10-K 1 0001.txt -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________ COMMISSION FILE NUMBER 1-14818 FEDERATED INVESTORS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------------------------------------------------------------- 25-1111467 PENNSYLVANIA ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- (I.R.S. EMPLOYER (STATE OR OTHER JURISDICTION OF IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- FEDERATED INVESTORS TOWER PITTSBURGH, PENNSYLVANIA 15222-3779 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- CLASS B COMMON STOCK, NO PAR VALUE NEW YORK STOCK EXCHANGE (TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH REGISTERED) ------------------------------------------------------------------------------- ------------------------------------------------------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE ------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes A No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in the definitive proxy statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. A The aggregate market value of the Class B Common Stock held by non-affiliates of the registrant as of March 19, 2001 was approximately $2,199 million, based on the last reported sales price of $26.76 as reported by the New York Stock Exchange. For purposes of this calculation, the registrant has deemed all of its executive officers and directors to be affiliates, but has made no determination as to whether any other persons are "affiliates" within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934. The number of shares of Class B Common Stock outstanding on March 19, 2001, was 116,466,611 shares. Documents incorporated by reference: Selected portions of the 2000 Annual Report to Shareholders - Part I, Part II and Part IV of this Report. Selected portions of the 2001 Information Statement - Part III of this Report. PART I ITEM 1 - BUSINESS OVERVIEW Federated Investors, Inc. and its consolidated subsidiaries (collectively, "Federated") is a leading provider of investment management and related financial services. Federated sponsors, markets and provides investment advisory, distribution and administrative services primarily to mutual funds in both domestic and international markets. Total assets under management at December 31, 2000, were $139.6 billion, primarily in funds managed, distributed and administered by Federated and in other non-fund products ("Managed Assets"), of which $5.9 billion were in separately managed accounts. Managed Assets at December 31, 2000, increased $14.8 billion over the prior year. Federated provided investment advisory services to 137 funds at December 31, 2000. These funds are offered through banks, broker/dealers and other financial intermediaries who use them to meet the needs of their customers; these customers include retail investors, corporations, and retirement plans. Federated also provides mutual fund administrative services to its managed funds and to funds sponsored by third parties, where Federated also acts as fund distributor. Federated provided these services for $39.7 billion of assets in funds sponsored by third parties, primarily banks, ("Administered Assets") as of December 31, 2000. In addition, Federated provides other services related to mutual funds including trade execution and clearing and retirement plan recordkeeping. Total Managed Assets for each of the past three years are as follows: MANAGED ASSETS Growth Rate ------------------- (DOLLARS IN MILLIONS) As of December 31, 3 Yr. -------------------- --------- 1998 CAGR* 2000 2000 1999 ----------------------------- ------------------- Money Market Funds/ Cash Equivalents $98,797 $83,299 $77,055 16% 19% Equity Funds 20,641 20,941 15,503 21% (1%) Fixed-Income Funds 14,268 15,857 16,437 (2%) (10%) Separate Accounts 5,878 4,723 2,558 40% 24% ----------------------------- Total Managed Assets $139,584 $124,820 $111,553 15% 12% ============================= *Compound Annual Growth Rate Average Managed Assets for the past three years were as follows: AVERAGE MANAGED ASSETS Growth Rate ------------------- (DOLLARS IN MILLIONS) Year ended December 31, 3 Yr. ----------------------------- -------------------- 1998 CAGR* 2000 2000 1999 ----------------------------- ------------------- Money Market Funds/ Cash Equivalent $86,406 $79,253 $69,074 16% 9% Equity Funds 22,107 17,531 13,777 32% 26% Fixed-Income Funds 14,713 16,680 15,851 1% (12%) Separate Accounts 5,168 4,109 2,334 40% 26% ----------------------------- Total Average Managed Assets $128,394 $117,573 $101,036 16% 9% ============================= * Compound Annual Growth Rate Federated's revenues from investment advisory, related administrative and other service fees provided under agreements with the funds and other entities, and other income over the last three years were as follows (Certain amounts previously reported have been reclassified to conform with the current year's presentation.): REVENUE (DOLLARS IN THOUSANDS) Growth Rate ----------------------- Year ended December 31, 3 Yr. ------------------------------- 2000 1999 1998 CAGR* 2000 ------------------------------------------------------ Investment Advisory $380,234 $324,923 $280,046 20% 17% Fees Administrative 109,870 104,381 97,234 9% 5% Service Fees Other Service Fees 166,356 147,700 124,599 24% 13% Other Income 24,308 24,094 20,248 29% 1% ------------------------------- TOTAL REVENUE $680,768 $601,098 $522,127 19% 13% =============================== * Compound Annual Growth Rate BUSINESS STRATEGY Federated pursues a multi-faceted business strategy having three broad objectives: -To be widely recognized as a world-class investment management company that offers highly competitive performance and disciplined risk management across a broad spectrum of products. -To profitably expand market penetration by increasing its assets under management in each market where it chooses to apply its substantial distribution resources. -To profitably expand its customer relationships by providing superior services designed to support the growth of Managed and Administered Assets. Federated offers a wide range of products, including equity, fixed-income and money market investments designed to meet the needs of investors with varying investment objectives. Federated has structured its investment process to meet the requirements of fiduciaries and others who use Federated's products to meet the needs of their customers. Fiduciaries typically have stringent demands related to portfolio composition, risk and investment performance. In recent years, Federated has emphasized growth of its equity business as an important component of its strategy and has broadened its range of equity products. Equity assets are managed across a wide range of styles including large cap value ($6.3 billion), equity income ($4.6 billion), mid-large cap growth ($4.2 billion) and international ($2.9 billion) investments. Federated also manages assets in equity index funds ($3.1 billion), balanced and asset allocation funds ($1.1 billion) and small cap blend ($0.4 billion). These asset allocation funds may include fixed-income assets. Federated's fixed-income assets are managed in a wide range of sectors including high-yield ($4.3 billion), mortgage-backed ($4.3 billion), multi-sector ($3.5 billion), municipal ($1.9 billion), corporate ($1.7 billion), U.S. government ($1.5 billion) and international/global ($1.0 billion). Federated's fixed-income funds offer fiduciaries and others a broad range of highly defined products designed to meet many of their investment needs and requirements. Federated uses a team of portfolio managers led by a senior portfolio manager for each fund. Federated's investment research process combines disciplined quantitative screening along with rigorous fundamental analysis to identify attractive securities. Portfolios are continually reevaluated with respect to valuation, price and earnings estimate momentum, company fundamentals, market factors, economic conditions and risk controls in order to achieve specific investment objectives. Federated is one of the largest U.S. managers of money market fund assets, with $98.8 billion in assets under management at December 31, 2000. Federated has developed expertise in managing cash for institutions, which typically have stringent requirements for regulatory compliance, relative safety, liquidity and competitive yields. Federated has managed money market funds for over 25 years and began selling money market fund products to institutions in 1974. Federated also manages retail money market fund products which are typically distributed through broker/dealers. Federated manages money market fund assets in a variety of asset classes including government ($48.0 billion), prime ($35.5 billion) and tax-free ($15.3 billion). Federated's distribution strategy is to provide products geared to financial intermediaries, primarily banks, broker/dealers and investment advisers, and directly to institutions such as corporations and government entities. Through substantial investments in distribution for more than 20 years, Federated has developed selling relationships with more than 4,000 institutions and sells its products directly to another 500 corporations and government entities. Federated uses its trained sales force of more than 180 representatives and managers across the United States to add new customer relationships and strengthen and expand existing relationships. INVESTMENT PRODUCTS AND MARKETS Federated's investment products are distributed in four principal markets: the bank trust market, the broker/dealer market, the institutional market and the international market. The following chart shows Federated Managed Assets by market for the dates indicated: MANAGED ASSETS BY MARKET Growth Rate ------------------ (DOLLARS IN MILLIONS) As of December 31, 3 Yr. --------- -------------------- 2000 1999 1998 CAGR* 2000 ----------------------------- ------------------ Bank Trust Market $71,955 $63,073 $58,891 13% 14% Broker/Dealer Market 43,462 40,769 35,232 15% 7% Institutional Market 17,808 16,349 13,993 16% 9% International Market 1,356 1,104 0 N/A 23% Other 5,003 3,525 3,437 15% 42% ----------------------------- Total Managed Assets $139,584 $124,820 $111,553 15% 12% ============================= *Compound Annual Growth Rate Note: Certain amounts previously reported have been reclassified to conform with the current year's presentation. BANK TRUST MARKET. Federated pioneered the concept of providing cash management to bank trust departments through mutual funds over 25 years ago. In addition, Federated initiated a strategy to provide a broad range of equity and fixed-income funds, termed MultiTrust(TM), to meet the evolving needs of bank trust departments. Federated's bank trust customers invest the assets subject to their control, or upon direction from their customers, in one or more funds managed by Federated. Federated employs a dedicated sales force backed by a staff of support personnel to offer its products and services in the bank trust market. In addition to bank trust departments, Federated provides services to bank capital markets (institutional brokerages within banks) and to other institutional customers as part of the bank trust market. Money market funds contain the majority of Federated's Managed Assets in the bank trust market. In allocating investments across various asset classes, investors typically maintain a portion of their portfolios in cash or cash equivalents, including money market funds, irrespective of trends in bond or stock prices. Federated also offers an extensive menu of equity and fixed-income mutual funds structured for use in the bank trust market. As of December 31, 2000, Managed Assets in the bank trust market were comprised of $62.4 billion in money market funds and cash equivalents, $5.0 billion in equity funds and $4.6 billion in fixed-income funds. BROKER/DEALER MARKET. Federated distributes its products in this market through a large, diversified group of approximately 2,000 national, regional, independent, and bank broker/dealers. Federated maintains a sales staff dedicated to this market, with a separate group focused on the bank broker/dealers. Broker/dealers use Federated's products to meet the needs of their customers, who are typically retail investors. Federated offers products with a variety of commission structures that enable brokers to offer their customers a choice of pricing options. Federated also offers money market mutual funds as cash management products designed for use in the broker/dealer market. As of December 31, 2000, Managed Assets in the broker/dealer market were comprised of $24.5 billion in money market funds, $12.5 billion in equity funds, $6.3 billion in fixed-income funds and $0.2 billion in separate accounts. INSTITUTIONAL MARKET. Federated maintains a dedicated sales staff to focus on the distribution of its products to a wide variety of users: investment advisors, corporations, corporate and public pension funds, insurance companies, government entities, foundations, endowments, hospitals, and non-Federated investment companies. As of December 31, 2000, Managed Assets in the institutional market were comprised of $10.9 billion in money market funds, $3.0 billion in separate accounts, $2.0 billion in fixed-income funds and $1.9 billion in equity funds. INTERNATIONAL MARKET. Federated continues to broaden distribution to areas outside of the U.S. In 1998, Federated entered into an agreement with LVM-Versicherungen (LVM), a large German insurance company, to create a joint-venture company named Federated Fonds-Service GmbH ("Federated GmbH"), to exclusively manage, distribute and market a family of mutual funds to insurance clients of LVM, as well as pursue institutional separate accounts. In early 2000, Federated GmbH launched six retail funds (Federated Unit Trust) for distribution in German speaking countries in Europe. As of December 31, 2000, Managed Assets in these funds and in separate accounts totaled $0.2 billion and $1.1 billion, respectively. ALTERNATIVE PRODUCTS. Over the last two years, Federated increased assets by entering into advisory agreements for three separate collateralized bond obligation (CBO) products. These products package Federated's investment management expertise into an alternative product structure and offer another source of investment advisory fee revenue. As of December 31, 2000, Managed Assets in Federated's CBOs totaled $1.0 billion. Federated plans to continue to seek opportunities to manage CBOs and other alternative products. Federated continues to look for new alliances and opportunities to enhance shareholder value through acquisitions. In 2000, Federated signed a definitive agreement to acquire the business of New York-based Edgemont Asset Management Corporation, the advisor for the $3.4 billion Kaufmann Fund. Upon closing the transaction, Federated will introduce the Federated Kaufmann Fund through Federated's existing distribution channels, and for the first time, this fund will become available through financial intermediaries. In addition, in 2000, Federated completed the acquisition of the mutual fund assets of Investment Advisers, Inc. (IAI). As a result of this transaction, Federated assumed the investment management, distribution and shareholder servicing responsibilities for 11 former IAI funds totaling $346.0 million as of the transaction date in primarily equity assets. Federated also acquired InvestLink Technologies, Inc. in 2000, a software developer and marketer of applications for recordkeeping, administration and servicing of defined contribution benefit plans. Federated's principal source of revenue is investment advisory fees earned by various subsidiaries and affiliates pursuant to investment advisory contracts with the funds. These subsidiaries and affiliates are registered as investment advisers under the Investment Advisers Act of 1940 (the "Advisers Act"). Investment advisers are compensated for their services in the form of investment advisory fees based upon the average daily net assets of the fund. Federated provided investment advisory services to 137 funds as of December 31, 2000. The funds sponsored by Federated are domiciled in the U.S., with the exception of Federated International Funds PLC and Federated Unit Trust, which are domiciled in Dublin, Ireland. Each of Federated's U.S.-domiciled funds (with the exception of a collective investment trust) is registered under the Investment Company Act of 1940 ("Investment Company Act") and under applicable federal and state laws. Each of the funds enters into an advisory agreement. The advisory agreements are subject to annual approval by the fund directors or trustees, including a majority of the directors who are not "interested persons" of the funds or Federated as defined under the Investment Company Act. Advisory agreements are subject to periodic review by the directors or trustees of the respective funds and amendments to such agreements must be approved by the fund shareholders. A significant portion of Federated's revenue is derived from these advisory agreements which generally are terminable upon 60 days notice. Of these 137 funds, Federated's investment advisory subsidiaries managed 52 money market funds (and cash equivalents) totaling $98.8 billion in assets, 46 fixed-income funds with $14.3 billion in assets and 39 equity funds with $20.6 billion in assets. Appendix "A" hereto lists all of these funds, including asset levels and date of inception. Federated also serves as investment advisor to pension and other employee benefit plans, corporations, trusts, foundations, endowments, mutual funds sponsored by third parties, and other investors. These separate accounts totaled $5.9 billion in assets under management as of December 31, 2000. Fees for separate accounts are typically based on the value of assets under management pursuant to investment advisory agreements that may be terminated at any time. Federated also provides a broad range of services to support the operation, administration, and distribution of Federated-sponsored funds. These services, for which Federated receives fees pursuant to administrative agreements with the funds, include legal support and regulatory compliance, audit, fund financial services, transfer agency services, and shareholder servicing and support. Federated also offers these services to institutions seeking to outsource all or part of their mutual fund service and distribution functions. Through various subsidiaries, Federated provides its experience and expertise in these areas to expand its relationships with key financial intermediaries, primarily banks, who sponsor proprietary mutual funds. Federated receives fees from these bank-sponsored funds for providing fund services. The following chart shows period-end and average Administered Assets for the past three years: ADMINISTERED ASSETS As of and for the year ended Growth (DOLLARS IN MILLIONS) December 31, Rate ----------------------------- ---------- 2000 2000 1999 1998 ----------------------------- ---------- Period End Administered Assets $39,732 $41,234 $28,165 (4%) Average Administered Assets 41,966 35,079 53,136 20% The decrease in 1999 average Administered Assets was due primarily to the termination of certain administration contracts in 1998 due to internalization of these functions by banks who developed the ability to provide mutual fund services through acquisitions. In addition, certain funds sponsored by Federated have adopted distribution plans that, subject to applicable law, provide for payment to Federated for the reimbursement of marketing expenses, including sales commissions paid to broker/dealers. These distribution plans are implemented through a distribution agreement between Federated and the Fund. Although the specific terms of each such agreement vary, the basic terms of the agreements are similar. Pursuant to the agreements, Federated acts as underwriter for the fund and distributes shares of the Fund through unaffiliated dealers. Each distribution plan and agreement is initially approved by the directors or trustees of the respective Fund and is reviewed for approval annually. Federated also provides retirement plan recordkeeping services and trade execution and settlement services through its various subsidiaries. COMPETITION The mutual fund industry is highly competitive. According to the Investment Company Institute, at the end of 2000, there were over 8,100 registered open-end investment companies, of varying sizes and investment policies, whose shares are currently being offered to the public both on a load and no-load basis. In addition to competition from other mutual fund managers and investment advisers, Federated and the mutual fund industry compete with investment alternatives offered by insurance companies, commercial banks, broker/dealers and other financial institutions. Competition for sales of mutual fund shares is influenced by various factors, including investment performance in terms of attaining the stated objectives of the particular funds and in terms of fund yields and total returns; advertising and sales promotional efforts; and type and quality of services. Changes in the mix of customers for mutual fund distribution and administrative services are expected to continue. Competition for fund administration services is extremely high. In addition to competing with other service providers, banks sponsoring mutual funds may choose to internalize certain service functions. Consolidation within the banking industry also impacts the fund administration business as merging bank funds typically choose a single fund administration provider. Due to the relatively lower revenues, changes in the amount of Administered Assets generally have less impact on Federated's results of operations than changes in the amount of Managed Assets. REGULATORY MATTERS Substantially all aspects of Federated's business are subject to federal and state regulation and to the extent operations take place outside the United States they are subject to the regulations of foreign countries. Depending upon the nature of any non-compliance, the results could include the suspension or revocation of licenses or registration, including broker/dealer licenses and registrations and transfer agent registrations, as well as the imposition of civil fines and penalties and in certain limited circumstances prohibition from acting as an adviser to registered investment companies. Federated's advisory companies are registered with the Securities and Exchange Commission (the "Commission") under the Advisers Act and with certain states. All of the mutual funds managed, distributed, and administered by Federated are registered with the Commission under the Investment Company Act. Certain wholly owned subsidiaries of Federated are registered as broker-dealers with the Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and with various states and are members of the National Association of Securities Dealers (the "NASD"). Their activities are regulated by the Commission, the NASD, and the various states in which they are registered. These subsidiaries are required to meet capital requirements established by the Commission pursuant to the Exchange Act. Two other subsidiaries are registered with the Commission as transfer agents. Federated Investors Trust Company is regulated by the State of New Jersey. Federated believes that it and its subsidiaries are in substantial compliance with all applicable laws and regulations. Amendments to current laws and regulations or newly promulgated laws and regulations governing Federated's operations could have a material adverse impact on Federated. The federal, state and foreign laws and regulations applicable to most aspects of Federated's business are primarily intended to benefit or protect Federated's customers and the funds' shareholders and generally grant supervisory agencies and bodies broad administrative powers, including the power to limit or restrict Federated from carrying on its business in the event that it fails to comply with such laws and regulations. In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of broker/dealer licenses and registrations and transfer agent registrations, censure and fines. EMPLOYEES At December 31, 2000, Federated employed 1,899 persons. Federated considers its relationships with its employees to be satisfactory. FORWARD-LOOKING INFORMATION THIS ANNUAL REPORT ON FORM 10-K AND THE 2000 ANNUAL REPORT TO SHAREHOLDERS CONTAIN CERTAIN "FORWARD- LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS INVOLVE CERTAIN UNKNOWN RISKS AND UNCERTAINTIES, INCLUDING, AMONG OTHERS THOSE DISCUSSED UNDER THE CAPTION "RISK FACTORS AND CAUTIONARY STATEMENTS" BELOW, THAT COULD CAUSE ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, OR ACHIEVEMENTS OF FEDERATED, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD LOOKING STATEMENTS. FEDERATED CAUTIONS READERS NOT TO PLACE UNDUE RELIANCE ON ANY SUCH FORWARD LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE MADE, AND SHOULD BE READ IN CONJUNCTION WITH THE RISK DISCLOSURE BELOW. FEDERATED WILL NOT UNDERTAKE AND SPECIFICALLY DECLINES ANY OBLIGATION TO RELEASE PUBLICLY THE RESULT OF ANY REVISIONS WHICH MAY BE MADE TO ANY FORWARD LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS OR REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS. AS A RESULT OF THE FOREGOING, AND OTHER FACTORS, NO ASSURANCE CAN BE GIVEN AS TO FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE, OR ACHIEVEMENTS OF FEDERATED, AND NEITHER FEDERATED NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF SUCH STATEMENTS. RISK FACTORS AND CAUTIONARY STATEMENTS POTENTIAL ADVERSE EFFECTS OF INCREASED COMPETITION IN THE INVESTMENT MANAGEMENT BUSINESS. The investment management business is highly competitive. Federated competes in the distribution of mutual funds with other independent fund management companies, national and regional broker/dealers, commercial banks, insurance companies, and other institutions. Many of these competitors have substantially greater resources and brand recognition than Federated. Competition is based on various factors, including business reputation; the investment performance of funds managed or administered by Federated; quality of service; the strength and continuity of management and selling relationships; marketing and distribution services offered; the range of products offered; and fees charged. See "Business--Competition." Many of Federated's fund products are designed for use by institutions such as banks, insurance companies and other corporations. A large portion of Federated's Managed Assets, particularly money market and fixed-income Managed Assets, are held by institutional investors. Because most institutional mutual funds are sold without sales commissions at either the time of purchase or the time of redemption, institutional investors may be more inclined to move their assets among various institutional funds than investors in retail mutual funds. Of Federated's 137 managed funds, 94 are sold without sales commission. Institutions are sensitive to fund investment performance, consistent adherence to investment objectives, quality of service and pricing. Federated believes that competitive pressures in the institutional fund market are increasing as a result of (i) the entry of well known managers from the retail investment industry and of low-fee investment managers, (ii) mergers and consolidation occurring in the banking industry, (iii) increased offering of proprietary funds by institutional investors such as banks, and (iv) regulatory changes affecting banks and other financial service firms. A significant portion of Federated's revenue is derived from providing mutual funds to its bank trust market, comprising over 1,400 banks and other financial institutions. Future profitability of Federated will be affected by its ability to retain its share of this market, and could also be adversely affected by the general consolidation which is occurring in the banking industry as well as recent regulatory changes. In addition, bank consolidation trends could not only cause changes in Federated's customer mix, but could also affect the scope of services provided and fees received by Federated, depending upon the degree to which banks internalize administrative functions attendant to proprietary mutual funds. POTENTIAL ADVERSE EFFECTS OF A DECLINE IN SECURITIES MARKETS. Changes in economic or market conditions may adversely affect the profitability and performance of and demand for Federated's investment products and services. The ability of Federated to compete and grow is dependent, in part, on the relative attractiveness of the types of investment products Federated offers and its investment philosophies and market strategies under prevailing market conditions. A significant portion of Federated's revenue is derived from investment advisory fees, which are based on the value of Managed Assets and vary with the type of asset being managed, with higher fees generally earned on equity and fixed-income funds than on money market funds. Consequently, significant fluctuations in the prices of securities held by, or the level of redemptions from, the funds advised by Federated may affect materially the amount of Managed Assets and thus Federated's revenue, profitability and ability to grow. Substantially all of Federated's Managed Assets are in open-end funds, which permit investors to redeem their investment at any time. POTENTIAL ADVERSE AFFECTS ON MONEY MARKET FUNDS RESULTING FROM INCREASES IN INTEREST RATES. Approximately 33% of Federated's revenue in 2000 was from managed money market funds. Assets in these funds are largely from institutional investors. In a period of rapidly rising interest rates, institutional investors may redeem shares in money market funds to invest directly in market issues offering higher yields. These redemptions would reduce Managed Assets, thereby reducing Federated's advisory fee revenue. Federated has been actively diversifying its products to expand its Managed Assets in equity mutual funds which may be less sensitive to interest rate increases. There can be no assurance that Federated will continue to be successful in these diversification efforts. ADVERSE EFFECTS OF POOR FUND PERFORMANCE. Success in the investment management and mutual fund business is largely dependent on the funds' investment performance relative to market conditions and performance of competing funds. Good performance generally stimulates sales of the funds' shares and tends to keep redemptions low. Sales of funds generate higher revenues (which are largely based on assets of the funds). Good performance also attracts private institutional accounts to Federated. Conversely, relatively poor performance tends to result in decreased sales, increased redemptions of the funds' shares, and the loss of private institutional accounts, with corresponding decreases in revenues to Federated. Failure of the funds to perform well could, therefore, have a material adverse effect on Federated. ADVERSE EFFECTS OF TERMINATION OR FAILURE TO RENEW FUND AGREEMENTS ON FEDERATED'S REVENUES AND PROFITABILITY. A substantial majority of Federated's revenues are derived from investment management agreements with the funds that, as required by law, are terminable on 60 days' notice. In addition, each such investment management agreement must be approved and renewed annually by each fund's board, including disinterested members of the board, or its shareholders, as required by law. Generally, Federated's administrative servicing agreements with bank proprietary fund customers have an initial term of three years with a provision for automatic renewal unless notice is otherwise given and provide for termination for cause. Failure to renew or termination of a significant number of these agreements could have a material adverse impact on Federated. In addition, as required by the Investment Company Act, each investment advisory agreement with a mutual fund automatically terminates upon its "assignment," although new investment advisory agreements may be approved by the mutual fund's directors or trustees and shareholders. A sale of a sufficient number of shares of Federated's voting securities to transfer control of Federated could be deemed an "assignment" in certain circumstances. An assignment, actual or constructive, will trigger these termination provisions and may adversely affect Federated's ability to realize the value of these assets. POTENTIAL ADVERSE EFFECTS OF CHANGES IN LAWS AND REGULATIONS ON FEDERATED'S INVESTMENT MANAGEMENT BUSINESS. Federated's investment management business is subject to extensive regulation in the United States primarily at the Federal level, including regulations by the Commission particularly under the Investment Company Act and the Advisers Act as well as the rules of the NASD and all states. Federated is also affected by the regulations governing banks and other financial institutions and, to the extent operations take place outside the United States, by foreign regulations. Changes in laws or regulations or in governmental policies could materially and adversely affect the business and operations of Federated. NO ASSURANCE OF SUCCESSFUL FUTURE ACQUISITIONS. Federated's business strategy contemplates the acquisition of other investment management companies as well as investment assets. There can be no assurance that Federated will find suitable acquisition candidates at acceptable prices, have sufficient capital resources to realize its acquisition strategy, be successful in entering into definitive agreements for desired acquisitions, or successfully integrate acquired companies into Federated, or that any such acquisitions, if consummated, will prove to be advantageous to Federated. SYSTEMS AND TECHNOLOGY RISKS. Federated utilizes software and related technologies throughout its businesses including both proprietary systems as well as those provided by outside vendors. As the century date change occurred, Federated encountered no significant problems with date-sensitive systems of its own or third party vendors in recognizing the year 2000. Unanticipated issues unrelated to the century date change could occur and it is not possible to predict with certainty all of the adverse effects that could result from a failure of a third party to address computer system problems. Accordingly, there can be no assurance that potential system interruptions or the cost necessary to rectify the problems would not have a material adverse effect on Federated's business, financial condition, results of operations or business prospects. ITEM 2 - PROPERTIES Federated's facilities are concentrated in Pittsburgh, Pennsylvania where it leases space sufficient to meet its operating needs. Federated's headquarters is located in the Federated Investors Tower, where Federated occupies approximately 345,000 square feet. Federated leases approximately 100,000 square feet at the Pittsburgh Office and Research Park and an aggregate of 60,000 square feet at other locations in Pittsburgh. Federated also leases approximately 50,800 square feet of office space for a portion of its servicing business in Rockland, Massachusetts. Federated maintains office space in Dublin, Ireland, and Frankfurt, Germany, where administrative offices for offshore funds and other international initiatives are maintained; in New York, New York, where Federated Global Investment Management Corp. and InvestLink Technologies, Inc. conduct their business; and in Gibbsboro, New Jersey, where Federated Investors Trust Company is located. Additional offices in Wilmington, Delaware are subleased by Federated. ITEM 3 - LEGAL PROCEEDINGS There is currently no pending litigation of a material nature involving Federated. ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None. PART II ITEM 5 - MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCK HOLDER MATTERS The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Notes to Consolidated Financial Statements" and is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the caption "Selected Consolidated Financial Data" and is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is incorporated herein by reference. ITEM 8 - FINANCIAL STATEMENT AND SUPPLEMENTARY DATA The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the captions "Report of Ernst & Young LLP, Independent Auditors," "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Changes in Shareholders' Equity," "Consolidated Statements of Cash Flows," and "Notes to Consolidated Financial Statements" and is incorporated herein by reference. ITEM 9 - CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The information required by this Item (other than the information set forth below) will be contained in Federated's Information Statement for its 2001 Annual Meeting of Shareholders under the captions "Board of Directors and Election of Directors" and "Security Ownership - Section 16(a) Beneficial Ownership Reporting Compliance," and is incorporated herein by reference. EXECUTIVE OFFICERS The following table sets forth certain information regarding the executive officers of Federated as of March 31, 2001: NAME POSITION AGE ---- -------- --- John F. Donahue Chairman and Director 76 J. Christopher Donahue President, Chief Executive Officer and Director 51 Arthur L. Cherry President and Chief Executive Officer, 47 Federated Services Company and Director William D. Dawson III Executive Vice President and Chief Investment 52 Officer - U.S. Fixed Income of Federated Advisory Companies* Thomas R. Donahue Vice President, Treasurer, Chief Financial 42 Officer and Director John B. Fisher President - Institutional Sales Division of 44 Federated Securities Corp. and Director Henry A. Frantzen Executive Vice President and Chief Investment 58 Officer - Global Equity and Fixed Income of Federated Advisory Companies* James F. Getz President -- Retail Sales Division of 54 Federated Securities Corp. and Director J. Thomas Madden Executive Vice President and Chief Investment 55 Officer - Domestic Equity, High Yield and Asset Allocation of Federated Advisory Companies* Eugene F. Maloney Vice President and Director 56 John W. McGonigle Executive Vice President, Chief Legal Officer, 62 Secretary and Director Denis McAuley III Vice President and Principal Accounting Officer 54 ---------------------------- *Federated Advisory Companies include the following subsidiaries of Federated: Federated Global Investment Management Corp., Passport Research Limited, Federated Investment Counseling, and Federated Investment Management Company. Mr. John F. Donahue was a founder of the predecessor of Federated and was Chairman and Chief Executive Officer of Federated and a trustee of Federated Investors, a Delaware business trust (the "Trust"), prior to the May 1998 merger of the Trust into Federated, its wholly-owned subsidiary (the "Merger"). Mr. Donahue has continued to serve as Chairman following the consummation of the Merger. He served as President from 1989 until 1993. Mr. Donahue is Chairman or President and a director or trustee of the investment companies managed by subsidiaries of Federated. Mr. Donahue is the father of J. Christopher Donahue and Thomas R. Donahue, each of whom serves as an executive officer and director of Federated. Mr. J. Christopher Donahue was a trustee of the Trust from 1989 until the consummation of the Merger and has been a director of Federated since the consummation of the Merger. He served as President and Chief Operating Officer from 1993 until April 1998, when he became President and Chief Executive Officer. Prior to 1993, he served as Vice President. He is President or Executive Vice President of the investment companies managed by subsidiaries of Federated and a director, trustee or managing general partner of some of the investment companies. Mr. Donahue is the son of John F. Donahue and the brother of Thomas R. Donahue. Mr. Arthur L. Cherry was a trustee of the Trust from 1997 until the Merger and has been a director of Federated since the consummation of the Merger. He is the President and Chief Executive Officer of Federated Services Company, a wholly-owned subsidiary of Federated. Prior to joining Federated in January 1997, he was a managing partner of AT&T Solutions, former president of Scudder Services Corporation and a managing director of Scudder, Stevens & Clark. Mr. William D. Dawson III serves as Executive Vice President and Chief Investment Officer - U.S. Fixed Income of Federated Advisory Companies. He has served as a portfolio manager and held various other positions in the advisory companies. He is responsible for the investment policy and management of domestic fixed-income funds. Mr. Dawson is a Chartered Financial Analyst. Mr. Thomas R. Donahue was a trustee of the Trust from 1995 until the consummation of the Merger and has been a director of Federated since the consummation of the Merger. He has been Vice President since 1993 and currently serves as Vice President, Treasurer and Chief Financial Officer. Prior to joining Federated, Mr. Donahue was in the venture capital business, and from 1983 to 1987 was employed by PNC Bank in its Investment Banking Division. Mr. Donahue is the son of John F. Donahue and the brother of J. Christopher Donahue. Mr. John B. Fisher has been a director of Federated since the consummation of the Merger. He is President-Institutional Sales Division of Federated Securities Corp., a wholly-owned subsidiary of Federated, and is responsible for the distribution of Federated's products and services to investment advisors, insurance companies, retirement plans and corporations Mr. Henry A. Frantzen serves as Executive Vice President and Chief Investment Officer - Global Equity and Fixed Income of Federated Advisory Companies. Mr. Frantzen is primarily responsible for the management of global equity and fixed-income funds. Prior to joining Federated, Mr. Frantzen was Managing Director of International Equities for Brown Brothers Harriman Investment Management Ltd. and Manager and International Equity Chief Investment Officer for Brown Brothers Harriman and Co. from 1992 to 1995. Prior thereto Mr. Frantzen served in executive capacities for various investment management companies, including Oppenheimer Management Corp., Yamaichi Capital Management and CREF. Mr. James F. Getz has been a director of Federated since the consummation of the Merger. He serves as President - Retail Sales Division of Federated Securities Corp., a wholly-owned subsidiary of Federated, and is responsible for the marketing and sales efforts in the trust and broker/dealer markets. Mr. Getz is a Chartered Financial Analyst. Mr. J. Thomas Madden serves as Executive Vice President and Chief Investment Officer - Domestic Equity, High Yield and Asset Allocation of Federated Advisory Companies. Mr. Madden oversees the portfolio management in the domestic equity, high yield and asset allocation areas. Mr. Madden is a Chartered Financial Analyst. Mr. Eugene F. Maloney was a trustee of the Trust from 1989 until the consummation of the Merger and has continued as a director of Federated since the consummation of the Merger. He serves as a Vice President of Federated and provides certain legal, technical and management expertise to Federated's sales divisions, including regulatory and legal requirements relating to a bank's use of mutual funds in both trust and commercial environments. Mr. John W. McGonigle was a trustee of the Trust from 1989 until the consummation of the Merger and has been a director since the consummation of the Merger. Mr. McGonigle has served as Secretary of Federated since 1989. He served as Vice President of Federated from 1989 until August 1995, when he became Executive Vice President. Mr. McGonigle acted as General Counsel until 1998 when he became the Chief Legal Officer. Mr. McGonigle is Executive Vice President and Secretary of the investment companies managed by subsidiaries of Federated. Mr. Denis McAuley III became Principal Accounting Officer of Federated on March 16, 2001. He also serves as Vice President of Federated and as Senior Vice President, Treasurer or Assistant Treasurer for various subsidiaries of Federated. Mr. McAuley is a Certified Public Accountant. ITEM 11 - EXECUTIVE COMPENSATION The information required by this Item is contained in Federated's Information Statement for the 2001 Annual Meeting of Shareholders under the captions "Board of Directors and Election of Directors" and "Executive Compensation" and is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is contained in Federated's Information Statement for the 2001 Annual Meeting of Shareholders under the caption "Security Ownership" and is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (A)(1) FINANCIAL STATEMENTS: The information required by this Item is contained in Federated's 2000 Annual Report to Shareholders under the captions "Report of Ernst & Young LLP, Independent Auditors," "Consolidated Balance Sheets," "Consolidated Statements of Income," "Consolidated Statements of Changes in Shareholders' Equity," "Consolidated Statements of Cash Flows," and "Notes to Consolidated Financial Statements" and is incorporated herein by reference. (A)(2) FINANCIAL STATEMENT SCHEDULES: Schedules for which provision are made in the applicable accounting regulations of the United States Securities and Exchange Commission have been omitted because such schedules are not required under the related instructions or are inapplicable or because the information required is included in the Consolidated Financial Statements or notes thereto. (A)(3) EXHIBITS: The following exhibits are filed or incorporated as part of this report: Exhibit NUMBER DESCRIPTION 2.01 Agreement and Plan of Merger, dated as of February 20, 1998, between Federated Investors and Federated (incorporated by reference to Exhibit 2.01 to the Registration Statement on Form S-1 (File No. 333-48405)) 3.01 Restated Articles of Incorporation of Federated (incorporated by reference to Exhibit 3.01 to the Registration Statement on Form S-1 (File No. 333-48405)) 3.02 Restated By-Laws of Federated (incorporated by reference to Exhibit 3.02 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.01 Form of Class A Common Stock certificate (incorporated by reference to Exhibit 4.01 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.02 Form of Class B Common Stock certificate (incorporated by reference to Exhibit 4.02 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.03 Stock Purchase Agreement, dated August 1, 1989, between Federated and Westinghouse Credit Corporation (incorporated by reference to Exhibit 4.04 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.04 Intercompany Subordination Agreement, dated as of June 15, 1996, by and among Federated Investors and its subsidiaries (incorporated by reference to Exhibit 4.05 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.05 Shareholder Rights Agreement, dated August 1, 1989, between Federated and The Standard Fire Insurance Company, as amended January 31, 1996 (incorporated by reference to Exhibit 4.06 to the Registration Statement on Form S-1 (File No. 333-48405)) 4.06 Senior Secured Credit Agreement, dated as of January 31, 1996, by and among Federated and the Banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 4.07 to the Registration Statement on Form S-1 (File No. 333-48405)) 9.01 Voting Shares Irrevocable Trust dated May 31, 1989 (incorporated by reference to Exhibit 9.01 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.01 Amendment No. 4 to Credit Agreement, dated as of May 11, 1998, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association. (incorporated by reference to Exhibit 10.1 of the June 30, 1998 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.02 Amendment No. 5 to Credit Agreement, dated as of May 11, 1998, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association. (incorporated by reference to Exhibit 10.2 of the June 30, 1998 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.03 Amendment No. 6 to Credit Agreement, dated as of December 3, 1998, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.03 of the Form 10-K for the fiscal year ended December 31, 1998 (File No. 001-14818)) 10.04 Amendment No. 7 to Credit Agreement, dated as of February 22, 1999, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 of the June 30, 1999 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.05 Federated Note Purchase Agreement, dated as of June 15, 1996 (incorporated by reference to Exhibit 4.08 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.06 Federated Program Master Agreement, dated as of October 24, 1997, among Federated, Federated Funding 1997-1, Inc., Federated Management Company, Federated Securities Corp., Wilmington Trust Company, PLT Finance, L.P., Putnam, Lovell & Thornton Inc. and Bankers Trust Company (incorporated by reference to Exhibit 4.09 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.07 Federated Investors, Inc. Employee Stock Purchase Plan, amended as of July 20, 1999 (incorporated by reference to Exhibit 10.2 of the June 30, 1999 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.08 Federated Investors Program Initial Purchase Agreement, dated as of October 24, 1997, between Federated Funding 1997-1, Inc. and Wilmington Trust Company, solely as Trustee of the PLT Finance Trust 1997-1 (incorporated by reference to Exhibit 4.10 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.09 Federated Investors Program Revolving Purchase Agreement, dated as of October 24, 1997, between Federated Funding 1997-1, Inc. and PLT Finance, L.P. (incorporated by reference to Exhibit 4.11 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.10 Federated Investors Program Fee Agreement, dated as October 24, 1997, between Federated Investors and PLT Finance, L.P. (incorporated by reference to Exhibit 4.12 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.11 Schedule X to Federated Program Master Agreement, dated as of October 24, 1997, among Federated, Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, PLT Finance, L.P., Putnam, Lovell & Thornton Inc. and Bankers Trust Company (incorporated by reference to Exhibit 4.13 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.12 Stock Incentive Plan, as amended as of July 20, 1999 (incorporated by reference to Exhibit 10.3 to the June 30, 1999 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.13 Executive Annual Incentive Plan (incorporated by reference to Exhibit 10.02 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.14 Form of Bonus Stock Option Agreement (incorporated by reference to Exhibit 10.13 of the Form 10-K for the fiscal year ended December 31, 1998 (File No. 001-14818)) 10.15 Federated Investors Tower Lease dated January 1, 1993 (incorporated by reference to Exhibit 10.03 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.16 Federated Investors Tower Lease dated February 1, 1994 (incorporated by reference to Exhibit 10.04 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.17 Centre City Tower Lease dated July 23, 1992, as amended (incorporated by reference to Exhibit 10.05 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.18 Employment Agreement, dated January 16, 1997, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.06 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.19 Employment Agreement, dated December 28, 1990, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.08 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.20 Employment Agreement, dated December 22, 1993, between Federated Securities Corp. and an executive officer (incorporated by reference to Exhibit 10.09 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.21 Employment Agreement, dated March 17, 1995, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.07 to the Registration Statement on Form S-1 (File No. 333-48405)) 10.22 Edgewood Services, Inc. Discretionary Line of Credit Demand Note, dated as of March 28, 2000 (incorporated by reference to Exhibit 10.1 to the March 31, 2000 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.23 Federated Investors, Inc. Guaranty and Suretyship Agreement, dated as of March 28, 2000 (incorporated by reference to Exhibit 10.2 to the March 31, 2000 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.24 Federated Investors, Inc. Supplemental Agreement, dated as of April 20, 2000, amending the Note Purchase Agreements dated June 15, 1996 (incorporated by reference to Exhibit 10.1 to the June 30, 2000 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.25 Amendment No. 8 to Credit Agreement, dated April 14, 2000, by and among Federated Investors, Inc. and the Banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to the June 30, 2000 Quarterly Report on Form 10-Q (File No. 001-14818)) 10.26 Purchase and Sale Agreement, dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. (Filed herewith) 10.27 Amendment No. 2 to the Federated Investors Program Documents dated as of December 21, 2000 among Federated Investors, Inc., Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, Putnam Lovell Finance L.P., Putnam Lovell Securities Inc., and Bankers Trust Company (Filed herewith) 10.28 Amended and Restated Senior Secured Credit Agreement, dated as of January 23, 2001, by and among Federated Investors, Inc., the banks set forth therein, PNC Bank, National Association and The Bank of New York (Filed herewith) 13.01 Selected Portions of 2000 Annual Report to Shareholders (Filed herewith) 21.01 Subsidiaries of the Registrant (Filed herewith) 23.01 Consent of Ernst & Young LLP (Filed herewith) (B) REPORTS ON FORM 8-K: Form 8-K filed on November 8, 2000 (C) EXHIBITS: See (a)(3) above. (D) FINANCIAL STATEMENT SCHEDULES: See (a)(2) above. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized. FEDERATED INVESTORS, INC. By: /S/ J. CHRISTOPHER DONAHUE -------------------------------------- J. Christopher Donahue President and Chief Executive Officer Date: March 22, 2001 Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ John F. Donahue Chairman and Director March 22, 2001 ------------------------- John F. Donahue /s/ J. Christopher Donahue President, Chief Executive March 22, 2001 Officer ------------------------- J. Christopher Donahue and Director (Principal Executive Officer) /s/ John W. McGonigle Director March 22, 2001 ------------------------- John W. McGonigle /s/ Arthur L. Cherry Director March 22, 2001 ------------------------- Arthur L. Cherry /s/ James F. Getz Director March 22, 2001 ------------------------- James F. Getz /s/ John B. Fisher Director March 22, 2001 ------------------------- John B. Fisher SIGNATURE TITLE DATE /s/ Thomas R. Donahue Chief Financial Officer and March 22, 2001 Director ------------------------- Thomas R. Donahue /s/ Eugene F. Maloney Director March 22, 2001 ------------------------- Eugene F. Maloney /s/ Michael J. Farrell Director March 22, 2001 ------------------------- Michael J. Farrell /s/ James L. Murdy Director March 22, 2001 ------------------------- James L. Murdy /s/ Denis McAuley III Principal Accounting Officer March 22, 2001 ------------------------- Denis McAuley III EXHIBIT INDEX Exhibit NUMBER DESCRIPTION 10.26 Purchase and Sale Agreement, dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. 10.27 Amendment No. 2 to the Federated Investors Program Documents dated as of December 21, 2000 among Federated Investors, Inc., Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, Putnam Lovell Finance L.P., Putnam Lovell Securities Inc., and Bankers Trust Company 10.28 Amended and Restated Senior Secured Credit Agreement, dated as of January 23, 2001, by and among Federated Investors, Inc., the banks set forth therein, PNC Bank, National Association and The Bank of New York 13.01 Selected Portions of 2000 Annual Report to Shareholders 21.01 Subsidiaries of the Registrant 23.01 Consent of Ernst & Young LLP Appendix A FEDERATED FUNDS
Number of Share Fund Classes Assets as Effective FUND NAME as of FUND CATEGORY of 12/31/00 LOAD DATE --------- 12/31/00 ------------- -------- ---- ---- EQUITY FUNDS: FEDERATED AGGRESSIVE GROWTH FUND 3 Equity Fund - $271,900,474 Y 11/18/1996 Growth FEDERATED AMERICAN LEADERS FUND 4 Equity Fund - 3,624,954,543 Y 2/26/1969 INC. Growth and Income FEDERATED AMERICAN LEADERS FUND II 1 Equity Fund - 485,611,608 N 12/15/1993 Growth and Income FEDERATED ASIA PACIFIC GROWTH FUND 3 International/Global 36,219,968 Y 1/31/1996 FEDERATED CAPITAL APPRECIATION FUND 3 Equity Fund - 943,594,621 Y 11/14/1995 Growth FEDERATED COMMUNICATIONS 3 Equity Fund - 533,695,604 Y 9/13/1999 TECHNOLOGY FUND Growth FEDERATED EMERGING MARKETS FUND 3 International/Global 61,467,864 Y 1/31/1996 FEDERATED EQUITY INCOME FUND INC. 4 Equity 2,946,986,963 Y 12/30/1986 FEDERATED EQUITY INCOME FUND II 1 Equity 104,911,769 N 12/16/1996 FEDERATED EUROPEAN GROWTH FUND 3 International/Global 82,050,575 Y 1/31/1996 FEDERATED GLOBAL EQUITY INCOME FUND 3 International/Global 60,751,278 Y 3/8/1998 FEDERATED GLOBAL FINANCIAL 3 International/Global 60,857,260 Y 8/24/1998 SERVICES FUND FEDERATED GROWTH STRATEGIES FUND 3 Equity Fund - 1,485,874,420 Y 8/23/1984 Growth FEDERATED GROWTH STRATEGIES FUND II 1 Equity Fund - 132,255,742 N 9/30/1995 Growth FEDERATED INTERNATIONAL EQUITY 1 International 24,361,183 N 3/21/1997 COMMINGLED TRUST Equity Fund FEDERATED INTERNATIONAL EQUITY FUND 3 International 654,697,454 Y 8/17/1984 Equity Fund FEDERATED INTERNATIONAL EQUITY 1 International 98,961,118 N 4/4/1995 FUND II Equity Fund FEDERATED INTERNATIONAL SMALL 3 International/Global 1,075,576,426 Y 1/31/1996 COMPANY FUND FEDERATED INTERNATIONAL SMALL 1 International/Global 9,436,175 N 6/21/2000 COMPANY FUND II FEDERATED LARGE CAP GROWTH FUND 3 Equity Fund - 786,242,649 Y 12/23/1998 Growth FEDERATED LARGE CAP GROWTH FUND II 1 Equity Fund - 7,205,309 N 6/21/2000 Growth FEDERATED MANAGED GROWTH PORTFOLIO 2 Asset Allocation 158,267,231 N 3/11/1994 Fund FEDERATED MANAGED CONSERVATIVE 2 Asset Allocation 175,377,787 N 3/11/1994 GROWTH PORTFOLIO Fund FEDERATED MANAGED MODERATE GROWTH 2 Asset Allocation 255,416,915 N 3/11/1994 PORTFOLIO Fund FEDERATED MARKET OPPORTUNITY FUND 3 Equity Fund - 3,424,394 Y 12/4/2000 Growth and Income FEDERATED MAX-CAP FUND 3 Equity Fund - 2,761,904,918 N 7/2/1990 Growth and Income/Index FEDERATED MID-CAP FUND 1 Equity Fund - 221,863,142 N 7/7/1992 Growth and Income/Index FEDERATED MINI-CAP FUND 2 Equity Fund - 90,935,938 N 7/7/1992 Growth and Income/Index FEDERATED NEW ECONOMY FUND 3 Equity Fund - 44,962,799 Y 8/30/2000 Growth FEDERATED SMALL CAP STRATEGIES FUND 3 Equity Fund - 307,037,989 Y 9/13/1995 Growth FEDERATED SMALL CAP STRATEGIES 1 Equity Fund - 6,480,630 N 5/21/1999 FUND II Growth FEDERATED STOCK AND BOND FUND INC. 3 Balanced 243,793,892 N 10/31/1984 FEDERATED STOCK TRUST 1 Equity Fund - 1,404,692,517 N 3/31/1982 Growth and Income FEDERATED UTILITY FUND INC. 4 Equity Fund - 1,045,024,398 Y 5/29/1987 Domestic Utility FEDERATED UTILITY FUND II 1 Equity Fund - 174,820,660 N 12/15/1993 Domestic Utility FEDERATED WORLD UTILITY FUND 3 International 139,769,425 Y 4/12/1994 Equity Fund LVM EUROPA-AKTIEN 1 International/Global 42,345,530 Y 1/26/2000 LVM INTER-AKTIEN 1 International/Global 41,622,490 Y 1/26/2000 LVM PROFUTUR 1 International/Global 35,861,846 Y 1/26/2000 ----------- TOTAL EQUITY FUNDS $20,641,215,504 ----------- FIXED INCOME FUNDS: CAPITAL PRESERVATION FUND 1 Short-Term $638,205,939 N 8/1/1988 Corporate Bond Fund - High Grade FEDERATED LIMITED DURATION 2 Government Bond 89,960,230 Y 3/2/1992 GOVERNMENT FUND Fund FEDERATED ARMS FUND 2 Adjustable Rate 295,566,242 N 12/3/1985 Mortgage-Backed Fund FEDERATED BOND FUND 4 Long Corporate Bond 887,623,718 Y 6/27/1995 Fund - High Grade FEDERATED CALIFORNIA MUNICIPAL 2 Municipal Bond Fund 63,578,683 Y 11/24/1992 INCOME FUND FEDERATED FUND FOR U.S. GOVERNMENT 3 Mortgage Backed 1,095,559,606 Y 10/6/1969 SECURITIES INC Fund FEDERATED FUND FOR U.S. GOVERNMENT 1 Mortgage Backed 159,732,341 N 12/15/1993 SECURITIES II Fund FEDERATED GNMA TRUST 2 Mortgage Backed 809,772,668 N 3/23/1982 Fund FEDERATED GOVERNMENT INCOME 4 Mortgage Backed 1,080,302,493 Y 8/2/1996 SECURITIES INC. Fund FEDERATED GOVERNMENT ULTRASHORT 2 Government Bond 186,365,878 N 9/29/1999 FUND Fund FEDERATED HIGH INCOME ADVANTAGE 1 High Yield Fund 62,427,143 Y 9/20/1993 FUND FEDERATED HIGH INCOME BOND FUND 3 High Yield Fund 1,713,257,731 Y 11/30/1977 INC. FEDERATED HIGH INCOME BOND FUND II 2 High Yield Fund 214,686,954 N 12/15/1993 FEDERATED HIGH YIELD TRUST 1 High Yield Fund 587,982,372 N 8/23/1984 FEDERATED INCOME TRUST 2 Mortgage Backed 636,087,551 N 3/30/1982 Fund FEDERATED INTERMEDIATE INCOME FUND 2 General Investment 326,204,632 N 12/8/1993 Grade FEDERATED INTERMEDIATE MUNICIPAL 1 Municipal Bond Fund 171,343,981 N 12/26/1985 TRUST FEDERATED INTERNATIONAL HIGH 3 International Bond 82,392,558 Y 9/9/1996 INCOME FUND Fund FEDERATED INTERNATIONAL BOND FUND 3 International Bond 82,204,079 Y 5/15/1991 Fund FEDERATED LIMITED DURATION FUND 2 Mortgage Backed 108,657,458 N 9/16/1996 Fund FEDERATED LIMITED TERM FUND 2 Short-Term 118,952,460 Y 12/24/1991 Corporate Bond Fund - High Grade FEDERATED LIMITED TERM MUNICIPAL 2 Municipal Bond Fund 67,257,788 Y 8/31/1993 FUND FEDERATED MANAGED INCOME PORTFOLIO 2 Asset Allocation 108,244,228 N 3/11/1994 Fund FEDERATED MICHIGAN INTERMEDIATE 1 Municipal Bond Fund 94,083,281 Y 9/9/1991 MUNICIPAL TRUST FEDERATED MORTGAGE FUND 2 US Government Int. 92,084,508 N 6/30/1998 Muni. Bond FEDERATED MUNICIPAL OPPORTUNITIES 4 Municipal Bond Fund 379,452,144 Y 5/3/1996 FUND INC. FEDERATED MUNICIPAL SECURITIES 3 Municipal Bond Fund 542,187,432 N 10/4/1976 FUND INC. FEDERATED MUNICIPAL ULTRASHORT FUND 2 Municipal Bond Fund 22,093,268 N 10/23/2000 FEDERATED NEW YORK MUNICIPAL 1 Municipal Bond Fund 21,701,573 Y 11/24/1992 INCOME FUND FEDERATED NORTH CAROLINA MUNICIPAL 1 Municipal Bond Fund 44,779,893 Y 6/4/1999 INCOME FUND FEDERATED OHIO MUNICIPAL INCOME 1 Municipal Bond Fund 75,027,516 Y 10/10/1990 FUND FEDERATED PENNSYLVANIA MUNICIPAL 2 Municipal Bond Fund 230,720,728 Y 10/10/1990 INCOME FUND FEDERATED QUALITY BOND FUND II 1 Short-Term 118,811,758 N 4/21/1999 Corporate Bond Fund - High Grade FEDERATED SHORT-TERM INCOME FUND 2 Short-Term 177,244,215 N 7/1/1986 Corporate Bond Fund - High Grade FEDERATED SHORT-TERM MUNICIPAL 2 Municipal Bond Fund 179,530,076 N 8/20/1981 TRUST FEDERATED STRATEGIC INCOME FUND 4 Balanced 804,064,618 Y 4/5/1994 FEDERATED STRATEGIC INCOME FUND II 1 Balanced 16,015,112 N 5/21/1999 FEDERATED TOTAL RETURN BOND FUND 2 Mortgage Backed 337,608,877 N 1/19/1994 Fund FEDERATED U.S.GOVERNMENT BOND FUND 1 Mortgage Backed 136,683,102 N 12/2/1985 Fund FEDERATED ULTRASHORT BOND FUND 2 US Government ST 217,498,167 N 10/27/1998 FEDERATED US GOVERNMENT SECURITIES 2 Government Bond 430,309,185 N 3/15/1984 FUND: 1-3 YEARS Fund FEDERATED US GOVERNMENT SECURITIES 2 Government Bond 581,595,584 N 2/18/1983 FUND: 2-5 YEARS Fund FEDERATED TOTAL RETURN GOVERNMENT 2 Government Bond 84,404,775 N 9/13/1995 BOND FUND Fund LVM EURO-KURZLAUFER 1 International/Global 28,131,405 Y 1/26/2000 LVM EURO-RENTEN 1 International/Global 35,103,500 Y 1/26/2000 LVM INTER-RENTEN 1 International/Global 32,551,639 Y 1/26/2000 ----------- TOTAL FIXED-INCOME FUNDS $ 14,268,049,089 ----------- ----------- TOTAL NON-MONEY MARKET FUNDS $ 34,909,264,593 ----------- MONEY MARKET FUNDS: ALABAMA MUNICIPAL CASH TRUST 1 Municipal Money $229,217,607 N 12/1/1993 Market ARIZONA MUNICIPAL CASH TRUST 1 Municipal Money 66,794,411 N 5/30/1998 Market AUTOMATED CASH MANAGEMENT TRUST 2 Prime Money Market 4,461,366,125 N 9/19/1996 Fund AUTOMATED GOVERNMENT CASH RESERVES 1 Government Money 709,653,747 N 2/2/1990 Market Fund AUTOMATED GOVERNMENT MONEY TRUST 1 Government Money 1,726,706,212 N 6/1/1982 Market Fund AUTOMATED TREASURY CASH RESERVES 1 Government Money 263,492,036 N 8/5/1991 Market Fund CALIFORNIA MUNICIPAL CASH TRUST 3 Municipal Money 787,123,858 N 2/29/1996 Market CONNECTICUT MUNICIPAL CASH TRUST 1 Municipal Money 284,631,051 N 11/1/1989 Market EDWARD D. JONES DAILY PASSPORT 1 Government Money 10,327,817,381N 5/9/1980 CASH TRUST Market Fund FEDERATED MASTER TRUST 1 Prime Money Market 424,662,154 N 12/16/1977 Fund FEDERATED PRIME MONEY FUND II 1 Prime Money Market 154,591,513 N 12/15/1993 Fund FEDERATED SHORT-TERM EURO FUND 1 Prime Money Market 110,538,840 N 11/9/1999 Fund FEDERATED SHORT-TERM U.S. 1 Government Money 285,239,846 N 4/16/1987 GOVERNMENT TRUST Market Fund FEDERATED SHORT-TERM U.S. PRIME 2 Government Money 812,949,842 N 9/20/1993 FUND Market Fund FEDERATED SHORT-TERM U.S.GOVT 3 Government Money 1,381,410,827 N 1/18/1991 SECURITIES FUND Market Fund FEDERATED SHORT-TERM U.S.TREASURY 1 Government Money 923,669,536 N 4/16/1992 SECURITIES FUND Market Fund FEDERATED TAX-FREE TRUST 1 Municipal Money 522,456,891 N 3/6/1979 Market FLORIDA MUNICIPAL CASH TRUST 2 Municipal Money 1,049,640,057 N 11/16/1995 Market GEORGIA MUNICIPAL CASH TRUST 1 Municipal Money 280,959,683 N 8/14/1995 Market GOVERNMENT CASH SERIES 1 Government Money 725,193,929 N 8/15/1989 Market Fund GOVERNMENT OBLIGATIONS FUND 2 Government Money 8,334,502,757 N 12/11/1989 Market Fund GOVERNMENT OBLIGATIONS TAX MANAGED 2 Government Money 4,285,031,831 N 5/7/1995 FUND Market Fund LIBERTY U.S. GOVERNMENT MONEY 2 Government Money 806,024,364 N 6/6/1980 MARKET TRUST Market Fund LIQUID CASH TRUST 1 Government Money 229,103,015 N 12/12/1980 Market Fund MARYLAND MUNICIPAL CASH TRUST 1 Municipal Money 86,436,497 N 5/4/1994 Market MASSACHUSETTS MUNICIPAL CASH TRUST 2 Municipal Money 964,185,399 N 2/22/1993 Market MICHIGAN MUNICIPAL CASH TRUST 2 Municipal Money 245,205,368 N 2/29/1996 Market MINNESOTA MUNICIPAL CASH TRUST 2 Municipal Money 506,626,323 N 12/31/1990 Market MONEY MARKET MANAGEMENT INC. 1 Prime Money Market 81,483,608 N 2/25/1993 Fund MONEY MARKET TRUST 1 Prime Money Market 352,345,579 N 10/13/1978 Fund MUNICIPAL CASH SERIES 1 Municipal Money 498,298,000 N 8/15/1989 Market MUNICIPAL CASH SERIES II 1 Municipal Money 451,256,920 N 1/25/1991 Market MUNICIPAL OBLIGATIONS FUND 3 Municipal Money 645,916,199 N 2/5/1993 Market NEW JERSEY MUNICIPAL CASH TRUST 2 Municipal Money 190,875,902 N 12/10/1990 Market NEW YORK MUNICIPAL CASH TRUST 2 Municipal Money 919,962,713 N 5/30/1994 Market NORTH CAROLINA MUNICIPAL CASH TRUST 1 Municipal Money 251,077,785 N 12/1/1993 Market OHIO MUNICIPAL CASH TRUST 3 Municipal Money 373,004,933 N 3/26/1991 Market PENNSYLVANIA MUNICIPAL CASH TRUST 3 Municipal Money 441,443,147 N 12/21/1990 Market PRIME CASH OBLIGATIONS FUND 3 Prime Money Market 5,011,882,780 N 2/5/1993 Fund PRIME CASH SERIES 1 Prime Money Market 5,716,707,247 N 8/15/1989 Fund PRIME OBLIGATIONS FUND 2 Prime Money Market 13,922,867,120N 7/5/1994 Fund PRIME VALUE OBLIGATIONS FUND 3 Prime Money Market 4,450,779,980 N 2/5/1993 Fund TAX-FREE INSTRUMENTS TRUST 2 Municipal Money 2,142,622,030 N 12/21/1982 Market TAX-FREE OBLIGATIONS FUND 2 Municipal Money 4,024,193,650 N 12/11/1989 Market TREASURY CASH SERIES 1 Government Money 641,706,841 N 2/5/1990 Market Fund TREASURY CASH SERIES II 1 Government Money 136,148,570 N 1/25/1991 Market Fund TREASURY OBLIGATIONS FUND 3 Government Money 12,086,290,233N 4/14/1997 Market Fund TRUST FOR GOVERNMENT CASH RESERVES 1 Government Money 324,711,027 N 3/30/1989 Market Fund TRUST FOR SHORT-TERM U.S. 1 Government Money 530,212,510 N 12/29/1975 GOVERNMENT SECURITIES Market Fund TRUST FOR U.S. TREASURY OBLIGATIONS 1 Government Money 975,538,409 N 11/8/1979 Market Fund U.S. TREASURY CASH RESERVES 2 Government Money 3,141,318,088 N 5/14/1991 Market Fund VIRGINIA MUNICIPAL CASH TRUST 2 Municipal Money 319,953,301 N 8/30/1993 Market ----------- TOTAL MONEY MARKET FUNDS $98,615,827,672 ----------- ------ ----------- MANAGED FUND TOTAL 262 $133,525,092,265 ------ ----------- Other Managed Assets* 6,058,570,871 ----------- ----------- TOTAL MANAGED ASSETS $139,583,663,136 ===========
Summary: Total Number of Load Funds: 43 Total Number of No-Load Funds: 94 Total Number of Funds: 137 *Other Managed Assets include Separate Account and Repo Assets