Greetings, and welcome to the Federated Investors Third Quarter 2014 Analyst Call and Webcast. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Ray Hanley, President of Federated Investors. Thank you, Mr. Hanley. You may now begin.

Good morning and welcome. Leading today’s call will be Chris Donahue, Federated’s President and CEO and Tom Donahue, Chief Financial Officer and joining us for the Q&A is Debbie Cunningham, who is the Chief Investment Officer for Federated Money Markets. Let me say that during today’s call we may make forward-looking statements and we want to note that Federated’s actual results may be materially different than the results implied by such statements. We invite you to review the risk disclosures in our SEC filings. No assurance can be given as to future results and Federated assumes no duty to update any of these forward-looking statements. And with that, I’ll turn it to Chris.

Thank you and good morning. I will briefly review Federated’s business performance and then Tom will comment on our financial results. I will begin by reviewing another strong quarter for our equities business. Federated was able to navigate challenging markets well in the third quarter posting solid equity sales growth and performance results. Our equity fund organic growth rate of 16% for the third quarter annualized was among the best in the industry. Based on strategic insights data our third quarter equity funded net flows ranked in the top 2% of the industry, using annualized growth rates from the third quarter data Federated equity fund net growth rate ranked 7th for firms with equity assets of $5 billion or more. That means the 7th out of a 119 firms. On a year-to-date basis our equity funds have produced $2.8 billion in net flows. Equity’s separate account net sales are up 10% for the same timeframe. Strong equity results in 2014 reflect many years of focus and investment in this area. Success factors include solid investment performance, effective and growing distribution, a wide range of well-developed products in areas of investor interest and high quality marketing and customer service efforts. Looking at overall equity performance, more than half of our strategies were in the top quartile for the trailing three years at quarter end while nearly three-fourths were in the top half for the same period. Eight of our strategies or over 30% are in the top decile on a trailing three year basis at quarter end. Looking at the trailing one year, half of our strategies are in the top-quartile and nearly 70% are above median. On the trailing three year basis the Kaufmann Large Cap Fund and the MDT Stock Value Fund are both in the top 1% of…

Thank you Chris. Revenue was up from both the prior quarter and from Q3, 2013 as equity related revenue growth more than offset lower money market revenue. The growth from the prior quarter included the impact of an additional day. Equities comprised 46% of our Q3 revenues, the highest percentage among the various asset classes and combined equity and fixed income revenues were just above 70% of our Q3 total revenues. Operating expenses increased from the prior quarter due mainly to higher distribution expense from an additional day in the quarter and higher equity assets, offset by lower money market fund average assets. The increase in office and occupancy was due to a lease termination. The increase from Q3, 2013 was driven by higher compensation expense, reflecting higher sales and strong investment results. The operating margin increased to 28% compared to both the prior quarter and Q3, 2013 as we continue across the funds to successfully manage expenses while investing for growth. Money Fund minimum yield waivers of 30 million were about the same as the prior quarter and Q3, 2013. Based on current assets and current rates the impact of these waivers to pretax income in Q4 will be about the same. Looking forward and holding all other variables constant we estimate that gaining 10 basis points in gross yields would likely reduce the impact of minimum yield waivers by about 45% and a 25 basis point increase would reduce the impact by about 17%. Multiple factors impact waiver levels and we expect these factors and their impact to vary. These factors include changes in fund assets, available yields for investments, action by regulators, changes in the expense level of the funds, changes in the mix of customer assets, changes in distribution fee arrangements with third parties, Federated’s willingness to continue to seek waivers and changes in the extent to which the impact of the fee waivers is shared by third parties. Non-operating income decreased from the prior quarter and from Q3, 2013 due to lower gains on investments including consolidated products partially offset by lower debt expense from the refinance of our long-term credit facility and from lower debt expense or lower debt balances. The Q3 effective tax rate was 37.3% and reflected certain tax, state tax refunds. We expect to be effective rate going forward to be about 38%. Looking at our balance sheet, cash and investments totaled $352 million at quarter end of which about $271 million is available to us. We would now like to open the call up for your questions.

Thank you. We will now be conducting the question-and-answer session. (Operator Instructions). Thank you. Our first question is from the line of Michael Kim with Sandler O’Neill. Please proceed with your question. Michael Kim – Sandler O’Neill: Hey guys good morning. Chris, I know it’s still early but just as you continue to work on putting together products to retain institutional prime money market fund assets that you might be at risk down the road, just any color or updates on sort of the discussions you’re having with clients in terms of their thinking and potential receptivity to some of these sort of alternate vehicles if you are.

The LCR component has added a lot of color to our discussions with our bigger clients because the LCRs are causing our bank clients to reevaluate the cash on their balance sheet and evaluate which clients are now deemed good and which clients are now deemed to need a warm and loving home like Federated. And so that has added another whole dimension to it that it effect accelerates their decision process as to what to do. Now of course as I mentioned since the implementation of the new rules the two year period started last week. There is a lot of good use of institutional prime funds for a substantial part of that time. So that has added a lot to it. In terms of where I think you were going, which was which products are leading and how we look at it, it is perhaps the 60 day fund has inched ahead of the private funds [advances] for people who don’t quality to stay in the existing funds the separate accounts are not having as big a reception as we thought they might get and the variable net asset value fund as per the rule, we still don’t think has a lot of leg. So that would be a little bit of an update on how those products are doing and the ebb and flow of who is ahead. Michael Kim – Sandler O’Neill: Great, that’s helpful. And then just be curious to get your take on sort of what you are seeing in terms of the M&A landscape these days in terms of deal flow was maybe sort of pricing trends, particularly as it relates to firms that might be more in demand like international equity or alternative funds.

Okay. On the international side, pricing and demand is – pricing is up and demand is up. So that’s a top thing we’re still over it, as Chris mentioned to go over and we’re looking for things and then in discussions. But again pricing seems to be the tougher than the ebbs and been flows of what’s going on. Back over here in the States the money fund we’re still in discussion on the money fund world in terms of people looking and whether they’re gone actually stay in business and that just will conclude, we think will just continue. And in terms of roll ups we’re still active there as we’ve done one deal this year so far and we’re in discussions with a number of others. We’ll see what happens. Michael Kim – Sandler O’Neill: Okay, and then just one more for you, Tom if I may just any color on sort of the ins and out in terms of the comp line this quarter as it relates to any shifts in bonus accrual and then any outlook going forward as we look out to the fourth quarter and beyond?

Yeah, the comp line is pretty similar to last quarter but there were changes in the mix there as the sales bumped up and we had some early Q4 sales in fixed income as we mentioned. So if I had to give a forecast on the comp line I would say it will be somewhere around the same as Q3 but if sales jump again we will have to bump that up and then we go through and look on the investment management side and performance and that can change people get paid on one, three and five years and quarters go out and new quarter comes in. It could go either way so that’s why I just stick with around where it was in Q3. Michael Kim – Sandler O’Neill: Okay, great. Thanks for taking my questions.

Our next question is from the line of Ken Worthington with JPMorgan. Please proceed with your question. Ken Worthington – JPMorgan: Hi, good morning.

Hey. Ken Worthington – JPMorgan: First, can you talk about the availability of short-term paper in the market giving shrinking repo and CP balances and how does this impact the money fund business going forward?

Debbie.

Sure, Ken this is Debbie Cunningham. We have seen definitely shrinkage over the course of the last six years, generally speaking from a CP perspective while the CD side of the equation has grown. As Chris has mentioned with various components of banking regulation incenting banks now to probably shut down or diminish how much they have out there from a deposits perspective we would expect that would be at least not as strong a growth going forward and probably shrinking to a degree also. Repo market very similar as you had mentioned at some point in the wages and tax it was probably more than 3.5 times the size that it is today. Having said that I think where we are seeing some growth has come from basic [inaudible] side of the equation, better from a corporate perspective as you well know, Money Market Funds traditionally have been concentrated from an industry perspective in the financial sector and I think we are becoming a little bit more diverse because of some of the growth in the non-finance corporate sector of the marketplace. And when you look at the banking side of the equation, structured deposits are definitely much less punitive from an LPR perspective and therefore those have been growing and the usage of those I think will continue to be a positive. What we look for also is basically with a growing economy comes a growing need for capital and that working capital is generally funded through the CP marketplace. So we think you know a lot of the shrinkage that occurred over the course of the last five or six years in the CP marketplace has come because of structures that from an ABCP perspective are no longer palatable or useful or considered appropriate for Money Market…

So first of all on the market share our stack card is showing its down below 8.3. Maybe there are some other statistics that you’re working on. And we have not done what you’re saying. We’ve done at least to the best of my knowledge or anybody here at the table. So I don’t know exactly what you’re picking up in terms of yield and increased waivers the way you’ve described it. I would say that overall as part of the whole effort of we looking at the money market offerings that we’re doing for what we were talking about before we’re also looking at the whole structure of the product, especially on the government side to see how things would shake out in the future because in light of that last question that you were going over with Debbie those are going to be a lot more interesting government funds is one of the main receivers of money so there is going to be more competition there. So that’s another thing we’re looking at.

I might add too, that maybe it’s the composition of the waivers to some degree from a client fund perspective we’ve been able to eke out maybe another basis point or two on a gross yield basis which gets the net yield to the client a basis point or two higher over the quarter. On the other side of the equation however as Chris is mentioning from a government fund perspective, particularly one of our largest treasury Omni-product is very, very difficult in the environment that we’ve been in to eke out anything more than four or five basis points and so the waivers have increased on that type of a product. So it perhaps it maybe the mix that has changed to some degree.

Ken, it’s Ray. I’ll just – another thing in the numbers you talked about – if I look at the gross yields of that fund prime obligation fund over ‘14, 2014 it average in the first part of the year about just under 22.5% basis points. Now they are just over or right around 23 basis points. So you’re going to get some rounding in there that might look like some things happening that isn’t. Ken Worthington – JPMorgan: I’ll take it offline. I was just curious to like given the share shifts I thought it was interesting, but thank you very much.

Okay.

Thank you. Our next question is from the line of Surinder Thind of Jefferies. Please go ahead with your question. Surinder Thind – Jefferies & Co.: Good morning, guys. Just a little bit more on the money market reform just kind of on your comments about the floating rate products. How far down the path of reform do you kind of have to be to know even if they are viable as a group? I mean you kind to put it on the funding in to place you got to build the products and then do you just kind of hope somewhat show up to the dance?

Well my guess would be as it was at the beginning and I haven’t changed it, that those kinds of funds aren’t going to be viable at all and the more likely thing that we’re going to do is use the existing funds that we have and have them either be for retail or have them be 60 day funds and whether or not any of them will be variable net asset value money funds, reason why people could differ and you are not certain of that now but I would be inclined to doubt it. And if you don’t have a bunch of assets in this so called floating net asset value money market fund then you got to do something in order to get enough of assets in there to make it a viable product by itself.

I would add too, and this is just over the course of maybe the last three months since the regulatory certainly has come to fruition we have been doing a series of about 20 different road shows across the country, major cities across the country attended generally by 40 to 50 clients in each location and I would say that one of the first ones was in late July and we mentioned the variable net asset value product from an institutional prime or an institutional municipal perspective there was nobody in the room that raised their hands and had any interest in that type of a product. However we just did one to be kept on Monday of this week where I would say out of a group that had maybe 10 tables of one person at every table had raised their hand that they still would have an interest in the product even with the variable net asset value component. So I think there is become a little bit more of potential acceptance to what might come to fruition. Again I think what has to be brought forth to them is the volatility that they will see. Certainly we have been providing as well as others in the industry have been providing the daily NAVs as they are calculated out to the fourth decimal points since 2013 now. However it’s been a pretty benign period of time and when you look at it in the context of a two digit NAV versus a four digit NAV, historically two digits was able to withstand over 300 basis points of change from an interest rate perspective instantaneously and not be impacted from a price. On a four digit basis translate that down to 3 to 3.5 basis which happens in a rising rate environment or declining rate environment almost every single day. So there has to be a lot of education, I think from a client perspective but there does seem to be at least a few more hands in the room that are going up when they say – when we ask the question might there be an interest at some point. Surinder Thind – Jefferies & Co.: Okay, that’s helpful. And then maybe switching gears a little bit over to the fixed income side, it seems like there is some good demand out there for your current product set. How do you think demand kind of holds up or the product positioning in when rates do begin to rise?

We think we are well situated for that. That’s been one of the themes of when we talk about the positioning on the performance and risk charts of being upper left, that’s what we are getting at and that’s part of the theme that customers are looking at staying in fixed income that yet staying short enough where if rates do rise they don’t get caught. And this kind of thought process is inside a lot of the workings of any of those portfolios. So we think we are in pretty good shape on that. What really drives the future of flows on the fixed income side, the individual performance products and staying with the approach so that you end up with a consistent type performance profile? So that’s how you do it. You are dedicated to those alpha pods that I talked about, then are in for the long haul and yes there is a lot of blocking and tackling but that seems to be the best way to set yourself up for the future. Surinder Thind – Jefferies & Co.: Okay, that’s helpful. And then one final kind of quick take, there seems to be a lot of talk around like unconstrained products and generally movement in that direction. What do you think is the staying power of something like that? Is it just more being driven by the fact that we are ultimately probably going to be entering a rising rate environment?

I think that – we’re certainly part of it. But I think we see a huge movement, you put your finger on it towards the unconstrained go anywhere type product and there have been a lot of major flows into that and we have products that are geared towards that. And it also hints at the liquid alternative space as well where you are now analyzing the risk of the various enterprises, you are looking at not just sticking to a [inaudible] although we offer those products as well. And I think there is a lot of staying power to that kind of investing go anywhere type approach but it’s going to require a consistency of performance across various cycles and moves and investors are gone be very attentive to how that performance is going and changing marketplaces. Surinder Thind – Jefferies & Co.: Okay. That’s it from me. Thanks.

Our next question is from the line of Craig Siegenthaler with Credit Suisse. Please proceed with your question. Craig Siegenthaler – Credit Suisse: Thanks, good morning.

Good morning. Craig Siegenthaler – Credit Suisse: With the few [inaudible] netting to $0.18 per quarter today, can you share your view if that area will be able to recover this full amount and rate sensing normalize or do you think some of your distribution partners could seek greater economies or economics in their relationship and yeah,, this would be for distributors where the money market sit on their platform.

Yeah Craig that’s why we’ve read – that I read have long paragraph about the factors that affect the waivers. Absolutely customers will get back to us saying hey you’ve been able to – not that I want give them their presentation but you’ve been able to manage all this at such a lower fee realization are continuing even though the rates are up. We were not interested in that and not earning your management fee for so many years is not fun, it’s not fun on our margin, it’s not fun on the makes growth tougher, makes investing for growth tougher, all these things makes our earnings much more difficult. But it’s a competitive world and we’re going to have to deal with it. So we will see what happens. Now our customers have maintained their relationships with us all through this and as Chris was talking about this he talked about the 40 years of people coming in and trying to grab share by reducing their fees and we’ve – so we’ll deal with that in the future and we think we will do well in the – in that. Craig Siegenthaler – Credit Suisse: And Tom just want to follow up here. If the economy declines how would the geography of the impact flow through between management fee distribution revenue and distribution expense?

Well we’ve had a thought process of keeping the lights on. So we’re getting some version of service basis points while we’re not getting the management fee and our kind of a philosophy that we say look we have to deal with turning the lights on and make everything work and we’ve been waving the management fee. So we would expect to continue that and if there are challenges that will probably come in the management fee.

Craig you’d also see that reflected in the distribution expense to your point about what would happen from the cost and distribution through [inaudible]. You would see in that case as you’ve seen really a multi-year trend an increase in the distribution expense relative to the asset base without the waivers. Craig Siegenthaler – Credit Suisse: So right the management fee would probably go down and the distribution expense could go up but distribution revenue would be stable if there are any kind of net economic concessions.

Yes. Craig Siegenthaler – Credit Suisse: Okay, thanks for clarifying. Thank you guys.

The next question is from the line of Bill Katz with Citigroup. Please go ahead with your question. William Katz – Citigroup: Okay, good morning, Thank you very much for taking the question. Just staying on the margins for a second, if I look at your margin and adding backlog if you weigh dynamics over the last seven or eight quarters you are sort of locked around 28% to 29%, obviously you had some equity flows coming into fixed income flow, you had some money market attrition. How you think about the margin on a perspective basis if you would assume fee waivers were to recover to some extent?

Well. So we try not to predict and guess what margin is gone be and we put in a – in our program in the company – well, not a program but an effort to make sure we are properly managing expense while continuing to invest in various areas of the growth and so what that means is we’ve a lot of things trying to keep expenses down and the switch over to – over the last year to positive net flows in – bigger positive net flows in the equity side will help along the way. But trying to predict what’s going to happen is not something that we are going to do Bill. William Katz – Citigroup: I have one more question there, I am sorry to belabor the point, if you do – if rates were at some point to go forward, if things were more of a ‘15-’16 events then anything in the near term, would you unlock some spending such that it’s not a straight add back of the fee waiver, just think about normalized earnings power?

We were investing where we think we need to be investing, so it’s not like we are holding back anywhere. The places we have held back are employees’ compensation, although we can’t deal with that in the sales and the investment management because we have programs going on there. So I don’t – we are holding back on doing anything and I am trying to predict what’s going to happen again that’s why I list all the factors in there to say we don’t know what’s going to happen and we are trying to maintain a margin that allows us to continue to invest. William Katz – Citigroup: Okay, thank you. And just one follow-up question, Chris you mentioned you had some good success on the institutional pipeline in terms of fixed income. You have about $1 billion and you mentioned small cap fund going out for about $79 million. Can you talk maybe – give more sense the details about what’s driving the respective growth and what are the characteristics specifically that the components you are looking at. You mentioned [inaudible] platform et cetera, maybe that the – part of that these days. I know on the small cap side this is sort of one off and one of the reasons for the falling in on any of the assets at risk that follow behind that.

That is a definite one off to answer the last question first. And the performance of that mandate is very strong in any event that was a change in style type thing by one particular client. So that is a one-off. On overall on the institutional side, the plus billion that will be coming in it’s a wide variety of mandate after a very, very good RFP type activity and with many different, as I said major – now of course the total return space has been accelerated because of changes in the marketplace and of course we are in a good position to be able to respond to some of these requests and have done so already and over the last couple of weeks this has been a very good source of growth for that mandate for total return bond fund. William Katz – Citigroup: Thanks for taking my questions.

Thank you. Our next question is from the line of Eric Berg of RBC. Please go ahead with your question. Eric Berg – RBC Capital Markets: Yes, thanks very much. Just one sort of broad question about your strategy in Muni Fund. You have mentioned that in your sort of informal pooling of investors they seem to be more responsive to the 60 day bonds and less responsive to the separate account and another point you talked about, I think Chris talked about modifying the 60 day funds and emphasizing retail. So I am just trying to sort of organize all this in my mind and answer the question, assuming we get to two years from now if loading NAV on the institutional prime and institutional municipal money market funds, what is your best sense at this point as to the most likely offerings that you will be – mostly likely products that you will offering in the money fund area of the institution as basis for holding NAV as well as retail investors?

My answer to that at this point is that I think the most likely thing is there will 60 day fund, there will be government fund, there will be private fund, although there is some things have to be worked out there and then there will be retail. And as I mentioned on this call before you can’t use any definition of retail that you had in your head before, you have to have a new definition of retail. It’s now a word of art or a word of legal or a word that split in quotes because there are many trust type accounts that can be retailed. So there is no doubt that we will be offering our retail funds. Then hanging in the balances whether we will have any of these floating NAV institutional prime funds I am still doubtful despite hand raising but we have healthy disputations about this as we should, as we’re in the water boarding stage of our activities. So that would be my best guess as to what we will see.

And I think with each of those product lines we would be offering the triple A rated version as well as the non or single A rated version for those customers that needs the rating aspects of it. Eric Berg – RBC Capital Markets: Are you saying in other words, so this will complete my questions. Are you seeing in other words that over the most part realizing that this is still a very fluid situation and that definitions are changing as Chris just emphasized, are you saying that a general statements then that you anticipate that the 60 day [decrement] in private funds will replace what is currently the institutional prime and municipal money fund.

Our goal is to have a warm and loving home for all of our client and even more money that’s being shaken loose out of the system through the LCR effort so that if you press me I would say that after a lull in the action that we will back on the growth path on the money market fund assets as we come to the end of the two year period. Eric Berg – RBC Capital Markets: All right thank you very much. That clarified things.

The next question comes from the line of Tom Whitehead with Morgan Stanley. Please go ahead with your question. Tom Whitehead – Morgan Stanley: Hey guys good morning. So a lot of mine have been answered but I wanted to come back to fixed income quickly. You mentioned you saw a little bit of pickup in the total return related to the dislocation that’s out there in the asset promotion from the news of Pimco. Couple of questions there have you seen any other products seeing greater demand or are you stepping up your efforts and really across this space and more broadly can you talk at a level of success you had given what’s going on.

We are stepping up our efforts in terms of underscoring the kinds of products that we’ve been offering for a long time. So we are enhancing a little bit of ad budget here and there and Ray has a comment a little further.

Tom just in terms of particular areas and we mentioned total return bonds, we have – we talked about adding high yield mandate, high yields been a multi-year really multi decade strong performer for us. And so we continue to see institutional interest there in the funds flow as of the early part of the fourth quarter and a return to positive territory. We talked earlier about our floating rate products. There’s considerable interest in that as well. Tom Whitehead – Morgan Stanley: Great, and then I know you’ve touched on M&A earlier but just maybe to give us a broader update on your capital priorities [inaudible] versus buyback plus M&A and what the potential could be for a special this year?

Well, specials are never off the table but they are not currently on the table. And as you look at our chart our pie chart you will see that overtime the approach we’ve had has been shall we say opportunistic and we try to evaluate it as being a shareholder friendly operation. We are very interested in returning monies to shareholder and doing the best thing with the money for shareholders we can think of. As we mentioned on this call many times the highest and best use in our view are acquisitions that meet our criteria. We like the dividend, and we are active on share purchase. So I know that doesn’t give you a whole lot of directions to which one of those we’re going to jump on the most. But that’s about as good as we can give you at this point. Tom Whitehead – Morgan Stanley: Understood. Thanks for taking my question.

Our next question comes from the line of Michael Carrier with Bank of America Merrill Lynch. Please go ahead with your questions. Michael Carrier – Bank of America Merrill Lynch: Hi thanks guys. Just on the long-term fund drive, you have always had good progress and traction on the equity unit side of the business. On the fixed income side it sounds like when we go to the funds and the some of the funds that you noted. You have some that have good performance and the flows haven’t been as strong. So just curious is there anything now that you guys are working on and that can be done on the distribution side or is it certain key products just aren’t where they need to be in order to be in order to be top five or ten funds that are selling in the industry?

Well it’s a lot of repeat the sounding joy, repeat the sounding joy, keep telling the story and that’s what’s going on. There were times where we would run into various situations where clients would say well I can’t get fired if I hire God or X and then that would just be the determinant and so now that particular answer doesn’t obtain and so that opens up a few little more but if you haven’t been doing the basic activities for a long time it just doesn’t – all of a sudden open up for you. And yes there are some funds that are ground under [inaudible] but there are certainly plenty that could drive successful and positive flows here in to the future.

Mike we talked earlier about unconstrained strategies. We have one that’s one clearly that where you’ve seen flows in the industry where we like to see a stronger effort and stronger results that would be one that we’re actively working on. Michael Carrier – Bank of America Merrill Lynch: Okay thanks and then Debbie if you could just go on, just curious given the volatility that we saw in the fixed income mortgage last week and given that the repo market is strong, quite a bit over the years, just more curious have you signed anything that was unusual where that made things a little bit more challenging or was it manageable?

No, it was very manageable, nothing, we’re as such low rates already from a standpoint of the shorter term offerings in the fixed income space for money market funds that it didn’t really translate into a lot of volatility. Certainly we saw treasury go a little bit lower. There was a flight to quality of different points and what might have been a 1.5 basis point that we were getting for our three months treasury became a 0.5 basis point. Nothing went into negative territory, maybe complicating things to some degree were the changes to the fed’s reverse repo program that occurred at the end of the third quarter, whereby we had to place our orders at 8 am rather than at 1 pm and we were constrained on a total volume basis to no more than $300 billion which obviously caused instead of a five basis points return on that investment that was zero for the day. But that didn’t seem and played through further within the quarter and we’re not sure what to expect from that from a fourth quarter perspective and I would venture to say that if anything is going to have more of an impact on the short, short, short term space it’s that particular program. Michael Carrier – Bank of America Merrill Lynch: Okay, thanks a lot.

Thank you. At this time I would like to turn the floor back to management for closing comments.

Well that will conclude our call and we thank you for joining us today.