1. Attribution Report Returns by Industry, Sector and Asset Classes
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Attribution Report Returns by Industry, Sector and Asset Classes
Prabhu Ramamoorthy
Feb 21, 2010
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

2. Federated Total Return Bond Series
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Federated Total Return Bond Series
Benchmark – Barclays Capital US Aggregate
Weighted Average Effective Maturity 6.1 Yrs
Weighted Average Effective Duration 4.3 Yrs.
Weighted Average Coupon 5.32%
Weighted Average YTM 4 .31%
Weighted Average Quality AA-, A2
Source: 
Source:
Can also be calculated from historical prices
Beta 9.7
R Square 0.77
Alpha 0.05
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

3. Bond Market Review Bond Index Returns 4Q09 vs. 1 Year 09
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Bond Market Review Bond Index Returns 4Q09 vs. 1 Year 09
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

4. Bond Market Review Sector Returns 4Q09 vs. 1 Year 09
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Bond Market Review Sector Returns 4Q09 vs. 1 Year 09
High Yield> CMBS>Corporate IG >ABS>MBS>Agencies>Treasuries in 4Q 2009
High Yield> CMBS>ABS>Corporate IG> Municipals>MBS>Agencies>Treasuries in 1 year
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

5. Bond Market Review Credit Returns 4Q09 vs. 1 Year 09
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Bond Market Review Credit Returns 4Q09 vs. 1 Year 09
Lower the Credit Rating, Higher the Returns. Increasing Risk appetite and stabilization
High Yields most attractive, Less Default and tightening credit spreads
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

6. Bond Market Review Industry – Investment Grade Option adjusted spreads
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Bond Market Review Industry – Investment Grade Option adjusted spreads
As on Nov 9, 2009
2006
2007
2008Q4
2009Q2
9-Nov
Aerospace and Defense 93
153
375
237
181
Bank 79
208
524
387
257
Brokerage 74
213
539
404
274
Capital Goods
112
168
397
231
175
Consumer Products
177
534
381
194
CPEG
138
201
463
270
263
Forest Products & Building Materials
174
261
834
543
378
Healthcare
104
160
351
191
146
High Technology
118
558
273
193
Spreads started to tighten due to stabilization and economic recovery
Note: Spreads highest during 2008Q4 during financial crisis
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

7. Bond Market Review Industry – Investment Grade Option adjusted spreads
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Bond Market Review Industry – Investment Grade Option adjusted spreads
As on Nov 9, 2009
2006
2007
2008Q4
2009Q2
9-Nov
Home Builders and Real Estate
112
245
663
595
399
Insurance
118
240
706
486
327
Integrated Oil and Gas
109
155
479
266
206
Media and Entertainment
181
255
675
448
294
Metals Mining and Steel
152
201
753
484
315
Oil Gas Exploration and Production
133
537
299
223
Retail and Restaurants
124
229
597
234
176
Telecommunication
187
243
555
Transportation
114
214
544
316
Utility
117
207
272
196
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

8. Bond Market Review Industry – Investment Grade Option adjusted spreads
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Bond Market Review Industry – Investment Grade Option adjusted spreads
Sample Spread Time Plot for Select Industries
Even though Spreads have started to tighten, Spreads as on Nov 9,2009 are still not at 2006 levels
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

9. Yield Curve Steepening over 09
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Yield Curve Steepening over 09
Yield Curve became steep due to Fed support. Fed discount and reserve rate kept low
Once Fed pulls back and stops monetary easing, interest rates expected to rise
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

10. FTRB Composition Sector
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FTRB Composition Sector
Core Plus Strategy – In addition to Benchmark, FTRB has High Yield Securities in portfolio holdings
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

11. FTRB Barclays Aggregate Sector Composition
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FTRB Barclays Aggregate Sector Composition
No Municipal Bonds. BBB and lower - zero
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

12. FTRB Allocation Sector FTBR vs. BCAB
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FTRB Allocation Sector FTBR vs. BCAB
Treasuries, Agencies – Underweight, Corporate, High Yield - Overweight
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

13. FTRB Allocation Credit FTBR vs. BCAB
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FTRB Allocation Credit FTBR vs. BCAB
Treasuries, Agencies – Underweight, AA and Below - Overweight
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

14. FTRB Performance Attribution Factors
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FTRB Performance Attribution Factors
FTRB Return attribution white paper strategy at
Return is attributed and split into
Sector Allocation –Treasuries, MBS, CMBS, ABS, Corporate High Yield
Security Selection – Bottom up analysis considering sector also
Duration – Interest Rate Risk
Yield Curve – Maturity, Barbell, Ladder, Bullet
Currency – Currency risk, Investing in dollar denominated foreign instruments
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

15. FTRB Allocation Impact on Returns
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FTRB Allocation Impact on Returns
Active Returns due to Sector Allocation is significant
Asset Allocation (a(i)p – a(i)b)
Multiplied By
Benchmark Sector Return r(i)b
=Active Asset Allocation Return for Sector(i)
Total Asset Allocation Return ∑iєS(a(i)-a(i)b)*r(i)b
Explains most of the excess returns over benchmark
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

16. FTRB Split up by Attribution Factors 4Q09
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FTRB Split up by Attribution Factors 4Q09
Asset Allocation by sector – Summation of ∑iєS(a(i)-a(i)b)*r(i)b almost explains 97 bp return
Source: 
Source:  Annual Report
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

17. FTRB Attribution Report Comment
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FTRB Attribution Report Comment
Return vs. Benchmark
Comments
Duration
Positive in 4Q 2009 and provided 22 bp of return vs. benchmark .
Fund Set to lower duration than that of Benchmark in expectation of Rising Interest Rate. But early on in year, duration effect was detracting with respect to BCAB as interest rates fell during summer with Fed support in market.
Sector Allocation
Provided 97 bp of return. Significant contribution relative to Benchmark over the year
Underweight in Treasuries
Overweight in High Yields, Corporate
Yield Curve
1 basis point in 4Q 2009.
Positive. During Summer 2009, Interest rates declined across all maturities. Fund held lesser long term maturity when compared to Barclays Aggregate Bond Index. Hence impact here was lesser and could have been more.
Security Selection
Negative for 4th Quarter. Selection was positive over a longer year horizon.
Holdings in High Quality MBS. Over the year ,Core Mortgage Holdings Outperformed Barclays MBS and led to positive returns. Other security selection in other sectors contributed relatively little to total performance.
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

18. FTRB Attribution Strategy and active bets in future
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FTRB Attribution Strategy and active bets in future
Treasury
Underweight
Rising Interest Rate and sensitivity. Short term rates expected to rise once Fed takes action and pulls out
MBS
Rising Rates and End of Fed MBS Purchase program. Higher Interest rates may bring extension risk and higher duration with slower prepayment, variability and default risk
High Yield, Corporate
Overweight
Tightening Credit Spread, Lower Defaults
Emerging Market Debt
Emerging countries have better economic fundamentals, Lower Debt as percent of GDP
Duration
85% of Benchmark
Duration Management with respect to Benchmark expecting rising rates
Source: 
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.

19. Important Links, References
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Important Links, References
For all fixed income research material and outlook used for the analysis, go to The page has compiled the link to all materials and is very helpful for market outlook and review of past returns
For Attribution Strategy of FTBR go to
For FTBR, go to The data from Annual reports and other public available information has been used. Approximate Portfolio holdings in Excel sheet
Other Web Sites -Yahoo finance, Treasury yield curve, References to data and reports from publicly available sources have been used
Benchmark data was collected from different sources including other prospectuses, fund reports. Detailed Benchmark data not available for extensive sector and security analysis
Source: 
© 2007 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries.
The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.