Document

0001056288-18-000035.txt : 20181026 0001056288-18-000035.hdr.sgml : 20181026 20181025195848 ACCESSION NUMBER: 0001056288-18-000035 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20181025 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20181026 DATE AS OF CHANGE: 20181025 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED INVESTORS INC /PA/ CENTRAL INDEX KEY: 0001056288 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 251111467 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14818 FILM NUMBER: 181140074 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWER STREET 2: 1001 LIBERTY AVENUE CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4122881900 MAIL ADDRESS: STREET 1: FEDERATED INVESTORS TOWER STREET 2: 1001 LIBERTY AVENUE CITY: PITTSBURGH STATE: PA ZIP: 15222 8-K 1 a8-kx2018q3epr.htm 8-K Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 25, 2018

FEDERATED INVESTORS, INC.

(Exact name of registrant as specified in its charter)



Pennsylvania	001-14818	25-1111467
(State or other jurisdiction	(Commission File Number)	(I.R.S. Employer
of incorporation)		Identification No.)

Federated Investors Tower

Pittsburgh, Pennsylvania 15222-3779

(Address of principal executive offices, including zip code)

(412) 288-1900

(Registrant's telephone number, including area code)

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).



	Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On October 25, 2018, Federated Investors, Inc. issued the earnings press release attached hereto as Exhibit 99.1 to report third quarter 2018 results.

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.

(d) Exhibits:

Exhibit 99.1 - Earnings press release issued by Federated Investors, Inc. dated October 25, 2018

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



			FEDERATED INVESTORS, INC.
			(REGISTRANT)


Date	October 25, 2018	By:	/s/ Thomas R. Donahue
			Thomas R. Donahue
			Chief Financial Officer

EX-99.1 2 a991-2018q3earningspressre.htm PRESS RELEASE Exhibit

Exhibit 99.1

Federated Investors, Inc. Reports Third Quarter 2018 Earnings


•	Q3 2018 EPS of $0.59 up 5 percent from $0.56 in Q3 2017


•	Managed assets reach a record $437 billion with completion of Hermes acquisition


•	Board declares $0.27 per share quarterly dividend

(PITTSBURGH, Pa., Oct. 25, 2018) — Federated Investors, Inc. (NYSE: FII), one of the nation's largest investment managers, today reported earnings per diluted share (EPS) of $0.59 for Q3 2018, compared to $0.56 for the same quarter last year on net income of $59.6 million for Q3 2018 compared to $56.4 million for Q3 2017. Federated reported EPS of $1.57 for both YTD 2018 and 2017 on YTD 2018 net income of $158.8 million compared to $159.5 million of net income for the same period last year. The results in this press release include the acquisition of Hermes Fund Managers Limited (Hermes), beginning July 1, 2018.

Federated's YTD 2018 results include a $27.2 million pre-tax net expense, representing $0.21 per diluted share net of tax, primarily from entering into two foreign exchange derivative instruments used to eliminate exposure to fluctuations in the British pound sterling in preparation for the Q3 2018 Hermes acquisition payment. In addition, Federated has incurred $9.9 million and $12.7 million for Q3 2018 and YTD 2018, respectively, in transaction-related costs directly attributable to the Hermes acquisition.

Federated's total managed assets were a record $437.2 billion at Sept. 30, 2018 with the completion of the Hermes acquisition, up $73.5 billion or 20 percent from $363.7 billion at Sept. 30, 2017 and up $57.5 billion or 15 percent from $379.7 billion at June 30, 2018. Total average managed assets for Q3 2018 were $433.9 billion, up $73.4 billion or 20 percent from $360.5 billion reported for Q3 2017 and up $47.9 billion or 12 percent from $386.0 billion reported for Q2 2018.

"Hermes incorporates environmental, social and governance factors into a wide range of actively managed strategies and stewardship services," said J. Christopher Donahue, president and chief executive officer. "Hermes and Federated are off to an exciting and promising start together. With demand for ESG investing on the rise, we look forward to Hermes' continued growth as we begin to offer Hermes' strategies to U.S. investors."

Federated's board of directors declared a dividend of $0.27 per share. The dividend is payable on Nov. 15, 2018 to shareholders of record as of Nov. 8, 2018. During Q3 2018, Federated purchased 276,982 shares of Federated class B common stock for $5.9 million.

Federated's equity assets were a record $84.1 billion at Sept. 30, 2018, primarily due to the inclusion of $25.7 billion of Hermes' assets. Equity assets were up $22.4 billion or 36 percent from $61.7 billion at Sept. 30, 2017 and up $26.1 billion or 45 percent from $58.0 billion at June 30, 2018. Top-selling equity funds during Q3 2018 on a net basis were Federated MDT Small Cap Core Fund, Federated Kaufmann Small Cap Fund, Federated MDT Small Cap Growth Fund, Federated MDT Mid Cap Growth Fund and Hermes SDG Engagement Equity Fund.

Federated's fixed-income assets were a record $65.4 billion at Sept. 30, 2018, primarily resulting from the inclusion of $2.8 billion of Hermes' assets. Fixed-income assets were up $12.7 billion or 24 percent from $52.7 billion at Sept. 30, 2017 and up



MEDIA:	MEDIA:	ANALYSTS:
Ed Costello 412-288-7538	Meghan McAndrew 412-288-8103	Ray Hanley 412-288-1920



Federated Reports Q3 2018 Earnings		Page 2 of 12

$4.0 billion or 7 percent from $61.4 billion at June 30, 2018. Top-selling fixed-income funds during Q3 2018 on a net basis were Federated Ultrashort Bond Fund, Federated Institutional High Yield Bond Fund, Federated Short-Term Income Fund, Federated Floating Rate Strategic Income Fund and Federated Total Return Bond Fund.

Money market assets were $264.2 billion at Sept. 30, 2018, up $20.4 billion or 8 percent from $243.8 billion at Sept. 30, 2017 and up $9.0 billion or 4 percent from $255.2 billion at June 30, 2018. Money market fund assets were $183.0 billion at Sept. 30, 2018, up $5.1 billion or 3 percent from $177.9 billion at Sept. 30, 2017 and up $10.3 billion or 6 percent from $172.7 billion at June 30, 2018. Federated's money market separate account assets were $81.3 billion at Sept. 30, 2018, up $15.3 billion or 23 percent from $66.0 billion at Sept. 30, 2017 and down $1.3 billion or 2 percent from $82.6 billion at June 30, 2018.

Financial Summary

Q3 2018 vs. Q3 2017

Revenue increased $30.3 million or 11 percent primarily due to the consolidation of Hermes' revenue. This increase was partially offset by a decrease in revenue due to the adoption of the new revenue recognition accounting standard and higher voluntary fee waivers for certain money market funds for competitive purposes.

During Q3 2018, Federated derived 66 percent of its revenue from long-term assets (45 percent from equity assets, 15 percent from fixed-income assets, and 6 percent from alternative/private markets and multi-asset), 33 percent from money market assets, and 1 percent from sources other than managed assets.

Operating expenses increased $37.1 million or 20 percent primarily due to the consolidation of Hermes' expenses. This increase was partially offset by a decrease in distribution expense due to the adoption of the new revenue recognition accounting standard and a change in the mix of average money market fund assets.

Q3 2018 vs. Q2 2018

Revenue increased $52.6 million or 21 percent and operating expenses increased $51.5 million or 29 percent primarily due to the consolidation of Hermes.

Nonoperating income (expenses), net increased $30.9 million primarily due to a loss recorded in Q2 2018 from two foreign currency forward derivative instruments entered into in connection with the Hermes acquisition (FX Forward Loss).

YTD 2018 vs. YTD 2017

Revenue increased $3.8 million primarily due to the consolidation of Hermes revenue. This increase was significantly offset by a decrease in revenue due to the adoption of the new revenue recognition accounting standard, a change in the mix of average money market assets and a previously disclosed Q1 2017 change in a customer relationship.

For the first nine months of 2018, Federated derived 63 percent of its revenue from long-term assets (42 percent from equity assets, 16 percent from fixed-income assets, and 5 percent from alternative/private markets and multi-asset), and 37 percent from money market assets.

Operating expenses increased by $12.2 million or 2 percent primarily due to the consolidation of Hermes' expenses. This increase was partially offset by a decrease in expense due to the adoption of the new revenue recognition accounting standard and a change in the mix of average money market fund assets.

Nonoperating (expenses) income, net decreased $36.1 million due primarily to the FX Forward Loss. In addition, investment income, net decreased due to a decrease in the market value of investments, primarily from securities held by consolidated



Federated Reports Q3 2018 Earnings		Page 3 of 12

investment companies, and fewer gains realized from the redemption of investments in the nine-month period ended Sept. 30, 2018 as compared to the same period in 2017.

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

Federated will host an earnings conference call at 9 a.m. Eastern on Oct. 26, 2018. Investors are invited to listen to Federated's earnings teleconference by calling 877-407-0782 (domestic) or 201-689-8567 (international) prior to the 9 a.m. start time. The call may also be accessed online in real time via the About Federated section of FederatedInvestors.com. A replay will be available from approximately 12:30 p.m. Eastern Oct. 26, 2018 until Nov. 2, 2018 by calling 877-481-4010 (domestic) or 919-882-2331 (international) and entering access code 37820. An online replay will be available via FederatedInvestors.com for one year.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $437.2 billion in assets as of Sept. 30, 2018. With 129 funds and a variety of separately managed account options, Federated provides comprehensive investment management to more than 9,600 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Federated ranks in the top 6 percent of equity fund managers in the industry, the top 8 percent of money market fund managers and the top 11 percent of fixed-income fund managers¹. Federated also ranks as the seventh-largest separately managed accounts manager². Information regarding Hermes is available at Hermes-Investment.com. An analyst presentation that includes information about Hermes also is available. For more information, visit FederatedInvestors.com.

###

1) Strategic Insight, Sept. 30, 2018. Based on assets under management in open-end funds.

2) Money Management Institute/Dover Financial Research, Q2 2018.

Federated Securities Corp. is distributor of the Federated funds.

Separately managed accounts are made available through Federated Global Investment Management Corp., Federated Investment Counseling, Federated MDTA LLC, Hermes Investment Management Limited and Hermes European Equities Limited, each a registered investment adviser.

Certain statements in this press release, such as those related to growth expectations, anticipated product or strategy offerings, the level of fee waivers and expenses incurred by the company, performance, investor preferences and demand, asset flows and mix, customer relationships, acquisitions, integration and expenses constitute or may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Other risks and uncertainties include the ability of the company to anticipate when products or strategies will be ready to be offered, predict the level of fee waivers and expenses in future quarters, sustain product demand, and asset flows and mix, which could vary significantly depending on various factors, such as market conditions, investment performance and investor behavior. Other risks and uncertainties include the risk factors discussed in the company's annual and quarterly reports as filed with the SEC. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness of such statements in the future.



Federated Reports Q3 2018 Earnings		Page 4 of 12



Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
	Quarter Ended						% Change Q3 2017 to Q3 2018		Quarter Ended			% Change Q2 2018 to Q3 2018
	Sept. 30, 2018			Sept. 30, 2017					June 30, 2018
Revenue
Investment advisory fees, net	$	217,036		$	184,886		17	%	$	168,127		29	%
Administrative service fees, net—affiliates	49,855			47,461			5		48,370			3
Other service fees, net	41,725			45,968			(9	)	39,496			6
Total Revenue	308,616			278,315			11		255,993			21

Operating Expenses
Compensation and related	103,092			72,454			42		74,147			39
Distribution	72,153			84,838			(15	)	69,446			4
Professional service fees	13,535			6,948			95		9,278			46
Systems and communications	12,213			7,992			53		7,751			58
Office and occupancy	9,332			7,293			28		7,365			27
Travel and related	4,622			3,258			42		3,523			31
Advertising and promotional	4,502			2,345			92		3,237			39
Other	7,269			4,497			62		489			NM
Total Operating Expenses	226,718			189,625			20		175,236			29
Operating Income	81,898			88,690			(8	)	80,757			1

Nonoperating Income (Expenses)
Investment income, net	1,199			3,556			(66	)	1,377			(13	)
Debt expense	(1,602		)	(1,250		)	28		(1,431		)	12
Other, net	2,240			1			NM		(28,974		)	(108	)
Total Nonoperating Income (Expenses), net	1,837			2,307			(20	)	(29,028		)	(106	)
Income before income taxes	83,735			90,997			(8	)	51,729			62
Income tax provision¹	21,741			33,756			(36	)	13,062			66
Net income including the noncontrolling interests in subsidiaries	61,994			57,241			8		38,667			60
Less: Net income (loss) attributable to the noncontrolling interests in subsidiaries	2,386			802			198		(155		)	NM
Net Income	$	59,608		$	56,439		6	%	$	38,822		54	%

Amounts Attributable to Federated Investors, Inc.
Earnings Per Share²
Basic and diluted	$	0.59		$	0.56		5	%	$	0.38		55	%
Weighted-average shares outstanding
Basic	96,664			97,128					97,193
Diluted	96,664			97,129					97,194
Dividends declared per share	$	0.27		$	0.25				$	0.27

1) Sept. 30, 2018 and June 30, 2018 reflect a lower effective tax rate primarily due to the enactment of the Tax Cuts and Jobs Act of 2017 (Tax Act).

2) Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of earnings per share under the "two-class method." As such, total net income of $2.8 million, $2.2 million and $1.5 million available to unvested restricted Federated shareholders and, to a lesser extent, unvested shareholders of a nonpublic consolidated subsidiary for the quarterly periods ended Sept. 30, 2018, Sept. 30, 2017 and June 30, 2018, respectively, was excluded from the computation of earnings per share.



Federated Reports Q3 2018 Earnings		Page 5 of 12



Unaudited Condensed Consolidated Statements of Income
(in thousands, except per share data)
	Nine Months Ended
	Sept. 30, 2018			Sept. 30, 2017			% Change
Revenue
Investment advisory fees, net	$	559,429		$	545,525		3	%
Administrative service fees, net—affiliates	147,248			139,763			5
Other service fees, net	121,784			139,324			(13	)
Total Revenue	828,461			824,612			0

Operating Expenses
Compensation and related	255,613			217,226			18
Distribution	214,098			262,371			(18	)
Professional service fees	32,443			20,141			61
Systems and communications	28,397			24,258			17
Office and occupancy	24,238			21,805			11
Advertising and promotional	10,967			8,396			31
Travel and related	10,967			9,150			20
Other	9,412			10,591			(11	)
Total Operating Expenses	586,135			573,938			2
Operating Income	242,326			250,674			(3	)

Nonoperating (Expenses) Income
Investment income, net	3,294			11,707			(72	)
Debt expense	(4,363		)	(3,534		)	23
Other, net	(26,877		)	(32		)	NM
Total Nonoperating (Expenses) Income, net	(27,946		)	8,141			(443	)
Income before income taxes	214,380			258,815			(17	)
Income tax provision¹	53,713			95,888			(44	)
Net income including the noncontrolling interests in subsidiaries	160,667			162,927			(1	)
Less: Net income attributable to the noncontrolling interests in subsidiaries	1,906			3,396			(44	)
Net Income	$	158,761		$	159,531		0	%

Amounts Attributable to Federated Investors, Inc.
Earnings Per Share²
Basic and diluted	$	1.57		$	1.57		0	%
Weighted-average shares outstanding
Basic	97,013			97,521
Diluted	97,014			97,522
Dividends declared per share	$	0.79		$	0.75

1) Sept. 30, 2018 reflects a lower effective tax rate primarily due to the enactment of the Tax Act.

Unvested share-based awards that receive non-forfeitable dividend rights are deemed participating securities and are required to be considered in the computation of earnings per share under the “two-class method.” As such, total net income of $6.7 million and $6.3 million available to unvested restricted Federated shareholders and, to a lesser extent, unvested shareholders of a nonpublic consolidated subsidiary for the nine months ended Sept. 30, 2018 and Sept. 30, 2017, respectively, was excluded from the computation of earnings per share.



Federated Reports Q3 2018 Earnings		Page 6 of 12



Unaudited Condensed Consolidated Balance Sheets
(in thousands)	Sept. 30, 2018			Dec. 31, 2017
Assets
Cash and other investments	$	157,059		$	369,538
Other current assets	114,563			67,736
Intangible assets, net, including goodwill	1,160,824			736,915
Other long-term assets	91,211			57,221
Total Assets	$	1,523,657		$	1,231,410

Liabilities, Redeemable Noncontrolling Interests and Equity
Current liabilities	$	164,301		$	128,849
Long-term debt	160,000			170,000
Other long-term liabilities	179,248			141,183
Redeemable noncontrolling interests	192,744			30,163
Equity excluding treasury stock	1,121,518			1,039,947
Treasury stock	(294,154		)	(278,732		)
Total Liabilities, Redeemable Noncontrolling Interests and Equity	$	1,523,657		$	1,231,410



Federated Reports Q3 2018 Earnings		Page 7 of 12



Unaudited Changes in Long-Term Assets - By Asset Class
(in millions)	Quarter Ended									Nine Months Ended
	Sept. 30, 2018			June 30, 2018			Sept. 30, 2017			Sept. 30, 2018			Sept. 30, 2017
Equity
Beginning assets	$	57,973		$	58,830		$	60,404		$	62,816		$	56,759
Sales¹	3,757			2,731			2,570			9,681			9,131
Redemptions¹	(5,288		)	(5,078		)	(3,078		)	(15,624		)	(11,586		)
Net redemptions¹	(1,531		)	(2,347		)	(508		)	(5,943		)	(2,455		)
Net exchanges	(11		)	202			(52		)	64			(53		)
Acquisition-related	24,700			0			0			24,700			287
Market gains and losses²	3,012			1,288			1,877			2,506			7,183
Ending assets	$	84,143		$	57,973		$	61,721		$	84,143		$	61,721

Fixed Income
Beginning assets	$	61,435		$	62,205		$	52,436		$	64,160		$	51,314
Sales¹	5,163			4,755			3,587			14,826			11,778
Redemptions¹	(4,418		)	(4,934		)	(3,897		)	(15,946		)	(12,415		)
Net sales (redemptions)¹	745			(179		)	(310		)	(1,120		)	(637		)
Net exchanges	2			(207		)	53			(78		)	(73		)
Acquisition-related	2,732			0			0			2,732			148
Market gains and losses²	455			(384		)	522			(325		)	1,949
Ending assets	$	65,369		$	61,435		$	52,701		$	65,369		$	52,701

Alternative / Private Markets
Beginning assets	$	292		$	343		$	443		$	366		$	458
Sales¹	757			15			22			813			94
Redemptions¹	(674		)	(44		)	(49		)	(785		)	(177		)
Net sales (redemptions)¹	83			(29		)	(27		)	28			(83		)
Net exchanges	(2		)	(2		)	1			(3		)	58
Acquisition-related³	18,509			0			0			18,509			0
Market gains and losses²	(261		)	(20		)	(10		)	(279		)	(26		)
Ending assets	$	18,621		$	292		$	407		$	18,621		$	407

Multi-asset
Beginning assets	$	4,730		$	4,843		$	5,011		$	5,014		$	5,164
Sales¹	120			126			110			374			371
Redemptions¹	(211		)	(229		)	(274		)	(675		)	(909		)
Net redemptions¹	(91		)	(103		)	(164		)	(301		)	(538		)
Net exchanges	4			(2		)	(8		)	2			(21		)
Acquisition-related	45			0			0			45			0
Market gains and losses²	102			(8		)	159			30			393
Ending assets	$	4,790		$	4,730		$	4,998		$	4,790		$	4,998

Total Long-term Assets
Beginning assets	$	124,430		$	126,221		$	118,294		$	132,356		$	113,695
Sales¹	9,797			7,627			6,289			25,694			21,374
Redemptions¹	(10,591		)	(10,285		)	(7,298		)	(33,030		)	(25,087		)
Net redemptions¹	(794		)	(2,658		)	(1,009		)	(7,336		)	(3,713		)
Net exchanges	(7		)	(9		)	(6		)	(15		)	(89		)
Acquisition-related³	45,986			0			0			45,986			435
Market gains and losses²	3,308			876			2,548			1,932			9,499
Ending assets	$	172,923		$	124,430		$	119,827		$	172,923		$	119,827

1) For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

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.


3)	Acquisition-related includes $8.4 billion of assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.



Federated Reports Q3 2018 Earnings		Page 8 of 12



Unaudited Changes in Long-Term Assets - By Asset Class and Product Type
(in millions)
	Quarter Ended
	Sept. 30, 2018
	Equity						Fixed Income						Alternative / Private Markets						Multi-asset						Total
	Funds			Separate Accounts¹			Funds			Separate Accounts¹			Funds²			Separate Accounts¹			Funds			Separate Accounts¹			Funds²			Separate Accounts¹
Beginning assets	$	31,699		$	26,274		$	39,877		$	21,558		$	292		$	0		$	4,521		$	209		$	76,389		$	48,041
Sales	2,447			1,310			3,878			1,285			723			34			120			0			7,168			2,629
Redemptions	(3,047		)	(2,241		)	(3,883		)	(535		)	(270		)	(404		)	(205		)	(6		)	(7,405		)	(3,186		)
Net (redemptions) sales	(600		)	(931		)	(5		)	750			453			(370		)	(85		)	(6		)	(237		)	(557		)
Net exchanges	(9		)	(2		)	3			(1		)	(2		)	0			4			0			(4		)	(3		)
Acquisition-related	11,131			13,569			1,565			1,167			10,823			7,686			45			0			23,564			22,422
Market gains and losses³	1,357			1,655			377			78			(109		)	(152		)	100			2			1,725			1,583
Ending assets	$	43,578		$	40,565		$	41,817		$	23,552		$	11,457		$	7,164		$	4,585		$	205		$	101,437		$	71,486

	Nine Months Ended
	Sept. 30, 2018
	Equity						Fixed Income						Alternative / Private Markets						Multi-asset						Total
	Funds			Separate Accounts¹			Funds			Separate Accounts¹			Funds²			Separate Accounts¹			Funds			Separate Accounts¹			Funds²			Separate Accounts¹
Beginning assets	$	33,008		$	29,808		$	41,144		$	23,016		$	366		$	0		$	4,783		$	231		$	79,301		$	53,055
Sales	5,763			3,918			11,817			3,009			779			34			374			0			18,733			6,961
Redemptions	(8,283		)	(7,341		)	(12,668		)	(3,278		)	(381		)	(404		)	(654		)	(21		)	(21,986		)	(11,044		)
Net (redemptions) sales	(2,520		)	(3,423		)	(851		)	(269		)	398			(370		)	(280		)	(21		)	(3,253		)	(4,083		)
Net exchanges	65			(1		)	(77		)	(1		)	(3		)	0			2			0			(13		)	(2		)
Acquisition-related	11,131			13,569			1,565			1,167			10,823			7,686			45			0			23,564			22,422
Market gains and losses³	1,894			612			36			(361		)	(127		)	(152		)	35			(5		)	1,838			94
Ending assets	$	43,578		$	40,565		$	41,817		$	23,552		$	11,457		$	7,164		$	4,585		$	205		$	101,437		$	71,486


1)	Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products. For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.


2)	Acquisition-related includes $8.4 billion of assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.


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.



Federated Reports Q3 2018 Earnings		Page 9 of 12



Unaudited Changes in Long-Term Assets - By Product Type
(in millions)	Quarter Ended									Nine Months Ended
	Sept. 30, 2018			June 30, 2018			Sept. 30, 2017			Sept. 30, 2018			Sept. 30, 2017
Total Fund Assets
Beginning assets	$	76,389		$	76,999		$	78,105		$	79,301		$	75,665
Sales	7,168			5,609			4,699			18,733			15,529
Redemptions	(7,405		)	(6,947		)	(5,566		)	(21,986		)	(18,430		)
Net redemptions	(237		)	(1,338		)	(867		)	(3,253		)	(2,901		)
Net exchanges	(4		)	(7		)	(6		)	(13		)	(33		)
Acquisition-related¹	23,564			0			0			23,564			435
Market gains and losses²	1,725			735			1,723			1,838			5,789
Ending assets	$	101,437		$	76,389		$	78,955		$	101,437		$	78,955

Total Separate Accounts Assets³
Beginning assets	$	48,041		$	49,222		$	40,189		$	53,055		$	38,030
Sales⁴	2,629			2,018			1,590			6,961			5,845
Redemptions⁴	(3,186		)	(3,338		)	(1,732		)	(11,044		)	(6,657		)
Net redemptions⁴	(557		)	(1,320		)	(142		)	(4,083		)	(812		)
Net exchanges	(3		)	(2		)	0			(2		)	(56		)
Acquisition-related	22,422			0			0			22,422			0
Market gains and losses²	1,583			141			825			94			3,710
Ending assets	$	71,486		$	48,041		$	40,872		$	71,486		$	40,872

Total Long-term Assets³
Beginning assets	$	124,430		$	126,221		$	118,294		$	132,356		$	113,695
Sales⁴	9,797			7,627			6,289			25,694			21,374
Redemptions⁴	(10,591		)	(10,285		)	(7,298		)	(33,030		)	(25,087		)
Net redemptions⁴	(794		)	(2,658		)	(1,009		)	(7,336		)	(3,713		)
Net exchanges	(7		)	(9		)	(6		)	(15		)	(89		)
Acquisition-related¹	45,986			0			0			45,986			435
Market gains and losses²	3,308			876			2,548			1,932			9,499
Ending assets	$	172,923		$	124,430		$	119,827		$	172,923		$	119,827


1)	Acquisition-related includes $8.4 billion of assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.

3) Includes separately managed accounts, institutional accounts, sub-advised funds and other managed products.


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.



Federated Reports Q3 2018 Earnings		Page 10 of 12



Unaudited Managed Assets (in millions)	Sept. 30, 2018		June 30, 2018		March 31, 2018		Dec. 31, 2017		Sept. 30, 2017
By Asset Class
Equity	$	84,143	$	57,973	$	58,830	$	62,816	$	61,721
Fixed-income	65,369		61,435		62,205		64,160		52,701
Alternative / private markets¹	18,621		292		343		366		407
Multi-asset	4,790		4,730		4,843		5,014		4,998
Total long-term assets	172,923		124,430		126,221		132,356		119,827
Money market	264,233		255,247		265,944		265,214		243,840
Total Managed Assets	$	437,156	$	379,677	$	392,165	$	397,570	$	363,667

By Product Type
Funds:
Equity	$	43,578	$	31,699	$	31,507	$	33,008	$	32,637
Fixed-income	41,817		39,877		40,529		41,144		41,142
Alternative / private markets¹	11,457		292		343		366		407
Multi-asset	4,585		4,521		4,620		4,783		4,769
Total long-term assets	101,437		76,389		76,999		79,301		78,955
Money market	182,966		172,671		182,437		185,536		177,865
Total Fund Assets	$	284,403	$	249,060	$	259,436	$	264,837	$	256,820
Separate Accounts:
Equity	$	40,565	$	26,274	$	27,323	$	29,808	$	29,084
Fixed-income	23,552		21,558		21,676		23,016		11,559
Alternative / private markets	7,164		0		0		0		0
Multi-asset	205		209		223		231		229
Total long-term assets	71,486		48,041		49,222		53,055		40,872
Money market	81,267		82,576		83,507		79,678		65,975
Total Separate Account Assets	$	152,753	$	130,617	$	132,729	$	132,733	$	106,847
Total Managed Assets	$	437,156	$	379,677	$	392,165	$	397,570	$	363,667

1) Alternative/private markets at Sept. 30, 2018 includes $8.4 billion of fund assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.



Federated Reports Q3 2018 Earnings		Page 11 of 12



Unaudited Average Managed Assets	Quarter Ended
(in millions)	Sept. 30, 2018		June 30, 2018		March 31, 2018		Dec. 31, 2017		Sept. 30, 2017
By Asset Class
Equity	$	84,262	$	58,818	$	61,555	$	62,140	$	60,782
Fixed-income	64,750		61,648		63,538		64,280		52,559
Alternative / private markets¹	18,504		319		355		397		425
Multi-asset	4,805		4,824		4,979		5,000		4,992
Total long-term assets	172,321		125,609		130,427		131,817		118,758
Money market	261,571		260,371		267,546		250,197		241,749
Total Avg. Managed Assets	$	433,892	$	385,980	$	397,973	$	382,014	$	360,507

By Product Type
Funds:
Equity	$	43,473	$	31,911	$	32,680	$	32,829	$	32,179
Fixed-income	41,501		40,199		41,022		41,169		40,896
Alternative / private markets¹	11,109		319		355		397		425
Multi-asset	4,598		4,604		4,749		4,771		4,768
Total long-term assets	100,681		77,033		78,806		79,166		78,268
Money market	179,562		175,885		181,856		176,918		174,358
Total Avg. Fund Assets	$	280,243	$	252,918	$	260,662	$	256,084	$	252,626
Separate Accounts:
Equity	$	40,789	$	26,907	$	28,875	$	29,311	$	28,603
Fixed-income	23,249		21,449		22,516		23,111		11,663
Alternative / private markets	7,395		0		0		0		0
Multi-asset	207		220		230		229		224
Total long-term assets	71,640		48,576		51,621		52,651		40,490
Money market	82,009		84,486		85,690		73,279		67,391
Total Avg. Separate Account Assets	$	153,649	$	133,062	$	137,311	$	125,930	$	107,881
Total Avg. Managed Assets	$	433,892	$	385,980	$	397,973	$	382,014	$	360,507

1) Alternative/private markets for the quarter ended Sept. 30, 2018 includes $8.2 billion of fund assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.



Federated Reports Q3 2018 Earnings		Page 12 of 12



Unaudited Average Managed Assets	Nine Months Ended
(in millions)	Sept. 30, 2018		Sept. 30, 2017
By Asset Class
Equity	$	68,212	$	59,627
Fixed-income	63,312		52,178
Alternative / private markets¹	6,393		456
Multi-asset	4,869		5,083
Total long-term assets	142,786		117,344
Money market	263,162		243,879
Total Avg. Managed Assets	$	405,948	$	361,223

By Product Type
Funds:
Equity	$	36,022	$	31,938
Fixed-income	40,907		40,511
Alternative / private markets¹	3,928		456
Multi-asset	4,650		4,864
Total long-term assets	85,507		77,769
Money market	179,100		176,467
Total Avg. Fund Assets	$	264,607	$	254,236
Separate Accounts:
Equity	$	32,190	$	27,689
Fixed-income	22,405		11,667
Alternative / private markets	2,465		0
Multi-asset	219		219
Total long-term assets	57,279		39,575
Money market	84,062		67,412
Total Avg. Separate Account Assets	$	141,341	$	106,987
Total Avg. Managed Assets	$	405,948	$	361,223

1) Alternative/Private Markets for the nine months ended Sept. 30, 2018 includes $2.7 billion of fund assets managed by a nonconsolidated entity, Hermes GPE LLP, in which Hermes holds an equity method investment.

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