FEDERATED HERMES, INC.
10-Ks and 10-Qs
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
|
x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31, 2011
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number 1-14818
FEDERATED INVESTORS, INC.
(Exact name of registrant as specified in its charter)
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Pennsylvania
(State or other jurisdiction of
incorporation or organization) |
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25-1111467
(I.R.S. Employer
Identification No.) |
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Federated Investors Tower
Pittsburgh, Pennsylvania
(Address of principal executive offices)
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15222-3779
(zip code)
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Class B Common Stock, no par value
(Title of each class)
|
|
New York Stock Exchange
(Name of each exchange on which registered)
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
x
No
o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
o
No
x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
x
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
x
No
o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
|
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o
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Smaller reporting company
|
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o
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
The aggregate market value of the Class B Common Stock held by non-affiliates of the registrant as of
June 30, 2011
was approximately
$2.2 billion
, based on the last reported sales price of
$23.84
as reported by the New York Stock Exchange. For purposes of this calculation, the registrant has deemed all of its executive officers and directors to be affiliates, but has made no determination as to whether any other persons are affiliates within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934. The number of shares of Class A and Class B Common Stock outstanding on
February 16, 2012
, was
9,000
and
103,743,090
, respectively.
Documents incorporated by reference:
Selected portions of the
2011
Annual Report to Shareholders – Part I, Part II and Part IV of this Form 10-K.
Selected portions of the
2012
Information Statement – Part III of this Form 10-K.
1
Table of Contents
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Page
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Part I
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Item 1
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Item 1A
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Item 1B
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Item 2
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Item 3
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Part II
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Item 5
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Item 6
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Item 7
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Item 7A
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Item 8
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Item 9
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Item 9A
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Item 9B
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Part III
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Item 10
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Item 11
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Item 12
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Item 13
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Item 14
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Part IV
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Item 15
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2
General
Federated Investors, Inc., a Pennsylvania corporation, together with its consolidated subsidiaries (collectively, Federated), is a leading provider of investment management products and related financial services. Federated has been in the investment management business since 1955 and is one of the largest mutual fund managers in the United States with
$369.7 billion
in assets under management at
December 31, 2011
.
Federated sponsors, markets and provides investment-related services to various investment products, including mutual funds and Separate Accounts (which include separately managed accounts, institutional accounts, sub-advised funds and other managed products). Federated’s principal source of revenue is investment advisory fee income earned by various subsidiaries of Federated pursuant to investment advisory contracts with the investment products. These subsidiaries are registered as investment advisers under the Investment Advisers Act of 1940 (Advisers Act). Investment advisers are compensated for their services in the form of investment advisory fees based primarily upon the assets under management of the investment products.
Federated provided investment advisory services to
134
Federated-sponsored funds (the Federated Funds) as of
December 31, 2011
. Federated markets these funds to banks, broker/dealers and other financial intermediaries who use them to meet the needs of their customers, including retail investors, corporations and retirement plans. The funds sponsored by Federated are domiciled in the U.S., with the exception of Federated International Funds Plc and Federated Unit Trust, which are domiciled in Dublin, Ireland. Most of Federated’s U.S.-domiciled funds are registered under the Investment Company Act of 1940 (Investment Company Act) and under applicable federal laws. Each of the U.S.-domiciled funds enters into an advisory agreement that is subject to annual approval by the fund’s board of directors or trustees, a majority of whom are not interested persons of the funds or Federated as defined under the Investment Company Act. In general, material amendments to such advisory agreements must be approved by the funds’ shareholders. A significant portion of Federated’s revenue is derived from these advisory agreements, which generally are terminable upon 60 days notice to the investment adviser.
Of the
134
Federated Funds as of
December 31, 2011
, Federated’s investment advisory subsidiaries managed 48 money market funds totaling
$255.9 billion
in assets under management, 51 fixed-income funds with
$37.2 billion
in assets under management and 35 equity funds with
$21.9 billion
in assets under management.
As of
December 31, 2011
, Federated provided investment advisory services to
$45.8 billion
in Separate Account assets. These Separate Accounts represent assets of high-net-worth individuals, government entities, pension and other employee benefit plans, corporations, trusts, foundations, endowments, mutual funds and other products sponsored by third parties. Fees for Separate Accounts are typically based on assets under management pursuant to investment advisory agreements that may be terminated at any time.
In addition, Federated managed liquidation portfolios which include portfolios of distressed fixed-income securities. In the distressed security category, Federated has been retained by third parties to manage these assets through an orderly liquidation process that will generally occur over a multi-year period. As of
December 31, 2011
, Federated managed two liquidation portfolios with
$8.9 billion
in assets.
Certain Federated Funds have adopted distribution plans that, subject to applicable law, provide for payment to Federated for distribution expenses, including sales commissions paid to broker/dealers. These distribution plans are implemented through a distribution agreement between Federated and each respective fund. Although the specific terms of each such agreement vary, the basic terms of the agreements are similar. Pursuant to these agreements, Federated acts as underwriter for the funds and distributes shares of the funds primarily through unaffiliated dealers. Each distribution plan and agreement is initially approved by the directors or trustees of the respective fund and is reviewed for approval by such directors or trustees annually.
Federated also provides a broad range of services to support the operation and administration of the Federated Funds. These services, for which Federated receives fees pursuant to agreements with the Federated Funds, include administrative services, shareholder servicing and general support.
3
Total managed assets are composed of Federated Funds, Separate Accounts and Liquidation Portfolios and represent the balance of assets under management at a point in time. Total managed assets for the past three years were as follows:
|
|
As of December 31,
|
2011
vs. 2010 |
|
2010
vs. 2009 |
|
|||||||||||||
|
dollars in millions
|
2011
|
|
2010
|
|
2009
|
|
||||||||||||
|
Money Market
|
$
|
285,140
|
|
$
|
276,026
|
|
$
|
313,260
|
|
3
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%
|
(12
|
)%
|
|||||
|
Fixed-Income
|
44,814
|
|
40,705
|
|
33,787
|
|
10
|
%
|
20
|
%
|
||||||||
|
Equity
|
30,887
|
|
30,802
|
|
29,673
|
|
0
|
%
|
4
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%
|
||||||||
|
Liquidation Portfolios
|
8,856
|
|
10,708
|
|
12,596
|
|
(17
|
)%
|
(15
|
)%
|
||||||||
|
Total Managed Assets
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$
|
369,697
|
|
$
|
358,241
|
|
$
|
389,316
|
|
3
|
%
|
(8
|
)%
|
|||||
Average managed assets represent the average balance of assets under management during a period of time. Because substantially all revenue and distribution expense are generally calculated daily based on assets under management, changes in average managed assets are typically a key indicator of changes in revenue earned and asset-based expenses incurred during the same period. Average managed assets for the past three years were as follows:
|
|
Year ended December 31,
|
2011
vs. 2010 |
|
2010
vs. 2009 |
|
|||||||||||||
|
dollars in millions
|
2011
|
|
2010
|
|
2009
|
|
||||||||||||
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Money Market
|
$
|
271,501
|
|
$
|
268,701
|
|
$
|
343,265
|
|
1
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%
|
(22
|
)%
|
|||||
|
Fixed-Income
|
42,573
|
|
37,690
|
|
28,684
|
|
13
|
%
|
31
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%
|
||||||||
|
Equity
|
30,560
|
|
29,104
|
|
26,680
|
|
5
|
%
|
9
|
%
|
||||||||
|
Liquidation Portfolios
|
9,753
|
|
11,579
|
|
6,966
|
|
(16
|
)%
|
66
|
%
|
||||||||
|
Total Average Managed Assets
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$
|
354,387
|
|
$
|
347,074
|
|
$
|
405,595
|
|
2
|
%
|
(14
|
)%
|
|||||
Changes in Federated’s average asset mix year-over-year across both asset class and product types have a direct impact on Federated’s operating income. Asset mix impacts Federated’s total revenue due to the difference in the fee rates earned per invested dollar on each asset class and product type. Equity products generally have a higher management-fee rate than fixed-income products, money market products and liquidation portfolios. Likewise, mutual fund products typically have a higher management-fee rate than Separate Accounts. Similarly, traditional separate accounts typically have a higher management-fee rate than liquidation portfolios. Additionally, certain components of distribution expense can vary depending upon the asset class, distribution channel and/or the size of the customer relationship. Federated generally pays out a larger portion of the revenue earned from managed assets in money market funds than managed assets in equity or fixed-income funds.
Federated’s revenues from investment advisory, administrative and other service fees provided under agreements with the Federated Funds and other entities over the last three years were as follows:
|
|
Year ended December 31,
|
2011
vs. 2010 |
|
2010
vs. 2009 |
|
|||||||||||||
|
dollars in thousands
|
2011
|
|
2010
|
|
2009
|
|
||||||||||||
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Investment advisory fees, net
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$
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586,340
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$
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639,404
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$
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749,823
|
|
(8
|
)%
|
(15
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)%
|
|||||
|
Administrative service fees, net
|
220,356
|
|
215,643
|
|
261,610
|
|
2
|
%
|
(18
|
)%
|
||||||||
|
Other service fees, net
|
85,385
|
|
94,035
|
|
158,999
|
|
(9
|
)%
|
(41
|
)%
|
||||||||
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Other, net
|
3,033
|
|
2,861
|
|
5,518
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|
6
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%
|
(48
|
)%
|
||||||||
|
Total revenue
|
$
|
895,114
|
|
$
|
951,943
|
|
$
|
1,175,950
|
|
(6
|
)%
|
(19
|
)%
|
|||||
As of
December 31, 2011
, Federated has the following revenue concentrations:
(a) Revenue Concentration by Asset Class
Approximately
46%
of Federated’s total revenue for 2011 was attributable to money market assets. A significant change in Federated’s money market business or a significant reduction in money market assets due to regulatory changes, changes in the financial markets including significant and rapid increases in interest rates over a short period of time causing certain investors to prefer direct investments in interest-bearing securities, significant deterioration in investor confidence, further persistent declines in or additional prolonged periods of historically low short-term interest rates and resulting fee waivers or other circumstances, could have a material adverse effect on Federated’s results of operations.
4
Current Regulatory Environment
In January 2010, the Securities and Exchange Commission (SEC) adopted extensive amendments to Rule 2a-7 of the Investment Company Act of 1940 aimed at enhancing the resiliency of money market funds. These amendments included a series of enhancements including rules that required all money market funds to meet specific portfolio liquidity standards and rules that significantly enhanced the public disclosure and regulatory reporting obligations of these funds. In Federated's view, the amendments of 2010 meaningfully and sufficiently strengthened money market funds. Recent experience demonstrated that the amendments of 2010 were effective in meeting heightened requests for redemptions occurring at various times throughout 2011 in connection with the U.S. credit rating downgrade and the ongoing European debt crisis.
The SEC staff is considering additional changes to Rule 2a-7 that could adversely impact the viability of money market funds, including requiring a floating net asset value, imposing capital requirements, and creating redemption restrictions. Federated believes the changes currently under consideration, if enacted, would significantly reduce the utility and attractiveness of money market funds to investors. Thus, rather than enhance the resiliency of money market funds, the contemplated changes would potentially severely harm the utility of money market funds for investors who, in Federated's view, value money market funds in their current form as an efficient and effective cash management investment product offering daily liquidity at par. It has been reported that the SEC may propose amendments to Rule 2a-7 as early as the first quarter of 2012.
If ultimately enacted, some or all of these changes would be detrimental to Federated's money market fund business and could materially and adversely affect Federated's operations. The very proposal of such amendments could have an adverse impact on Federated's money market fund business and operations and could also negatively impact the short-term credit markets. Management is carefully monitoring developments in this area and plans to actively participate both individually and with industry groups in the public comment process that would accompany any rule change proposal. Federated is unable to assess the degree of any potential impact such additional reforms may have on its business and operations until such proposals are issued. Even when issued, the final version of any SEC rule amendment could vary significantly from the form in which it is proposed.
Historically Low Short-Term Interest Rates
In certain money market funds, the gross yield is not sufficient to cover all of the fund’s normal operating expenses due to historically low short-term interest rates. Since the fourth quarter 2008, Federated has voluntarily waived fees in order for certain funds to maintain positive or zero net yields. These fee waivers were partially offset by related reductions in distribution expense and net income attributable to noncontrolling interests as a result of Federated's ability to share the impact of the waivers with third-party intermediaries.
The impact of such fee waivers on various components of Federated's Consolidated Statements of Income was as follows for the years ended December 31:
|
2011
|
|
2010
|
|
|||||||||||||||
|
dollars in millions
|
2011
|
|
2010
|
|
2009
|
|
vs. 2010
|
|
vs. 2009
|
|
||||||||
|
Investment advisory fees
|
$
|
(201.6
|
)
|
$
|
(134.3
|
)
|
$
|
(69.0
|
)
|
50
|
%
|
95
|
%
|
|||||
|
Other service fees
|
(119.1
|
)
|
(107.3
|
)
|
(51.6
|
)
|
11
|
%
|
108
|
%
|
||||||||
|
Total Revenue
|
(320.7
|
)
|
(241.6
|
)
|
(120.6
|
)
|
33
|
%
|
100
|
%
|
||||||||
|
Distribution expense
|
(232.3
|
)
|
(186.6
|
)
|
(86.4
|
)
|
24
|
%
|
116
|
%
|
||||||||
|
Operating income
|
(88.4
|
)
|
(55.0
|
)
|
(34.2
|
)
|
61
|
%
|
61
|
%
|
||||||||
|
Noncontrolling interest
|
(6.5
|
)
|
(1.0
|
)
|
0
|
|
550
|
%
|
N/A
|
|
||||||||
|
Pre-tax impact
|
$
|
(81.9
|
)
|
$
|
(54.0
|
)
|
$
|
(34.2
|
)
|
52
|
%
|
58
|
%
|
|||||
During
2011
, changes in asset mix as well as further declines in interest rates for certain money market investments caused an increase in these fee waivers. (See
Note (22)
to the Consolidated Financial Statements incorporated by reference in Item 8 of Part II of this Form 10-K for information regarding the quarterly pre-tax impact of the fee waivers.) Based on recent Federal Reserve Bank commentary on their outlook for interest rates, management expects the fee waivers and the related reduction in distribution expense and net income attributable to noncontrolling interests will continue at least until late
2014
. Based on recent market conditions and assuming asset levels remain constant, fee waivers for the first quarter
2012
may result in a net negative pre-tax impact on income of approximately
$27 million
. Increases in short-term interest rates that result in higher yields on securities purchased in money market fund portfolios would reduce the net pre-tax impact of these waivers. Management estimates that an increase of
10
basis points in gross yields on securities purchased in money market fund portfolios will likely reduce the net pre-tax impact of these waivers between
thirty-five
and
forty percent
from the current levels and an increase of
25
basis points would reduce the impact between
sixty-five
and
seventy percent
. The actual amount of future
5
fee waivers could vary significantly from management’s estimates as they are contingent on a number of variables including, but not limited to, changes in assets within the money market funds, available yields on instruments held by the money market funds, actions by the Federal Reserve, the U.S. Department of the Treasury and other governmental entities, changes in expenses of the money market funds, changes in the mix of money market customer assets, Federated’s willingness to continue the fee waivers and changes in the extent to which the impact of the waivers is shared by third parties.
(b) Revenue Concentration by Investment Fund
Approximately
12%
and
11%
of Federated’s total revenue for
2011
were derived from services provided to two sponsored funds, the Federated Kaufmann Fund and the Federated Prime Obligations Fund, respectively. A significant and prolonged decline in the assets under management in these funds could have a material adverse effect on Federated’s future revenues and, to a lesser extent, net income, due to a related reduction to distribution expenses associated with these funds.
(c) Revenue Concentration by Customer
Approximately
10%
of Federated’s total revenue for
2011
was derived from services provided to one intermediary customer, the Bank of New York Mellon Corporation. Significant changes in Federated’s relationship with this customer could have a material adverse effect on Federated’s future revenues and, to a lesser extent, net income, due to related material reductions to distribution expenses associated with this intermediary.
(d) Revenue Concentration by Geographical Location
Federated’s revenues from domestic and foreign operations over the last three years were as follows:
|
|
Year ended December 31,
|
2011
vs. 2010 |
|
2010
vs. 2009 |
|
|||||||||||||
|
dollars in thousands
|
2011
|
|
2010
|
|
2009
|
|
||||||||||||
|
Domestic
|
$
|
878,504
|
|
$
|
929,903
|
|
$
|
1,140,956
|
|
(6
|
)%
|
(18
|
)%
|
|||||
|
Foreign
|
16,610
|
|
22,040
|
|
34,994
|
|
(25
|
)%
|
(37
|
)%
|
||||||||
|
Total revenue
|
$
|
895,114
|
|
$
|
951,943
|
|
$
|
1,175,950
|
|
(6
|
)%
|
(19
|
)%
|
|||||
Investment Products
Federated offers a wide range of products, including money market, equity and fixed-income investments. Federated’s mix includes products that Federated expects to be in demand under a variety of economic and market conditions. Federated has structured its investment process to meet the requirements of fiduciaries and others who use Federated’s products to meet the needs of their customers. Fiduciaries typically have stringent demands regarding portfolio composition, risk and investment performance.
Federated is one of the largest U.S. managers of money market assets, with
$285.1 billion
in such assets under management at
December 31, 2011
. Federated has developed expertise in managing cash for institutions, which typically have stringent requirements for regulatory compliance, relative safety, liquidity and competitive yields. Federated has managed money market funds for over 35 years and began selling money market fund products to institutions in 1974. Federated also manages retail money market products that are typically distributed through broker/dealers. Federated manages money market assets in the following asset classes: government ($147.9 billion); prime ($113.0 billion); and tax free ($24.2 billion).
Federated’s fixed-income assets totaled
$44.8 billion
at
December 31, 2011
and are managed in a wide range of sectors including multi-sector ($19.3 billion); municipal ($6.3 billion); U.S. government ($6.0 billion); U.S. corporate ($4.8 billion); mortgage-backed ($3.3 billion); high-yield ($3.1 billion); and international/global ($2.0 billion). Federated’s fixed-income products offer fiduciaries and others a broad range of highly defined products designed to meet their investment needs.
Equity assets totaled
$30.9 billion
at
December 31, 2011
and are managed across a wide range of styles including value ($13.7 billion); growth ($7.8 billion); blend ($4.0 billion); alternative ($2.1 billion); and international/global ($1.8 billion). Federated also manages assets in balanced and asset allocation funds ($1.5 billion). These asset allocation funds may include fixed-income assets.
Federated’s liquidation portfolios totaled
$8.9 billion
at
December 31, 2011
.
Investment products are generally managed by a team of portfolio managers supported by fundamental and quantitative research analysts. Federated’s proprietary, independent investment research process is centered on the integration of several fundamentals: fundamental research and credit analysis, quantitative research models, style-consistent and disciplined portfolio construction and management, performance attribution and trading.
6
Distribution Channels
Federated’s distribution strategy is to provide products geared toward financial intermediaries, primarily banks, broker/dealers and investment advisers and directly to institutions such as corporations and government entities. Federated provides comprehensive investment management to approximately 4,700 institutions and intermediaries including corporations, government entities, insurance companies, foundations, endowments, banks and broker/dealers. Federated uses its trained sales force of approximately 200 representatives and managers to add new customer relationships and strengthen and expand existing relationships.
Product Markets
Federated’s investment products are primarily distributed in three markets. These markets and the relative percentage of managed assets at
December 31, 2011
attributable to such markets are as follows: wealth management and trust (
51%
), broker/dealer (
30%
) and global institutional (
17%
).
Wealth Management & Trust, Global Capital Markets and Institutional Cash.
Federated pioneered the concept of providing liquidity management to bank trust departments through money market mutual funds over 35 years ago, and has since expanded our services nationwide to institutional cash management and treasury professionals, as well as financial professionals. Today, wealth management professionals across all of these types of firms use a broad range of Federated’s equity and fixed-income funds to invest the assets over which they have discretion.
The majority of Federated’s managed assets from the wealth management channel are invested in money market funds. In allocating investments across various asset classes, investors typically maintain a portion of their portfolios in cash or cash equivalents, including money market funds, irrespective of trends in bond or stock prices. In addition, Federated offers an extensive menu of equity and fixed-income mutual funds and Separate Accounts structured for the wealth management and trust market. In addition to bank trust departments and registered investment advisory firms, Federated provides products and services to capital markets clients (institutional brokerages generally within banks) and directly to cash management and treasury departments at major corporations and government entities.
Federated employs a dedicated sales force backed by an experienced support staff to offer products and services to the wealth management and trust market. As of
December 31, 2011
, managed assets in this market included $167.2 billion in money market assets, $14.1 billion in fixed-income assets and $6.7 billion in equity assets.
Broker/Dealer.
Federated distributes its products in this market through a large, diversified group of approximately 1,500 national, regional and independent broker/dealers and bank broker/dealers. Federated maintains sales staff dedicated to calling on broker/dealers, bank broker/dealers and insurance interests. Broker/dealers use Federated’s products to meet the needs of their customers, who are typically retail investors. Federated offers products with a variety of commission structures that enable brokers to offer their customers a choice of pricing options. Federated also offers money market mutual funds as cash management products designed for use by its broker/dealer clients. As of
December 31, 2011
, managed assets in the broker/dealer market included $74.1 billion in money market assets, $18.1 billion in fixed-income assets and $17.5 billion in equity assets.
Global Institutional.
Federated maintains a dedicated sales staff to focus on the distribution of its products to a wide variety of global institutional customers: corporations, corporate and public pension funds, government entities, foundations, endowments, hospitals, and non-Federated investment companies. Federated includes institutional assets gathered in the U.S. in this market, as well as assets gathered from customers outside the U.S. through Federated Investors (U.K.) Ltd. and Federated Asset Management GmbH. As of
December 31, 2011
, managed assets in the global institutional market included $39.4 billion in money market assets, $11.1 billion in fixed-income assets, $8.9 billion in liquidation portfolios and $3.1 billion in equity assets.
Competition
The investment management business is highly competitive. Competition is particularly intense among mutual fund providers. According to the Investment Company Institute, at the end of
2011
, there were approximately 7,600 open-end mutual funds of varying sizes and investment objectives whose shares are currently being offered to the public both on a sales-load and no-sales-load basis. In addition to competition from other mutual fund managers and investment advisers, Federated and the mutual fund industry compete with investment alternatives offered by insurance companies, commercial banks, broker/dealers, other financial institutions, hedge funds and exchange traded funds.
Competition for sales of investment products is influenced by various factors, including investment performance, in terms of attaining the stated objectives of the particular products and in terms of fund yields and total returns, advertising and sales
7
promotional efforts, investor confidence and type and quality of services.
Regulatory Matters
Federated and its investment management business are subject to extensive regulation in the United States and abroad. Federated and the Federated Funds are subject to Federal securities laws, principally the Securities Act of 1933, the Investment Company Act and the Investment Advisers Act of 1940, state laws regarding securities fraud, and regulations promulgated by various regulatory authorities, including the SEC, the Financial Industry Regulatory Authority (FINRA), and the New York Stock Exchange (the NYSE). Federated is also affected by the regulations governing banks and other financial institutions and, to the extent operations take place outside the United States, by foreign laws and regulatory authorities. Changes in laws, regulations or governmental policies, and the costs associated with compliance, could materially and adversely affect the business and operations of Federated.
From time to time, the Federal securities laws have been augmented substantially. For example, among other measures, Federated has been impacted by the Sarbanes-Oxley Act of 2002, the Patriot Act of 2001 and the Gramm-Leach-Bliley Act of 1999. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) was enacted into law on July 21, 2010. Under the Dodd-Frank Act, Federated, as well as mutual funds, continue to be primarily regulated by the SEC. The Dodd-Frank Act provides, however, for a new systemic risk regulation regime under which it is possible that Federated and/or any one or more of its mutual funds could be designated by a newly created Financial Stability Oversight Council (FSOC) for enhanced prudential regulation by the Federal Reserve Board, in addition to primary regulation by the SEC. Other provisions of the Dodd-Frank Act may affect intermediaries in their sale or use of Federated's products. Prior to complete implementation, it will be difficult to assess the full impact of the Dodd-Frank Act on Federated.
On October 21, 2010, the President's Working Group issued its report on Money Market Fund Reform Options (the Report). The President's Working Group was tasked with studying possible reforms relating to money market funds that could mitigate systemic risk in the financial markets (including the potential for disruption in the financial markets caused by rapid shareholder redemptions in money market funds). The Report discusses the conditions that could cause money market funds to experience rapid shareholder redemptions and describes the advantages and disadvantages of a variety of policy options that could reduce the risk of such rapid redemptions. The Report suggests that the FSOC examine these options as part of its implementation of the Dodd-Frank Act.
In January 2010, the SEC adopted extensive amendments to Rule 2a-7 of the Investment Company Act aimed at enhancing the resiliency of money market funds. These amendments included a series of enhancements including rules that required all money market funds to meet specific portfolio liquidity standards and rules that significantly enhanced the public disclosure and regulatory reporting obligations of these funds. In Federated's view, the amendments of 2010 meaningfully and sufficiently strengthened money market funds. Recent experience demonstrated that the amendments of 2010 were effective in meeting heightened requests for redemptions occurring at various times throughout 2011 in connection with the U.S. credit rating downgrade and the ongoing European debt crisis.
The SEC staff is considering additional changes to Rule 2a-7 that could adversely impact the viability of money market funds, including requiring a floating net asset value, imposing capital requirements, and creating redemption restrictions. Federated believes the changes currently under consideration, if enacted, would significantly reduce the utility and attractiveness of money market funds to investors. Thus, rather than enhance the resiliency of money market funds, the contemplated changes would potentially severely harm the utility of money market funds for investors who, in Federated's view, value money market funds in their current form as an efficient and effective cash management investment product offering daily liquidity at par. It has been reported that the SEC may propose amendments to Rule 2a-7 as early as the first quarter of 2012.
If ultimately enacted, some or all of these changes would be detrimental to Federated's money market fund business and could materially and adversely affect Federated's operations. The very proposal of such amendments could have an adverse impact on Federated's money market fund business and operations and could also negatively impact the short-term credit markets. Management is carefully monitoring developments in this area and plans to actively participate both individually and with industry groups in the public comment process that would accompany any rule change proposal. Federated is unable to assess the degree of any potential impact such additional reforms may have on its business and operations until such proposals are issued. Even when issued, the final version of any SEC rule amendment could vary significantly from the form in which it is proposed.
In addition, during the past few years the SEC, FINRA and the NYSE have adopted regulations that have increased Federated's operating expenses and affected the conduct of its business, and may continue to do so. Other significant regulations or amendments to regulations have been proposed that, if adopted, will affect Federated and the Federated Funds. Federated anticipates that other reforms and regulatory actions affecting Federated and/or the mutual fund industry are likely to occur,
8
including proposals for further amendments to Rule 2a-7.
Over the past few years, various service industries, including mutual fund service providers, have been the subject of changes in tax policy that impact their state and local tax liability. Changes that have been adopted or proposed include (1) an expansion of the nature of a service company's activities that subject it to tax in a jurisdiction, (2) a change in the methodology by which multi-state companies apportion their income between jurisdictions, and (3) a requirement that affiliated companies calculate their state tax as one combined entity. As adopted changes become effective and additional jurisdictions effect similar changes, there could be a material adverse effect on Federated's tax liability and effective tax rate and, as a result, net income.
Employees
At
December 31, 2011
, Federated employed 1,351 persons.
Forward-Looking Statements
Certain statements in this Annual Report on Form 10-K and the
2011
Annual Report to Shareholders, including those related to asset flows and business mix; obligations to make additional contingent payments pursuant to acquisition agreements; obligations to make additional payments pursuant to employment arrangements; legal proceedings; future cash needs and management’s expectations regarding borrowing; future principal uses of cash; performance indicators; impact of accounting policies and new accounting pronouncements; concentration risk; indemnification obligations; the impact of increased regulation including potential rule proposals by the Securities and Exchange Commission affecting money market funds; the prospect of increased distribution-related expenses; management’s expectations regarding fee waivers and the impact of such waivers on revenues and net income; the ability to raise additional capital; the rising costs of risk management; possible impairment charges; tax liability and the realization of deferred tax assets; capital losses; the impact of the interest rate swap and the various items set forth under the section entitled Risk Factors 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 Federated 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. Among other risks and uncertainties, market conditions may change significantly resulting in changes to Federated’s asset flows and business mix, which may cause a decline in revenues and net income, result in impairments and increase the amount of fee waivers incurred by Federated. The obligation to make contingent payments is based on certain growth and fund performance targets and will be affected by the achievement of such targets, and the obligation to make additional payments pursuant to employment agreements is based on satisfaction of certain conditions set forth in those agreements. Future cash needs and future uses of cash will be impacted by a variety of factors, including the number and size of any acquisitions, Federated’s success in distributing its products, the resolution of pending litigation, potential increases in costs relating to risk management, as well as potential changes in assets under management and/or changes in the terms of distribution and shareholder services contracts with intermediaries who offer Federated’s products to customers. Federated’s risks and uncertainties also include liquidity and credit risks in Federated’s money market funds and revenue risk, which will be affected by yield levels in money market fund products, changes in market values of assets under management and the ability of Federated to collect fees in connection with the management of such products. Many of these factors may be more likely to occur as a result of the increased scrutiny of the mutual fund industry by federal and state regulators, and the recent and ongoing disruption in global financial markets. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither Federated nor any other person assumes responsibility for the accuracy and completeness of such statements in the future. For more information on these items, see the section entitled Risk Factors under Item 7 of Part II, Management’s Discussion and Analysis of Financial Condition and Results of Operations.
9
Executive Officers
The following section sets forth certain information regarding the executive officers of Federated as of
February 24, 2012
:
|
Name
|
|
Position
|
|
Age
|
|
|
John F. Donahue
|
|
Chairman and Director
|
|
87
|
|
|
J. Christopher Donahue
|
|
President, Chief Executive Officer and Director
|
|
62
|
|
|
Brian P. Bouda
|
|
Vice President and Chief Compliance Officer
|
|
64
|
|
|
Gordon J. Ceresino
|
|
Vice Chairman and President, Federated International Management Limited
|
|
54
|
|
|
Thomas R. Donahue
|
|
Vice President, Treasurer and Chief Financial Officer and President, FII Holdings, Inc.
|
|
53
|
|
|
John B. Fisher
|
|
Vice President and President and Chief Executive Officer of Federated Advisory Companies*
|
|
55
|
|
|
Eugene F. Maloney
|
|
Executive Vice President and Executive Vice President, Federated Investors Management Company
|
|
66
|
|
|
Denis McAuley III
|
|
Vice President, Principal Accounting Officer, President of Federated Shareholder Services Company and President of Federated Investors Trust Company
|
|
65
|
|
|
John W. McGonigle
|
|
Vice Chairman, Executive Vice President, Chief Legal Officer, Secretary and Director
|
|
73
|
|
|
Thomas E. Territ
|
|
Vice President and President, Federated Securities Corp.
|
|
52
|
|
|
*
|
Federated Advisory Companies include the following: Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Passport Research Ltd., Federated Investment Counseling, Federated Investment Management Company and Federated MDTA LLC.
|
Mr. John F. Donahue is a co-founder of Federated. He has served as director and Chairman of Federated since Federated's initial public offering in May 1998. He is a director or trustee of 40 investment companies managed by subsidiaries of Federated. Mr. Donahue is the father of J. Christopher Donahue who serves as President, Chief Executive Officer and director of Federated and Thomas R. Donahue who serves as Vice President, Treasurer and Chief Financial Officer of Federated.
Mr. J. Christopher Donahue has served as director, President and Chief Executive Officer of Federated since 1998. He is President of 40 investment companies managed by subsidiaries of Federated. He is also director or trustee of 43 investment companies managed by subsidiaries of Federated. Mr. Donahue is the son of John F. Donahue who serves as Chairman and director of Federated and the brother of Thomas R. Donahue who serves as Vice President, Treasurer and Chief Financial Officer.
Mr. Brian P. Bouda has served as Vice President of Federated Services Company since 1999. Mr. Bouda has been Vice President of Federated and serves as Chief Compliance Officer of Federated and for each of Federated’s subsidiaries. He is also Chief Compliance Officer and Senior Vice President of the investment companies managed by subsidiaries of Federated since as early as 2004.
Mr. Gordon J. Ceresino has served as Vice Chairman of Federated since 2007. He is President of Federated International Management Limited and Vice Chairman of Federated MDTA LLC, both of which are wholly owned subsidiaries of Federated.
Mr. Thomas R. Donahue has served as Vice President, Treasurer and Chief Financial Officer of Federated since 1998. He is President of FII Holdings, Inc., a wholly owned subsidiary of Federated. Mr. Donahue is the son of John F. Donahue who serves as Chairman and director of Federated and the brother of J. Christopher Donahue who serves as director, President and Chief Executive Officer of Federated.
Mr. John B. Fisher has served as Vice President of Federated since 1998. He has also been President and Chief Executive Officer of Federated Advisory Companies since 2006 and serves as a board member for each of those wholly owned subsidiaries. Prior to that, he served as President of the Institutional Sales Division of Federated Securities Corp., a wholly owned subsidiary of Federated.
Mr. Eugene F. Maloney has served as Executive Vice President of Federated since March 2009. Prior to that time, he served as Vice President of Federated since 1998. He is also Executive Vice President of Federated Investors Management Company, a wholly owned subsidiary of Federated. Mr. Maloney provides certain legal, technical and management expertise to Federated’s sales divisions, including regulatory and legal requirements relating to a bank’s use of mutual funds in both trust and commercial environments.
10
Mr. Denis McAuley III has served as Vice President of Federated since 1998 and as Principal Accounting Officer of Federated since 2001. He also serves as President of Federated Investors Trust Company, as President of Federated Shareholder Services Company and as Senior Vice President, Treasurer or Assistant Treasurer for various other subsidiaries of Federated. Mr. McAuley is a Certified Public Accountant.
Mr. John W. McGonigle has been a director of Federated since 1998. He has served as Executive Vice President, Chief Legal Officer and Secretary of Federated since 1998 and as Vice Chairman since 2003. Mr. McGonigle is also Chairman of Federated International Management Limited, a wholly owned subsidiary of Federated. He is a trustee of three investment companies managed by subsidiaries of Federated. Mr. McGonigle is also Secretary of 43 registered investment companies managed by subsidiaries of Federated and Executive Vice President of 42 of those registered investment companies.
Mr. Thomas E. Territ has served as Vice President of Federated since 2006. He is President of Federated Securities Corp., a wholly owned subsidiary of Federated. As President of Federated Securities Corp., Mr. Territ is responsible for the marketing and sales efforts of Federated. Mr. Territ had previously served as Senior Vice President of Federated Securities Corp. since 1995, and held the position of National Sales Director for several of Federated’s sales divisions during that time.
Available Information
Federated makes available, free of charge on its website, www.FederatedInvestors.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934 as soon as reasonably practicable after such information is electronically filed with or furnished to the SEC.
Federated will also provide, free of charge, a copy of the company's most recent annual report on Form 10-K upon written request. Send requests to: Corporate Communications, Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The public may read and copy any materials Federated files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxies and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
Other Information
All other information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the captions Management’s Discussion and Analysis of Financial Condition and Results of Operations, Consolidated Balance Sheets, Consolidated Statements of Income and Notes to the Consolidated Financial Statements and is incorporated herein by reference.
The information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the caption Management’s Discussion and Analysis of Financial Condition and Results of Operations – Risk Factors and is incorporated herein by reference.
None.
Federated’s facilities are concentrated in Pittsburgh, Pennsylvania where it leases space sufficient to meet its operating needs. Federated’s headquarters are located in the Federated Investors Tower, where Federated occupies approximately 259,000 square feet. Federated leases approximately 94,000 square feet at the Keystone Summit Corporate Park location in Warrendale, Pennsylvania. Federated also leases an aggregate of approximately 25,000 square feet at other locations in the Pittsburgh area. Federated maintains office space in Frankfurt, Germany for certain international initiatives; in Rochester, New York, for the operations of Federated Clover Investment Advisors; in New York, New York, for the operations of Federated Global Investment Management Corp.; and in Boston, Massachusetts, for the operations of Federated MDTA LLC.
11
The information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the caption Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Contingent Liabilities and under the caption Notes to the Consolidated Financial Statements –
Note (20) Commitments and Contingencies
–
(c) Past Mutual Fund Trading Issues and Related Legal Proceedings
and
(d) Other Legal Proceedings
and is incorporated herein by reference.
The following table summarizes stock repurchases under Federated’s share repurchase program during the fourth quarter of
2011
.
|
Total Number
of Shares
Purchased
|
|
Average
Price Paid
per Share
|
|
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
1
|
|
Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans or Programs
1
|
|
||||||
|
October
|
10,000
|
|
$
|
19.77
|
|
10,000
|
|
2,699,834
|
|
||||
|
November
|
490,000
|
|
16.30
|
|
490,000
|
|
2,209,834
|
|
|||||
|
December
2
|
61,850
|
|
12.41
|
|
50,000
|
|
2,159,834
|
|
|||||
|
Total
|
561,850
|
|
$
|
15.93
|
|
550,000
|
|
2,159,834
|
|
||||
|
1
|
Federated’s share repurchase program was authorized in August 2008 by the board of directors and permits the purchase of up to 5.0 million shares of Federated Class B common stock with no stated expiration date. No other plans existed as of
December 31, 2011
.
|
|
2
|
In December 2011, 11,850 shares of restricted stock with a price of $3.00 per share were repurchased in connection with employee separations.
|
12
The following performance graph compares the total shareholder return of an investment in Federated’s Class B Common Stock to that of the Standard and Poor’s 500
®
Index (S&P 500 Index) and to the S&P 1500 Asset Management & Custody Banks Index for the five-year period ended on
December 31, 2011
.
The graph assumes that the value of the investment in Federated’s Class B Common Stock and each index was $100 on December 31, 2006. Total return includes reinvestment of all dividends. As a member of the S&P 500 Index, Federated is required to include this comparison. Peer Group returns are weighted by the market capitalization of each firm at the beginning of each measurement period. The historical information set forth below is not necessarily indicative of future performance. Federated does not make or endorse any predictions as to future stock performance.
|
12/31/2007
|
|
12/31/2008
|
|
12/31/2009
|
|
12/31/2010
|
|
12/31/2011
|
|
||||||
|
Federated
|
124.49
|
|
57.97
|
|
97.88
|
|
101.97
|
|
61.84
|
|
|||||
|
S&P 500
®
Index
|
105.49
|
|
66.46
|
|
84.05
|
|
96.71
|
|
98.76
|
|
|||||
|
S&P 1500 Asset Management & Custody Banks
|
116.38
|
|
59.74
|
|
75.49
|
|
86.13
|
|
70.00
|
|
|||||
All other information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the captions Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes to the Consolidated Financial Statements (including, but not limited to Note
(11) Recourse Debt and Interest Rate Swap
and Note
(22) Supplementary Quarterly Financial Data (Unaudited)
) and is incorporated herein by reference.
The information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the caption Selected Consolidated Financial Data and is incorporated herein by reference.
The information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the caption Management’s Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.
The information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the caption Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative
13
Disclosures About Market Risk and is incorporated herein by reference.
The information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the captions Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on Consolidated Financial Statements, Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Changes in Equity, Consolidated Statements of Cash Flows, and Notes to the Consolidated Financial Statements and is incorporated herein by reference.
None.
Federated carried out an evaluation, under the supervision and with the participation of management, including Federated’s President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of Federated’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
December 31, 2011
. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that Federated’s disclosure controls and procedures were effective at
December 31, 2011
.
There has been no change in Federated’s internal control over financial reporting that occurred during the fourth quarter ended
December 31, 2011
that has materially affected, or is reasonably likely to materially affect, Federated’s internal control over financial reporting.
All other information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the caption Management’s Assessment of Internal Control Over Financial Reporting and Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on Effectiveness of Internal Control Over Financial Reporting and is incorporated herein by reference.
None.
The information required by this Item (other than the information set forth below) is contained in Federated’s Information Statement for the
2012
Annual Meeting of Shareholders under the captions Board of Directors and Election of Directors and Security Ownership – Section 16(a) Beneficial Ownership Reporting Compliance, and is incorporated herein by reference.
Executive Officers
The information required by this Item with respect to Federated’s executive officers is contained in Item 1 of Part I of this Form 10-K under the section Executive Officers.
Code of Ethics
In October 2003, Federated adopted a code of ethics for its senior financial officers. This code meets the requirements provided by Item 406 of Regulation S-K and is incorporated by reference in Part IV, Item 15(a)(3) of this Form 10-K as Exhibit 14.01. The code of ethics is available at www.FederatedInvestors.com. In the event that Federated amends or waives a provision of this code and such amendment or waiver relates to any element of the code of ethics definition enumerated in paragraph (b) of Item 406 of Regulation S-K, Federated would post such information on its internet website.
The information required by this Item is contained in Federated’s Information Statement for the
2012
Annual Meeting of Shareholders under the captions Board of Directors and Election of Directors and Executive Compensation and is incorporated herein by reference.
14
The following table sets forth information regarding Federated’s share-based compensation as of
December 31, 2011
:
|
Category of share-based compensation plan
|
Number of securities to be issued upon exercise
of outstanding options
|
|
Weighted-average
exercise price of
outstanding options
|
Number of securities
remaining available for future issuance under equity compensation plans
|
|
|||||
|
Approved by shareholders
|
392,479
|
|
$
|
29.72
|
|
6,627,079
|
|
|||
|
Not approved by shareholders
|
0
|
|
0
|
|
0
|
|
||||
|
Total
|
392,479
|
|
$
|
29.72
|
|
6,627,079
|
|
|||
All other information required by this Item is contained in Federated’s Information Statement for the
2012
Annual Meeting of Shareholders under the caption Security Ownership and is incorporated herein by reference.
The information required by this Item is contained in Federated’s Information Statement for the
2012
Annual Meeting of Shareholders under the captions Transactions with Related Persons, Conflict of Interest Policies and Procedures and Board of Directors and Election of Directors and is incorporated herein by reference.
The information required by this Item is contained in Federated’s Information Statement for the
2012
Annual Meeting of Shareholders under the caption Independent Registered Public Accounting Firm and is incorporated herein by reference.
(a)(1) Financial Statements:
The information required by this Item is contained in Federated’s
2011
Annual Report to Shareholders under the captions Report of Ernst & Young LLP, Independent Registered Public Accounting Firm, on Consolidated Financial Statements, Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Changes in Equity, Consolidated Statements of Cash Flows and Notes to the Consolidated Financial Statements and is incorporated herein by reference.
(a)(2) Financial Statement Schedules:
All schedules for which provisions are made in the applicable accounting regulations of the Securities and Exchange Commission have been omitted because such schedules are not required under the related instructions, are inapplicable, or the required information is either incorporated herein by reference or included in the financial statements or notes thereto included in this Form 10-K.
(a)(3) Exhibits:
The following exhibits are filed or incorporated as part of this Form 10-K:
|
Exhibit
Number
|
|
Description
|
|
2.01
|
|
Agreement and Plan of Merger, dated as of February 20, 1998, between Federated Investors and Federated (incorporated by reference to Exhibit 2.01 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
2.02
|
|
Asset Purchase Agreement dated as of October 20, 2000, by and among Federated Investors, Inc., Edgemont Asset Management Corporation, Lawrence Auriana and Hans P. Utsch (incorporated by reference to Exhibit 2.1 of Amendment No. 2 to the Current Report on Form 8-K dated April 20, 2001, filed with the Securities and Exchange Commission on July 3, 2001 (File No. 001-14818))
|
|
2.03
|
|
Amendment No. 1, dated April 11, 2001, to the Asset Purchase Agreement dated as of October 20, 2000, by and among Federated Investors, Inc., Edgemont Asset Management Corporation, Lawrence Auriana and Hans P. Utsch (incorporated by reference to Exhibit 2.2 of Amendment No. 2 to the Current Report on Form 8-K dated April 20, 2001, filed with the Securities and Exchange Commission on July 3, 2001 (File No. 001-14818))
|
15
|
2.04
|
|
Sale, Purchase and Put/Call Agreement dated as of May 11, 2006, among Federated Investors, Inc., MDTA LLC, HBSS Acquisition Co. and the Selling Parties (incorporated by reference to Exhibit 2.1 to the June 30, 2006 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
2.05
|
|
Definitive Agreement between Federated Investors, Inc. and David W. Tice & Associates, LLC dated as of July 14, 2008 (incorporated by reference to Exhibit 2.1 to the September 30, 2008 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
2.06
|
|
Definitive Agreement between Federated Investors, Inc. and Clover Capital Management, Inc. dated as of September 12, 2008 (incorporated by reference to Exhibit 2.2 to the September 30, 2008 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
2.07
|
|
Amendment No. 1 dated as of December 1, 2008 to the Asset Purchase Agreement dated as of September 12, 2008, among Federated Investors, Inc. and Clover Capital Management Inc. (incorporated by reference to Exhibit 2.07 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 001-14818))
|
|
2.08
|
|
Definitive Agreement between Federated Investors, Inc. and SunTrust Banks, Inc. dated July 16, 2010 (incorporated by reference to Exhibit 2.1 to the September 30, 2010 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
3.01
|
|
Restated Articles of Incorporation of Federated (incorporated by reference to Exhibit 3.01 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
3.02
|
|
Restated By-Laws of Federated (incorporated by reference to Exhibit 3.02 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
4.01
|
|
Form of Class A Common Stock certificate (incorporated by reference to Exhibit 4.01 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
4.02
|
|
Form of Class B Common Stock certificate (incorporated by reference to Exhibit 4.02 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
4.05
|
|
Shareholder Rights Agreement, dated August 1, 1989, between Federated and The Standard Fire Insurance Company, as amended January 31, 1996 (incorporated by reference to Exhibit 4.06 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
9.01
|
|
Voting Shares Irrevocable Trust dated May 31, 1989 (incorporated by reference to Exhibit 9.01 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
10.14
|
|
Form of Bonus Stock Option Agreement (incorporated by reference to Exhibit 10.13 of the Form 10-K for the fiscal year ended December 31, 1998 (File No. 001-14818))
|
|
10.15
|
|
Federated Investors Tower Lease dated January 1, 1993 (incorporated by reference to Exhibit 10.03 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
10.16
|
|
Federated Investors Tower Lease dated February 1, 1994 (incorporated by reference to Exhibit 10.04 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
10.19
|
|
Employment Agreement, dated December 28, 1990, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.08 to the Registration Statement on Form S-1 (File No. 333-48405))
|
|
10.26
|
|
Purchase and Sale Agreement, dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. Company (incorporated by reference to Exhibit 10.26 of the Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 001-14818))
|
|
10.27
|
|
Amendment No. 2 to the Federated Investors Program Documents dated as of December 21, 2000, among Federated Investors, Inc., Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, Putnam Lovell Finance L.P., Putnam Lovell Securities Inc., and Bankers Trust Company (incorporated by reference to Exhibit 10.27 of the Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 001-14818))
|
|
10.34
|
|
Annual Stock Option Agreement dated April 24, 2002, between Federated Investors, Inc. and the independent directors (incorporated by reference to Exhibit 10.1 to the June 30, 2002 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.39
|
|
Federated Investors, Inc. Guaranty and Suretyship Agreement, dated as of September 30, 2003 (incorporated by reference to Exhibit 10.2 to the September 30, 2003 Quarterly Report on Form 10-Q (File No. 001-14818))
|
16
|
10.40
|
|
Amendment to Purchase and Sale Agreement, dated as of December 31, 2003, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. Company (incorporated by reference to Exhibit 10.40 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File No. 001-14818))
|
|
10.41
|
|
Amendments No. 6, 5, 4, 3 and 2 to Federated Investors Tower Lease dated as of December 31, 2003; November 10, 2000; June 30, 2000; February 10, 1999; and September 19, 1996 (incorporated by reference to Exhibit 10.41 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File No. 001-14818))
|
|
10.45
|
|
Agreement with Boston Financial Data Services (incorporated by reference to Exhibit 10.1 to the June 30, 2004 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.46
|
|
Agreement with Alliance Capital Management L.P., dated as of October 28, 2004 (incorporated by reference to Exhibit 10.46 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (File No. 001-14818))
|
|
10.47
|
|
Amendment dated December 31, 2004 to the Federated Investors Program Documents dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A. and Citicorp North America, Inc. (incorporated by reference to Exhibit 10.47 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (File No. 001-14818))
|
|
10.49
|
|
Form of Bonus Restricted Stock Program Award Agreement (incorporated by reference to Exhibit 10.1 to the March 31, 2005 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.50
|
|
Amendment dated June 29, 2005 to the definitive agreement between Federated Investors and Alliance Capital Management L.P. dated October 28, 2004 and filed as Exhibit 10.46 to Federated’s Annual Report on Form 10-K for the year ended December 31, 2004 (incorporated by reference to Exhibit 10.1 to the June 30, 2005 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.51
|
|
Amendment dated June 30, 2005 to the Federated Investors Program Documents dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A. and Citicorp North America, Inc. (incorporated by reference to Exhibit 10.2 to the June 30, 2005 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.52
|
|
Amendment dated June 30, 2005 to the Federated Program Master Agreement, dated as of October 24, 1997, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors Inc., Wilmington Trust Company, Putnam Lovell Finance, L.P., Putnam, Lovell NBF Securities Inc. and Deutsche Bank Trust Company Americas (incorporated by reference to Exhibit 10.3 to the June 30, 2005 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.55
|
|
Asset Purchase Agreement dated as of February 15, 2006, by and between Matrix Settlement & Clearing Services, LLC and Edgewood Services, Inc. (incorporated by reference to Exhibit 10.1 to the March 31, 2006 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.58
|
|
Federated Investors, Inc. Employee Stock Purchase Plan, amended as of October 26, 2006 (incorporated by reference to Exhibit 10.2 to the September 30, 2006 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.60
|
|
Amendment dated December 29, 2006 to the Federated Investors Program Documents dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A. and Citicorp North America, Inc. (incorporated by reference to Exhibit 10.60 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-14818))
|
|
10.61
|
|
Agreement, effective March 1, 2007, by and among Federated, Federated Investors Management Company, as transferor, Federated Securities Corp., as distributor, principal shareholder servicer and servicer, Federated Funding 1997-1, Inc., as Seller, Citibank, N.A., as purchaser, and Citicorp North America, Inc., as Program Agent (incorporated by reference to Exhibit 10.1 to the March 7, 2007 Report on Form 8-K (File No. 001-14818))
|
17
|
10.62
|
|
Definitive Agreement between Federated Investors, Inc. and Rochdale Investment Management, LLC dated as of April 20, 2007 (incorporated by reference to Exhibit 10.1 to the June 30, 2007 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.63
|
|
Federated Investors, Inc. Annual Incentive Plan, as amended (incorporated by reference to Exhibit 10.2 to the June 30, 2007 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.65
|
|
Form of Restricted Stock Program Award Agreement (incorporated by reference to Exhibit 10.65 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 001-14818))
|
|
10.66
|
|
Federated Investors, Inc. Stock Incentive Plan, amended as of April 22, 2010 (incorporated by reference to Exhibit 10.1 to the April 28, 2010 Report on Form 8-K (File No. 001-14818))
|
|
10.67
|
|
ISDA Master Agreement and schedule between Federated Investors, Inc. and PNC Bank National Association related to the $425,000,000 forward-starting interest rate swap, entered into on March 30, 2010 and effective April 9, 2010 (incorporated by reference to Exhibit 10.2 to the June 30, 2010 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.68
|
|
ISDA Master Agreement and schedule between Federated Investors, Inc. and Citibank, N.A. related to the $425,000,000 forward-starting interest rate swap, entered into on March 30, 2010 and effective April 9, 2010 (incorporated by reference to Exhibit 10.3 to the June 30, 2010 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
10.69
|
|
Employment Agreement, dated July 6, 1983, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.69 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (File No. 001-14818))
|
|
10.70
|
Federated Investors, Inc. Stock Incentive Plan, amended as of April 28, 2011 (incorporated by reference to Exhibit 10.1 to the March 31, 2011 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
|
10.71
|
The Amended and Restated Credit Agreement, dated as of June 10, 2011, by and among Federated Investors, Inc. and PNC Bank, National Association, PNC Bank Capital Markets LLC, Citigroup Global Markets, Inc. and Citibank, N.A. (incorporated by reference to Exhibit 10.1 to the June 30, 2011 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
|
10.72
|
Amendments No. 8 and 7 to Federated Investors Tower Lease dated as of September 9, 2011 and August 15, 2007 (incorporated by reference to Exhibit 10.1 to the September 30, 2011 Quarterly Report on Form 10-Q (File No. 001-14818))
|
|
|
13.01
|
|
Selected Portions of 2011 Annual Report to Shareholders (Filed herewith)
|
|
14.01
|
|
Federated Investors, Inc. Code of Ethics for Senior Financial Officers (incorporated by reference to Exhibit 14.01 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 (File No. 001-14818))
|
|
21.01
|
|
Subsidiaries of the Registrant (Filed herewith)
|
|
23.01
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (Filed herewith)
|
|
31.01
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
|
|
31.02
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
|
|
32.01
|
|
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
|
|
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
|
|
The following XBRL documents are furnished herewith:
XBRL Instance Document
XBRL Taxonomy Extension Schema Document
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
|
(b) Exhibits:
See (a)(3) above.
(c) Financial Statement Schedules:
See (a)(2) above.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
FEDERATED INVESTORS, INC.
|
||
|
By:
|
/s/ J. Christopher Donahue
|
|
|
J. Christopher Donahue
|
||
|
President and Chief Executive Officer
|
||
|
Date:
|
February 24, 2012
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
Signature
|
|
Title
|
|
Date
|
|
/s/ John F. Donahue
|
|
Chairman and Director
|
|
February 24, 2012
|
|
John F. Donahue
|
|
|
||
|
/s/ J. Christopher Donahue
|
|
President, Chief Executive Officer
|
|
February 24, 2012
|
|
J. Christopher Donahue
|
|
and Director (Principal Executive Officer)
|
|
|
|
/s/ Thomas R. Donahue
|
|
Chief Financial Officer
|
|
February 24, 2012
|
|
Thomas R. Donahue
|
|
|
||
|
/s/ Michael J. Farrell
|
|
Director
|
|
February 24, 2012
|
|
Michael J. Farrell
|
|
|
||
|
/s/ David M. Kelly
|
|
Director
|
|
February 24, 2012
|
|
David M. Kelly
|
|
|
||
|
/s/ Denis McAuley III
|
|
Principal Accounting Officer
|
|
February 24, 2012
|
|
Denis McAuley III
|
|
|||
|
/s/ John W. McGonigle
|
|
Director
|
|
February 24, 2012
|
|
John W. McGonigle
|
|
|||
|
/s/ Edward G. O’Connor
|
|
Director
|
|
February 24, 2012
|
|
Edward G. O’Connor
|
|
|||
19
EXHIBIT INDEX
|
Exhibit
Number
|
|
Description
|
|
13.01
|
|
Selected Portions of 2011 Annual Report to Shareholders
|
|
21.01
|
|
Subsidiaries of the Registrant
|
|
23.01
|
|
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
|
|
31.01
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31.02
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32.01
|
|
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101.INS
|
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
20
TABLE OF CONTENTS
Part IItem 1 BusinessItem 1A Risk FactorsItem 1B Unresolved Staff CommentsItem 2 PropertiesItem 3 Legal ProceedingsPart IIItem 5 Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6 Selected Financial DataItem 7 Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A Quantitative and Qualitative Disclosures About Market RiskItem 8 Financial Statements and Supplementary DataItem 9 Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A Controls and ProceduresItem 9B Other InformationPart IIIItem 10 Directors, Executive Officers and Corporate GovernanceItem 11 Executive CompensationItem 12 Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13 Certain Relationships and Related Transactions, and Director IndependenceItem 14 Principal Accountant Fees and ServicesPart IVItem 15 Exhibits, Financial Statement Schedules