United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of Registered Management Investment Companies
811-22217
(Investment Company Act File Number)
Federated Core Trust III
______________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Date of Fiscal Year End: 03/31/2013
Date of Reporting Period: Six months ended 09/30/2012
Item 1. Reports to Stockholders
Semi-Annual Shareholder Report
September 30, 2012
Federated Project and Trade Finance Core Fund
A Portfolio of Federated Core Trust III
Not FDIC Insured • May Lose Value • No Bank Guarantee
Portfolio of Investments Summary Table (unaudited)
At September 30, 2012, the Fund's portfolio composition1 was as follows:
| Security Type | Percentage of
Total Net Assets |
| Trade Finance Agreements | 85.5% |
| Asset-Backed Securities | 4.1% |
| Cash Equivalents2 | 15.2% |
| Derivative Contracts3,4 | (0.0)% |
| Other Assets and Liabilities—Net5 | (4.8)% |
| TOTAL | 100.0% |
| 1 | See the Fund's Confidential Private Offering Memorandum and Part B: Information Required in a Statement of Additional Information for a description of these security types. |
| 2 | Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements. |
| 3 | Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report. |
| 4 | Represents less than 0.1%. |
| 5 | Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities.
|
Semi-Annual Shareholder Report
Portfolio of Investments
September 30, 2012 (unaudited)
Principal
Amount
or Shares | | | Value |
| | Asset-Backed Securities—4.1% | |
| | Finance—4.1% | |
| $3,630,853 | | Oz Wing Cayman II Ltd., Series EMTN, 3.216%, 2/27/2017 | $3,649,007 |
| 4,000,000 | | Sealane 2011-1X, Class A, 14.438%, 2/12/2016 | 4,124,000 |
| 1,588,235 | | Yapi DPR Finance Co. 2010-1, Class A, 1.069%, 11/21/2014 | 1,513,588 |
| | TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $9,113,519) | 9,286,595 |
| | Trade Finance Agreements—85.5% | |
| | Automotive—0.9% | |
| 2,252,444 | | Giti Tire Co., 3.464%, 12/1/2012 | 2,180,366 |
| | Basic Industry - Fertilizers/Chemicals—3.0% | |
| 2,000,000 | | Amaggi, 2.500%, 8/29/2014 | 1,987,000 |
| 5,000,000 | | Eurochem Mineral and Chemical Co. OJSC, Moscow, Floating Rate Note, 2.436%, 8/7/2016 | 4,767,500 |
| | TOTAL | 6,754,500 |
| | Basic Industry - Forestry—2.1% | |
| 4,850,000 | | Bakrie Sumatera Plantations, 7.359%, 10/30/2016 | 4,811,200 |
| | Basic Industry - Metals/Mining Excluding Steel—14.3% | |
| 2,817,801 | | African Minerals, 0.414%, 10/13/2016 | 2,774,125 |
| 6,000,000 | | Discovery Copper, 4.109%, 3/31/2015 | 5,967,000 |
| 4,000,000 | | Erdenet, 7.214%, 9/6/2014 | 3,978,000 |
| 3,993,421 | 1 | Evraz Group SA, 3.014%, 11/19/2015 | 3,831,687 |
| 3,125,000 | | Glencore International, 2.095%, 6/12/2013 | 3,081,250 |
| 1,923,077 | | Kazakhmys PLC, 1.464%, 2/28/2013 | 1,890,385 |
| 58,234 | 1 | Mechel Chelyabin, 5.214%, 12/12/2012 | 55,701 |
| 131,869 | | Mechel Chelyabin, 5.75%, 9/15/2016 | 126,759 |
| 56,825 | | Mechel Chelyabin II, 5.00%, 9/15/2016 | 54,623 |
| 523,810 | 1 | Mechel Kuzbass, 5.214%, 12/12/2012 | 501,024 |
| 1,186,817 | | Mechel Kuzbass, 5.75%, 9/15/2016 | 1,140,828 |
| 528,271 | | Mechel Kuzbass II, 5.00%, 9/15/2016 | 507,800 |
| 263,737 | | Mechel S Ural, 5.75%, 9/15/2016 | 253,517 |
| 116,402 | 1 | Mechel S Urals, 5.214%, 12/12/2012 | 111,338 |
| 117,394 | | Mechel Ural II, 5.00%, 9/15/2016 | 112,845 |
| 523,809 | | Mechel Yakutugol, 5.214%, 12/12/2012 | 501,024 |
| 1,186,817 | | Mechel Yakutugol, 5.75%, 9/15/2016 | 1,140,828 |
| 528,271 | | Mechel Yakutugol II, 5.00%, 9/15/2016 | 507,800 |
| 1,000,000 | | Vedanta 2012, 3.464%, 12/7/2014 | 968,500 |
| 2,250,000 | | Vedanta Resources PLC, Floating Rate Note, 3.241%, 1/16/2013 | 2,223,000 |
| 3,000,000 | | Vedanta/Twinstar, 1.750%, 6/7/2013 | 2,999,400 |
| | TOTAL | 32,727,434 |
| | Basic Industry - Steel Producers/Products—11.1% | |
| 6,000,000 | | Essar Steel Ltd., 3.464%, 12/15/2012 | 5,640,000 |
| 3,000,000 | | Hyundai Steel Co., 1.850%, 5/30/2013 | 2,974,500 |
| 2,686,514 | | JSW Duferco, 1.914%, 9/1/2013 | 2,648,902 |
| 6,100,000 | | Metalloinvest, Floating Rate Note, 3.214%, 4/4/2016 | 6,057,300 |
| 4,000,000 | | Metinvest15, 4.964%, 5/25/2015 | 3,926,000 |
| 1,333,333 | | Severstal, 2.709%, 9/23/2013 | 1,310,667 |
| 2,948,829 | | Stemcor, 2.35%, 4/26/2013 | 2,934,085 |
| | TOTAL | 25,491,454 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | Trade Finance Agreements—continued | |
| | Capital Goods—2.1% | |
| $892,857 | 1 | Azul Airlines, A 6.458%, 3/30/2013 | $876,786 |
| 892,857 | 1 | Azul Airlines, B 6.458%, 3/30/2013 | 876,786 |
| 3,000,000 | | TAAG II, Floating Rate Note, 6.109%, 6/27/2016 | 3,007,500 |
| | TOTAL | 4,761,072 |
| | Consumer Cyclical—1.2% | |
| 2,142,857 | | A & Y Marka, Floating Rate Note, 4.214%, 4/29/2014 | 2,742,663 |
| | Consumer Non-Cyclical—11.3% | |
| 2,761,832 | 2,3,4 | Arrocera Covadonga SA de CV, 8.500%, 12/31/2012 | 0 |
| 1,529,412 | | Bahia Cellulose, 4.229%, 11/10/2015 | 1,529,412 |
| 3,625,000 | | Bajaj Hindusthan Ltd., Floating Rate Note, 1.739%, 3/14/2015 | 3,525,313 |
| 729,154 | | Banacol, 3.714%, 6/14/2013 | 713,841 |
| 2,500,000 | | COCOBOD, Floating Rate Note, 1.750%, 8/30/2013 | 2,473,750 |
| 3,823,530 | | GVO, 5.214%, 11/2/2015 | 3,886,618 |
| 2,500,000 | | Louis Drey May, 3.859%, 8/31/2015 | 2,490,000 |
| 4,000,000 | | Marfrig Alimentos SA, 5.714%, 11/9/2015 | 3,976,000 |
| 2,000,000 | | Ukrland Farming, 8.500%, 6/29/2014 | 1,992,000 |
| 5,400,000 | | Vicentin, 7.636%, 11/18/2015 | 5,400,000 |
| | TOTAL | 25,986,934 |
| | Consumer Non-Cyclical/Food-Wholesale—1.2% | |
| 2,750,000 | | Kernel Holding SA, 5.500%, 3/3/2016 | 2,758,250 |
| | Consumer Non-Cyclical/Tobacco—0.8% | |
| 1,727,328 | | Premium Tobacco, 5.250%, 5/31/2013 | 1,724,737 |
| | Energy—25.6% | |
| 4,678,269 | | BP Angola, 2.859%, 6/30/2015 | 4,652,538 |
| 5,926,853 | | BP Caspian, Bank Note, 2.859%, 8/20/2015 | 5,917,962 |
| 3,315,000 | | Btc. Pipeline, 3.000%, 12/16/2013 | 3,222,180 |
| 4,001,468 | | Bumi Resources Tbk, 11.214%, 8/26/2013 | 4,091,501 |
| 4,479,167 | | Canbaikal Resources, 5.714%, 4/10/2016 | 4,454,531 |
| 510,400 | | Egpc Pel V Tr A, 3.609%, 3/31/2015 | 474,162 |
| 18,425 | | Egpc Pel V Trb, 3.359%, 12/31/2012 | 17,440 |
| 2,000,000 | | Energi Mega Persada Tbk, 12.214%, 9/12/2013 | 1,979,000 |
| 1,750,000 | | Estrella De Oro Mobile Home, 8.359%, 11/30/2015 | 1,667,750 |
| 4,550,203 | | Gunvor Group, 3.714%, 11/30/2016 | 4,445,548 |
| 2,678,571 | | OAO Rosneft Oil Co., Floating Rate Note, 1.164%, 2/19/2013 | 2,657,143 |
| 827,938 | | Petroleum Export Ltd. III, 3.859%, 3/15/2013 | 819,244 |
| 5,000,000 | | Rompetrol, 3.550%, 2/28/2017 | 4,964,000 |
| 1,666,667 | | Rosneft Oil Co., 1.164%, 7/12/2013 | 1,630,000 |
| 5,000,000 | 1 | Shunkhlai LLC, 4.719%, 10/19/2012 | 4,997,500 |
| 3,515,037 | | Sonangol 2014, 1.185%, 7/31/2014 | 3,377,951 |
| 361,111 | | Sonangol Finance Ltd., 3.214%, 11/30/2012 | 358,222 |
| 4,285,714 | | SUEK OJSC, 3.464%, 9/8/2015 | 4,206,429 |
| 312,500 | | SV Oil & Natural Gas Ltd., 4.214%, 9/14/2013 | 310,156 |
| 720,000 | | Tatneft, 3.314%, 6/23/2013 | 699,480 |
| 3,318,182 | | Tuscany International Drilling, Inc., 6.859%, 8/15/2016 | 3,316,523 |
| 303,030 | | Tuscany Revolver, 6.859%, 9/15/2014 | 302,970 |
| | TOTAL | 58,562,230 |
| | Energy/Exploration and Production—2.1% | |
| 4,761,538 | | Ptmitraperk, 6.214%, 11/30/2015 | 4,794,869 |
Semi-Annual Shareholder Report
Principal
Amount
or Shares | | | Value |
| | Trade Finance Agreements—continued | |
| | Finance—1.7% | |
| $2,100,000 | | International Bank of Azerbaijan, 5.386%, 7/23/2013 | $2,050,650 |
| 1,800,000 | | Utd Bank Africa, 5.136%, 11/29/2013 | 1,799,640 |
| | TOTAL | 3,850,290 |
| | Finance/Banks/Brokers—1.3% | |
| 3,000,000 | | Afrexim, 0.237%, 6/29/2014 | 2,980,500 |
| | Regional Manufacturing - Agricultural Services—0.8% | |
| 1,744,048 | | ETG, 2.500%, 7/31/2013 | 1,742,304 |
| | Services—1.6% | |
| 1,406,061 | | Azeri RR Tran A, Floating Rate Note, 3.714%, 1/9/2013 | 1,370,909 |
| 2,411,041 | | Azeri RR Tran B, 4.214%, 1/9/2015 | 2,347,149 |
| | TOTAL | 3,718,058 |
| | Services/Railroads—1.6% | |
| 3,728,814 | | Eastcomtrans, Floating Rate Note, 6.214%, 4/1/2016 | 3,676,610 |
| | Telecommunications & Cellular—1.7% | |
| 993,408 | | Brightstar VI, 3.350%, 12/10/2012 | 984,169 |
| 2,857,200 | | Digicel Ltd., 3.788%, 3/31/2015 | 2,858,629 |
| | TOTAL | 3,842,798 |
| | Utility/Electricity Generation—1.1% | |
| 2,500,000 | 1 | MOF Angola, 5.500%, 2/16/2018 | 2,476,250 |
| | TOTAL TRADE FINANCE AGREEMENTS
(IDENTIFIED COST $199,197,059) | 195,582,519 |
| | MUTUAL FUND—15.2% | |
| 34,832,603 | 5,6 | Federated Prime Value Obligations Fund, Institutional Shares, 0.18%
(AT NET ASSET VALUE) | 34,832,603 |
| | TOTAL INVESTMENTS—104.8%
(IDENTIFIED COST $243,143,181)7 | 239,701,717 |
| | OTHER ASSETS AND LIABILITIES - NET—(4.8)%8 | (10,914,571) |
| | TOTAL NET ASSETS—100% | $228,787,146 |
At September 30, 2012, the Fund had the following outstanding foreign exchange contracts as follows:
| Settlement Date | Foreign Currency
Units to Receive | In Exchange For | Unrealized
Depreciation |
| Contracts Sold: |
| 1/11/2013 | 2,230,000 Euros | $2,811,852 | $(57,011) |
Unrealized Depreciation on Foreign Exchange Contracts is included in “Other Assets and Liabilities—Net.”
| 1 | Denotes a restricted security 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) is subject to a contractual restriction on public sales. At September 30, 2012, these restricted securities amounted to $13,727,072, which represented 6.0% of total net assets. |
| 2 | Issuer in default. Principal amount and interest were not paid upon final maturity. |
| 3 | Market quotations and price evaluations are not available. Fair value determined in accordance with procedures established by and under the general supervision of the Fund's Board of Trustees (the “Trustees”). |
| 4 | Non-income producing security. |
| 5 | Affiliated holding. |
| 6 | 7-Day net yield. |
| 7 | Also represents cost for federal tax purposes. |
| 8 | 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, 2012.
Semi-Annual Shareholder Report
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1—quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of September 30, 2012, in valuing the Fund's assets carried at fair value:
| Valuation Inputs | | | | |
| Level 1—
Quoted
Prices and
Investments in
Mutual Funds | Level 2—
Other
Significant
Observable
Inputs | Level 3—
Significant
Unobservable
Inputs | Total |
| Debt Securities: | | | | |
| Asset-Backed Securities | $— | $— | $9,286,595 | $9,286,595 |
| Trade Finance Agreements | — | — | 195,582,519 | 195,582,519 |
| Mutual Fund | 34,832,603 | — | — | 34,832,603 |
| TOTAL SECURITIES | $34,832,603 | $— | $204,869,114 | $239,701,717 |
| OTHER FINANCIAL INSTRUMENTS* | $— | $(57,011) | $— | $(57,011) |
| * | Other financial instruments included foreign exchange contracts. |
Following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
| Investments
in Asset-Backed
Securities | Investments in
Trade Finance
Agreements |
| Balance as of April 1, 2012 | $9,813,971 | $199,844,936 |
| Accrued discounts/premiums | (184) | 571,351 |
| Realized gain | 23,650 | 6,034 |
| Change in unrealized appreciation | 171,246 | 411,968 |
| Purchases | — | 64,967,222 |
| (Sales) | (722,088) | (70,218,992) |
| Balance as of September 30, 2012 | $9,286,595 | $195,582,519 |
| The total change in unrealized appreciation included in the Statement of Operations attributable to investments still held at September 30, 2012. | $171,246 | $201,792 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Six Months
Ended
(unaudited)
9/30/2012 | Year Ended March 31, | Period
Ended
3/31/20101 |
| 2012 | 2011 |
| Net Asset Value, Beginning of Period | $9.77 | $9.95 | $9.93 | $10.00 |
| Income From Investment Operations: | | | | |
| Net investment income | 0.21 | 0.53 | 0.45 | 0.15 |
| Net realized and unrealized gain (loss) on investments and foreign currency transactions | 0.07 | (0.16) | 0.04 | (0.07) |
| TOTAL FROM INVESTMENT OPERATIONS | 0.28 | 0.37 | 0.49 | 0.08 |
| Less Distributions: | | | | |
| Distributions from net investment income | (0.23) | (0.51) | (0.45) | (0.15) |
| Distributions from net realized gain on investments and foreign currency transactions | (0.01) | (0.04) | (0.02) | (0.00)2 |
| TOTAL DISTRIBUTIONS | (0.24) | (0.55) | (0.47) | (0.15) |
| Net Asset Value, End of Period | $9.81 | $9.77 | $9.95 | $9.93 |
| Total Return3 | 2.92% | 3.76% | 5.05% | 0.76% |
| Ratios to Average Net Assets: | | | | |
| Net expenses | 0.00%4 | 0.00% | 0.00% | 0.00%4 |
| Net investment income | 4.37%4 | 5.35% | 4.58% | 2.13%4 |
| Expense waiver/reimbursement5 | 0.33%4 | 0.35% | 0.45% | 0.83%4 |
| Supplemental Data: | | | | |
| Net assets, end of period (000 omitted) | $228,787 | $224,843 | $143,710 | $97,645 |
| Portfolio turnover | 24% | 38% | 72% | 21% |
| 1 | Reflects operations for the period from August 26, 2009 (date of initial investment) to March 31, 2010. |
| 2 | Represents less than $0.01. |
| 3 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 4 | Computed on an annualized basis. |
| 5 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
September 30, 2012 (unaudited)
| Assets: | | |
| Total investment in securities, at value including $34,832,603 of investment in an affiliated holding (Note 5) (identified cost $243,143,181) | | $239,701,717 |
| Cash | | 789,776 |
| Cash denominated in foreign currencies (identified cost $146,954) | | 146,954 |
| Income receivable | | 81,944 |
| Receivable for investments sold | | 3,102,725 |
| Bank loan receivable | | 1,088,316 |
| TOTAL ASSETS | | 244,911,432 |
| Liabilities: | | |
| Payable for investments purchased | $15,960,883 | |
| Unrealized depreciation on foreign exchange contracts | 57,011 | |
| Income distribution payable | 75,512 | |
| Payable to adviser (Note 5) | 1,632 | |
| Payable for Directors'/Trustees' fees | 375 | |
| Accrued expenses | 28,873 | |
| TOTAL LIABILITIES | | 16,124,286 |
| Net assets for 23,330,820 shares outstanding | | $228,787,146 |
| Net Assets Consist of: | | |
| Paid-in capital | | $231,608,588 |
| Net unrealized depreciation of investments and translation of assets and liabilities in foreign currency | | (3,498,475) |
| Accumulated net realized gain on investments and foreign currency transactions | | 918,415 |
| Distributions in excess of net investment income | | (241,382) |
| TOTAL NET ASSETS | | $228,787,146 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $228,787,146 ÷ 23,330,820 shares outstanding, no par value, unlimited shares authorized | | $9.81 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended September 30, 2012 (unaudited)
| Investment Income: | | | |
| Interest | | | $4,906,021 |
| Dividends received from an affiliated holding (Note 5) | | | 22,209 |
| TOTAL INCOME | | | 4,928,230 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $112,685 | |
| Administrative fee (Note 5) | | 73,324 | |
| Custodian fees | | 7,976 | |
| Transfer and dividend disbursing agent fees and expenses | | 9,256 | |
| Directors'/Trustees' fees | | 4,287 | |
| Auditing fees | | 27,971 | |
| Legal fees | | 31,149 | |
| Portfolio accounting fees | | 93,227 | |
| Printing and postage | | 4,865 | |
| Insurance premiums | | 2,106 | |
| Miscellaneous | | 3,838 | |
| TOTAL EXPENSES | | 370,684 | |
| Waivers and Reimbursements (Note 5): | | | |
| Waiver/reimbursement of investment adviser fee | $(112,685) | | |
| Waiver of administrative fee | (73,324) | | |
| Reimbursement of other operating expenses | (184,675) | | |
| TOTAL WAIVERS AND REIMBURSEMENTS | | (370,684) | |
| Net expenses | | | — |
| Net investment income | | | 4,928,230 |
| Realized and Unrealized Gain on Investments and Foreign Currency Transactions: | | | |
| Net realized gain on investments and foreign currency transactions | | | 1,319,577 |
| Net change in unrealized depreciation of investments and translation of assets and liabilities in foreign currency | | | 126,205 |
| Net realized and unrealized gain on investments and foreign currency transactions | | | 1,445,782 |
| Change in net assets resulting from operations | | | $6,374,012 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Changes in Net Assets
| Six Months
Ended
(unaudited)
9/30/2012 | Year Ended
3/31/2012 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $4,928,230 | $10,351,264 |
| Net realized gain on investments and foreign currency transactions | 1,319,577 | 120,715 |
| Net change in unrealized appreciation/depreciation of investments and translation of assets and liabilities in foreign currency | 126,205 | (3,605,133) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 6,374,012 | 6,866,846 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (5,212,183) | (9,992,583) |
| Distributions from net realized gain on investments | (342,580) | (744,182) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (5,554,763) | (10,736,765) |
| Share Transactions: | | |
| Proceeds from sale of shares | 2,025,000 | 118,801,951 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 5,080,712 | 9,978,537 |
| Cost of shares redeemed | (3,980,000) | (43,778,542) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 3,125,712 | 85,001,946 |
| Change in net assets | 3,944,961 | 81,132,027 |
| Net Assets: | | |
| Beginning of period | 224,842,185 | 143,710,158 |
| End of period (including undistributed (distributions in excess of) net investment income of $(241,382) and $42,571, respectively) | $228,787,146 | $224,842,185 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
September 30, 2012 (unaudited)
1. ORGANIZATION
Federated Project and Trade Finance Core Fund (the “Fund”) is a non-diversified portfolio of Federated Core Trust III (the “Trust”). The Trust is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company, which operates as an extended payment fund. The Fund's investment objective is to provide total return. Currently, the Fund is only available for purchase by organizations or entities that are “accredited investors” within the meaning of Regulation D of the 1933 Act and “qualified purchasers” as defined in Section 2(a)(51) of the Act. The Fund is not a mutual fund, and its shares are offered pursuant to an exemption from registration under the Securities Act of 1933, as amended.
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, including trade finance agreements acquired with remaining maturities greater than 60 days, are fair valued using price evaluations provided by a pricing service approved by the Fund's Board of Trustees (the “Trustees”). |
| ■ | Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value. |
| ■ | Equity securities listed on an exchange or traded through a regulated market system are valued at their last reported sale price or official closing price in their principal exchange or market. |
| ■ | Shares of other mutual funds are valued based upon their reported NAVs. |
| ■ | Derivative contracts listed on exchanges are valued at their reported settlement or closing price. |
| ■ | Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees. |
| ■ | For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security, information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers. |
If the Fund cannot obtain a price or price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation and Significant Events Procedures
The Trustees have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and the Adviser's affiliated companies to determine fair value of securities and in overseeing the calculation of the NAV. The Trustees have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Although the factors on which pricing services base their evaluations generally consist of observable inputs, certain fixed-income securities, such as trade finance agreements, are typically held to maturity by investors and therefore do not trade on a consistent basis. Accordingly, pricing services frequently cannot rely on executed trade prices to support their evaluations of these securities and must necessarily rely more heavily on unobservable inputs. In such circumstances, the Fund may classify securities as having a Level 3 valuation due to a lack of observable market transactions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid evaluations for U.S. Treasury and Agency securities and mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for trade finance agreements, other types of fixed-income securities and OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
Semi-Annual Shareholder Report
The Trustees also have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
| ■ | With respect to securities traded in foreign markets, significant trends in U.S. equity markets or in the trading of foreign securities index futures contracts; |
| ■ | Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and |
| ■ | Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the issuer's industry. |
The Trustees have approved the use of a pricing service to determine the fair value of equity securities traded principally in foreign markets when the Adviser determines that there has been a significant trend in the U.S. equity markets or in index futures trading. For other significant events, the Fund may seek to obtain more current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method approved by the Trustees.
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. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Premium and Discount Amortization
All premiums and discounts on fixed-income securities are amortized/accreted using the effective interest rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended September 30, 2012, 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, 2012, tax years 2010 through 2012 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the state of Delaware.
Foreign Exchange Contracts
The Fund enters into foreign exchange contracts for the delayed delivery of securities or foreign currency exchange transactions. The Fund enters into foreign exchange contracts to protect assets against adverse changes in foreign currency exchange rates or exchange control regulations. Purchased contracts are used to acquire exposure to foreign currencies, whereas, contracts to sell are used to hedge the Fund's securities against currency fluctuations. Risks may arise upon entering into these transactions from the potential inability of counterparties to meet the terms of their commitments and from unanticipated movements in security prices or foreign exchange rates. The foreign exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded for financial statement purposes as unrealized until the settlement date.
Foreign exchange contracts outstanding at period end are listed after the Fund's Portfolio of Investments.
The average value at settlement date payable and receivable of foreign exchange contracts purchased and sold by the Fund throughout the period was $171,393 and $8,144, respectively. This is based on the contracts held as of each month-end throughout the six-month period.
Foreign Currency Translation
The accounting records of the Fund are maintained in U.S. dollars. All assets and liabilities denominated in foreign currencies (FCs) are translated into U.S. dollars based on the rates of exchange of such currencies against U.S. dollars on the date of valuation. Purchases and sales of securities, income and expenses are translated at the rate of exchange quoted on the respective date that such transactions are recorded. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of portfolio securities, sales and maturities of short-term securities, sales of FCs, currency gains or losses realized between the trade and settlement dates on securities transactions, the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments in securities at fiscal year-end, resulting from changes in the exchange rate.
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
Semi-Annual Shareholder Report
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 are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined in accordance with procedures established by and under the general supervision of the Directors.
Additional Disclosure Related to Derivative Instruments
| Fair Value of Derivative Instruments |
| Liability |
| Statement of Assets
and Liabilities Location | Fair
Value |
| Derivatives not accounted for as hedging instruments under ASC Topic 815 | | |
| Foreign exchange contracts | Unrealized depreciation on foreign exchange contracts | $57,011 |
The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended September 30, 2012
| Amount of Realized Gain or (Loss) on Derivatives Recognized in Income |
| Forward
Currency
Contracts |
| Foreign exchange contracts | $(11,584) |
| Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income |
| Forward
Currency
Contracts |
| Foreign exchange contracts | $(462,775) |
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated.
3. SHARES OF BENEFICIAL INTEREST
Shareholders of the Fund will have a restricted ability to redeem shares of the Fund. When a redeeming shareholder presents Shares to the transfer agent in proper order for redemption, the Fund has up to 31 days to make payment to the redeeming shareholder.
The following table summarizes share activity:
| Six Months Ended
9/30/2012 | Year Ended
3/31/2012 |
| Shares sold | 207,121 | 11,919,505 |
| Shares issued to shareholders in payment of distributions declared | 519,287 | 1,005,140 |
| Shares redeemed | (407,370) | (4,356,235) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 319,038 | 8,568,410 |
4. FEDERAL TAX INFORMATION
At September 30, 2012, the cost of investments for federal tax purposes was $243,143,181. The net unrealized depreciation of investments for federal tax purposes excluding: a) any unrealized depreciation resulting from the translation from FCs to U.S. dollars of assets and liabilities other than investments in securities and b) outstanding foreign currency commitments was $3,441,464. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $842,455 and net unrealized depreciation from investments for those securities having an excess of cost over value of $4,283,919.
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 0.10% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and/or reimbursement at any time at its sole discretion. For the six months ended September 30, 2012, the Adviser voluntarily waived $100,048 of its fee and voluntarily reimbursed $184,675 of other operating expenses.
Certain of the Fund's assets are managed by GML Capital LLP (the “Sub-Adviser”). Under the terms of a sub-adviser agreement between the Adviser and the Sub-Adviser, the Sub-Adviser receives a fee. The fee is paid by the Adviser out of its resources and is not an incremental Fund expense. For the six months ended September 30, 2012, the Sub-Adviser earned a fee of $251,939.
Semi-Annual Shareholder Report
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Aggregate Daily Net Assets
of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
Prior to September 1, 2012, the administrative fee received during any fiscal year was at least $150,000 per portfolio and $40,000 per each additional class of Shares. For the six months ended September 30, 2012, FAS waived its entire fee of $73,324. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
Transactions Involving Affiliated Holdings
Affiliated holdings are mutual funds which are managed by the Adviser or an affiliate of the Adviser. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated mutual funds. For the six months ended September 30, 2012, the Adviser reimbursed $12,637. Transactions involving the affiliated holding during the six months ended September 30, 2012, were as follows:
| Federated
Prime Value
Obligations Fund,
Institutional Shares |
| Balance of Shares Held 3/31/2012 | 8,351,126 |
| Purchases/Additions | 95,902,918 |
| Sales/Reductions | 69,421,441 |
| Balance of Shares Held 9/30/2012 | 34,832,603 |
| Value | $34,832,603 |
| Dividend Income | $22,209 |
6. Investment TRANSACTIONS
Purchases and sales of investments, excluding long-term U.S. government securities and short-term obligations, for the six months ended September 30, 2012, were as follows:
| Purchases | $47,360,444 |
| Sales | $44,886,256 |
Semi-Annual Shareholder Report
7. CONCENTRATION OF RISK
The Fund invests in securities of non-U.S. issuers. Political or economic developments may have an effect on the liquidity and volatility of portfolio securities and currency holdings.
At September 30, 2012, the diversification of countries was as follows:
| Country | Percentage of
Net Assets |
| Russia | 15.2% |
| India | 8.0% |
| Brazil | 7.6% |
| Indonesia | 6.8% |
| Angola | 6.1% |
| Azerbaijan | 5.1% |
| Cayman Islands | 4.1% |
| Mongolia | 3.9% |
| Ukraine | 3.8% |
| Singapore | 3.5% |
| Argentina | 3.1% |
| Botswana | 2.6% |
| Turkey | 2.6% |
| Kazakhstan | 2.2% |
| Romania | 2.2% |
| Colombia | 1.9% |
| Egypt | 1.9% |
| Great Britain | 1.3% |
| Korea | 1.3% |
| Jamaica | 1.2% |
| Sierra Leone | 1.2% |
| Ghana | 1.1% |
| China | 0.9% |
| Nigeria | 0.8% |
| Saudi Arabia | 0.8% |
| United States | 0.4% |
| Mexico | 0.0% |
8. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of September 30, 2012, there were no outstanding loans. During the six months ended September 30, 2012, 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 Investors, 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, 2012, there were no outstanding loans. During the six months ended September 30, 2012, the program was not utilized.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services 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, 2012 to September 30, 2012.
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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. 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.
| Beginning
Account Value
4/1/2012 | Ending
Account Value
9/30/2012 | Expenses Paid
During Period1 |
| Actual | $1,000.00 | $1,029.20 | $0.00 |
| Hypothetical (assuming a 5% return before expenses) | $1,000.00 | $1,025.07 | $0.00 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.00%, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half-year period). |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2012
Federated Project and Trade Finance Core Fund (the “Fund”)
Following a review and recommendation of approval by the Fund's independent trustees, the Fund's Board reviewed and approved at its May 2012 meetings the Fund's investment advisory and subadvisory contracts for an additional one-year period. The Board's decision regarding the contracts reflects the exercise of its business judgment on whether to continue the existing arrangements. The Fund is distinctive in that it is designed for the efficient management of a particular asset class and is made available for investment only to other Federated funds and a limited number of other accredited investors. Although the Adviser charges the Fund an investment advisory fee for its services, the Adviser has agreed to waive its fee and/or reimburse the Fund so that total fund expenses are zero. The Adviser or its affiliates may, however, receive compensation for managing assets invested in the Fund.
The Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory and subadvisory contracts.
As previously noted, the Adviser charges the Fund an investment advisory fee for its services but has agreed to waive its fee and/or reimburse the Fund so that total fund expenses are zero; however, the Board did consider compensation and benefits received by the Adviser and subadviser, including fees received for services provided to the Fund by other entities in the Federated organization and research services received by the Adviser from brokers that execute Federated fund trades. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory and subadvisory contracts to the extent it considered them to be appropriate and relevant, as discussed further below.
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial information in connection with the May meeting at which the Board's formal review of the advisory and subadvisory contracts occurred. At this May meeting, senior management of the Adviser also met with the independent trustees and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the trustees. Between regularly scheduled meetings, the Board has received information on particular matters as the need arose. Thus, the Board's consideration of the advisory and subadvisory contracts included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's and subadviser's investment philosophy, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance, and comments on the reasons for performance; the Fund's investment objectives; the Fund's overall expense structure; the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the
Semi-Annual Shareholder Report
Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
The Fund's performance when compared to its benchmark index was also deemed to be relevant by the Board as a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory and subadvisory contracts.
The Board was informed by the Adviser that, for the periods covered by the Evaluation, the Fund outrperformed its benchmark index for the one-year period.
Because the Fund's expenses will remain at zero due to waiver of the investment advisory fee and/or reimbursement of other expenses, the Fund's Board does not consider fee comparisons to other mutual funds or other institutional or separate accounts to be relevant.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waive non-advisory fees and/or reimburse other expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate advisory and administrative services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory and subadvisory contracts.
The Board based its decision to approve the advisory and subadvisory contracts on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. In particular, due to the unusual nature of the Fund as primarily an internal product with no net advisory fee, the Board does not consider the assessment of whether economies of scale would be realized if the Fund were to grow to some sufficient size to be relevant. With respect to the factors that were relevant, the Board's decision to approve the contracts reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report
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, as well as a report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30, are available, without charge and upon request, by calling 1-800-341-7400. These materials are also available at the SEC's Web site at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.)
Semi-Annual Shareholder Report
The Fund is not a bank deposit or obligation, is not guaranteed by any bank and is 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 the Fund 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 Confidential Private Offering Memorandum, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
Federated Project and Trade Finance Core Fund
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Placement Agent
CUSIP 31415N103
41216 (11/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 ©Federated Investors, Inc.
Item 2. Code of Ethics
Not Applicable
Item 3. Audit Committee Financial Expert
Not Applicable
Item 4. Principal Accountant Fees and Services
Not Applicable
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; 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
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Item 10. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have concluded that the
registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics- Not Applicable to this Report.
(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant Federated Core Trust III
By /S/ Richard A. Novak
Richard A. Novak, Principal Financial Officer
Date November 21, 2012
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 21, 2012
By /S/ Richard A. Novak
Richard A. Novak, Principal Financial Officer
Date November 21, 2012
