Federated Hermes (FHI) 8-K Federated Investors, Inc. Reports Second Quarter 2005 Results

Exhibit 99.1

Press Release

Federated Investors, Inc. Reports Second Quarter 2005 Results

• Assets Under Management Reach Record $204.7 Billion at Quarter End

• Acquisition of Alliance Capital Management L.P.’s Cash Management Assets Completed

• Q2 2005 Revenue Reaches Record $221.3 Million

(PITTSBURGH, Pa., July 28, 2005) — Federated Investors, Inc. (NYSE: FII), one of the nation’s largest investment managers, today reported earnings per diluted share from continuing operations of $0.35 for the quarter ended June 30, 2005, compared with $0.44 for the same quarter last year. Income from continuing operations was $37.8 million for Q2 2005 compared to $48.6 million for Q2 2004.

Federated’s Q2 2005 results include a pretax charge to income of $6.6 million for various legal, regulatory and compliance matters, including a net increase of $5.0 million to the estimate of costs for the company’s anticipated settlement of governmental inquiries (Settlement Charges). Certain portions of the Settlement Charges are not tax deductible. The changes made to the Settlement Charges in Q2 2005 reduced net earnings by $0.09 per diluted share.

Federated’s total managed assets were a period-end record $204.7 billion at June 30, 2005, up $20.9 billion or 11 percent from $183.8 billion at June 30, 2004 and up 14 percent from $179.0 billion at March 31, 2005. The increase in assets under management was due to the significant organic growth of Federated’s money market assets across distribution channels and to the conversion of managed assets totaling $0.8 billion in Q1 2005 and $18.5 billion in Q2 2005 related to Federated’s acquisition of Alliance Capital Management L.P.’s cash management assets.

“Federated experienced money market asset growth in each of its major distribution channels during the second quarter,” said J. Christopher Donahue, president and CEO. “We are optimistic about continuing to grow this part of our business, both organically and through acquisitions such as the Alliance transaction.”

Federated’s board of directors declared a quarterly dividend of $0.15 per share. The dividend is payable on August 15, 2005, to shareholders of record as of August 8, 2005.

Contacts:
MEDIA	MEDIA	ANALYSTS
Meghan McAndrew	J.T. Tuskan	Ray Hanley
(412) 288-8103	(412) 288-7895	(412) 288-1920
mmcandrew@federatedinv.com	jtuskan@federatedinv.com	rhanley@federatedinv.com

Federated Investors Reports Q2 Results

July 28, 2005

Page 2 of 7

Through its mutual funds and separately managed accounts, Federated managed $53.2 billion in equity and fixed-income assets as of June 30, 2005, a one percent increase from $52.5 billion at June 30, 2004. Average managed assets for Q2 2005 were $193.1 billion, up $2.6 billion from $190.5 billion reported for Q2 2004 and $13.7 billion higher than the $179.4 billion in average managed assets reported for Q1 2005.

Federated’s equity assets increased to $28.9 billion at June 30, 2005, compared to $28.3 billion at March 31, 2005, and $26.6 billion at June 30, 2004. Federated had $1.3 billion in gross equity fund sales during the quarter. For Q2 2005, Federated had $176 million in net equity fund redemptions and exchanges. The top selling equity funds, on a net basis, were Federated Market Opportunity Fund, Federated Muni and Stock Advantage Fund, Federated Strategic Value Fund and Federated Kaufmann Small Cap Fund.

Federated’s equity managed account product had $170 million in gross sales and $111 million in net sales during the quarter as overall assets in the product grew to $1.3 billion. Sales continued to be led by the Strategic Value (Equity Income) Strategy.

Federated’s fixed-income assets were $24.4 billion at June 30, 2005, down $522 million from March 31, 2005, and down $1.5 billion from June 30, 2004. Federated had $1.4 billion in gross fixed-income fund sales during the quarter. For Q2 2005, Federated had $676 million in net fixed-income fund redemptions and exchanges. The top selling fixed-income funds, on a net basis, were Federated Capital Preservation Fund, Federated Total Return Government Bond Fund, Federated Municipal High Yield Advantage Fund, Inc. and Federated Mortgage Fund.

Money market mutual fund and separately managed account assets totaled $151.4 billion at the end of Q2 2005, up $20.0 billion or 15 percent from $131.4 billion at the end of Q2 2004 and up $25.7 billion or 20 percent from $125.7 billion at the end of Q1 2005. Money market mutual fund assets increased to $136.9 billion at the end of Q2 2005, up 17 percent from $117.5 billion at the end of Q2 2004 and up 25 percent from $109.9 billion at the end of Q1 2005. Money market separate account assets were $14.6 billion at the end of Q2 2005, up six percent from $13.8 billion at the end of Q2 2004 and down eight percent from the end of Q1 2005, due largely to seasonality.

Financial Summary

For the quarter ended June 30, 2005, revenue increased four percent to a record $221.3 million compared to $213.1 million for Q2 2004. Revenue growth during the quarter was due primarily to a $13.6 million increase from the conversion of the Alliance money market assets and a $7.3 million increase derived from increased average equity assets. These revenue increases were partially offset by a $10.6 million decline in revenues derived from decreased fixed-income and money market average assets (excluding the money market assets acquired from Alliance). For Q2 2005, Federated derived 42 percent of its revenue from money market assets, 38 percent from equity assets, 17 percent from fixed-income assets and three percent from other sources.

Federated Investors Reports Q2 Results

July 28, 2005

Page 3 of 7

Operating expenses for Q2 2005 of $147.7 million increased $17.8 million or 14 percent from $129.9 million for Q2 2004. The increase was due primarily to $11.6 million in marketing and distribution expenses associated with the Alliance transaction as well as the $5.0 million net increase to the Settlement Charges recorded as other expenses.

Federated will host an earnings conference call at 9 a.m. Eastern on Friday, July 29, 2005. Investors are invited to listen to Federated’s Q2 earnings teleconference by calling 888-412-9259 (domestic) or 706-679-0848 (international) prior to the 9 a.m. start time for the teleconference. The call may also be accessed in real time on the Internet via theAbout Us section ofFederatedInvestors.com. A replay will be available after 12:30 p.m. and until Aug. 5, 2005, by calling 800-642-1687 (domestic) or 706-645-9291 (international) and entering code 7998115.

Federated Investors, Inc. is one of the largest investment managers in the United States, managing $204.7 billion in assets as of June 30, 2005. With 138 mutual funds and separately managed accounts in a wide range of investment strategies, Federated provides comprehensive investment management to nearly 5,700 institutions and intermediaries including corporations, government entities, insurance companies, foundations and endowments, banks and broker/dealers. Federated ranks in the top two percent of money market fund managers in the industry and in the top six percent of both fixed-income fund and equity fund managers¹. For more information, visitFederatedInvestors.com.

###

1 Strategic Insight, May 31, 2005. Based on assets in open-end funds.

Certain statements in this press release, such as those related to the company’s continued growth of money market assets, constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Among other risks and uncertainties is the ability of the company to continue to grow money market assets through its client base and to identify and complete mergers and acquisitions in a cost-effective manner and the risk factors discussed in the company’s annual and quarterly reports as filed with the Securities and Exchange Commission. Many of these factors may be more likely to occur as a result of the ongoing threat of terrorism. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither the company nor any other person assumes responsibility for the accuracy and completeness of such statements.

For more complete information on Federated funds, please visitFederatedInvestors.com for prospectuses. Investors should consider the fund’s investment objectives, risks, charges, and expenses carefully before investing. Information about these and other important subjects is in the fund’s prospectus, which should be read carefully before investing.

Federated Securities Corp. is distributor of the Federated funds.

Separately managed accounts are made available through Federated Investment Counseling, a registered investment advisor.

An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in these funds.

Federated Investors Reports Q2 Results

July 28, 2005

Page 4 of 7

Unaudited Condensed Consolidated Statements of Income

(in thousands, except per share data)

	Quarter Ended June 30,						% Change Q2 2004 to Q2 2005		Quarter Ended March 31, 2005			% Change Q1 2005 to Q2 2005
	2005			2004
Revenue
Investment advisory fees, net	$	138,890		$	137,137		1	%	$	134,879		3	%
Administrative service fees, net		32,726			34,543		(5	)		30,056		9
Other service fees, net		47,456			39,624		20			39,178		21
Other, net		2,182			1,780		23			1,785		22
Total Revenue		221,254			213,084		4			205,898		7
Operating Expenses
Compensation and related		44,005			41,852		5			44,409		(1	)
General and administrative
Marketing and distribution		52,320			40,544		29			38,354		36
Professional service fees		7,649			10,206		(25	)		7,915		(3	)
Office and occupancy		5,700			5,660		1			5,762		(1	)
Systems and communications		5,713			4,761		20			4,596		24
Advertising and promotional		4,422			4,277		3			3,220		37
Travel and related		3,187			3,184		0			2,477		29
Other		8,267			2,774		198			53,656		(85	)
Total general and administrative		87,258			71,406		22			115,980		(25	)
Amortization of deferred sales commissions		12,940			13,964		(7	)		13,599		(5	)
Amortization of intangible assets		3,525			2,692		31			2,479		42
Total Operating Expenses		147,728			129,914		14			176,467		(16	)
Operating Income		73,526			83,170		(12	)		29,431		150
Nonoperating Income (Expenses)
Investment income, net		1,811			633		186			1,593		14
Debt expense––recourse		(91	)		(90	)	1			(83	)	10
Debt expense––nonrecourse		(4,444	)		(5,246	)	(15	)		(4,587	)	(3	)
Other		(8	)		(34	)	(76	)		(44	)	(82	)
Total Nonoperating Expenses, net		(2,732	)		(4,737	)	(42	)		(3,121	)	(12	)
Minority interest		2,478			2,478		0			2,449		1
Income from continuing operations before income taxes		68,316			75,955		(10	)		23,861		186
Income tax provision		30,522			27,306		12			16,678		83
Income from continuing operations		37,794			48,649		(22	)		7,183		426
Discontinued operations, net of tax		(33	)		2,000		(102	)		(155	)	79
Net Income	$	37,761		$	50,649		(25	)%	$	7,028		437	%
Earnings Per Share—Basic*
Income from continuing operations	$	0.36		$	0.45		(20	)%	$	0.07		414	%
(Loss) Income from discontinued operations	$	(0.00	)	$	0.02		(100	)%	$	(0.00	)	0
Net Income	$	0.36		$	0.47		(23	)%	$	0.07		414	%
Earnings Per Share—Diluted*
Income from continuing operations	$	0.35		$	0.44		(20	)%	$	0.07		400	%
(Loss) Income from discontinued operations	$	(0.00	)	$	0.02		(100	)%	$	(0.00	)	0
Net Income**	$	0.35		$	0.46		(24	)%	$	0.06		483	%
Weighted-average shares outstanding
Basic		105,908			107,654					106,326
Diluted		107,857			110,919					108,322
Dividends declared per share	$	0.150		$	0.102				$	0.125

* Federated’s Q2 2005, Q2 2004 and Q1 2005 results include pretax charges to income for various legal, regulatory and compliance matters of $6.6 million, $5.0 million and $52.9 million respectively, which reduced earnings per diluted share by $0.09, $0.02 and $0.39 respectively.

** May not sum due to rounding.

Federated Investors Reports Q2 Results

July 28, 2005

Page 5 of 7

Unaudited Condensed Consolidated Statements of Income

(in thousands, except per share data)

	Six Months Ended June 30,						% Change
	2005			2004
Revenue
Investment advisory fees, net	$	273,768		$	278,703		(2	)%
Administrative service fees, net		62,781			70,281		(11	)
Other service fees, net		86,635			81,097		7
Other, net		3,967			3,683		8
Total Revenue		427,151			433,764		(2	)
Operating Expenses
Compensation and related		88,414			88,125		0
General and administrative
Marketing and distribution		90,674			82,043		11
Professional service fees		15,564			19,045		(18	)
Office and occupancy		11,462			10,626		8
Systems and communications		10,309			9,914		4
Advertising and promotional		7,641			8,065		(5	)
Travel and related		5,664			5,699		(1	)
Other		61,923			5,184		1,095
Total general and administrative		203,237			140,576		45
Amortization of deferred sales commissions		26,539			28,277		(6	)
Amortization of intangible assets		6,004			5,351		12
Total Operating Expenses		324,194			262,329		24
Operating Income		102,957			171,435		(40	)
Nonoperating Income (Expenses)
Investment income, net		3,404			1,326		157
Debt expense––recourse		(174	)		(182	)	(4	)
Debt expense––nonrecourse		(9,031	)		(10,692	)	(16	)
Other		(52	)		(123	)	(58	)
Total Nonoperating Expenses, net		(5,853	)		(9,671	)	(39	)
Minority interest		4,927			4,989		(1	)
Income from continuing operations before income taxes		92,177			156,775		(41	)
Income tax provision		47,199			56,939		(17	)
Income from continuing operations		44,978			99,836		(55	)
Discontinued operations, net of tax		(189	)		2,546		(107	)
Net Income	$	44,789		$	102,382		(56	)%
Earnings Per Share—Basic*
Income from continuing operations	$	0.42		$	0.92		(54	)%
(Loss) Income from discontinued operations	$	(0.00	)	$	0.02		(100	)%
Net Income**	$	0.42		$	0.95		(56	)%
Earnings Per Share—Diluted*
Income from continuing operations	$	0.42		$	0.90		(53	)%
(Loss) Income from discontinued operations	$	(0.00	)	$	0.02		(100	)%
Net Income**	$	0.41		$	0.92		(55	)%
Weighted-average shares outstanding
Basic		106,116			108,025
Diluted		108,089			111,432
Dividends declared per share	$	0.275		$	0.187

* Federated’s YTD 2005 and 2004 results include a pretax charge to income for various legal, regulatory and compliance matters of $59.5 million and $9.2 million respectively, which reduced earnings per diluted share by $0.47 and $0.05, respectively.

** May not sum due to rounding.

Federated Investors Reports Q2 Results

July 28, 2005

Page 6 of 7

Unaudited Condensed Consolidated Balance Sheets

(in thousands)

	June 30, 2005			Dec. 31, 2004
Assets
Cash and other short-term investments	$	240,234		$	258,271
Other current assets		78,517			64,229
Deferred sales commissions, net		264,582			286,650
Intangible assets, net		337,225			311,974
Other long-term assets		30,938			33,564
Total Assets	$	951,496		$	954,688
Liabilities, Minority Interest and Shareholders’ Equity
Current liabilities	$	194,695		$	175,367
Long-term debt—recourse		0			8
Long-term debt—nonrecourse		266,416			284,915
Other long-term liabilities and minority interest		34,070			36,645
Shareholders’ equity excluding treasury stock		1,008,337			994,199
Treasury stock		(552,022	)		(536,446	)
Total Liabilities, Minority Interest and Shareholders’ Equity	$	951,496		$	954,688

Changes in Equity and Fixed-Income Fund Assets

(in millions)

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Equity Funds
Beginning Assets	$	25,279		$	23,994		$	25,951		$	22,817
Sales		1,309			1,422			2,688			3,385
Redemptions		(1,490	)		(1,400	)		(3,016	)		(2,933	)
Net (redemptions) sales		(181	)		22			(328	)		452
Net exchanges		5			49			28			113
Other*		470			9			(78	)		692
Ending Assets	$	25,573		$	24,074		$	25,573		$	24,074
Fixed-Income Funds
Beginning Assets	$	20,596		$	23,824		$	21,137		$	24,004
Sales		1,387			1,884			2,872			4,508
Redemptions		(2,055	)		(3,713	)		(4,043	)		(6,758	)
Net redemptions		(668	)		(1,829	)		(1,171	)		(2,250	)
Net exchanges		(8	)		(171	)		(41	)		(195	)
Acquisition Related		50			0			50			0
Other*		267			(351	)		262			(86	)
Ending Assets	$	20,237		$	21,473		$	20,237		$	21,473

* Includes changes in the market value of securities held by the funds, reinvested dividends and distributions and net investment income.

Federated Investors Reports Q2 Results

July 28, 2005

Page 7 of 7

(in millions)

MANAGED ASSETS	June 30, 2005		March 31, 2005		Dec. 31, 2004		Sept. 30, 2004		June 30, 2004
By Asset Class
Equity	$	28,886	$	28,345	$	29,013	$	26,217	$	26,598
Fixed-income		24,357		24,879		25,953		25,926		25,858
Money market		151,431		125,747		124,302		125,474		131,385
Total Managed Assets	$	204,674	$	178,971	$	179,268	$	177,617	$	183,841
By Market
Trust	$	91,555	$	84,681	$	86,947	$	86,968	$	91,507
Broker/dealer		68,780		49,283		47,706		45,103		45,570
Institutional		22,805		21,971		23,135		23,400		24,418
International		2,798		2,957		2,855		2,606		2,486
Other		18,736		20,079		18,625		19,540		19,860
Total Managed Assets	$	204,674	$	178,971	$	179,268	$	177,617	$	183,841
By Product Type
Mutual Funds:
Equity	$	25,573	$	25,279	$	25,951	$	23,589	$	24,074
Fixed-income		20,237		20,596		21,137		21,315		21,473
Money market		136,852		109,895		110,559		112,672		117,543
Total Fund Assets	$	182,662	$	155,770	$	157,647	$	157,576	$	163,090
Separate Accounts:
Equity	$	3,313	$	3,066	$	3,062	$	2,628	$	2,524
Fixed-income		4,121		4,283		4,816		4,611		4,385
Money market		14,578		15,852		13,743		12,802		13,842
Total Separate Accounts	$	22,012	$	23,201	$	21,621	$	20,041	$	20,751
Total Managed Assets	$	204,674	$	178,971	$	179,268	$	177,617	$	183,841
	Quarter Ended
AVERAGE MANAGED ASSETS	June 30, 2005		March 31, 2005		Dec. 31, 2004		Sept. 30, 2004		June 30, 2004
By Asset Class
Equity	$	28,279	$	28,558	$	27,659	$	25,746	$	26,104
Fixed-income		24,590		25,463		26,014		26,079		27,366
Money market		140,191		125,385		125,272		129,933		137,022
Total Avg. Assets	$	193,060	$	179,406	$	178,945	$	181,758	$	190,492
By Product Type
Mutual Funds:
Equity	$	25,114	$	25,521	$	24,793	$	23,207	$	23,686
Fixed-income		20,410		21,013		21,262		21,606		22,461
Money market		125,037		109,334		112,373		116,753		122,089
Total Avg. Fund Assets	$	170,561	$	155,868	$	158,428	$	161,566	$	168,236
Separate Accounts:
Equity	$	3,165	$	3,037	$	2,866	$	2,539	$	2,418
Fixed-income		4,180		4,450		4,752		4,473		4,905
Money market		15,154		16,051		12,899		13,180		14,933
Total Avg. Separate Acct.	$	22,499	$	23,538	$	20,517	$	20,192	$	22,256
Total Avg. Assets	$	193,060	$	179,406	$	178,945	$	181,758	$	190,492
	Quarter Ended
ADMINISTERED ASSETS	June 30, 2005		March 31, 2005		Dec. 31, 2004		Sept. 30, 2004		June 30, 2004
Period End	$	17,612	$	18,169	$	37,164	$	36,289	$	43,566
Average	$	17,661	$	19,365	$	36,558	$	41,024	$	43,331