x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Pennsylvania
|
|
25-1111467
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
Federated Investors Tower
Pittsburgh, Pennsylvania
|
|
15222-3779
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Large accelerated filer
|
x
|
|
|
|
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
|
|
|
|
Smaller reporting company
|
o
|
|
|
|
|
|
|
Emerging growth company
|
o
|
|
|
|||
|
Item 1.
|
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
Item 2.
|
||
|
Item 3.
|
||
|
Item 4.
|
||
|
|||
|
Item 1
|
||
|
Item 1A.
|
||
|
Item 2.
|
||
|
Item 6.
|
||
Special Note Regarding Forward-Looking Information
|
Consolidated Balance Sheets
|
|
|
|
||||
(dollars in thousands)
|
|
|
|
||||
(unaudited)
|
|
|
|
||||
|
March 31, 2019
|
|
December 31, 2018
|
||||
ASSETS
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and Cash Equivalents
|
$
|
134,485
|
|
|
$
|
156,832
|
|
Investments—Consolidated Investment Companies
|
15,593
|
|
|
22,798
|
|
||
Investments—Affiliates and Other
|
12,033
|
|
|
10,860
|
|
||
Receivables, net of reserve of $191 and $50, respectively
|
48,708
|
|
|
60,094
|
|
||
Receivables—Affiliates
|
48,092
|
|
|
34,985
|
|
||
Prepaid Expenses
|
17,177
|
|
|
16,513
|
|
||
Other Current Assets
|
2,263
|
|
|
2,019
|
|
||
Total Current Assets
|
278,351
|
|
|
304,101
|
|
||
Long-Term Assets
|
|
|
|
||||
Goodwill
|
813,920
|
|
|
809,608
|
|
||
Intangible Assets, net of accumulated amortization of $14,240 and $11,203, respectively
|
342,889
|
|
|
339,639
|
|
||
Property and Equipment, net of accumulated depreciation of $89,356 and $89,937, respectively
|
53,980
|
|
|
53,229
|
|
||
Right-of-Use Assets, net of accumulated amortization of $3,315
|
109,167
|
|
|
0
|
|
||
Other Long-Term Assets
|
36,869
|
|
|
37,106
|
|
||
Total Long-Term Assets
|
1,356,825
|
|
|
1,239,582
|
|
||
Total Assets
|
$
|
1,635,176
|
|
|
$
|
1,543,683
|
|
LIABILITIES
|
|
|
|
||||
Current Liabilities
|
|
|
|
||||
Accounts Payable and Accrued Expenses
|
$
|
61,381
|
|
|
$
|
56,110
|
|
Accrued Compensation and Benefits
|
40,781
|
|
|
113,865
|
|
||
Lease Liabilities
|
13,502
|
|
|
0
|
|
||
Other Current Liabilities
|
16,028
|
|
|
11,205
|
|
||
Total Current Liabilities
|
131,692
|
|
|
181,180
|
|
||
Long-Term Liabilities
|
|
|
|
||||
Long-Term Debt
|
130,000
|
|
|
135,000
|
|
||
Long-Term Deferred Tax Liability, net
|
153,603
|
|
|
148,164
|
|
||
Long-Term Lease Liabilities
|
116,813
|
|
|
0
|
|
||
Other Long-Term Liabilities
|
19,129
|
|
|
39,705
|
|
||
Total Long-Term Liabilities
|
419,545
|
|
|
322,869
|
|
||
Total Liabilities
|
551,237
|
|
|
504,049
|
|
||
Commitments and Contingencies (Note (15))
|
|
|
|
||||
TEMPORARY EQUITY
|
|
|
|
||||
Redeemable Noncontrolling Interest in Subsidiaries
|
186,200
|
|
|
182,513
|
|
||
PERMANENT EQUITY
|
|
|
|
||||
Federated Investors, Inc. Shareholders' Equity
|
|
|
|
||||
Common Stock:
|
|
|
|
||||
Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding
|
189
|
|
|
189
|
|
||
Class B, No Par Value, 900,000,000 Shares Authorized, 109,505,456 Shares Issued
|
374,173
|
|
|
367,063
|
|
||
Retained Earnings
|
807,322
|
|
|
791,823
|
|
||
Treasury Stock, at Cost, 8,264,583 and 8,702,074 Shares Class B Common Stock, respectively
|
(276,992
|
)
|
|
(287,337
|
)
|
||
Accumulated Other Comprehensive Income (Loss), net of tax
|
(6,953
|
)
|
|
(14,617
|
)
|
||
Total Permanent Equity
|
897,739
|
|
|
857,121
|
|
||
Total Liabilities, Temporary Equity and Permanent Equity
|
$
|
1,635,176
|
|
|
$
|
1,543,683
|
|
Consolidated Statements of Income
|
|||||||||
(dollars in thousands, except per share data)
|
|||||||||
(unaudited)
|
|||||||||
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31,
|
||||||
|
|
|
2019
|
|
2018
|
||||
Revenue
|
|
|
|
|
|
||||
Investment Advisory Fees, net—Affiliates
|
|
|
$
|
155,607
|
|
|
$
|
135,231
|
|
Investment Advisory Fees, net—Other
|
|
|
55,592
|
|
|
39,035
|
|
||
Administrative Service Fees, net—Affiliates
|
|
|
54,135
|
|
|
49,023
|
|
||
Other Service Fees, net—Affiliates
|
|
|
38,610
|
|
|
40,563
|
|
||
Other Service Fees, net—Other
|
|
|
3,106
|
|
|
0
|
|
||
Total Revenue
|
|
|
307,050
|
|
|
263,852
|
|
||
Operating Expenses
|
|
|
|
|
|
||||
Compensation and Related
|
|
|
111,216
|
|
|
78,374
|
|
||
Distribution
|
|
|
77,632
|
|
|
72,498
|
|
||
Systems and Communications
|
|
|
12,794
|
|
|
8,433
|
|
||
Office and Occupancy
|
|
|
11,362
|
|
|
7,541
|
|
||
Professional Service Fees
|
|
|
10,486
|
|
|
9,631
|
|
||
Advertising and Promotional
|
|
|
4,190
|
|
|
3,228
|
|
||
Travel and Related
|
|
|
3,848
|
|
|
2,821
|
|
||
Other
|
|
|
4,633
|
|
|
1,655
|
|
||
Total Operating Expenses
|
|
|
236,161
|
|
|
184,181
|
|
||
Operating Income
|
|
|
70,889
|
|
|
79,671
|
|
||
Nonoperating Income (Expenses)
|
|
|
|
|
|
||||
Investment Income, net
|
|
|
1,030
|
|
|
1,900
|
|
||
Gain (Loss) on Securities, net
|
|
|
1,679
|
|
|
(1,182
|
)
|
||
Debt Expense
|
|
|
(1,400
|
)
|
|
(1,330
|
)
|
||
Other, net
|
|
|
324
|
|
|
(143
|
)
|
||
Total Nonoperating Income (Expenses), net
|
|
|
1,633
|
|
|
(755
|
)
|
||
Income Before Income Taxes
|
|
|
72,522
|
|
|
78,916
|
|
||
Income Tax Provision
|
|
|
17,911
|
|
|
18,910
|
|
||
Net Income Including the Noncontrolling Interests in Subsidiaries
|
|
|
54,611
|
|
|
60,006
|
|
||
Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries
|
|
|
65
|
|
|
(325
|
)
|
||
Net Income
|
|
|
$
|
54,546
|
|
|
$
|
60,331
|
|
Amounts Attributable to Federated Investors, Inc.
|
|
|
|
|
|||||
Earnings Per Common Share—Basic and Diluted
|
|
|
$
|
0.54
|
|
|
$
|
0.60
|
|
Cash Dividends Per Share
|
|
|
$
|
0.27
|
|
|
$
|
0.25
|
|
Consolidated Statements of Comprehensive Income
|
|||||||||
(dollars in thousands)
|
|||||||||
(unaudited)
|
|||||||||
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31,
|
||||||
|
|
|
2019
|
|
2018
|
||||
Net Income Including the Noncontrolling Interests in Subsidiaries
|
|
|
$
|
54,611
|
|
|
$
|
60,006
|
|
|
|
|
|
|
|
||||
Other Comprehensive Income (Loss), net of tax
|
|
|
|
|
|
||||
Permanent Equity
|
|
|
|
|
|
||||
Foreign Currency Translation Gain (Loss)
|
|
|
7,664
|
|
|
243
|
|
||
Reclassification Adjustment Related to Foreign Currency Items
|
|
|
0
|
|
|
(191
|
)
|
||
Reclassification Adjustment Related to Equity Securities
|
|
|
0
|
|
|
(29
|
)
|
||
Temporary Equity
|
|
|
|
|
|
||||
Foreign Currency Translation Gain (Loss)
|
|
|
3,714
|
|
|
0
|
|
||
Other Comprehensive Income (Loss), net of tax
|
|
|
11,378
|
|
|
23
|
|
||
Comprehensive Income Including the Noncontrolling Interests in Subsidiaries
|
|
|
65,989
|
|
|
60,029
|
|
||
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interest in Subsidiaries
|
|
|
3,779
|
|
|
(325
|
)
|
||
Comprehensive Income Attributable to Federated Investors, Inc.
|
|
|
$
|
62,210
|
|
|
$
|
60,354
|
|
Consolidated Statements of Changes in Equity
|
||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||
|
|
Federated Investors, Inc. Shareholders' Equity
|
|
|
|
|
||||||||||||||||||
|
|
Common
Stock |
|
Retained
Earnings |
|
Treasury
Stock |
|
Accumulated
Other Comprehensive Income (Loss), net of tax |
|
Total
Permanent Equity |
|
Redeemable
Noncontrolling Interest in Subsidiaries/ Temporary Equity |
||||||||||||
Balance at December 31, 2017
|
|
$
|
343,378
|
|
|
$
|
697,359
|
|
|
$
|
(278,732
|
)
|
|
$
|
(790
|
)
|
|
$
|
761,215
|
|
|
$
|
30,163
|
|
Adoption of New Accounting Pronouncements
|
|
0
|
|
|
125
|
|
|
0
|
|
|
(254
|
)
|
|
(129
|
)
|
|
0
|
|
||||||
Net Income
|
|
0
|
|
|
60,331
|
|
|
0
|
|
|
0
|
|
|
60,331
|
|
|
(325
|
)
|
||||||
Other Comprehensive Income (Loss), net of tax
|
|
0
|
|
|
0
|
|
|
0
|
|
|
277
|
|
|
277
|
|
|
0
|
|
||||||
Subscriptions—Redeemable Noncontrolling Interest Holders
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
500
|
|
||||||
Stock Award Activity
|
|
6,966
|
|
|
(10,721
|
)
|
|
10,822
|
|
|
0
|
|
|
7,067
|
|
|
0
|
|
||||||
Dividends Declared
|
|
0
|
|
|
(25,265
|
)
|
|
0
|
|
|
0
|
|
|
(25,265
|
)
|
|
0
|
|
||||||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(1,684
|
)
|
||||||
Purchase of Treasury Stock
|
|
0
|
|
|
0
|
|
|
(3,876
|
)
|
|
0
|
|
|
(3,876
|
)
|
|
0
|
|
||||||
Balance at March 31, 2018
|
|
$
|
350,344
|
|
|
$
|
721,829
|
|
|
$
|
(271,786
|
)
|
|
$
|
(767
|
)
|
|
$
|
799,620
|
|
|
$
|
28,654
|
|
Balance at December 31, 2018
|
|
$
|
367,252
|
|
|
$
|
791,823
|
|
|
$
|
(287,337
|
)
|
|
$
|
(14,617
|
)
|
|
$
|
857,121
|
|
|
$
|
182,513
|
|
Net Income
|
|
0
|
|
|
54,546
|
|
|
0
|
|
|
0
|
|
|
54,546
|
|
|
65
|
|
||||||
Other Comprehensive Income (Loss), net of tax
|
|
0
|
|
|
0
|
|
|
0
|
|
|
7,664
|
|
|
7,664
|
|
|
3,714
|
|
||||||
Subscriptions—Redeemable Noncontrolling Interest Holders
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
2,168
|
|
||||||
Stock Award Activity
|
|
7,110
|
|
|
(11,830
|
)
|
|
11,830
|
|
|
0
|
|
|
7,110
|
|
|
0
|
|
||||||
Dividends Declared
|
|
0
|
|
|
(27,217
|
)
|
|
0
|
|
|
0
|
|
|
(27,217
|
)
|
|
0
|
|
||||||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
(2,260
|
)
|
||||||
Purchase of Treasury Stock
|
|
0
|
|
|
0
|
|
|
(1,485
|
)
|
|
0
|
|
|
(1,485
|
)
|
|
0
|
|
||||||
Balance at March 31, 2019
|
|
$
|
374,362
|
|
|
$
|
807,322
|
|
|
$
|
(276,992
|
)
|
|
$
|
(6,953
|
)
|
|
$
|
897,739
|
|
|
$
|
186,200
|
|
Consolidated Statements of Cash Flows
|
||||||||
(dollars in thousands)
|
||||||||
(unaudited)
|
||||||||
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Operating Activities
|
|
|
|
|
||||
Net Income Including the Noncontrolling Interests in Subsidiaries
|
|
$
|
54,611
|
|
|
$
|
60,006
|
|
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities
|
|
|
|
|
||||
Amortization of Deferred Sales Commissions
|
|
592
|
|
|
839
|
|
||
Depreciation and Other Amortization
|
|
7,221
|
|
|
2,638
|
|
||
Share-Based Compensation Expense
|
|
7,110
|
|
|
6,967
|
|
||
(Gain) Loss on Disposal of Assets
|
|
492
|
|
|
(723
|
)
|
||
Provision (Benefit) for Deferred Income Taxes
|
|
4,696
|
|
|
4,318
|
|
||
Net Unrealized (Gain) Loss on Investments
|
|
(2,162
|
)
|
|
1,905
|
|
||
Net Sales of Investments—Consolidated Investment Companies
|
|
8,136
|
|
|
500
|
|
||
Other Changes in Assets and Liabilities:
|
|
|
|
|
||||
(Increase) Decrease in Receivables, net
|
|
(575
|
)
|
|
3,424
|
|
||
(Increase) Decrease in Prepaid Expenses and Other Assets
|
|
2,693
|
|
|
818
|
|
||
Increase (Decrease) in Accounts Payable and Accrued Expenses
|
|
(72,337
|
)
|
|
(43,666
|
)
|
||
Increase (Decrease) in Other Liabilities
|
|
6,281
|
|
|
11,070
|
|
||
Net Cash Provided (Used) by Operating Activities
|
|
16,758
|
|
|
48,096
|
|
||
Investing Activities
|
|
|
|
|
||||
Purchases of Investments—Affiliates and Other
|
|
(1,566
|
)
|
|
(1,555
|
)
|
||
Proceeds from Redemptions of Investments—Affiliates and Other
|
|
1,185
|
|
|
1,572
|
|
||
Cash Paid for Property and Equipment
|
|
(5,060
|
)
|
|
(3,106
|
)
|
||
Net Cash Provided (Used) by Investing Activities
|
|
(5,441
|
)
|
|
(3,089
|
)
|
||
Financing Activities
|
|
|
|
|
||||
Dividends Paid
|
|
(27,217
|
)
|
|
(25,265
|
)
|
||
Purchases of Treasury Stock
|
|
(1,485
|
)
|
|
(4,024
|
)
|
||
Distributions to Noncontrolling Interest in Subsidiaries
|
|
(2,260
|
)
|
|
(1,684
|
)
|
||
Contributions from Noncontrolling Interest in Subsidiaries
|
|
43
|
|
|
500
|
|
||
Proceeds from Shareholders for Share-Based Compensation
|
|
0
|
|
|
101
|
|
||
Proceeds from New Borrowings
|
|
8,800
|
|
|
0
|
|
||
Payments on Debt
|
|
(13,800
|
)
|
|
(5,000
|
)
|
||
Other Financing Activities
|
|
0
|
|
|
(228
|
)
|
||
Net Cash Provided (Used) by Financing Activities
|
|
(35,919
|
)
|
|
(35,600
|
)
|
||
Effect of Exchange Rates on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
|
|
2,264
|
|
|
0
|
|
||
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents
|
|
(22,338
|
)
|
|
9,407
|
|
||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period
|
|
157,426
|
|
|
316,809
|
|
||
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period
|
|
135,088
|
|
|
326,216
|
|
||
Less: Restricted Cash and Restricted Cash Equivalents Recorded in Other Long-Term Assets
|
|
603
|
|
|
607
|
|
||
Cash and Cash Equivalents
|
|
$
|
134,485
|
|
|
$
|
325,609
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
(in millions)
|
|
|
||
Cash and Cash Equivalents
|
|
$
|
175.8
|
|
Other Current Assets
1
|
|
53.7
|
|
|
Goodwill
2
|
|
155.9
|
|
|
Intangible Assets
3
|
|
276.2
|
|
|
Other Long-Term Assets
4
|
|
35.1
|
|
|
Less: Long-Term Deferred Tax Liability, net
|
|
(20.5
|
)
|
|
Less: Liabilities Acquired
5
|
|
(162.3
|
)
|
|
Less: Fair Value of Redeemable Noncontrolling Interest in Subsidiary
6
|
|
(169.6
|
)
|
|
Total Purchase Price Consideration
|
|
$
|
344.3
|
|
1
|
Includes
$31.9 million
of receivables, substantially all of which has been collected as of
March 31, 2019
.
|
2
|
The goodwill recognized is attributable to enhanced revenue and AUM growth opportunities from future investors and the assembled workforce of Hermes. In this instance, goodwill is not deductible for tax purposes.
|
3
|
Includes
$93.6 million
for customer relationships with a weighted-average useful life of
8.4 years
,
$132.7 million
for indefinite-lived renewable investment advisory contracts and
$49.9 million
for an indefinite-lived trade name, all of which are recorded in Intangible Assets, net on the
Consolidated Balance Sheets
.
|
4
|
Includes
$11.2 million
of Property and Equipment, net.
|
5
|
Includes
$130.3 million
related to
Accrued Compensation and Benefits
.
|
6
|
The fair value of the noncontrolling interest was determined utilizing the market approach and consideration of the overall business enterprise value.
|
|
|
|
|
Three Months Ended
|
||
(in millions)
|
|
|
|
March 31, 2018
|
||
Revenue
|
|
|
|
$
|
307.4
|
|
Net Income
|
|
|
|
$
|
60.2
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
Equity
|
|
$
|
123,634
|
|
|
$
|
103,609
|
|
Money Market
|
|
117,307
|
|
|
104,483
|
|
||
Fixed-Income
|
|
43,677
|
|
|
45,048
|
|
||
Other
1
|
|
22,432
|
|
|
10,712
|
|
||
Total Revenue
|
|
$
|
307,050
|
|
|
$
|
263,852
|
|
1
|
Includes Alternative / Private Markets (including but not limited to private equity, real estate and infrastructure), Multi-Asset and, beginning in the third quarter of 2018,
stewardship services
revenue.
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands)
|
|
2019
|
|
2018
|
||||
Asset Management
1
|
|
$
|
211,199
|
|
|
$
|
174,266
|
|
Administrative Services
|
|
54,135
|
|
|
49,023
|
|
||
Distribution
2
|
|
36,246
|
|
|
38,057
|
|
||
Other
3
|
|
5,470
|
|
|
2,506
|
|
||
Total Revenue
|
|
$
|
307,050
|
|
|
$
|
263,852
|
|
1
|
The performance obligation may include administrative, distribution and other services recorded as a single asset management fee under
Topic 606
, as it is part of a unitary fee arrangement with a single performance obligation.
|
2
|
The performance obligation is satisfied at a point in time and may include contingent deferred sales charges and upfront commissions. A portion of this revenue relates to a performance obligation that has been satisfied in a prior period.
|
3
|
Includes shareholder service fees and, beginning in the third quarter of 2018,
stewardship services
revenue.
|
1
|
This represents revenue earned by non-U.S. domiciled subsidiaries.
|
1
|
Includes
stewardship services
revenue.
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
|
Three Months Ended
|
||||
|
|
March 31,
|
||||
|
|
2019
|
|
2018
|
||
Federated Strategic Value Dividend strategy
1
|
|
11
|
%
|
|
17
|
%
|
Federated Government Obligations Fund
|
|
9
|
%
|
|
10
|
%
|
Federated Kaufmann Mid-Cap Growth strategy
2
|
|
9
|
%
|
|
10
|
%
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
(in millions)
|
|
March 31, 2019
|
|
|
December 31, 2018
|
|
||
Investments—Consolidated Investment Companies
|
|
$
|
13.9
|
|
|
$
|
21.2
|
|
Receivables
|
|
0.3
|
|
|
0.4
|
|
||
Less: Liabilities
|
|
0.4
|
|
|
0.3
|
|
||
Less: Redeemable Noncontrolling Interest in Subsidiaries
|
|
9.6
|
|
|
11.2
|
|
||
Federated's Net Interest in Federated Fund VIEs
|
|
$
|
4.2
|
|
|
$
|
10.1
|
|
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31,
|
||||||
(in thousands)
|
|
|
2019
|
|
2018
|
||||
Investments—Consolidated Investment Companies
|
|
|
|
|
|
||||
Unrealized Gains (Losses)
|
|
|
$
|
1,285
|
|
|
$
|
(1,690
|
)
|
Realized Gains
1
|
|
|
107
|
|
|
824
|
|
||
Realized Losses
1
|
|
|
(568
|
)
|
|
(175
|
)
|
||
Net Gains (Losses) on Investments—Consolidated Investment Companies
|
|
|
824
|
|
|
(1,041
|
)
|
||
Investments—Affiliates and Other
|
|
|
|
|
|
||||
Unrealized Gains (Losses) Recognized on Securities Still Held
|
|
|
877
|
|
|
(215
|
)
|
||
Net Realized Gains (Losses) Recognized on Securities Sold
1
|
|
|
(22
|
)
|
|
74
|
|
||
Net Gains (Losses) on Investments—Affiliates and Other
|
|
|
855
|
|
|
(141
|
)
|
||
Gain (Loss) on Securities, net
|
|
|
$
|
1,679
|
|
|
$
|
(1,182
|
)
|
1
|
Realized gains and losses are computed on a specific-identification basis.
|
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
NAV Practical Expedient
|
|
Total
|
||||||||||
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and Cash Equivalents
|
|
$
|
134,485
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
134,485
|
|
Investments—Consolidated Investment Companies
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity Securities
|
|
1,018
|
|
|
721
|
|
|
0
|
|
|
0
|
|
|
1,739
|
|
|||||
Debt Securities
|
|
0
|
|
|
13,854
|
|
|
0
|
|
|
0
|
|
|
13,854
|
|
|||||
Investments—Affiliates and Other
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity Securities
|
|
7,697
|
|
|
120
|
|
|
41
|
|
|
347
|
|
|
8,205
|
|
|||||
Debt Securities
|
|
0
|
|
|
3,527
|
|
|
301
|
|
|
0
|
|
|
3,828
|
|
|||||
Other
|
|
627
|
|
|
0
|
|
|
70
|
|
|
0
|
|
|
697
|
|
|||||
Total Financial Assets
|
|
$
|
143,827
|
|
|
$
|
18,222
|
|
|
$
|
412
|
|
|
$
|
347
|
|
|
$
|
162,808
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Financial Liabilities
1
|
|
$
|
14
|
|
|
$
|
782
|
|
|
$
|
571
|
|
|
$
|
0
|
|
|
$
|
1,367
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and Cash Equivalents
|
|
$
|
156,832
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
156,832
|
|
Investments—Consolidated Investment Companies
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity Securities
|
|
1,269
|
|
|
633
|
|
|
0
|
|
|
0
|
|
|
1,902
|
|
|||||
Debt Securities
|
|
0
|
|
|
20,896
|
|
|
0
|
|
|
0
|
|
|
20,896
|
|
|||||
Investments—Affiliates and Other
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Equity Securities
|
|
6,684
|
|
|
403
|
|
|
38
|
|
|
279
|
|
|
7,404
|
|
|||||
Debt Securities
|
|
0
|
|
|
3,456
|
|
|
0
|
|
|
0
|
|
|
3,456
|
|
|||||
Other
|
|
597
|
|
|
0
|
|
|
70
|
|
|
0
|
|
|
667
|
|
|||||
Total Financial Assets
|
|
$
|
165,382
|
|
|
$
|
25,388
|
|
|
$
|
108
|
|
|
$
|
279
|
|
|
$
|
191,157
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Financial Liabilities
1
|
|
$
|
53
|
|
|
$
|
3,852
|
|
|
$
|
385
|
|
|
$
|
0
|
|
|
$
|
4,290
|
|
1
|
Amounts primarily consist of derivative liabilities and acquisition-related future contingent consideration liabilities.
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
|
|
|
Three Months Ended
|
||||
|
|
|
March 31,
|
||||
|
|
|
2019
|
|
2018
|
||
Class B Shares
|
|
|
|
|
|
||
Beginning Balance
|
|
|
100,803,382
|
|
|
101,100,453
|
|
Stock Award Activity
|
|
|
498,324
|
|
|
454,769
|
|
Purchase of Treasury Stock
|
|
|
(60,833
|
)
|
|
(118,645
|
)
|
Ending Balance
|
|
|
101,240,873
|
|
|
101,436,577
|
|
|
|
|
|
|
|
||
Treasury Shares
|
|
|
|
|
|
||
Beginning Balance
|
|
|
8,702,074
|
|
|
8,405,003
|
|
Stock Award Activity
|
|
|
(498,324
|
)
|
|
(454,769
|
)
|
Purchase of Treasury Stock
|
|
|
60,833
|
|
|
118,645
|
|
Ending Balance
|
|
|
8,264,583
|
|
|
8,068,879
|
|
|
|
Three Months Ended
|
||||||
|
|
March 31,
|
||||||
(in thousands, except per share data)
|
|
2019
|
|
2018
|
||||
Numerator
|
|
|
|
|
||||
Net Income Attributable to Federated Investors, Inc.
|
|
$
|
54,546
|
|
|
$
|
60,331
|
|
Less: Total Net Income Available to Participating Unvested Restricted Shareholders
1
|
|
(2,135
|
)
|
|
(2,375
|
)
|
||
Total Net Income Attributable to Federated Common Stock - Basic
|
|
$
|
52,411
|
|
|
$
|
57,956
|
|
Less: Total Net Income Available to Unvested Restricted Shareholders of a Nonpublic Consolidated Subsidiary
|
|
(33
|
)
|
|
0
|
|
||
Total Net Income Attributable to Federated Common Stock - Diluted
|
|
$
|
52,378
|
|
|
$
|
57,956
|
|
Denominator
|
|
|
|
|
||||
Basic Weighted-Average Federated Common Stock
2
|
|
96,994
|
|
|
97,187
|
|
||
Dilutive Potential Shares from Stock Options
|
|
1
|
|
|
2
|
|
||
Diluted Weighted-Average Federated Common Stock
2
|
|
96,995
|
|
|
97,189
|
|
||
Earnings Per Share
|
|
|
|
|
||||
Net Income Attributable to Federated Common Stock – Basic and Diluted
2
|
|
$
|
0.54
|
|
|
$
|
0.60
|
|
1
|
Includes dividends paid on unvested restricted Federated Class B Common shares and their proportionate share of undistributed earnings attributable to Federated shareholders.
|
2
|
Federated Common Stock excludes unvested restricted stock which are deemed participating securities in accordance with the two-class method of computing earnings per share.
|
|
||
Notes to the Consolidated Financial Statements (continued)
|
||
(unaudited)
|
|
|
Weighted-average remaining lease term
(in years)
|
|
9.2
|
|
|
Weighted-average discount rate (IBR)
|
|
3.79
|
%
|
|
Cash paid for the amounts included in the measurement of lease liabilities
(in millions)
|
|
$
|
4.7
|
|
(in thousands)
|
Unrealized
Gain (Loss) on Equity Securities
|
|
|
Foreign Currency
Translation Gain (Loss)
|
|
|
Total
|
|
||||
Balance at December 31, 2017
|
|
$
|
29
|
|
|
$
|
(819
|
)
|
|
$
|
(790
|
)
|
Other Comprehensive Income (Loss) Before Reclassifications and Tax
|
|
0
|
|
|
243
|
|
|
243
|
|
|||
Reclassification Adjustment, before Tax
1
|
|
(80
|
)
|
|
(242
|
)
|
|
(322
|
)
|
|||
Tax Impact
1
|
|
51
|
|
|
51
|
|
|
102
|
|
|||
Net Current-Period Other Comprehensive Income (Loss)
|
|
(29
|
)
|
|
52
|
|
|
23
|
|
|||
Balance at March 31, 2018
|
|
$
|
0
|
|
|
$
|
(767
|
)
|
|
$
|
(767
|
)
|
|
|
|
|
|
|
|
||||||
Balance at December 31, 2018
|
|
$
|
0
|
|
|
$
|
(14,617
|
)
|
|
$
|
(14,617
|
)
|
Other Comprehensive Income (Loss)
|
|
0
|
|
|
7,664
|
|
|
7,664
|
|
|||
Net Current-Period Other Comprehensive Income (Loss)
|
|
0
|
|
|
7,664
|
|
|
7,664
|
|
|||
Balance at March 31, 2019
|
|
$
|
0
|
|
|
$
|
(6,953
|
)
|
|
$
|
(6,953
|
)
|
1
|
Amount represents the reclassification from
Accumulated Other Comprehensive Income (Loss), net of tax
to
Retained Earnings
on the Consolidated Balance Sheets as a result of the adoption of ASU 2016-01 and ASU 2018-02.
|
Part I, Item 2. Management's Discussion and Analysis
|
|
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
On March 20, 2019, the SEC proposed rules and amendments to permit registered closed-end funds and business development companies to use the registration, offering and communications reforms the SEC had previously adopted for operating companies under the 1933 Act and to further harmonize the disclosure and regulatory framework for these funds with that of operating companies. The proposed rules and amendments implement provisions of the Economic Growth, Regulatory Relief, and Consumer Protection Act (the "CEF Act") and Small Business Credit Availability Act (the "BDC Act"), and would generally provide eligible closed-end funds and business development companies with flexibility to follow more lenient securities offering rules currently available to traditional public operating companies. The proposed rules and amendments may benefit certain types of business development companies or closed-end funds, such as exchange listed closed-end funds, but would impose additional regulatory requirements on other types of funds, such as continuously offered closed-end funds (including interval and tender offer closed-end funds). Federated offers exchange listed and continuously offered closed-end funds. The public comment period on the proposed rules and amendments ends on June 9, 2019.
|
•
|
On February 19, 2019, the SEC proposed a rule and related amendments under the 1933 Act that would enable all issuers, including registered investment companies, to engage in test-the-waters communications with certain institutional investors regarding a contemplated registered securities offering prior to, or following, the filing of a registration statement related to such offering. These communications would be exempt from restrictions imposed by Section 5 of the 1933 Act on written and oral offers prior to or after filing a registration statement and would be limited to qualified institutional buyers and institutional accredited investors. The proposed rule would be non-exclusive and an issuer could rely on other 1933 Act communications rules or exemptions when determining how, when, and what to communicate related to a contemplated securities offering. Under the proposed rule, there would be no filing or legend requirements; the "test-the-waters
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
SEC proposed rule 12d1-4, and amendments, under the 1940 Act on December 19, 2018, which are designed to streamline and enhance the regulatory framework for funds that invest in other funds (or "fund of funds" arrangements). At the same time, the SEC rescinded rule 12d1-2 under the 1940 Act and most related exemptive orders granted by the SEC to provide relief from Sections 12(d)(1)(A), (B), (C) and (G) of the 1940 Act. The SEC also proposed related amendments to rule 12d-1 under the 1940 Act and Form N-CEN. The proposed rule would, under certain specified conditions, permit a fund to acquire shares of another fund in excess of the limits of section 12(d)(1) of the 1940 Act without obtaining an exemptive order from the SEC. Specifically, proposed rule 12d1-4 would: (1) prohibit an acquiring fund, except one that is part of the same group of investment companies as the acquired fund or one that has a sub-advisor that acts as advisor to the acquired fund, from controlling an acquired fund and requires an applicable acquiring fund that holds more than 3% of an acquired fund's outstanding voting securities to vote those securities in a prescribed manner in order to minimize influence over the acquired fund; (2) prohibit an acquiring fund that acquires more than 3% of an acquired fund's outstanding voting securities from redeeming more than 3% of the acquired fund's total outstanding securities in any 30-day period; (3) impose conditions designed to prevent duplicative and excessive fees in fund of funds arrangements by requiring an evaluation of aggregate fees associated with the investment in the acquired fund and the complexity of the fund of funds arrangement; and (4) prohibit funds from creating three-tier fund of fund structures, except in certain limited circumstances. Rule 12d1-2, which is proposed to be rescinded, permits funds that primarily invest in funds within the same group of investment companies to invest in unaffiliated funds and certain non-fund assets. The proposed amendments to rule 12d1-1 would allow funds that primarily invest in funds within the same group of investment companies to continue to invest in unaffiliated money market funds. Finally, the amendments to Form N-CEN would require funds to report whether they relied on rule 12d1-4 or the statutory exception in Section 12(d)(1)(G) of the 1940 Act during the applicable reporting period. The public comment period on the proposed rule ends May 2, 2019. Federated is analyzing the potential impact that the proposed rule, if adopted as proposed, would have on Federated's fund of fund arrangements and relevant products and, as of March 31, 2019, Federated is unable to conclusively determine the impact on its business, results of operations, financial condition and/or cash flows.
|
•
|
The SEC adopted a new rule under the 1933 Act on November 30, 2018, to establish, subject to certain conditions, a non-exclusive safe harbor for an unaffiliated broker-dealer participating in a securities offering of a covered investment fund to publish or distribute a covered investment fund research report. The rule was first proposed by the SEC on May 23, 2018. Under the new rule, a broker-dealer's publication or distribution of research reports that satisfy the conditions in the rule would be deemed, for purposes of Sections 2(a)(10) and 5(c) of the 1933 Act, not to constitute an offer for sale or offer to sell a covered investment fund's securities. The new rule generally became effective on January 14, 2019.
|
•
|
Three new SEC proposals were issued on April 18, 2018, including Regulation Best Interest, clarifications on an investment advisor's fiduciary duty and a short client or customer relationship summary report (Form CRS). In a December 6, 2018 speech, SEC Chairman Jay Clayton indicated that a key priority for the SEC in 2019 is to finalize Regulation Best Interest, which, if adopted as proposed, would require broker-dealers to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities and to put the retail customer's interests ahead of the broker-dealer's interests when making recommendations. Moreover, until Regulation Best Interest is finalized, it remains uncertain whether, and to what degree, broker-dealers or other intermediaries will roll-back or continue changes made prior to mid-2018 when the Department of Labor's rule imposing a modified fiduciary standard for retirement plan advisors (DOL Fiduciary Rule) was vacated in its entirety. These changes included, for example, eliminating commission-based compensation arrangements, reducing the number of mutual funds offered on their platforms or requiring "clean shares" or other product fee structure changes based on SEC guidance. It is also uncertain to what degree a final Regulation Best Interest may impact the types of products that intermediaries, such as broker-dealers, may offer to their customers, and to what degree, if any, such an impact may have on demand for Federated's products and services or how they are offered and sold.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
An SEC request for comment was issued on June 5, 2018 seeking public input on enhancing mutual fund, ETF and other investment fund disclosures to improve the investor experience and help investors to make informed investment decisions. Among other matters, it also solicits feedback on investor preferences for means of delivery and how to make better use of 21st century technology, including how to make disclosures more interactive and personalized. The public comment period ended on October 31, 2018.
|
•
|
Rule 30e-3 under the 1940 Act (Rule 30e-3), adopted by the SEC on June 6, 2018, creates an optional "notice and access" method for delivering shareholder reports through website posting in lieu of mailing. Subject to certain accessibility, quarterly holdings availability, formatting, notice, print upon request, and paper copy election conditions in the rule, the rule will allow funds to deliver their shareholder reports by making them publicly accessible on a website, free of charge, and sending investors a paper notice of each report's availability by mail. Federated intends to rely on Rule 30e-3 and the Federated Funds registered under the 1940 Act began including the required notice to shareholders in annual reports to fund shareholders and fund prospectuses beginning January 1, 2019.
|
•
|
In light of the adoption of Rule 30e-3, the SEC also issued on June 5, 2018, a request for public comment and additional data on the current processing fee framework intermediaries charge for forwarding fund materials, such as shareholder reports and prospectuses, to beneficial shareholders under current rules of the New York Stock Exchange (NYSE) and other self-regulatory organizations, to better understand the potential effects on funds and their investors. The public comment period ended on October 31, 2018.
|
•
|
The SEC adopted amendments on June 28, 2018 to the public liquidity-related disclosure requirements for open-end mutual funds to assist in providing investors with accessible and useful information about the liquidity risk management practices of the funds in which they invest. Under the amendments, funds will be required to discuss in their annual or semi-annual shareholder reports the operation and effectiveness of their liquidity risk management program, replacing a pending requirement that funds publicly provide the aggregate liquidity classification profile of their portfolios on Form N-PORT. This rule became effective on September 10, 2018, with a compliance date for the Form N-PORT amendments of June 1, 2019, and a compliance date for the shareholder report disclosure requirements of December 1, 2019, for larger fund complexes, such as Federated's SEC-registered Federated Funds.
|
•
|
The SEC proposed rule 6c-11 under the 1940 Act (Rule 6c-11) on June 28, 2018, which would (1) permit ETFs that satisfy certain conditions to operate without the expense and delay of obtaining an exemptive order; (2) impose certain enhanced disclosure requirements regarding ETF trading costs; and (3) amend Form N-CEN to require ETFs to (a) report whether they rely on Rule 6c-11 and (b) report additional information to allow the SEC to confirm compliance with Rule 6c-11. The public comment period on the proposed rule ended on October 1, 2018.
|
•
|
The SEC issued on June 28, 2018, a final rule that requires, among other things, the use of the Inline eXtensible Business Reporting Language (iXBRL) format for the submission of operating company financial statement information and fund risk/return summary information. The new rule became effective on September 17, 2018, and must be complied with by large mutual fund complexes, such as the Federated Funds, beginning September 17, 2020, and for public companies, such as Federated, with respect to fiscal periods ending on or after June 15, 2019.
|
•
|
While the SEC's proposed derivatives rule, which was issued on December 11, 2015 and would increase the regulation of the use of derivatives by investment companies, remains on the SEC's 2019 regulatory agenda, the SEC is considering issuing a new proposed derivatives rule later in 2019, which signals that this proposed rule will be modified from the SEC's original proposal. Among other recommendations on derivatives regulation, the Treasury Asset Management Report recommended that the SEC consider a derivatives rule that would include a derivatives risk management program and an asset segregation requirement, but reconsider what, if any, portfolio limits should be part of the rule.
|
•
|
The SEC adopted rules on October 13, 2016 relating to the modernization of investment company reporting and disclosure, the enhancement of liquidity risk management by open-end investment companies and the permitted use of "swing pricing" by open-end investment companies. Under the reporting modernization rules, the Federated Funds that are registered under the 1940 Act were required to report on Form N-CEN beginning in June 2018. For larger fund complexes, such as Federated's SEC-registered Federated Funds, required information for Form N-PORT was required to be compiled, maintained and made available to the SEC from and after June 1, 2018 and filing of Form N-PORT was required to begin as of April 30, 2019. On February 27, 2019, the SEC issued an interim final rule that modified the timing requirements for filing monthly reports on Form N-PORT by amending Rule 30b1-9 under the 1940 Act and Form N-PORT to (1) require funds to file a report on Form N-PORT for each month in the fund's fiscal quarter not later than 60 days after the end of that fiscal quarter and (2) require funds, no later than 30 days after the end of each month to maintain in their records the information that is required to be included in Form N-PORT. Regarding the liquidity management rules, compliance with
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
On April 5, 2017, European Parliament passed EU money market fund reforms (Money Market Fund Regulation or MMFR). The MMFR provides for the following types of money market funds in the EU: (1) Government constant NAV (CNAV) funds; (2) Low volatility NAV (LVNAV) funds; (3) Short-term variable NAV (VNAV) funds; and (4) standard VNAV funds. The reforms became effective (i.e., must be complied with) in regards to new funds on July 21, 2018 and became effective in regards to certain existing funds (including the Federated Funds in Ireland and the UK) on January 21, 2019. Federated utilized both internal and external resources to complete the conversion of two non-U.S. money market funds to LVNAV funds and two government non-U.S. money market funds to public debt CNAV funds, and otherwise began to comply with the MMFR, on January 11, 2019. Federated also continues to engage with trade associations and appropriate regulators in connection with the MMFR because the European Securities Market Authority and the European Commission continue work on implementing the MMFR and government CNAV and LVNAV fund reforms will be subject to a future review of their adequacy from a prudential and economic perspective by the European Commission in 2022.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
•
|
The EU Securitization Regulation became applicable on January 1, 2019 for originators, sponsors, lenders, securitization special purpose entities, and institutional investors, including among others, UCITs funds, alternative investment fund managers and investment firms. Among other requirements, this regulation establishes requirements for due diligence, risk retention and transparency of disclosure for those involved in securitization transactions. For example, the regulation requires investors to conduct due diligence, and to maintain written policies on due diligence and monitoring. The EU also will insist on investors only investing in products where the originator, lender or sponsor maintains at least a 5% retention in the product, even if another country (such as the U.S.) removes their requirement for a 5% risk retention. The regulation also requires the performance of stress tests on cash flows and collateral values or, in the absence of stress testing, testing based on assumptions having regard to the nature, scale and complexity of risk positions. The regulation also requires internal reporting to a relevant management body so that such management body is aware of material risks and can ensure that they are appropriately managed. Finally, under the regulation, the originators, sponsors or lenders involved with a securitized product have to agree amongst themselves to publish information that will be publicly available via repositories that will enable investors to more easily conduct due diligence when investing in securitized products.
|
•
|
A European FTT also continues to be discussed without the FTT being adopted. Notwithstanding challenges to its legality, these discussions continue to involve, among other topics, the scope, application and allocation of the FTT, although any agreement on the FTT may be delayed until the Brexit negotiations are completed. Since the European Commission first proposed a European FTT in 2011, proponents of the FTT have sought the widest possible application of the FTT with low tax rates. On December 3, 2018, Germany and France discussed with other EU Member States, including Austria, Belgium, Greece, Italy, Portugal, Slovakia, Slovenia and Spain, at a finance ministers' meeting in Brussels, a renewed proposal for a European FTT based on an existing French FTT on stock trades involving domestically issued shares by companies with a market capitalization over one billion Euros. It has been reported that the Belgian Finance Minister indicated that the German-French initiative is a positive evolution in the discussions, and the Austrian Finance Minister indicated that more information is needed to assess the proposal, that an FTT with the scope limited to domestically issued shares would not be a real FTT, and that the finance ministers will consider it as a possible alternative. This new German-French initiative is narrower than prior proposals for a European FTT, which involved a broader, more substantial FTT applicable to securities transactions, including derivatives. For example, prior proposals would have imposed a 0.1% tax on equity and bond trades and a 0.01% tax on derivative transactions. The latest FTT proposal in 2019 would levy a 0.2% tax on the purchase price of shares issued by companies based in one of the participating countries and whose market capitalization exceeds €1 billion. This FTT would apply even if a transaction occurs outside the EU. Market-making activity would be exempt, and intraday transactions would also be exempt from this FTT, such that it would only apply to net positions in an applicable security at the end of a day. The exact time needed to reach resolution, implement any agreement and enact legislation is not known at this time. As noted above, Brexit could delay agreement on, and implementation of, the FTT in Europe. The Labour Party in the UK has also separately proposed a UK FTT, but with the uncertainty of Brexit, it is unclear whether a UK FTT will be advanced in 2019.
|
•
|
The FCA has issued its final guidance on extending the Senior Managers and Certification Regime (SMCR) to insurers and all other firms offering financial services in the UK, intended to increase accountability for senior personnel and key staff. The FCA designates certain "senior management functions" and "certification functions." Under the SMCR, personnel conducting senior management functions (called Senior Managers) will need to be approved by the FCA and, those approved, will be listed in a Financial Services Register. Personnel that do not perform senior management functions but whose role could cause significant harm to customers or the firm are considered to perform certification functions (called Certification Staff). As such, firms are required to certify that such personnel are fit and proper to perform their roles. Both Senior Managers and Certification Staff must be identified and trained by December 9, 2019. Firms will have an additional twelve months to complete the certification process for Certification Staff. All staff (other than ancillary staff) will be subject to certain conduct rules set forth by the FCA.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
March 31,
|
|
Percent
Change
|
|||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
||||
By Asset Class
|
|
|
|
|
|
|
|||||
Equity
|
|
$
|
80,245
|
|
|
$
|
58,830
|
|
|
36
|
%
|
Fixed-Income
|
|
64,107
|
|
|
62,205
|
|
|
3
|
|
||
Alternative / Private Markets
1
|
|
17,854
|
|
|
343
|
|
|
NM
|
|
||
Multi-Asset
|
|
4,259
|
|
|
4,843
|
|
|
(12
|
)
|
||
Total Long-Term Assets
|
|
166,465
|
|
|
126,221
|
|
|
32
|
|
||
Money Market
|
|
318,413
|
|
|
265,944
|
|
|
20
|
|
||
Total Managed Assets
|
|
$
|
484,878
|
|
|
$
|
392,165
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|||||
By Product Type
|
|
|
|
|
|
|
|||||
Funds:
|
|
|
|
|
|
|
|||||
Equity
|
|
$
|
42,057
|
|
|
$
|
31,507
|
|
|
33
|
%
|
Fixed-Income
|
|
41,189
|
|
|
40,529
|
|
|
2
|
|
||
Alternative / Private Markets
1
|
|
11,164
|
|
|
343
|
|
|
NM
|
|
||
Multi-Asset
|
|
4,072
|
|
|
4,620
|
|
|
(12
|
)
|
||
Total Long-Term Assets
|
|
98,482
|
|
|
76,999
|
|
|
28
|
|
||
Money Market
|
|
214,764
|
|
|
182,437
|
|
|
18
|
|
||
Total Fund Assets
|
|
313,246
|
|
|
259,436
|
|
|
21
|
|
||
Separate Accounts:
|
|
|
|
|
|
|
|||||
Equity
|
|
38,188
|
|
|
27,323
|
|
|
40
|
|
||
Fixed-Income
|
|
22,918
|
|
|
21,676
|
|
|
6
|
|
||
Alternative / Private Markets
|
|
6,690
|
|
|
0
|
|
|
NM
|
|
||
Multi-Asset
|
|
187
|
|
|
223
|
|
|
(16
|
)
|
||
Total Long-Term Assets
|
|
67,983
|
|
|
49,222
|
|
|
38
|
|
||
Money Market
|
|
103,649
|
|
|
83,507
|
|
|
24
|
|
||
Total Separate Account Assets
|
|
171,632
|
|
|
132,729
|
|
|
29
|
|
||
Total Managed Assets
|
|
$
|
484,878
|
|
|
$
|
392,165
|
|
|
24
|
%
|
1
|
The balance at
March 31, 2019
includes
$8.1 billion
of fund assets managed by a non-consolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Three Months Ended
|
|
|
|||||||
|
|
March 31,
|
|
Percent Change
|
|||||||
(in millions)
|
|
2019
|
|
|
2018
|
|
|
||||
By Asset Class
|
|
|
|
|
|
|
|||||
Equity
|
|
$
|
77,554
|
|
|
$
|
61,555
|
|
|
26
|
%
|
Fixed-Income
|
|
64,167
|
|
|
63,538
|
|
|
1
|
|
||
Alternative / Private Markets
1
|
|
18,311
|
|
|
355
|
|
|
NM
|
|
||
Multi-Asset
|
|
4,225
|
|
|
4,979
|
|
|
(15
|
)
|
||
Total Long-Term Assets
|
|
164,257
|
|
|
130,427
|
|
|
26
|
|
||
Money Market
|
|
311,150
|
|
|
267,546
|
|
|
16
|
|
||
Total Average Managed Assets
|
|
$
|
475,407
|
|
|
$
|
397,973
|
|
|
19
|
%
|
|
|
|
|
|
|
|
|||||
By Product Type
|
|
|
|
|
|
|
|||||
Funds:
|
|
|
|
|
|
|
|||||
Equity
|
|
$
|
40,217
|
|
|
$
|
32,680
|
|
|
23
|
%
|
Fixed-Income
|
|
41,095
|
|
|
41,022
|
|
|
0
|
|
||
Alternative / Private Markets
1
|
|
11,545
|
|
|
355
|
|
|
NM
|
|
||
Multi-Asset
|
|
4,042
|
|
|
4,749
|
|
|
(15
|
)
|
||
Total Long-Term Assets
|
|
96,899
|
|
|
78,806
|
|
|
23
|
|
||
Money Market
|
|
209,260
|
|
|
181,856
|
|
|
15
|
|
||
Total Average Fund Assets
|
|
306,159
|
|
|
260,662
|
|
|
17
|
|
||
Separate Accounts:
|
|
|
|
|
|
|
|||||
Equity
|
|
37,337
|
|
|
28,875
|
|
|
29
|
|
||
Fixed-Income
|
|
23,072
|
|
|
22,516
|
|
|
2
|
|
||
Alternative / Private Markets
|
|
6,766
|
|
|
0
|
|
|
NM
|
|
||
Multi-Asset
|
|
183
|
|
|
230
|
|
|
(20
|
)
|
||
Total Long-Term Assets
|
|
67,358
|
|
|
51,621
|
|
|
30
|
|
||
Money Market
|
|
101,890
|
|
|
85,690
|
|
|
19
|
|
||
Total Average Separate Account Assets
|
|
169,248
|
|
|
137,311
|
|
|
23
|
|
||
Total Average Managed Assets
|
|
$
|
475,407
|
|
|
$
|
397,973
|
|
|
19
|
%
|
1
|
The average for the
three
months ended
March 31, 2019
includes
$8.4 billion
of average fund assets managed by a non-consolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31,
|
||||||
(in millions)
|
|
|
2019
|
|
|
2018
|
|
||
Equity Funds
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
36,584
|
|
|
$
|
33,008
|
|
Sales
|
|
|
3,412
|
|
|
1,680
|
|
||
Redemptions
|
|
|
(3,003
|
)
|
|
(2,772
|
)
|
||
Net Sales (Redemptions)
|
|
|
409
|
|
|
(1,092
|
)
|
||
Net Exchanges
|
|
|
13
|
|
|
(130
|
)
|
||
Impact of Foreign Exchange
1
|
|
|
(15
|
)
|
|
0
|
|
||
Market Gains and Losses
2
|
|
|
5,066
|
|
|
(279
|
)
|
||
Ending Assets
|
|
|
$
|
42,057
|
|
|
$
|
31,507
|
|
|
|
|
|
|
|
||||
Equity Separate Accounts
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
35,913
|
|
|
$
|
29,808
|
|
Sales
3
|
|
|
1,724
|
|
|
1,513
|
|
||
Redemptions
3
|
|
|
(2,923
|
)
|
|
(2,486
|
)
|
||
Net Sales (Redemptions)
3
|
|
|
(1,199
|
)
|
|
(973
|
)
|
||
Net Exchanges
|
|
|
0
|
|
|
3
|
|
||
Impact of Foreign Exchange
1
|
|
|
(107
|
)
|
|
0
|
|
||
Market Gains and Losses
2
|
|
|
3,581
|
|
|
(1,515
|
)
|
||
Ending Assets
|
|
|
$
|
38,188
|
|
|
$
|
27,323
|
|
|
|
|
|
|
|
||||
Total Equity
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
72,497
|
|
|
$
|
62,816
|
|
Sales
3
|
|
|
5,136
|
|
|
3,193
|
|
||
Redemptions
3
|
|
|
(5,926
|
)
|
|
(5,258
|
)
|
||
Net Sales (Redemptions)
3
|
|
|
(790
|
)
|
|
(2,065
|
)
|
||
Net Exchanges
|
|
|
13
|
|
|
(127
|
)
|
||
Impact of Foreign Exchange
1
|
|
|
(122
|
)
|
|
0
|
|
||
Market Gains and Losses
2
|
|
|
8,647
|
|
|
(1,794
|
)
|
||
Ending Assets
|
|
|
$
|
80,245
|
|
|
$
|
58,830
|
|
1
|
Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. Reporting only contains foreign exchange separately beginning with the first quarter 2019 (previously included in Market Gains and Losses).
|
2
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates for periods prior to the first quarter 2019.
|
3
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31,
|
||||||
(in millions)
|
|
|
2019
|
|
|
2018
|
|
||
Fixed-Income Funds
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
40,490
|
|
|
$
|
41,144
|
|
Sales
|
|
|
4,154
|
|
|
4,107
|
|
||
Redemptions
|
|
|
(4,726
|
)
|
|
(4,567
|
)
|
||
Net Sales (Redemptions)
|
|
|
(572
|
)
|
|
(460
|
)
|
||
Net Exchanges
|
|
|
(8
|
)
|
|
127
|
|
||
Impact of Foreign Exchange
1
|
|
|
23
|
|
|
0
|
|
||
Market Gains and Losses
2
|
|
|
1,256
|
|
|
(282
|
)
|
||
Ending Assets
|
|
|
$
|
41,189
|
|
|
$
|
40,529
|
|
|
|
|
|
|
|
||||
Fixed-Income Separate Accounts
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
22,668
|
|
|
$
|
23,016
|
|
Sales
3
|
|
|
1,262
|
|
|
801
|
|
||
Redemptions
3
|
|
|
(1,615
|
)
|
|
(2,027
|
)
|
||
Net Sales (Redemptions)
3
|
|
|
(353
|
)
|
|
(1,226
|
)
|
||
Net Exchanges
|
|
|
(25
|
)
|
|
0
|
|
||
Impact of Foreign Exchange
1
|
|
|
(15
|
)
|
|
0
|
|
||
Market Gains and Losses
2
|
|
|
643
|
|
|
(114
|
)
|
||
Ending Assets
|
|
|
$
|
22,918
|
|
|
$
|
21,676
|
|
|
|
|
|
|
|
||||
Total Fixed-Income
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
63,158
|
|
|
$
|
64,160
|
|
Sales
3
|
|
|
5,416
|
|
|
4,908
|
|
||
Redemptions
3
|
|
|
(6,341
|
)
|
|
(6,594
|
)
|
||
Net Sales (Redemptions)
3
|
|
|
(925
|
)
|
|
(1,686
|
)
|
||
Net Exchanges
|
|
|
(33
|
)
|
|
127
|
|
||
Impact of Foreign Exchange
1
|
|
|
8
|
|
|
0
|
|
||
Market Gains and Losses
2
|
|
|
1,899
|
|
|
(396
|
)
|
||
Ending Assets
|
|
|
$
|
64,107
|
|
|
$
|
62,205
|
|
1
|
Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. Reporting only contains foreign exchange separately beginning with the first quarter 2019 (previously included in Market Gains and Losses).
|
2
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates for periods prior to the first quarter 2019.
|
3
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31,
|
||||||
(in millions)
|
|
|
2019
|
|
|
2018
|
|
||
Alternative / Private Markets Funds
1
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
11,365
|
|
|
$
|
366
|
|
Sales
|
|
|
254
|
|
|
41
|
|
||
Redemptions
|
|
|
(387
|
)
|
|
(67
|
)
|
||
Net Sales (Redemptions)
|
|
|
(133
|
)
|
|
(26
|
)
|
||
Net Exchanges
|
|
|
(2
|
)
|
|
1
|
|
||
Impact of Foreign Exchange
2
|
|
|
240
|
|
|
0
|
|
||
Market Gains and Losses
3
|
|
|
(306
|
)
|
|
2
|
|
||
Ending Assets
|
|
|
$
|
11,164
|
|
|
$
|
343
|
|
|
|
|
|
|
|
||||
Alternative / Private Markets Separate Accounts
|
|
|
|
|
|||||
Beginning Assets
|
|
|
$
|
6,953
|
|
|
$
|
0
|
|
Sales
4
|
|
|
59
|
|
|
0
|
|
||
Redemptions
4
|
|
|
(471
|
)
|
|
0
|
|
||
Net Sales (Redemptions)
4
|
|
|
(412
|
)
|
|
0
|
|
||
Impact of Foreign Exchange
2
|
|
|
147
|
|
|
0
|
|
||
Market Gains and Losses
3
|
|
|
2
|
|
|
0
|
|
||
Ending Assets
|
|
|
$
|
6,690
|
|
|
$
|
0
|
|
|
|
|
|
|
|
||||
Total Alternative / Private Markets
1
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
18,318
|
|
|
$
|
366
|
|
Sales
4
|
|
|
313
|
|
|
41
|
|
||
Redemptions
4
|
|
|
(858
|
)
|
|
(67
|
)
|
||
Net Sales (Redemptions)
4
|
|
|
(545
|
)
|
|
(26
|
)
|
||
Net Exchanges
|
|
|
(2
|
)
|
|
1
|
|
||
Impact of Foreign Exchange
2
|
|
|
387
|
|
|
0
|
|
||
Market Gains and Losses
3
|
|
|
(304
|
)
|
|
2
|
|
||
Ending Assets
|
|
|
$
|
17,854
|
|
|
$
|
343
|
|
1
|
The balance at
March 31, 2019
includes
$8.1 billion
of fund assets managed by a non-consolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
|
2
|
Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. Reporting only contains foreign exchange separately beginning with the first quarter 2019 (previously included in Market Gains and Losses).
|
3
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates for periods prior to the first quarter 2019.
|
4
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31,
|
||||||
(in millions)
|
|
|
2019
|
|
|
2018
|
|
||
Multi-Asset Funds
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
3,920
|
|
|
$
|
4,783
|
|
Sales
|
|
|
102
|
|
|
128
|
|
||
Redemptions
|
|
|
(235
|
)
|
|
(228
|
)
|
||
Net Sales (Redemptions)
|
|
|
(133
|
)
|
|
(100
|
)
|
||
Net Exchanges
|
|
|
2
|
|
|
0
|
|
||
Market Gains and Losses
1
|
|
|
283
|
|
|
(63
|
)
|
||
Ending Assets
|
|
|
$
|
4,072
|
|
|
$
|
4,620
|
|
|
|
|
|
|
|
||||
Multi-Asset Separate Accounts
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
173
|
|
|
$
|
231
|
|
Sales
2
|
|
|
2
|
|
|
0
|
|
||
Redemptions
2
|
|
|
(6
|
)
|
|
(7
|
)
|
||
Net Sales (Redemptions)
2
|
|
|
(4
|
)
|
|
(7
|
)
|
||
Market Gains and Losses
1
|
|
|
18
|
|
|
(1
|
)
|
||
Ending Assets
|
|
|
$
|
187
|
|
|
$
|
223
|
|
|
|
|
|
|
|
||||
Total Multi-Asset
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
4,093
|
|
|
$
|
5,014
|
|
Sales
2
|
|
|
104
|
|
|
128
|
|
||
Redemptions
2
|
|
|
(241
|
)
|
|
(235
|
)
|
||
Net Sales (Redemptions)
2
|
|
|
(137
|
)
|
|
(107
|
)
|
||
Net Exchanges
|
|
|
2
|
|
|
0
|
|
||
Market Gains and Losses
1
|
|
|
301
|
|
|
(64
|
)
|
||
Ending Assets
|
|
|
$
|
4,259
|
|
|
$
|
4,843
|
|
1
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.
|
2
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
|
Three Months Ended
|
||||||
|
|
|
March 31,
|
||||||
(in millions)
|
|
|
2019
|
|
|
2018
|
|
||
Total Long-Term Fund Assets
1
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
92,359
|
|
|
$
|
79,301
|
|
Sales
|
|
|
7,922
|
|
|
5,956
|
|
||
Redemptions
|
|
|
(8,351
|
)
|
|
(7,634
|
)
|
||
Net Sales (Redemptions)
|
|
|
(429
|
)
|
|
(1,678
|
)
|
||
Net Exchanges
|
|
|
5
|
|
|
(2
|
)
|
||
Impact of Foreign Exchange
2
|
|
|
248
|
|
|
0
|
|
||
Market Gains and Losses
3
|
|
|
6,299
|
|
|
(622
|
)
|
||
Ending Assets
|
|
|
$
|
98,482
|
|
|
$
|
76,999
|
|
|
|
|
|
|
|
||||
Total Long-Term Separate Accounts Assets
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
65,707
|
|
|
$
|
53,055
|
|
Sales
4
|
|
|
3,047
|
|
|
2,314
|
|
||
Redemptions
4
|
|
|
(5,015
|
)
|
|
(4,520
|
)
|
||
Net Sales (Redemptions)
4
|
|
|
(1,968
|
)
|
|
(2,206
|
)
|
||
Net Exchanges
|
|
|
(25
|
)
|
|
3
|
|
||
Impact of Foreign Exchange
2
|
|
|
25
|
|
|
0
|
|
||
Market Gains and Losses
3
|
|
|
4,244
|
|
|
(1,630
|
)
|
||
Ending Assets
|
|
|
$
|
67,983
|
|
|
$
|
49,222
|
|
|
|
|
|
|
|
||||
Total Long-Term Assets
1
|
|
|
|
|
|
||||
Beginning Assets
|
|
|
$
|
158,066
|
|
|
$
|
132,356
|
|
Sales
4
|
|
|
10,969
|
|
|
8,270
|
|
||
Redemptions
4
|
|
|
(13,366
|
)
|
|
(12,154
|
)
|
||
Net Sales (Redemptions)
4
|
|
|
(2,397
|
)
|
|
(3,884
|
)
|
||
Net Exchanges
|
|
|
(20
|
)
|
|
1
|
|
||
Impact of Foreign Exchange
2
|
|
|
273
|
|
|
0
|
|
||
Market Gains and Losses
3
|
|
|
10,543
|
|
|
(2,252
|
)
|
||
Ending Assets
|
|
|
$
|
166,465
|
|
|
$
|
126,221
|
|
1
|
The balance at
March 31, 2019
includes
$8.1 billion
of fund assets managed by a non-consolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.
|
2
|
Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes. Reporting only contains foreign exchange separately beginning with the first quarter 2019 (previously included in Market Gains and Losses).
|
3
|
Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions, net investment income and the impact of changes in foreign exchange rates for periods prior to the first quarter 2019.
|
4
|
For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
|
|
Percent of Total Average Managed Assets
|
|
Percent of Total Revenue
|
||||||||
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
|
March 31, 2019
|
|
|
March 31, 2018
|
|
By Asset Class
|
|
|
|
|
|
|
|
|
||||
Money Market
|
|
65
|
%
|
|
67
|
%
|
|
38
|
%
|
|
40
|
%
|
Equity
|
|
16
|
%
|
|
16
|
%
|
|
40
|
%
|
|
39
|
%
|
Fixed-Income
|
|
14
|
%
|
|
16
|
%
|
|
14
|
%
|
|
17
|
%
|
Alternative / Private Markets
|
|
4
|
%
|
|
0
|
%
|
|
4
|
%
|
|
0
|
%
|
Multi-Asset
|
|
1
|
%
|
|
1
|
%
|
|
3
|
%
|
|
4
|
%
|
Other
|
|
--
|
|
|
--
|
|
|
1
|
%
|
|
0
|
%
|
By Product Type
|
|
|
|
|
|
|
|
|
||||
Funds:
|
|
|
|
|
|
|
|
|
||||
Money Market
|
|
44
|
%
|
|
46
|
%
|
|
35
|
%
|
|
37
|
%
|
Equity
|
|
8
|
%
|
|
9
|
%
|
|
30
|
%
|
|
30
|
%
|
Fixed-Income
|
|
9
|
%
|
|
10
|
%
|
|
12
|
%
|
|
14
|
%
|
Alternative / Private Markets
|
|
3
|
%
|
|
0
|
%
|
|
1
|
%
|
|
0
|
%
|
Multi-Asset
|
|
1
|
%
|
|
1
|
%
|
|
3
|
%
|
|
4
|
%
|
Separate Accounts:
|
|
|
|
|
|
|
|
|
||||
Money Market
|
|
21
|
%
|
|
21
|
%
|
|
3
|
%
|
|
3
|
%
|
Equity
|
|
8
|
%
|
|
7
|
%
|
|
10
|
%
|
|
9
|
%
|
Fixed-Income
|
|
5
|
%
|
|
6
|
%
|
|
2
|
%
|
|
3
|
%
|
Alternative / Private Markets
|
|
1
|
%
|
|
0
|
%
|
|
3
|
%
|
|
0
|
%
|
Other
|
|
--
|
|
|
--
|
|
|
1
|
%
|
|
0
|
%
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
Management's Discussion and Analysis (continued)
|
||
of Financial Condition and Results of Operations (unaudited)
|
|
(a)
|
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
March 31, 2019
. The scope of management's assessment of the effectiveness of its disclosure controls and procedures did not include the internal controls over financial reporting at
Hermes
, which was acquired effective July 1, 2018.
Hermes
represented approximately 11% and 12% of Federated's total and net assets, respectively, as of
March 31, 2019
and approximately 16% and 0% of Federated's total revenue and net income, respectively, for the
three months ended
March 31, 2019
. This exclusion is consistent with the SEC Staff's guidance that an assessment of a recently acquired business may be omitted from the scope of management's assessment of the effectiveness of disclosure controls and procedures that are also part of internal control over financial reporting for one year following an acquisition. 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
March 31, 2019
.
|
(b)
|
There has been no change in Federated's internal control over financial reporting that occurred during the quarter ended
March 31, 2019
that has materially affected, or is reasonably likely to materially affect, Federated's internal control over financial reporting.
|
|
|
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
|
|||||
January
|
|
0
|
|
|
$
|
0.00
|
|
|
0
|
|
|
1,019,401
|
|
February
2
|
|
10,833
|
|
|
2.92
|
|
|
0
|
|
|
1,019,401
|
|
|
March
|
|
50,000
|
|
|
29.06
|
|
|
50,000
|
|
|
969,401
|
|
|
Total
|
|
60,833
|
|
|
$
|
24.41
|
|
|
50,000
|
|
|
969,401
|
|
1
|
In October 2016
,
the board of directors authorized a share repurchase program with no stated expiration date that allows Federated to buy back up to
4.0 million
shares of Federated Class B common stock. No other programs existed as of March 31, 2019.
See
Note (13)
to the Consolidated Financial Statements for additional information on this program.
|
2
|
In February
2019
, 10,833 shares of restricted stock with a weighted-average price of $2.92 per share were repurchased as employees forfeited restricted stock.
|
|
|
|
|
|
|
Federated Investors, Inc.
|
|
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
Date
|
|
May 1, 2019
|
|
By:
|
|
/s/ J. Christopher Donahue
|
|
|
|
|
|
|
J. Christopher Donahue
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
|
May 1, 2019
|
|
By:
|
|
/s/ Thomas R. Donahue
|
|
|
|
|
|
|
Thomas R. Donahue
|
|
|
|
|
|
|
Chief Financial Officer
|
(1)
|
Hermes Fund Managers Limited
(registered in England under number 1661776 whose registered office is at Sixth Floor, 150 Cheapside, London, England, EC2V 6ET (the "
Company
"); and
|
(2)
|
Federated Holdings (UK) II Limited
(registered in England under registered number 11227851) whose registered office is at 5
th
Floor One New charge, London, United Kingdom EC4M 9AF ("
Federated
"); and
|
(3)
|
Name,
of Address (the "
Award Holder
").
|
(A)
|
The Company has granted to the Award Holder an Award under the terms of the Company’s Long Term Incentive Plan (as amended from time to time, the “
Plan
”).
|
(B)
|
Under the Award, the Award Holder will acquire beneficial ownership of [TOTAL] Shares in the Company ("
Award Shares
").
|
1.1
|
In this agreement unless the context otherwise requires words and expressions shall have the meaning given to them in the rules of the Plan, except as set out below:
|
1.2
|
References to Rules are to Rules of the Plan, and references to Clauses are to Clauses of this Agreement.
|
2.1
|
Subject to the Award Holder having executed and delivered to the Company a new employment contract and a deed of waiver in relation to rights and claims against the Company, including (without limitation) any rights or entitlements the Award Holder had or might have had under the Original Plan, the Company shall procure the transfer of beneficial ownership of the Award Shares
|
3.1
|
The Award Holder hereby agrees that the Award Shares are subject to the terms set out in this Agreement and the Plan. In the event of a conflict between the terms of this Agreement and the Plan, the terms of the Plan shall prevail.
|
3.2
|
The Award Holder hereby undertakes that he or she will not, and will not purport to, transfer, assign, charge or otherwise dispose of his or her interest in the Award Shares (except on his or her death to his or her personal representatives or to Federated as contemplated in this Agreement and consistent with the Plan).
|
3.3
|
The Award Holder hereby undertakes that he or she will not request the Nominee to transfer legal title to the Award Shares to him or her, or to any other person.
|
3.4
|
The Award Holder hereby undertakes that he or she will not exercise any right to vote in relation to the Award Shares, and hereby agrees and acknowledges that in the event the Award Holder does instruct the Nominee to exercise any right to vote in relation to the Award Shares, the Nominee shall disregard any such instruction.
|
3.5
|
The Award Holder hereby agrees to and accepts the provisions of Rules 10 and 11.
|
4.1
|
Subject to Clause 4.4, the Award shall Vest in accordance with the provisions of Clause 4.2 in relation to the Pool A Shares and Clause 4.3 in relation to the Pool B Shares, except where earlier Vesting occurs under Rules 5 or 7.
|
4.2
|
The Pool A Award shall vest:
|
a.
|
as to 20% of the Pool A Shares (rounded down to the nearest whole number of Shares) on the third anniversary of the Vesting Commencement Date;
|
b.
|
as to a further 30% of the Pool A Shares (rounded down to the nearest whole number of Shares) on the fourth anniversary of the Vesting Commencement Date; and
|
c.
|
as to the remainder of the Pool A Shares on the earlier of the fifth anniversary of the Vesting Commencement Date and/or the day before the fifth anniversary of the date on which the Award Holder acquired beneficial ownership of the Shares.
|
4.3
|
The Pool B Award shall vest:
|
a.
|
as to 50% of the Pool B Shares (rounded down to the nearest whole number of Shares) on the date which is thirty-nine (39) months after the Vesting Commencement Date; and
|
b.
|
as to the remainder of the Pool B Shares on the date which is fifty-one (51) months after the Vesting Commencement Date.
|
4.4
|
The Award shall cease to Vest immediately upon the Award Holder giving or being given notice of the termination of the Award Holder’s employment.
|
5.1
|
The Award Holder hereby agrees that, in the event the Award Holder ceases to be an Employee in circumstances where the Award Holder is a Good Leaver, the Award Holder may, upon notice
|
5.2
|
The Award Holder hereby agrees that, in the event the Award Holder ceases to be an Employee in circumstances where the Award Holder is an Other Leaver:
|
a.
|
the Award Holder shall immediately transfer beneficial ownership of the Award Holder’s Unvested Shares to the Nominee for no consideration; and
|
b.
|
the Award Holder’s vested Shares shall continue to be subject to the provisions of Clause 6.
|
5.3
|
The Award Holder hereby agrees that, in the event the Award Holder ceases to be an Employee in circumstances where the Award Holder is a Bad Leaver, or if the Award Holder is declared bankrupt, or if the Award Holder attempts or purports to transfer, assign, charge or otherwise dispose of his or her interest in the Award Shares (except on his or her death to his or her personal representatives or to Federated as contemplated in this Agreement and consistent with the Plan), the Award Holder shall immediately transfer beneficial ownership of his or her Award Shares to the Nominee for no consideration.
|
5.4
|
The Award Holder agrees and acknowledges that, unless the Award Holder as a Good Leaver provides notice to Federated pursuant to Clause 5.1, Federated shall have the right but not the obligation to purchase the beneficial ownership of the Award Holder’s Award Shares under Clause 5.1 or Vested Shares under Clause 5.2. The Award Holder, further agrees that Federated may exercise its right under Clauses 5.1 or 5.2 at any time after that right has arisen, and in particular (but without limitation) may delay its exercise of its right, and/or its obligation upon receiving notice from the Award Holder as a Good Leaver under Clause 5.1, until the next Sale Window.
|
6.1
|
The Award Holder and Federated hereby agree that the Award Holder may sell to Federated, and Federated agrees to buy from the Award Holder, the Award Holder’s beneficial interest in Vested Shares at the following times:
|
a.
|
As to one third of the Vested Shares (rounded down to the nearest whole number of Shares) during the first Sale Window following the sixth anniversary of the Vesting Commencement Date;
|
b.
|
As to a further one third of the Vested Shares (rounded down to the nearest whole number of Shares) during the first Sale Window following the seventh anniversary of the Vesting Commencement Date; and
|
c.
|
As to the remainder of the Vested Shares during the first Sale Window following the eighth anniversary of the Vesting Commencement Date and thereafter the first Sale Window following each subsequent anniversary of the Vesting Commencement Date.
|
6.2
|
In the event that the Award Holder does not sell his or her beneficial interest in Vested Shares which have become capable of sale under Clause 6.1 during a Sale Window, the Award Holder’s beneficial interest in those Vested Shares shall remain capable of sale to Federated, and the Award Holder may sell his or her beneficial interest in some or all of the Vested Shares to Federated (and Federated agrees to buy the beneficial interest) during the next and/or any subsequent Sale Window.
|
6.3
|
The Award Holder and Federated hereby agree that Federated may buy from the Award Holder, and the Award Holder agrees to sell to Federated, the Award Holder’s beneficial interest in Vested Shares at the following times:
|
a.
|
As to one third of the Vested Shares (rounded down to the nearest whole number of Shares) during the first Sale Window following the sixth anniversary of the Vesting Commencement Date;
|
b.
|
As to a further one third of the Vested Shares (rounded down to the nearest whole number of Shares) during the first Sale Window following the seventh anniversary of the Vesting Commencement Date; and
|
c.
|
As to the remainder of the Vested Shares during the first Sale Window following the eighth anniversary of the Vesting Commencement Date and thereafter the first Sale Window following each subsequent anniversary of the Vesting Commencement Date.
|
6.4
|
In the event that Federated does not purchase the Award Holder’s beneficial interest in Vested Shares which it has become entitled to purchase under Clause 6.3 during a Sale Window, the Award Holder’s beneficial interest in those Vested Shares shall remain capable of purchase by Federated, and Federated may purchase the Award Holder’s beneficial interest in some or all of the Vested Shares during the next and/or any subsequent Sale Window.
|
6.5
|
The price at which the Award Holder’s beneficial interest in Vested Shares may be bought and sold pursuant to this Clause 6 shall be the Fair Value of the Vested Shares at the beginning of the relevant Sale Window.
|
7.1
|
The Award Holder, hereby covenants to pay to the Company an amount equal to any Tax Liability arising on the occurrence of any Taxable Event.
|
7.2
|
In order to give effect to the covenant in Clause 7.1, the Company and the Award Holder hereby agree that, at the election of the Award Holder, the Attorney may sell to Federated on behalf of the Award Holder, and Federated hereby agrees to buy, the Award Holder’s beneficial interest in sufficient Award Shares as are necessary (after payment of all costs of sale) to satisfy such Tax Liability and apply the proceeds to reimburse the Company, the Award Holder’s employer or former employer (as appropriate) with such funds as are required to satisfy such Tax Liability.
|
7.3
|
The Award Holder and the Company hereby agree that, in the event that the Company does not withhold the full amount of the Tax Liability, the Award Holder shall remit to the Company an amount equal to the amount of any such Tax Liability not withheld, and the Company shall apply the funds so remitted in discharge of the Tax Liability arising on the occurrence of a Taxable Event. The Award Holder and the Company hereby further agree that any such amount to be remitted shall be immediately due and payable, and that the Company or its successor may recover any such amount from time to time at any time thereafter by deduction through payroll (or procuring that such deductions are made by the Award Holder’s employer). The Award Holder agrees and acknowledges that he or she is responsible for any Tax Liability arising as a result of any amount remitted or any failure to remit such amount.
|
8.1
|
The Award Holder hereby authorises and appoints the Company as his or her attorney in his or her name and on his or her behalf to execute (as a deed or otherwise) and/or enter into all and any documentation and do all other such things as such Attorney may deem necessary or desirable in its absolute and unfettered discretion to give effect to any of the matters set out in this Agreement, including but not limited to:
|
a.
|
all matters necessary to give effect to the transfer of beneficial ownership of the Award Shares to the Award Holder;
|
b.
|
entering into an election under section 431(2) of ITEPA as set out in the Schedule hereto within 14 days after the date on which the Award Holder acquired beneficial ownership of the Shares;
|
c.
|
all matters necessary to give effect to the transfer of the Award Holder’s interest in the Award Shares, pursuant to Clause 5 (including but not limited to entering into a deed of surrender for the transfer Award Holder’s interest in the Award Shares to the Nominee) and Clause 6.3,
|
d.
|
all matters necessary to give effect to the terms of Clause 7;
|
e.
|
all matters necessary to give effect to the provisions of Rules 10 and 11; and
|
f.
|
all matters necessary to enter into an amended Award Agreement pursuant to Rule 12,
|
8.2
|
The Attorney may delegate one or more of the powers conferred on the Attorney by this Clause 8 to an officer or officers appointed for that purpose by the board of directors of the Attorney by resolution or otherwise.
|
9.1
|
The rights and obligations of the Award Holder under the terms of his or her office or employment with the Company or any Group Company shall not be affected by the acquisition of an interest in that Award Shares. The acquisition of an interest in the Award Shares shall not confer on the Award Holder any right with respect to continuance of employment by the Company or any Group Company, nor will it interfere in any way with the right of the Company to terminate the Award Holder’s employment at any time. The grant of the Award to the Award Holder does not entitle the Award Holder to any further grants of Awards on any future occasion. The Award Holder shall have no rights to compensation or damages in consequence of the termination of his or her office or employment with the Company or any Group Company for any reason whatsoever, whether or not in breach of contract, insofar as those rights arise or may arise from the loss or diminution in value of the Award Holder’s interest in the Award Shares.
|
9.2
|
No waiver at any time of any term or provision of this Agreement shall be construed as a waiver of any other term or provision of this Agreement and a waiver at any time of any term or provision of this Agreement shall not be construed as a waiver at any subsequent time of the same term or provision.
|
9.3
|
All headings set forth in this Agreement are intended for convenience only and shall not control or affect the meaning, construction or effect of this Agreement or of any of the provisions hereof.
|
9.4
|
This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall constitute a duplicate original, but all the counterparts shall together constitute the one agreement.
Transmission of an executed counterpart of this deed (but for the avoidance of doubt not just a signature page) by (a) fax or (b) email (in PDF, JPEG or other agreed format) shall take effect as delivery of an executed counterpart of this deed. If either method of delivery is adopted, without prejudice to the validity of the agreement thus made, each party shall provide the others with the original of such counterpart as soon as reasonably possible thereafter
.
No counterpart shall be effective until each party has executed and delivered at least one counterpart
.
|
9.5
|
A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.
|
9.6
|
This Agreement and any disputes or claims arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of England and Wales. Each of the Company, Federated and the Award Holder agree that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this deed or its subject matter or formation (including non-contractual disputes and claims).
|
NAME OF EMPLOYER:
|
Hermes Fund Managers Limited ('your Employer’)
|
1
|
TERM OF EMPLOYMENT AND NOTICE
|
1.1
|
Your employment under this Employment Contract (“Agreement”) shall be deemed to have commenced on the Start Date and shall continue, subject to clauses 2 or 13, until terminated by either you or your Employer giving the other not less than six months’ notice in writing at any time.
|
1.2
|
Your Employer reserves the right to place you on “Garden Leave” as set out in Section 4 of the Employee Handbook.
|
1.3
|
Without prejudice to clauses 1.2 and 13, at its absolute discretion your Employer may terminate this Contract and your employment with immediate effect at any time by notifying you in writing that your employment will so terminate and paying you a sum in lieu of notice (“a Payment in Lieu of Notice”). The Payment in Lieu of Notice will be equal to the basic salary you would have been entitled to receive under clause 1.1 if you had remained employed during your notice period (less deductions for income tax and National Insurance) or, if notice has already been given, during the remainder of the notice period. For the avoidance of doubt, your employment will terminate on the date specified in the notice given by your Employer pursuant to this clause.
|
2
|
DUTIES
|
2.1
|
Your duties are set out in your job description. You agree to perform such duties and exercise such powers in relation to the business of your Employer and Group Companies as may be assigned to or vested in you by your Employer and to undertake other duties from time to time as your Employer may reasonably require.
|
2.2
|
At all times during your employment you will report to such senior managers, officers or directors, and you will serve in such other positions commensurate with your status, as the Employer may from time to time determine. The Employer reserves the right to make reasonable changes to your duties if the needs of the Employer's business so require.
|
2.3
|
You shall, subject always to the control of the Employer, carry out such duties and (without further remuneration) accept such offices and directorships, notwithstanding your job title, as may be reasonably assigned to you from time to time by the Employer and such duties and/or offices and/or directorships may relate to the business of the Employer or of any Group Company.
|
2.4
|
You shall in addition to observing any fiduciary duties that may arise from your being employed in, or assigned to, a position of trust from time to time and your implied duty of fidelity:
|
2.4.1
|
use all proper means to the best of your ability to maintain and improve the businesses of the Employer and the Group Companies and further their respective reputations and interests;
|
2.4.2
|
faithfully, efficiently and diligently perform all of your duties and exercise such powers as are consistent with them which shall from time to time be assigned to or vested in you;
|
2.4.3
|
comply with all lawful and reasonable directions, restrictions, requirements, rules and regulations from time to time laid down or adopted by the Employer or any Group Company (including, without limitation, the Employer’s compliance procedures manual);
|
2.4.4
|
accept any secondments offered to you by the Employer, on such terms as may be reasonably proposed by the Employer, from time to time;
|
2.4.5
|
carry out your duties and exercise your powers jointly with any other person who may at any time be appointed by the Employer to act jointly with you;
|
2.4.6
|
promptly provide (in writing, if so requested), details of any misconduct or breach of duty, whether by you or any other person (whether or not employed by any Group Company) and any other information which comes into your possession which adversely affects or may adversely affect the Employer or any Group Company or their respective businesses including (without limitation) any misuse of the Employer’s property or resources (including, without limitation, any Confidential Information) by any employee;
|
2.4.7
|
promptly provide (in writing, if so requested) such information, advice and explanations as the Employer may reasonably require in connection with your activities in relation to the business of the Employer or any Group Company;
|
2.4.8
|
not, without first obtaining the approval of the Employer, speak in public or write any article for publication on any matter connected with or relating to the business of the Employer or any Group Company; and
|
2.4.9
|
under no circumstances whatsoever either directly or indirectly receive or accept for your own benefit any commission, rebate, discount, gratuity or profit from any person, company or firm having business transactions with the Employer or any Group Company unless previously agreed in writing by the Employer.
|
2.5
|
You shall not without the prior written consent of the Employer:
|
2.5.1
|
incur on behalf of the Employer or any Group Company any capital expenditure in excess of such sum as may be authorised from time to time; or
|
2.5.2
|
enter into on behalf of the Employer or any Group Company any commitment, contract or arrangement otherwise than in the normal course of business or outside the scope of your normal duties or of an unusual or onerous or long term nature.
|
2.6
|
You warrant that
|
(a)
|
you are entitled to work in the UK without any additional approvals and shall provide at your Employer's request all relevant documentation in this respect. You will notify your Employer immediately if you cease to be so entitled at any time during your employment and your Employer may immediately terminate your employment without notice or any payment of compensation;
|
(b)
|
by entering into this Contract or any other arrangements with your Employer you will not be in breach of or subject to any express or implied terms of any contract with or other obligation to any third party binding on you, including, without limitation, any notice period or the provisions of any restrictive covenants or confidentiality obligations arising out of any employment with any other employer or former employer, nor shall you be in breach of any agreement, undertaking or Court order which in any way prohibits you from entering into this Contract or from performing your duties under it;
|
(c)
|
you have not brought and will not bring or use any confidential documentation or information from any other employer or former employer to your Employer; and
|
(d)
|
all of the information you have provided to your Employer and any third party acting on behalf of your Employer prior to the commencement of your employment is to your knowledge complete, true and up-to-date and you have not deliberately omitted any information relevant to your employment.
|
2.7
|
Except when prevented by sickness, accident or holiday you will devote the whole of your time and all of your attention and skill to the affairs of your Employer and any Group Companies, to comply with the reasonable directions of and regulations made by your Employer and use your best endeavours to promote your Employer’s interests.
|
2.8
|
During your employment you shall comply with all requirements, recommendations or regulations, as amended from time to time, of the FCA and all regulatory authorities relevant to your Employer and any relevant Group Companies.
|
2.9
|
During your employment you shall comply with all rules, policies and procedures issued by your employer or Group Company.
|
2.10
|
You shall not accept any employment or engagement or any appointment to any office in relation to any third party or directly or indirectly be interested in any other OBI unless specifically authorised by your manager and Compliance in the first instance except as holder or beneficial owner (for investment purposes only) of any class of securities in a company whose securities are listed on a recognised investment exchange and where you do not hold nor are beneficially interested in more than five percent of the securities of any class.
|
3
|
PLACE OF WORK AND REQUIREMENT TO TRAVEL
|
3.1
|
Your normal place of work will be the Employer’s London office at 150 Cheapside, London, EC2V 6ET (the “Address”). Your Employer in any event reserves the right to change your normal place of work to any place within the United Kingdom, on either a temporary or permanent basis. You will be consulted prior to any decision being taken by your Employer to change your place of work.
|
4
|
NORMAL WORK HOURS
|
4.1
|
You are required to work a minimum of 35 hours per week, normally between 8.00am and 6.00pm Monday to Friday, with one hour per day for lunch. You are also required to work such additional hours without any additional remuneration as may be necessary to fulfil the duties of your role and due to the needs of its business. Your Employer reserves the right upon reasonable notice to vary your normal hours of work.
|
5
|
REMUNERATION
|
5.1
|
You acknowledge that, in addition to the remuneration and other benefits provided for in this Agreement, good and sufficient consideration for your execution and delivery of this Agreement is your eligibility to participate in the long-term incentive plan being implemented by your Employer.
|
5.2
|
Your annual full time basic salary (which shall accrue day to day) is £458,700.00 per annum (subject to deductions for income tax and national insurance) and shall be paid monthly in arrears.
|
5.3
|
Your Employer may deduct from your salary or any other sums due to you any money you owe your Employer or Group Company.
|
6
|
DISCRETIONARY BONUS
|
6.1
|
You may be eligible to receive a bonus of such amount (if any) at such times and subject to such conditions (including as to its form and deferral and forfeiture provisions) as the Remuneration Committee may in its absolute discretion decide. Any bonus payment made to you shall be purely discretionary and shall not form part of your contractual remuneration under this Agreement. Bonus payments are not pensionable.
|
6.2
|
The fact that a bonus may be paid in one year is not indicative of the likelihood that a payment will be made in any subsequent year, regardless of equivalent performance and/or circumstances. The amount of any bonus payment made to you in one year is not indicative of the amount of any bonus which may be paid to you in any subsequent year (if any).
|
6.3
|
You will only be eligible for consideration for a bonus payment if you are in active employment with your Employer and are not under notice of termination (whether given by you or your Employer, for any reason) at the date on which any bonus payments are made. Employees who are undergoing disciplinary proceedings on the date when a bonus might otherwise have been payable will not be paid any bonus until the matter is determined. Employees who receive a disciplinary sanction as a result of such proceedings or who have an unexpired disciplinary warning of any kind on file on the date when a bonus might otherwise have been payable will not normally be eligible to receive an award.
|
6.4
|
Any bonus payments or awards made by your Employer must comply with all applicable laws and any codes or rulings or other requirements (the "Rules") issued by the Financial Conduct Authority or any other applicable regulator (the "Regulator”), and your Employer will of course work to ensure that this is the case. However, if, in the reasonable good faith judgment of your Employer, any such payments or awards which are made are subsequently considered to be contrary to any Rules, you agree that your Employer may modify those payments or awards (including in relation to their amount, form, and conditions relating to deferral and forfeiture) to the extent considered appropriate by your Employer.
|
7
|
BENEFITS
|
7.1
|
You are eligible to participate in your Employer’s Medical Health Insurance scheme, Income Protection scheme and Group Life Cover scheme (full details of which are available from the HR team).
|
7.2
|
Your participation (and that of your family, where applicable) in any of the insurance schemes referred to above is subject to: (i) the terms of the applicable scheme as amended or replaced by your Employer from time to time in its absolute discretion; (ii) the rules of the insurance policy of the relevant insurance provider as amended from time to time; (iii) you being eligible to participate or benefit from such schemes pursuant to their rules at a cost which is acceptable to your Employer; (iv) any age eligibility requirements or rules under the terms of the relevant scheme in place at the relevant time.
|
7.3
|
Your Employer in its sole and absolute discretion reserves the right to discontinue, vary or amend the insurance schemes (including the insurer and the level of your cover or that of your family, where applicable) at any time without compensation by providing you with reasonable notice.
|
7.4
|
If the relevant insurance provider refuses for any reason to provide cover or refuses to accept a liability to you (or your family, where applicable) under the relevant scheme, your Employer shall not be liable to provide you (or your family, where applicable) with any replacement cover or benefit of the same or similar kind or to pay any compensation in lieu of such cover or benefit. In particular, in relation to the income protection scheme your Employer shall only be obliged to make payments to you under the scheme if it has received payment from the insurance provider for that purpose.
|
7.5
|
Your entitlement to insurance benefits under this clause shall cease upon the termination of your employment (howsoever arising). Nothing in this clause 7 gives rise to any express or implied limitations on the ability of your Employer to terminate your employment.
|
8
|
PENSION
|
8.1
|
Your Employer operates contractual enrolment for pension purposes and you will be contractually enrolled into the Hermes Group Flexible Retirement Plan (“the Plan”) with effect from the date on which your employment commences. The Plan is a defined contribution (DC) pension arrangement administered by Standard Life. Under a DC arrangement contributions are invested in a personal account in your name, and the value of the account at retirement is used to provide you with benefits.
|
8.2
|
For as long as you remain a member of the Plan, your Employer will make a contribution of a percentage of your basic salary to the Plan (details of which can be found in the enclosed pension scheme documentation or such other documentation provided by your Employer from time to time). Although you are not required to contribute personally as a condition of membership, you may elect to make voluntary contributions should you so wish which your Employer will match dependent on age group up to a maximum of 7% of basic salary (subject to the cap).
|
8.3
|
Membership of the Plan shall be subject to the rules of the Plan as amended from time to time. Your Employer reserves the right to amend, vary, replace or discontinue the Plan and to vary the contributions payable to it at any time, subject to compliance with automatic enrolment legislation. Should you choose to transfer your benefits out of the Plan at any time, your Employer will not be required to continue to contribute to the Plan in respect of you.
|
9
|
HOLIDAYS
|
9.1
|
The full time annual holiday entitlement is 30 days. Your pro-rated annual holiday entitlement for the current holiday year will be confirmed on the holiday system. Holidays for employees on part time hours will be pro-rated.
|
9.2
|
Your Employer’s holiday year for the purpose of holiday entitlement runs from 1 April to 31 March. Full time holiday accrues at the rate of 2.5 days per completed month’s employment from 1
st
April each year.
|
9.3
|
Your holiday entitlement is in addition to the normal Bank and Public Holidays in England.
|
9.4
|
Employees on part time hours will be entitled to pro-rated Bank and Public Holidays (“public holiday entitlement”). This public holiday entitlement should be taken on the usual bank and public holidays. If due to your weekly working pattern, you cannot take all of your public holiday entitlement on ‘normal’ public holidays you can take the excess on alternative days, subject to the approval of your manager. If due to your weekly working pattern you enjoy a greater number of public holidays than your annual public holiday entitlement, then after your public holiday entitlement has been exhausted you will be required to use your ordinary annual leave entitlement on any remaining public holidays.
|
9.5
|
During all holiday leave to which you are entitled, your normal basic salary will be paid.
|
9.6
|
In the years during which your employment commenced and terminates, your holiday entitlement shall be calculated on a pro-rata basis. On leaving your employer pro-rated holiday is calculated on completed month’s employment.
|
9.7
|
Upon termination of your employment you will be entitled to pay in lieu of any accrued and unused holiday entitlement (unless your employment is terminated by your Employer for gross misconduct or if you have terminated this agreement in breach of clause 1.1 in which case you shall have no contractual entitlement to pay in lieu of untaken holiday and any payment in lieu will be limited to your statutory holiday entitlement). If you have taken more than your accrued entitlement as at the date of termination, your Employer may recover from you by way of deduction from payments due to you (including your final salary payment) or otherwise, one day’s pay in respect of each excess day. A day’s pay for these purposes is 1/260 of your annual basic salary. For employees on part time hours, a day's pay for these purposes will be calculated by pro-rating your annual basic salary.
|
9.8
|
Your Employer may require you to take any untaken holiday during your notice period.
|
9.9
|
Details of the holiday entitlements are set out in Section 9 of the Employee Handbook.
|
10
|
ABSENCE FROM WORK
|
10.1
|
You must notify your manager of any absence, and the reason, by 10am on your first day of absence. Unless otherwise agreed, you must speak to your manager on each successive day of absence. If you fall ill whilst at work and are unable to continue working, you should notify your manager that you intend to go home.
|
10.2
|
You must complete a Sickness Absence Self-Certification Form for one or more days of sickness absence - even when a doctor's certificate is produced. Managers must countersign the form, which will be forwarded to the HR Team for inclusion in records.
|
10.3
|
You must provide your manager with a doctor's certificate for periods of sickness absence of more than seven consecutive days, including Saturdays, Sundays and Public Holidays.
|
10.4
|
Unauthorised absence from work is not permitted. If you intend to be absent you must inform your manager. Should an emergency arise you must telephone your manager at the earliest opportunity.
|
10.5
|
You agree to consent to a medical examination (at your Employer’s expense) by a doctor nominated by your Employer should your Employer so require. This may include drugs and alcohol testing.
|
10.6
|
If you are away from work due to illness or injury, your Employer may appoint or designate another person or persons to perform your duties until you return to work.
|
10.7
|
Details of absence notification rules and procedures and your entitlements in the case of absence due to sickness are set out in Section 9 of the Employee Handbook.
|
11
|
GRIEVANCE AND DISCIPLINARY PROCEDURES
|
11.1
|
Details of your Employer’s non-contractual Grievance and Disciplinary Policies can be found in Section 16 of the Employee Handbook.
|
11.2
|
Your Employer at any time may suspend you from your employment if it deems it appropriate to do so in accordance with the Grievance and Disciplinary Policy in force from time to time.
|
12
|
COMPLIANCE WITH RULES AND REGULATIONS
|
12.1
|
You are required to comply with all domestic, foreign, local or other laws, rules and regulations of any regulatory authorities applicable to you or your Employer or any Group Company relevant to your employment, as well as with their respective policies, procedures and instructions as applicable in connection with the performance of your duties.
|
13
|
TERMINATION OF EMPLOYMENT
|
13.1
|
Your Employer may terminate this Agreement with immediate effect without notice or payment in lieu of notice, if you:
|
13.1.1
|
commit any material or persistent breach or non-observance of any of the terms, conditions or stipulations contained in this Agreement or Section 4 of the Employee Handbook or if you refuse or neglect to comply with any reasonable and lawful directions of your Employer;
|
13.1.2
|
are guilty of any serious negligence or gross misconduct in connection with or affecting the business or affairs of your Employer or Group Company for which you are required to perform duties;
|
13.1.3
|
are guilty of conduct which, in the opinion of your Employer, brings or is likely to bring you or your Employer or a Group Company into disrepute or to prejudicially affect your Employer or a Group Company;
|
13.1.4
|
commit any act of dishonesty relating to your Employer or a Group Company, including but not limited to the fraudulent claiming of expenses and the acceptance of bribes and gifts other than in accordance with your Employer’s policies and procedures as issued and amended from time to time;
|
13.1.5
|
are convicted of a criminal offence punishable by imprisonment (other than an offence under road traffic legislation in the UK or elsewhere for which a non-custodial penalty is imposed);
|
13.1.6
|
are adjudged bankrupt or make any arrangement or composition with your creditors or have an interim order made against you pursuant to section 252 Insolvency Act 1986;
|
13.1.7
|
cease to be eligible to work in the UK;
|
13.1.8
|
should for any reason:
|
13.1.9
|
are guilty of a serious breach of any rules, policies or procedures issued by your Employer or a Group Company (including but not limited to in relation to the use of information technology, personal data, privacy, computer systems, email and the internet).
|
13.2
|
The rights of your Employer under clause 13.1 are without prejudice to any other rights that it might have at law to terminate this Agreement or to accept any breach of this Agreement by you having brought the Agreement to an end. Any delay by your Employer in exercising its rights to terminate shall not constitute a waiver of those rights.
|
13.3
|
On termination of your employment (for whatever reason and howsoever arising), or at any other time when requested to do so by your Employer, you shall:
|
13.3.1
|
not take away conceal or destroy, but shall immediately deliver up to your Employer all documents (which expression shall include but without limitation, notes, memoranda, correspondence, drawings, sketches, plans, designs and any other material upon which data or information is recorded or stored), on whatever media and wherever located, relating to the business or affairs of your Employer or any Group Company or any of their suppliers, agents, distributors, clients/customers, employees, officers, and members (and you shall not be entitled to retain any copies or reproductions of any such documents) (including for the avoidance of doubt any Confidential Information as defined in Clause 15.2), together with keys, credit card, mobile phone, blackberry, laptop and any other property belonging to Employer or any Group Company including any passwords to social media activity linked to your Employer or any Group Company which may then be in your possession or control;
|
13.3.2
|
irretrievably delete any information relating to the business of your Employer and any Group Company stored on any magnetic or optical disk or memory and all matter derived from such sources which is in your possession or control outside your Employer’s premises, and at your Employer's request, provide a detailed account of the information so deleted and any use made of it to date and allow access to your Employer’s IT representatives to relevant electronic equipment to verify such decision;
|
13.3.3
|
immediately repay all outstanding debts or loans due to your Employer or any Group Company, including any sums which your Employer reasonably believes that you owe to your Employer due to the misuse of Employer property (including but not limited to technology equipment). Your Employer is hereby authorised to deduct from any of your wages (as defined by section 27 Employment Rights Act 1996) a sum in repayment of all or any part of any such debts or loans;
|
13.3.4
|
at your Employer’s request, provide a signed statement that you have complied fully with the obligations under this Clause 13.3.
|
14
|
INTELLECTUAL PROPERTY
|
14.1
|
Any Intellectual Property Rights invented, developed, created or acquired by you (whether alone or jointly with any other person) in the course of and/or during the period of your employment with your Employer in connection with or in any way affecting or relating to, or capable of being used or adapted for use in connection with, the business or any product or service of your Employer or any member of the Group Company shall immediately be fully disclosed by you to your Employer or such member of the Group Company as your Employer may nominate for that purpose. You hereby assign, including by way of present assignment of future rights, all Intellectual Property Rights to your Employer with full title guarantee free from all encumbrances and third party rights. You shall (at the request and reasonable expense of your Employer) sign all such documents and perform all such acts as may be required by your Employer fully to vest in your Employer (or its nominee), protect and exploit all such Intellectual Property Rights.
|
14.2
|
You acknowledge that your Employer in its sole and absolute discretion shall decide the extent, if any, of the protection sought in relation to the matters referred to in Clause 14.1. Accordingly, you
|
15
|
CONFIDENTIALITY
|
15.1
|
You are aware that in the course of your employment you may have access to and be entrusted with information in respect of the business of your Employer and/or its Group Companies, it’s or their respective customers and its or their respective dealings, transactions and affairs all of which information is or may be confidential.
|
15.2
|
Confidential information includes, but is not limited to information which relates to any and all information (whether or not recorded in hard copy, electronic or digital form), which may be imparted in confidence or which is of a confidential nature or which your Employer and / or any Group Company may reasonably regard as being confidential or a trade secret concerning the business, business performance, prospective business plans or internal affairs of your Employer, any Group Company, or any of its or their respective clients, customers or suppliers or prospective clients, customers or suppliers, including without prejudice to the generality of the foregoing, details of financial arrangements, investments, information on computer databases, financial and/or investment strategies, service level agreements and support contracts, remuneration and commissions of employees, details of clients and suppliers, actual and potential contracts or assets. Confidential information shall also include information made available to your Employer or its Group Companies by any third party who requires it to be kept confidential.
|
15.3
|
You shall not (except in the proper course of your duties) either prior to, during or after the period of your employment divulge to any person or persons whatsoever, or otherwise make use of, and shall use your best endeavours to prevent the publication or disclosure of, any trade secret or any confidential information concerning the business or finances of your Employer or any Group Company or of its or their respective customers or any of its or their respective dealings transactions or affairs.
|
15.4
|
You shall not (except in the proper course of your duties) either prior to, during or after the period of your employment copy or reproduce in any form or by or on any media or device or allow others to copy or reproduce any trade secret or confidential information.
|
15.5
|
All notes, memoranda or electronic records of such trade secrets or confidential information made or received by you during the course of your employment shall be the property of your Employer and shall be surrendered by you to us at the termination of your employment or at our request at any time during the course of your employment.
|
15.6
|
The express permission of your Head of Business Area and the Head of Legal must be obtained before any confidential information is discussed with any third parties, and before confidential documents are removed or transmitted from your Employer’s premises.
|
15.7
|
Your obligation above shall continue to apply after the termination of your employment (whether terminated lawfully or not) without limit of time. Each of those obligations is enforceable independently of each of the others and its validity shall not be affected if any of the others is unenforceable to any extent.
|
15.8
|
The restrictions in Clauses 15.3 - 15.6 do not apply in relation to any disclosure or use required by law or to any protected disclosure within the meaning of s.43A Employment Rights Act 1996.
|
16
|
DATA PROTECTION
|
16.1
|
Each Party will comply with its obligations under all relevant Data Protection Laws at all times in relation to this Agreement.
|
16.2
|
In order to fulfil our obligations to you as an employer, including under this Contract and generally in the course of your employment, the Employer will be required to process your personal data (as defined in the Employer’s Information Protection Policy). The Employer will process your personal data in accordance with the provisions of that notice.
|
17
|
WHISTLEBLOWING
|
17.1
|
Your Employer's Whistleblowing Policy (which may be changed from time to time at the Employer's discretion) is available at Section 17 of the Employee Handbook. Its purpose is to ensure that your Employer has appropriate and effective procedures for the purposes of disclosing and handling reportable concerns (as defined at that section of the Employee Handbook).
|
17.2
|
Your Employer takes the making of reportable concerns extremely seriously, and you should ensure that you regularly review and are familiar with the contents of the Whistleblowing Policy, and the methods for making reportable concerns.
|
17.3
|
For the avoidance of any doubt, nothing in this contract precludes you from making a reportable concern as set out in the Whistleblowing Policy, or from making a “protected disclosure” within the meaning of Part4A (Protected Disclosures) of the Employment Rights Act 1996 or from disclosing a "reportable concern" under the Financial Conduct Authority Handbook or the Prudent Regulatory Authority Rulebook. This includes protected disclosures made about matters previously disclosed to another recipient.
|
17.4
|
Notwithstanding any other provision of this Contract, for the avoidance of doubt, nothing herein prevents reporting or receiving financial awards from the government resulting from reporting possible violations of applicable law or regulation to any governmental agency or entity, or making other disclosures, protected under the whistleblower provisions of applicable law or regulation, including, without limitation, good faith disclosure on a confidential basis of Confidential Information constituting "Trade Secrets" as defined in 18 U.S.C. § 1839 (or similar law in the UK), and so long as such disclosures are consistent with 18 U.S.C. § 1833 (or similar law in the UK).
|
18
|
RESTRICTIVE COVENANTS
|
18.1
|
In this clause, the following words shall have the following meanings:
|
18.2
|
In order to protect the confidential information, business connections and other legitimate interests of your Employer and any Group Company to which you have access as a result of your Employment, you covenant with your Employer (for itself and as trustee and agent for each Group Company) that you shall not:
|
18.2.1
|
while you remain employed and for twelve months after the Termination Date, solicit or endeavour to entice away from your Employer or any Group Company the business or custom of a Restricted Client with a view to providing goods or services to that Restricted Client in competition with any Restricted Business; or
|
18.2.2
|
while you remain employed and for twelve months after the Termination Date in the course of or in connection with any business concern which is in competition with any Restricted Business, offer to employ, hire or employ, or engage or otherwise endeavour to entice away from your Employer or any Group Company any Restricted Person; or
|
18.2.3
|
while you remain employed and for twelve months after the Termination Date, be involved in any Capacity with any business concern which is (or intends to be) in competition with any Restricted Business; or
|
18.2.4
|
while you remain employed and for twelve months after the Termination Date, be involved with the provision of goods or services to (or otherwise have any business dealings with) any Restricted Client in the course of any business concern which is in competition with any Restricted Business; or
|
18.2.5
|
at any time after the Termination Date, represent yourself as connected with your Employer or any Group Company in any Capacity.
|
18.3
|
None of the restrictions in clause 18.2 shall prevent you from:
|
18.3.1
|
holding an investment by way of shares or other securities of not more than 5% of the total issued share capital of any company, whether or not it is listed or dealt in on a recognised stock exchange; or
|
18.3.2
|
being engaged or concerned in any business concern insofar as your duties or work shall relate solely to geographical areas where the business concern is not in competition with any Restricted Business; or
|
18.3.3
|
being engaged or concerned in any business concern, provided that your duties or work shall relate solely to services or activities of a kind with which you were not concerned to a material extent in the Relevant Period.
|
18.4
|
The restrictions imposed on you by this clause 18 apply to you acting:
|
18.4.1
|
directly or indirectly; and
|
18.4.2
|
on your own behalf or on behalf of, or in conjunction with, any firm, company or person.
|
18.5
|
The periods for which the restrictions in clause 18.2 apply shall be reduced by any period that you spend on Garden Leave immediately prior to the Termination Date.
|
18.6
|
If you receive an offer to be involved in a business concern in any Capacity during the Employment, or prior to the expiry of the last of the covenants in this clause 18, you shall give the person making the offer a copy of this clause 18 and shall tell your Employer the identity of that person as soon as possible after accepting the offer.
|
18.7
|
If, at any time during your employment, two or more Restricted Persons have left their employment, appointment or engagement with your Employer to perform Restricted Business for a business concern which is, or intends to be, in competition with any Restricted Business, you will not at any time during the six months following the last date on which any of those Restricted Persons were employed or engaged by your Employer, be employed or engaged in any way with that business concern under which you will perform Restricted Business on the behalf of that business concern.
|
18.8
|
You acknowledge that the provisions of this clause 18 are fair and reasonable and necessary to protect the goodwill and interests of your Employer and its Group Companies.
|
18.9
|
Each of the restrictions in this clause 18 is intended to be separate and severable. If any of the restrictions shall be held to be void but would be valid if part of their wording were deleted, such restriction shall apply with such deletion as may be necessary to make it valid or effective.
|
18.10
|
You will, at the request and expense of your Employer, enter into a separate agreement with any Group Company in which you agree to be bound by restrictions corresponding to those restrictions in this clause 18 (or such of those restrictions as may be appropriate) in relation to that Group Company.
|
19
|
ADDITIONAL INFORMATION
|
19.1
|
There are no collective agreements relevant to your employment.
|
19.2
|
You are required to comply at all times with your Employer’s rules, policies and procedures. Copies of all rules, policies and procedures are set out or referred to in the Employee Handbook and the applicable section on the intranet. For the avoidance of doubt such rules, policies and procedures are not incorporated by reference into this Contract and they can be changed, replaced or withdrawn at any
|
19.3
|
This Contract, your offer letter and Section 4 of the Employee Handbook constitute your contract of employment with your Employer. These documents contain the entire and only agreement between you and your Employer and supersede any previous agreements between you and your Employer.
|
19.4
|
This Agreement sets out the written particulars of your employment with your Employer in accordance with section 1 of the Employment Rights Act 1996.
|
19.5
|
The Contracts (Rights of Third Parties) Act 1999 shall not apply to this agreement. No person other than you and your Employer shall have any rights under this agreement and this agreement shall not be enforceable by any person other than you and your Employer.
|
19.6
|
This agreement shall be governed and construed in accordance with English law.
|
20
|
SECURITY AND USE OF EQUIPMENT
|
20.1
|
You acknowledge and understand that, consistent with the Employer’s employee privacy notice, the Employer may legitimately monitor any communications sent or received by you either in the performance of your duties or by way of the Employer's networks. For the purposes of this clause 20:
|
20.1.1
|
"monitoring" means the checking, recording and reviewing of telephone calls, computer files, records and e-mails, and the undertaking of any other compliance, security or risk analysis checks the Employer reasonably considers necessary; and
|
20.1.2
|
"networks" includes any telephone communications using the Employer's switchboard; voicemail system, and Employer's e-mail network.
|
20.2
|
You undertake at all times to comply with all conditions of use which may from time to time be imposed by the Employer with regard to the use of equipment networks and systems provided by the Employer.
|
21.1
|
“Data Protection Laws” means the Data Protection Act 1998 and all subordinate legislation in force from time to time in England which implements the European Union Directive 95/46/EC, Directive 97/66/EC or any successor legislations thereto (including Regulation 2016/679), and any
|
21.2
|
associated codes, regulation or guidance (as may be amended or replaced from time to time) and the term ‘Personal Data’ shall have the meaning set out in the Data Protection Laws.
|
21.3
|
For the purposes of this Agreement, “
Group Company
” means: your Employer’s subsidiary undertakings and any entity which is your Employer’s parent undertaking or a subsidiary undertaking of your Employer’s parent undertaking (other than your Employer) from time to time where the expressions “
subsidiary undertaking
” and “
parent undertaking
” shall have the meanings given to them by section 1162 and schedule 7 of the Companies Act 2006, and includes any company wholly or partly owned by any subsidiary of your Employer.
|
21.4
|
“
Intellectual Property Rights
” means (a) copyright, patents, database rights, topography rights and rights in trademarks, domain names, designs, know-how and confidential information (whether registered or unregistered); (b) applications for registration, and the right to apply for registration, for any of these rights; and (c) all other intellectual property rights and forms of protection of a similar nature or having equivalent effect anywhere in the world.
|
HERMES FUND MANAGERS LIMITED
|
||
|
LONG TERM INCENTIVE PLAN
|
|
1.
|
DEFINITIONS AND INTERPRETATION
|
1.1
|
In the Plan, unless the context otherwise requires:
|
(a)
|
ill-health or disability (evidenced to the satisfaction of the Board); or
|
(b)
|
death;
|
(c)
|
the acquisition of an interest in the Award Shares;
|
(d)
|
the Vesting of the Award Shares;
|
(e)
|
the sale or transfer of an interest in the Award Shares; and
|
(f)
|
any other taxable event in relation to the Award Shares.
|
(a)
|
a date on which any tranche of Award Shares is due to Vest under Rules 3.2 or 3.3, and/or
|
(b)
|
the third anniversary of Completion and each subsequent anniversary of Completion;
|
1.2
|
Any reference in the Plan to any enactment includes a reference to that enactment as from time to time modified, extended or re-enacted.
|
1.3
|
Where the context admits, a reference to the singular includes the plural and a reference to the male includes the female.
|
1.4
|
Expressions in italics and headings are for guidance only and do not form part of the Plan.
|
2.
|
GRANT OF AWARDS
|
2.1
|
Timing of grant
|
(a)
|
The Board shall grant the Roll-over Awards as soon as reasonably practicable after Completion.
|
(b)
|
Thereafter, subject to Rule 2.3, the Board may resolve to grant an Award to any Employee as it may in its absolute discretion determine:
|
(i)
|
on or as soon as reasonably practicable after each anniversary of Completion; and
|
(ii)
|
at such other times when the Board, in its absolute discretion, considers that circumstances exist such as to justify the grant of an Award.
|
2.2
|
Nature of an Award
|
2.3
|
Limits on the grant of Awards
|
(a)
|
The total number of Shares over which the Board may grant Awards on any date shall not exceed the total number of Shares then held by the Trustee in respect of which the beneficial ownership:
|
(i)
|
is not already subject to an Award; and
|
(ii)
|
has not already been acquired by Federated.
|
(b)
|
In the event that on any date the Board grants Awards over a total number of Shares in excess of that determined under Rule 2.3(a), the number of Shares comprised in each Award granted on that date shall be reduced pro-rata so that the total number of Shares over which those Awards take effect does not cause the number determined under Rule 2.3(a) to be exceeded.
|
2.4
|
Size of an Award
|
2.5
|
Type of an Award
|
2.6
|
Mechanics of grant
|
2.7
|
Contents of the Award Agreement
|
(a)
|
specify the number of Award Shares,
|
(b)
|
specify the Vesting Commencement Date in relation to the Award (which shall in respect of the Roll-over Awards by 1 July 2018);
|
(c)
|
in the case of a Roll-over Award, specify the number of Award Shares comprised in each of the Pool A Award and a Pool B Award;
|
(d)
|
contain an indemnity in relation to any Tax Liability;
|
(e)
|
contain an undertaking that the Award Holder shall not exercise any voting rights attaching to the Award Shares;
|
(f)
|
contain provisions under which the Award Holder may sell the beneficial ownership of the Award Shares to Federated pursuant to Rule 4.2 or Rule 4.6,
|
(g)
|
contain an agreement to and acceptance of the provisions of Rules 10 and 11;
|
(h)
|
save in respect of the Roll-over Awards, contain any additional terms or conditions in relation to an Award as the Board may specify; and
|
(i)
|
contain a power of attorney in favour of Hermes to facilitate the operation of the Plan, and in particular (but without limitation) the provisions of Rules 5, 7, 8, 9 and 11.
|
2.8
|
Non-transferability of Award Shares
|
3.
|
VESTING OF AWARDS
|
3.1
|
Timing of Vesting
|
3.2
|
Timing of Vesting: Pool A
|
(a)
|
As to 20% of the Award Shares (rounded down to the nearest whole number of Shares) on the third anniversary of the Vesting Commencement Date;
|
(b)
|
As to a further 30% of the Award Shares (rounded down to the nearest whole number of Shares) on the fourth anniversary of the Vesting Commencement Date; and
|
(c)
|
As to the remainder of the Award Shares on the earlier of the fifth anniversary of the Vesting Commencement Date and/or the day before the fifth anniversary of the date on which the Award Holder acquired beneficial ownership of the Award Shares.
|
3.3
|
Timing of Vesting: Pool B
|
(a)
|
As to 50% of the Award Shares (rounded down to the nearest whole number of Shares) on the date which is thirty-nine (39) months after the Vesting Commencement Date; and
|
(b)
|
As to the remainder of the Award Shares on the date which is fifty-one (51) months after the Vesting Commencement Date.
|
3.4
|
Notice
|
4.
|
CONSEQUENCES OF VESTING
|
4.1
|
Release of forfeiture risk
|
4.2
|
Right to sell Award Shares
|
4.3
|
Timing of sale: Pool A
|
(a)
|
As to one third of the Vested Shares (rounded down to the nearest whole number of Shares) during the first Sale Window following the sixth anniversary of the Vesting Commencement Date;
|
(b)
|
As to a further one third of the Vested Shares (rounded down to the nearest whole number of Shares) during the first Sale Window following the seventh anniversary of the Vesting Commencement Date; and
|
(c)
|
As to the remainder of the Vested Shares during the first Sale Window following the eighth anniversary of the Vesting Commencement Date and thereafter the first Sale Window following each subsequent anniversary of the Vesting Commencement Date.
|
4.4
|
Timing of sale: Pool B
|
4.5
|
Shares remain saleable
|
4.6
|
Federated’s call right
|
4.7
|
Timing of purchase: Pool A
|
(a)
|
As to one third of the Vested Shares (rounded down to the nearest whole number of Shares) during the first Sale Window following the sixth anniversary of the Vesting Commencement Date;
|
(b)
|
As to a further one third of the Vested Shares (rounded down to the nearest whole number of Shares) during the first Sale Window following the seventh anniversary of the Vesting Commencement Date; and
|
(c)
|
As to the remainder of the Vested Shares during the first Sale Window following the eighth anniversary of the Vesting Commencement Date and thereafter the first Sale Window following each subsequent anniversary of the Vesting Commencement Date.
|
4.8
|
Timing of purchase: Pool B
|
4.9
|
Shares remain purchasable
|
5.
|
LEAVERS AND OTHER FORFEITURE CIRCUMSTANCES
|
5.1
|
Good Leavers
|
5.2
|
Other Leavers
|
(a)
|
the Award Holder shall be obliged to transfer the beneficial ownership of his or her Unvested Shares to the Trustee for no consideration; and
|
(b)
|
the Award Holder’s Vested Shares shall continue to be subject to the provisions of Rules 4.2 to 4.9.
|
5.3
|
Bad Leavers and other forfeiture circumstances
|
5.4
|
Meaning of ceasing employment
|
(a)
|
An Award Holder shall be treated for the purposes of Rule 3.4 and/or this Rule 5 as ceasing to be an Employee on the earlier of (i) the date he or she gives or receives notice to terminate his or her employment or (ii) the first date on which he or she is no longer an Employee of any Group Company.
|
(b)
|
If any Award Holder ceases to be such an Employee before the Vesting of his or her Award in circumstances where he or she retains a statutory right to return to work then he or she shall be treated as not having ceased to be such an Employee until
|
(c)
|
The reason for the termination of office or employment of an Award Holder shall be determined for the purposes of Rules 5.1 to 5.3 regardless of whether such termination was lawful or unlawful.
|
(d)
|
For the avoidance of doubt, an Award ceases to vest immediately upon an Award Holder giving or being given notice of termination as provided in Clause 3.4.
|
5.5
|
Timing of Federated’s purchase of Award Shares
|
6.
|
VALUATION AND SALES WINDOWS
|
6.1
|
At least 30 days prior to a Valuation Trigger Date, the Board shall appoint a Valuation Expert (which shall act as expert and not as arbitrator) to determine the Fair Value of the Award Shares. The Board may appoint a Valuation Expert to determine the Fair Value of the Award Shares at any other time the Board considers necessary.
|
6.2
|
The Valuation Expert shall be requested to determine Fair Value as at relevant Valuation Trigger Date, and to notify the Board and Federated of its determination prior to that Valuation Trigger Date.
|
6.3
|
Prior to the fourth anniversary of Completion and each subsequent anniversary of Completion, the Board shall determine the commencement date and duration of a Sale Window. The Sale Window shall commence on the relevant anniversary of Completion, provided that in the event the Valuation Expert has not notified the Board of its determination under Rule 6.3 within a reasonable time before the relevant anniversary of Completion, the Board may determine that the Sale Window shall commence on a date as soon as reasonably practicable after the Valuation Expert has notified the Board of its determination under Rule 6.3.
|
6.4
|
Once the Board has determined the commencement date and duration of a Sale Window under Rule 6.4, it shall notify Award Holders of the commencement date and duration of the Sale Window, and the Fair Value of the Award Shares applying during that Sale Window.
|
7.
|
LISTING OF SHARES; WINDING UP
|
7.1
|
Listing
|
(a)
|
the Unvested Shares comprised in each tranche of an Award (as set out in Rule 3.2 for a Pool A Award and in Rule 3.3 for a Pool B Award) shall continue to Vest in accordance with the terms of this Plan (i.e., Rule 3) and, upon Vesting, the Award Shares may be sold by the Award Holder in the open market;
|
(b)
|
Vested Shares may be sold by the Award Holder in the open market; and
|
(c)
|
all rights of or obligations on Federated to purchase Award Shares, and all rights of or obligations on an Award Holder to sell Award Shares to Federated, under any Rule, shall cease to apply or have any effect immediately on the Listing.
|
7.2
|
Winding up
|
(a)
|
the Company passes a resolution for a voluntary winding up of the Company; or
|
(b)
|
an order is made for the compulsory winding up of the Company,
|
8.
|
TAXATION
|
8.1
|
Tax indemnity
|
8.2
|
Payment of Tax Liability
|
9.
|
ADJUSTMENT OF AWARDS
|
(a)
|
any variation of the share capital of the Company; or
|
(b)
|
a demerger, special dividend or other similar event which affects the Fair Value of Shares to a material extent,
|
10.
|
CIRCUMSTANCES IN WHICH MALUS AND CLAWBACK CAN APPLY
|
10.1
|
This Rule 10 applies in relation to an Award if:
|
(a)
|
either or both of Rules 10.2 and/or 10.3 apply; and
|
(b)
|
Rule 10.4 applies.
|
10.2
|
This Rule 10.2 applies in relation to an Award if the Board, at its discretion, determines that any of the following circumstances exist:
|
(a)
|
the Award Holder has participated in or was responsible for conduct which resulted in significant losses to a Group Company;
|
(b)
|
the Award Holder has failed to meet appropriate standards of fitness and propriety;
|
(c)
|
the Company has reasonable evidence of fraud or material dishonesty by the Award Holder;
|
(d)
|
the Company has become aware of any material wrongdoing on the part of the Award Holder;
|
(e)
|
the Award Holder has acted in any manner which in the opinion of the Board has brought or is likely to bring any Group Company into material disrepute or is materially adverse to the interests of any Group Company;
|
(f)
|
there is a breach of the Award Holder’s employment contract that is a potentially fair reason for dismissal;
|
(g)
|
the Award Holder is in breach of a fiduciary duty owed to any Group Company or any client or customer of any Group Company;
|
(h)
|
the Award Holder participates in a ‘lift out’ of a team or group of Employees, or whether alone or with others entices or otherwise encourages a team or group of Employees to move to another firm;
|
(i)
|
an Award Holder who has ceased to be an Employee was in breach of his or her employment contract or fiduciary duties in a manner that would have prevented the grant or Vesting of the Award had the Company been aware (or fully aware) of that breach, and which the Company was not aware (or not fully aware) until after:
|
(aa)
|
the Award Holder’s ceasing to be an employee; and
|
(bb)
|
the time Award Vested; or
|
(aa)
|
determining whether the Award should be granted; or
|
(bb)
|
determining the size and nature of the Award.
|
10.3
|
This Rule 10.3 applies in relation to an Award if the Board, at its discretion, determines that either of the following circumstances exist:
|
(a)
|
a Group Company mis-stated any financial information (whether or not audited) for any part of any financial year that was taken into account in:
|
(i)
|
determining whether the Award should be made; or
|
(ii)
|
determining the size and nature of the Award; or
|
(b)
|
a Group Company or business unit that employs or employed the Award Holder, or for which the Award Holder is responsible, has suffered a material failure of risk management.
|
10.4
|
This Rule 10.4 applies in relation to an Award if the Board, at its discretion, determines that, if the circumstances mentioned in Rules 10.2 or 10.3 had existed, and the Board had been fully aware that they existed at the date on which the Award was granted, then:
|
(a)
|
the Board would not have granted the Award; or
|
(b)
|
the Board would have granted the Award in relation to a smaller number of Shares.
|
10.5
|
If the Board makes a determination in relation to an Award under this Rule 10, it must do so within three years of becoming aware of the circumstances mentioned in Rules 10.2 or 10.3.
|
11.
|
OPERATION OF MALUS AND CLAWBACK
|
11.1
|
This Rule 11 applies to an Award if Rule 10 applies to the Award.
|
11.2
|
The Board may determine that such number of Award Shares (up to the total number of Award Shares, and whether Vested Shares or Unvested Shares) as the Board considers to be fair and reasonable, taking into account of all circumstances that the Board considers to be relevant, shall be forfeited by the Award Holder for no consideration.
|
11.3
|
If at the end of the determination under Rule 10.4, the Award has Vested and the Award Holder has sold the beneficial ownership of some or all of the Award Shares to Federated, the Board may determine a Clawback Amount in relation to the Award.
|
11.4
|
The Clawback Amount shall be such amount as the Board considers to be fair and reasonable, taking account of all circumstances that the Board considers to be relevant, but shall not be more than the greater of:
|
(a)
|
the Fair Value of those Award Shares sold to Federated, measured on the date of Vesting, and
|
(b)
|
the Fair Value of those Award Shares sold to Federated, measured on the date of the determination.
|
11.5
|
If the Award Holder has paid or is liable to pay any amount of a Tax Liability which cannot be recovered from or repaid by any relevant tax authority (whether directly or indirectly), the Board may in its discretion decide to, or where Rule 10.3 applies, will, reduce the Clawback Amount to take account of this amount. In deciding whether to reduce the Clawback Amount, the Board shall take account of such factors as it thinks fit, which may include market practice, corporate governance rules and guidelines, and the expectations of shareholders.
|
11.6
|
For the avoidance of doubt, the Board is not obliged to determine a Clawback Amount in relation to any particular Award, even if the Board does determine a Clawback Amount in relation to other Awards to the same or other Award Holders which were granted or which Vested on the same date or dates.
|
11.7
|
The Award Holder shall reimburse the Company for the Clawback Amount, in any way acceptable to the Board, on or as soon as possible after the Board determines a Clawback Amount in relation to the Award. If the Award Holder fails to reimburse the Company within 30 days after the determination, the Company shall obtain reimbursement from the Award Holder in any (or a combination of the following ways:
|
(a)
|
by causing Award Shares (whether Vested Shares or Unvested Shares) held by the Trustee as nominee for the Award Holder to be forfeited for no consideration, with the consequence that the Award Holder no longer has any beneficial interest in those Shares;
|
(b)
|
by reducing or cancelling any cash bonus payable to the Award Holder by any Group Company;
|
(c)
|
by reducing or cancelling any future or existing award made or option granted to the Award Holder under any other share incentive plan or bonus plan operated by any Group Company (other than a Schedule 2 SIP or a Schedule 3 SAYE option plan, as those terms are defined in ITEPA);
|
(d)
|
by requiring the Award Holder to make a cash payment to a Group Company; or
|
(e)
|
by reducing the Award Holder’s salary.
|
11.8
|
If the Award Holder participates in another share incentive plan or bonus plan operated by a Group Company, and that other plan contains a provision that has a similar effect to his or her Rule 10, the Board may give effect to that provision by causing such number of Award Shares (up to the total number of Award Shares, and whether Vested Shares or Unvested Shares) as the Board considers to be fair and reasonable, to be forfeited by the Award Holder for no consideration.
|
11.9
|
In the event that Award Shares are forfeited under any provision of this Rule 11, the beneficial ownership of the forfeited Award Shares shall be transferred by the Award Holder to the Trustee as soon as reasonably practicable.
|
12.
|
ALTERATIONS
|
12.1
|
The Board may at any time, acting fairly and reasonably, alter the Plan or the terms of any Award, save that alterations to the detriment of the Award Holders may not be made without the consent of the majority in number of the Award Holders who would be detrimentally affected by the alteration.
|
12.2
|
The Board may, in its discretion, require an Award Holder to enter into an amended Award Agreement to give effect to any alteration to the Plan or the terms of the Award Holder’s Award, save that where entry into the amended Award Agreement would be to the detriment of the Award Holder, the Award Holders may not be required to do so without the consent of the majority in number of the Award Holders who would be detrimentally affected.
|
13.
|
MISCELLANEOUS
|
13.1
|
Employment
|
13.2
|
Disputes
|
13.3
|
Exercise of powers and discretions
|
13.4
|
Share rights
|
13.5
|
Notices
|
(a)
|
by personal delivery or by post, in the case of a company to its registered office, and in the case of an individual to his or her last known address, or, where he or she is a director or employee of a Group Company, either to his or her last known address or to the address of the place of business at which he or she performs the whole or substantially the whole of the duties of his or her office or employment;
|
(b)
|
in an electronic communication to their usual business address or such other address for the time being notified for that purpose to the person giving the notice; or
|
(c)
|
by such other method as the Board determines.
|
13.6
|
Third parties
|
13.7
|
Benefits not pensionable
|
13.8
|
Governing law
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Federated Investors, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
Date
|
May 1, 2019
|
By:
|
/s/ J. Christopher Donahue
|
|
|
|
|
|
J. Christopher Donahue
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Federated Investors, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
Date
|
May 1, 2019
|
By:
|
/s/ Thomas R. Donahue
|
|
|
|
|
|
Thomas R. Donahue
|
|
|
|
|
|
Chief Financial Officer
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
Date
|
May 1, 2019
|
By:
|
/s/ J. Christopher Donahue
|
|
|
|
|
|
J. Christopher Donahue
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date
|
May 1, 2019
|
By:
|
/s/ Thomas R. Donahue
|
|
|
|
|
|
Thomas R. Donahue
|
|
|
|
|
|
Chief Financial Officer
|
|