Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
412-288-1900 PhoneFederated
FederatedInvestors.com World-Class Investment Manager®
May 14, 2012
United States Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Attn: Kathy Churko
Dear Ms. Churko:
On April 23, 2012 we discussed comments on the following registrants:
Federated Clover Value Fund (FCVF) 09/30/11
Federated Clover Small Value Fund (FCSVF) 09/30/11
Federated Prudent Bear Fund (FPBF) 09/30/11
Federated InterContinental Fund (FICF) 11/30/11
Federated Mortgage Strategy Portfolio (FMSP) 12/31/11
Federated Corporate Bond Strategy Portfolio (FCP) 12/31/11
Federated GNMA Trust (GNMA) 01/31/12
Federated Real Return Bond Fund (FRRBF) 03/31/11
Federated Unconstrained Bond Fund (FUBF) 11/30/11
Federated Capital Income Fund (FCIF) 11/30/11
Federated Inflation-Protected Securities Core Fund (IPCORE) 12/31/11
You requested that the items listed below be resolved for each Fund’s next update. Following are my responses to your comments.
Response: While Federated is not aware of any specific rule, we believe the current presentation is consistent with relevant no-action letters dealing broadly with presentation of “performance information” for new classes. See, e.g., Quest for Value Dual Purpose Fund, Inc. (pub. avail. Feb. 28, 1997); and Comstock Partners Strategy Fund, Inc. (pub. avail. Apr. 6, 1995) (with specific reference to shareholder reports). Additionally, we note that the Form N1-A prescribed MDFP total return table specifically requires the use of the SEC “standardized” total returns, which were specifically addressed in the cited no-action letters. Moreover, we view the current presentation as appropriate and desirable, in that it provides more complete information, and avoids the investor confusion that would result from using performance periods in the MDFP that would differ from all other presentations of performance. The Federated funds have taken this approach to presenting new class information in the MDFP for quite some time, and based on discussions with one of the Big Four accounting firms, is done by others in the industry. We are not aware of any policy consideration that would dictate a different approach to presenting performance information in the MDFP than what the staff has permitted for every other presentation of performance information.
Response: Although this fund does not accrue advisory fees, the investment adviser assumes third party expenses. This amount represents an over-accrual of assumed expenses recorded and therefore is owed back to the adviser.
Response: There were no Level 2 transfers. It is Federated’s policy to disclose transfers among Levels 1,2 and 3 when they occur.
Response: We believe that the staff position to which you refer specifically applies only to funds that use the master-feeder structure. FRRBF is more appropriately considered a fund-of-funds as it also invests in other securities. The inclusion of the financial statements of IPCORE in the Annual Report of FRRBF is to allow the shareholder to have more information available and also to comply with the November 7, 1997 “Dear CFO” letter relating to fund-of-funds.
Response: The financial statements for IPCORE are included in the FRRBF annual report. Due to this fact, we believe the shareholder can easily determine that a significant portion of IPCORE is owned by FRRBF and believe no additional disclosure is necessary.
Response: We will add a discussion of the Fund’s investment in other mutual funds in the summary section of the Fund’s prospectus at the next update.
Response: We will indicate securities held as collateral, if any, going forward.
Response: Yes. The quarterly dividend paid by FRRBF (and the distribution yield quoted) is directly impacted by the dividend paid by IPCORE to FRRBF. The dividend paid by IPCORE reflects the income it earns adjusted for inflation/deflation due to TIPS investments.
Response: We note that the staff position to which you refer specifically applied only to funds that use the master-feeder structure, and that it’s continued application to filings on Form N-1A is not applicable (see Rel. No. 33-7512, Mar. 13, 1998, at fn. 214 indicating that neither the Guides nor the GCLs will apply to registration statements prepared on the amended Form). As previously indicated, this is not a master-feeder structure but instead a fund-of-funds. Additionally, Federated does not believe there is any additional benefit to investors to require that the Trustees of Federated Core Trust sign the registration statement of Federated Income Securities Trust. The Trustees of both registrants are identical. Based on this fact, the shared board is consequently equally liable for the content of both filings. To require the same individuals to sign the registration statement of Federated Income Securities Trust again does not, in our view, add to the protection of the investing public.
Response: The Statement of Assets and Liabilities of IPCORE does not present a Payable to Adviser.
Response: In footnote five of the Notes to Financial Statements of FRRBF under the heading Transactions Involving Affiliated Holdings, we make the statement; “The performance of the Fund is directly affected by the performance of the Core Trust”. We believe this statement, as well as the fact that the footnote also indicates that 89.8% of FRRBF’s assets are invested in IPCORE is sufficient disclosure.
Response: We will elaborate on the portfolio turnover language in the summary prospectus at the next update.
Response: We will add a discussion of the Fund’s investment in other mutual funds in the summary section of the Fund’s prospectus at the next update.
Response: In accordance with Rule 13a-1, we will not allow the Fund to revert to non-diversified status without shareholder approval.
In connection with the review of this submission by the staff of the Securities and Exchange Commission, the Funds acknowledge the staff’s view that: the Funds are responsible for the adequacy and accuracy of the disclosure in the filings; staff comments or changes to disclosure in response to staff comments in the filings reviewed by the staff do not foreclose the Commission from taking any action with respect to the filing; and the Funds may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
If you have any further comments or questions on my responses, please contact me at (412) 288-7045
Sincerely,
/s/ Richard A. Novak
Richard A. Novak
Treasurer
