Federated Investors, Inc. Reports Fourth Quarter and Year-End 2009 Earnings; Board Declares Cash Dividend of $1.50 Per Share Including $0.24 Quarterly and $1.26 Special Dividend

- Equity and fixed-income assets increase $13.3 billion during 2009 to $63.5 billion

- Bond funds net $6.8 billion in flows during 2009

Jan 28, 2010, 16:01 ET from Federated Investors, Inc.

PITTSBURGH, Jan. 28 /PRNewswire-FirstCall/ -- Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.51 for the quarter ended Dec. 31, 2009 compared to $0.53 for the same quarter last year.  Net income was $51.9 million for Q4 2009 compared to $54.3 million for Q4 2008.  

For the year ended Dec. 31, 2009, Federated reported EPS from continuing operations of $1.92 compared to $2.15 for 2008, a decrease of 11 percent.  For 2009, income from continuing operations was $197.3 million compared to $221.5 million for the same period in 2008.  Earnings for 2009 included $21.3 million in non-cash impairment charges recognized primarily in Q1 2009.

Federated's total managed assets were $389.3 billion at Dec. 31, 2009, down $18.0 billion or 4 percent from $407.3 billion at Dec. 31, 2008 and down $3.0 billion or 1 percent from $392.3 billion reported at Sept. 30, 2009.  Average managed assets for Q4 2009 were $388.1 billion, up $18.3 billion or 5 percent from $369.8 billion reported for Q4 2008 and down $20.0 billion or 5 percent from $408.1 billion reported for Q3 2009.

"With better market conditions in 2009, Federated experienced strong demand for fixed-income and equity products," said J. Christopher Donahue, president and chief executive officer.  "Gross sales of fixed-income and equity funds increased 64 percent from 2008. In particular, fixed-income fund sales were strong as investors valued our consistent fund performance over a multi-year period."  

Federated's board of directors declared a dividend of $1.50 per share.  The dividend, which will be paid in cash, is considered an ordinary dividend for tax purposes and consists of a $0.24 quarterly dividend and a $1.26 special dividend.  The dividend is payable on Feb. 12, 2010 to shareholders of record as of Feb. 5, 2010.  

"The February 2010 special dividend rewards shareholders for the success that Federated achieved in 2009," said Thomas R. Donahue, chief financial officer.  "Through our diversified business mix and the efforts of our outstanding employees,  Federated has successfully navigated through the challenges of the last several quarters and remains well positioned for new growth opportunities."

In addition, during Q4 2009, Federated purchased 50,000 shares of Federated class B common stock for $1.3 million.  In 2009, the company purchased 828,918 shares of Federated class B common stock for $20.1 million.

Federated's fixed-income assets were $33.8 billion at Dec. 31, 2009, up $10.3 billion or 44 percent from $23.5 billion at Dec. 31, 2008 and up $1.8 billion or 6 percent from $32.0 billion at Sept. 30, 2009.  Federated experienced continued strong net positive flows into its bond funds with $1.3 billion during Q4 2009, bringing total net bond fund inflows to $6.8 billion for 2009, an increase of $5.4 billion over 2008.  Net sales were driven by strong flows into ultrashort bond funds and intermediate-term bond funds including Federated Total Return Bond Fund.  

Federated's equity assets were $29.7 billion at Dec. 31, 2009, up $3.0 billion or 11 percent from $26.7 billion at Dec. 31, 2008 and up $0.6 billion or 2 percent from $29.1 billion at Sept. 30, 2009.  During Q4 2009, Federated's net flows into equity funds were $67 million.  Equity fund net outflows improved to $47 million for 2009 compared to net outflows of $2.2 billion in 2008.  Net sales were led by Federated Prudent Bear Fund, Federated Strategic Value Fund and Federated Market Opportunity Fund.

Money market assets in both funds and separate accounts were $313.3 billion at Dec. 31, 2009, down $42.4 billion or 12 percent from $355.7 billion at Dec. 31, 2008 and down $4.8 billion or 2 percent from $318.1 billion at Sept. 30, 2009.  Money market mutual fund assets were $281.6 billion at Dec. 31, 2009, down $45.7 billion or 14 percent from $327.3 billion at Dec. 31, 2008 and down $6.0 billion or 2 percent from $287.6 billion at Sept. 30, 2009.  

Financial Summary

Q4 2009 vs. Q4 2008

For Q4 2009, revenue decreased by $37.0 million or 12 percent from the same quarter last year.  The decrease in revenue primarily reflects a $54.1 million increase in voluntary fee waivers related to certain money market funds in order to maintain positive or zero net yields.  This increase in fee waivers was largely offset by a related decrease in marketing and distribution expenses of $40.7 million such that the net impact on operating income was a decrease of $13.4 million.  In addition, revenue decreased due to lower average money market managed assets.  These decreases were partially offset by the impact of increased average fixed-income and equity managed assets.  

Fee waivers to produce positive or zero net yields may increase and such increases could be significant.  The amount of these waivers will be determined by a variety of factors including available yields on instruments held by the money market funds, changes in assets within money market funds, actions by the Federal Reserve and the U.S. Department of the Treasury, changes in the mix of money market customer assets, changes in expenses of the money market funds and Federated's willingness to continue these waivers.

In Q4 2009, Federated derived 56 percent of its revenue from money market assets, 43 percent from fluctuating assets (28 percent from equity assets and 15 percent from fixed-income assets) and 1 percent from other products and services.

Operating expenses for Q4 2009 were $178.4 million compared to $216.0 million for Q4 2008.  This change was primarily a result of lower marketing and distribution expenses due to the aforementioned fee-waiver-related reductions.  

Q4 2009 vs. Q3 2009

Compared to the prior quarter, revenue decreased by $28.8 million or 10 percent. The decrease in revenue primarily reflects a $21.0 million increase in voluntary fee waivers on certain money market funds in order to maintain positive or zero net yields.  This increase in fee waivers was largely offset by a related decrease in marketing and distribution expenses of $14.7 million such that the net impact on operating income was a decrease of $6.3 million compared to the prior quarter.  In addition, revenue decreased due to lower average money market managed assets.  These decreases were partially offset by the impact of increased average equity and fixed-income managed assets.

Compared to Q3 2009, operating expenses decreased by $20.4 million or 10 percent.  Changes from the prior period include a decrease in marketing and distribution expenses primarily related to the aforementioned fee-waiver-related reductions.  

2009 vs. 2008

Revenue for 2009 decreased by $47.7 million or 4 percent compared to last year.  The decrease in revenue primarily reflects a $117.0 million increase in voluntary fee waivers on certain money market funds in order to maintain positive or zero net yields.  This increase in fee waivers was largely offset by a related decrease in marketing and distribution expenses of $84.5 million such that the net impact on operating income was a decrease of $32.5 million.  In addition, revenue decreased due to lower average equity managed assets.  These decreases were partially offset by the impact of increased average money market and fixed-income managed assets.  

In 2009, Federated derived 65 percent of its revenue from money market assets, 35 percent from fluctuating assets (23 percent from equity assets and 12 percent from fixed-income assets).  

Operating expenses for 2009 decreased by $15.8 million or 2 percent compared to last year.  Changes from the prior year include a decrease in marketing and distribution expenses primarily related to the aforementioned fee-waivers  offset by the impact of average asset changes, higher acquisition-related compensation expense and non-cash impairment charges to write down certain intangible assets in Q1 2009.  Compared to 2008, professional service fees, travel and related and advertising and promotional expenses all decreased during 2009 due, in part, to companywide cost-saving initiatives.

Federated's level of business activity and financial results are dependent upon many factors including market conditions, investment performance and investor behavior.  These factors and others including asset levels, product sales and redemptions, market appreciation or depreciation, revenues, fee waivers and expenses can impact Federated's activity levels and financial results significantly.  Risk factors and uncertainties that can influence Federated's financial results are discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.

Federated will host an earnings conference call at 9 a.m. Eastern on Friday, Jan. 29, 2010.  Investors are invited to listen to Federated's earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time.  The call may also be accessed in real time on the Internet via the About Us section of FederatedInvestors.com.  A replay will be available after 12:30 p.m. and until Feb. 6, 2010 by calling 877-660-6853 (domestic) or 201-612-7415 (international) and entering codes 286 and 340551.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $389.3 billion in assets as of Dec. 31, 2009.  With 145 funds and a variety of separately managed account options, Federated provides comprehensive investment management to more than 5,200 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers.  Federated ranks in the top 2 percent of money market fund managers in the industry, the top 6 percent of fixed-income fund managers and the top 8 percent of equity fund managers(1).  For more information, visit FederatedInvestors.com.

(1)  Strategic Insight, Nov. 30, 2009.  Based on assets under management in open-end funds.

Federated Securities Corp. is distributor of the Federated funds.

Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling and Federated MDTA LLC, each a registered investment advisor.

Certain statements in this press release, such as those related to the level of fee waivers incurred by the company, product demand and asset flows, constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  Other risks and uncertainties include the ability of the company to predict the level of fee waivers in future quarters, which could vary significantly depending on a variety of factors identified above, and include the ability of the company to sustain product demand and asset flows, which could vary significantly depending on market conditions, investment performance and investor behavior.  Other risks and uncertainties also include the risk factors discussed in the company's annual and quarterly reports as filed with the Securities and Exchange Commission.  As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness of such statements in the future.

    
    
    
    Unaudited Condensed Consolidated Statements of Income(1)
    (in thousands, except per share data)
    
                                                      %                  %
                                Quarter Ended       Change             Change
                                   Dec. 31,           Q4    Quarter      Q3
                               ----------------      2008     Ended     2009
                               2009        2008     to Q4   Sept. 30,  to Q4
                               ----        ----      2009     2009      2009
    Revenue
      Investment advisory
       fees, net             $175,586    $187,684     (6)%  $190,012    (8)%
      Administrative
       service fees, net       61,884      60,907      2      65,267    (5)
      Other service fees, net  26,124      50,889    (49)     36,957   (29)
      Other, net                1,216       2,288    (47)      1,367   (11)
      ----------                -----       -----    ---       -----    ---
         Total Revenue        264,810     301,768    (12)    293,603   (10)
         -------------        -------     -------    ---     -------    ---
    
    Operating Expenses
      Compensation and 
       related                 62,359      56,219     11      62,232     0
      General and 
       administrative
        Marketing and
         distribution          76,403     115,518    (34)     95,452   (20)
        Professional
         service fees           8,260       9,945    (17)     10,089   (18)
        Office and occupancy    6,194       6,276     (1)      6,001     3
        Systems and
         communications         5,914       5,721      3       6,517    (9)
        Travel and related      3,743       3,883     (4)      2,316    62
        Advertising and
         promotional            2,847       3,323    (14)      2,529    13
        Other                   5,274       4,958      6       4,677    13
        -----                   -----       -----    ---       -----   ---
        Total general and
         administrative       108,635     149,624    (27)    127,581   (15)
      Amortization of 
       deferred sales
       commissions              3,526       5,453    (35)      5,104   (31)
      Intangible asset
       amortization             3,909       4,715    (17)      3,953    (1)
       ------------             -----       -----    ---       -----    ---
          Total
           Operating
           Expenses           178,429     216,011    (17)    198,870   (10)
           --------           -------     -------    ---     -------    ---
      Operating Income         86,381      85,757      1      94,733    (9)
      ----------------         ------      ------    ---      ------    ---
    
    Nonoperating Income (Expenses)
      Investment income, net      814      (1,115)   173       1,685   (52)
      Debt expense - recourse    (975)     (1,464)   (33)     (1,112)  (12)
      Debt expense – nonrecourse (253)       (518)   (51)       (314)  (19)
      Other, net                   41        (100)   141        (101)  141
      ----------                  ---        ----    ---        ----   ---
          Total Nonoperating
           (Expenses) Income, 
           net                   (373)     (3,197)   (88)        158  (336)
           ---                   ----      ------    ---         ---   ----
      Income  before
       income taxes            86,008      82,560      4      94,891    (9)
      Income tax provision     31,308      27,041     16      34,604   (10)
      --------------------     ------      ------    ---      ------    ---
      Net income including
       noncontrolling
       interests in
       subsidiaries            54,700      55,519     (1)     60,287    (9)
        Less: Net income
         attributable
         to noncontrolling
         interests in
         subsidiaries           2,803       1,256    123       3,301   (15)
         ------------           -----       -----    ---       -----   ---
      Net Income              $51,897     $54,263     (4)%   $56,986    (9)%
      ----------              -------     -------    ---     -------   ---
    
    Amounts Attributable
     to Federated Earnings 
     Per Share(2)
        Basic                   $0.51       $0.53     (4)%     $0.56    (9)%
        Diluted                 $0.51       $0.53     (4)%     $0.56    (9)%
        -------                 -----       -----     ---      -----    ---
      Weighted-average
       shares outstanding
        Basic                  99,763      99,891             99,958
        Diluted                99,938     100,025            100,086
        -------                ------     -------            -------
      Dividends declared per
       share                    $0.24       $0.24              $0.24
       -----                    -----       -----              -----
    
    (1) Provisions of a new accounting standard adopted on Jan. 1, 2009
    require that minority interest be renamed noncontrolling interest and that
    companies present a consolidated net income that includes the amount
    attributable to noncontrolling interests for all periods presented. 
    
    (2) Under a new accounting standard adopted on Jan. 1, 2009, unvested
    share-based payment awards that receive non-forfeitable dividend rights
    are considered participating securities and are now required to be 
    in the computation of earnings per share under the "two-class method."  
    As a result, current and prior periods have been adjusted to reflect this
    new standard.  Total income available to participating restricted 
    shareholders was $1.4 million, $0.9 million and $1.4 million for the 
    quarterly periods ended Dec. 31, 2009, Dec. 31, 2008 and Sept. 30, 2009, 
    respectively.
    
    
    
    Unaudited Condensed Consolidated Statements of Income(1)
    (in thousands, except per share data)
    
                                Year Ended Dec. 31,
                                -------------------     % Change
                                 2009        2008
                                 ----        ----
    Revenue
      Investment advisory
       fees, net               $749,823    $775,381         (3)%
      Administrative
       service fees, net        261,610     218,735         20
      Other service fees,
       net                      158,999     221,327        (28)
      Other, net                  5,518       8,237        (33)
      ----------                  -----       -----        ---
         Total Revenue        1,175,950   1,223,680         (4)
         -------------        ---------   ---------        ---
    
    Operating Expenses
      Compensation and
       related                  254,428     237,186          7
      General and
       administrative
       Marketing and
        distribution            408,300     440,317         (7)
       Professional service
        fees                     38,133      40,301         (5)
       Systems and
        communications           25,189      23,648          7
       Office and occupancy      24,509      24,342          1
       Travel and related        11,374      14,048        (19)
       Advertising and
        promotional              11,085      14,819        (25)
       Other                     22,669      18,080         25
       -----                     ------      ------        ---
       Total general and
        administrative          541,259     575,555         (6)
      Amortization of
       deferred sales
       commissions               18,462      31,376        (41)
      Intangible asset
       impairment and
       amortization              32,574      18,388         77
      ----------------           ------      ------        ---
         Total Operating
          Expenses              846,723     862,505         (2)
         ---------------        -------     -------        ---
      Operating Income          329,227     361,175         (9)
      ----------------          -------     -------        ---
    
    Nonoperating Income
     (Expenses)
      Investment income,  net     3,308       1,250        165
      Debt expense - recourse    (4,345)     (2,425)        79
      Debt expense - nonrecourse (1,366)     (2,750)       (50)
      Other, net                     (6)       (457)       (99)
      ----------                    ---        ----        ---
          Total Nonoperating
           Expenses, net         (2,409)     (4,382)       (45)
           -------------         ------      ------        ---
      Income  from
       continuing
       operations before
       income taxes             326,818     356,793         (8)
      Income tax provision      118,278     128,168         (8)
      --------------------      -------     -------        ---
      Income from
       continuing
       operations
       including
       noncontrolling
       interests in
       subsidiaries             208,540     228,625         (9)
      Discontinued operations, 
       net of tax                     -       2,808       (100)
       ----------                   ---       -----       ----
      Net income including
       noncontrolling
       interests in
       subsidiaries             208,540     231,433        (10)
        Less: Net income
         attributable to the
         noncontrolling
         interest in
         subsidiaries            11,248       7,116         58
         ------------            ------       -----        ---
      Net Income               $197,292    $224,317        (12)%
      ----------               --------    --------        ---
    
    Amounts Attributable
     to Federated
      Income from
       continuing
       operations              $197,292    $221,509       (11)%
      Discontinued
       operations, net of
       tax                            -       2,808       (100)
       ---                          ---       -----       ----
      Net Income               $197,292    $224,317        (12)%
      ----------               --------    --------        ---
    Earnings Per
     Share-Basic(2)
       Income from
        continuing
        operations                $1.93       $2.17       (11)%
       Income from
        discontinued
        operations                    -        0.03       (100)
       -------------                ---        ----       ----
       Net Income                 $1.93       $2.20        (12)%
       ----------                 -----       -----        ---
    Earnings Per
     Share-Diluted(2)
       Income from
        continuing
        operations                $1.92       $2.15        (11)%
       Income from
        discontinued
        operations                    -        0.03       (100)
       -------------                ---        ----       ----
       Net Income                 $1.92       $2.18        (12)%
       ----------                 -----       -----        ---
      Weighted-average
       shares outstanding
       Basic                     99,923      99,605
       Diluted                  100,056     100,395
       -------                  -------     -------
      Dividends declared
       per share                  $0.96       $3.69
      ------------------          -----       -----
    
    (1) Provisions of a new accounting standard adopted on Jan. 1, 2009 
    require that minority interest be renamed noncontrolling interest and that
    companies present a consolidated net income that includes the amount 
    attributable to noncontrolling interests for all periods presented.
    
    (2) Under a new accounting standard adopted on Jan. 1, 2009, unvested 
    share-based payment awards that receive non-forfeitable dividend rights
    are considered participating securities and are now required to be 
    included in the computation of earnings per share under the "two-class 
    method."  As a result current and prior periods have been adjusted to 
    reflect this new standard.  Total income available to participating 
    restricted shareholders was $4.9 million and $5.2 million for the years 
    ended Dec. 31, 2009 and Dec. 31, 2008, respectively.
    
    
    
    Unaudited Condensed Consolidated Balance Sheets
    (in thousands)
    
                                                        Dec. 31,   Dec. 31,
                                                          2009       2008
                                                          ----       ----
    Assets
      Cash and other short-term investments           $121,990    $58,647
      Other current assets                              62,797     58,185
      Deferred sales commissions, net                   15,318     30,261
      Intangible assets, net and goodwill              662,996    657,321
      Other long-term assets                            49,332     42,196
      ----------------------                          --------   --------
         Total Assets                                 $912,433   $846,610
         ------------                                 --------   --------
    
    Liabilities and Equity
      Current liabilities                             $196,998   $217,838
      Long-term debt recourse                          105,000    126,000
      Long-term debt nonrecourse                        13,556     30,497
      Other long-term liabilities                       54,151     47,705
      Equity excluding treasury stock(1)             1,338,117  1,229,051
      Treasury stock                                  (795,389)  (804,481)
      --------------                                  --------   --------
         Total Liabilities and Equity                 $912,433   $846,610
         ----------------------------                 --------   --------
    
    (1) Provisions of a new accounting standard adopted on Jan. 1, 2009
    require that minority interest be renamed noncontrolling interest and
    companies present it as a component of equity for all periods presented.
    Noncontrolling interest was previously included in other long-term 
    liabilities, but is now included in Equity excluding treasury stock.
    
    
    
    Changes in Equity and Fixed-Income Fund Managed Assets
    (in millions)
                              Quarter Ended          Year Ended Dec. 31,
                              -------------          -------------------
                        Dec. 31, Dec. 31, Sept. 30,
                          2009     2008     2009       2009     2008
                          ----     ----     ----       ----     ----
    Equity Funds
      Beginning
       assets           $20,350  $21,583  $17,966    $17,562  $29,145
      ---------         -------  -------  -------    -------  -------
       Sales              1,555    1,031    1,503      5,560    5,040
       Redemptions       (1,488)  (1,752)  (1,377)    (5,607)  (7,205)
       -----------       ------   ------   ------     ------   ------
         Net sales
          (redemptions)      67     (721)     126        (47)  (2,165)
       Net exchanges        (11)    (103)     (12)       (90)    (266)
       Acquisition
        related               0    1,149      257        257    1,191
       Market gains
        and losses/        
        reinvestments(1)    554   (4,346)   2,013      3,278  (10,343)
        ---------------     ---   ------    -----      -----  -------
      Ending assets     $20,960  $17,562  $20,350    $20,960  $17,562
      -------------     -------  -------  -------    -------  -------
    
    Fixed-Income
     Funds
      Beginning
       assets           $26,960  $19,136  $24,100    $19,321  $17,943
      ---------         -------  -------  -------    -------  -------
       Sales              4,355    2,172    4,789     16,892    8,681
       Redemptions       (3,095)  (2,331)  (2,971)   (10,073)  (7,242)
       -----------       ------   ------   ------    -------   ------
         Net sales
          (redemptions)   1,260     (159)   1,818      6,819    1,439
       Net exchanges         27       13       53        128       92
       Acquisition
        related               0      658        0          0      658
       Market gains      
        and losses/   
        reinvestments(1)    180     (327)     989      2,159     (811)
        ---------------     ---     ----      ---      -----     ----
      Ending assets     $28,427  $19,321  $26,960    $28,427  $19,321
      -------------     -------  -------  -------    -------  -------
    
    (1) Reflects the approximate changes in the market value of the securities
    held by the funds and, to a lesser extent, reinvested dividends,
    distributions, net investment income and the impact of changes in foreign
    exchange rates.
    
    
    
    Changes in Equity and Fixed-Income Separate Account Assets(2)
    (in millions)
                                  Quarter Ended           Year Ended Dec. 31,
                          Dec. 31,   Dec. 31,   Sept. 30,
                            2009       2008        2009    2009        2008
                            ----       ----        ----    ----        ----
    Equity Separate
     Accounts
      Beginning assets    $8,774     $10,068      $8,245  $9,099     $13,017
      ----------------    ------     -------      ------  ------     -------
       Net customer
        flows(3)            (403)       (754)       (261) (1,429)     (1,375)
       Acquisition
        related(4)             0       1,537        (257)   (257)      1,537
       Market gains  
        and losses/          
        reinvestments(5)     342      (1,752)      1,047   1,300      (4,080)
        ---------------      ---      ------       -----   -----      ------
      Ending assets       $8,713      $9,099      $8,774  $8,713      $9,099
      -------------       ------      ------      ------  ------      ------
    
    Fixed-Income
     Separate Accounts
      Beginning assets    $5,079      $3,602      $4,583  $4,165      $3,754
      ----------------    ------      ------      ------  ------      ------
       Net customer     
        flows(3)             241         180         188     510          86
       Acquisition
        related                0         444           0       0         444
       Market gains         
        and losses/         
        reinvestments(5)      40         (61)        308     685        (119)
        ---------------      ---         ---         ---     ---        ----
      Ending assets       $5,360      $4,165      $5,079  $5,360      $4,165
      -------------       ------      ------      ------  ------      ------
    
    (2) Includes separately managed accounts, institutional accounts and sub-
    advised funds (both variable annuity and other) and other managed 
    products.  Flows for liquidation portfolios have been removed from Changes
    in Equity and Fixed-Income Separate Account Assets and are detailed on the
    following page.
    
    (3) For certain accounts, Net customer flows are calculated as the 
    remaining difference between beginning and ending assets after the 
    calculation of Market gains and losses/reinvestments. 
    
    (4) Includes assets that were reclassified from Equity Separate Accounts
    to Equity Funds as a result of the transaction with the Touchstone Funds,
    which was completed during Q3 2009.  See related press release dated Aug.
    31, 2009 for more information about the Touchstone transaction.
    
    (5) Reflects the approximate changes in the market value of the securities
    held in the portfolios, and, to a lesser extent, reinvested dividends, 
    distributions, net investment income and the impact of changes in foreign 
    exchange rates.  
    
    
    
    Changes in Liquidation Portfolios(1)
    (in millions)
                                 Quarter Ended           Year Ended Dec. 31,
                                 -------------           -------------------
                           Dec. 31, Dec. 31, Sept. 30,
                             2009     2008     2009        2009       2008
    Liquidation Portfolios
      Beginning
       assets              $13,073   $1,777     $556      $1,505     $1,127
       ------              -------   ------     ----      ------     ------
        Net customer
         flows(2)             (478)    (205)  12,516      11,085        652
        Market gains
         and losses/
         reinvestments(3)        1      (67)       1           6       (274)
         ---------------       ---      ---      ---         ---       ----
      Ending assets        $12,596   $1,505  $13,073     $12,596     $1,505
      -------------        -------   ------  -------     -------     ------
    
    (1) Liquidation portfolios include portfolios of distressed fixed-income
    securities and liquidating collateralized debt obligation (CDO) products.
    In the distressed security category, Federated has been retained by a 
    third party to manage these assets through an orderly liquidation process
    that will generally occur over a multi-year period.  In the case of 
    liquidating CDOs, the CDO structure has unwound earlier than expected due
    to events of default related to certain distressed securities in the 
    portfolio.  Management fee rates earned from these portfolios are 
    significantly different than those of traditional separate account 
    mandates. 
    
    (2) For certain accounts, Net customer flows are calculated as the 
    remaining difference between beginning and ending assets after the 
    calculation of Market gains and losses/reinvestments.
    
    (3) Reflects the approximate changes in the market value of the securities
    held in the portfolios, and, to a lesser extent, reinvested dividends, 
    distributions, net investment income and the impact of changes in foreign 
    exchange rates.   
    
    
    
    (in millions)
                         Dec. 31,  Sept. 30, June 30, March 31, Dec. 31,
    MANAGED ASSETS         2009     2009      2009     2008      2009
    --------------         ----     ----      ----     ----      ----
    By Asset Class
    --------------
       Equity             $29,673  $29,124  $26,211  $23,411  $26,661
       Fixed-income        33,787   32,039   28,683   24,971   23,486
       Money market       313,260  318,064  346,354  360,127  355,658
       Liquidation
        portfolios(1)      12,596   13,073      556      700    1,505
       ---------------     ------   ------      ---      ---    -----
         Total Managed
          Assets         $389,316 $392,300 $401,804 $409,209 $407,310
         -------------   -------- -------- -------- -------- --------
    By Product Type
    ---------------
       Mutual Funds:
          Equity          $20,960  $20,350  $17,966  $15,902  $17,562
          Fixed-income     28,427   26,960   24,100   20,752   19,321
          Money market    281,569  287,634  312,808  328,780  327,267
          ------------    -------  -------  -------  -------  -------
         Total Fund
          Assets         $330,956 $334,944 $354,874 $365,434 $364,150
         ----------      -------- -------- -------- -------- --------
       Separate
        Accounts:
          Equity           $8,713   $8,774   $8,245   $7,509   $9,099
          Fixed-income      5,360    5,079    4,583    4,219    4,165
          Money market     31,691   30,430   33,546   31,347   28,391
          ------------     ------   ------   ------   ------   ------
         Total Separate
          Accounts        $45,764  $44,283  $46,374  $43,075  $41,655
         --------------   -------  -------  -------  -------  -------
         Total
          Liquidation
          Portfolios(1)   $12,596  $13,073     $556     $700   $1,505
         --------------   -------  -------     ----     ----   ------
         Total Managed
          Assets         $389,316 $392,300 $401,804 $409,209 $407,310
         -------------   -------- -------- -------- -------- --------
    
    AVERAGE MANAGED
     ASSETS                                Quarter Ended
                          Dec. 31, Sept. 30, June 30, March 31, Dec. 31,
                           2009     2009      2009     2009      2008
    --------------         ----     ----      ----     ----      ----
    By Asset Class
    --------------
       Equity             $29,343  $27,872  $25,287  $24,219  $24,870
       Fixed-income        33,164   30,376   26,978   24,218   22,546
       Money market       312,761  336,530  361,502  362,269  320,684
       Liquidation
        portfolios(1)      12,881   13,370      637      975    1,650
       ---------------     ------   ------      ---      ---    -----
         Total Avg.
          Assets         $388,149 $408,148 $414,404 $411,681 $369,750
         ----------      -------- -------- -------- -------- --------
    By Product Type
    ---------------
       Mutual Funds:
          Equity          $20,625  $19,215  $17,220  $16,240  $16,904
          Fixed-income     27,903   25,499   22,545   20,009   18,674
          Money market    283,353  304,959  326,280  330,294  293,428
          ------------    -------  -------  -------  -------  -------
         Total Avg. Fund
          Assets         $331,881 $349,673 $366,045 $366,543 $329,006
         --------------- -------- -------- -------- -------- --------
       Separate
        Accounts:
          Equity           $8,718   $8,657   $8,067   $7,979   $7,966
          Fixed-income      5,261    4,877    4,433    4,209    3,872
          Money market     29,408   31,571   35,222   31,975   27,256
          ------------     ------   ------   ------   ------   ------
         Total Avg.
          Separate
          Accts.          $43,387  $45,105  $47,722  $44,163  $39,094
         ----------       -------  -------  -------  -------  -------
         Total Avg.
          Liquidation
          Portfolios(1)   $12,881  $13,370     $637     $975   $1,650
         --------------   -------  -------     ----     ----   ------
         Total Avg.
          Managed Assets $388,149 $408,148 $414,404 $411,681 $369,750
         --------------- -------- -------- -------- -------- --------
    
    (1) Liquidation portfolios include portfolios of distressed fixed-income 
    securities and liquidating collateralized debt obligation (CDO) products.
    In the distressed security category, Federated has been retained by a 
    third party to manage these assets through an orderly liquidation process 
    that will generally occur over a multi-year period.  In the case of 
    liquidating CDOs, the CDO structure has unwound earlier than expected due 
    to events of default related to certain distressed securities in the 
    portfolio.  Management fee rates earned from these portfolios are 
    significantly different than those of traditional separate account 
    mandates.
    
    

SOURCE Federated Investors, Inc.



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