Federated Hermes, Inc 10-Q for FY2023 Q1

Federated Hermes, Inc. (FHI)

10-Q 2023-05-02 For: 2023-03-31

Added on April 08, 2026

About this 10-Q

Federated Hermes, Inc filed this 10-Q on May 2, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $382.19M; up 17.7% from $324.76M a year earlier
Net income: $69.6M; up 24.6% from net income of $55.86M a year earlier
Diluted EPS: $0.78; up 27.9% from $0.61 a year earlier

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Pennsylvania						25-1111467
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class B common stock, no par value	FHI	New York Stock Exchange


Part I. Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets	4
		Consolidated Statements of Income	5
		Consolidated Statements of Comprehensive Income	6
		Consolidated Statements of Changes in Equity	7
		Consolidated Statements of Cash Flows	8
		Notes to the Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
	Item 4.	Controls and Procedures	51
Part II. Other Information
	Item 1.	Legal Proceedings	51
	Item 1A.	Risk Factors	51
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
	Item 5.	Other Information	52
	Item 6.	Exhibits	53
Signatures			54


Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
	March 31, 2023		December 31, 2022
ASSETS
Current Assets
Cash and Cash Equivalents	$	323,983	$	336,782
Investments—Consolidated Investment Companies	83,366		108,448
Investments—Affiliates and Other	80,640		76,524
Receivables, net of reserve of $21 and $21, respectively	75,234		58,068
Receivables—Affiliates	35,018		35,941
Prepaid Expenses	31,450		27,004
Other Current Assets	6,561		8,264
Total Current Assets	636,252		651,031
Long-Term Assets
Goodwill	802,940		800,417

Intangible Assets, net of accumulated amortization of $51,984 and $47,650, respectively	410,982		409,157
Property and Equipment, net of accumulated depreciation of $116,983 and $119,640, respectively	32,501		35,743
Right-of-Use Assets, net	84,234		92,860
Other Long-Term Assets	32,070		31,271
Total Long-Term Assets	1,362,727		1,369,448
Total Assets	$	1,998,979	$	2,020,479
LIABILITIES
Current Liabilities
Accounts Payable and Accrued Expenses	$	95,377	$	73,901
Accrued Compensation and Benefits	69,028		149,760
Lease Liabilities	18,891		18,394
Income Taxes Payable	22,048		2,286
Other Current Liabilities	6,846		13,072
Total Current Liabilities	212,190		257,413
Long-Term Liabilities
Long-Term Debt	347,645		347,581
Long-Term Deferred Tax Liability, net	180,908		180,410
Long-Term Lease Liabilities	76,931		86,809
Other Long-Term Liabilities	35,094		40,753
Total Long-Term Liabilities	640,578		655,553
Total Liabilities	852,768		912,966
Commitments and Contingencies (Note (17))
TEMPORARY EQUITY
Redeemable Noncontrolling Interests in Subsidiaries	39,508		61,821
PERMANENT EQUITY
Federated Hermes, Inc. Shareholders’ Equity
Common Stock:
Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding	189		189
Class B, No Par Value, 900,000,000 Shares Authorized, 99,505,456 Shares Issued	451,630		440,953

Retained Earnings	1,051,095		1,015,589
Treasury Stock, at Cost, 9,986,317 and 10,229,521 Shares Class B Common Stock, respectively	(360,155)		(365,363)
Accumulated Other Comprehensive Income (Loss), net of tax	(36,056)		(45,676)


Total Permanent Equity	1,106,703		1,045,692
Total Liabilities, Temporary Equity and Permanent Equity	$	1,998,979	$	2,020,479


Consolidated Statements of Income
(dollars in thousands, except per share data)
(unaudited)
	Three Months Ended
	March 31,
	2023		2022
Revenue
Investment Advisory Fees, net—Affiliates	$	201,889	$	170,221
Investment Advisory Fees, net—Other	62,093		62,773
Administrative Service Fees, net—Affiliates	79,180		73,507
Other Service Fees, net—Affiliates	34,862		13,607
Other Service Fees, net—Other	4,165		4,656
Total Revenue	382,189		324,764
Operating Expenses
Compensation and Related	136,878		133,965
Distribution	93,333		48,562
Systems and Communications	19,972		19,494
Professional Service Fees	16,220		13,468
Office and Occupancy	12,874		11,322
Advertising and Promotional	4,342		2,732
Intangible Asset Related	3,326		3,334
Travel and Related	3,231		1,795

Other	6,847		6,143
Total Operating Expenses	297,023		240,815
Operating Income	85,166		83,949
Nonoperating Income (Expenses)
Investment Income, net	4,820		1,093
Gain (Loss) on Securities, net	5,492		(11,695)
Debt Expense	(3,125)		(1,222)
Other, net	122		83
Total Nonoperating Income (Expenses), net	7,309		(11,741)
Income Before Income Taxes	92,475		72,208
Income Tax Provision	21,009		17,611
Net Income Including the Noncontrolling Interests in Subsidiaries	71,466		54,597
Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries	1,865		(1,266)
Net Income	$	69,601	$	55,863
Amounts Attributable to Federated Hermes, Inc.
Earnings Per Common Share—Basic and Diluted	$	0.78	$	0.61

Cash Dividends Per Share	$	0.27	$	0.27


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934







Balance at December 31, 2021	$	449,118	$	0	$	1,187,001	$	(538,464)	$	16,362	$	1,114,017	$	63,202

Net Income (Loss)	0		0		55,863		0		0		55,863		(1,266)
Other Comprehensive Income (Loss), net of tax	0		0		0		0		(17,134)		(17,134)		(457)
Subscriptions—Redeemable Noncontrolling Interest Holders	0		0		0		0		0		0		30,340
Consolidation (Deconsolidation)	0		0		0		0		0		0		(16,034)
Stock Award Activity	9,288		0		(12,116)		12,147		0		9,319		707
Dividends Declared	0		0		(24,952)		0		0		(24,952)		0
Distributions to Noncontrolling Interests in Subsidiaries	0		0		0		0		0		0		(4,339)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests	0		0		(14,221)		0		0		(14,221)		14,221
Acquisition of Additional Equity of FHL	0		3,518		0		34,048		0		37,566		(37,805)
Purchase of Treasury Stock	0		0		0		(102,537)		0		(102,537)		0
Balance at March 31, 2022	$	458,406	$	3,518	$	1,191,575	$	(594,806)	$	(772)	$	1,057,921	$	48,569


(in millions)

Right-of-Use Asset	$	0.8
Intangible Assets1	15.4
Goodwill2	16.4
Less: Lease Liability Assumed	0.8
Less: Fair Value of Contingent Consideration	3.7
Total Upfront Purchase Price Consideration	$	28.1


	Three Months Ended
	March 31,
(in thousands)	2023		2022
Money market	$	179,536	$	86,290
Equity	124,653		146,856
Fixed-income	47,890		57,874
Other1	30,110		33,744
Total Revenue	$	382,189	$	324,764


(in thousands)
Remainder of 2023	$	7,791
2024	3,823
2025	1,236
2026 and Thereafter	372
Total Remaining Unsatisfied Performance Obligations	$	13,222


(in millions)	March 31, 2023		December 31, 2022
Cash and Cash Equivalents	$	7.1	$	8.0
Investments—Consolidated Investment Companies	23.7		50.1
Other Assets	2.6		0.7
Other Long-Term Assets	12.7		13.4
Less: Liabilities	7.7		5.7
Less: Accumulated Other Comprehensive Income (Loss), net of tax	0.7		1.2
Less: Redeemable Noncontrolling Interests in Subsidiaries	25.0		49.5
Federated Hermes’ Net Interest in VIEs	$	12.7	$	15.8



(in thousands)	Level 1		Level 2		Level 3		Total
March 31, 2023
Financial Assets
Cash and Cash Equivalents	$	323,983	$	0	$	0	$	323,983
Investments—Consolidated Investment Companies	24,083		59,283		0		83,366
Investments—Affiliates and Other	77,972		2,643		25		80,640
Other1	6,624		3,490		0		10,114
Total Financial Assets	$	432,662	$	65,416	$	25	$	498,103






Total Financial Liabilities2	$	0	$	0	$	7,831	$	7,831

December 31, 2022
Financial Assets
Cash and Cash Equivalents	$	336,782	$	0	$	0	$	336,782
Investments—Consolidated Investment Companies	49,119		59,329		0		108,448
Investments—Affiliates and Other	71,369		5,130		25		76,524
Other1	6,538		469		0		7,007
Total Financial Assets	$	463,808	$	64,928	$	25	$	528,761



Total Financial Liabilities2	$	27	$	4	$	8,439	$	8,470


(in thousands)
Balance at December 31, 2022	$	8,439

Changes in Fair Value	249
Contingent Consideration Payments	(857)
Balance at March 31, 2023	$	7,831


	Three Months Ended
	March 31,
(in thousands, except per share data)	2023		2022
Numerator
Net Income Attributable to Federated Hermes, Inc.	$	69,601	$	55,863
Less: Total Net Income Available to Participating Unvested Restricted Shareholders1	(3,509)		(2,443)
Total Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted	$	66,092	$	53,420


Denominator


Basic and Diluted Weighted-Average Federated Hermes Common Stock2	84,875		88,270
Earnings Per Share
Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted2	$	0.78	$	0.61



Table of Contents


(in thousands)	Consolidated Investment Companies		FHL and other entities		Total
Balance at December 31, 2022	$	50,317	$	11,504	$	61,821
Net Income (Loss)	1,925		(60)		1,865
Other Comprehensive Income (Loss), net of tax	0		232		232
Subscriptions—Redeemable Noncontrolling Interest Holders	12,669		107		12,776
Consolidation/(Deconsolidation)	(33,962)		0		(33,962)

Distributions to Noncontrolling Interests in Subsidiaries	(2,499)		(725)		(3,224)



Balance at March 31, 2023	$	28,450	$	11,058	$	39,508



Balance at December 31, 2021	$	24,659	$	38,543	$	63,202
Net Income (Loss)	(1,744)		478		(1,266)
Other Comprehensive Income (Loss), net of tax	0		(457)		(457)
Subscriptions—Redeemable Noncontrolling Interest Holders	29,577		763		30,340
Consolidation/(Deconsolidation)	(16,034)		0		(16,034)
Stock Award Activity	0		707		707
Distributions to Noncontrolling Interests in Subsidiaries	(771)		(3,568)		(4,339)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL	0		14,221		14,221
Acquisition of Additional Equity of FHL	0		(37,805)		(37,805)
Balance at March 31, 2022	$	35,687	$	12,882	$	48,569


Part I, Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations (unaudited)



Management's Discussion and Analysis (continued)
of Financial Condition and Results of Operations (unaudited)


	March 31,				Percent Change
(in millions)	2023		2022
By Asset Class
Equity	$	83,629	$	91,676	(9)	%
Fixed-Income	87,461		92,146		(5)
Alternative / Private Markets	21,174		23,109		(8)
Multi-Asset	2,973		3,555		(16)
Total Long-Term Assets	195,237		210,486		(7)
Money Market	505,800		420,596		20
Total Managed Assets	$	701,037	$	631,082	11	%

By Product Type
Funds:
Equity	$	44,732	$	51,890	(14)	%
Fixed-Income	43,616		54,830		(20)
Alternative / Private Markets	13,040		14,847		(12)
Multi-Asset	2,832		3,401		(17)
Total Long-Term Assets	104,220		124,968		(17)
Money Market	357,346		279,514		28
Total Fund Assets	461,566		404,482		14
Separate Accounts:
Equity	38,897		39,786		(2)
Fixed-Income	43,845		37,316		17
Alternative / Private Markets	8,134		8,262		(2)
Multi-Asset	141		154		(8)
Total Long-Term Assets	91,017		85,518		6
Money Market	148,454		141,082		5
Total Separate Account Assets	239,471		226,600		6
Total Managed Assets	$	701,037	$	631,082	11	%


	Three Months Ended
	March 31,				Percent Change
(in millions)	2023		2022
By Asset Class
Equity	$	84,155	$	92,034	(9)	%
Fixed-Income	88,209		95,475		(8)
Alternative / Private Markets	20,938		22,848		(8)
Multi-Asset	3,012		3,621		(17)
Total Long-Term Assets	196,314		213,978		(8)
Money Market	483,083		433,254		12
Total Average Managed Assets	$	679,397	$	647,232	5	%

By Product Type
Funds:
Equity	$	45,055	$	52,419	(14)	%
Fixed-Income	43,961		57,413		(23)
Alternative / Private Markets	13,062		14,746		(11)
Multi-Asset	2,869		3,460		(17)
Total Long-Term Assets	104,947		128,038		(18)
Money Market	333,358		291,157		14
Total Average Fund Assets	438,305		419,195		5
Separate Accounts:
Equity	39,100		39,615		(1)
Fixed-Income	44,248		38,062		16
Alternative / Private Markets	7,876		8,102		(3)
Multi-Asset	143		161		(11)
Total Long-Term Assets	91,367		85,940		6
Money Market	149,725		142,097		5
Total Average Separate Account Assets	241,092		228,037		6
Total Average Managed Assets	$	679,397	$	647,232	5	%


	Percent of Total Average Managed Assets				Percent of Total Revenue
	Three Months Ended				Three Months Ended
	March 31, 2023		March 31, 2022		March 31, 2023		March 31, 2022
By Asset Class
Money Market	71	%	67	%	47	%	27	%
Equity	12	%	14	%	33	%	45	%
Fixed-Income	13	%	15	%	13	%	18	%
Alternative / Private Markets	3	%	3	%	5	%	7	%
Multi-Asset	1	%	1	%	1	%	2	%
Other	—	%	—	%	1	%	1	%
By Product Type
Funds:
Money Market	49	%	45	%	44	%	23	%
Equity	6	%	8	%	25	%	35	%
Fixed-Income	6	%	9	%	10	%	15	%
Alternative / Private Markets	2	%	2	%	3	%	5	%
Multi-Asset	1	%	1	%	1	%	2	%

Separate Accounts:
Money Market	22	%	22	%	3	%	4	%
Equity	6	%	6	%	8	%	10	%
Fixed-Income	7	%	6	%	3	%	3	%
Alternative / Private Markets	1	%	1	%	2	%	2	%

Other	—	%	—	%	1	%	1	%


	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs1
January	0	$	0.00	0	4,722,415
February	50,000	38.80		50,000	4,672,415
March2	82,592	33.92		70,000	4,602,415
Total	132,592	$	35.76	120,000	4,602,415


Director	Shares Voted For	Shares Voted Against	Shares Withheld
Joseph C. Bartolacci	9,000	—	—
J. Christopher Donahue	9,000	—	—
Thomas R. Donahue	9,000	—	—
Michael J. Farrell	9,000	—	—
John B. Fisher	9,000	—	—
Marie Milie Jones	9,000	—	—


1. Eligibility, Nature of Scheme and Definitions			1
2. Other Definitions			6
3. Participation Criteria & Selection of Funds			7
Selection of Funds by Investment Professionals			8
Selection of Funds for Non-Investment Professionals			8
No change of investment choice permitted by Investment Professionals			8
4. Closure & Rebalance of Funds			9
5. Making of Awards			11
6. Investment Professionals – Allocation of Initial Unit Value to the Funds			12
7. Non-Investment Professionals – Allocation of Initial Unit Value to the Funds			13
8. Vesting of Awards			14
9. Determination of Final Unit Values			15
10. Cessation of Employment			16
11. Winding-up			17
12. No payments until Vesting			18
13. Cash Scheme Only			19
14. Alterations to the Scheme			20
15. Relationship with Service Contract and Other Employee Compensation Schemes			21
16. Withholdings			22
17. No Assignment			23
18. Service of Documents			24
19. Governing Law			25
20. US Section 409A / Foreign Jurisdictions			26
21. Data Protection			28
22. Malus & Clawback			29
23. Personal Investment Strategies and Remuneration Regulation Compliance			30


Aggregate Bonus			the aggregate of all bonuses which, but for the Scheme, an Employee would have been eligible to receive in respect of a Financial Year;
Award			a right to a cash payment to the Award Holder, pursuant to these Rules;
Award Holder			a person holding an Award, or his personal representatives, as the context may require;
Bad Leaver			an Award Holder who ceases to be employed within the Group in circumstances where he is not a Good Leaver (or gives or receives notice of such cessation) and, for the avoidance of doubt, this shall include where cessation is for Cause;
Board			the board of directors of the Company;
Cause			means (i) the Award Holder materially violating the ‘standards of conduct’; (ii) the Award Holder violating a term or terms of the Award or any employment contract; (iii) the Award Holder being insubordinate or engaging in unprofessional conduct directed at clients, customers, co-workers or management personnel; (iv) the Award Holder’s refusal to perform their duties in good faith and to the best of their ability (v) any wilful, negligent or grossly negligent conduct by the Award Holder which does or may result in damage to the professional reputation or capabilities of the Company; (vi) any wilfully negligent or grossly negligent conduct by the Award Holder which causes the Company to be the subject of scorn, disrespect, negative publicity or embarrassment; (vii) the Award Holder participates in or is responsible for conduct which results in significant losses to the Company. For the purposes of this definition, the Award Holder shall be in violation of the ‘standard of conduct’ if they do not abide by all rules, codes of conduct, regulations, policies, practices and procedures, which the Company (or, as applicable, another Group Company) may operate and may amend from time to time, and all applicable compliance, legal and regulatory requirements (whether domestic, foreign or local) including appropriate standards of fitness and propriety;
Clawback			the recovery from a Participant of some or all of the value of an Award where the Award has already Vested or been delivered to the Participant in accordance with the Remuneration Risk Adjustment Policy and Remuneration Policy;
Closed Fund			any fund (being a Managed Fund or a fund which constituted part of the Growth Fund) which has closed at any time during the year ending on the commencement of a Rebalancing Period;
Closure Date			the date upon which a Closed Fund closed (and in the event of any dispute as to such date, the Senior Management Team’s determination shall be final and binding on all parties);
Closure Investment Return			in respect of a Unit comprised in an Award where any amount of the Initial Unit Value is invested in a Closed Fund (including a Closed Fund that is a Managed Fund), the Investment Return on such amount as at the Closure Date;
Company			Federated Hermes Limited;
Deferred Amount			an amount calculated in relation to an Aggregate Bonus (and notified to an Award Holder in the relevant Financial Year’s annual compensation review statement) as follows: Has the Remuneration Committee exercised discretion under Rule 3.10 Status of Participant to apply rule 3.2? Rule Not a Regulated Employee No applicable Rule 3.2 Regulated Employee Yes Rule 3.2 Regulated Employee No Rule 3.3 or 3.4 (as appropriate)



Effective Date			1 March immediately following the end of the Financial Year in respect of which the Award Holder’s Aggregate Bonus is subject to Rule 3.1, unless another date is specified via the Online Award Portal;
Employee			an employee of the Company or another Group Company (including a US Employee);
Final Unit Value			an amount ascribed to a Unit relating to an Award in accordance with Rule 9, being one of: (a) the amount ascribed to Unit 1 (the “Final Unit 1 Value”); (b) the amount ascribed to Unit 2 (the “Final Unit 2 Value”); (c) the amount ascribed to Unit 3 (the “Final Unit 3 Value”) ;
Financial Year			a financial year of the Company (as determined in accordance with the provisions of section 390 of the Companies Act 2006;
First Vesting Date			the first anniversary of the Effective Date of an Award;
Fixed Remuneration			the total amount for a Financial Year of an Employee’s base salary, pension, and any other corporate benefits, which primarily reflects the Employee’s professional experience and organisational responsibility as set out in the Employee’s job description and the terms of their contract of employment; all components are permanent, pre-determined, non-discretionary, non-revocable and not dependent on performance;
Fully Regulated Material Risk Taker			any Employee who is a Material Risk Taker to whom proportionality does not apply as set out in accordance with the Remuneration Policy;
Good Leaver			an Award Holder who ceases to be employed within the Group as a result of, redundancy, or ill-health or disability (in either case evidenced to the satisfaction of the Company), or death, or any other reason as the Company so determines in its absolute discretion in any particular case;
Group			the Company and its subsidiaries (within the meaning of section 1159 of the Companies Act 2006) and “Group Company” shall be construed accordingly;
Growth Fund			in respect of any Financial Year, the basket of separate funds identified on the relevant Online Award Portal as forming the Growth Fund, subject to any rebalancing or other amendment pursuant to Rule 4;
Initial Unit Value			an amount ascribed to a Unit relating to an Award in accordance with Rule 5.3 and specified in the Award Holder’s Online Award Portal, being one of: the amount ascribed to Unit 1 (the “Initial Unit 1 Value”); the amount ascribed to Unit 2 (the “Initial Unit 2 Value”); the amount ascribed to Unit 3 (the “Initial Unit 3 Value”);

Investment Professional			A Participant engaged in portfolio management of funds;
Investment Return			in respect of any amount of an Initial Unit Value invested in a fund (including a Managed Fund) (“Seed Amount”) in relation to a particular Award, the amount of money that would be paid out of such fund to the Award Holder as at the relevant date proscribed by these Rules (taking into account the provisions of Rule 4 and all gains and losses accrued in relation to the Seed Amount and net of any management fees) if such fund was closed and, for the purpose of this definition, “fund” means any Managed Fund specified on the relevant Online Award Portal and, in relation to the Growth Fund, each separate fund set out on the relevant Online Award Portal, but in all cases, taking account of Rule 4.7;
Malus			the reduction or cancellation of a deferred Award where the Award has not yet vested in accordance with the Remuneration Risk Adjustment Policy and Remuneration Policy;
Managed Funds			the fund or funds directly managed by an Investment Professional;
Mandatory Percentage			the Remaining Percentage divided by the number of Managed Funds;
Material Risk Taker			any Employee who has been identified by the Company in respect of the Financial Year in question as being one whose professional activities have a material impact on the risk profile of the Company or Group, or of the assets that the Company or Group manages as set out in the Remuneration Policy;
Non-Investment Professional			an Employee who is not an Investment Professional;
Online Award Portal			the “Intertrust Classic Awards” online portal, or such other online portal as is used for the purposes of the Scheme, which contains the detail of an Award Holder’s Awards;


Overseas Equivalent			the equivalent of any sum stipulated in Sterling in these Rules in the currency in which the Participant whose Aggregate Bonus is being applied for the purpose of Rule 3.2, 3.3 or 3.4 (as the case may be) is normally paid using, for this purpose, the 12 month average interbank exchange rate for exchanging Sterling into that currency measured over the relevant Financial Year or such other rate of exchange as the Senior Management Team deems appropriate;
Participant			an Employee eligible to participate in the Scheme in respect of a Financial Year in accordance with Rule 1.1;
Participation Criteria			the criteria for participation in the Scheme for a Financial Year as set out in Rule 3;
Principles of Proportionality			the principles of proportionality to remuneration policies of AIFM and MIFIDPRU as referred to in the AIFM Remuneration Code at SYSC 19B.1.1A(2) and MIFIDPRU Remuneration Code at SYSC 19G.1.1 of the Financial Conduct Authority Handbook;
Rebalancing Period			either: where the Senior Management Team has not exercised its discretion pursuant to Rule 4.8, the period of 30 days ending on 1 March; or where the Senior Management Team exercises that discretion, the period of 30 days commencing on the date determined by the Senior Management Team pursuant to Rule 4.8;
Remaining Percentage			the percentage remaining after deducting from 100 per cent, the Selected Percentage (which may be zero);
Remuneration			any form of an Employee’s remuneration, whether Fixed Remuneration or Variable Remuneration, including salary, discretionary pension benefits and benefits of any kind payable to them by virtue of their employment by any Group Company;

Remuneration Policy			The Remuneration Policy of the Company as in force from time to time;
Remuneration Risk Adjustment Policy			The risk adjustment policy as adopted by the Board on [21 March 2023] and as subsequently amended from time to time;
Replacement Fund			a fund selected at the sole discretion of the Senior Management Team to replace a Closed Fund;


Repudiatory Event			any one or more of the following: the Award Holder has participated in or was responsible for conduct which resulted in significant losses to a Group Company; the Award Holder has failed to meet appropriate standards of fitness and propriety; the Company has reasonable evidence of fraud or material dishonesty by the Award Holder; the Company has become aware of any material wrongdoing on the part of the Award Holder; the Award Holder has acted in any manner which in the opinion of the Company has brought or is likely to bring any Group Company into material disrepute or is materially adverse to the interests of any Group Company; there is a breach of the Award Holder’s employment contract that is a potentially fair reason for dismissal; the Award Holder is in breach of a fiduciary duty owed to any Group Company or any client or customer of any Group Company; the Award Holder participates in a ‘lift out’ of a team or group of Employees, or whether alone or with others entices or otherwise encourages a team or group of Employees to move to another firm; an Award Holder who has ceased to be an Employee was in breach of his or her employment contract or fiduciary duties in a manner that would have prevented the grant or Vesting of the Award had the Company been aware (or fully aware) of that breach, and which the Company was not aware (or not fully aware) until after both: the Award Holder’s ceasing to be an Employee; and the time Award Vested; or there was a material error in determining: whether the Award should be granted; or the size and nature of the Award; a Group Company mis-stated any financial information (whether or not audited) for any part of any financial year that was taken into account in determining: whether the Award should be made; or the Deferred Amount of the Award; or a Group Company or business unit that employs or employed the Award Holder, or for which the Award Holder is responsible, has suffered a material failure of risk management;
Rules			the rules of the Scheme as set out herein and as may be amended from time to time;
Scheme			the co-investment scheme described by the Rules;
Second Vesting Date			the second anniversary of the Effective Date of an Award;
Section 409A			Section 409A of the U.S. Internal Revenue Code of 1986, as amended, and the regulations issued thereunder;
Selected Percentage			a percentage (not exceeding fifty per cent) of a Participant’s Deferred Amount specified by them via the Online Award Portal pursuant to Rule 3.7, to be notionally invested in the Growth Fund (or zero, if no percentage is specified);
Senior Management Team			the committee comprising those executive directors as designated from time to time by the Chief Executive Officer of the Company and such other individual or individuals as he or she shall determine;
Subsisting			an Award shall be treated as subsisting to the extent that it has not Vested or lapsed in respect of any Unit, and “Subsist” and “Subsisted” shall be construed accordingly;
Third Vesting Date			the third anniversary of the Effective Date of an Award;
Unit			a notional unit subject to an Award for the purpose of determining the amount of the cash payment that may be made to the Award Holder on Vesting of the Award being, as the context requires, any of the following:


			(a) Unit 1; (b) Unit 2; (c) Unit 3; and references to “each of the Units” shall be construed as meaning each of Unit 1, Unit 2 and Unit 3;
US Employees			Employees or Award Holders resident in or subject to taxation under the laws of the United States of America;
Variable Remuneration			any Remuneration that is received by an Employee, in respect of a Financial Year that does not constitute Fixed Remuneration but rather is based on performance or, in exceptional cases, other conditions; it includes, where relevant to the Employee, carried interest and discretionary pension benefits; performance-based Variable Remuneration reflects the long-term performance of the Employee as well as performance in excess of their job description and the terms of their contract of employment;
Vest			in relation to an Award, means the Award Holder becoming entitled to a payment in respect of the Award (by reference to one or more Units comprised in it) in accordance with the Scheme, and “Vested” and “Vesting” shall be construed accordingly;
Vesting Date			in relation to an Award, means a date on which an Award Vests, being any of the First Vesting Date, the Second Vesting Date or the Third Vesting Date (according to the context) or any other date on which it Vests and “Vesting Dates” shall be construed accordingly.


			Co-Investment Thresholds			Deferred Percentage
			Any part of the Aggregate Bonus not exceeding £150,000 (or the Overseas Equivalent) if bonus is equal to or greater than £75,000			10%
			Any part of the Aggregate Bonus exceeding £150,000 (or the Overseas Equivalent) but not exceeding £300,000 (or the Overseas Equivalent)			30%
			Any part of the Aggregate Bonus exceeding £300,000 (or the Overseas Equivalent)			50%