fixed-rate yields before they declined
following the Fed rate cuts and subsequent credit spread tightening. This
decision helped the total return performance of the Fund versus the BB1MBI,
but with the structural duration differential of the index versus the Fund and
the significant decline in rates, the Fund lagged in price performance versus
the BB1MBI.
As part of the duration positioning of the Fund and with strong cash inflows
into the Fund from May through September, the floating-rate/variable-rate
percentage of the Fund was maintained at 30% to 50% over the period.
However, the Fund’s holdings of MVRDNs and MFRNs produced above
average income over the period. For example, MFRNs, which comprised about
25% to 30% of the Fund, had an average coupon rate of 0.74% at the end of
the reporting period. This coupon income was significantly higher than
comparable maturity fixed-rate yields in the market over the period.
Maturity/Yield Curve
During the reporting period, the municipal yield curve steepened as yields
on shorter maturities (one to five years) fell more than intermediate and longer
maturity bonds (five years and longer).
Because the Fund pursues an ultrashort duration strategy to seek to provide
income exempt from federal regular income tax, the Fund was managed during
the reporting period with an intention of maintaining a barbell structure
consisting of: 35% to 55% weighting in very short-term maturity securities
such as tax-exempt weekly reset MVRDNs and weekly and monthly reset
MFRNs combined with 45% to 65% weighting in tender option bonds,
tax-exempt fixed-rate municipal notes and fixed-rate municipal bonds with
durations generally from three months to five years.
The BB1MBI contains only bonds with maturities greater than one year but
less than two years, and it does not contain any bonds with less than one year
remaining to maturity nor does it include MVRDNs and MFRNs. The
Fund’s portfolio of 25% to 30% in MFRNs and 10% to 25% in MVRDNs
underperformed the longer maturity bonds contained in the BB1MBI
(1-to-2-year maturities) during the reporting period, but contributed to lower
price volatility within the portfolio, especially in March.
Annual Shareholder Report
5
SECTOR ALLOCATION
During the reporting period, the Fund received a positive contribution from
sector allocation relative to the BB1MBI. The Fund maintained a higher
portfolio allocation, relative to the BB1MBI, to securities issued by industrial
development and pollution control revenue entities (corporate obligors and
investor-owned electric and gas utilities), and hospitals. These allocations
helped the Fund’s performance due to the outperformance of these sectors
relative to the BB1MBI.
The Fund was significantly underweight, compared to the BB1MBI, in
pre-refunded bonds (which are bonds for which the principal and interest
payments are secured or guaranteed by cash or U.S. Treasury securities held in
an escrow account), and since this sector was a slight underperformer and a
37% weight within the BB1MBI, this decision positively affected Fund
performance relative to the BB1MBI during the reporting period.
Overall, security selection had a negative impact on the Fund’s performance
relative to the BB1MBI during the reporting period. FRNs lagged the price
performance of fixed-rate bonds in the BB1MBI over the reporting period, and
the Fund’s need to maintain liquidity and sell fixed-rate securities in a volatile
March period when investors had a strong preference for stable value
U.S. Treasury-backed cash compared to risk based sectors such as municipals
also detracted from performance.
CREDIT QUALITY
During the reporting period, investor appetite for yield in the low interest
rate environment along with strong municipal bond fund inflows, the exception
being significant outflows in March and April, resulted in outperformance of
bonds rated “A” and “BBB” (or unrated bonds of comparable quality) relative
to bonds rated in the higher rating categories (“AA” and “AAA”) (or unrated
bonds of comparable quality). This credit allocation had a significant and
positive effect on performance.
The Fund’s overweight position, relative to the BB1MBI, in “A”, “BBB”
debt (or unrated bonds of comparable quality) during the reporting period had a
significant and positive impact on the Fund’s performance. The Fund’s
underweight position in bonds rated “AAA” and “AA” (or unrated bonds of
comparable quality) also made a positive contribution to performance as bonds
in these ratings categories underperformed within the BB1MBI.
Annual Shareholder Report
6
1
Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a
decline in their prices. The Fund is not a “money market” mutual fund. Some money market
mutual funds attempt to maintain a stable net asset value through compliance with relevant
Securities and Exchange Commission (SEC) rules. The Fund is not governed by those rules, and
its shares will fluctuate in value.
2
Income may be subject to the federal alternative minimum tax, as well as state and local taxes.
3
Please see the footnotes to the line graphs under “Fund Performance and Growth of a $10,000
Investment” below for the definition of, and more information about, the BB1MBI.
4
Please see the footnotes to the line graphs under “Fund Performance and Growth of a $10,000
Investment” below for the definition of, and more information about, the LSMDFA.
5
Please see the footnotes to the line graphs under “Fund Performance and Growth of a $10,000
Investment” below for the definition of, and more information about, the Blended Index.
6
Duration is a measure of a security’s price sensitivity to changes in interest rates. Securities with
longer durations are more sensitive to changes in interest rates than securities with shorter
durations. For purposes of this Management’s Discussion of Fund Performance, duration is
determined using a third-party analytical system.
7
Investment-grade securities and noninvestment-grade securities may either be: (a) rated by a
nationally recognized statistical ratings organization or rating agency; or (b) unrated securities
that the Fund’s investment adviser (“Adviser”) believes are of comparable quality. The rating
agencies that provided the ratings for rated securities include Standard & Poor’s, Moody’s
Investor Services, Inc. and Fitch Rating Service. When ratings vary, the highest rating is used.
Credit ratings of “AA” or better are considered to be high credit quality; credit ratings of “A”
are considered high or medium/good quality; and credit ratings of “BBB” are considered to be
medium/good credit quality, and the lowest category of investment-grade securities; credit
ratings of “BB” and below are lower-rated, noninvestment-grade securities or junk bonds; and
credit ratings of “CCC” or below are noninvestment-grade securities that have high default risk.
Any credit quality breakdown does not give effect to the impact of any credit derivative
investments made by the Fund. Credit ratings are an indication of the risk that a security will
default. They do not protect a security from credit risk. Lower-rated bonds typically offer higher
yields to help compensate investors for the increased risk associated with them. Among these
risks are lower creditworthiness, greater price volatility, more risk to principal and income than
with higher rated securities and increased possibilities of default.
Annual Shareholder Report
7
FUND PERFORMANCE AND GROWTH OF A $10,000 INVESTMENT
The graph below illustrates the hypothetical investment of $10,0001 in the
Federated Hermes Municipal Ultrashort Fund (the “Fund”) from
September 30, 2010 to September 30, 2020, compared to the Bloomberg
Barclays 1-Year U.S. Municipal Bond Index (BB1MBI),2 the Lipper
Short Municipal Debt Funds Average (LSMDFA)3 and a 50/50 blended index
(Blended Index) of the BB1MBI and Lipper Tax-Exempt Money Market
Funds Average.2,3 The Average Annual Total Return table below shows
returns for each class averaged over the stated periods.
Growth of a $10,000 Investment
Growth of $10,000 as of September 30, 2020
■ Total returns shown for Class A include the maximum sales charge of 2.00% ($10,000
investment minus $200 sales charge = $9,800).
The Fund offers multiple share classes whose performance may be greater than
or less than its other share class(es) due to differences in sales charges and
expenses. See the Average Annual Return table below for the returns of
additional classes not shown in the line graph above.
Average Annual Total Returns for the Period Ended 9/30/2020
(returns reflect all applicable sales charges as specified below in footnote #1)
|
|
1 Year
|
5 Years
|
10 Years
|
|
Class A Shares
|
-0.84%
|
0.46%
|
0.42%
|
|
Institutional Shares
|
1.35%
|
1.27%
|
1.05%
|
|
Class R6 Shares4
|
1.37%
|
1.27%
|
1.05%
|
|
BB1MBI
|
2.24%
|
1.40%
|
1.14%
|
|
LSMDFA
|
1.84%
|
1.36%
|
1.14%
|
|
Blended Index
|
1.39%
|
1.00%
|
0.72%
|
Annual Shareholder Report
8
Performance data quoted represents past performance which is no
guarantee of future results. Investment return and principal value will
fluctuate so that an investor’s shares, when redeemed, may be worth more
or less than their original cost. Mutual fund performance changes over
time and current performance may be lower or higher than what is stated.
For current to the most recent month-end performance and after-tax
returns, visit FederatedInvestors.com or call 1-800-341-7400. Returns
shown do not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares. Mutual funds
are not obligations of or guaranteed by any bank and are not
federally insured.
1
Represents a hypothetical investment of $10,000 in the Fund after deducting applicable sales
charge. For Class A Shares, the maximum sales charge of 2.00% ($10,000 investment minus $200
sales charge = $9,800). The Fund’s performance assumes the reinvestment of all dividends and
distributions. The BB1MBI, the LSMDFA and the Blended Index have been adjusted to reflect
reinvestment of dividends on securities in the index and the average.
2
The BB1MBI is the one-year (1-2) component of the Bloomberg Barclays U.S. Municipal Bond
Index. The Bloomberg Barclays U.S. Municipal Bond Index covers the USD-denominated
long-term tax-exempt bond market. The index has four main sectors: state and local general
obligation bonds, revenue bonds, insured bonds and prerefunded bonds. The BB1MBI is not
adjusted to reflect sales charges, expenses or other fees that the SEC requires to be reflected in
the Fund’s performance. The Fund is not a money market fund and is not subject to the special
regulatory requirements (including maturity and credit quality constraints) designed to enable
money market funds to maintain a stable share price. The BB1MBI is unmanaged, and unlike the
Fund, is not affected by cash flows. It is not possible to invest directly in an index.
3
Lipper figures represent the average of the total returns reported by all funds designated by
Lipper, Inc., as falling into the respective category and are not adjusted to reflect any sales
charges. The Lipper figures in the Growth of $10,000 line graph are based on historical return
information published by Lipper and reflect the return of the funds comprising the category in
the year of publication. Because the funds designated by Lipper as falling into the category can
change over time, the Lipper figures in the line graph may not match the Lipper figures in the
Average Annual Total Returns table, which reflect the return of the funds that currently comprise
the category.
4
The Fund’s Class R6 Shares commenced operations on May 29, 2019. For the period prior to the
commencement of operations of the Class R6 Shares, the Class R6 Shares performance
information shown is for the Fund’s Institutional Shares. The performance of the Institutional
Shares has not been adjusted to reflect the expenses of the Class R6 Shares since the Class R6
Shares have a lower expense ratio than the expense ratio of the Institutional Shares.
Annual Shareholder Report
9
Portfolio of Investments Summary Table (unaudited)
At September 30, 2020, the Fund’s sector composition1 was as follows:
|
Sector Composition
|
Percentage of
Total Net Assets
|
|
Industrial Development Bond/Pollution Control Revenue
|
21.6%
|
|
General Obligation—Local
|
21.0%
|
|
Hospital
|
7.9%
|
|
Electric and Gas
|
7.8%
|
|
Prepaid Gas Utility
|
6.4%
|
|
Toll Road
|
4.3%
|
|
Water & Sewer
|
4.1%
|
|
General Obligation—State
|
4.1%
|
|
Higher Education
|
3.1%
|
|
Other Transportation
|
2.7%
|
|
Other2
|
19.3%
|
|
Other Assets and Liabilities—Net3
|
(2.3)%
|
|
TOTAL
|
100.0%
|
1
Sector classifications, and the assignment of holdings to such sectors, are based upon the
economic sector and/or revenue source of the underlying obligor, as determined by the Fund’s
Adviser. For securities that have been enhanced by a third-party guarantor, such as bond insurers
and banks, sector classifications are based upon the economic sector and/or revenue source of
the underlying obligor, as determined by the Fund’s Adviser.
2
For purposes of this table, sector classifications constitute 83.0% of the Fund’s total net assets.
Remaining sectors have been aggregated under the designation “Other.”
3
Assets, other than investments in securities, less liabilities. See Statement of Assets
and Liabilities.
Annual Shareholder Report
10
Portfolio of Investments
September 30, 2020
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—80.7%
|
|
|
|
|
Alabama—2.4%
|
|
|
$1,250,000
|
|
Black Belt Energy Gas District, AL, Gas Prepay Revenue Bonds
Project No. 4 (Series 2019A-1), (Morgan Stanley GTD),
4.000%, 6/1/2021
|
$1,278,613
|
|
1,425,000
|
|
Black Belt Energy Gas District, AL, Gas Prepay Revenue Bonds
Project No. 4 (Series 2019A-1), (Morgan Stanley GTD),
4.000%, 6/1/2022
|
1,506,125
|
|
1,500,000
|
|
Black Belt Energy Gas District, AL, Gas Prepay Revenue Bonds
Project No. 4 (Series 2019A-1), (Morgan Stanley GTD),
4.000%, 6/1/2023
|
1,634,250
|
|
22,500,000
|
1
|
Black Belt Energy Gas District, AL, Gas Prepay Revenue Bonds
Project No.3 (Series 2018B-1) FRNs, (Goldman Sachs Group, Inc.
GTD), 1.004% (1-month USLIBOR x 0.67 +0.900%), Mandatory
Tender 12/1/2023
|
22,426,200
|
|
2,000,000
|
|
Lower Alabama Gas District, Gas Project Revenue Bonds Project
No.2 (Series 2020A) TOBs, (Goldman Sachs Group, Inc. GTD),
4.000%, Mandatory Tender 12/1/2025
|
2,290,520
|
|
3,650,000
|
|
Selma, AL IDB (International Paper Co.), Gulf Opportunity Zone
Revenue Refunding Bonds (Series 2019A) TOBs, 2.000%,
Mandatory Tender 10/1/2024
|
3,807,278
|
|
5,250,000
|
|
Selma, AL IDB (International Paper Co.), Gulf Opportunity Zone
Revenue Refunding Bonds (Series 2020A) TOBs, 1.375%,
Mandatory Tender 6/16/2025
|
5,349,960
|
|
30,000,000
|
1
|
Southeast Alabama Gas Supply District, Gas Supply Revenue
Bonds Project No. 2 (Series 2018B) FRNs, (Morgan Stanley GTD),
0.954% (1-month USLIBOR x 0.67 +0.850%), Mandatory
Tender 6/1/2024
|
29,907,900
|
|
|
|
TOTAL
|
68,200,846
|
|
|
|
Arizona—0.8%
|
|
|
5,000,000
|
|
Chandler, AZ IDA (Intel Corp.), Industrial Development Revenue
Bonds (Series 2019) TOBs, 4.918%, Mandatory Tender 6/3/2024
|
5,770,450
|
|
4,000,000
|
|
Coconino County, AZ Pollution Control Corp. (Nevada Power
Co.), Pollution Control Refunding Revenue Bonds (Series 2017A)
TOBs, 1.875%, Mandatory Tender 3/31/2023
|
4,033,200
|
|
2,500,000
|
|
Maricopa County, AZ Pollution Control Corp. (Public Service Co.,
NM), Pollution Control Revenue Refunding Bonds Palo Verde
Project (Series 2003A) TOBs, 1.050%, Mandatory
Tender 6/1/2022
|
2,508,200
|
|
5,000,000
|
|
Tempe, AZ IDA (Mirabella at ASU), Revenue Bonds
(Series 2017B), 4.000%, 10/1/2023
|
4,986,050
|
Annual Shareholder Report
11
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Arizona—continued
|
|
|
$4,000,000
|
2
|
Yavapai County, AZ IDA Solid Waste Disposal (Waste
Management, Inc.), Solid Waste Disposal Revenue Bonds
(Series 2002) TOBs, 2.800%, Mandatory Tender 6/1/2021
|
$4,058,200
|
|
|
|
TOTAL
|
21,356,100
|
|
|
|
California—5.2%
|
|
|
9,350,000
|
1
|
Bay Area Toll Authority, CA, San Francisco Bay Area Toll Bridge
Revenue Bonds (Index Rate Bonds Series 2017D) FRNs, 0.757%
(3-month USLIBOR x 0.70 +0.550%), Mandatory Tender 4/1/2021
|
9,350,280
|
|
10,000,000
|
1
|
California Infrastructure & Economic Development Bank
(California Academy of Sciences), Revenue Bonds (Series 2018B)
FRNs, 0.483% (1-month USLIBOR x 0.70 +0.380%), Mandatory
Tender 8/1/2021
|
9,966,300
|
|
12,500,000
|
|
California Infrastructure & Economic Development Bank
(DesertXpress Enterprises, LLC), (Series 2020A: Brightline West
Passenger Rail) TOBs, (United States Treasury GTD), 0.450%,
Mandatory Tender 7/1/2021
|
12,500,000
|
|
15,000,000
|
1
|
California Infrastructure & Economic Development Bank (J Paul
Getty Trust), Variable Rate Refunding Revenue Bonds
(Series 2011A-1) FRNs, 0.309% (1-month USLIBOR x 0.70
+0.200%), Mandatory Tender 4/1/2021
|
15,001,050
|
|
50,000,000
|
1
|
California Infrastructure & Economic Development Bank (Los
Angeles County Museum of Art), Revenue Refunding Bonds
(Series 2017B) FRNs, 0.754% (1-month USLIBOR x 0.70 +0.650%),
Mandatory Tender 2/1/2021
|
49,982,000
|
|
1,000,000
|
|
California PCFA (Republic Services, Inc.), (Series A-2) TOBs,
0.600%, Mandatory Tender 10/15/2020
|
1,000,140
|
|
14,000,000
|
2
|
California PCFA (Republic Services, Inc.), Solid Waste Refunding
Revenue Bonds (Series 2010A) TOBs, 0.500%, Mandatory
Tender 11/2/2020
|
14,003,220
|
|
3,700,000
|
|
California State Pollution Control Financing Authority (American
Water Capital Corp.), Revenue Refunding Bonds (Series 2020)
TOBs, 0.600%, Mandatory Tender 9/1/2023
|
3,694,228
|
|
7,500,000
|
1
|
California State, UT GO Bonds (Index Floating Rate Bonds Series
2013D) FRNs, 0.370% (SIFMA 7-day +0.290%), Mandatory
Tender 12/1/2020
|
7,500,000
|
|
3,750,000
|
|
California State, UT GO Various Purpose Bonds,
5.000%, 3/1/2029
|
4,974,900
|
|
3,000,000
|
|
California State, UT GO Various Purpose Refunding Bonds,
5.000%, 3/1/2025
|
3,612,630
|
|
1,670,000
|
|
California State, Various Purpose GO Bonds (Series 2020-1),
5.000%, 11/1/2024
|
1,987,267
|
|
1,250,000
|
|
California State, Various Purpose GO Bonds (Series 2020-1),
5.000%, 11/1/2025
|
1,539,700
|
|
5,000,000
|
|
Southern California Public Power Authority (Power Projects),
Windy Point/Windy Flats Project Revenue Refunding Bonds
(Series 2020-1) Green Bonds, 5.000%, 4/1/2024
|
5,778,000
|
Annual Shareholder Report
12
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
California—continued
|
|
|
$2,000,000
|
|
Western Placer, CA Unified School District, Community Facilities
District No. 1 2020 Bond Anticipation Notes, 2.000%, 6/1/2025
|
$2,068,320
|
|
2,730,000
|
|
Western Placer, CA Unified School District, Community Facilities
District No.2 2020 Bond Anticipation Notes, 2.000%, 6/1/2025
|
2,811,545
|
|
|
|
TOTAL
|
145,769,580
|
|
|
|
Colorado—1.3%
|
|
|
5,825,000
|
1
|
Colorado School of Mines Board of Trustees (Colorado School
of Mines, CO), Institutional Enterprise Revenue Refunding Bonds
(Series 2018A) FRNs, 0.604% (1-month USLIBOR x
0.67 +0.500%), 2/1/2023
|
5,805,253
|
|
14,375,000
|
|
Denver, CO City & County Department of Aviation, Airport
System Revenue Refunding Bonds (Series 2019D) TOBs, 5.000%,
Mandatory Tender 11/15/2022
|
15,681,257
|
|
6,000,000
|
1
|
E-470 Public Highway Authority, CO, Senior Revenue Bonds
(LIBOR Index Series 2017B) FRNs, 1.151% (1-month USLIBOR x
0.67 +1.050%), Mandatory Tender 9/1/2021
|
6,016,920
|
|
8,000,000
|
1
|
E-470 Public Highway Authority, CO, Senior Revenue Bonds
(LIBOR Index Series 2019A) FRNs, 0.517% (1-month USLIBOR x
0.67 +0.420%), Mandatory Tender 9/1/2021
|
8,000,160
|
|
|
|
TOTAL
|
35,503,590
|
|
|
|
Connecticut—1.2%
|
|
|
5,000,000
|
|
Connecticut State Health & Educational Facilities (Yale-New
Haven Hospital), Revenue Bonds (Series 2019B) TOBs, 1.800%,
Mandatory Tender 7/1/2024
|
5,199,100
|
|
500,000
|
|
Connecticut State Special Transportation Fund, Special Tax
Obligation Bonds Transportation Infrastructure Purposes
(Series 2020A), 4.000%, 5/1/2021
|
510,990
|
|
400,000
|
|
Connecticut State Special Transportation Fund, Special Tax
Obligation Bonds Transportation Infrastructure Purposes
(Series 2020A), 5.000%, 5/1/2022
|
430,152
|
|
675,000
|
|
Connecticut State Special Transportation Fund, Special Tax
Obligation Bonds Transportation Infrastructure Purposes
(Series 2020A), 5.000%, 5/1/2023
|
756,196
|
|
1,000,000
|
|
Connecticut State Special Transportation Fund, Special Tax
Obligation Bonds Transportation Infrastructure Purposes
(Series 2020A), 5.000%, 5/1/2024
|
1,164,900
|
|
850,000
|
|
Connecticut State Special Transportation Fund, Special Tax
Obligation Bonds Transportation Infrastructure Purposes
(Series 2020A), 5.000%, 5/1/2025
|
1,023,119
|
|
1,200,000
|
|
Connecticut State Special Transportation Fund, Special Tax
Obligation Bonds Transportation Infrastructure Purposes
(Series 2020A), 5.000%, 5/1/2026
|
1,485,264
|
|
3,400,000
|
|
Connecticut State Special Transportation Fund, Special Tax
Obligation Bonds Transportation Infrastructure Purposes
(Series 2020A), 5.000%, 5/1/2027
|
4,303,584
|
Annual Shareholder Report
13
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Connecticut—continued
|
|
|
$4,000,000
|
1
|
Connecticut State, UT GO SIFMA Index Bonds (Series 2013A)
FRNs, 0.870% (SIFMA 7-day +0.750%), 3/1/2021
|
$4,007,800
|
|
3,065,000
|
1
|
Connecticut State, UT GO SIFMA Index Bonds (Series 2013A)
FRNs, 0.970% (SIFMA 7-day +0.850%), 3/1/2022
|
3,086,363
|
|
1,500,000
|
1
|
Connecticut State, UT GO SIFMA Index Bonds (Series 2013A)
FRNs, 1.020% (SIFMA 7-day +0.900%), 3/1/2023
|
1,512,885
|
|
4,160,000
|
|
Griswold, CT BANs, 2.000%, 10/20/2020
|
4,164,202
|
|
4,850,000
|
|
West Haven, CT, (Series B) BANs, 2.000%, 9/30/2021
|
4,902,719
|
|
|
|
TOTAL
|
32,547,274
|
|
|
|
Delaware—0.1%
|
|
|
4,000,000
|
|
Delaware Economic Development Authority (Delmarva Power and
Light Co.), Gas Facilities Revenue Refunding Bonds
(Series 2020A) TOBs, 1.050%, Mandatory Tender 7/1/2025
|
4,028,000
|
|
|
|
Florida—1.5%
|
|
|
775,000
|
|
Escambia County, FL (International Paper Co.), Environmental
Improvement Revenue Refunding Bonds (Series 2019B) TOBs,
2.000%, Mandatory Tender 10/1/2024
|
808,395
|
|
8,500,000
|
|
Jacksonville, FL EDC (JEA, FL Electric System), (Series 2000-A),
CP, (U.S. Bank, N.A. LIQ), 0.210%, Mandatory Tender 10/1/2020
|
8,500,000
|
|
3,500,000
|
|
Miami-Dade County, FL IDA (Waste Management, Inc.),
(Series 2011) TOBs, 1.600%, Mandatory Tender 11/2/2020
|
3,503,535
|
|
5,000,000
|
|
Orlando, FL Utilities Commission, Utility System Revenue
Refunding Bonds (Series 2017A) TOBs, 3.000%, Mandatory
Tender 10/1/2020
|
5,000,000
|
|
10,000,000
|
|
Orlando, FL Utilities Commission, Utility System Revenue
Refunding Bonds (Series 2017A) TOBs, 5.000%, Mandatory
Tender 10/1/2020
|
10,000,000
|
|
14,000,000
|
1
|
Pasco County, FL School Board, Variable Rate Refunding
Certificates of Participation (Series 2020B) FRNs, 0.870%
(SIFMA 7-day +0.750%), Mandatory Tender 8/2/2023
|
14,006,300
|
|
|
|
TOTAL
|
41,818,230
|
|
|
|
Georgia—2.3%
|
|
|
1,000,000
|
|
Atlanta, GA (Atlantic Station Project), Tax Allocation Refunding
Bonds (Series 2017), 5.000%, 12/1/2020
|
1,006,820
|
|
1,125,000
|
|
Atlanta, GA (Atlantic Station Project), Tax Allocation Refunding
Bonds (Series 2017), 5.000%, 12/1/2021
|
1,179,214
|
|
4,100,000
|
|
Bartow County, GA Development Authority (Georgia Power Co.),
Bowen Project Pollution Control Revenue Bonds (First Series
1997) TOBs, 2.050%, Mandatory Tender 11/19/2021
|
4,167,814
|
|
6,700,000
|
|
Burke County, GA Development Authority (Georgia Power Co.),
Vogtle Project Pollution Control Revenue Bonds (Fifth Series
1994) TOBs, 2.150%, Mandatory Tender 6/13/2024
|
6,994,532
|
Annual Shareholder Report
14
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Georgia—continued
|
|
|
$10,000,000
|
|
Burke County, GA Development Authority (Georgia Power Co.),
Vogtle Project Pollution Control Revenue Bonds (First Series
2012) TOBs, 1.550%, Mandatory Tender 8/19/2022
|
$10,122,800
|
|
6,000,000
|
|
Burke County, GA Development Authority (Georgia Power Co.),
Vogtle Project Pollution Control Revenue Bonds (Second Series
2012) TOBs, 1.700%, Mandatory Tender 8/22/2024
|
6,174,060
|
|
22,000,000
|
1
|
Main Street Natural Gas, Inc., GA, Gas Supply Revenue Bonds
(Series 2018B) FRNs, (Royal Bank of Canada GTD), 0.854%
(1-month USLIBOR x 0.67 +0.750%), Mandatory Tender 9/1/2023
|
21,975,580
|
|
3,000,000
|
|
Main Street Natural Gas, Inc., GA, Gas Supply Revenue Bonds
(Series 2019B) TOBs, (Toronto Dominion Bank GTD), 4.000%,
Mandatory Tender 12/2/2024
|
3,403,320
|
|
2,500,000
|
|
Monroe County, GA Development Authority Pollution Control
(Georgia Power Co.), Scherer Project Pollution Control Revenue
Bonds (First Series 2009) TOBs, 2.050%, Mandatory
Tender 11/19/2021
|
2,541,350
|
|
5,000,000
|
|
Private Colleges & Universities Facilities of GA (Emory
University), Revenue Bonds (Series 2020B), 5.000%, 9/1/2025
|
6,142,300
|
|
|
|
TOTAL
|
63,707,790
|
|
|
|
Illinois—2.5%
|
|
|
4,000,000
|
|
Chicago, IL Water Revenue, Second Lien Water Revenue
Refunding Bonds (Series 2004), 5.000%, 11/1/2020
|
4,014,080
|
|
4,000,000
|
|
Chicago, IL Water Revenue, Second Lien Water Revenue
Refunding Bonds (Series 2004), 5.000%, 11/1/2021
|
4,188,360
|
|
1,705,000
|
|
Illinois Finance Authority (Admiral at the Lake), Revenue
Refunding Bonds (Series 2017), 5.000%, 5/15/2021
|
1,707,694
|
|
3,625,000
|
|
Illinois Finance Authority (OSF Health Care Systems),
Revenue Bonds (Series 2020A) TOBs, 5.000%, Mandatory
Tender 11/15/2024
|
4,173,680
|
|
19,000,000
|
|
Illinois State Solid Waste Development Authority (Waste
Management, Inc.), (Series 2019) TOBs, 1.600%, Mandatory
Tender 11/2/2020
|
19,019,190
|
|
10,000,000
|
|
Illinois State, GO Bonds (Series 2017D), 5.000%, 11/1/2020
|
10,020,400
|
|
5,000,000
|
|
Illinois State, GO Bonds (Series 2017D), 5.000%, 11/1/2021
|
5,134,500
|
|
8,000,000
|
|
Illinois State, GO Bonds (Series 2017D), 5.000%, 11/1/2022
|
8,330,080
|
|
5,000,000
|
|
Illinois State, GO Bonds (Series 2017D), 5.000%, 11/1/2024
|
5,327,800
|
|
2,000,000
|
|
Illinois State, UT GO Bonds (Series 2020B), 5.375%, 5/1/2023
|
2,126,180
|
|
2,000,000
|
|
Illinois State, UT GO Refunding Bonds (Series 2018A),
5.000%, 10/1/2021
|
2,057,340
|
|
3,000,000
|
|
Illinois State, UT GO Refunding Bonds (Series 2018A),
5.000%, 10/1/2022
|
3,141,630
|
|
|
|
TOTAL
|
69,240,934
|
Annual Shareholder Report
15
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Indiana—1.5%
|
|
|
$10,000,000
|
|
Bartholomew Consolidated School Corp., IN TANs,
4.000%, 12/31/2020
|
$10,083,300
|
|
1,450,000
|
|
Beech Grove, IN CSD BANs, 2.000%, 7/15/2021
|
1,459,730
|
|
100,000
|
|
Indiana Health Facility Financing Authority (Ascension Health
Alliance Senior Credit Group), Revenue Bonds (Series 2001A-2)
TOBs, (United States Treasury PRF), 2.000%, Mandatory
Tender 2/1/2023
|
103,518
|
|
5,900,000
|
|
Indiana Health Facility Financing Authority (Ascension Health
Alliance Senior Credit Group), Revenue Bonds (Series 2001A-2)
TOBs, 2.000%, Mandatory Tender 2/1/2023
|
6,123,020
|
|
18,000,000
|
|
Indiana State EDA (Republic Services, Inc.), (Series A) TOBs,
0.650%, Mandatory Tender 12/1/2020
|
18,012,600
|
|
2,000,000
|
|
Rockport, IN PCR (American Electric Power Co., Inc.), Pollution
Control Revenue Refunding Bonds (Series 1995A) TOBs, 1.350%,
Mandatory Tender 9/1/2022
|
2,018,180
|
|
2,250,000
|
|
Rockport, IN PCR (American Electric Power Co., Inc.), Pollution
Control Revenue Refunding Bonds (Series 1995B) TOBs, 1.350%,
Mandatory Tender 9/1/2022
|
2,270,632
|
|
|
|
TOTAL
|
40,070,980
|
|
|
|
Iowa—0.1%
|
|
|
4,000,000
|
1
|
Iowa Finance Authority, Single Family Mortgage Bonds
(Series 2018B) FRNs, 0.420% (SIFMA 7-day +0.300%),
Mandatory Tender 5/3/2021
|
4,000,080
|
|
|
|
Kansas—0.1%
|
|
|
3,000,000
|
|
Holton, KS (Holton Community Hospital), Hospital Loan
Anticipation Revenue Bonds (Series 2019), 2.500%, 7/1/2021
|
3,009,420
|
|
|
|
Kentucky—2.4%
|
|
|
3,500,000
|
|
Kentucky Housing Corp. (BTT Development III Portfolio),
Multifamily Rental Housing Revenue Bonds (Series 2019) TOBs,
(United States Treasury GTD), 1.400%, Mandatory
Tender 6/1/2022
|
3,555,790
|
|
16,655,000
|
|
Kentucky State Rural Water Finance Corp., Public Project
Construction Notes (Series E-2019-1), 1.450%, 6/1/2021
|
16,684,646
|
|
9,600,000
|
|
Louisville & Jefferson County, KY Metropolitan Government
(Louisville Gas & Electric Co.), Revenue Refunding Bonds
Series 2013A (Remarketing 4/1/19) TOBs, 1.850%, Mandatory
Tender 4/1/2021
|
9,653,760
|
|
13,000,000
|
|
Louisville & Jefferson County, KY Metropolitan Government
(Norton Healthcare, Inc.), Health System Revenue Bonds
(Series 2020B) TOBs, 5.000%, Mandatory Tender 10/1/2023
|
14,635,270
|
|
2,500,000
|
|
Owen County, KY (American Water Capital Corp.), Revenue
Refunding Bonds (Series 2020) TOBs, 0.700%, Mandatory
Tender 9/1/2023
|
2,496,125
|
Annual Shareholder Report
16
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Kentucky—continued
|
|
|
$8,000,000
|
|
Public Energy Authority of Kentucky, Gas Supply Revenue Bonds
(Series 2018B) TOBs, (BP PLC GTD), 4.000%, Mandatory
Tender 1/1/2025
|
$8,965,760
|
|
5,000,000
|
|
Public Energy Authority of Kentucky, Gas Supply Revenue Bonds
(Series 2019A-1) TOBs, (Morgan Stanley GTD), 4.000%,
Mandatory Tender 6/1/2025
|
5,664,050
|
|
5,000,000
|
|
Public Energy Authority of Kentucky, Gas Supply Revenue Bonds
(Series 2020A) TOBs, (BP PLC GTD), 4.000%, Mandatory
Tender 6/1/2026
|
5,783,650
|
|
|
|
TOTAL
|
67,439,051
|
|
|
|
Louisiana—0.6%
|
|
|
5,000,000
|
|
Louisiana Local Government Environmental Facilities Community
Development Authority (East Baton Rouge Sewerage
Commission), Subordinate Lien Multi-Modal Revenue Refunding
Bonds (Series 2020B) TOBs, 0.875%, Mandatory Tender 2/1/2025
|
4,961,300
|
|
6,885,000
|
|
St. John the Baptist Parish, LA (Marathon Oil Corp.), Revenue
Refunding Bonds (Series 2017B-1) TOBs, 2.125%, Mandatory
Tender 7/1/2024
|
6,928,238
|
|
6,000,000
|
|
St. John the Baptist Parish, LA (Marathon Oil Corp.), Revenue
Refunding Bonds (Series 2019 A-1) TOBs, 2.000%, Mandatory
Tender 4/1/2023
|
6,018,960
|
|
|
|
TOTAL
|
17,908,498
|
|
|
|
Massachusetts—2.0%
|
|
|
3,500,000
|
|
Massachusetts Department of Transportation, Subordinated
Metropolitan Highway System Revenue Refunding Bonds
(Series 2019A) TOBs, 5.000%, Mandatory Tender 1/1/2023
|
3,850,035
|
|
11,000,000
|
1
|
Massachusetts Development Finance Agency (Mass General
Brigham), Index Floating Rate Bonds (Series 2017S) FRNs,
0.540% (SIFMA 7-day +0.420%), Mandatory Tender 1/27/2022
|
10,983,280
|
|
12,000,000
|
1
|
Massachusetts Development Finance Agency (Mass General
Brigham), Index Floating Rate Bonds (Series 2017S) FRNs,
0.620% (SIFMA 7-day +0.500%), Mandatory Tender 1/26/2023
|
11,989,560
|
|
5,700,000
|
|
Massachusetts Development Finance Agency (Mass General
Brigham), Revenue Bonds (Series 2017 S-4) TOBs, 5.000%,
Mandatory Tender 1/25/2024
|
6,565,374
|
|
6,250,000
|
|
Massachusetts HEFA (University of Massachusetts), Revenue
Bonds (Series A) TOBs, 1.819%, Mandatory Tender 4/1/2022
|
6,386,063
|
|
4,000,000
|
1
|
Massachusetts State HFA (Massachusetts State HFA SFH
Revenue), Single Family Housing Revenue Bonds (Series 196)
FRNs, 0.459% (1-month USLIBOR x 0.70 +0.350%), Mandatory
Tender 6/1/2021
|
4,000,000
|
|
2,225,000
|
|
Massachusetts State HFA (Massachusetts State HFA SFH
Revenue), Single Family Housing Revenue Bonds (Series 212)
TOBs, 1.450%, Mandatory Tender 12/1/2022
|
2,256,795
|
Annual Shareholder Report
17
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Massachusetts—continued
|
|
|
$9,190,000
|
|
Orange, MA BANs, 1.250%, 8/27/2021
|
$9,248,816
|
|
|
|
TOTAL
|
55,279,923
|
|
|
|
Michigan—1.5%
|
|
|
10,000,000
|
|
Michigan State Hospital Finance Authority (Ascension
Health Alliance Senior Credit Group), Refunding and Project
Revenue Bonds (Series 2010F-2) TOBs, 1.900%, Mandatory
Tender 4/1/2021
|
10,079,900
|
|
13,030,000
|
1
|
Michigan State Hospital Finance Authority (McLaren Health
Care Corp.), Hospital Revenue Refunding Floating Rate Bonds
(Series 2015D-1) FRNs, 0.503% (1-month USLIBOR x 0.68
+0.400%), Mandatory Tender 10/15/2021
|
12,944,132
|
|
11,680,000
|
1
|
Michigan State Housing Development Authority, Rental Housing
Revenue Bonds (Series 2016E) FRNs, 1.207% (3-month USLIBOR x
0.70 +1.000%), Mandatory Tender 10/1/2021
|
11,707,682
|
|
6,225,000
|
|
University of Michigan (The Regents of), General Revenue Bonds
(Series 2019C) TOBs, 3.934%, Mandatory Tender 4/1/2024
|
6,872,587
|
|
|
|
TOTAL
|
41,604,301
|
|
|
|
Minnesota—0.4%
|
|
|
5,000,000
|
|
Brooklyn Center, MN (Sonder House Apartments), Multifamily
Housing Revenue Refunding Bonds (Series 2019) TOBs, 1.350%,
Mandatory Tender 7/1/2022
|
5,011,950
|
|
7,000,000
|
1
|
Minnesota State HFA, Residential Housing Finance Bonds
(Series 2018D) FRNs, 0.550% (SIFMA 7-day +0.430%), Mandatory
Tender 7/3/2023
|
6,997,830
|
|
|
|
TOTAL
|
12,009,780
|
|
|
|
Mississippi—0.3%
|
|
|
7,750,000
|
|
Mississippi Business Finance Corp. (Mississippi Power Co.),
Revenue Bonds (First Series 2010) TOBs, 2.750%, Mandatory
Tender 12/9/2021
|
7,856,020
|
|
|
|
Missouri—1.0%
|
|
|
10,000,000
|
|
Missouri State Environmental Improvement & Energy Resources
Authority (Union Electric Co.), Environmental Improvement
Revenue Refunding Bonds (Series 1992), 1.600%, 12/1/2022
|
10,123,900
|
|
17,000,000
|
|
Missouri State Public Utilities Commission, Interim Construction
Notes (Series 2020), 0.500%, 3/1/2022
|
17,017,000
|
|
|
|
TOTAL
|
27,140,900
|
|
|
|
Montana—0.5%
|
|
|
12,235,000
|
1
|
Montana Facility Finance Authority (Billings Clinic Obligated
Group), Variable Rate Revenue Bonds (Series 2018C) FRNs,
0.670% (SIFMA 7-day +0.550%), Mandatory Tender 8/15/2023
|
12,228,883
|
|
3,000,000
|
1
|
Montana State University (The Board of Regents of), Facilities
Refunding Revenue Bonds (Series 2018F) FRNs, 0.570% (SIFMA
7-day +0.450%), Mandatory Tender 9/1/2023
|
2,996,190
|
|
|
|
TOTAL
|
15,225,073
|
Annual Shareholder Report
18
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Multi State—0.4%
|
|
|
$1,210,000
|
1
|
BB&T Muni Trust, Tax-Exempt Pool Certificates
(Series 2016 Class D) FRNs, (Cooperatieve Rabobank UA LOC),
1.370% (SIFMA 7-day +1.250%), 12/31/2021
|
$1,210,000
|
|
11,264,344
|
1
|
BB&T Muni Trust, Tax-Exempt Pool Certificates
(Series 2018 Class C) FRNs, (Cooperatieve Rabobank UA LOC),
1.020% (SIFMA 7-day +0.800%), 11/30/2021
|
11,264,344
|
|
|
|
TOTAL
|
12,474,344
|
|
|
|
Nevada—1.8%
|
|
|
27,000,000
|
|
Clark County, NV Airport System, Airport System Junior
Subordinate Lien Revenue Notes (Series 2017C),
5.000%, 7/1/2021
|
27,867,510
|
|
2,000,000
|
|
Clark County, NV Airport System, Airport System Subordinate
Lien Revenue Refunding Bonds (Series 2019A), 5.000%, 7/1/2025
|
2,376,180
|
|
5,000,000
|
|
Clark County, NV Pollution Control (Nevada Power Co.), Pollution
Control Refunding Revenue Bonds (Series 2017) TOBs, 1.650%,
Mandatory Tender 3/31/2023
|
5,042,650
|
|
500,000
|
|
Clark County, NV School District, LT GO Building Bonds
(Series 2020A), (Assured Guaranty Municipal Corp. INS),
3.000%, 6/15/2023
|
532,000
|
|
1,450,000
|
|
Clark County, NV School District, LT GO Building Bonds
(Series 2020A), (Assured Guaranty Municipal Corp. INS),
3.000%, 6/15/2025
|
1,602,148
|
|
550,000
|
|
Clark County, NV School District, LT GO Building Bonds
(Series 2020A), (Assured Guaranty Municipal Corp. INS),
5.000%, 6/15/2026
|
673,651
|
|
2,500,000
|
|
Director of the State of Nevada Department of Business and
Industry (DesertXpress Enterprises, LLC),
(Series 2020A: Brightline West Passenger Rail) TOBs, (United
States Treasury GTD), 0.500%, Mandatory Tender 7/1/2021
|
2,500,000
|
|
3,000,000
|
|
Director of the State of Nevada Department of Business and
Industry (Republic Services, Inc.) TOBs, 0.875%, Mandatory
Tender 12/1/2020
|
3,003,210
|
|
7,000,000
|
|
Humboldt County, NV (Idaho Power Co.), PCR Refunding Bonds
(Series 2003), 1.450%, 12/1/2024
|
7,195,510
|
|
|
|
TOTAL
|
50,792,859
|
|
|
|
New Hampshire—0.9%
|
|
|
4,000,000
|
|
National Finance Authority, NH (Waste Management, Inc.),
(Series A-2) TOBs, 0.400%, Mandatory Tender 12/1/2020
|
4,000,120
|
|
5,000,000
|
|
National Finance Authority, NH (Waste Management, Inc.),
(Series A-3) TOBs, 0.400%, Mandatory Tender 12/1/2020
|
5,000,150
|
|
10,000,000
|
1
|
National Finance Authority, NH (Waste Management, Inc.), Solid
Waste Disposal Refunding Revenue Bonds (Series 2018A) FRNs,
0.870% (SIFMA 7-day +0.750%), Mandatory Tender 10/1/2021
|
10,001,100
|
Annual Shareholder Report
19
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
New Hampshire—continued
|
|
|
$1,500,000
|
|
National Finance Authority, NH (Waste Management, Inc.), Solid
Waste Disposal Refunding Revenue Bonds (Series 2019A-1)
TOBs, 2.150%, Mandatory Tender 7/1/2024
|
$1,556,550
|
|
4,000,000
|
|
National Finance Authority, NH (Waste Management, Inc.), Solid
Waste Disposal Refunding Revenue Bonds (Series 2019A-3)
TOBs, 2.150%, Mandatory Tender 7/1/2024
|
4,150,800
|
|
2,000,000
|
|
National Finance Authority, NH (Waste Management, Inc.), Solid
Waste Disposal Refunding Revenue Bonds (Series 2019A-4)
TOBs, 2.150%, Mandatory Tender 7/1/2024
|
2,075,400
|
|
|
|
TOTAL
|
26,784,120
|
|
|
|
New Jersey—5.4%
|
|
|
10,174,759
|
|
Asbury Park, NJ BANs, 1.500%, 1/22/2021
|
10,211,693
|
|
9,578,827
|
|
Bridgeton, NJ BANs, 1.250%, 5/25/2021
|
9,621,644
|
|
4,086,518
|
|
Englewood Cliffs, NJ BANs, 2.000%, 2/19/2021
|
4,113,121
|
|
7,000,000
|
|
New Jersey EDA (New Jersey-American Water Co., Inc.), Water
Facilities Refunding Revenue Bonds (Series 2020B) TOBs,
1.200%, Mandatory Tender 6/1/2023
|
7,103,810
|
|
7,000,000
|
1
|
New Jersey Turnpike Authority, Revenue Refunding Bonds
(Series 2017 C-2) FRNs, 0.589% (1-month USLIBOR x 0.70
+0.480%), 1/1/2022
|
6,984,950
|
|
30,000,000
|
1
|
New Jersey Turnpike Authority, Revenue Refunding Bonds
(Series 2017 C-5) FRNs, 0.569% (1-month USLIBOR x 0.70
+0.460%), Mandatory Tender 1/1/2021
|
29,994,000
|
|
20,000,000
|
1
|
New Jersey Turnpike Authority, Revenue Refunding Bonds
(Series 2017 C-6) FRNs, 0.859% (1-month USLIBOR x 0.70
+0.750%), Mandatory Tender 1/1/2023
|
20,013,200
|
|
3,250,000
|
|
Newark, NJ BANs, 3.500%, 7/27/2021
|
3,325,270
|
|
1,170,000
|
|
Newark, NJ, (Series B) BANs, 2.000%, 10/5/2021
|
1,185,093
|
|
4,239,000
|
|
Newark, NJ, (Series C) BANs, 2.000%, 10/5/2021
|
4,293,683
|
|
630,000
|
|
Newark, NJ, UT GO Qualified General Improvement Refunding
Bonds (Series 2020A), (Assured Guaranty Municipal Corp. INS),
5.000%, 10/1/2023
|
711,491
|
|
750,000
|
|
Newark, NJ, UT GO Qualified General Improvement Refunding
Bonds (Series 2020A), (Assured Guaranty Municipal Corp. INS),
5.000%, 10/1/2024
|
874,485
|
|
100,000
|
|
Newark, NJ, UT GO Qualified General Improvement Refunding
Bonds (Series 2020A), 5.000%, 10/1/2021
|
104,163
|
|
650,000
|
|
Newark, NJ, UT GO Qualified General Improvement Refunding
Bonds (Series 2020A), 5.000%, 10/1/2022
|
703,846
|
|
400,000
|
|
Newark, NJ, UT GO Qualified School Refunding Bonds
(Series 2020B), (Assured Guaranty Municipal Corp. INS),
5.000%, 10/1/2023
|
451,740
|
|
200,000
|
|
Newark, NJ, UT GO Qualified School Refunding Bonds
(Series 2020B), 5.000%, 10/1/2021
|
208,490
|
Annual Shareholder Report
20
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
New Jersey—continued
|
|
|
$400,000
|
|
Newark, NJ, UT GO Qualified School Refunding Bonds
(Series 2020B), 5.000%, 10/1/2022
|
$433,552
|
|
5,305,844
|
|
Riverdale Borough, NJ BANs, 1.500%, 9/10/2021
|
5,355,613
|
|
6,316,000
|
|
Roseland, NJ BANs, 2.000%, 4/30/2021
|
6,352,064
|
|
5,837,030
|
|
Roselle, NJ BANs, 2.000%, 11/18/2020
|
5,849,638
|
|
3,562,500
|
|
South Hackensack, NJ BANs, 1.500%, 2/18/2021
|
3,578,745
|
|
6,167,000
|
|
Spring Lake Heights, NJ BANs, 1.000%, 10/7/2021
|
6,198,884
|
|
3,500,000
|
|
Tobacco Settlement Financing Corp., NJ, Tobacco Settlement
Asset-Backed Refunding Bonds (Series 2018A), 5.000%, 6/1/2021
|
3,598,490
|
|
2,000,000
|
|
Tobacco Settlement Financing Corp., NJ, Tobacco Settlement
Asset-Backed Refunding Bonds (Series 2018A), 5.000%, 6/1/2022
|
2,139,640
|
|
6,594,974
|
|
Union Beach, NJ BANs, 1.500%, 2/19/2021
|
6,625,245
|
|
2,952,000
|
|
Weehawken Township, NJ BANs, 1.750%, 2/12/2021
|
2,967,557
|
|
8,585,257
|
|
West Orange Township, NJ BANs, 2.000%, 5/6/2021
|
8,662,954
|
|
|
|
TOTAL
|
151,663,061
|
|
|
|
New Mexico—1.2%
|
|
|
2,000,000
|
|
Farmington, NM (Public Service Co., NM), Pollution Control
Revenue Refunding Bonds (Series 2010B) TOBs, 2.125%,
Mandatory Tender 6/1/2022
|
2,043,120
|
|
5,000,000
|
|
Farmington, NM (Public Service Co., NM), Pollution Control
Revenue Refunding Bonds (Series 2016B) TOBs, 1.875%,
Mandatory Tender 10/1/2021
|
5,056,800
|
|
5,000,000
|
|
Farmington, NM (Public Service Co., NM), Pollution Control
Revenue Refunding Bonds San Juan Project (Series 2010C) TOBs,
1.150%, Mandatory Tender 6/4/2024
|
5,028,800
|
|
3,000,000
|
|
Farmington, NM (Public Service Co., NM), Pollution Control
Revenue Refunding Bonds San Juan Project (Series 2010D) TOBs,
1.100%, Mandatory Tender 6/1/2023
|
3,014,220
|
|
3,300,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A) TOBs,
(Royal Bank of Canada GTD), 5.000%, Mandatory
Tender 5/1/2025
|
3,926,637
|
|
1,000,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 11/1/2021
|
1,038,870
|
|
1,000,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 11/1/2022
|
1,073,790
|
|
1,150,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 11/1/2023
|
1,273,223
|
|
1,685,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 11/1/2024
|
1,918,440
|
Annual Shareholder Report
21
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
New Mexico—continued
|
|
|
$1,200,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 5/1/2021
|
$1,225,092
|
|
1,000,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 5/1/2022
|
1,056,230
|
|
1,100,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 5/1/2023
|
1,199,308
|
|
1,600,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 5/1/2024
|
1,796,624
|
|
3,725,000
|
|
New Mexico Municipal Energy Acquisition Authority, Gas Supply
Revenue Refunding and Acquisition Bonds (Series 2019A), (Royal
Bank of Canada GTD), 4.000%, 5/1/2025
|
4,290,194
|
|
|
|
TOTAL
|
33,941,348
|
|
|
|
New York—15.7%
|
|
|
9,940,000
|
|
Attica, NY Central School District BANs, 2.000%, 6/23/2021
|
10,019,122
|
|
9,000,000
|
|
Auburn City School District, NY BANs, 1.500%, 6/23/2021
|
9,039,060
|
|
4,838,035
|
|
Belfast, NY Central School District, (Series 2019A) BANs,
2.000%, 12/4/2020
|
4,849,937
|
|
6,795,000
|
|
Campbell-Savona, NY, Central School District BANs,
1.500%, 6/25/2021
|
6,824,694
|
|
16,500,000
|
|
Chautauqua County, NY Capital Resource Corporation (NRG
Energy, Inc.), Exempt Facilities Revenue Refunding Bonds
(Series 2020) TOBs, 1.278%, Mandatory Tender 4/3/2023
|
16,388,130
|
|
3,235,000
|
|
Cortland, NY BANs, 1.750%, 11/25/2020
|
3,237,006
|
|
10,307,000
|
|
Dalton-Nunda, NY Central School District BANs,
1.500%, 6/24/2021
|
10,359,463
|
|
13,584,000
|
|
Elba, NY BANs, 1.750%, 11/24/2020
|
13,599,350
|
|
35,555,000
|
|
Elmira, NY City School District BANs, 1.500%, 6/25/2021
|
35,736,330
|
|
2,523,000
|
|
Endicott, NY BANs, 1.000%, 8/26/2021
|
2,534,808
|
|
4,500,000
|
|
Fort Plain, NY CSD BANs, 1.500%, 6/30/2021
|
4,529,475
|
|
28,000,000
|
|
Greater Southern Tier Board of Cooperative Educational
Services, NY RANs, 1.500%, 6/30/2021
|
28,189,560
|
|
1,625,000
|
|
Hempstead, NY Union Free School District RANs,
1.750%, 12/15/2020
|
1,628,185
|
|
2,780,000
|
|
Honeoye, NY Central School District BANs, 1.500%, 6/30/2021
|
2,794,261
|
|
3,165,000
|
|
Island Park Village, NY BANs, 2.000%, 3/4/2021
|
3,186,490
|
|
3,349,170
|
|
Jamestown, NY BANs, 2.000%, 3/4/2021
|
3,365,447
|
Annual Shareholder Report
22
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
New York—continued
|
|
|
$12,000,000
|
1
|
Long Island Power Authority, NY, Electric System General
Revenue Bonds (Series 2014C) (LIBOR Floating Rate Tender
Notes) FRNs, 0.859% (1-month USLIBOR x 0.70 +0.750%),
Mandatory Tender 10/1/2023
|
$11,993,160
|
|
12,000,000
|
|
Long Island Power Authority, NY, Electric System General
Revenue Bonds (Series 2019B) TOBs, 1.650%, Mandatory
Tender 9/1/2024
|
12,375,360
|
|
10,385,000
|
|
Long Island Power Authority, NY, Electric System General
Revenue Bonds (Series 2020B) TOBs, 0.850%, Mandatory
Tender 9/1/2025
|
10,436,717
|
|
3,015,000
|
1
|
Metropolitan Transportation Authority, NY (MTA Dedicated Tax
Fund), Dedicated Tax Fund Variable Rate Bonds
(Series 2008A-2A) FRNs, 0.570% (SIFMA 7-day +0.450%),
Mandatory Tender 6/1/2022
|
2,988,679
|
|
9,000,000
|
1
|
Metropolitan Transportation Authority, NY (MTA Transportation
Revenue), Transportation Revenue Variable Rate Refunding Bonds
(Series 2002D-A2) FRNs, (Assured Guaranty Municipal Corp. INS),
0.787% (1-month USLIBOR x 0.69 +0.680%), Mandatory
Tender 4/6/2021
|
8,914,860
|
|
28,000,000
|
1
|
Metropolitan Transportation Authority, NY (MTA Transportation
Revenue), Transportation Revenue Variable Rate Refunding Bonds
(Series 2011B) FRNs, 0.654% (1-month USLIBOR x 0.67 +0.550%),
Mandatory Tender 11/1/2022
|
26,487,440
|
|
6,380,000
|
|
Montgomery County, NY BANs, 2.000%, 10/8/2021
|
6,481,761
|
|
7,990,000
|
|
New York City Housing Development Corp., Sustainable
Development Bonds (Series 2016C-2) TOBs, 0.850%, Mandatory
Tender 4/29/2021
|
7,991,278
|
|
6,000,000
|
|
New York State Board of Cooperative Educational Services
(Jefferson Lewis Hamilton Counties, NY) RANs,
1.250%, 6/17/2021
|
6,032,340
|
|
17,000,000
|
|
New York State Board of Cooperative Educational Services
(Orange and Ulster Counties, NY CSD) RANs, 1.000%, 7/22/2021
|
17,069,870
|
|
25,000,000
|
|
New York State Dormitory Authority State Personal Income Tax
Revenue, (Series B), 5.000%, 3/31/2021
|
25,600,750
|
|
3,000,000
|
|
New York State Environmental Facilities Corp. (Waste
Management, Inc.), Solid Waste Disposal Refunding Revenue
Bonds (Series 2012) TOBs, 0.450%, Mandatory Tender 11/2/2020
|
3,000,180
|
|
12,900,000
|
|
Newark Valley, NY Central School District BANs,
1.000%, 6/25/2021
|
12,961,404
|
|
3,732,000
|
|
North West Fire District, NY, (Series A) BANs, 1.500%, 4/27/2021
|
3,740,919
|
|
4,350,213
|
|
Oneida, NY Public Library District BANs, 1.500%, 7/9/2021
|
4,351,823
|
|
16,790,000
|
|
Oneonta, NY City School District BANs, 1.500%, 6/25/2021
|
16,838,859
|
|
8,000,000
|
|
Portville, NY Central School District BANs, 1.500%, 7/30/2021
|
8,066,880
|
|
7,350,000
|
|
Romulus, NY Central School District BANs, 1.500%, 6/25/2021
|
7,392,924
|
|
2,660,000
|
|
Rose, NY BANs, 1.250%, 9/16/2021
|
2,677,769
|
Annual Shareholder Report
23
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
New York—continued
|
|
|
$5,242,406
|
|
Sackets Harbor, NY CSD BANs, 2.000%, 6/18/2021
|
$5,294,568
|
|
7,000,000
|
|
Schenectady, NY TANs, 1.000%, 9/30/2021
|
7,040,390
|
|
5,559,271
|
|
Scio, NY Central School District BANs, 1.250%, 6/25/2021
|
5,584,455
|
|
19,065,000
|
|
Southwestern, NY Central School District BANs,
1.500%, 6/24/2021
|
19,206,653
|
|
5,340,000
|
|
Stillwater, NY BANs, 1.500%, 6/4/2021
|
5,374,123
|
|
25,000,000
|
|
Syracuse, NY BANs, 2.000%, 7/30/2021
|
25,341,750
|
|
5,845,000
|
|
Warrensburg, NY CSD BANs, 1.500%, 6/25/2021
|
5,852,131
|
|
2,544,000
|
|
Watson, NY BANs, 1.500%, 4/23/2021
|
2,548,528
|
|
11,529,686
|
|
Wayne, NY Central School District BANs, 1.500%, 6/30/2021
|
11,612,123
|
|
|
|
TOTAL
|
439,539,012
|
|
|
|
North Carolina—1.3%
|
|
|
850,000
|
|
Columbus County, NC Industrial Facilities & Pollution Control
Financing Authority (International Paper Co.), Recovery Zone
Facility Revenue Refunding Bonds (Series 2019B) TOBs, 2.000%,
Mandatory Tender 10/1/2024
|
886,626
|
|
1,000,000
|
|
Columbus County, NC Industrial Facilities & Pollution Control
Financing Authority (International Paper Co.), Recovery Zone
Facility Revenue Refunding Bonds (Series 2020A) TOBs, 1.375%,
Mandatory Tender 6/16/2025
|
1,019,040
|
|
12,500,000
|
|
North Carolina Capital Facilities Finance Agency (Republic
Services, Inc.), (Series 2013) TOBs, 0.280%, Mandatory
Tender 12/15/2020
|
12,501,500
|
|
3,000,000
|
|
North Carolina Capital Facilities Finance Agency (Republic
Services, Inc.), (Series B) TOBs, 0.280%, Mandatory
Tender 12/1/2020
|
3,000,300
|
|
20,000,000
|
1
|
University of North Carolina at Chapel Hill, General Revenue
Refunding Bonds (Series 2019A) FRNs, 0.454% (1-month
USLIBOR x 0.67 +0.350%), Mandatory Tender 12/1/2021
|
20,000,000
|
|
|
|
TOTAL
|
37,407,466
|
|
|
|
Ohio—1.4%
|
|
|
1,000,000
|
|
Chillicothe, OH BANs, 1.000%, 9/29/2021
|
1,005,150
|
|
2,500,000
|
|
Harrison, OH BANs, 3.000%, 10/28/2020
|
2,504,775
|
|
8,000,000
|
|
Lancaster, OH Port Authority, Gas Supply Revenue Refunding
Bonds (Series 2019) TOBs, (Royal Bank of Canada GTD), 5.000%,
Mandatory Tender 2/1/2025
|
9,438,960
|
|
4,400,000
|
|
Lorain County, OH, (Series A) BANs, 3.000%, 2/6/2021
|
4,435,024
|
|
2,250,000
|
|
Obetz Village, OH, (Series B) BANs, 2.000%, 11/20/2020
|
2,254,927
|
|
13,000,000
|
1
|
Ohio State Higher Educational Facility Commission (Case
Western Reserve University, OH), Revenue Refunding Bonds
(Series 2019A) FRNs, 0.529% (1-month USLIBOR x 0.70 +0.420%),
Mandatory Tender 4/1/2022
|
12,987,260
|
Annual Shareholder Report
24
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Ohio—continued
|
|
|
$4,000,000
|
|
Ohio State Hospital Revenue (University Hospitals Health System,
Inc.), Hospital Revenue Bonds (Series 2020B) TOBs, 5.000%,
Mandatory Tender 1/15/2025
|
$4,681,360
|
|
1,000,000
|
|
Ohio Waste Development Authority Solid Waste (Waste
Management, Inc.), Revenue Bonds (Series 2002),
3.250%, 11/1/2022
|
1,049,600
|
|
1,225,000
|
|
Trenton, OH BANs, 2.125%, 11/12/2020
|
1,227,401
|
|
|
|
TOTAL
|
39,584,457
|
|
|
|
Oklahoma—0.2%
|
|
|
2,850,000
|
|
Cleveland County, OK Educational Facilities Authority (Norman
Public Schools), Education Facilities Lease Revenue Bonds
(Series 2019), 5.000%, 6/1/2022
|
3,055,314
|
|
2,080,000
|
|
Cleveland County, OK Educational Facilities Authority (Norman
Public Schools), Educational Facilities Lease Revenue Bonds
(Series 2019), 5.000%, 6/1/2021
|
2,141,526
|
|
1,500,000
|
|
Cleveland County, OK Educational Facilities Authority (Norman
Public Schools), Educational Facilities Lease Revenue Bonds
(Series 2019), 5.000%, 6/1/2024
|
1,726,695
|
|
|
|
TOTAL
|
6,923,535
|
|
|
|
Oregon—0.1%
|
|
|
530,000
|
|
Clackamas County, OR Hospital Facilities Authority (Rose Villa,
Inc.), Senior Living Revenue Bonds TEMPS-50 (Series 2020B-2),
2.750%, 11/15/2025
|
534,606
|
|
1,780,000
|
|
Clackamas County, OR Hospital Facilities Authority (Rose Villa,
Inc.), Senior Living Revenue Bonds TEMPS-85 (Series 2020B-1),
3.250%, 11/15/2025
|
1,795,201
|
|
|
|
TOTAL
|
2,329,807
|
|
|
|
Pennsylvania—8.1%
|
|
|
8,135,000
|
1
|
Bethlehem, PA Area School District Authority, Revenue
Refunding Bonds (Series 2018) FRNs, 0.586% (1-month
USLIBOR x 0.70 +0.480%), Mandatory Tender 11/1/2021
|
8,077,160
|
|
9,990,000
|
1
|
Bethlehem, PA Area School District Authority, Revenue
Refunding Bonds (Series 2018A) FRNs, 0.586% (1-month
USLIBOR x 0.70 +0.480%), Mandatory Tender 11/1/2021
|
9,918,971
|
|
11,505,000
|
1
|
Lehigh County, PA General Purpose Authority (Muhlenberg
College), College Revenue Bonds (Series 2019) FRNs, 0.700%
(SIFMA 7-day +0.580%), Mandatory Tender 11/1/2024
|
11,466,803
|
|
5,450,000
|
|
Lehigh County, PA IDA (PPL Electric Utilities Corp.), Pollution
Control Revenue Refunding Bonds (Series 2016B) TOBs, 1.800%,
Mandatory Tender 8/15/2022
|
5,520,142
|
|
1,500,000
|
1
|
Manheim Township, PA School District, GO LIBOR Notes
(Series 2017A) FRNs, 0.425% (1-month USLIBOR x 0.68
+0.320%), 5/3/2021
|
1,494,705
|
Annual Shareholder Report
25
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Pennsylvania—continued
|
|
|
$1,850,000
|
1
|
Manheim Township, PA School District, GO LIBOR Notes
(Series 2017A) FRNs, 0.525% (1-month USLIBOR x 0.68
+0.420%), 11/1/2021
|
$1,839,511
|
|
3,400,000
|
1
|
Manheim Township, PA School District, GO LIBOR Notes
(Series 2017A) FRNs, 0.575% (1-month USLIBOR x 0.68 +0.470%),
Mandatory Tender 11/1/2021
|
3,382,456
|
|
5,000,000
|
1
|
Montgomery County, PA Higher Education & Health Authority
Hospital (Thomas Jefferson University), Revenue Bonds
(Series 2018C) FRNs, 0.840% (SIFMA 7-day +0.720%),
Mandatory Tender 9/1/2023
|
4,996,950
|
|
1,100,000
|
1
|
North Penn, PA Water Authority, SIFMA Index Rate Water
Revenue Refunding Bonds (Series 2019) FRNs, 0.380%
(SIFMA 7-day +0.260%), 11/1/2021
|
1,097,393
|
|
1,200,000
|
1
|
North Penn, PA Water Authority, SIFMA Index Rate Water
Revenue Refunding Bonds (Series 2019) FRNs, 0.580%
(SIFMA 7-day +0.460%), 11/1/2023
|
1,192,728
|
|
4,000,000
|
1
|
Northampton County, PA General Purpose Authority (St. Luke’s
University Health Network), Variable Rate Hospital Revenue
Bonds (Series 2018B) FRNs, 1.149% (1-month USLIBOR x 0.70
+1.040%), Mandatory Tender 8/15/2024
|
3,985,600
|
|
10,000,000
|
|
Pennsylvania Economic Development Financing Authority (PPL
Electric Utilities Corp.), Pollution Control Revenue Refunding
Bonds (Series 2008), 0.400%, 10/1/2023
|
10,001,100
|
|
50,000,000
|
|
Pennsylvania Economic Development Financing Authority
(Republic Services, Inc.), (Series 2014) TOBs, 0.650%, Mandatory
Tender 1/4/2021
|
50,000,000
|
|
1,500,000
|
|
Pennsylvania Economic Development Financing Authority
(Republic Services, Inc.), (Series B-1) TOBs, 0.600%, Mandatory
Tender 10/15/2020
|
1,500,210
|
|
15,500,000
|
|
Pennsylvania Economic Development Financing Authority (Waste
Management, Inc.), (Series 2013) TOBs, 0.450%, Mandatory
Tender 11/2/2020
|
15,500,930
|
|
5,000,000
|
|
Pennsylvania Economic Development Financing Authority (Waste
Management, Inc.), Solid Waste Disposal Revenue Bonds
(Series 2017A) TOBs, 0.700%, Mandatory Tender 8/2/2021
|
5,004,150
|
|
6,000,000
|
1
|
Pennsylvania HFA, SFM Revenue Bonds (Series 2018-127C) FRNs,
0.676% (1-month USLIBOR x 0.70 +0.570%), Mandatory
Tender 10/1/2023
|
5,994,060
|
|
4,000,000
|
1
|
Pennsylvania State Turnpike Commission, Variable Rate Turnpike
Revenue Bonds (Series 2018B) FRNs, 0.620% (SIFMA 7-day
+0.500%), 12/1/2021
|
4,001,000
|
|
5,000,000
|
1
|
Pennsylvania State Turnpike Commission, Variable Rate Turnpike
Revenue Bonds (Series 2018B) FRNs, 0.820% (SIFMA 7-day
+0.700%), 12/1/2023
|
5,027,600
|
|
10,000,000
|
1
|
Pennsylvania State Turnpike Commission, Variable Rate Turnpike
Revenue Bonds (SIFMA Index Bonds)(Series 2018A-1) FRNs,
0.720% (SIFMA 7-day +0.600%), 12/1/2023
|
10,044,400
|
Annual Shareholder Report
26
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Pennsylvania—continued
|
|
|
$2,285,000
|
|
Philadelphia, PA, GO Bonds (Series 2019B), 5.000%, 2/1/2023
|
$2,516,219
|
|
750,000
|
|
Philadelphia, PA, GO Bonds (Series 2019B), 5.000%, 2/1/2024
|
857,160
|
|
40,000,000
|
1
|
Pittsburgh, PA Water & Sewer Authority, First Lien Revenue
Refunding Bonds (Series 2018C) FRNs, (Assured Guaranty
Municipal Corp. INS), 0.765% (1-month USLIBOR x 0.70
+0.640%), Mandatory Tender 12/1/2020
|
40,000,000
|
|
4,015,000
|
1
|
Scranton, PA School District, GO Notes (Series 2014) (LIBOR
Floating Rate Tender Notes) FRNs, (Pennsylvania School District
Intercept Program GTD), 0.955% (1-month USLIBOR x 0.68
+0.850%), Mandatory Tender 4/1/2021
|
4,009,660
|
|
6,750,000
|
1
|
Southcentral PA, General Authority (Wellspan Health Obligated
Group), Revenue Bonds (Series 2019A) FRNs, 0.720% (SIFMA
7-day +0.600%), Mandatory Tender 6/1/2024
|
6,750,000
|
|
13,000,000
|
1
|
University of Pittsburgh, Pitt Asset Notes—Higher Education
Registered Series of 2019 FRNs, 0.480% (SIFMA 7-day
+0.360%), 2/15/2024
|
13,010,790
|
|
|
|
TOTAL
|
227,189,698
|
|
|
|
South Carolina—1.9%
|
|
|
2,500,000
|
1
|
Charleston, SC Waterworks and Sewer System, Capital
Improvement Revenue Bonds (Series 2006B) FRNs, 0.474%
(3-month USLIBOR x 0.70 +0.370%), Mandatory Tender 1/1/2022
|
2,495,150
|
|
25,000,000
|
1
|
Patriots Energy Group Financing Agency, Gas Supply Revenue
Bonds (Series 2018B) FRNs, (Royal Bank of Canada GTD), 0.960%
(1-month USLIBOR x 0.67 +0.860%), Mandatory Tender 2/1/2024
|
25,034,500
|
|
24,765,000
|
1
|
South Carolina Transportation Infrastructure Bank, Revenue
Refunding Bonds (Series 2003B) FRNs, 0.554% (1-month
USLIBOR x 0.67 +0.450%), Mandatory Tender 10/1/2022
|
24,637,460
|
|
|
|
TOTAL
|
52,167,110
|
|
|
|
Tennessee—0.9%
|
|
|
4,000,000
|
|
Lewisburg, TN IDB (Waste Management, Inc.), (Series 2012)
TOBs, 0.450%, Mandatory Tender 11/2/2020
|
4,000,240
|
|
2,350,000
|
|
Memphis, TN Health, Educational and Housing Facility Board
(Chickasaw Place Apartments), Collateralized Multifamily Housing
Bonds (Series 2020) TOBs, 0.625%, Mandatory Tender 6/1/2022
|
2,359,259
|
|
16,200,000
|
|
Tennergy Corp., TN Gas Revenue, Gas Supply Revenue Bonds
(Series 2019A) TOBs, (Royal Bank of Canada GTD), 5.000%,
Mandatory Tender 10/1/2024
|
18,893,574
|
|
|
|
TOTAL
|
25,253,073
|
|
|
|
Texas—9.2%
|
|
|
3,000,000
|
|
Alvin, TX Independent School District, Variable Rate Unlimited
Tax Schoolhouse Bonds (Series 2014B) TOBs, (Texas Permanent
School Fund Guarantee Program GTD), 0.450%, Mandatory
Tender 8/15/2023
|
2,997,180
|
|
5,000,000
|
|
Austin, TX Airport System, Revenue Refunding Bonds
(Series 2019), 5.000%, 11/15/2020
|
5,027,800
|
Annual Shareholder Report
27
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Texas—continued
|
|
|
$2,695,000
|
|
Austin, TX Airport System, Revenue Refunding Bonds
(Series 2019), 5.000%, 11/15/2021
|
$2,834,871
|
|
2,500,000
|
|
Austin, TX Airport System, Revenue Refunding Bonds
(Series 2019), 5.000%, 11/15/2022
|
2,726,625
|
|
2,135,000
|
|
Austin, TX Airport System, Revenue Refunding Bonds
(Series 2019), 5.000%, 11/15/2023
|
2,414,685
|
|
3,400,000
|
|
Austin, TX Airport System, Revenue Refunding Bonds
(Series 2019), 5.000%, 11/15/2024
|
3,972,390
|
|
5,000,000
|
|
Central Texas Regional Mobility Authority, Senior Lien Revenue &
Refunding Bonds (Series 2015B) TOBs, 5.000%, Mandatory
Tender 1/7/2021
|
5,014,000
|
|
4,000,000
|
|
Cypress-Fairbanks, TX Independent School District, Variable Rate
UT School Building Bonds (Series 2017A-2) TOBs, (Texas
Permanent School Fund Guarantee Program GTD), 1.250%,
Mandatory Tender 8/15/2022
|
4,072,280
|
|
5,000,000
|
|
Dickinson, TX Independent School District, Variable Rate
Unlimited Tax Refunding Bonds (Series 2013) TOBs, (Texas
Permanent School Fund Guarantee Program GTD), 1.350%,
Mandatory Tender 8/2/2021
|
5,044,900
|
|
15,000,000
|
|
Eagle Mountain-Saginaw, TX Independent School District,
Variable Rate Unlimited Tax School Building Bonds (Series 2011)
TOBs, (Texas Permanent School Fund Guarantee Program GTD),
2.000%, Mandatory Tender 8/1/2024
|
15,808,500
|
|
4,465,000
|
|
Eanes, TX Independent School District, Variable Rate UT School
Building Bonds (Series 2019B) TOBs, (Texas Permanent School
Fund Guarantee Program GTD), 1.750%, Mandatory
Tender 8/1/2025
|
4,649,628
|
|
5,810,000
|
|
Fort Bend, TX Independent School District, UT GO Refunding
Bonds (Series 2019A) TOBs, (Texas Permanent School Fund
Guarantee Program GTD), 1.950%, Mandatory Tender 8/1/2022
|
5,987,031
|
|
5,000,000
|
|
Fort Bend, TX Independent School District, Variable Rate
Unlimited Tax School Building and Refunding Bonds
(Series 2020B) TOBs, (Texas Permanent School Fund Guarantee
Program GTD), 0.875%, Mandatory Tender 8/1/2025
|
5,040,200
|
|
4,500,000
|
|
Georgetown, TX Independent School District, Variable Rate
Unlimited Tax School Building Bonds (Series 2019B) TOBs, (Texas
Permanent School Fund Guarantee Program GTD), 2.750%,
Mandatory Tender 8/1/2022
|
4,702,815
|
|
13,625,000
|
|
Goose Creek, TX ISD, Variable Rate UT School Building Bonds
(Series 2019B) TOBs, (Texas Permanent School Fund Guarantee
Program INS), 3.000%, Mandatory Tender 10/1/2020
|
13,625,000
|
|
3,710,000
|
1
|
Harris County, TX Cultural Education Facilities Finance Corp.
(Memorial Hermann Health System), Hospital Revenue Refunding
Bonds (Series 2013B) FRNs, 0.950% (SIFMA 7-day
+0.830%), 6/1/2021
|
3,715,083
|
Annual Shareholder Report
28
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Texas—continued
|
|
|
$3,000,000
|
|
Harris County, TX Education Facilities Finance Corp.
(Memorial Hermann Health System), Hospital Revenue Bonds
(Series 2019B-1) TOBs, 5.000%, Mandatory Tender 12/1/2022
|
$3,298,890
|
|
5,000,000
|
1
|
Harris County, TX Education Facilities Finance Corp.
(Memorial Hermann Health System), Hospital Revenue Bonds
(Series 2019C-1) FRNs, 0.540% (SIFMA 7-day +0.420%),
Mandatory Tender 12/1/2022
|
4,971,650
|
|
5,000,000
|
1
|
Harris County, TX Education Facilities Finance Corp.
(Memorial Hermann Health System), Hospital Revenue Bonds
(Series 2019C-2) FRNs, 0.690% (SIFMA 7-day +0.570%),
Mandatory Tender 12/4/2024
|
4,973,050
|
|
3,500,000
|
|
Harris County, TX Education Facilities Finance Corp. (Memorial
Hermann Health System), Variable Rate Hospital Revenue
Refunding Bonds (Series 2020C-1) TOBs, 5.000%, Mandatory
Tender 12/1/2022
|
3,858,330
|
|
2,750,000
|
|
Harris County, TX Education Facilities Finance Corp. (Memorial
Hermann Health System), Variable Rate Hospital Revenue
Refunding Bonds (Series 2020C-2) TOBs, 5.000%, Mandatory
Tender 12/1/2024
|
3,243,460
|
|
6,300,000
|
|
Harris County, TX Education Facilities Finance Corp. (Memorial
Hermann Health System), Variable Rate Hospital Revenue
Refunding Bonds (Series 2020C-3) TOBs, 5.000%, Mandatory
Tender 12/1/2026
|
7,883,064
|
|
5,000,000
|
1
|
Houston, TX Combined Utility System, First Lien Revenue
Refunding Bonds (Series 2018C) FRNs, 0.466% (1-month
USLIBOR x 0.70 +0.360%), Mandatory Tender 8/1/2021
|
4,988,000
|
|
3,750,000
|
|
Hutto, TX Independent School District, Unlimited Tax School
Building Bonds (Series 2017) TOBs, (Texas Permanent School
Fund Guarantee Program GTD), 2.000%, Mandatory
Tender 8/1/2025
|
3,993,037
|
|
6,100,000
|
1
|
Katy, TX Independent School District, Variable Rate Unlimited Tax
Refunding Bonds (Series 2015C) FRNs, (Texas Permanent School
Fund Guarantee Program GTD), 0.380% (1-month USLIBOR x
0.67 +0.280%), Mandatory Tender 8/16/2021
|
6,080,419
|
|
1,340,000
|
|
Lower Colorado River Authority, TX (LCRA Transmission Services
Corp.), Transmission Contract Refunding Revenue Bonds
(Series 2019A), 5.000%, 5/15/2021
|
1,379,369
|
|
1,000,000
|
|
Lower Colorado River Authority, TX (LCRA Transmission Services
Corp.), Transmission Contract Refunding Revenue Bonds
(Series 2019A), 5.000%, 5/15/2022
|
1,076,550
|
|
1,000,000
|
|
Lower Colorado River Authority, TX (LCRA Transmission Services
Corp.), Transmission Contract Refunding Revenue Bonds
(Series 2019A), 5.000%, 5/15/2023
|
1,119,550
|
|
1,040,000
|
|
Lower Colorado River Authority, TX (LCRA Transmission Services
Corp.), Transmission Contract Refunding Revenue Bonds
(Series 2019A), 5.000%, 5/15/2024
|
1,208,355
|
Annual Shareholder Report
29
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Texas—continued
|
|
|
$1,020,000
|
|
Lower Colorado River Authority, TX (LCRA Transmission Services
Corp.), Transmission Contract Refunding Revenue Bonds
(Series 2019A), 5.000%, 5/15/2025
|
$1,224,673
|
|
1,000,000
|
|
Lower Colorado River Authority, TX (LCRA Transmission Services
Corp.), Transmission Contract Refunding Revenue Bonds
(Series 2020), 5.000%, 5/15/2021
|
1,029,380
|
|
1,000,000
|
|
Lower Colorado River Authority, TX (LCRA Transmission Services
Corp.), Transmission Contract Refunding Revenue Bonds
(Series 2020), 5.000%, 5/15/2022
|
1,076,550
|
|
5,500,000
|
|
Mansfield, TX Independent School District, UT GO School
Building Bonds (Series 2012) TOBs, (Texas Permanent School
Fund Guarantee Program GTD), 2.500%, Mandatory
Tender 8/1/2021
|
5,601,695
|
|
3,000,000
|
|
Matagorda County, TX Navigation District No. 1 (AEP Texas,
Inc.), PCR Refunding Bonds (Central Power and Light Company
Project) (Series 1996) TOBs, 0.900%, Mandatory Tender 9/1/2023
|
2,987,640
|
|
12,465,000
|
|
Midlothian, TX Independent School District, Variable Rate
Unlimited Tax School Building Bonds (Series 2017B) TOBs,
(Texas Permanent School Fund Guarantee Program GTD),
2.000%, Mandatory Tender 8/1/2023
|
13,010,718
|
|
5,250,000
|
|
Mission, TX Economic Development Corp. (Republic Services,
Inc.) TOBs, 0.500%, Mandatory Tender 11/2/2020
|
5,251,207
|
|
7,000,000
|
|
Mission, TX Economic Development Corp. (Republic Services,
Inc.), (Series 2020 A) TOBs, 0.500%, Mandatory Tender 11/2/2020
|
7,001,610
|
|
5,000,000
|
|
Mission, TX Economic Development Corp. (Waste Management,
Inc.), (Series B) TOBs, 0.400%, Mandatory Tender 12/1/2020
|
5,000,150
|
|
10,000,000
|
1
|
Mission, TX Economic Development Corp. (Waste Management,
Inc.), Solid Waste Disposal Revenue Bonds (Series 2018) FRNs,
0.920% (SIFMA 7-day +0.800%), Mandatory Tender 11/1/2021
|
10,003,200
|
|
12,500,000
|
|
Northside, TX Independent School District, Variable Rate
Unlimited Tax School Building Bonds (Series 2020) TOBs, (Texas
Permanent School Fund Guarantee Program GTD), 0.700%,
Mandatory Tender 6/1/2025
|
12,484,750
|
|
3,675,000
|
|
Pflugerville, TX Independent School District, Variable Rate
Unlimited Tax School Building Bonds (Series 2014) TOBs, (Texas
Permanent School Fund Guarantee Program GTD), 2.250%,
Mandatory Tender 8/15/2022
|
3,809,872
|
|
4,000,000
|
|
San Antonio, TX Water System, Water System Variable Rate
Junior Lien Revenue Bonds (Series 2019A) TOBs, 2.625%,
Mandatory Tender 5/1/2024
|
4,271,720
|
|
5,000,000
|
|
Spring Branch, TX Independent School District, Unlimited Tax
Schoolhouse Bonds (Series 2013) TOBs, (Texas Permanent School
Fund Guarantee Program GTD), 1.550%, Mandatory
Tender 6/15/2021
|
5,021,150
|
|
40,000,000
|
|
Texas State TRANs, 4.000%, 8/26/2021
|
41,370,400
|
Annual Shareholder Report
30
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Texas—continued
|
|
|
$2,675,000
|
|
Tomball, TX Independent School District, Variable Rate Unlimited
Tax School Building Bonds (Series 2014B-1) TOBs, 0.450%,
Mandatory Tender 8/15/2023
|
$2,676,311
|
|
|
|
TOTAL
|
257,527,738
|
|
|
|
Utah—0.3%
|
|
|
5,000,000
|
|
Utah County, UT Hospital Revenue (IHC Health Services, Inc.),
Revenue Bonds (Series 2020 B-1) TOBs, 5.000%, Mandatory
Tender 8/1/2024
|
5,852,250
|
|
1,500,000
|
|
Utah State, UT GO Bonds (Series 2020B), 5.000%, 7/1/2023
|
1,699,380
|
|
1,250,000
|
|
Utah State, UT GO Bonds (Series 2020B), 5.000%, 7/1/2024
|
1,473,863
|
|
|
|
TOTAL
|
9,025,493
|
|
|
|
Virginia—2.0%
|
|
|
13,000,000
|
|
Chesapeake Bay Bridge & Tunnel District, VA, First Tier General
Resolution Revenue Bonds Anticipation Notes (Series 2019),
5.000%, 11/1/2023
|
14,581,450
|
|
3,000,000
|
|
Chesapeake, VA EDA (Virginia Electric & Power Co.), PCR
Refunding Bonds (Series 2008A) TOBs, 1.900%, Mandatory
Tender 6/1/2023
|
3,111,060
|
|
4,500,000
|
|
Louisa, VA IDA (Virginia Electric & Power Co.), PCR Refunding
Bonds (Series 2008A) TOBs, 1.800%, Mandatory Tender 4/1/2022
|
4,590,540
|
|
5,000,000
|
|
Virginia Peninsula Port Authority (Dominion Terminal Associates),
Coal Terminal Revenue Refunding Bonds (Series 2003) TOBs,
1.700%, Mandatory Tender 10/1/2022
|
5,049,900
|
|
4,000,000
|
|
Virginia State Public Building Authority Public Facilities, Public
Facilities Revenue Refunding Bonds (Series 2020B),
5.000%, 8/1/2022
|
4,355,280
|
|
8,650,000
|
|
Virginia State Public Building Authority Public Facilities, Public
Facilities Revenue Refunding Bonds (Series 2020B),
5.000%, 8/1/2023
|
9,831,330
|
|
5,000,000
|
|
Wise County, VA IDA (Virginia Electric & Power Co.),
(Series 2010A) TOBs, 1.200%, Mandatory Tender 5/31/2024
|
5,087,300
|
|
5,000,000
|
|
Wise County, VA IDA (Virginia Electric & Power Co.), Solid Waste
and Sewage Disposal Revenue Bonds (Series 2009A) TOBs,
0.750%, Mandatory Tender 9/2/2025
|
4,992,250
|
|
5,500,000
|
|
York County, VA EDA (Virginia Electric & Power Co.), PCR
Refunding Bonds (Series 2009A) TOBs, 1.900%, Mandatory
Tender 6/1/2023
|
5,699,980
|
|
|
|
TOTAL
|
57,299,090
|
|
|
|
Washington—0.9%
|
|
|
5,000,000
|
1
|
Seattle, WA Municipal Light & Power, Refunding Revenue
Bonds—SIFMA Index (Series 2018C) FRNs, 0.610% (SIFMA 7-day
+0.490%), Mandatory Tender 11/1/2023
|
5,016,750
|
Annual Shareholder Report
31
|
Principal
Amount
|
|
|
Value
|
|
|
|
MUNICIPAL BONDS—continued
|
|
|
|
|
Washington—continued
|
|
|
$2,500,000
|
|
Washington State Health Care Facilities Authority (CommonSpirit
Health), Revenue Bonds (Series 2019B-1) TOBs, 5.000%,
Mandatory Tender 8/1/2024
|
$2,820,950
|
|
10,000,000
|
1
|
Washington State Health Care Facilities Authority (Fred
Hutchinson Cancer Research Center), Variable Rate LIBOR Index
Revenue Bonds (Series 2017B) FRNs, 1.201% (1-month
USLIBOR x 0.67 +1.100%), Mandatory Tender 7/1/2022
|
10,060,700
|
|
7,000,000
|
1
|
Washington State Health Care Facilities Authority (Fred
Hutchinson Cancer Research Center), Variable Rate SIFMA Index
Revenue Bonds (Series 2017C) FRNs, 1.170% (SIFMA 7-day
+1.050%), Mandatory Tender 7/3/2023
|
7,068,740
|
|
|
|
TOTAL
|
24,967,140
|
|
|
|
West Virginia—0.3%
|
|
|
2,500,000
|
|
Roane County, WV Building Commission (Roane General
Hospital), Lease Revenue Bond Anticipation Notes (Series 2019),
2.550%, 11/1/2021
|
2,503,325
|
|
5,500,000
|
|
West Virginia EDA Solid Waste Disposal Facilities (Appalachian
Power Co.), Revenue Bonds (Series 2011A) TOBs, 1.000%,
Mandatory Tender 9/1/2025
|
5,470,080
|
|
|
|
TOTAL
|
7,973,405
|
|
|
|
Wisconsin—1.0%
|
|
|
5,000,000
|
|
Wisconsin State Public Finance Authority (Waste Management,
Inc.), (Series A) TOBs, 0.450%, Mandatory Tender 11/2/2020
|
5,000,300
|
|
13,000,000
|
|
Wisconsin State Public Finance Authority (Waste Management,
Inc.), (Series A-2) TOBs, 0.450%, Mandatory Tender 11/2/2020
|
13,000,780
|
|
10,000,000
|
|
Wisconsin State Public Finance Authority (Waste Management,
Inc.), (Series A-3) TOBs, 0.450%, Mandatory Tender 11/2/2020
|
10,000,600
|
|
|
|
TOTAL
|
28,001,680
|
|
|
|
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $2,251,843,498)
|
2,264,560,806
|
|
|
1
|
SHORT-TERM MUNICIPALS—21.6%
|
|
|
|
|
Alabama—0.1%
|
|
|
75,000
|
|
Bessemer, AL IDB (Hardwick Co., Inc.), (Series 2002) Weekly
VRDNs, (Compass Bank, Birmingham LOC), 2.000%, 10/1/2020
|
75,000
|
|
3,500,000
|
|
Columbia, AL IDB PCRB (Alabama Power Co.), (Series 1997) Daily
VRDNs, 0.170%, 10/1/2020
|
3,500,000
|
|
|
|
TOTAL
|
3,575,000
|
|
|
|
California—2.6%
|
|
|
10,000,000
|
|
Los Angeles, CA Community Redevelopment Agency
(DWF V Hollywood & Vine, LP), Tender Option Bond Trust
Floater Certificates (2020-MIZ9038) Weekly VRDNs, (Federal
Home Loan Mortgage Corp. GTD)/(Mizuho Bank Ltd. LIQ),
0.270%, 10/1/2020
|
10,000,000
|
Annual Shareholder Report
32
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM MUNICIPALS—continued
|
|
|
|
|
California—continued
|
|
|
$12,400,000
|
|
Nuveen California AMT-Free Quality Municipal Income Fund,
(Series A) Weekly VRDNs, 0.680%, 10/1/2020
|
$12,400,000
|
|
41,700,000
|
|
Nuveen California Quality Municipal Income Fund, PUTTERs 3a-7
(Series 5038) (VRDP Series 5) Daily VRDNs, (JPMorgan Chase
Bank, N.A. LIQ), 0.290%, 10/1/2020
|
41,700,000
|
|
3,730,000
|
|
Sweetwater, CA Union High School District, Tender Option Bond
Trust Certificates (Series 2017-XF2462) Weekly VRDNs, (Morgan
Stanley Bank, N.A. LIQ), 0.570%, 10/1/2020
|
3,730,000
|
|
4,000,000
|
|
Sweetwater, CA Union High School District, Tender Option Bond
Trust Receipts (2018-XF0704) Weekly VRDNs, (Toronto Dominion
Bank LIQ), 0.520%, 10/1/2020
|
4,000,000
|
|
|
|
TOTAL
|
71,830,000
|
|
|
|
Florida—0.2%
|
|
|
180,000
|
|
JEA, FL Water & Sewer System, (2008 Series A-1: Subordinate
Revenue Bonds) Daily VRDNs, (U.S. Bank, N.A. LIQ),
0.030%, 9/1/2020
|
180,000
|
|
3,300,000
|
|
Martin County, FL PCRB (Florida Power & Light Co.),
(Series 2000) Daily VRDNs, 0.150%, 10/1/2020
|
3,300,000
|
|
1,700,000
|
|
St. Lucie County, FL Solid Waste Disposal (Florida Power & Light
Co.), (Series 2003) Daily VRDNs, 0.170%, 10/1/2020
|
1,700,000
|
|
|
|
TOTAL
|
5,180,000
|
|
|
|
Georgia—1.8%
|
|
|
1,900,000
|
|
Appling County, GA Development Authority (Georgia Power
Co.), (1st Series 1997) Daily VRDNs, 0.170%, 10/1/2020
|
1,900,000
|
|
850,000
|
|
Appling County, GA Development Authority (Georgia Power
Co.), (First Series 2011) Daily VRDNs, 0.170%, 10/1/2020
|
850,000
|
|
4,940,000
|
|
Bartow County, GA Development Authority (Somerset Cove
Apartments, LP), (Series 2002) Weekly VRDNs, (Compass Bank,
Birmingham LOC), 0.540%, 10/1/2020
|
4,940,000
|
|
6,650,000
|
|
Burke County, GA Development Authority (Georgia Power Co.),
(2018 1st Series) Daily VRDNs, 0.160%, 10/1/2020
|
6,650,000
|
|
27,065,000
|
|
Burke County, GA Development Authority (Georgia Power Co.),
(Third Series 2012) Daily VRDNs, 0.170%, 10/1/2020
|
27,065,000
|
|
1,400,000
|
|
Heard County, GA Development Authority (Georgia Power Co.),
(First Series 1996) Daily VRDNs, 0.200%, 10/1/2020
|
1,400,000
|
|
3,600,000
|
|
Monroe County, GA Development Authority (Gulf Power Co.),
(Series 2019) Daily VRDNs, 0.180%, 10/1/2020
|
3,600,000
|
|
5,500,000
|
|
Monroe County, GA Development Authority Pollution Control
(Gulf Power Co.), (First Series of 2002) Daily VRDNs,
0.150%, 10/1/2020
|
5,500,000
|
|
|
|
TOTAL
|
51,905,000
|
Annual Shareholder Report
33
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM MUNICIPALS—continued
|
|
|
|
|
Kentucky—1.0%
|
|
|
$4,800,000
|
|
Louisville & Jefferson County, KY Regional Airport Authority
(UPS Worldwide Forwarding, Inc. Project), (1999 Series B) Daily
VRDNs, (United Parcel Service, Inc. GTD), 0.150%, 10/1/2020
|
$4,800,000
|
|
9,200,000
|
|
Meade County, KY Industrial Building Revenue Authority (Nucor
Corp.), (Series 2020A-1) Daily VRDNs, 0.190%, 10/1/2020
|
9,200,000
|
|
14,000,000
|
|
Meade County, KY Industrial Building Revenue Authority (Nucor
Corp.), (Series 2020B-1) Daily VRDNs, 0.190%, 10/1/2020
|
14,000,000
|
|
|
|
TOTAL
|
28,000,000
|
|
|
|
Multi State—2.2%
|
|
|
50,000,000
|
|
Nuveen AMT-Free Municipal Credit Income Fund, Series B
Weekly VRDPs, 0.680%, 10/1/2020
|
50,000,000
|
|
11,700,000
|
|
Nuveen AMT-Free Quality Municipal Income Fund, Series D
Weekly VRDPs, 0.680%, 10/1/2020
|
11,700,000
|
|
|
|
TOTAL
|
61,700,000
|
|
|
|
New York—0.3%
|
|
|
1,200,000
|
|
New York City, NY Municipal Water Finance Authority, Second
General Resolution (Fiscal 2009 Series BB-2) Daily VRDNs,
(Landesbank Hessen-Thuringen LIQ), 0.130%, 10/1/2020
|
1,200,000
|
|
2,300,000
|
|
New York City, NY, (Series B-3) Weekly VRENs,
0.360%, 10/1/2020
|
2,300,000
|
|
1,750,000
|
|
New York City, NY, Fiscal 2013 (Subseries A-3) Daily VRDNs,
(Mizuho Bank Ltd. LOC), 0.130%, 10/1/2020
|
1,750,000
|
|
2,000,000
|
|
New York State HFA (350 West 43rd Street), (Series A) Daily
VRDNs, (Landesbank Hessen-Thuringen LOC), 0.160%, 10/1/2020
|
2,000,000
|
|
1,500,000
|
|
New York State Mortgage Agency, (Series 135) Daily VRDNs,
(Barclays Bank plc LIQ), 0.160%, 10/1/2020
|
1,500,000
|
|
|
|
TOTAL
|
8,750,000
|
|
|
|
Ohio—0.9%
|
|
|
23,885,000
|
|
Ohio State Higher Educational Facility Commission (University
Hospitals Health System, Inc.), (Series 2015-B) Weekly VRENs,
0.300%, 10/1/2020
|
23,885,000
|
|
500,000
|
|
Ohio State Hospital Revenue (University Hospitals Health System,
Inc.), Hospital Revenue Bonds (Series 2014B) Weekly VRENs,
0.450%, 10/1/2020
|
500,000
|
|
|
|
TOTAL
|
24,385,000
|
|
|
|
Oregon—0.1%
|
|
|
3,360,000
|
|
Port of Morrow, OR Pollution Control (Idaho Power Co.),
(Series 2000) Weekly VRDNs, 0.250%, 10/1/2020
|
3,360,000
|
|
|
|
Pennsylvania—0.9%
|
|
|
25,355,000
|
|
Pennsylvania State Higher Education Facilities Authority (Thomas
Jefferson University), R-Float (Series 2017B) Weekly VRENs,
0.350%, 10/7/2020
|
25,355,000
|
Annual Shareholder Report
34
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM MUNICIPALS—continued
|
|
|
|
|
Texas—10.3%
|
|
|
$8,000,000
|
|
Brazos River Harbor, TX Navigation District of Brazoria County
(BASF Corp.), (Series 1996) Weekly VRDNs, 0.300%, 10/7/2020
|
$8,000,000
|
|
2,180,000
|
|
Lower Neches Valley Authority, TX IDC (Exxon Mobil Corp.),
(Series 2001 B-2) Daily VRDNs, 0.130%, 10/1/2020
|
2,180,000
|
|
5,000,000
|
|
Lower Neches Valley Authority, TX IDC (Exxon Mobil Corp.),
(Series2001 B-4) Daily VRDNs, 0.130%, 10/1/2020
|
5,000,000
|
|
36,875,000
|
|
Port of Corpus Christi Authority of Nueces County, TX (Flint Hills
Resources LLC), (Series 2002A) Weekly VRDNs,
0.300%, 10/7/2020
|
36,875,000
|
|
11,300,000
|
|
Port of Port Arthur Navigation District of Jefferson County, TX
(BASF Corp.), (Series 1998) Weekly VRDNs, (BASF SE GTD),
0.300%, 10/7/2020
|
11,300,000
|
|
23,500,000
|
|
Port of Port Arthur Navigation District of Jefferson County, TX
(Motiva Enterprises LLC), (Series 2002) Weekly VRDNs,
0.510%, 10/7/2020
|
23,500,000
|
|
64,300,000
|
|
Port of Port Arthur Navigation District of Jefferson County, TX
(Motiva Enterprises LLC), (Series 2010A) Daily VRDNs,
0.170%, 10/1/2020
|
64,300,000
|
|
59,100,000
|
|
Port of Port Arthur Navigation District of Jefferson County, TX
(Motiva Enterprises LLC), (Series 2010B) Daily VRDNs,
0.170%, 10/1/2020
|
59,100,000
|
|
23,280,000
|
|
Port of Port Arthur Navigation District of Jefferson County, TX
(Motiva Enterprises LLC), (Series 2010C) Daily VRDNs,
0.190%, 10/1/2020
|
23,280,000
|
|
50,475,000
|
|
Port of Port Arthur Navigation District of Jefferson County, TX
(Motiva Enterprises LLC), (Series 2010D) Weekly VRDNs,
0.400%, 10/7/2020
|
50,475,000
|
|
5,000,000
|
|
Port of Port Arthur Navigation District of Jefferson County, TX
(Motiva Enterprises LLC), (Series 2010E) Weekly VRDNs,
0.430%, 10/7/2020
|
5,000,000
|
|
|
|
TOTAL
|
289,010,000
|
|
|
|
Utah—0.4%
|
|
|
10,000,000
|
|
Utah State Housing Corporation (Triview Apartment Associates II,
LLC), Tender Option Bond Trust Certificates (Series 2019-XF1081)
Weekly VRDNs, (Deutsche Bank AG LIQ)/(Deutsche Bank AG
LOC), 0.520%, 10/1/2020
|
10,000,000
|
|
|
|
Wisconsin—0.3%
|
|
|
9,000,000
|
|
Wisconsin State HEFA (Marshfield Clinic), (Series 2020C) Weekly
VRENs, 0.370%, 10/1/2020
|
9,000,000
|
Annual Shareholder Report
35
|
Principal
Amount
|
|
|
Value
|
|
|
1
|
SHORT-TERM MUNICIPALS—continued
|
|
|
|
|
Wyoming—0.5%
|
|
|
$14,895,000
|
|
Sublette County, WY (Exxon Capital Ventures, Inc.), (Series 2014)
Daily VRDNs, (Exxon Mobil Corp. GTD), 0.160%, 10/1/2020
|
$14,895,000
|
|
|
|
TOTAL SHORT-TERM MUNICIPALS
(IDENTIFIED COST $606,945,000)
|
606,945,000
|
|
|
|
TOTAL INVESTMENT IN SECURITIES—102.3%
(IDENTIFIED COST $2,858,788,498)3
|
2,871,505,806
|
|
|
|
OTHER ASSETS AND LIABILITIES - NET—(2.3)%4
|
(64,323,590)
|
|
|
|
TOTAL NET ASSETS—100%
|
$2,807,182,216
|
Securities that are subject to the federal alternative minimum tax (AMT) represent 19.4%
of the Fund’s portfolio as calculated based upon total market value. (Unaudited)
1
Current rate and current maturity or next reset date shown for floating rate notes and variable
rate notes/demand instruments. Certain variable rate securities are not based on a published
reference rate and spread but are determined by the issuer or agent and are based on current
market conditions. These securities do not indicate a reference rate and spread in their
description above.
2
Denotes a restricted security that either: (a) cannot be offered for public sale without first being
registered, or availing of an exemption from registration, under the Securities Act of 1933; or (b)
is subject to a contractual restriction on public sales. At September 30, 2020, these restricted
securities amounted to $18,061,420, which represented 0.6% of total net assets.
3
The cost of investments for federal tax purposes amounts to $2,858,778,817.
4
Assets, other than investments in securities, less liabilities. See Statement of Assets
and Liabilities.
Note: The categories of investments are shown as a percentage of total net assets at
September 30, 2020.
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.
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.
As of September 30, 2020, all investments of the Fund utilized Level 2 inputs in valuing
the Fund’s assets carried at fair value.
Annual Shareholder Report
36
The following acronym(s) are used throughout this portfolio:
|
AMT
|
—Alternative Minimum Tax
|
|
BANs
|
—Bond Anticipation Notes
|
|
CP
|
—Commercial Paper
|
|
CSD
|
—Central School District
|
|
EDA
|
—Economic Development Authority
|
|
EDC
|
—Economic Development Corporation
|
|
FRNs
|
—Floating Rate Notes
|
|
GO
|
—General Obligation
|
|
GTD
|
—Guaranteed
|
|
HEFA
|
—Health and Education Facilities Authority
|
|
HFA
|
—Housing Finance Authority
|
|
IDA
|
—Industrial Development Authority
|
|
IDB
|
—Industrial Development Bond
|
|
IDC
|
—Industrial Development Corporation
|
|
INS
|
—Insured
|
|
ISD
|
—Independent School District
|
|
LIBOR
|
—London Interbank Offered Rate
|
|
LIQ
|
—Liquidity Agreement
|
|
LOC
|
—Letter of Credit
|
|
LT
|
—Limited Tax
|
|
PCFA
|
—Pollution Control Finance Authority
|
|
PCR
|
—Pollution Control Revenue
|
|
PRF
|
—Pre-refunded
|
|
PUTTERs
|
—Puttable Tax-Exempt Receipts
|
|
RANs
|
—Revenue Anticipation Notes
|
|
SFH
|
—Single Family Housing
|
|
SFM
|
—Single Family Mortgage
|
|
SIFMA
|
—Securities Industry and Financial Markets Association
|
|
TANs
|
—Tax Anticipation Notes
|
|
TEMPS
|
—Tax Exempt Mandatory Paydown Securities
|
|
TOBs
|
—Tender Option Bonds
|
|
UT
|
—Unlimited Tax
|
|
VRDNs
|
—Variable Rate Demand Notes
|
|
VRDPs
|
—Variable Rate Demand Preferreds
|
|
VRENs
|
—Variable Rate Extendible Notes
|
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
37
Financial Highlights–Class A Shares
(For a Share Outstanding Throughout Each Period)
|
Year Ended September 30
|
2020
|
2019
|
2018
|
2017
|
2016
|
|
Net Asset Value, Beginning of Period
|
$10.01
|
$9.98
|
$10.01
|
$9.99
|
$10.00
|
|
Income From Investment Operations:
|
|
|
|
|
|
|
Net investment income
|
0.09
|
0.13
|
0.10
|
0.05
|
0.03
|
|
Net realized and unrealized gain (loss)
|
0.02
|
0.03
|
(0.03)
|
0.02
|
(0.01)
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
0.11
|
0.16
|
0.07
|
0.07
|
0.02
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions from net investment income
|
(0.09)
|
(0.13)
|
(0.10)
|
(0.05)
|
(0.03)
|
|
Net Asset Value, End of Period
|
$10.03
|
$10.01
|
$9.98
|
$10.01
|
$9.99
|
|
Total Return1
|
1.14%
|
1.59%
|
0.65%
|
0.74%
|
0.21%
|
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
Net expenses2
|
0.57%3
|
0.81%3
|
0.81%3
|
0.81%3
|
0.81%
|
|
Net investment income
|
0.94%
|
1.28%
|
0.94%
|
0.54%
|
0.30%
|
|
Expense waiver/reimbursement4
|
0.09%
|
0.13%
|
0.17%
|
0.17%
|
0.21%
|
|
Supplemental Data:
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$584,371
|
$626,570
|
$661,860
|
$799,292
|
$785,216
|
|
Portfolio turnover
|
100%
|
83%
|
87%
|
88%
|
29%
|
1
Based on net asset value, which does not reflect the sales charge, redemption fee or contingent
deferred sales charge, if applicable.
2
Amount does not reflect net expenses incurred by investment companies in which the Fund
may invest.
3
The net expense ratio is calculated without reduction for expense offset arrangements. The net
expense ratios are 0.57%, 0.81%, 0.81% and 0.81% for the years ended September 30, 2020,
2019, 2018 and 2017, respectively, after taking into account these expense reductions.
4
This expense decrease is reflected in both the net expense and net investment income ratios
shown above. Amount does not reflect expense waiver/reimbursement recorded by investment
companies in which the Fund may invest.
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
38
Financial Highlights–Institutional Shares
(For a Share Outstanding Throughout Each Period)
|
Year Ended September 30
|
2020
|
2019
|
2018
|
2017
|
2016
|
|
Net Asset Value, Beginning of Period
|
$10.01
|
$9.98
|
$10.01
|
$9.99
|
$10.00
|
|
Income From Investment Operations:
|
|
|
|
|
|
|
Net investment income
|
0.11
|
0.17
|
0.14
|
0.10
|
0.08
|
|
Net realized and unrealized gain (loss)
|
0.02
|
0.03
|
(0.03)
|
0.02
|
(0.01)
|
|
TOTAL FROM
INVESTMENT OPERATIONS
|
0.13
|
0.20
|
0.11
|
0.12
|
0.07
|
|
Less Distributions:
|
|
|
|
|
|
|
Distributions from net investment income
|
(0.11)
|
(0.17)
|
(0.14)
|
(0.10)
|
(0.08)
|
|
Net Asset Value, End of Period
|
$10.03
|
$10.01
|
$9.98
|
$10.01
|
$9.99
|
|
Total Return1
|
1.35%
|
2.04%
|
1.11%
|
1.19%
|
0.66%
|
|
Ratios to Average Net Assets:
|
|
|
|
|
|
|
Net expenses2
|
0.36%3
|
0.36%3
|
0.36%3
|
0.36%3
|
0.35%
|
|
Net investment income
|
1.14%
|
1.72%
|
1.39%
|
0.99%
|
0.75%
|
|
Expense waiver/reimbursement4
|
0.08%
|
0.08%
|
0.12%
|
0.12%
|
0.16%
|
|
Supplemental Data:
|
|
|
|
|
|
|
Net assets, end of period (000 omitted)
|
$2,162,027
|
$2,158,811
|
$1,711,181
|
$1,864,456
|
$1,518,382
|
|
Portfolio turnover
|
100%
|
83%
|
87%
|
88%
|
29%
|
1
Based on net asset value.
2
Amount does not reflect net expenses incurred by investment companies in which the Fund
may invest.
3
The net expense ratio is calculated without reduction for expense offset arrangements. The net
expense ratios are 0.36%, 0.36%, 0.36% and 0.36% for the years ended September 30, 2020,
2019, 2018 and 2017, respectively, after taking into account these expense reductions.
4
This expense decrease is reflected in both the net expense and net investment income ratios
shown above. Amount does not reflect expense waiver/reimbursement recorded by investment
companies in which the Fund may invest.
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
39
Financial Highlights–Class R6 Shares
(For a Share Outstanding Throughout Each Period)
|
|
Year
Ended
9/30/2020
|
Period
Ended
9/30/20191
|
|
Net Asset Value, Beginning of Period
|
$10.01
|
$10.00
|
|
Income From Investment Operations:
|
|
|
|
Net investment income
|
0.12
|
0.05
|
|
Net realized and unrealized gain (loss)
|
0.02
|
0.01
|
|
TOTAL FROM INVESTMENT OPERATIONS
|
0.14
|
0.06
|
|
Less Distributions:
|
|
|
|
Distributions from net investment income
|
(0.12)
|
(0.05)
|
|
Net Asset Value, End of Period
|
$10.03
|
$10.01
|
|
Total Return2
|
1.37%
|
0.66%
|
|
Ratios to Average Net Assets:
|
|
|
|
Net expenses3
|
0.34%4
|
0.34%4,5
|
|
Net investment income
|
0.99%
|
1.52%5
|
|
Expense waiver/reimbursement6
|
0.06%
|
0.07%5
|
|
Supplemental Data:
|
|
|
|
Net assets, end of period (000 omitted)
|
$60,784
|
$12,263
|
|
Portfolio turnover
|
100%
|
83%7
|
1
Reflects operations for the period from May 29, 2019 (date of initial investment) to
September 30, 2019.
2
Based on net asset value. Total returns for periods of less than one year are not annualized.
3
Amount does not reflect net expenses incurred by investment companies in which the Fund
may invest.
4
The net expense ratio is calculated without reduction for expense offset arrangements. The net
expense ratios are 0.34% for the year ended September 30, 2020, and 0.34% for the period
ended September 30, 2019 after taking into account these expense reductions.
5
Computed on an annualized basis.
6
This expense decrease is reflected in both the net expense and net investment income ratios
shown above. Amount does not reflect expense waiver/reimbursement recorded by investment
companies in which the Fund may invest.
7
Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the
fiscal year ended September 30, 2019.
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
40
Statement of Assets and Liabilities
September 30, 2020
|
Assets:
|
|
|
|
Investment in securities, at value (identified cost $2,858,788,498)
|
|
$2,871,505,806
|
|
Cash
|
|
1,258,000
|
|
Income receivable
|
|
10,961,516
|
|
Receivable for shares sold
|
|
8,052,388
|
|
Receivable for investments sold
|
|
495,140
|
|
TOTAL ASSETS
|
|
2,892,272,850
|
|
Liabilities:
|
|
|
|
Payable for investments purchased
|
$78,470,678
|
|
|
Payable for shares redeemed
|
5,942,838
|
|
|
Income distribution payable
|
296,263
|
|
|
Payable for other service fees (Notes 2 and 5)
|
71,155
|
|
|
Payable for investment adviser fee (Note 5)
|
21,931
|
|
|
Payable for administrative fee (Note 5)
|
7,073
|
|
|
Accrued expenses (Note 5)
|
280,696
|
|
|
TOTAL LIABILITIES
|
|
85,090,634
|
|
Net assets for 279,867,126 shares outstanding
|
|
$2,807,182,216
|
|
Net Assets Consists of:
|
|
|
|
Paid-in capital
|
|
$2,802,328,523
|
|
Total distributable earnings (loss)
|
|
4,853,693
|
|
TOTAL NET ASSETS
|
|
$2,807,182,216
|
|
Net Asset Value, Offering Price and Redemption
Proceeds Per Share:
|
|
|
|
Class A Shares:
|
|
|
|
Net asset value per share ($584,371,124 ÷ 58,263,264 shares
outstanding) $0.001 par value, 500,000,000 shares authorized
|
|
$10.03
|
|
Offering price per share
|
|
$10.03
|
|
Redemption proceeds per share
|
|
$10.03
|
|
Institutional Shares:
|
|
|
|
Net asset value per share ($2,162,026,734 ÷ 215,542,309 shares
outstanding) $0.001 par value, 500,000,000 shares authorized
|
|
$10.03
|
|
Offering price per share
|
|
$10.03
|
|
Redemption proceeds per share
|
|
$10.03
|
|
Class R6 Shares:
|
|
|
|
Net asset value per share ($60,784,358 ÷ 6,061,553 shares
outstanding) $0.001 par value, 500,000,000 shares authorized
|
|
$10.03
|
|
Offering price per share
|
|
$10.03
|
|
Redemption proceeds per share
|
|
$10.03
|
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
41
Statement of Operations
Year Ended September 30, 2020
|
Investment Income:
|
|
|
|
|
Interest
|
|
|
$39,048,769
|
|
Expenses:
|
|
|
|
|
Investment adviser fee (Note 5)
|
|
$7,782,075
|
|
|
Administrative fee (Note 5)
|
|
2,031,582
|
|
|
Custodian fees
|
|
83,421
|
|
|
Transfer agent fees (Notes 2 and 5)
|
|
1,167,781
|
|
|
Directors’/Trustees’ fees (Note 5)
|
|
17,556
|
|
|
Auditing fees
|
|
34,030
|
|
|
Legal fees
|
|
12,615
|
|
|
Distribution services fee (Note 5)
|
|
261,243
|
|
|
Other service fees (Notes 2 and 5)
|
|
975,201
|
|
|
Portfolio accounting fees
|
|
219,440
|
|
|
Share registration costs
|
|
161,838
|
|
|
Printing and postage
|
|
37,999
|
|
|
Miscellaneous (Notes 5)
|
|
42,600
|
|
|
TOTAL EXPENSES
|
|
12,827,381
|
|
|
Waivers, Reimbursement and Reduction:
|
|
|
|
|
Waiver of investment adviser fee (Note 5)
|
$(1,651,726)
|
|
|
|
Waiver/Reimbursement of other operating expenses
(Notes 2 and 5)
|
(529,454)
|
|
|
|
Reduction of custodian fees (Note 6)
|
(10,422)
|
|
|
|
TOTAL WAIVERS, REIMBURSEMENT
AND REDUCTION
|
|
(2,191,602)
|
|
|
Net expenses
|
|
|
10,635,779
|
|
Net investment income
|
|
|
28,412,990
|
|
Realized and Unrealized Gain (Loss) on Investments:
|
|
|
|
|
Net realized loss on investments
|
|
|
(6,601,326)
|
|
Net change in unrealized appreciation of investments
|
|
|
7,666,390
|
|
Net realized and unrealized gain (loss) on investments
|
|
|
1,065,064
|
|
Change in net assets resulting from operations
|
|
|
$29,478,054
|
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
42
Statement of Changes in Net Assets
|
Year Ended September 30
|
2020
|
2019
|
|
Increase (Decrease) in Net Assets
|
|
|
|
Operations:
|
|
|
|
Net investment income
|
$28,412,990
|
$41,109,841
|
|
Net realized gain (loss)
|
(6,601,326)
|
251,580
|
|
Net change in unrealized appreciation/depreciation
|
7,666,390
|
7,081,922
|
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
|
29,478,054
|
48,443,343
|
|
Distributions to Shareholders:
|
|
|
|
Class A Shares
|
(5,428,040)
|
(8,061,884)
|
|
Institutional Shares
|
(22,694,604)
|
(32,958,088)
|
|
Class R6 Shares1
|
(252,413)
|
(24,338)
|
|
CHANGE IN NET ASSETS RESULTING FROM
DISTRIBUTIONS TO SHAREHOLDERS
|
(28,375,057)
|
(41,044,310)
|
|
Share Transactions:
|
|
|
|
Proceeds from sale of shares
|
2,356,103,817
|
2,076,124,921
|
|
Net asset value of shares issued to shareholders in payment of
distributions declared
|
22,240,324
|
31,903,748
|
|
Cost of shares redeemed
|
(2,369,909,496)
|
(1,690,823,864)
|
|
CHANGE IN NET ASSETS RESULTING FROM
SHARE TRANSACTIONS
|
8,434,645
|
417,204,805
|
|
Change in net assets
|
9,537,642
|
424,603,838
|
|
Net Assets:
|
|
|
|
Beginning of period
|
2,797,644,574
|
2,373,040,736
|
|
End of period
|
$2,807,182,216
|
$2,797,644,574
|
1
The Fund’s R6 Class commenced operations on May 29, 2019.
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
43
Notes to Financial Statements
September 30, 2020
1. ORGANIZATION
Federated Hermes Fixed Income Securities, Inc. (the “Corporation”) is registered under
the Investment Company Act of 1940, as amended (the “Act”), as an open-end
management investment company. The Corporation consists of two portfolios. The
financial statements included herein are only those of Federated Hermes Municipal
Ultrashort Fund (the “Fund”), a diversified portfolio. The financial statements of the
other portfolio are presented separately. The assets of each portfolio are segregated
and a shareholder’s interest is limited to the portfolio in which shares are held. Each
portfolio pays its own expenses. The Fund offers three classes of shares: Class A Shares,
Institutional Shares and Class R6 Shares. All shares of the Fund have equal rights with
respect to voting, except on class-specific matters. The investment objective of the Fund
is to provide current income exempt from federal regular income tax. Interest income
from the Fund’s investments may be subject to the federal AMT for individuals and state
and local taxes.
The Fund’s Class R6 Shares commenced operations on May 29, 2019.
Prior to June 29, 2020, the name of the Trust and Fund were Federated Fixed Income
Securities, Inc. and Federated Municipal Ultrashort Fund, respectively.
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 are fair valued using price evaluations provided by a pricing
service approved by the Fund’s Board of Directors (the “Directors”).
■ 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, except that options are valued at the mean of closing bid and
asked quotations.
■ Over-the-counter (OTC) derivative contracts are fair valued using price evaluations
provided by a pricing service approved by the Directors.
■ For securities that are fair valued in accordance with procedures established by and
under the general supervision of the Directors, certain factors may be considered
such as: the last traded or purchase price of the security, information obtained by
contacting the issuer or dealers, 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, public trading in similar securities or derivative contracts of the
issuer or comparable issuers, movement of a relevant index, or other factors including
but not limited to industry changes and relevant government actions.
Annual Shareholder Report
44
If any price, quotation, price evaluation or other pricing source is not readily available
when the NAV is calculated, 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, or if information
furnished by a pricing service, in the opinion of the valuation committee (“Valuation
Committee”), is deemed not representative of the fair value of such security, 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 obtain the fair value
assigned to an investment if it sold the investment at approximately the time at which
the Fund determines its NAV per share, and the actual value obtained could be
materially different.
Fair Valuation Procedures
The Directors have ultimate responsibility for determining the fair value of investments
for which market quotations are not readily available. The Directors have appointed a
Valuation Committee comprised of officers of the Fund, Federated Investment
Management Company (the “Adviser”) and certain of the Adviser’s affiliated companies
to assist in determining fair value and in overseeing the calculation of the NAV. The
Directors 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, methods, models 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 Directors. The Directors 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 any U.S. Treasury and Agency
securities, mortgage-backed securities and municipal securities. The Fund normally uses
mid evaluations for any other types of fixed-income securities and any 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 Directors.
Annual Shareholder Report
45
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. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Distributions of net investment
income, if any, are declared daily and paid monthly. Non-cash dividends included in
dividend income, if any, are recorded at fair value. Amortization/accretion of premium
and discount is included in investment income. Investment income, realized and
unrealized gains and losses and certain fund-level expenses are allocated to each class
based on relative average daily net assets, except that select classes will bear certain
expenses unique to those classes. The detail of the total fund expense waivers,
reimbursement and reduction of $2,191,602 is disclosed in various locations in this
Note 2, Note 5 and Note 6. For the year ended September 30, 2020, transfer agent fees
for the Fund were as follows:
|
|
Transfer Agent
Fees Incurred
|
Transfer Agent
Fees Reimbursed
|
|
Class A Shares
|
$229,125
|
$(73,046)
|
|
Institutional Shares
|
937,085
|
(404,159)
|
|
Class R6 Shares
|
1,571
|
—
|
|
TOTAL
|
$1,167,781
|
$(477,205)
|
Dividends are declared separately for each class. No class has preferential dividend
rights; differences in per share dividend rates are generally due to differences in
separate class expenses.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the
Fund’s Class A Shares to financial intermediaries or to Federated Shareholder Services
Company (FSSC) for providing services to shareholders and maintaining shareholder
accounts. Beginning December 1, 2019, the Fund incurred and paid up to 0.15% of the
maximum 0.25%. The Fund’s Class A Shares will not incur and pay such other service
fees to exceed 0.15% until such time as subsequently approved by the Directors.
Subject to the terms described in the Expense Limitation note, FSSC may voluntarily
reimburse the Fund for other service fees. For the year ended September 30, 2020,
other service fees for the Fund were as follows:
|
|
Other
Service Fees
Incurred
|
|
Class A Shares
|
$975,201
|
Annual Shareholder Report
46
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 September 30, 2020, 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
September 30, 2020, tax years 2017 through 2020 remain subject to examination by the
Fund’s major tax jurisdictions, which include the United States of America, the state of
Maryland and the Commonwealth of Pennsylvania.
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.
Restricted Securities
The Fund may purchase securities which are considered restricted. Restricted securities
are securities that either: (a) cannot be offered for public sale without first being
registered, or being able to take advantage of an exemption from registration, under
the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In
some cases, when a security cannot be offered for public sale without first being
registered, the issuer of the restricted security has agreed to register such securities for
resale, at the issuer’s expense, either upon demand by the Fund or in connection with
another registered offering of the securities. Many such restricted securities may be
resold in the secondary market in transactions exempt from registration. Restricted
securities may be determined to be liquid under criteria established by the Directors.
The Fund will not incur any registration costs upon such resales. The Fund’s restricted
securities, like other securities, are priced in accordance with procedures established by
and under the general supervision of the Directors.
Additional information on restricted securities held at September 30, 2020, is
as follows:
|
Security
|
Acquisition
Date
|
Acquisition
Cost
|
Value
|
|
California PCFA (Republic Services, Inc.), Solid Waste
Refunding Revenue Bonds (Series 2010A) TOBs, 0.500%,
Mandatory Tender 11/2/2020
|
7/31/2020
|
$14,000,000
|
$14,003,220
|
|
Yavapai County, AZ IDA Solid Waste Disposal (Waste
Management, Inc.), Solid Waste Disposal Revenue Bonds
(Series 2002) TOBs, 2.800%, Mandatory Tender 6/1/2021
|
6/1/2018
|
$4,000,000
|
$4,058,200
|
Annual Shareholder Report
47
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
materially from those estimated. The Fund applies investment company accounting and
reporting guidance.
3. CAPITAL STOCK
The following tables summarize capital stock activity:
|
Year Ended September 30
|
2020
|
2019
|
||
|
Class A Shares:
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
27,997,956
|
$280,018,819
|
26,583,322
|
$265,714,842
|
|
Shares issued to shareholders in payment
of distributions declared
|
523,910
|
5,238,666
|
777,257
|
7,769,774
|
|
Shares redeemed
|
(32,829,359)
|
(328,123,313)
|
(31,076,910)
|
(310,582,739)
|
|
NET CHANGE RESULTING FROM
CLASS A SHARE TRANSACTIONS
|
(4,307,493)
|
$(42,865,828)
|
(3,716,331)
|
$(37,098,123)
|
|
Year Ended September 30
|
2020
|
2019
|
||
|
Institutional Shares:
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
200,812,977
|
$2,008,863,541
|
179,832,595
|
$1,797,664,458
|
|
Shares issued to shareholders in
payment of distributions declared
|
1,694,318
|
16,949,278
|
2,413,692
|
24,133,974
|
|
Shares redeemed
|
(202,538,338)
|
(2,022,928,238)
|
(138,057,658)
|
(1,379,782,844)
|
|
NET CHANGE
RESULTING FROM
INSTITUTIONAL SHARE
TRANSACTIONS
|
(31,043)
|
$2,884,581
|
44,188,629
|
$442,015,588
|
|
Year Ended September 30
|
2020
|
20191
|
||
|
Class R6 Shares:
|
Shares
|
Amount
|
Shares
|
Amount
|
|
Shares sold
|
6,711,460
|
$67,221,457
|
1,270,750
|
$12,745,621
|
|
Shares issued to shareholders in payment of
distributions declared
|
5,237
|
52,380
|
—
|
—
|
|
Shares redeemed
|
(1,880,120)
|
(18,857,945)
|
(45,774)
|
(458,281)
|
|
NET CHANGE RESULTING FROM
CLASS R6 SHARE TRANSACTIONS
|
4,836,577
|
$48,415,892
|
1,224,976
|
$12,287,340
|
|
NET CHANGE RESULTING FROM
TOTAL FUND SHARE TRANSACTIONS
|
498,041
|
$8,434,645
|
41,697,274
|
$417,204,805
|
1
Reflects operations for the period from May 29, 2019 (date of initial investment) to
September 30, 2019.
Annual Shareholder Report
48
4. FEDERAL TAX INFORMATION
The tax character of distributions as reported on the Statement of Changes in Net
Assets for the years ended September 30, 2020 and 2019, was as follows:
|
|
2020
|
2019
|
|
Tax-exempt income
|
$28,315,505
|
$41,044,310
|
|
Ordinary income
|
$59,552
|
$—
|
As of September 30, 2020, the components of distributable earnings on a tax-basis were
as follows:
|
Undistributed tax-exempt income
|
$3,244
|
|
Net unrealized appreciation
|
$12,726,989
|
|
Capital loss carryforwards
|
$(7,876,540)
|
The difference between book-basis and tax-basis net unrealized appreciation is
attributable to differing treatments for discount accretion/premium amortization on
debt securities.
At September 30, 2020, the cost of investments for federal tax purposes was
$2,858,778,817. The net unrealized appreciation of investments for federal tax purposes
was $12,726,989. This consists of net unrealized appreciation from investments for those
securities having an excess of value over cost of $15,724,694 and net unrealized
depreciation from investments for those securities having an excess of cost over value
of $2,997,705.
As of September 30, 2020, the Fund had a capital loss carryforward of $7,876,540
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, these net capital losses
retain their character as either short-term or long-term and do not expire.
The following schedule summarizes the Fund’s capital loss carryforwards:
|
Short-Term
|
Long-Term
|
Total
|
|
$7,094,408
|
$782,132
|
$7,876,540
|
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 fee
equal to 0.30% of the Fund’s average daily net assets. Subject to the terms described in
the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of
its fee and/or reimburse certain operating expenses of the Fund. For the year ended
September 30, 2020, the Adviser voluntarily waived $1,651,726 of its fee and voluntarily
reimbursed $477,205 of transfer agent fees.
Annual Shareholder Report
49
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement,
provides the Fund with administrative personnel and services. For purposes of
determining the appropriate rate breakpoint, “Investment Complex” is defined as all of
the Federated Hermes Funds subject to a fee under the Administrative Services
Agreement. The fee paid to FAS is based on the average daily net assets of the
Investment Complex as specified below:
|
Administrative Fee
|
Average Daily Net Assets of
the Investment Complex
|
|
0.100%
|
on assets up to $50 billion
|
|
0.075%
|
on assets over $50 billion
|
Subject to the terms described in the Expense Limitation note, FAS may voluntarily
choose to waive any portion of its fee. For the year ended September 30, 2020, the
annualized fee paid to FAS was 0.078% of average daily net assets of the Fund.
In addition, FAS may charge certain out-of-pocket expenses to the Fund.
Distribution Services Fee
The Fund has adopted a Distribution Plan (the “Plan”) pursuant to Rule 12b-1 under the
Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp.
(FSC), the principal distributor, from the daily net assets of the Fund’s Class A Shares to
finance activities intended to result in the sale of these shares. Effective
December 1, 2019, the fee was eliminated. Prior to December 1, 2019, the Plan
provided that the Fund may incur distribution expenses at 0.25% of average daily net
assets annually to compensate FSC.
Subject to the terms described in the Expense Limitation note, FSC may voluntarily
choose to waive any portion of its fee. For the year ended September 30, 2020,
distribution services fees for the Fund were as follows:
|
|
Distribution
Services Fees
Incurred
|
Distribution
Services Fees
Waived
|
|
Class A Shares
|
$261,243
|
$(52,249)
|
When FSC receives fees, it may pay some or all of them to financial intermediaries
whose customers purchase shares. For the year ended September 30, 2020, FSC
retained $208,994 of fees paid by the Fund.
Annual Shareholder Report
50
Sales Charges
Front-end sales charges and contingent deferred sales charges do not represent
expenses of the Fund. They are deducted from the proceeds of sales of Fund shares
prior to investment or from redemption proceeds prior to remittance, as applicable. For
the year ended September 30, 2020, FSC did not retain any sales charges from the sale
of Class A Shares. Effective December 1, 2019, the maximum 2% sales charge imposed
on Class A Shares was eliminated.
Other Service Fees
For the year ended September 30, 2020, FSSC received $605 of the other service fees
disclosed in Note 2.
Interfund Transactions
During the year ended September 30, 2020, the Fund engaged in purchase and sale
transactions with funds that have a common investment adviser (or affiliated investment
advisers), common Directors/Trustees and/or common Officers. These purchase and sale
transactions complied with Rule 17a-7 under the Act and amounted to $515,124,580
and $788,068,550, respectively. Net realized gain recognized on these transactions
was $8,550.
Expense Limitation
The Adviser and certain of its affiliates (which may include FSC, FAS and FSSC) on their
own initiative have agreed to waive certain amounts of their respective fees and/or
reimburse expenses. Total annual fund operating expenses (as shown in the financial
highlights, excluding interest expense, extraordinary expenses and proxy-related
expenses, paid by the Fund, if any) paid by the Fund’s Class A Shares, Institutional
Shares and Class R6 Shares (after the voluntary waivers and reimbursements) will not
exceed 0.51%, 0.36% and 0.34% (the “Fee Limit”), respectively, up to but not including
the later of (the “Termination Date”): (a) December 1, 2021; or (b) the date of the Fund’s
next effective Prospectus. Prior to December 1, 2019, the Fee limits disclosed above for
the referenced share classes were 0.81%, 0.36% and 0.34%. While the Adviser and its
affiliates currently do not anticipate terminating or increasing these arrangements prior
to the Termination Date, these arrangements may only be terminated or the Fee Limit
increased prior to the Termination Date with the agreement of the Directors.
Directors’/Trustees’ and Miscellaneous Fees
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of
certain of the above companies. To efficiently facilitate payment, Independent
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. These expenses related to
conducting meetings of the Directors/Trustees and other miscellaneous expenses may
be included in Accrued and Miscellaneous Expenses on the Statement of Assets and
Liabilities and Statement of Operations, respectively.
Annual Shareholder Report
51
6. EXPENSE REDUCTION
Through arrangements with the Fund’s custodian, net credits realized as a result of
uninvested cash balances were used to reduce custody expenses. For the year ended
September 30, 2020, the Fund’s expenses were reduced by $10,422 under
these arrangements.
7. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and
short-term obligations, for the year ended September 30, 2020, were as follows:
|
Purchases
|
$1,170,222,068
|
|
Sales
|
$1,096,744,254
|
8. LINE OF CREDIT
The Fund participates with certain other Federated Hermes Funds, on a several basis, in
an up to $500,000,000 unsecured, 364-day, committed, revolving line of credit (LOC)
agreement dated June 24, 2020. The LOC was made available to temporarily finance
the repurchase or redemption of shares of the Fund, failed trades, payment of
dividends, settlement of trades and for other short-term, temporary or emergency
general business purposes. The Fund cannot borrow under the LOC if an inter-fund loan
is outstanding. The Fund’s ability to borrow under the LOC also is subject to the
limitations of the Act and various conditions precedent that must be satisfied before the
Fund can borrow. Loans under the LOC are charged interest at a fluctuating rate per
annum equal to the highest, on any day, of (a) (i) the federal funds effective rate, (ii) the
one month London Interbank Offered Rate (LIBOR), or a replacement rate as
appropriate, and (iii) 0.0%, plus (b) a margin. Any fund eligible to borrow under the LOC
pays its pro rata share of an upfront fee, and its pro rata share of a commitment fee
based on the amount of the lenders’ commitment that has not been utilized, quarterly in
arrears and at maturity. As of September 30, 2020, the Fund had no outstanding loans.
During the year ended September 30, 2020, the Fund did not utilize the LOC.
9. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the
Fund, along with other funds advised by subsidiaries of Federated Hermes, Inc., may
participate in an interfund lending program. This program provides an alternative credit
facility allowing the Fund to borrow from other participating affiliated funds. As of
September 30, 2020, there were no outstanding loans. During the year ended
September 30, 2020, the program was not utilized.
Annual Shareholder Report
52
10. OTHER MATTERS
An outbreak of respiratory disease caused by a novel coronavirus was first detected in
China in late 2019 and subsequently spread globally. As of the date of the issuance of
these financial statements, this coronavirus has resulted in closing borders, enhanced
health screenings, healthcare service preparation and delivery, quarantines,
cancellations and disruptions to supply chains, workflow operations and consumer
activity, as well as general concern and uncertainty. The impact of this coronavirus may
be short term or may last for an extended period of time and has resulted in a
substantial economic downturn. Health crises caused by outbreaks, such as the
coronavirus outbreak, may exacerbate other pre-existing political, social and economic
risks. The impact of this outbreak, and other epidemics and pandemics that may arise in
the future, could continue to negatively affect the worldwide economy, as well as the
economies of individual countries, individual companies (including certain Fund service
providers and issuers of the Fund’s investments) and the markets in general in significant
and unforeseen ways. Any such impact could adversely affect the Fund’s performance.
11. FEDERAL TAX INFORMATION (UNAUDITED)
For the fiscal year ended September 30, 2020, 99.79% of distributions from net
investment income is exempt from federal income tax, other than the federal AMT.
Annual Shareholder Report
53
Report of Independent Registered Public
Accounting Firm
To the Board of Directors of Federated Hermes Fixed Income
Securities, Inc. and Shareholders of Federated Hermes
Municipal Ultrashort Fund:
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of the Federated Hermes Municipal
Ultrashort Fund (formerly, Federated Municipal Ultrashort Fund) (the “Fund”),
a portfolio of Federated Hermes Fixed Income Securities, Inc. (formerly,
Federated Fixed Income Securities, Inc.), as of September 30, 2020, the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the years in the two year period then ended, and the
related notes (collectively, the “financial statements”) and the financial
highlights for each of the years or periods in the five year period then ended. In
our opinion, the financial statements and financial highlights present fairly, in
all material respects, the financial position of the Fund as of
September 30, 2020, the results of its operations for the year then ended, the
changes in its net assets for each of the years in the two year period then ended,
and the financial highlights for each of the years or periods in the five year
period then ended, in conformity with U.S. generally accepted
accounting principles.
Basis for Opinion
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 are a
public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent
with respect to the Fund in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
Annual Shareholder Report
54
We conducted our audits in accordance with the standards of the PCAOB.
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, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material
misstatement of the financial statements and financial highlights, whether due
to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements and financial highlights.
Such procedures also included confirmation of securities owned as of
September 30, 2020, by correspondence with the custodian and brokers, or by
other appropriate auditing procedures. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements and
financial highlights. We believe that our audits provide a reasonable basis for
our opinion.
We have served as the auditor of one or more of Federated Hermes’ investment
companies since 2006.
Boston, Massachusetts
November 20, 2020
November 20, 2020
Annual Shareholder Report
55
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase or redemption payments; and
(2) ongoing costs, including management fees and to the extent applicable,
distribution (12b-1) fees and/or other service fees and other Fund expenses.
This Example is intended to help you to understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. It is based on an investment of $1,000
invested at the beginning of the period and held for the entire period from
April 1, 2020 to September 30, 2020.
ACTUAL EXPENSES
The first section of the table below provides information about actual account
values and actual expenses. You may use the information in this section,
together with the amount you invested, to estimate the expenses that you
incurred over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first section under the heading entitled “Expenses
Paid During Period” to estimate the expenses attributable to your investment
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund’s actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is
not the Fund’s actual return. Thus, you should not use the hypothetical account
values and expenses to estimate the actual ending account balance or your
expenses for the period. Rather, these figures are required to be provided to
enable you to compare the ongoing costs of investing in the Fund with other
funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Annual Shareholder Report
56
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) on purchase or redemption payments. Therefore, the second
section of the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher.
|
|
Beginning
Account Value
4/1/2020
|
Ending
Account Value
9/30/2020
|
Expenses Paid
During Period1
|
|
Actual:
|
|
|
|
|
Class A Shares
|
$1,000.00
|
$1,012.60
|
$2.57
|
|
Institutional Shares
|
$1,000.00
|
$1,013.40
|
$1.81
|
|
Class R6 Shares
|
$1,000.00
|
$1,013.50
|
$1.71
|
|
Hypothetical (assuming a 5% return
before expenses):
|
|
|
|
|
Class A Shares
|
$1,000.00
|
$1,022.45
|
$2.58
|
|
Institutional Shares
|
$1,000.00
|
$1,023.20
|
$1.82
|
|
Class R6
|
$1,000.00
|
$1,023.30
|
$1.72
|
1
Expenses are equal to the Fund’s annualized net expense ratios, multiplied by the average
account value over the period, multiplied by 183/366 (to reflect the one-half-year period). The
annualized net expense ratios are as follows:
|
Class A Shares
|
0.51%
|
|
Institutional Shares
|
0.36%
|
|
Class R6 Shares
|
0.34%
|
Annual Shareholder Report
57
Board of Directors and Corporation Officers
The Board of Directors is responsible for managing the Corporation business
affairs and for exercising all the Corporation powers except those reserved for
the shareholders. The following tables give information about each Director
and the senior officers of the Fund. Where required, the tables separately list
Directors who are “interested persons” of the Fund (i.e., “Interested” Directors)
and those who are not (i.e., “Independent” Directors). Unless otherwise noted,
the address of each person listed is 1001 Liberty Avenue, Pittsburgh,
PA 15222. The address of all Independent Directors listed is 4000 Ericsson
Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of
December 31, 2019, the Corporation comprised two portfolio(s), and the
Federated Hermes Fund Family consisted of 41 investment companies
(comprising 135 portfolios). Unless otherwise noted, each Officer is elected
annually. Unless otherwise noted, each Director oversees all portfolios in the
Federated Hermes Fund Family and serves for an indefinite term. The Fund’s
Statement of Additional Information includes additional information about
Corporation Directors and is available, without charge and upon request, by
calling 1-800-341-7400.
Interested DIRECTORS Background
|
Name
Birth Date
Positions Held
with Corporation
Date Service Began
|
Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s)
|
|
J. Christopher Donahue*
Birth Date: April 11, 1949
President and Director
Indefinite Term
Began serving:
January 2000
|
Principal Occupations: Principal Executive Officer and President of
certain of the Funds in the Federated Hermes Fund Family; Director or
Trustee of the Funds in the Federated Hermes Fund Family; President,
Chief Executive Officer and Director, Federated Hermes, Inc.;
Chairman and Trustee, Federated Investment Management Company;
Trustee, Federated Investment Counseling; Chairman and Director,
Federated Global Investment Management Corp.; Chairman and
Trustee, Federated Equity Management Company of Pennsylvania;
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; Chairman, Passport Research, Ltd.
|
Annual Shareholder Report
58
|
Name
Birth Date
Positions Held
with Corporation
Date Service Began
|
Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s)
|
|
John B. Fisher*
Birth Date: May 16, 1956
Director
Indefinite Term
Began serving: May 2016
|
Principal Occupations: Principal Executive Officer and President of
certain of the Funds in the Federated Hermes Fund Family; Director or
Trustee of certain of the Funds in the Federated Hermes Fund Family;
Vice President, Federated Hermes, Inc.; President, Director/Trustee
and CEO, Federated Advisory Services Company, Federated Equity
Management Company of Pennsylvania, Federated Global Investment
Management Corp., Federated Investment Counseling, Federated
Investment Management Company; President of some of the Funds in
the Federated Hermes Fund Family and Director, Federated Investors
Trust Company.
Previous Positions: President and Director of the Institutional Sales
Division of Federated Securities Corp.; President and Director of
Federated Investment Counseling; President and CEO of Passport
Research, Ltd.; Director, Edgewood Securities Corp.; Director,
Federated Services Company; Director, Federated Hermes, Inc.;
Chairman and Director, Southpointe Distribution Services, Inc. and
President, Technology, Federated Services Company.
|
*
Reasons for “interested” status: J. Christopher Donahue and John B. Fisher are interested due
to their beneficial ownership of shares of Federated Hermes, Inc. and due to positions they hold
with Federated Hermes, Inc. and its subsidiaries.
INDEPENDENT DIRECTORS Background
|
Name
Birth Date
Positions Held
with Corporation
Date Service Began
|
Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
|
|
John T. Collins
Birth Date: January 24, 1947
Director
Indefinite Term
Began serving:
October 2013
|
Principal Occupations: Director or Trustee of the Federated Hermes
Fund Family; formerly, Chairman and CEO, The Collins Group, Inc.
(a private equity firm) (Retired).
Other Directorships Held: Chairman of the Board of Directors,
Director, and Chairman of the Compensation Committee, KLX Energy
Services Holdings, Inc. (oilfield services); former Director of
KLX Corp. (aerospace).
Qualifications: Mr. Collins has served in several business and financial
management roles and directorship positions throughout his career.
Mr. Collins previously served as Chairman and CEO of The Collins
Group, Inc. (a private equity firm) and as a Director of KLX Corp.
Mr. Collins serves as Chairman Emeriti, Bentley University. Mr. Collins
previously served as Director and Audit Committee Member, Bank of
America Corp.; Director, FleetBoston Financial Corp.; and Director,
Beth Israel Deaconess Medical Center (Harvard University
Affiliate Hospital).
|
Annual Shareholder Report
59
|
Name
Birth Date
Positions Held
with Corporation
Date Service Began
|
Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
|
|
G. Thomas Hough
Birth Date: February 28, 1955
Director
Indefinite Term
Began serving: August 2015
|
Principal Occupations: Director or Trustee, Chair of the Audit
Committee of the Federated Hermes Fund Family; formerly, Vice
Chair, Ernst & Young LLP (public accounting firm) (Retired).
Other Directorships Held: Director, Chair of the Audit Committee,
Equifax, Inc.; Director, Member of the Audit Committee, Haverty
Furniture Companies, Inc.; formerly, Director, Member of Governance
and Compensation Committees, Publix Super Markets, Inc.
Qualifications: Mr. Hough has served in accounting, business
management and directorship positions throughout his career.
Mr. Hough most recently held the position of Americas Vice Chair of
Assurance with Ernst & Young LLP (public accounting firm). Mr. Hough
serves on the President’s Cabinet and Business School Board of
Visitors for the University of Alabama. Mr. Hough previously served on
the Business School Board of Visitors for Wake Forest University, and
he previously served as an Executive Committee member of the
United States Golf Association.
|
|
Maureen Lally-Green
Birth Date: July 5, 1949
Director
Indefinite Term
Began serving: August 2009
|
Principal Occupations: Director or Trustee of the Federated Hermes
Fund Family; Adjunct Professor of Law, Duquesne University School of
Law; formerly, Dean of the Duquesne University School of Law and
Professor of Law and Interim Dean of the Duquesne University School
of Law; formerly, Associate General Secretary and Director, Office of
Church Relations, Diocese of Pittsburgh.
Other Directorships Held: Director, CNX Resources Corporation
(formerly known as CONSOL Energy Inc.).
Qualifications: Judge Lally-Green has served in various legal and
business roles and directorship positions throughout her career. Judge
Lally-Green previously held the position of Dean of the School of Law
of Duquesne University (as well as Interim Dean). Judge Lally-Green
previously served as a member of the Superior Court of Pennsylvania
and as a Professor of Law, Duquesne University School of Law. Judge
Lally-Green was appointed by the Supreme Court of Pennsylvania to
serve on the Supreme Court’s Board of Continuing Judicial Education
and the Supreme Court’s Appellate Court Procedural Rules
Committee. Judge Lally-Green also currently holds the positions on
not for profit or for profit boards of directors as follows: Director and
Chair, UPMC Mercy Hospital; Director and Vice Chair, Our Campaign
for the Church Alive!, Inc.; Regent, Saint Vincent Seminary; Member,
Pennsylvania State Board of Education (public); Director, Catholic
Charities, Pittsburgh; and Director CNX Resources Corporation
(formerly known as CONSOL Energy Inc.). Judge Lally-Green has held
the positions of: Director, Auberle; Director, Epilepsy Foundation of
Western and Central Pennsylvania; Director, Ireland Institute of
Pittsburgh; Director, Saint Thomas More Society; Director and Chair,
Catholic High Schools of the Diocese of Pittsburgh, Inc.; Director,
Pennsylvania Bar Institute; Director, St. Vincent College; and Director
and Chair, North Catholic High School, Inc.
|
Annual Shareholder Report
60
|
Name
Birth Date
Positions Held
with Corporation
Date Service Began
|
Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
|
|
Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
Director
Indefinite Term
Began serving: January 1999
|
Principal Occupations: Director or Trustee of the Federated Hermes
Fund Family; Management Consultant and Author.
Other Directorships Held: None.
Qualifications: Mr. Mansfield has served as a Marine Corps officer and
in several banking, business management, educational roles and
directorship positions throughout his long career. He remains active as
a Management Consultant and Author.
|
|
Thomas M. O’Neill
Birth Date: June 14, 1951
Director
Indefinite Term
Began serving: August 2006
|
Principal Occupations: Director or Trustee of the Federated Hermes
Fund Family; Sole Proprietor, Navigator Management Company
(investment and strategic consulting).
Other Directorships Held: None.
Qualifications: Mr. O’Neill has served in several business, mutual fund
and financial management roles and directorship positions throughout
his career. Mr. O’Neill serves as Director, Medicines for Humanity and
Director, The Golisano Children’s Museum of Naples, Florida.
Mr. O’Neill previously served as 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).
|
|
Madelyn A. Reilly
Birth Date: February 2, 1956
Director
Indefinite Term
Began serving:
November 2020
|
Principal Occupations: Director or Trustee of the Federated Hermes
Fund Family; Senior Vice President for Legal Affairs, General Counsel
and Secretary of the Board of Trustees, Duquesne University.
Other Directorships Held: None.
Qualifications: Ms. Reilly has served in various business and legal
management roles throughout her career. Ms. Reilly previously served
as Director of Risk Management and Associate General Counsel,
Duquesne University. Prior to her work at Duquesne University,
Ms. Reilly served as Assistant General Counsel of Compliance and
Enterprise Risk as well as Senior Counsel of Environment, Health and
Safety, PPG Industries. Ms. Reilly also previously served as Chair of
the Risk Management Committee for Holy Ghost Preparatory School,
Philadelphia and Secretary and Chair of the Governance Committee,
Oakland Catholic High School Board of Trustees, Pittsburgh.
|
Annual Shareholder Report
61
|
Name
Birth Date
Positions Held
with Corporation
Date Service Began
|
Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
|
|
P. Jerome Richey
Birth Date: February 23, 1949
Director
Indefinite Term
Began serving:
October 2013
|
Principal Occupations: Director or Trustee of the Federated Hermes
Fund Family; Management Consultant; Retired; formerly, Senior Vice
Chancellor and Chief Legal Officer, University of Pittsburgh and
Executive Vice President and Chief Legal Officer, CNX Resources
Corporation (formerly known as CONSOL Energy Inc.).
Other Directorships Held: None.
Qualifications: Mr. Richey has served in several business and legal
management roles and directorship positions throughout his career.
Mr. Richey most recently held the positions of Senior Vice Chancellor
and Chief Legal Officer, University of Pittsburgh. Mr. Richey previously
served as Chairman of the Board, Epilepsy Foundation of Western
Pennsylvania and Chairman of the Board, World Affairs Council of
Pittsburgh. Mr. Richey previously served as Chief Legal Officer and
Executive Vice President, CNX Resources Corporation (formerly known
as CONSOL Energy Inc.); and Board Member, Ethics Counsel and
Shareholder, Buchanan Ingersoll & Rooney PC (a law firm).
|
|
John S. Walsh
Birth Date:
November 28, 1957
Director
Indefinite Term Began serving:
November 1999
|
Principal Occupations: Director or Trustee, and Chair of the Board of
Directors or Trustees, of the Federated Hermes 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.
Other Directorships Held: None.
Qualifications: Mr. Walsh has served in several business management
roles and directorship positions throughout his career. Mr. Walsh
previously served as Vice President, Walsh & Kelly, Inc.
(paving contractors).
|
Annual Shareholder Report
62
OFFICERS
|
Name
Birth Date
Positions Held
with Corporation
Date Service Began
|
Principal Occupation(s) for Past Five Years
and Previous Position(s)
|
|
Lori A. Hensler
Birth Date: January 6, 1967
TREASURER
Officer since: April 2013
|
Principal Occupations: Principal Financial Officer and Treasurer of the
Federated Hermes Fund Family; Senior Vice President, Federated
Administrative Services; Financial and Operations Principal for
Federated Securities Corp.; and Assistant Treasurer, Federated
Investors Trust Company. Ms. Hensler has received the Certified
Public Accountant designation.
Previous Positions: Controller of Federated Hermes, 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.
|
|
Peter J. Germain
Birth Date:
September 3, 1959
CHIEF LEGAL OFFICER,
SECRETARY and EXECUTIVE
VICE PRESIDENT
Officer since: January 2005
|
Principal Occupations: Mr. Germain is Chief Legal Officer, Secretary
and Executive Vice President of the Federated Hermes Fund Family.
He is General Counsel, Chief Legal Officer, Secretary and Executive
Vice President, Federated Hermes, Inc.; Trustee and Senior Vice
President, Federated Investors Management Company; Trustee and
President, Federated Administrative Services; Director and President,
Federated Administrative Services, Inc.; Director and Vice President,
Federated Securities Corp.; Director and Secretary, Federated Private
Asset Management, Inc.; Secretary, Federated Shareholder Services
Company; and Secretary, Retirement Plan Service Company of
America. Mr. Germain joined Federated Hermes, Inc. 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 Hermes, Inc.;
Senior Vice President, Federated Services Company; and Senior
Corporate Counsel, Federated Hermes, Inc.
|
|
Stephen Van Meter
Birth Date: June 5, 1975
CHIEF COMPLIANCE
OFFICER AND SENIOR VICE
PRESIDENT
Officer since: July 2015
|
Principal Occupations: Senior Vice President and Chief Compliance
Officer of the Federated Hermes Fund Family; Vice President and
Chief Compliance Officer of Federated Hermes, Inc. and Chief
Compliance Officer of certain of its subsidiaries. Mr. Van Meter joined
Federated Hermes, Inc. in October 2011. He holds FINRA licenses
under Series 3, 7, 24 and 66.
Previous Positions: Mr. Van Meter previously held the position of
Compliance Operating Officer, Federated Hermes, Inc. Prior to joining
Federated Hermes, Inc., Mr. Van Meter served at the United States
Securities and Exchange Commission in the positions of Senior
Counsel, Office of Chief Counsel, Division of Investment Management
and Senior Counsel, Division of Enforcement.
|
Annual Shareholder Report
63
|
Name
Birth Date
Positions Held
with Corporation
Date Service Began
|
Principal Occupation(s) for Past Five Years
and Previous Position(s)
|
|
Deborah A. Cunningham
Birth Date:
September 15, 1959
Chief Investment Officer
Officer since: June 2012
|
Principal Occupations: Deborah A. Cunningham was named Chief
Investment Officer of Federated Hermes’ money market products in
2004. She joined Federated Hermes in 1981 and has been a Senior
Portfolio Manager since 1997 and an Executive Vice President of the
Fund’s Adviser since 2009. Ms. Cunningham has received the
Chartered Financial Analyst designation and holds an M.S.B.A. in
Finance from Robert Morris College.
|
|
Mary Jo Ochson
Birth Date:
September 12, 1953
CHIEF INVESTMENT OFFICER
Officer since: May 2004
|
Principal Occupations: Mary Jo Ochson was named Chief Investment
Officer of Federated Hermes’ tax-exempt, fixed-income products in
2004 and Chief Investment Officer of Federated Hermes’ Tax-Free
Money Markets in 2010. She joined Federated Hermes in 1982 and
has been a Senior Portfolio Manager and a Senior Vice President of
the Fund’s Adviser since 1996. Ms. Ochson has received the Chartered
Financial Analyst designation and holds an M.B.A. in Finance from the
University of Pittsburgh.
|
Annual Shareholder Report
64
Evaluation and Approval of Advisory
Contract–May 2020
Federated Municipal Ultrashort Fund (the “Fund”)
(EFFECTIVE CLOSE OF BUSINESS ON JUNE 26, 2020, THE FUND’S
NAME CHANGED TO FEDERATED HERMES MUNICIPAL
ULTRASHORT FUND)
At its meetings in May 2020 (the “May Meetings”), the Fund’s Board of
Directors (the “Board”), including a majority of those Directors who are not
“interested persons” of the Fund, as defined in the Investment Company Act of
1940 (the “Independent Directors”), reviewed and unanimously approved the
continuation of the investment advisory contract between the Fund and
Federated Investment Management Company (the “Adviser”) (the “Contract”)
for an additional one-year term. The Board’s determination to approve the
continuation of the Contract reflects the exercise of its business judgment after
considering all of the information and factors believed to be relevant and
appropriate on whether to continue the existing arrangements. The information,
factors and conclusions that formed the basis for the Board’s approval are
summarized below.
Information Received and Review Process
At the request of the Independent Directors, the Fund’s Chief Compliance
Officer (the “CCO”) furnished to the Board in advance of its May Meetings an
independent written evaluation presenting on the topics discussed below. The
Board considered the CCO’s independent written evaluation (the “CCO Fee
Evaluation Report”), along with other information, in evaluating the
reasonableness of the Fund’s management fee and in determining to approve
the continuation of the Contract. The CCO, in preparing the CCO Fee
Evaluation Report, has the authority to retain consultants, experts or staff as
reasonably necessary to assist in the performance of his duties, reports directly
to the Board, and can be terminated only with the approval of a majority of the
Independent Directors. At the request of the Independent Directors, the
CCO Fee Evaluation Report followed the same general approach and covered
the same topics as that of the report that had previously been delivered by
the CCO in his capacity as “Senior Officer” prior to the elimination of the
Senior Officer position in December 2017.
In addition to the extensive materials that comprise and accompany the
CCO Fee Evaluation Report, in the months preceding the May Meetings, the
Board requested and reviewed written responses and supporting materials
prepared by the Adviser and its affiliates (collectively, “Federated Hermes”) in
response to requests posed to Federated Hermes on behalf of the Independent
Directors encompassing a wide variety of topics. The Board also considered
such additional matters as the Independent Directors deemed reasonably
necessary to evaluate the Contract, which included detailed information about
the Fund and Federated Hermes furnished to the Board at its meetings
Annual Shareholder Report
65
throughout the year and in between regularly scheduled meetings on particular
matters as the need arose, as well as information specifically prepared in
connection with the approval of the continuation of the Contract that was
presented at the May Meetings.
The Board’s consideration of the Contract included review of materials and
information covering the following matters, among others: the Adviser’s and
sub-adviser’s investment philosophy, revenue, profitability, personnel and
processes; investment and operating strategies; the Fund’s short-term and
long-term performance (in absolute terms, both on a gross basis and net of
expenses, and relative to the Fund’s particular investment program and a group
of its peer funds and/or its benchmark, as appropriate) and comments on the
reasons for the Fund’s performance; the Fund’s investment objectives; the
Fund’s expenses, including the advisory fee and the overall expense structure
of the Fund (both in absolute terms and relative to a group of its peer funds),
with due regard for contractual or voluntary expense limitations (if any); 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 and other risks assumed by the Adviser in sponsoring and
managing the Fund; the continuing state of competition in the mutual fund
industry and market practices; the range of comparable fees for similar funds in
the mutual fund industry; the Fund’s relationship to the other funds advised by
Federated Hermes (each, a “Federated Hermes Fund”), which include a
comprehensive array of funds with different investment objectives, policies
and strategies which are generally available for exchange without the
incurrence of additional sales charges; compliance and audit reports
concerning the Federated Hermes Funds and the Federated Hermes’ affiliates
that service them (including communications from regulatory agencies), as
well as Federated Hermes’ responses to any issues raised therein; and relevant
developments in the mutual fund industry and how the Federated Hermes
Funds and/or Federated Hermes may be responding to them. In addition, the
Board received and considered information furnished by Federated Hermes on
the impacts of the coronavirus (COVID-19) outbreak on Federated Hermes
generally and the Fund in particular, including, among other information, the
current and anticipated impacts on the management, operations and
performance of the Fund. The Board noted that its evaluation process is
evolutionary and that the criteria considered and the emphasis placed on
relevant criteria may change in recognition of changing circumstances in the
mutual fund marketplace.
The Board also considered judicial decisions concerning allegedly excessive
investment advisory fees in determining to approve the Contract. Using these
judicial decisions as a guide, the Board observed that the following factors may
be relevant to an adviser’s fiduciary duty with respect to its receipt of
Annual Shareholder Report
66
compensation from a fund: (1) the nature and quality of the services provided
by an adviser to a fund and its shareholders (including the performance of the
fund, its benchmark, and comparable funds); (2) an adviser’s cost of providing
the services (including the profitability to an adviser of providing advisory
services to a fund); (3) the extent to which an adviser may realize “economies
of scale” as a fund grows larger and, if such economies of scale exist, whether
they have been shared with a fund and its shareholders or the family of funds;
(4) any “fall-out” financial benefits that accrue to an 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 an adviser for services
rendered to a fund); (5) comparative fee and expense structures (including a
comparison of fees paid to an adviser with those paid by similar funds both
internally and externally as well as management fees charged to institutional
and other advisory clients of the adviser for what might be viewed as like
services); and (6) the extent of care, conscientiousness and independence with
which the fund’s board members perform their duties and their expertise
(including whether they are fully informed about all facts the board deems
relevant to its consideration of an adviser’s services and fees). The Board noted
that the Securities and Exchange Commission (“SEC”) disclosure requirements
regarding the basis for a fund board’s approval of the fund’s investment
advisory contracts generally align with the factors listed above. The Board was
aware of these factors and was guided by them in its review of the Contract to
the extent it considered them to be appropriate and relevant, as discussed
further below.
The Board considered and weighed these factors in light of its substantial
accumulated experience in governing the Fund and working with Federated
Hermes on matters relating to the Federated Hermes Funds. While individual
members of the Board may have weighed certain factors differently, the
Board’s determination to continue the Contract was based on a comprehensive
consideration of all information provided to the Board throughout the year and
specifically with respect to the continuation of the Contract. The Independent
Directors were assisted throughout the evaluation process by independent legal
counsel. In connection with their deliberations at the May Meetings, the
Independent Directors met separately in executive session with their
independent legal counsel and without management present to review the
relevant materials and consider their responsibilities under applicable laws. In
addition, senior management representatives of Federated Hermes also met
with the Independent Directors and their independent legal counsel to discuss
the materials and presentations furnished to the Board at the May Meetings.
The Board considered the approval of the Contract for the Fund as part of its
consideration of agreements for funds across the Federated Hermes Funds
family, but its approvals were made on a fund-by-fund basis.
Annual Shareholder Report
67
Nature, Extent and Quality of Services
The Board considered the nature, extent and quality of the services provided
to the Fund by the Adviser and the resources of the Adviser and its affiliates
dedicated to the Fund. In this regard, the Board evaluated, among other things,
the Adviser’s personnel, experience and track record, as well as the financial
resources and overall reputation of Federated Hermes and its willingness to
invest in personnel and infrastructure that benefit the Federated Hermes Funds.
The Board noted the significant acquisition of Hermes Fund Managers Limited
by Federated Hermes in 2018, which has deepened the organization’s
investment management expertise and capabilities and expanded the
investment process for all of the Federated Hermes Funds to incorporate
environmental, social and governance (“ESG”) factors and issuer engagement
on ESG matters.
In addition, the Board reviewed the qualifications, backgrounds and
responsibilities of the portfolio management team primarily responsible for the
day-to-day management of the Fund and the Adviser’s ability and experience
in attracting and retaining qualified personnel to service the Fund. The Board
noted the compliance program of the Adviser and the compliance-related
resources devoted by the Adviser and its affiliates in support of the Fund’s
obligations pursuant to Rule 38a-1 under the Investment Company Act of
1940, including the Adviser’s commitment to respond to rulemaking and other
regulatory initiatives of the SEC such as the liquidity risk management
program rules. In addition, the Board considered the response by the Adviser to
recent market conditions and considered the overall performance of the
Adviser in this context. The Fund’s ability to deliver competitive performance
when compared to its Performance Peer Group (as defined below) was also
deemed to be relevant by the Board as a useful indicator of how the Adviser is
executing the Fund’s investment program. The Adviser’s ability to execute this
program was one of the Board’s considerations in reaching a conclusion that
the nature, extent and quality of the Adviser’s investment management and
related services warrant the continuation of the Contract.
Fund Investment Performance
In evaluating the Fund’s investment performance, the Board considered
performance results in light of the Fund’s investment objective, strategies and
risks, as disclosed in the Fund’s prospectus. The Board also considered the
Fund’s performance in light of the overall recent market conditions. The Board
considered detailed investment reports on the Fund’s performance over
different time periods that were provided to the Board throughout the year and
in connection with the May Meetings and evaluated the Adviser’s analysis of
the Fund’s performance for these time periods. The Board also reviewed
comparative information regarding the performance of other mutual funds in
the category of peer funds selected by Morningstar, Inc. (the “Morningstar”),
an independent fund ranking organization (the “Performance Peer Group”),
noting the CCO’s view that comparisons to fund peer groups may be helpful,
Annual Shareholder Report
68
though not conclusive, in evaluating the performance of the Adviser in
managing the Fund. The Board considered, in evaluating such comparisons,
that in some cases there may be differences in the funds’ objectives or
investment management techniques, or the costs to implement the funds, even
within the same Performance Peer Group.
The Fund’s performance fell below the median of the relevant Performance
Peer Group for the one-year, three-year and five-year periods ended
December 31, 2019. The Board discussed the Fund’s performance with the
Adviser and recognized the efforts being taken by the Adviser in the context of
other factors considered relevant by the Board.
Following such evaluation, and full deliberations, the Board concluded that
the performance of the Fund supported renewal of the Contract.
Fund Expenses
While mindful that courts have cautioned against giving too much weight to
comparative information concerning fees charged by other advisers for
managing funds with comparable investment programs, the Board has found
the use of such comparisons to be relevant to its deliberations. In this regard,
the Board was presented with, and considered, information regarding the
contractual advisory fee rates, net advisory fee rates, total expense ratios and
each element of the Fund’s total expense ratio (i.e., gross and net advisory fees,
administrative fees, custody fees, portfolio accounting fees and transfer agency
fees) relative to an appropriate group of peer funds compiled by Federated
Hermes from the category of peer funds selected by Morningstar (the “Expense
Peer Group”). The Board received a description of the methodology used to
select the Expense Peer Group from the overall Morningstar category. The
Board also reviewed comparative information regarding the fees and expenses
of the broader group of funds in the overall Morningstar category. The Board
focused on comparisons with other similar mutual funds more heavily than
non-mutual fund products or services because such comparisons are believed
to be more relevant. The Board considered that other mutual funds are the
products most like the Fund, in that 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 Board noted that the range of their fees and expenses, therefore, appears to
be a relevant indicator of what consumers have found to be reasonable in the
marketplace in which the Fund competes.
The Board reviewed the contractual advisory fee rate, net advisory fee rate
and other expenses of the Fund and noted the position of the Fund’s fee rates
relative to its Expense Peer Group. In this regard, the Board noted that the
contractual advisory fee rate was below the median of the Expense Peer Group
and the Board was satisfied that the overall expense structure of the Fund
remained competitive.
Annual Shareholder Report
69
For comparison, the Board received and considered information about the
fees charged by Federated Hermes for providing advisory services to other
types of clients with investment strategies similar to those of the Federated
Hermes Funds, including non-mutual fund clients such as institutional separate
accounts and third-party unaffiliated mutual funds for which the Adviser or its
affiliates serve as sub-adviser. The Board noted the CCO’s conclusion that
non-mutual fund clients are inherently different products due to the following
differences, among others: (i) different types of targeted investors; (ii) different
applicable laws and regulations; (iii) different legal structures; (iv) different
average account sizes and portfolio management techniques made necessary by
different cash flows and different associated costs; (v) and the time spent by
portfolio managers and their teams (among other personnel across various
departments, including legal, compliance and risk management) in reviewing
securities pricing, addressing different administrative responsibilities, and
addressing different degrees of risk associated with management; and (vi) a
variety of different costs. The Board also considered information regarding the
differences in the nature of the services required for Federated Hermes to
manage its proprietary mutual fund business versus managing a discrete pool
of assets as a sub-adviser to another institution’s mutual fund, noting that
Federated Hermes generally performs significant additional services and
assumes substantially greater risks in managing the Fund and other Federated
Hermes Funds than in its role as sub-adviser to an unaffiliated third-party
mutual fund. The Board noted that the CCO did not consider the fees for
providing advisory services to other types of clients to be determinative in
judging the appropriateness of the Federated Hermes Funds’ advisory fees.
Following such evaluation, and full deliberations, the Board concluded that
the fees and expenses of the Fund are reasonable and supported renewal of
the Contract.
Profitability and Other Benefits
The Board also received financial information about Federated Hermes,
including information regarding the compensation and ancillary (or “fall-out”)
benefits Federated Hermes derived from its relationships with the Federated
Hermes Funds. This information covered not only the fees under the Federated
Hermes Funds’ investment advisory contracts, but also fees received by
Federated Hermes’ affiliates for providing other services to the Federated
Hermes Funds under separate contracts (e.g., for serving as the Federated
Hermes Funds’ administrator and distributor). In this regard, the Board
considered that certain of Federated Hermes’ affiliates provide distribution and
shareholder services to the Federated Hermes Funds, for which they may be
compensated through distribution and servicing fees paid pursuant to
Rule 12b-1 plans or otherwise. The Board also received and considered
information detailing any indirect benefit Federated Hermes may derive from
its receipt of research services from brokers who execute portfolio trades for
the Federated Hermes Funds. In addition, the Board considered the fact that, in
Annual Shareholder Report
70
order for the Federated Hermes Funds to be competitive in the marketplace, the
Adviser and its affiliates frequently waived fees and/or reimbursed expenses
and have disclosed to Federated Hermes Fund shareholders and/or reported to
the Board their intention to do so in the future. Moreover, the Board received
and considered regular reports from Federated Hermes throughout the year
as to the institution, adjustment or elimination of these voluntary waivers
and/or reimbursements.
The Board received and considered information furnished by Federated
Hermes, as requested by the CCO, 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 CCO and described to the
Board. The Board considered the CCO’s view that, while these cost allocation
reports apply consistent allocation processes, the inherent difficulties in
allocating costs continues to cause the CCO to question the precision of the
process and to conclude that such reports may be unreliable, because a single
change in an allocation estimate may dramatically alter the resulting estimate
of cost and/or profitability of a Federated Hermes Fund and may produce
unintended consequences. The allocation information, including the CCO’s
view that fund-by-fund estimations may be unreliable, was considered in the
evaluation by the Board. In addition, the Board considered that, during the
prior year, an independent consultant conducted a review of the allocation
methodologies used by Federated Hermes in estimating profitability for
purposes of reporting to the Board in connection with the continuation of the
Contract. The Board noted the consultant’s view that, although there is no
single best method to allocate expenses, the methodologies used by Federated
Hermes are reasonable.
The Board also reviewed information compiled by Federated Hermes
comparing its profitability information to other publicly held fund management
companies, including information regarding profitability trends over time. The
Board considered the CCO’s conclusion that, based on such profitability
information, Federated Hermes’ profit margins did not appear to be excessive.
The Board also considered the CCO’s view that Federated Hermes appeared
financially sound, with the resources necessary to fulfill its obligations under
its contracts with the Federated Hermes Funds.
Economies of Scale
The Board received and considered information about the notion of possible
realization of “economies of scale” as a fund grows larger, the difficulties of
calculating economies of scale at an individual fund level, and the extent to
which potential scale benefits are shared with shareholders. In this regard, the
Board considered that the Adviser has made significant and long-term
investments in areas that support all of the Federated Hermes Funds, such as
personnel and processes for the portfolio management, trading operations,
issuer engagement (including with respect to ESG matters), shareholder
Annual Shareholder Report
71
services, compliance, business continuity, internal audit and risk management
functions, as well as systems technology (including technology relating to
cybersecurity) and use of data. The Board noted that Federated Hermes’
investments in these areas are extensive and are designed to provide enhanced
services to the Federated Hermes Funds and their shareholders. The Board
considered that the benefits of these investments (as well as the benefits of any
economies of scale, should they exist) are likely to be shared with the
Federated Hermes Fund family as a whole. In addition, the Board considered
that the Adviser and its affiliates have frequently waived fees and/or
reimbursed expenses for the Federated Hermes Funds and that such waivers
and reimbursements are another means for potential economies of scale to be
shared with shareholders and can provide protection from an increase in
expenses if a Federated Hermes Fund’s assets decline. Federated Hermes, as it
does throughout the year, and specifically in connection with the Board’s
review of the Contract, furnished information relative to adviser-paid fees
(commonly referred to as revenue sharing). The Board considered the beliefs
of Federated Hermes and the CCO that this information should be viewed to
determine if there was an incentive to either not apply breakpoints, or to apply
breakpoints at higher levels, and should not be viewed to determine the
appropriateness of advisory fees. The Board also noted the absence of any
applicable regulatory or industry guidelines on this subject, which is
compounded by the lack of any common industry practice or general pattern
with respect to structuring fund advisory fees with “breakpoints” that serve to
reduce the fee as a fund attains a certain size.
Conclusions
The Board considered the CCO’s conclusion that his observations and the
information accompanying the CCO Fee Evaluation Report show that the
management fee for the Fund was reasonable and the CCO’s recommendation
that the Board approve the management fee. The Board noted that, under these
circumstances, no changes were recommended to, and no objection was raised
to the continuation of, the Contract by the CCO. The CCO also recognized that
the Board’s evaluation of the Federated Hermes Funds’ advisory and
subadvisory arrangements is a continuing and on-going process that is
informed by the information that the Board requests and receives from
management throughout the course of the year and, in this regard, the CCO
noted certain items for future reporting to the Board or further consideration by
management as the Board continues its on-going oversight of the Federated
Hermes Funds.
In its determination 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 investment 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
Annual Shareholder Report
72
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 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 summarized above, including the nature, quality and scope
of the services provided to the Fund by the Adviser and its affiliates,
continuation of the Contract was appropriate.
The Board based its determination to approve the Contract 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 deemed to be relevant to the Fund, nor did the Board
consider any one of them to be determinative. With respect to the factors that
were deemed to be relevant, the Board’s determination to approve the
continuation of the Contract reflects its view that Federated Hermes’
performance and actions provided a satisfactory basis to support the
determination to continue the existing arrangement.
Annual Shareholder Report
73
Liquidity Risk Management Program–
Annual Evaluation of Adequacy and Effectiveness
In accordance with Rule 22e-4 under the Investment Company Act of 1940, as
amended (the “Liquidity Rule”), Federated Hermes Fixed Income Securities,
Inc. (the “Corporation”) has adopted and implemented a liquidity risk
management program (the “Program”) for Federated Hermes Municipal
Ultrashort Fund (the “Fund” and, collectively with the Federated Hermes
funds, the “Federated Hermes Funds”). The Program seeks to assess and
manage the Fund’s liquidity risk. “Liquidity risk” is defined under the
Liquidity Rule as the risk that the Fund is unable to meet redemption requests
without significantly diluting remaining investors’ interests in the Fund. The
Board of Directors of the Corporation (the “Board”) has approved the
designation of the Fund’s investment adviser as the administrator for the
Program for the Fund. Each affiliated Federated Hermes advisory subsidiary
(including the Fund’s investment adviser) that serves as investment adviser to a
Federated Hermes Fund (including the Fund) has been approved as the
administrator of the Program for each Federated Hermes Fund they manage
(each an “Administrator”). The Administrator in turn has delegated daily
responsibility for the administration of the Program to multiple Liquidity Risk
Management Committees (the “Committees”). The Committees, which are
comprised of representatives of Enterprise Risk Management, Compliance,
Investment Management and Trading, must review and assess certain
information related to the liquidity of the Federated Hermes Funds, including
the Fund.
The Program is comprised of various components designed to support the
assessment and/or management of liquidity risk, including: (1) the periodic
assessment (no less frequently than annually) of certain factors that influence
the Fund’s liquidity risk; (2) the periodic classification (no less frequently than
monthly) of the Fund’s investments into one of four liquidity categories that
reflect an estimate of their liquidity under current market conditions;
(3) a 15% limit on the acquisition of “illiquid investments” (as defined under
the Liquidity Rule); (4) to the extent a Fund does not invest primarily in
“highly liquid investments” (as defined under the Liquidity Rule), the
determination of a minimum percentage of the Fund’s assets that generally will
be invested in highly liquid investments (an “HLIM”); (5) if a Fund has
established an HLIM, the periodic review (no less frequently than annually) of
the HLIM and the adoption of policies and procedures for responding to a
shortfall of the Fund’s highly liquid investments below its HLIM; and
(6) periodic reporting to the Board.
At its meetings in May 2020, the Board received and reviewed a written
report (the “Report”) from the Federated Hermes Funds’ Chief Compliance
Officer and Chief Risk Officer, on behalf of the Administrator, concerning the
operation of the Program for the period from the Program’s inception on
Annual Shareholder Report
74
December 1, 2018 through March 31, 2020 (the “Period”). The Report
addressed the operation of the Program and assessed its adequacy and
effectiveness, including, where applicable, the operation of any HLIM
established for a Federated Hermes Fund and each Federated Hermes Fund’s
access to other available funding sources such as the Federated Hermes Funds’
interfund lending facility, redemptions in-kind and committed lines of credit.
There were no material changes to the Program during the Period. The Report
summarized the operation of the Program and the information and factors
considered by the Administrator in assessing whether the Program has been
adequately and effectively implemented with respect to the Federated Hermes
Funds. Such information and factors included, among other things:
■ confirmation that the Fund did not utilize alternative funding sources during
the Period;
■ the periodic classifications of the Fund’s investments into one of four
liquidity categories and the methodologies and inputs used to classify the
investments, including the Fund’s reasonably anticipated trade size;
■ the analysis received from a third-party liquidity assessment vendor that is
taken into account in the process of determining the liquidity classifications
of the Fund’s investments and the results of an evaluation of the services
performed by the vendor in support of this process;
■ the fact that the Fund invested primarily in highly liquid investments during
the Period and, therefore, was not required to establish, and has not
established, an HLIM and the procedures for monitoring the status of the
Fund as investing primarily in highly liquid investments;
■ the fact that the Fund invested no more than 15% of its assets in illiquid
investments during the Period and the procedures for monitoring this
limit; and
■ liquidity events during the Period, including the impact on liquidity caused
by extended non-U.S. market closures and the market disruptions resulting
from the novel coronavirus outbreak, and the fact that there were no specific
liquidity events during the Period that materially affected the Fund’s
liquidity risk.
Based on this review, the Fund’s investment adviser, in its role as
Administrator, collectively with the other investment advisers to the Federated
Hermes Funds, concluded that the Program is operating effectively to assess
and manage the Fund’s liquidity risk, and that the Program has been and
continues to be adequately and effectively implemented to monitor and, as
applicable, respond to the Fund’s liquidity developments.
Annual Shareholder Report
75
Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the 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 such 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
FederatedInvestors.com/FundInformation. Form N-PX filings are also
sec.gov.
Quarterly Portfolio Schedule
Each fiscal quarter, the Fund will file with the SEC a complete schedule of its
monthly portfolio holdings on “Form N-PORT.” The Fund’s holdings as of the
end of the third month of every fiscal quarter, as reported on Form N-PORT,
sec.gov within 60 days of
the end of the fiscal quarter upon filing. You may also access this information
FederatedInvestors.com.
Annual Shareholder Report
76
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This Report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund’s Prospectus, which contains facts
concerning its objective and policies, management fees, expenses and
other information.
Federated Hermes Municipal Ultrashort Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes 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.
Federated Securities Corp., Distributor
CUSIP 31417P866
CUSIP 31417P858
CUSIP 31417P817
CUSIP 31417P858
CUSIP 31417P817
29303 (11/20)
© 2020 Federated Hermes, 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) There was no amendment to the registrant’s code of ethics described in Item 2(a) above during the period covered by the report.
(d) There was no waiver granted, either actual or implicit, from a provision to the registrant’s code of ethics described in Item 2(a) above during the period covered by the report.
(e) Not Applicable
(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: John T. Collins, G. Thomas Hough and Thomas M. O'Neill.
| Item 4. | Principal Accountant Fees and Services |
(a) Audit Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2020 - $65,830
Fiscal year ended 2019 - $67,530
(b) Audit-Related Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2020 - $0
Fiscal year ended 2019 - $4,690
Fiscal year ended 2019- Audit consent for N-1A filing.
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 2020 - $0
Fiscal year ended 2019 - $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 2020 - $0
Fiscal year ended 2019 - $0
Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $41,103 and $26,413 respectively. Fiscal year ended 2020- Service fees for analysis of potential Passive Foreign Investment Company holdings. Fiscal year ended 2019- Service fees for analysis of potential Passive Foreign Investment Company holdings.
(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 to management its responsibilities to pre-approve services performed by the independent auditor.
The Audit Committee has delegated pre-approval authority to its Chairman for services that do not exceed a specified dollar threshold. The Chairman or Chief Audit Executive will report any such 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 will approve, if necessary, 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; with limited exception, 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 RIC’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 RIC 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; with limited exception, 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 permissible services other than audit, review or attest services the pre-approval requirement is waived if:
| (1) | With respect to such services rendered to the Funds, the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by the audit client to its accountant during the fiscal year in which the services are provided; and, |
| (2) | With respect to such services rendered to the Fund’s investment adviser and any entity controlling, controlled by to under common control with the investment adviser such as affiliated non-U.S. and U.S. funds not under the Audit Committee’s purview and which do not fall within a category of service which has been determined by the Audit Committee not to have a direct impact on the operations or financial reporting of the RIC, the aggregate amount of all services provided constitutes no more than five percent of the total amount of revenues paid to the RIC’s auditor by the RIC, its investment adviser and any entity controlling, controlled by, or under common control with the investment adviser during the fiscal year in which the services are provided; and |
| (3) | Such services were not recognized by the issuer or RIC at the time of the engagement to be non-audit services; and |
| (4) | Such services are promptly brought to the attention of the Audit Committee 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 which qualify for pre-approval and which 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 these services and 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 the Fund’s Principal Accounting Officer and/or the Chief Audit Executive of Federated Hermes, Inc., only after those individuals have determined that 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 registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
4(b)
Fiscal year ended 2020 – 0%
Fiscal year ended 2019 - 0%
Percentage of services provided to the registrants 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 registrants 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 2020 – 0%
Fiscal year ended 2019 – 0%
Percentage of services provided to the registrants 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 registrants 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 2020 – 0%
Fiscal year ended 2019 – 0%
Percentage of services provided to the registrants 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 registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
| (f) | NA |
| (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 2020 - $128,365
Fiscal year ended 2019 - $605,437
| (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. |
The registrant’s management and Audit Committee continue to believe that the registrant’s registered public accounting firms, Ernst & Young LLP (“EY”) and KPMG LLP (“KPMG”) (as applicable, “EY/KPMG”), have the ability to exercise objective and impartial judgment on all issues encompassed within their audit services. EY/KPMG is required to make a determination that it satisfies certain independence requirements under the federal securities laws. Like other registrants, there is a risk that activities or relationships of EY/KPMG, or its partners or employees, can prevent a determination from being made that it satisfies such independence requirements with respect to the registrant, which could render it ineligible to serve as the registrant’s independent public accountant.
In their respective required communications to the Audit Committee of the registrant’s Board, EY/KPMG informed the Audit Committee that EY/KPMG and/or covered person professionals within EY/KPMG maintain lending relationships with certain owners of greater than 10% of the shares of certain investment companies within the “investment company complex” as defined under Rule 2-01(f)(14) of Regulation S-X, which are affiliates of the registrant. EY/KPMG has advised the Audit Committee that these lending relationships implicate Rule 2-01(c)(1)(ii)(A) of Regulation S-X (referred to as the “Loan Rule”). The Loan Rule prohibits an independent public accountant, or covered person professionals at such firm, from having a financial relationship (such as a loan) with a lender that is a record or beneficial owner of more than 10% of an audit client’s equity securities. For purposes of the Loan Rule, audit clients include the registrant, as well as all registered investment companies advised by advisory subsidiaries of Federated Hermes, Inc., the Adviser (for which EY serves as independent public accountant), and their respective affiliates (collectively, the “Federated Hermes Fund Complex”).
EY/KPMG informed the Audit Committee that EY/KPMG believes that these lending relationships described above do not and will not impair EY/KPMG’s ability to exercise objective and impartial judgment in connection with financial statement audits of their respective funds of the registrant and a reasonable investor with knowledge of all relevant facts and circumstances would conclude that EY/KPMG has been and is capable of objective and impartial judgment on all issues encompassed within EY/KPMG’s audits.
On June 20, 2016, the Division of Investment Management of the Securities and Exchange Commission (“SEC”) issued a no-action letter to another mutual fund complex (see Fidelity Management & Research Company et al., No-Action Letter) related to similar Loan Rule matters as those described above (the “Letter”). In the Letter, the SEC Staff confirmed that it would not recommend enforcement action against an investment company that relied on the audit services performed by an independent public accountant where the Loan Rule was implicated in certain specified circumstances provided that: (1) the auditor has complied with PCAOB Rule 3526(b)(1) and 3526(b)(2); (2) the Loan Rule is implicated because of lending relationships; and (3) notwithstanding such lending relationships that implicate the Loan Rule, the auditor has concluded that it is objective and impartial with respect to the issues encompassed within its engagement as auditor of the funds. The circumstances described in the Letter are substantially similar to the circumstances that implicated the Loan Rule with respect to EY/KPMG and the registrant. On September 22, 2017, the SEC extended the expiration of the Letter until the effectiveness of any amendments to the Loan Rule designed to address the concerns in the Letter. On June 18, 2019, the SEC adopted amendments (effective October 3, 2019) to the Loan Rule, which, refocus the analysis that must be conducted to determine whether an auditor is independent when the auditor has a lending relationship with certain shareholders of an audit client at any time during an audit or professional engagement period.
If it were to be determined that, with respect to the Loan Rule, the relief available under the Letter was improperly relied upon, or that the independence requirements under the federal securities laws were not complied with regarding the registrant, for certain periods, and/or given the implication of the Investment Rule for certain periods, any of the registrant’s filings with the SEC which contain financial statements of the registrant for such periods may be determined not to be consistent with or comply with applicable federal securities laws, the registrant’s ability to offer shares under its current registration statement may be impacted, and certain financial reporting and/or other covenants with, and representations and warranties to, the registrant’s lender under its committed line of credit may be impacted. Such events could have a material adverse effect on the registrant and the Federated Hermes Fund Complex.
| 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; 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 |
Not Applicable
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies |
Not Applicable
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers |
Not Applicable
| 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 registrant’s most recent fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
| Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies |
Not Applicable
| Item 13. | 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 Hermes Fixed Income Securities, Inc.
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date November 20, 2020
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 November 20, 2020
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date November 20, 2020