Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549Form 10-K ANNUAL.
2025-04-22
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Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549_FORM 10-K(MARK ONE)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934ORTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934_For the fiscal year ended December 31,2024Commission file number 1-2189Abbott LaboratoriesAn Illinois Corporation36-0698440100 Abbott Park RoadAbbott Park,Illinois 60064-6400(I.R.S.employer identification number)(224)667-6100(telephone number)Securities Registered Pursuant to Section 12(b)of the Act:Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which RegisteredCommon Shares,Without Par ValueABTNew York Stock ExchangeChicago Stock Exchange,Inc.Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.Yes No 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 12months(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 No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 ofthis chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Smaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reportingunder Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction ofan error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrantsexecutive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No The aggregate market value of the 1,704,109,171 shares of voting stock held by nonaffiliates of the registrant,computed by reference to the closing price as reported on the New YorkStock Exchange,as of the last business day of Abbott Laboratories most recently completed second fiscal quarter(June 28,2024),was$177,073,983,959.Abbott has no non-votingcommon equity.Number of common shares outstanding as of January 31,2025:1,734,323,411DOCUMENTS INCORPORATED BY REFERENCEPortions of the 2025 Abbott Laboratories Proxy Statement are incorporated by reference into Part III.The Proxy Statement will be filed on or about March 14,2025.Table of ContentsTable of ContentsPagePART I.Item 1.Business1Item 1A.Risk Factors9Item 1B.Unresolved Staff Comments15Item 1C.Cybersecurity15Item 2.Properties17Item 3.Legal Proceedings18Item 4.Mine Safety Disclosures18PART II.Item 5.Market for Registrants Common Equity,Related Shareholder Matters and Issuer Purchases of Equity Securities21Item 6.Reserved21Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations22Item 7A.Quantitative and Qualitative Disclosures About Market Risk38Item 8.Consolidated Financial Statements and Supplementary Data40Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure80Item 9A.Controls and Procedures80Item 9B.Other Information80Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections80PART III.Item 10.Directors,Executive Officers and Corporate Governance81Item 11.Executive Compensation81Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters81Item 13.Certain Relationships and Related Transactions,and Director Independence82Item 14.Principal Accountant Fees and Services82PART IV.Item 15.Exhibit and Financial Statement Schedules83Item 16.Form 10-K Summary89Signatures90Table of ContentsPART IITEM 1.BUSINESSGENERAL DEVELOPMENT OF BUSINESSAbbott Laboratories is an Illinois corporation,incorporated in 1900.Abbotts*principal business is the discovery,development,manufacture,and sale of abroad and diversified line of healthcare products.NARRATIVE DESCRIPTION OF BUSINESSAbbott has four reportable segments:Established Pharmaceutical Products,Diagnostic Products,Nutritional Products,and Medical Devices.Established Pharmaceutical ProductsThese products include a broad line of branded generic pharmaceuticals manufactured worldwide and marketed and sold outside the United States inemerging markets.These products are generally sold directly to wholesalers,distributors,government agencies,healthcare facilities,pharmacies,andindependent retailers from Abbott-owned distribution centers or public warehouses,depending on the market served.Certain products are co-marketed orco-promoted with,or licensed from,other companies.The principal products included in the broad therapeutic area portfolios of the Established Pharmaceutical Products segment are:gastroenterology products,including Creon,for the treatment of pancreatic exocrine insufficiency associated with several underlyingconditions,including cystic fibrosis and chronic pancreatitis;Duspatal and Dicetel,for the treatment of irritable bowel syndrome or biliaryspasm;Heptral,Transmetil,and Samyr,for the treatment of intrahepatic cholestasis(associated with liver disease)or depressivesymptoms;and Duphalac,for regulation of the physiological rhythm of the colon;womens health products,including Duphaston,for the treatment of many different gynecological disorders;and Femoston,a hormonereplacement therapy for postmenopausal women;cardiovascular and metabolic products,including Lipanthyl and TriCor,for the treatment of dyslipidemia;Omacor,for the treatment ofhypertriglyceridemia;Physiotens,for the treatment of hypertension;and Synthroid,for the treatment of hypothyroidism;pain and central nervous system products,including Serc,for the treatment of Mnires disease and vestibular vertigo;Brufen,for thetreatment of pain,fever,and inflammation;and Sevedol,for the treatment of severe migraines;respiratory drugs and vaccines,including the anti-infective clarithromycin(sold under the trademarks Klacid,Claribid,and Klaricid);andInfluvac,an influenza vaccine;andbiosimilar products,including the areas of oncology and womens health.The Established Pharmaceutical Products segment directs its primary marketing efforts toward building strong brands with key stakeholders,includingconsumers,pharmacists,physicians,and other healthcare providers.Government agencies are also important customers.Competition in the Established Pharmaceutical Products segment is generally from other healthcare and pharmaceutical companies.In addition,thesubstitution of generic drugs for the brand prescribed and introduction of additional forms of already marketed established products by generic or brandedcompetitors may increase competitive pressures._*As used throughout the text of this report on Form 10-K,the term“Abbott”refers to Abbott Laboratories,an Illinois corporation,or AbbottLaboratories and its consolidated subsidiaries,as the context requires.1Table of ContentsDiagnostic ProductsThese products include a broad line of diagnostic systems and tests manufactured,marketed,and sold worldwide.These products are generally marketedand sold directly to blood banks,hospitals,commercial laboratories,clinics,physicians offices,retailers,government agencies,alternate care testing sites,and plasma protein therapeutic companies from Abbott-owned distribution centers,public warehouses or third party distributors.The principal products included in the Diagnostic Products segment are:core laboratory and transfusion medicine systems in the areas of immunoassay,clinical chemistry,hematology,and transfusion serology testing,including the Alinity family of instruments along with the ARCHITECT and Cell-Dyn systems.These systems are used for screening and/ordiagnosis for cancer,cardiac and metabolic disorders,drugs of abuse,thyroid function,fertility,neurologic and general chemistries,infectiousdiseases such as hepatitis and HIV,therapeutic drug monitoring,and a suite of SARS-CoV-2 serology assays;molecular diagnostics polymerase chain reaction(PCR)instrument systems,including Alinity m and m2000 that automate the extraction,purification,and preparation of DNA and RNA from patient samples,and detect and measure infectious agents including HIV,hepatitis,HPV,sexually transmitted infections,SARS-CoV-2 and influenza A&B,and respiratory syncytial virus(RSV);and products for oncology with theVysis FISH product line of genomic-based tests;point-of-care systems,including the i-STAT and i-STAT Alinity and cartridges for testing blood gas,chemistry,electrolytes,coagulation andimmunoassay;rapid diagnostics lateral flow testing products in the area of infectious diseases such as SARS-CoV-2,including the BinaxNOW and Panbiorapid testing platforms,influenza,HIV,hepatitis,and tropical diseases such as malaria and dengue fever;molecular point-of-care testing for HIV,including the m-PIMA HIV-1/2 Viral Load Test,and for SARS-CoV-2 and influenza A&B,RSV and strep A,including the ID NOW rapidmolecular system;cardiometabolic testing,including Afinion and Cholestech LDX platforms and tests;and a toxicology business for drug andalcohol testing;andinformatics and automation solutions for use in laboratories,including laboratory automation systems such as the GLP systems Track,theRALS point-of-care solution,and AlinIQ,a suite of informatics tools and professional services.The Diagnostic Products segments products are subject to competition in technological innovation,price,convenience of use,service,instrument warrantyprovisions,product performance,laboratory efficiency,long-term supply contracts,and product potential for overall cost-effectiveness and productivitygains.Some products in this segment can be subject to rapid product obsolescence or regulatory changes.Although Abbott has benefited fromtechnological advantages of certain of its current products,these advantages may be reduced or eliminated as competitors introduce new products.Nutritional ProductsThese products include a broad line of pediatric and adult nutritional products manufactured,marketed,and sold worldwide.These products are generallymarketed and sold directly to consumers and to institutions,wholesalers,retailers,healthcare facilities,government agencies,and third-party distributorsfrom Abbott-owned distribution centers or third-party distributors.The principal products included in the Nutritional Products segment are:various forms of infant formula and follow-on formula,including Similac,Similac 360 Total Care,Similac Pro-Advance,SimilacAdvance,Similac 360 Total Care Sensitive,Similac Sensitive,Go&Grow by Similac,Similac NeoSure,Similac Organic,SimilacSpecial Care,Similac Total Comfort,Similac Soy Isomil,Similac Alimentum,EleCare,Gain,and Grow;adult and other pediatric nutritional products,including Ensure,Ensure Plus,Ensure Enlive,Ensure NutriVigor,Ensure Max Protein,Ensure High Protein,Glucerna,Glucerna Hunger Smart,ProSure,PediaSure,PediaSure SideKicks,PediaSure Peptide,Juven,Abound,and Pedialyte;andnutritional products used in enteral feeding in healthcare institutions,including Jevity,Glucerna 1.2 Cal,Glucerna 1.5 Cal,Osmolite,Oxepa,Freego(Enteral Pump)and Freego sets,Nepro,and Vital.Primary marketing efforts for nutritional products are directed toward consumers or physicians or other healthcare professionals.In addition,nutritionalproducts are also promoted directly to the public by consumer marketing efforts in markets where permitted.2Table of ContentsCompetition for nutritional products in the segment is generally from other diversified consumer and healthcare manufacturers.Competitive factors includeconsumer advertising,formulation,packaging,scientific innovation,price,retail distribution,and availability of product forms.A significant aspect ofcompetition is the search for ingredient innovations.The introduction of new products by competitors,changes in medical practices and procedures,andregulatory changes can result in product obsolescence.In addition,private label and local manufacturers products may increase competitive pressure.Medical DevicesThese products include a broad line of rhythm management,electrophysiology,heart failure,vascular and structural heart devices for the treatment ofcardiovascular diseases,and diabetes care and continuous glucose monitoring products,as well as neuromodulation devices for the management of chronicpain and movement disorders.Medical devices are manufactured,marketed and sold worldwide.In the United States,depending upon the product,medicaldevices are generally marketed and sold directly to wholesalers,hospitals,ambulatory surgery centers,physicians offices,consumers,and distributorsfrom Abbott-owned distribution centers,public warehouses or third party distributors.Outside the United States,sales are made either directly to customersor through distributors,depending on the market served.The principal products included in the Medical Devices segment are:rhythm management products,including Assurity MRI and Endurity MRI pacemaker systems,and Aveir single-chamber(VR and AR)andAveir dual chamber(DR)leadless pacemaker systems;Ellipse,Fortify Assura,and Gallant implantable cardioverter defibrillators and Gallantand Quadra Assura MP implantable cardioverter defibrillator with cardiac resynchronization therapy and MultiPoint Pacing technology;andConfirm Rx,Jot Dx and ASSERT-IQ implantable cardiac monitors;electrophysiology products,including the TactiFlex and TactiCath families of ablation catheters,and FlexAbility irrigated ablation catheters;EnSite family of cardiac mapping systems;Agilis NxT and Swartz introducer catheters;the Advisor HD Grid mapping catheter;andViewFlex family of intracardiac echocardiography catheters;heart failure related products,including the HeartMate left ventricular assist device family;the CardioMEMS HF System pulmonary arterysensor,a heart failure monitoring system;the CentriMag System,an acute mechanical circulatory support system;and patient self-testingproducts and services;vascular products,including the XIENCE family of drug-eluting coronary stent systems developed on the Multi-Link Vision platform;StarClose SE,Perclose ProGlide and Perclose ProStyle vessel closure devices,TREK coronary balloon dilatation products,Hi-TorqueBalance Middleweight Universal II guidewires,Supera Peripheral Stent System,a peripheral vascular stent system;Acculink/Accunet andXact/Emboshield NAV6,carotid stent systems;the OPTIS integrated systems with Ultreon 1.0 and 2.0 Software,compatible with theDragonfly OPTIS and OpStar imaging catheters and PressureWire fractional flow reserve measurement systems;Diamondback 360 coronaryand peripheral orbital atherectomy systems;and Esprit BTK everolimus eluting resorbable scaffold system;structural heart products,including MitraClip,a mitral valve transcatheter edge-to-edge repair system;TriClip,a tricuspid valve transcatheteredge-to-edge repair system;Epic,a surgical family of aortic valve and mitral valve replacement devices;Portico and Navitor transcatheteraortic heart valves;Regent and Masters Series mechanical heart valves;Amplatzer PFO occluders;Amplatzer Amulet occluder devices;andthe Tendyne transcatheter mitral valve replacement system;continuous glucose and blood glucose monitoring systems under the FreeStyle brand such as the FreeStyle Libre system,including sensors,datamanagement decision software,test strips,and accessories for people with diabetes;and the Lingo continuous glucose monitoring system,including sensors and data management decision software for peoples health and wellness;andneuromodulation products,including spinal cord stimulators Proclaim Plus and Proclaim XR recharge-free implantable pulse generators(IPG)and rechargeable Eterna IPG,each with BurstDR stimulation,and Proclaim DRG IPG,a neurostimulation device designed for dorsal rootganglion therapy,for the treatment of chronic pain disorders;and the non-rechargeable Infinity deep brain stimulation(DBS)system and therechargeable Liberta RC DBS system,each with directional lead technology for the treatment of movement disorders.3Table of ContentsThese products are subject to competition in technological innovation,price,convenience of use,service,product performance,long-term supply contracts,and product potential for overall cost-effectiveness and productivity gains.Some products in this segment can be subject to rapid product obsolescence orregulatory changes.Although Abbott has benefited from technological advantages of certain of its current products,these advantages may be reduced oreliminated as competitors introduce new products.INFORMATION WITH RESPECT TO ABBOTTS BUSINESS IN GENERALSources and Availability of Raw MaterialsAbbott purchases,in the ordinary course of business,raw materials and supplies essential to Abbotts operations from numerous suppliers in the UnitedStates and around the world.There have been no recent significant availability problems or supply shortages for raw materials or supplies.Patents,Trademarks,and LicensesAbbott is aware of the desirability for patent and trademark protection for its products.Accordingly,where possible,patents and trademarks are sought andobtained for Abbotts products in the United States and countries of interest to Abbott.Abbott owns or has licenses under a substantial number of patentsand patent applications.Principal trademarks and the products they cover are discussed in the Narrative Description of Business on pages 1 through 4.These,and various patents that expire during the period from 2025 to 2045,in the aggregate,are believed to be of material importance in the operation ofAbbotts business.Abbott believes that no single patent,license,or trademark is material in relation to Abbotts business as a whole.Seasonal Aspects,Customers,and RenegotiationThere are no significant seasonal aspects to Abbotts business.Abbott has no single customer that,if the customer was lost,would have a material adverseeffect on Abbott.No material portion of Abbotts business is subject to renegotiation of profits or termination of contracts at the election of a government.Environmental MattersAbbott believes that its operations comply in all material respects with applicable laws and regulations concerning environmental protection.Regulationsunder federal,state,and various other countries environmental laws impose stringent limitations on emissions and discharges to the environment fromvarious manufacturing operations.Abbotts capital and operating expenditures for pollution control in 2024 were not material and are not expected to bematerial in 2025.Abbott has been identified as one of many potentially responsible parties in investigations and/or remediations at several locations in the United States,including Puerto Rico,under the Comprehensive Environmental Response,Compensation,and Liability Act,commonly known as Superfund.Abbott isalso engaged in remediation at several other sites,some of which are owned by Abbott,in cooperation with the Environmental Protection Agency orsimilar agencies.While it is not feasible to predict with certainty the final costs related to those investigations and remediation activities,Abbott believesthat such costs,together with other expenditures to maintain compliance with applicable laws and regulations concerning environmental protection,shouldnot have a material adverse effect on Abbotts financial position,cash flows,or results of operations.Human CapitalThe sustainability of Abbotts business depends on attracting,engaging and developing talented people with diverse backgrounds who share Abbottsmission to help people live their healthiest possible lives.Abbott provides its employees opportunities to grow and develop their careers,marketcompetitive compensation and benefit programs,and the satisfaction of being part of a global company dedicated to improving health in more than 160countries.As of December 31,2024,Abbott employed approximately 114,000 people,69%of whom were employed outside of the U.S.Women represented 47%ofAbbotts U.S.workforce,46%of its global workforce,and 43%of its managers.4Table of ContentsTalent ManagementAbbott has an integrated global talent management process that is designed to identify and assess talent across the organization and provide equal andconsistent opportunities for employees to develop their skills.All levels of employees participate in Abbotts annual performance management process tocreate development plans that support their particular career objectives,and Abbott provides a broad range of training,mentoring and other developmentopportunities to help its employees meet these objectives.The board of directors conducts an annual Talent Management Review,focusing on developmentof talent,diversity,and succession planning for critical positions.Similar reviews take place across Abbott to develop talent and diversity across theorganization.Diversity and InclusionAbbott is committed to fostering a workplace that is inclusive for all.Abbott ties executive compensation to human capital management to sustain aninclusive culture and the fair and balanced treatment of Abbotts employees.Abbotts diversity,equity,and inclusion report provides an update on the plans,strategies,and actions undertaken to ensure that Abbott continues to attract,retain,and develop the best talent from the more than 160 countries in which itdoes business.Abbotts employee networks play an important role in building an inclusive culture across all Abbott operations.A corporate officer serves as a sponsor foreach of these networks,helping to align their objectives with Abbotts business strategies.Abbott has nine such networks,which are:Asian Leadership andCultural Network,Black Business Network,disABILITY Network(supporting employees with disabilities),Early Career Network(supporting early careeremployees),LA VOICE Network(supporting Hispanic and Latino employees),PRIDE(supporting LGBTQ employees),Veterans Network,WomenLeaders of Abbott,and Women in STEM.All networks are open to all Abbott employees.Abbott offers professional development programs,which provide recent college graduates the opportunity to rotate through different areas of Abbott,oftenwith the chance to work outside their home country.Also,Abbott hosts hundreds of college students for paid internships.Further,Abbott has offered aSTEM internship program for high school students in the U.S.since 2012 and since 2021,students who complete the program receive a college creditrecommendation from the American Council on Education.The programs objective is to increase the number of students pursuing STEM-related careersand contribute to a more diverse talent pipeline for Abbott.Health and SafetyThe health,safety and wellness of its employees is an Abbott priority embedded at every level of its business.Abbotts integrated Environmental,Healthand Safety organization governs health,safety and wellness at Abbotts facilities.Abbott also maintains global policies and standards for managingemployee health and safety.Abbott takes a holistic approach to employee well-being.Abbotts global wellness programs are designed to meet the unique needs of employees acrossbusinesses and geographies and offer a wide range of programs,including supporting the emotional,physical,and financial health of employees and theirfamilies.For example,for over 20 years,Abbott has annually offered Exercise Across Abbott,which is a four-week physical wellness program thatencourages employees to team up with colleagues and track how many minutes they exercise each day.Over 40,000 Abbott employees across 75 countriestook part in 2024.Compensation and BenefitsAbbott is committed to building,retaining,and motivating a diverse talent pipeline that can meet the current and future needs of its businesses.To that end,Abbott provides market competitive compensation,healthcare benefits,continuing education benefits,pension and/or retirement savings plans,financialsupport for employees with student loan debt,and several programs to facilitate employees building an ownership stake in Abbott,including a global long-term incentive program for employees generally beginning at the manager level.Abbott also has procedures and processes focused on ensuring employeesreceive equitable compensation,regardless of race or gender or other personal characteristics.5Table of ContentsRegulationThe development,manufacture,marketing,sale,promotion,and distribution of Abbotts products are subject to comprehensive government regulation bythe U.S.Food and Drug Administration(FDA)and similar national and international regulatory agencies.Government regulation by various international,supranational,federal and state agencies addresses(among other matters)the development and approval to market Abbotts products,as well as theinspection of,and controls over,research and laboratory procedures,clinical investigations,product approvals and manufacturing,postmarket changes toproducts,labeling,packaging,supply chains,marketing and promotion,pricing and reimbursement,sampling,distribution,quality control,post-marketsurveillance,record keeping,storage,and disposal practices.In addition,Abbotts laboratories and associated testing services are subject to comprehensivegovernment regulation,including registration,certification,and licensure,by federal,state,and local agencies,such as the Centers for Medicare&Medicaid Services,the Drug Enforcement Administration,the Substance Abuse and Mental Health Services Administration,and their respective foreigncounterparts.Certain of these agencies require Abbotts laboratories to meet quality assurance,quality control,and personnel standards and undergoinspections.Abbotts international operations are also affected by trade and investment regulations in many countries.These may require local investment,restrictAbbotts investments,or limit the import of raw materials and finished products.Abbotts laboratory facilities,home monitoring services,and durable medical equipment suppliers,which provide services,related products and medicaldevices to consumers,are subject to additional laws and regulations applicable to healthcare providers and suppliers that submit claims for reimbursementor payment to third-party payors,including government agencies such as Medicare and Medicaid,or governments.In the United States,these entities mayfrom time to time conduct inquiries,claims audits,investigations,and enforcement actions relating to the claims or enrollment criteria.Abbott is subject to laws and regulations pertaining to healthcare fraud and abuse,including state and federal anti-kickback,anti-self-referral,and falseclaims laws in the United States.Prescription drug,nutrition,and medical device manufacturers such as Abbott are also subject to taxes,as well asapplication,product,user,establishment,and other fees.Governmental agencies can also invalidate intellectual property rights.Compliance with these laws and regulations is costly and materially affects Abbotts business.Among other effects,healthcare regulations and significantchanges thereto(such as the introduction of the Medical Devices Regulation and the In Vitro Diagnostic Medical Devices Regulation in the EuropeanUnion)substantially increase the time,difficulty,and costs incurred in developing,obtaining and maintaining approval to market,and marketing newlydeveloped and existing products.Abbott expects this regulatory environment will continue to require significant technical expertise and investment toensure compliance.Failure to comply can delay the release of a new product or result in regulatory and enforcement actions,the seizure or recall of aproduct,the suspension or revocation of the authority necessary for a products production and sale,suspension or revocation of billing privileges,andother civil or criminal sanctions,including fines and penalties.Similarly,compliance with the laws and regulations governing laboratories and testingservices requires specialized expertise.Failure to comply with these regulatory requirements can result in sanctions,including suspension,revocation,orlimitation of a laboratorys certification,which is necessary to conduct business,as well as significant fines or criminal penalties.Abbotts business can also be affected by ongoing studies of the utilization,safety,efficacy,and outcomes of healthcare products and their components thatare regularly conducted by industry participants,government agencies,and others.These studies can call into question the utilization,safety,and efficacyof previously marketed products.In some cases,these studies have resulted,and may in the future result,in the discontinuation of marketing of suchproducts in one or more countries,and may give rise to claims for damages from persons who believe they have been injured as a result of their use.6Table of ContentsAccess to human healthcare products continues to be a subject of investigation and action by governmental agencies,legislative bodies,and privateorganizations in many countries.A major focus is cost containment.Efforts to reduce health care costs are also being made in the private sector,notably byhealthcare payors and providers,which have instituted various cost reduction and containment measures.Abbott expects that insurers and providers willcontinue attempts to reduce the cost or utilization of healthcare products.Many countries control the price of healthcare products directly or indirectly,through reimbursement,payment,pricing,or coverage limitations.Budgetary pressures on healthcare payors may also heighten the scope and severity ofpricing pressures on Abbotts products for the foreseeable future.In the United States,the federal government regularly evaluates reimbursement formedical devices,diagnostics,supplies,and other products,as well as the procedures in which these products may be used.The government follows adiagnosis-related group(DRG)payment system for certain institutional services provided under Medicare or Medicaid and has implemented a prospectivepayment system(PPS)for services delivered in hospital outpatient,nursing home,and home health settings.DRG and PPS entitle a healthcare facility to afixed reimbursement based on the diagnosis and/or procedure rather than actual costs incurred in patient treatment,thereby increasing the incentive for thefacility to limit or control expenditures for many healthcare products.Other payment methodology changes have been proposed and implemented fromtime to time.For example,Medicare implemented a competitive bidding system for certain durable medical equipment(including diabetes products),enteral nutrition products,and supplies.Governmental cost containment efforts also affect Abbotts nutritional products business.In the United States,for example,under regulations governing thefederally funded Special Supplemental Nutrition Program for Women,Infants,and Children(WIC),all states must have a cost containment program forinfant formula.As a result,through competitive bidding states obtain rebates from manufacturers of infant formula whose products are used in the program.The Patient Protection and Affordable Care Act(the Affordable Care Act)includes provisions known as the Physician Payments Sunshine Act,whichrequires manufacturers of drugs,devices,and medical supplies covered under Medicare and Medicaid to record any transfers of value to physicians andteaching hospitals and to report this data to the Centers for Medicare&Medicaid Services for subsequent public disclosure.Similar reporting requirementshave also been enacted at the state level domestically,and an increasing number of governments worldwide either have adopted or are considering similarlaws requiring transparency of interactions with healthcare professionals.Failure to report appropriate data may result in civil or criminal fines and/orpenalties.Policy changes or implementation of new healthcare legislation could result in significant changes to healthcare systems.In the United States,this couldinclude potential modification,including expansion or repeal of all or parts of the Affordable Care Act.The regulation of data privacy and security,and the protection of the confidentiality of certain personal information(including patient health information,financial information and other sensitive personal information),is increasing.For example,the European Union,China,various other countries,andvarious U.S.states have enacted or are considering enacting data protection laws that contain significant compliance obligations and financial penalties fornoncompliance.In addition,regulators with general consumer protection authority,such as the U.S.Federal Trade Commission and U.S.states AttorneysGeneral,are focused on how consumer data is used by entities in the healthcare industry.Further,there are regulations of data privacy and security that arespecific to healthcare companies.For example,the U.S.Department of Health and Human Services has issued rules governing the use,disclosure,andsecurity of protected health information,and the FDA has issued further guidance concerning cybersecurity for medical devices.In addition,certaincountries have issued or are considering“data localization”laws,which limit companies ability to transfer protected data across country borders.Failureto comply with data privacy and security laws and regulations can result in business disruption and enforcement actions,which could include civil orcriminal penalties.Transferring and managing protected information will become more challenging as laws and regulations are enacted or amended,andAbbott expects there will be increasing complexity in this area.Abbott expects debate to continue at all government levels worldwide over the manufacture,quality assurance requirements,marketing authorizationprocesses,post-market surveillance requirements,availability,method of delivery,and payment for healthcare products and services,as well as dataprivacy and security.Abbott believes that future legislation and regulation in the markets it serves could affect the timing and expense associated withbringing healthcare products or services to market,access to healthcare products and services,increase rebates,reduce prices or reimbursements or the rateof price increases for healthcare products and services,change healthcare delivery systems,create new fees and obligations for the pharmaceutical,nutrition,diagnostic,and medical device industries,or require additional reporting and disclosure.It is not possible to predict the extent to which Abbott orthe healthcare industry in general might be affected by the matters discussed above.7Table of ContentsINTERNET INFORMATIONCopies of Abbotts Annual Report on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K,and amendments to those reports filedor furnished pursuant to Section 13(a)or 15(d)of the Securities Exchange Act of 1934 are available,free of charge,through Abbotts investor relationswebsite()as soon as reasonably practicable after Abbott electronically files the material with,or furnishes it to,the Securities andExchange Commission(the Commission).These reports and other information are also available,free of charge,at www.sec.gov.Abbotts corporate governance guidelines,outline of directorship qualifications,code of business conduct and the charters of Abbotts audit committee,compensation committee,nominations and governance committee,and public policy committee are all available on Abbotts investor relations website().8Table of ContentsITEM 1A.RISK FACTORS In addition to the other information in this report,the following risk factors should be considered before deciding to invest in any of Abbotts securities.Additional risks and uncertainties not presently known to Abbott,or risks Abbott currently considers immaterial,could also affect Abbotts actual results.Abbotts business,financial condition,results of operations,or prospects could be materially adversely affected by any of these risks.Business and Operational RisksDisruptions to Abbotts global supply chain,which is large and complex,could negatively affect Abbotts results of operations.Abbotts operations and performance depend on its ability to manage its large and complex global supply chain.While Abbott has taken and will continueto take actions to mitigate the risks of disruptions to its global supply chain,disruptions to it could negatively affect Abbotts results of operations.Forexample,the COVID-19 pandemic and macroeconomic conditions such as inflationary pressures and labor shortages contributed to global supply chainchallenges in the early part of the decade,which adversely impacted the cost and availability of certain raw materials,supplies,and services.Abbott may acquire other businesses,license rights to technologies or products,form alliances,or dispose of or spin-off businesses,which could causeit to incur significant expenses and could negatively affect profitability.From time to time,Abbott pursues acquisitions,licensing arrangements,and strategic alliances,or may dispose of or spin-off some of its businesses,as partof its business strategy.Abbott may not complete these transactions in a timely manner,on a cost-effective basis,or at all,and may not realize the expectedbenefits.If Abbott is successful in making an acquisition,the products and technologies that are acquired may not be successful or may requiresignificantly greater resources and investments than originally anticipated.Abbott may not be able to integrate acquisitions successfully into its existingbusiness or transition disposed businesses efficiently,and could incur or assume significant debt and unknown or contingent liabilities.Abbott could alsoexperience negative effects on its reported results of operations from acquisition or disposition-related charges,amortization of expenses related tointangibles and charges for impairment of long-lived assets.These effects could cause a deterioration of Abbotts credit rating,result in increasedborrowing costs and interest expense,and decrease liquidity.Abbott depends on sophisticated information systems and maintains protected personal data,and a significant cybersecurity incident or otherdisruption affecting these information systems or protected data could have a material adverse effect on Abbotts business,financial condition andresults of operations.Similar to other large multi-national companies,the size and complexity of the information systems on which Abbott relies for both its infrastructure andproducts make them susceptible to a cybersecurity incident,breakdown,destruction,loss of data privacy,or other significant disruption.These systemshave been and are expected to continue to be the target of malware and other cybersecurity incidents.In addition,third party hacking attempts may causeAbbotts information systems and related products,protected data,or proprietary information to be compromised or stolen.A significant cybersecurityincident or other disruption could result in adverse consequences,including regulatory inquiries or litigation,increased costs and expenses,manufacturingchallenges or disruption,problems with product availability,functionality or safety,damage to customer relations,reputational damage,lost revenue,andfines or penalties.Abbott also collects,manages and processes protected personal data,including protected health information,in connection with certain medical productsand service offerings.Abbott is subject to numerous data privacy and data protection laws and regulations globally,including data protection laws thatprohibit or restrict the transfer of protected data across country borders.For additional information concerning data privacy and security regulation,see thediscussion in“Regulation”under Item 1,“Business.”A breach or unauthorized disclosure of protected personal information could result in adverseconsequences,including regulatory inquiries or litigation,increased costs and expenses,reputational damage,lost revenue,and fines or penalties.9Table of ContentsAbbott invests in its information systems and technology and in the protection of its products and data to reduce the risk of a cybersecurity incident or othersignificant disruption,and monitors its information systems on an ongoing basis for any current or potential cybersecurity threats or vulnerabilities and forchanges in technology and the regulatory environment.There can be no assurance that these measures and efforts will prevent future cybersecurityincidents or other significant disruptions to any of the information systems on which Abbott relies or that related product issues will not arise in the future.Similarly,there can be no assurance that third party information technology providers or other partners with whom Abbott contracts will not suffer asignificant cybersecurity incident or disruption that impacts Abbott.Any significant cybersecurity incident or other disruption affecting Abbottsinformation systems or products could have a material adverse effect on Abbotts business,financial condition and results of operations.Abbotts research and development efforts to develop commercially successful products and technologies and its efforts to develop and maintain newbusiness and operating models necessary to support data-driven healthcare solutions may not succeed,either of which may cause Abbotts revenue andprofitability to decline.To remain competitive,Abbott must continue to launch new products and technologies.To accomplish this,Abbott commits substantial efforts,funds,andother resources to research and development.A risk of failure is inherent in the research and development of new products and technologies.Abbott mustmake ongoing substantial expenditures without any assurance that its efforts will be commercially successful.Failure can occur at any point in the process,including after significant funds have been invested.Promising new products and technologies may fail to reach the market or may only have limited commercial success because of efficacy or safetyconcerns,failure to achieve positive clinical outcomes,inability to obtain necessary regulatory approvals,limited scope of approved uses,excessive costs tomanufacture,failure to establish or maintain intellectual property rights,or infringement of the intellectual property rights of others.Even if Abbottsuccessfully develops new products or enhancements or new generations of Abbotts existing products,they may be quickly rendered obsolete by changingcustomer preferences,changing industry or regulatory standards,or competitors innovations.Innovations may not be accepted quickly in the marketplacebecause of,among other things,entrenched patterns of clinical practice or uncertainty over third-party reimbursement.Abbott cannot state with certaintywhen or whether any of its products under development will be launched,whether it will be able to develop,license,or otherwise acquire compounds orproducts,or whether any products will be commercially successful.Failure to launch successful new products or technologies,or new indications or usesfor existing products,may cause Abbotts products or technologies to become obsolete,causing Abbotts revenues and operating results to suffer.In addition,Abbott is developing new business and operating models necessary to support the creation of data-driven healthcare solutions such as data-centric prevention and treatment strategies,new products and technologies that incorporate data insights,and product technology strategies that focus onconnectivity and data creation management.Even if Abbott successfully develops such new data-driven healthcare solutions,they may be renderedobsolete by competitors innovations,the nature of the data and insights generated,or changing customer preferences.Failure to develop and maintainbusiness and operating models necessary to support data-driven healthcare solutions may negatively impact the demand for Abbott products andtechnologies,causing Abbotts revenues and profitability to decline.The manufacture of many of Abbotts products is a highly exacting and complex process,and if Abbott or one of its suppliers or manufacturersencounters problems manufacturing products,Abbotts business could suffer.The manufacture of many of Abbotts products is a highly exacting and complex process,due in part to strict regulatory requirements.Problems may ariseduring manufacturing for a variety of reasons,including equipment malfunction,failure to follow specific protocols and procedures,problems with rawmaterials or the global supply chain,failure to meet product specifications,cybersecurity incidents,natural disasters,and environmental factors.Inaddition,single suppliers are currently used for certain products and materials.If problems arise during the production of a lot or batch of product,thoseproducts may have to be discarded.If problems are not discovered before the product is released to the market,recall and product liability costs may alsobe incurred.Any of these events could,among other things,lead to increased costs,lost revenue,damage to customer relations,reputational damage,timeand expense spent investigating the cause and remediating the problem,if any,a production stoppage at a manufacturing facility,and depending on thecause,similar losses with respect to other lots,batches or products.To the extent Abbott or one of its suppliers or manufacturers experiences significantmanufacturing problems,this could have a material adverse effect on Abbotts revenues and profitability.Abbott has indebtedness,which could adversely affect its business,including decreasing its business flexibility.As of December 31,2024,Abbotts consolidated indebtedness was approximately$14.1 billion.This consolidated indebtedness could have the effect,among other things,of reducing Abbotts flexibility to respond to changing business10Table of Contentsand economic conditions,and reducing funds available for working capital,capital expenditures,acquisitions,and other general corporate purposes.Further,Abbott may be required to raise additional financing for working capital,capital expenditures,future acquisitions or other general corporatepurposes.Abbotts ability to arrange additional financing or refinancing will depend on,among other factors,Abbotts financial position and performance,as well as prevailing market conditions and other factors beyond Abbotts control.Consequently,Abbott cannot assure that it will be able to obtainadditional financing or refinancing on terms acceptable to Abbott or at all,which could adversely impact Abbotts ability to make scheduled payments withrespect to its consolidated indebtedness and its profitability and financial condition.Additionally,further borrowing could cause a deterioration of Abbotts credit ratings.Abbotts credit ratings reflect each credit rating agencys then opinionof Abbotts financial strength,operating performance,and ability to meet its debt obligations.Adverse changes in Abbotts credit ratings may result inincreased borrowing costs for future long-term debt or short-term borrowing facilities and may limit financing options,including access to the unsecuredborrowing market.Abbott may also be subject to additional restrictive covenants that would reduce flexibility.Legal and Regulatory RisksIt is costly for Abbott to comply with numerous governmental regulations and to develop compliant products and processes,and consequences for non-compliance could have a material adverse effect on Abbotts revenues,profitability,cash flows,and financial condition.Abbotts products are subject to rigorous regulation by the FDA and numerous international,supranational,federal,and state authorities.The process ofobtaining regulatory approvals to market a drug,medical device,diagnostic product,or nutritional product can be costly and time-consuming,andapprovals might not be granted for future products,or additional indications or uses of existing products,on a timely basis,if at all.Delays in the receipt of,or failure to obtain,approvals for future products,or new indications and uses,could result in delayed realization of product revenues,reduction inrevenues,and substantial additional costs.In addition,no assurance can be given that Abbott will remain in compliance with applicable FDA and other regulatory requirements once approval,clearance,or marketing authorization has been obtained for a product.These requirements include,among other things,regulations regardingmanufacturing practices,product labeling,postmarket changes to products,advertising,and postmarketing reporting,including adverse event reports andfield alerts.Many of Abbotts facilities and procedures and those of Abbotts suppliers are subject to ongoing regulation,including periodic inspection bythe FDA and other regulatory authorities.Abbott must incur expense and spend time and effort to ensure compliance with these complex regulations.Possible regulatory actions for non-compliance include warning letters,fines,damages,injunctions,civil penalties,recalls,consent decrees,seizures ofAbbotts products,and civil litigation and/or criminal prosecution.These actions could result in,among other things,substantial modifications to Abbotts business practices and operations;refunds,recalls,or seizures ofAbbotts products;a total or partial shutdown of production in one or more facilities while Abbott or Abbotts suppliers remedy any actual or potentialissues;the inability to obtain future product approvals,clearances,or marketing authorizations;and withdrawals or suspensions of current products fromthe market.Any of these events could disrupt Abbotts business and have a material adverse effect on Abbotts revenues,profitability,cash flows,andfinancial condition.For example,in February 2022,Abbott initiated a voluntary recall of certain powder infant formula products manufactured at itsfacility in Sturgis,Michigan at which time it temporarily stopped manufacturing at the facility.In May 2022,Abbott entered into a consent decree with theFDA.For information on the impact of Abbotts voluntary recall and manufacturing stoppage,see the discussion in the“Financial Review”section in Item7,Managements Discussion and Analysis of Financial Condition and Results of Operations,of this report.Laws and regulations affecting government benefit programs could impose new obligations on Abbott,require Abbott to change its business practices,and restrict its operations,which could result in a material adverse effect on Abbotts revenues,profitability,and financial condition.Abbotts industry is subject to various international,supranational,federal,and state laws and regulations pertaining to government benefit programreimbursement,price reporting and regulation,and healthcare fraud and abuse,including anti-kickback and false claims laws,and international andindividual state laws relating to pricing and sales and marketing practices.Violations of these laws may be punishable by criminal and/or civil sanctions,including,in some instances,substantial fines,imprisonment,and exclusion from participation in government healthcare programs,including Medicare,Medicaid,and Veterans Administration health programs in the U.S.These laws and regulations are broad in scope and they are subject to evolvinginterpretations,which could require Abbott to incur substantial costs associated with compliance or to alter one or more of its sales or marketing practices.In addition,violations of these laws,or allegations of such11Table of Contentsviolations,could disrupt Abbotts business and result in a material adverse effect on Abbotts revenues,profitability,and financial condition.Changes in the healthcare regulatory environment may adversely impact the demand for and price of Abbotts products.Both in the U.S.and internationally,government authorities may enact changes in regulatory requirements,make legislative or administrative reforms toexisting reimbursement programs,make adverse decisions relating to Abbotts products coverage or reimbursement,or make changes to patient access tohealthcare,all of which could adversely impact the demand for and usage of Abbotts products or the prices that Abbotts customers are willing to pay forthem.Further,in the U.S.,a number of the provisions of the Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 address access tohealthcare products and services.These provisions may be modified,expanded,repealed,or otherwise invalidated,in whole or in part.Future rulemakingcould affect rebates,prices or the rate of price increases for healthcare products and services,or required reporting and disclosure.Abbott cannot predict thetiming or impact of any future rulemaking or changes in the law.For additional information concerning healthcare regulation,see the discussion in“Regulation”under Item 1,“Business.”The expiration or loss of intellectual property protection and licenses may affect Abbotts future revenues and operating income.Many of Abbotts businesses rely on patent and trademark and other intellectual property protection.Although most of the challenges to Abbottsintellectual property have come from other companies,governments may also challenge intellectual property protections.To the extent Abbotts intellectualproperty is successfully challenged,invalidated,or circumvented or to the extent it does not allow Abbott to compete effectively,Abbotts businesses couldsuffer.To the extent that countries do not enforce Abbotts intellectual property rights,Abbotts future revenues and operating income could be reduced.Any material litigation regarding Abbotts patents and trademarks is described in the section captioned“Legal Proceedings.”Significant safety concerns could arise for Abbotts products,which could have a material adverse effect on Abbotts revenues and financial condition.Healthcare products typically receive regulatory approval based on data obtained in controlled clinical trials of limited duration.Following regulatoryapproval,these products will be used over longer periods of time in many patients.Investigators may also conduct additional,and perhaps more extensive,studies.When new safety concerns are reported,Abbott may be required to amend the conditions of use for a product.For example,Abbott may berequired to provide additional warnings on a products label or narrow its approved intended use,either of which could reduce the products marketacceptance.If serious safety concerns arise with an Abbott product,sales of the product have been and could be halted by Abbott or by regulatoryauthorities.Safety concerns affecting suppliers or competitors products also may reduce the market acceptance of Abbotts products.In addition,in the ordinary course of business,Abbott is the subject of product liability claims and lawsuits alleging that its products or the products ofother companies that Abbott promotes have resulted or could result in an unsafe condition for,or injury to,patients.Product liability claims and lawsuits,safety alerts or product recalls,and other allegations of product safety or quality issues,regardless of their validity or ultimate outcome,may have amaterial adverse effect on Abbotts business and reputation and on Abbotts ability to attract and retain customers.Consequences may also includeadditional costs,a decrease in market share for the products,lower income or exposure to other claims.Product liability losses are self-insured and couldhave a material adverse effect on Abbotts profitability,cash flows,and financial condition.Economic,Geopolitical and Industry RisksAbbott is subject to cost containment efforts that could cause a reduction in future revenues and operating income.In the United States and other countries,Abbotts businesses have experienced downward pressure on certain product pricing.Cost containment efforts bygovernments and private organizations are described in greater detail in the section captioned“Regulation.”To the extent these cost containment efforts arenot offset by greater patient access to healthcare or other factors,Abbotts future revenues and operating income will be reduced.Competitors intellectual property may prevent Abbott from selling its products or have a material adverse effect on Abbotts future profitability andfinancial condition.In the ordinary course of business,Abbott is the subject of patent litigation,such as competitor claims that an Abbott product infringes their intellectualproperty.Resolving an intellectual property infringement claim can be costly and time12Table of Contentsconsuming and may require Abbott to enter into license agreements.Abbott cannot guarantee that it would be able to obtain license agreements oncommercially reasonable terms.A successful claim of patent or other intellectual property infringement could subject Abbott to significant damages or aninjunction preventing the manufacture,sale or use of affected Abbott products.Any of these events could have a material adverse effect on Abbottsprofitability and financial condition.New products and technological advances by Abbotts competitors may negatively affect Abbotts results of operations.Abbotts products face intense competition from competitors products and technological advances.Competitors products may be safer,more effective,more effectively marketed or sold,or have lower prices or superior performance features than Abbotts products.Further,the development of newtechnology,healthcare products and medicines,and the development of new treatments for disease could significantly change the competitive landscape ofthe healthcare industry and negatively impact the demand for certain Abbott products.Abbott cannot predict with certainty the timing or impact of theintroduction of competitors products and technological advances.Fluctuation in foreign currency exchange rates has adversely affected and may continue to adversely affect Abbotts financial statements and its abilityto realize projected sales and earnings.Although Abbotts financial statements are denominated in U.S.dollars,a significant portion of Abbotts revenues and costs are realized in othercurrencies.Sales outside of the U.S.in 2024 made up approximately 61 percent of Abbotts net sales.Abbotts profitability is affected by movement of theU.S.dollar against other currencies.Fluctuations in exchange rates between the U.S.dollar and other currencies may also affect the reported value ofAbbotts assets and liabilities,as well as its cash flows.Some foreign currencies are subject to government exchange controls.While Abbott enters intohedging arrangements to mitigate some of its foreign currency exposure,Abbott cannot predict with any certainty changes in foreign currency exchangerates or its ability to mitigate these risks.Information on the impact of foreign exchange rates on Abbotts financial results is contained in the“Financial Review Results of Operations”section inItem 7,Managements Discussion and Analysis of Financial Condition and Results of Operations,of this report.A discussion of the steps taken to mitigatethe impact of foreign exchange is contained in Item 7A,Quantitative and Qualitative Disclosures about Market Risk,of this report.Information on Abbottshedging arrangements is contained in Note 12 to the consolidated financial statements in this report.Adverse changes in tax laws,regulations or interpretations,both in the U.S.and internationally,could have a material adverse effect on Abbottseffective tax rate,financial condition and results of operations.Abbott is a large,global corporation and is subject to complex and evolving tax rules,both in the U.S.and internationally.Changes in tax laws,regulationsor interpretations,such as the two-pillared plan proposed by the Organization for Economic Cooperation&Development(OECD),or adverse decisionsregarding Abbotts tax positions could materially adversely affect Abbotts effective tax rate,financial condition and results of operations.A discussion onthe OECD proposals and their potential impact on Abbotts business in the future is contained in the“Financial Review”section in Item 7,ManagementsDiscussion and Analysis of Financial Condition and Results of Operations,of this report.Abbott is unable to predict what changes to the tax laws of theU.S.or other jurisdictions may be proposed or enacted in the future or what impact such changes would have on its business.Deterioration in the economic condition and credit quality of certain countries may negatively affect Abbotts results of operations.Unfavorable economic conditions in certain countries may increase the time it takes to collect outstanding trade receivables or inhibit Abbotts ability tobest utilize its cash.Financial instability and fiscal deficits in these countries may result in additional austerity measures to reduce costs,includinghealthcare.Deterioration in the quality of sovereign debt,including credit downgrades,could increase Abbotts collection risk where a significant amountof Abbotts receivables in these countries are with governmental healthcare systems or where Abbotts customers depend on payment by governmenthealthcare systems.Abbott is subject to risks related to public health crises,such as widespread outbreaks of infectious diseases,which could have a material effect onAbbotts business,financial condition and results of operations.As a global healthcare company,public health crises,such as the widespread outbreaks of infectious diseases,may negatively impact certain Abbottsoperations.Health concerns and significant changes in political or economic conditions caused by such outbreaks can cause,and during the COVID-19pandemic caused,significant reductions in demand for certain products,increased difficulty in serving customers,disruptions to manufacturing and supplychains,and negative effects on certain of Abbotts operations as well as the operations of its suppliers,distributors and other third-party partners.Furthermore,such widespread outbreaks may impact,and during the COVID-19 pandemic impacted,the broader13Table of Contentseconomies of affected countries,including negatively impacting economic growth,the proper functioning of financial and capital markets,inflation rates,foreign currency exchange rates,and interest rates.For information on the impact that the COVID-19 pandemic had on Abbotts business,see the discussion in the“Financial Review”section in Item 7,Managements Discussion and Analysis of Financial Condition and Results of Operations,of this report.The international nature of Abbotts business subjects it to additional business risks that may cause its revenue and profitability to decline.Abbotts business is subject to risks associated with managing a global supply chain and doing business internationally.Sales outside of the United Statesin 2024 made up approximately 61 percent of Abbotts net sales.Additional risks associated with Abbotts international operations include:differing local product preferences and product requirements;trade protection measures,including tariffs,import or export licensing requirements,other governmental restrictions such as trade sanctions,andchanges to international trade agreements;difficulty in establishing,staffing,and managing operations;differing labor regulations;potentially negative consequences from changes in or interpretations of tax laws;geopolitical and economic instability,including sovereign debt issues;restrictions on local currency conversion and/or cash extraction;price controls,limitations on participation in local enterprises,expropriation,nationalization,and other governmental action;inflation,recession,and fluctuations in interest rates;diminished protection of intellectual property;andpotential penalties or other adverse consequences for violations of anti-corruption,anti-bribery,anti-competition,and other similar laws andregulations,including the Foreign Corrupt Practices Act and the U.K.Bribery Act.Events contemplated by these risks may,individually or in the aggregate,have a material adverse effect on Abbotts revenues and profitability.Other factors can have a material adverse effect on Abbotts future profitability and financial condition.Many other factors can affect Abbotts profitability and its financial condition,including:changes in or interpretations of laws and regulations,including changes in accounting standards,taxation requirements,product approvalstandards,product labeling standards,manufacturing standards,source and use laws,and environmental laws;differences between the fair value measurement of assets and liabilities and their actual value,particularly for pensions,retiree healthcare,stockcompensation,intangibles,goodwill,and contingent consideration;and for contingent liabilities such as litigation,the absence of a recordedamount,or an amount recorded at the minimum,compared to the actual amount;changes in the rate of inflation(including the cost of raw materials,labor,commodities,and supplies),interest rates,market value of Abbottsequity investments,and the performance of investments held by Abbott or Abbotts employee benefit trusts;changes in the creditworthiness of counterparties that transact business with or provide services to Abbott or Abbotts employee benefit trusts;changes in business,economic,and geopolitical conditions,including:war,political instability,terrorist attacks,the threat of future terroristactivity and related military action;global climate change,extreme weather and natural disasters;the cost and availability of insurance due to anyof the foregoing events;labor disputes,strikes,slow-downs,or other forms of labor or union activity;and pressure from third-party interestgroups;changes in Abbotts business units and investments and changes in the relative and absolute contribution of each to earnings and cash flowresulting from evolving business strategies,and changing product mix;14Table of Contentschanges in the buying patterns of a major distributor,retailer,wholesaler,or other customer resulting from buyer purchasing decisions,pricing,seasonality,or other factors,or other problems with licensors,suppliers,distributors,and business partners;andlegal challenges,any of which could preclude or delay commercialization of products or adversely affect profitability,including claims assertingstatutory or regulatory violations,and adverse litigation decisions.Many of these factors may manifest individually or collectively,such as Russias invasion of Ukraine which resulted in political instability,sanctions,economic and currency volatility,inflation and other operational and supply disruptions.To date,Abbott has been able to manage these disruptions withoutmaterial impact to its results of operations.However,it is difficult to predict the future implications and consequences of the situation on local,regional orglobal economies and Abbotts operations.There could be additional sanctions,economic volatility,cybersecurity threats,political instability,transportation and other supply disruptions,as well as collection default or liquidity risks or limited availability of resources to conduct essential businessprocesses that could have a material adverse impact to Abbotts operations and financial condition.The resolution and long-term impact of this matter areuncertain and difficult to predict.CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSThis Form 10-K contains forward-looking statements that are based on managements current expectations,estimates,and projections.Words such as“expects,”“anticipates,”“intends,”“plans,”“believes,”“seeks,”“estimates,”“forecasts,”“could,”“may,”variations of these words,and similarexpressions are intended to identify these forward-looking statements.Certain factors,including but not limited to those identified under“Item 1A.RiskFactors”of this Form 10-K,may cause actual results to differ materially from current expectations,estimates,projections,forecasts,and from past results.No assurance can be made that any expectation,estimate,or projection contained in a forward-looking statement will be achieved or will not be affected bythe factors cited above or other unknown or future events.Abbott undertakes no obligation to release publicly any revisions to forward-looking statementsas the result of subsequent events or developments,except as required by law.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 1C.CYBERSECURITYRisk Management and StrategyAbbotts cybersecurity risk management process is designed to identify and assess internal and external cybersecurity threats and vulnerabilities to andwithin Abbotts business and operations,and analyze and prioritize risks from cybersecurity threats to inform strategies and action plans aimed atmitigating and managing these risks.Abbotts cybersecurity program utilizes a variety of technical and process controls that are designed to identify,protect against,detect,respond to,andrecover from cybersecurity threats,including:dedicated cybersecurity professionals who are responsible for analyzing cybersecurity threats,defining cybersecurity policy and requirements,implementing protections,and monitoring and responding to cybersecurity incidents;periodic cybersecurity awareness training for relevant employees and contractors on Abbott policies and emerging cybersecurity threats,includingphishing awareness training;internal and third party cybersecurity testing,including penetration testing of Abbotts information systems and hardware;cybersecurity risk assessments for Abbotts systems and applications;cybersecurity monitoring and response processes intended to identify,assess,escalate,investigate,contain,and remediate incidents;anddisaster recovery plans.In addition,risks from cybersecurity threats are integrated into Abbotts enterprise risk management(ERM)program.The ERM program establishes a riskmanagement framework that seeks to identify and assess risks that could materially impact Abbotts business and operations.15Table of ContentsAs part of Abbotts cybersecurity program,Abbott regularly engages with assessors and third party advisers to perform various services,includingassessments of process design and operating effectiveness;security testing and attestation;periodic assessment of enterprise cybersecurity maturity;industry benchmarking;and thought leadership related to continuous improvement of processes,training,technology,and data.Abbotts cybersecurity program also aims to identify and assess cybersecurity risks associated with its use of third party service providers with access toAbbotts systems and data,as well as such third party service providers adherence to certain cybersecurity standards and processes.As appropriate,Abbottrequires such third party service providers to agree to be subject to cybersecurity evaluations by Abbott.A discussion of how Abbotts business,results of operations,and financial condition could be materially adversely affected by risks from cybersecuritythreats is contained in Item 1A.Risk Factors under“Abbott depends on sophisticated information systems and maintains protected personal data,and asignificant cybersecurity incident or other disruption affecting these information systems or protected personal data could have a material adverse effecton Abbotts business,financial condition and results of operations.GovernanceThe board of directors has risk oversight responsibility for Abbott,which it administers directly and with assistance from its committees.Throughout theyear,the board and its committees engage with management to discuss a wide range of enterprise risks.The audit committee assists the board of directors in fulfilling its oversight responsibilities with respect to ERM,including risks from cybersecurity threats,and the steps management has taken to monitor and mitigate those risks.The audit committee receives reports semiannually from Abbotts ChiefInformation Officer(CIO)and Chief Information Security Officer(CISO)on Abbotts cybersecurity strategy and program.In addition,the audit committeeconducts an annual review of the ERM process,including the program structure,risk assessment,and risk mitigation.The public policy committee assists the board of directors in fulfilling its oversight responsibility with respect to product cybersecurity,and receives reportsat least annually on this topic from the CIO and CISO.The CISO leads Abbotts cybersecurity strategy and program and its cybersecurity and privacy incident response team that is responsible for monitoring thedetection of cybersecurity incidents and executing Abbotts cybersecurity incident response process,as needed.Pursuant to the process,the team isresponsible for the investigation and resolution of cybersecurity incidents,including reporting to an Abbott senior management-level committee ondetection,mitigation,and remediation of significant cybersecurity incidents.The CISO reports to the CIO,who has overall responsibility for thecybersecurity program and organization.Abbott has two cross-functional senior management-level committees that assess Abbotts material risks from cybersecurity threats one that overseesAbbotts cybersecurity program and another that oversees the cybersecurity incident response process.The CISO has extensive technology work experience,having served in various roles in risk management,including information security audit andassessments,developing cybersecurity strategy/programs for enterprise and product security,and cybersecurity operations focused on identification,mitigation and response to cybersecurity threats.The CISO has also held leadership positions in several health sector industry organizations developingcybersecurity standards and best practices.The CIO has extensive technology work experience at S&P 100 companies overseeing and executing technology strategies in complex,global,highlymatrixed environments.The CIO provides executive leadership on technology strategy,policy,and capabilities across the Abbott enterprise.16Table of ContentsITEM 2.PROPERTIESAs of December 31,2024,Abbott owned or leased properties totaling approximately 44 million square feet,of which approximately 65%is owned byAbbott.Abbotts principal corporate offices are located in Illinois and are owned by Abbott.Abbott operates 89 manufacturing facilities globally.Abbotts facilities are deemed suitable and provide adequate productive capacity.The manufacturingfacilities are used by Abbotts reportable segments as follows:Reportable SegmentsManufacturingSitesMedical Devices32Diagnostic Products21Established Pharmaceutical Products23Nutritional Products13Worldwide Total89Abbotts research and development facilities in the United States are primarily located in California,Illinois,Minnesota,New Jersey,and Ohio.Abbott alsohas research and development facilities in various other countries,including Colombia,India,Singapore,Spain,and the United Kingdom.There are no material encumbrances on the properties.17Table of ContentsITEM 3.LEGAL PROCEEDINGSAbbott is involved in various claims,legal proceedings,and investigations,including(as of January 31,2025)those described below.While it is notfeasible to predict the outcome of such pending claims,proceedings,and investigations with certainty,management is of the opinion that their ultimateresolution should not have a material adverse effect on Abbotts financial position,cash flows,or results of operations.Abbott is a defendant in numerous lawsuits involving certain of its specialty infant formula products administered to preterm infants.The lawsuits allegethat preterm infants developed necrotizing enterocolitis as a result of being administered a cows milk-based preterm infant formula product,which resultedin personal injuries or death.As of January 31,2025,there were 1,490 lawsuits pending in federal and state courts in which Abbott is a party.The plaintiffsseek various damages,including punitive damages.In April 2022,the U.S.Judicial Panel on Multidistrict Litigation ordered all federal court casesconsolidated for pretrial purposes in the U.S.District Court for the Northern District of Illinois.In addition,in December 2021,a purported class ofCanadian preterm infants filed suit in British Columbia that makes similar allegations as those made in the United States against Abbott.These plaintiffsseek various damages.Many of the lawsuits name another infant formula manufacturer as a co-defendant.In a trial held in July 2024,a jury in a Missouristate court awarded a plaintiff$495 million in damages.Abbott stands by its products and the information it provided about them,and it appealed thisjurys verdict with the Missouri Court of Appeals in December 2024.In a trial held in October 2024 involving Abbott and another infant formulamanufacturer and the treating hospital as co-defendants,a jury in a Missouri state court returned a unanimous verdict for Abbott and its co-defendants.InDecember 2024,the plaintiff filed a motion for a new trial.As previously disclosed,DexCom,Inc.(Dexcom)and Abbott filed various patent infringement actions against each other over certain of the othercompanys continuous glucose monitoring products in the U.S.,Germany,the U.K,Spain,and the Unified Patent Court,which litigation commenced in2021.In December 2024,Abbott reached an agreement with Dexcom to settle all outstanding patent disputes between the companies in cases related tocontinuous glucose monitoring products.The agreement will result in the dismissal of all pending cases in courts and patent offices worldwide.In November 2022,Abbott learned that the United States Department of Justice,through the United States Attorneys Office for the Western District ofMichigan,is conducting a criminal investigation related to Abbotts manufacturing of infant formula.In December 2022,Abbott received a subpoena fromthe Enforcement Division of the Commission requesting information relating to Abbotts powder infant formula business and related public disclosures.InJanuary 2023,Abbott received a civil investigative demand from the United States Federal Trade Commission seeking information in connection with itsinvestigation of companies who participate in bids for WIC infant formula contracts.In addition,multiple civil lawsuits have been filed against Abbottrelating to Abbotts manufacturing of certain powder infant formula products.Six shareholder derivative lawsuits against certain of Abbotts current andformer directors and officers are pending in a consolidated proceeding,In re Abbott Laboratories Infant Formula Shareholder Derivative Litigation,in theU.S.District Court for the Northern District of Illinois.The consolidated lawsuit seeks monetary damages from the defendants to Abbott.In re AbbottLaboratories Infant Formula Shareholder Derivative Litigation includes:Thomas P.DiNapoli,Controller of the State of New York,as Administrative Headof the New York State and Local Retirement System,and as Trustee of the New York State Common Retirement Fund,and International Brotherhood ofTeamsters Local No.710 Pension Fund and Southeastern Pennsylvania Transportation Authority,both filed in June 2023;David Hamilton filed in April2023;Matthew Steele filed in February 2023;Ilene Lippman filed in January 2023;and Leon Martin filed in October 2022.In August 2024,the courtgranted in part and denied in part the defendants motion to dismiss,allowing the securities and breach of fiduciary duty claims to move forward.InSeptember 2024,Abbotts board of directors established an independent and disinterested special litigation committee to investigate and evaluate theasserted claims.In November 2024,the special litigation committee filed a motion to stay the case in order to conduct its investigation.In February 2025,the court granted in part and denied in part the committees motion,allowing written discovery to proceed.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.18Table of ContentsINFORMATION ABOUT OUR EXECUTIVE OFFICERSExecutive officers of Abbott are elected annually by the board of directors.Each executive officer holds office until a successor has been duly elected orappointed and qualified or until the officers death,resignation,or removal.Vacancies may be filled at any time by the board of directors.Any executiveofficer may be removed by the board of directors when,in its judgment,removal would serve the best interests of Abbott.Abbotts executive officers,their ages as of February 21,2025,and the dates of their first election as officers of Abbott are listed below.The executiveofficers principal occupations and employment for the past five years and the year of appointment to the earliest reported office are also shown.Unlessotherwise stated,employment was by Abbott.There are no family relationships between any executive officers or directors.Robert B.Ford,512021 to present Chairman of the Board and Chief Executive Officer,and Director.2020 to 2021 President and Chief Executive Officer,and Director.2018 to 2020 President and Chief Operating Officer,and Director since 2019.Elected Corporate Officer 2008.Hubert L.Allen,592013 to present Executive Vice President,General Counsel and Secretary.Elected Corporate Officer 2012.Philip P.Boudreau,522024 to present Executive Vice President,Finance and Chief Financial Officer.2023 to 2024 Senior Vice President,Finance and Chief Financial Officer.2020 to 2023 Vice President,Finance and Controller.2017 to 2020 Divisional Vice President,Controller,Medical Devices.Elected Corporate Officer 2020.Lisa D.Earnhardt,552023 to present Executive Vice President and Group President,Medical Devices.2019 to 2023 Executive Vice President,Medical Devices.Elected Corporate Officer 2019.Mary K.Moreland,582019 to present Executive Vice President,Human Resources.Elected Corporate Officer 2019.Louis H.Morrone,482023 to present Executive Vice President,Core Diagnostics.2021 to 2023 Senior Vice President,Rapid Diagnostics.2017 to 2021 Vice President,Transfusion Medicine.Elected Corporate Officer 2017.19Table of ContentsDaniel Salvadori,462021 to present Executive Vice President and Group President,Established Pharmaceuticals and Nutritional Products.2017 to 2021 Executive Vice President,Nutritional Products.Elected Corporate Officer 2014.Andrea Wainer,562019 to present Executive Vice President,Rapid and Molecular Diagnostics.Elected Corporate Officer 2015.John A.McCoy,Jr.,552023 to present Vice President,Finance and Controller.2021 to 2023 Vice President,Treasurer.2018 to 2021 Divisional Vice President,Controller,Rapid Diagnostics.Elected Corporate Officer 2021.20Table of ContentsPART IIITEM 5.MARKET FOR REGISTRANTS COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESPrincipal MarketThe principal market for Abbotts common shares is the New York Stock Exchange under the symbol“ABT.”Shares are also listed on the Chicago StockExchange and traded on various regional and electronic exchanges.Outside the United States,Abbotts shares are listed on the SIX Swiss Exchange.ShareholdersThere were 30,768 shareholders of record of Abbott common shares as of January 31,2025.Tax Information for ShareholdersThe Illinois Department of Commerce and Economic Opportunity(DCEO)has designated Abbott as an Illinois High Impact Business(HIB)through June2043.Dividends paid by a corporation that is designated as a HIB and conducts business in a foreign trade zone may be eligible for a subtraction from baseincome for Illinois income tax purposes.Abbott certified that the HIB requirements were met for the calendar year ending December 31,2024.If you have any questions,please contact your tax advisor.Issuer Purchases of Equity SecuritiesPeriod(a)Total Numberof Shares(or Units)Purchased(b)Average PricePaid per Share(or Unit)(c)Total Numberof Shares(or Units)Purchased as Part of Publicly Announced Plans or Programs(d)Maximum Number(orApproximate Dollar Value)of Shares(or Units)that May Yet Be Purchased Under the Plans or Programs October 1,2024 October 31,2024(1)$7,659,092,986(2)November 1,2024 November 30,2024840,000(1)$117.639 840,000$7,560,276,206(2)December 1,2024 December 31,20242,350,000(1)$113.640 2,350,000$7,293,222,352(2)Total3,190,000(1)$114.693 3,190,000$7,293,222,352(2)_(1)These shares do not include the shares surrendered to Abbott to satisfy tax withholding obligations in connection with the vesting of restricted stock orrestricted stock units.(2)On December 10,2021,Abbott announced that its board of directors authorized the repurchase of up to$5 billion of Abbott common shares,from timeto time(the 2021 Plan).On October 11,2024,the board of directors authorized the repurchase of up to$7 billion of Abbott common shares,fromtime to time(the 2024 Plan).The 2024 Plan is in addition to the unused portion of the 2021 Plan.ITEM 6.RESERVED21Table of ContentsITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFinancial ReviewAbbotts revenues are derived primarily from the sale of a broad line of health care products,which include medical devices,diagnostic testing products,nutritional products and branded generic pharmaceuticals.These products are sold under short-term receivable arrangements.Patent protection andlicenses,technological and performance features,and inclusion of Abbotts products under a contract most impact which products are sold;price controls,competition and rebates most impact the net selling prices of products;and the measurement of net sales and costs is impacted by foreign currencytranslation.Sales in international markets comprise 61 percent of consolidated net sales.Abbotts sales growth in 2024 was primarily driven by the Medical Devices,Established Pharmaceutical and Nutritional businesses.The growth is theresult of a productive research and development(R&D)pipeline and a combination of the introduction of new products and indication expansions acrossvarious businesses.Sales growth was negatively impacted by continued year-over-year decline in COVID-19 testing-related sales,as the COVID-19pandemic shifted to an endemic state.In 2024,2023 and 2022,Abbotts COVID-19 testing related sales total$747 million,$1.6 billion and$8.4 billion,respectively.Sales in emerging markets,which represent approximately 37 percent of total company sales,increased 8.2 percent in 2024 and 5.4 percent in2023,excluding the impact of foreign exchange.(Emerging markets include all countries,except the United States,Japan,Canada,Australia,New Zealand,the United Kingdom and Western European countries.)Abbotts operating margin profile increased in 2024 to 16.3 percent from 16.2 percent in 2023.The increase in 2024 reflects the favorable impact of marginimprovement initiatives,partially offset by foreign exchange and inflation.In 2022,operating margin as a percentage of sales was 19.2 percent.Thedecrease in 2023 from 2022 reflects the unfavorable effects of lower COVID-19 testing-related sales,foreign exchange,and higher costs for variousmanufacturing inputs.In 2023,these unfavorable effects were partially offset by the favorable impact of margin improvement initiatives.With respect to the performance of each reportable segment over the last three years,sales in the Medical Devices segment,excluding the impact of foreignexchange,increased 13.7 percent in 2024 and 15.1 percent in 2023.In Medical Devices,sales in 2024 and 2023 increased across all businesses,withdouble-digit growth in Diabetes Care,Structural Heart,Electrophysiology,and Heart Failure.In 2023,Neuromodulation sales also increased double digits.Growth was led by Diabetes Care where sales of Abbotts continuous glucose monitoring(CGM)systems continued to increase and totaled$6.4 billion in2024 and$5.3 billion in 2023.In 2024,key product approvals in the Medical Devices segment included:U.S.Food and Drug Administration(FDA)clearance for two new over-the-counter CGM systems,Lingo and Libre Rio,which are based onAbbotts FreeStyle Libre CGM technology,FDA approval of the Esprit below-the-knee(BTK)system,which is designed to keep arteries open in people living with peripheral arterydisease and deliver a drug to support vessel healing prior to completely dissolving,FDA approval of TriClip,which provides a minimally invasive treatment option for patients with tricuspid regurgitation,or a leaky tricuspidheart valve,CE Mark for the Aveir dual chamber(DR)leadless pacemaker system,which is the worlds first dual chamber leadless pacemaker system thattreats people with abnormal or slow heart rhythms,andFDA clearance for Advisor HD Grid X Mapping Catheter,Sensor Enabled,which will further support mapping of both pulsed field ablation(PFA)and radiofrequency(RF)ablation cases.Operating earnings for the Medical Devices segment increased 16.0 percent in 2024 and 19.6 percent in 2023.The operating margin profile for the MedicalDevices segment increased from 30.0 percent in 2022 to 31.4 percent in 2023 and then increased to 32.4 percent in 2024.The increase in 2024 from 2022reflects the impact of higher sales volumes across the Medical Devices businesses.In Abbotts Diagnostics segment,sales decreased 3.9 percent in 2024 and 38.2 percent in 2023,excluding the impact of foreign exchange.The 2024 and2023 sales decreases were driven by continued lower demand for the companys portfolio of COVID-19 tests,partially offset by higher volume of routinediagnostic tests in the Rapid Diagnostics and Core Laboratory businesses and the continued deployment of Abbotts Alinity testing platform.Abbottcontinues to build out its test menu for the Alinity testing platform.In the first quarter of 2024,Abbott received FDA clearance of its i-STAT traumaticbrain injury(TBI)cartridge for use with the i-STAT Alinity instrument,a whole blood point-of-care test to help assess mild TBI.In the fourth quarter of2023,Abbott received FDA approval of its new laboratory automation system,GLP systems Track,to help laboratories optimize lab performance byconsolidating multiple analytical instruments into a unified workflow.22Table of ContentsIn 2024,operating earnings for the Diagnostics segment decreased 14.8 percent.The operating margin profile decreased from 40.3 percent in 2022 to 22.2percent in 2024 primarily due to lower demand for Abbotts COVID-19 tests.In Abbotts Nutritional Products segment,total pediatric nutrition sales,excluding the impact of foreign exchange,increased 3.7 percent in 2024 and 14.8percent in 2023,which includes market share recovery in the U.S.infant formula business following the voluntary recall of certain products in 2022,asdiscussed below,and the continued favorable impact of price increase initiatives.Excluding the impact of foreign exchange,total adult nutrition salesincreased 8.0 percent in 2024 and 8.8 percent in 2023,led by the continued growth of Abbotts Ensure and Glucerna products.U.S.Adult Nutritionalssales were partially offset by the discontinuation of the ZonePerfect product line.In 2024,operating earnings for the Nutritional Products segment increased 12.9 percent compared to 2023.Operating margin profile for this segmentincreased from 9.5 percent in 2022 to 16.4 percent in 2023 and then increased to 17.9 percent in 2024.The increase in 2024 reflects the favorable effects ofhigher sales,the favorable impact of price increases and a continued focus on margin improvement initiatives.The increase in 2023 reflects the favorableeffects of higher sales and a continued focus on margin improvement initiatives,partially offset by higher commodity and other costs.In February 2022,Abbotts U.S.Pediatric Nutrition business was impacted by a voluntary recall of certain infant powder formula products manufactured atits facility in Sturgis,Michigan,at which time the company temporarily stopped operations at that facility.Abbott took various actions to mitigate theimpact of the recall on the supply of formula in the U.S.Abbott resumed operations later in 2022 and made significant progress through 2023 to increaseproduction of infant formula in the U.S and recover market share.Beginning in the fourth quarter of 2023 and through 2024,Abbott has regained andmaintained its market-leading position in the U.S.,as measured on a volume basis.The Established Pharmaceutical Products segment focuses on the sale of its products in emerging markets.Excluding the impact of foreign exchange,Established Pharmaceutical sales increased 9.2 percent in 2024 and 10.9 percent in 2023.The sales increase in 2024 was led by higher revenue in severalcountries in Latin America,Southeast Asia and the Middle East and across several therapeutic areas,including respiratory,gastroenterology,cardiometabolic and central nervous system/pain management.The sales increase in 2023 reflects higher sales in several geographies including India,Vietnam,and Brazil.In 2024,operating earnings for the Established Pharmaceutical Products segment increased 2.2 percent.Operating margin profileincreased from 21.4 percent in 2022 to 23.7 percent in 2024 primarily due to the impact of margin improvement initiatives and higher sales,partially offsetby inflation on various product inputs.With respect to Abbotts financial position,at December 31,2024 and 2023,Abbotts cash and cash equivalents and short-term investments totalapproximately$8.0 billion and$7.3 billion,respectively.Abbotts long-term debt totals$14.1 billion and$14.7 billion at December 31,2024 and 2023,respectively.Abbott declared dividends of$2.24 per share in 2024 and$2.08 per share in 2023,an increase of 7.7 percent.Dividends paid totaled$3.8 billion in 2024compared to$3.6 billion in 2023.The year-over-year change in the amount of dividends paid reflects the increase in the dividend rate.In December 2024,Abbott increased the companys quarterly dividend by 7.3 percent to$0.59 per share from$0.55 per share,effective with the dividend paid in February2025.In December 2023,Abbott increased the companys quarterly dividend by 7.8 percent to$0.55 per share from$0.51 per share,effective with thedividend paid in February 2024.On September 22,2023,Abbott completed the acquisition of Bigfoot Biomedical,Inc.(Bigfoot),which furthers Abbotts efforts to develop connectedsolutions for making diabetes management more personal and precise.On April 27,2023,Abbott completed the acquisition of Cardiovascular Systems,Inc.(CSI).CSIs atherectomy system,which is used in treating peripheral and coronary artery disease,adds complementary technologies to Abbottsportfolio of vascular device offerings.In 2025,Abbott will focus on continuing to invest in product development areas that provide the opportunity for strong sustainable growth over the nextseveral years.In its diagnostics business,Abbotts focus will include driving sales growth from its Alinity suite of diagnostics instruments along with GLPtrack integration and its portfolio of rapid diagnostic testing systems.In the medical devices business,Abbott will focus on growing recently launched newproducts and expanding its market position across the various businesses.In its nutritional business,Abbott will continue to focus on driving growthglobally and further enhancing its portfolio with the introduction of science-based products and line extensions.In the established pharmaceuticalsbusiness,Abbott will continue to focus on growing its business with the depth and breadth of its portfolio in emerging markets.23Table of ContentsCritical Accounting PoliciesSales Rebates In 2024,48 percent of Abbotts consolidated gross revenues were subject to various forms of rebates and allowances that Abbott recordedas reductions of revenues at the time of sale.Most of these rebates and allowances in 2024 are in the Nutritional Products and Diabetes Care businesses.Abbott provides rebates to state agencies that administer the Special Supplemental Nutrition Program for Women,Infants,and Children(WIC),wholesalers,group purchasing organizations,and other government agencies and private entities.Rebate amounts are usually based upon the volume ofpurchases using contractual or statutory prices for a product.Factors used in the rebate calculations include the identification of which products have beensold subject to a rebate,which customer or government agency price terms apply,and the estimated lag time between sale and payment of a rebate.Usinghistorical trends,adjusted for current changes,Abbott estimates the amount of the rebate that will be paid,and records the liability as a reduction of grosssales when Abbott records its sale of the product.Settlement of the rebate generally occurs from one to six months after sale.Abbott regularly analyzes thehistorical rebate trends and makes adjustments to reserves for changes in trends and terms of rebate programs.Rebates and chargebacks charged againstgross sales in 2024,2023,and 2022 amounted to$4.4 billion in 2024 and$3.9 billion in 2023 and 2022,or 18.6 percent,17.4 percent,and 17.6 percent ofgross sales,respectively,based on gross sales of approximately$23.5 billion,$22.7 billion,and$22.4 billion,respectively,subject to rebate.A one-percentage point increase in the percentage of rebates to related gross sales would decrease net sales by approximately$235 million in 2024.Abbottconsiders a one-percentage point increase to be a reasonably likely increase in the percentage of rebates to related gross sales.Other allowances chargedagainst gross sales were approximately$319 million,$263 million,and$280 million for cash discounts in 2024,2023,and 2022,respectively,and$211 million,$169 million,and$379 million for returns in 2024,2023,and 2022,respectively.Cash discounts are known within 15 to 30 days of sale,andtherefore can be reliably estimated.Returns can be reliably estimated because Abbotts historical returns are low,and because sales returns terms and othersales terms have remained relatively unchanged for several periods.Management analyzes the adequacy of ending rebate accrual balances each quarter.In the domestic nutritional business,management uses both internal andexternal data available to estimate the accruals.In the WIC business,estimates are required for the amount of WIC sales within each state where Abbottholds the WIC contract.The state where the sale is made,which is the determining factor for the applicable rebated price,is reliably determinable.Rebatedprices are based on contractually obligated agreements generally lasting a period of two to four years.Except for a change in contract price or a transit
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2024Annual ReportCitis Value PropositionA mission of enabling growth and economic progressWhat you can expect from us and what we expect from ourselvesCitis mission is to serve as a trusted partner to our clients by responsibly providing financial services that enable growth and economic progress.Our core activities are safeguarding assets,lending money,making payments and accessing the capital markets on behalf of our clients.We have more than 200 years of experience helping our clients meet the worlds toughest challenges and embrace its greatest opportunities.We are Citi,the global bank an institution connecting millions of people across hundreds of countries and cities.We protect peoples savings and help them make the purchases from everyday transactions to buying a home that improve the quality of their lives.We advise people on how to invest for future needs,such as their childrens education and their own retirement,and help them buy securities such as stocks and bonds.We work with companies to optimize their daily operations,whether they need working capital,to make payroll or export their goods overseas.By lending to companies large and small,we help them grow,creating jobs and real economic value at home and in communities around the world.We provide financing and support to governments at all levels,so they can build sustainable infrastructure,such as housing,transportation,schools and other vital public works.These capabilities create an obligation to act responsibly,do everything possible to create the best outcomes and prudently manage risk.If we fall short,we will take decisive action and learn from our experience.We strive to earn and maintain the publics trust by constantly adhering to the highest ethical standards.We ask our colleagues to ensure that their decisions pass three tests:they are in our clients interests,create economic value and are always systemically responsible.When we do these things well,we make a positive financial and social impact in the communities we serve and show what a global bank can do.13Letter to shareholdersDear Shareholders,As I reflect on the changes we have made at Citi over the past several years,one fact is clear:today,we are a fundamentally different bank simpler,more focused,and fully aligned with what our stakeholders expect of us.Since our Investor Day in 2022,we have taken decisive action to make Citi the preeminent banking partner for institutions with cross-border needs,a global leader in wealth management and a valued personal bank in our home market.We have set a clear vision,simplified our operations,sharpened and executed our strategy,and positioned ourselves to drive consistently stronger financial performance and higher returns.Here are just some of the key steps we have taken to strengthen our ability to deliver for all stakeholders:We have focused our business mix.Our focus is now around five interconnected businesses Services,Markets,Banking,Wealth and U.S.Personal Banking each with a clear path to accelerating growth,gaining share and increasing returns.As part of focusing our business mix,we continue to make progress with the divestitures of our international consumer franchises,with all either completed or moving towards completion.In 2024,we passed a major milestone when we successfully separated Banamex into a new entity,an important step towards its eventual IPO and a testament to our ability to get the hard things done.We have strengthened connectivity between our businesses.The natural linkages between our businesses have always been a strength,and today we are maximizing those connections.All parts of the firm are working more closely together to bring the full power of Citi to our clients.Our Retail Banking business,for instance,is an important source of referrals and deposits for our Wealth business.Meanwhile,Services and Markets work together to provide seamless foreign exchange solutions to help clients optimize their global financial operations.We have shifted our priority to improving returns.With the changes to our business mix and the emphasis on increasing the synergies between our five businesses,our focus is squarely on growing returns.Our senior leaders are assessed based on how well our businesses are increasing returns rather than revenues,and we have increased their alignment with shareholders by delivering a greater portion of compensation in Citi stock.While we have changed our Return on Tangible Common Equity(RoTCE)target for 2026 to between 10%and 11%1,which is slightly lower than our previous goal,let me be clear that this is not our final destination.We absolutely have the ambition to grow our returns further over time,and we will hold ourselves accountable every step of the way.We have changed how we run the bank.With our organizational simplification behind us,the heads of our five businesses are at my table,fully engaged in how we run the bank and in the critical decisions we make every day.Senior management is closer to our clients so they can deliver the full firm to them.Decision-making is faster,our teams are more agile,and we can move more quickly for all our stakeholders.We have invested heavily in our infrastructure.As part of our enterprise-wide Transformation,we have enhanced governance,overhauled our risk management structures,automated processes and controls,and embedded accountability throughout the firm.And we are not stopping there.The vast amounts of data we have as a global bank can be a true competitive resource for us,and we are making the necessary investments in data governance and quality to make that happen.We have raised the bar on what we expect from ourselves.To strengthen accountability and a culture of excellence,we have revamped our scorecards to ensure we are always delivering for clients.Our new structure enables our people to partner consistently across our businesses and geographies.We have also attracted top industry talent,including new leadership in Banking,Wealth and Technology,who are driving greater intensity around delivering results.Momentum is buildingWith these foundations in place,we are laser-focused on our two priorities improving our business performance and executing the Transformation.In 2024,each of our five businesses delivered solid results,including record revenues for Services,Wealth and U.S.Personal Banking.As a firm,we delivered$81.1 billion in revenues in 2024,our highest since 2010.We also delivered positive operating leverage for the firm overall,as well as in every one of our five businesses.Cost of credit remained elevated,but in line with our expectations.Net income was$12.7 billion,up 37%from the prior year.We returned nearly$7 billion in capital to our common shareholders,and our RoTCE was 7%2,a 210-basis point improvement from the prior year.Additionally,we announced a$20 billion multiyear common stock repurchase program,demonstrating our commitment to return excess capital to our shareholders.Services continued to outperform the competition,delivering another year of record revenue as a result of new mandates and our emphasis on fee growth.For the full year,revenues for the business grew 9%,with both Treasury&Trade Solutions and Securities Services continuing to gain market share.Our focus in the business remains on investing in the client experience and enhancing our technology to deepen client relationships.In 2024,we expanded our position as the leading global bank for cross-border payments as we connected our network with Mastercards vast debit network.Markets delivered another strong performance,closing out the year with its best fourth quarter in a decade.Full-year revenues increased 6%,fueled by strong growth in Equities,which had its highest annual revenue in a decade.Our fully integrated trading and securitization capabilities continue to enhance our competitive position;there is no other financial institution that can match the product breadth and geographic reach Citi offers corporate and investor clients.Banking,which includes Investment Banking,Corporate Banking and Commercial Banking,also had a strong year.We gained share across all three Investment Banking products equity capital markets,debt capital markets and M&A driving a 32%increase in revenues for our Banking business.We continued to play a leading role in the most transformative deals,including Mars acquisition of Kellanova,the years“The world is changing fast,but Citi is changing faster.We are not just keeping pace with the future;we are helping to shape it.”Jane Fraser,Chief Executive Officer45REVENUES$81.1BNET INCOME$12.7BSERVICES REVENUES9%MARKETS REVENUES6%EPS$5.94RoTCE7.0+ANKING REVENUES32%4WEALTH REVENUES7%SLR5.8ET1 CAPITAL RATIO13.6%3USPB REVENUES6%Full year 2024 results and key metrics1 As used herein,2026 RoTCE is a forward-looking non-GAAP financial measure.From time to time,management may discuss forward-looking non-GAAP financial measures,such as forward-looking estimates or targets for revenue,expenses and RoTCE.Citi is unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because Citi is unable to provide,without unreasonable effort,a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur.Such unavailable information could be significant for future results.2 RoTCE is a non-GAAP financial measure.RoTCE represents annualized net income available to common shareholders as a percentage of average TCE.For a reconciliation to reported results,please see page 49 of Citis 2024 Form 10-K.3 Citigroups Common Equity Tier 1(CET1)and Supplementary Leverage Ratio(SLR)reflect certain deferrals based on the modified regulatory capital transition provision related to the Current Expected Credit Losses(CECL)standard.Excluding those deferrals,Citigroups CET1 Capital ratio and SLR as of December 31,2024,would be 13.5%and 5.8%,respectively on a fully reflected basis.Citis binding CET1 Capital ratio was derived under the Basel III Standardized Approach as of December 31,2024.For additional information about the CET1 Capital ratio and the SLR,see“Capital Resources”in Citis 2024 Form 10-K.4 Banking includes revenues earned by Citigroup that are subject to a revenue-sharing arrangement with Banking Corporate Lending for investment,Markets and Services products sold to Corporate Lending clients.Five core businesses each generated positive operating leverage for the full year Record year in Services;continued momentum in deepening client relationships and winning new mandates Markets driven by growth in Equity,which had its highest annual revenue in a decade,as well as momentum in Spread Products Continued momentum in Investment Banking;wallet-share gains in all products across regions and key sectors Record year in Wealth with strong growth in Net New Investment Assets,driving investment fee revenue Record year in USPB with growth driven by cards with continued strong customer engagement Key financial metricsKey highlightsBusinesses snapshotlargest announced M&A transaction.We also struck an innovative$25 billion private credit partnership with Apollo that significantly expands our offering.Wealth continues to focus on growing its investments business,optimizing its expense base and improving the client experience.Those efforts are paying off:last year was a turning point for the business as revenues increased 7%from the prior year and net new investment assets grew 40%.We attracted top talent throughout the year to lead our Wealth team.As we look ahead,there is tremendous potential with existing clients across Citi,and we are leaning into it.U.S.Personal Banking continued to experience strong momentum,with the demand for borrowing driving strong revenue growth across both cards businesses.For the full year,revenues rose 6%.We launched several exciting products in Branded Cards,including the enhanced Citi Strata Premier Card and Citi Shop browser.We also extended and expanded our iconic co-branded partnership with American Airlines for another decade.In Retail Services,we successfully launched a private label Dillards credit card and a co-branded Dillards Mastercard.Additionally,we converted four million customers to our Simplified Banking platform in the U.S.,demonstrating our commitment to providing more seamless experiences for our customers.Modernizing how we operate Our strategy is producing results,but we are not standing still.We are driving the next wave of innovation to ensure Citi stays ahead of what our clients need from their banking partner.We believe generative AI can drive a fundamental shift in how we work.We have equipped our developers with sophisticated tools to write code and launched two AI platforms that are boosting efficiency for more than 140,000 of our colleagues.We are also integrating AI directly into our business operations to help us make smarter decisions,deliver insights even faster and improve client experiences.We are determined to build one of the industrys first AI-ready workforces,and we are well on our way.At the same time,we are modernizing Citis infrastructure for the long term.This includes enhancing and automating controls,digitizing processes,streamlining our tech platforms and strengthening risk management.Our firms number one priority is our Transformation.But it is not just about remediating the 2020 Consent Orders it is about addressing decades of underinvestment,strengthening our foundations,and ensuring Citi is resilient and ready to lead in a digital-first world.While we advanced key areas of the Transformation in 2024,not all our deliverables were completed on time,as the July regulatory enforcement actions reinforced.Specifically,we did not make enough progress in our data quality management and in other areas such as regulatory reporting.These events led to a meaningful reduction in the third and final tranche of our Transformation bonus program,which was designed to incentivize collective accountability for improving the firms risk management,controls and culture.Although setbacks like this are disappointing,we will not make excuses nor let them distract us from the work that must get done.Consequently,we have reviewed our entire data program,retooled its governance and increased our investments in technology and talent to ensure we meet our obligations.We will continue to focus our resources where needed and are committed to spending whatever it takes to get this critical work done and done right.Ready for a new era of opportunity While our firm is evolving,what wont change is what has always made Citi indispensable to clients:our unparalleled global network,our deep expertise,and the relationships built over more than 200 years of us advising the most important institutions.Today,we are seeing a new global dynamic one shaped by rapid technological advancement,shifting trade flows,and a reconfiguration of economic power.While uncertainty remains a constant,the forces of innovation,entrepreneurship and resilience are creating extraordinary opportunities for our clients.With our global reach and perspective,Citi is uniquely positioned to help them navigate and capitalize on these opportunities.One of the biggest game-changers is AI,which is poised to transform industries much in the same way that previous technological leaps,including the personal computer and the internet,once did.Around the world,AI is catalyzing major investments in the infrastructure and energy that is required to support the revolution ahead.At the same time,we see many clients investing to decarbonize their business models.Balancing sustainability while ensuring the worlds current energy needs are met requires significant investment and innovation,and Citi is financing the infrastructure and clean energy solutions that will support this transition and the increased energy demand.Breakthroughs in health care and life sciences are also accelerating and bringing us closer to treatments and cures for cancer and other diseases.Citi is playing a key role in channeling the capital to fuel this progress,connecting investors with companies driving this innovation.We also continue to play an important role in the changing nature of globalization.On a local level,Citi is a growth engine for many communities around the world,helping finance critical infrastructure,supporting businesses and households in their journeys to prosperity,and promoting broader access to financial services.On a macro level,we serve as a backbone to the global financial system and an enabler of the global economy,which is increasingly tilting towards the United States.The U.S.s unmatched capital market strength and entrepreneurship,combined with ongoing challenges in Europe and China,have continued to make it an attractive destination for greater investment.And with the U.S.currently at the center of gravity,it is clear that multinational companies will need an American-based bank with a truly global footprint such as Citi to succeed.As we look at the rapidly evolving world around us,we can say with confidence that we are ready for it.We have strategic clarity and focus,have simplified our organization,are modernizing our infrastructure and are investing in our talent.We are doing exactly what we said we would.We are entering a new era one where our focus,innovation and excellence will set us apart.We are moving forward with a clear sense of purpose and the confidence to turn ambition into action.The world is changing fast,but Citi is changing faster.We are not just keeping pace with the future;we are helping to shape it.Sincerely,Jane FraserChief Executive Officer,Citigroup Inc.1.2.3.4.5.6.76Throughout the year,we continued to find new ways to elevate the client experience.Services Became the first global bank to enable near-instant cross-border payments into Mastercard debit cards in 14 receiving markets,across 65 origination countries.Elevated Citi Token Services for Cash from a pilot program to a live commercial solution,facilitating multimillion-dollar transactions for institutional clients.Markets Increased client activity in Spread Products,as we brought innovative transactions to market across regions and asset classes.Ranked#1 in Institutional Investor poll of buyside clients for web-based analytics of our market-leading platform,Citi Velocity.Banking Announced a landmark$25 billion private credit,direct lending program with Apollo,increasing clients access to the private lending capital pool.Grew the Citi Commercial Bank by expanding into Japan and continued the rollout of the CitiDirect Commercial Banking platform to elevate the client experience.Wealth Launched an effort to add more Citigold advisors to branches and provide retail clients with tailored investment advice and guidance to help them move up the wealth spectrum.Established an integrated client team to make it simpler and more efficient to connect the firms Banking clients with our wealth management platform.U.S.Personal Banking Launched the enhanced Citi Strata Premier Card and Dillards private label and co-branded credit cards.Extended and expanded our iconic partnership with American Airlines,becoming the exclusive issuer of the AAdvantage U.S.co-branded card portfolio in 2026 and paving the way for more customer benefits.Delivering for clients through our five interconnected businesses Finalized significant organizational changes that eliminated management layers and maximizes the synergies between our five businesses.Completed the separation of Banamex from our institutional business in Mexico,a major milestone in our effort to simplify operations and center the bank around a focused set of interconnected and high-returning businesses.Entered a strategic,multiyear alliance with Google Cloud to modernize our technology infrastructure and fuel firmwide innovation with AI.Kicked off the largest branch investment and expansion in decades,starting in Chicago and Washington,D.C.Rolled out generative AI tools for more than 140,000 employees to increase productivity and improve how we serve clients.Implemented a more systematic approach to compliance and continued to automate manual controls as part of the Transformation initiative.Increased investment in data governance and quality to transform the banks vast amount of data into a competitive resource.Strengthened a culture of accountability by implementing firmwide performance and talent management programs.Recruited top industry talent to the management team,including Tim Ryan as Head of Technology&Business Enablement and Vis Raghavan as Head of Banking.A bank built for the future98UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2024 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number 1-9924 Citigroup Inc.(Exact name of registrant as specified in its charter)Delaware52-1568099(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)388 Greenwich Street,New York NY10013(Address of principal executive offices)(Zip code)(212)559-1000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Securities Exchange Act of 1934 formatted in Inline XBRL:See Exhibit 99.01 Securities registered pursuant to Section 12(g)of the Act:none Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes x No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.Yes o No xIndicate 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 x No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes x No oIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Yes oIndicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.oIndicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).oIndicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No xThe aggregate market value of Citigroup Imon stock held by non-affiliates of Citigroup Inc.on June 30,2024 was approximately$120.8 billion.Number of shares of Citigroup Imon stock outstanding on January 31,2025:1,884,479,551 Documents Incorporated by Reference:Portions of the registrants proxy statement for the annual meeting of stockholders scheduled to be held on April 29,2025 are incorporated by reference in this Form 10-K in response to Items 10,11,12,13 and 14 of Part III.Available on the web at FORM 10-K CROSS-REFERENCE INDEX Item NumberPage Part I 1.Business432,130135,137,169173,314315 1A.Risk Factors5064 1B.Unresolved Staff CommentsNot Applicable 1C.Cybersecurity5658,1191212.PropertiesNot Applicable 3.Legal ProceedingsSee Note 30 to the Consolidated Financial Statements301308 4.Mine Safety DisclosuresNot Applicable Part II 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities146147,179181,316318 6.Reserved 7.Managements Discussion and Analysis of Financial Condition and Results of Operations732,70129 7A.Quantitative and Qualitative Disclosures About Market Risk70129,174178,198238,245292 8.Financial Statements and Supplementary Data142313 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot Applicable9A.Controls and Procedures135136 9B.Other Information3179C.Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsNot ApplicablePart III 10.Directors,Executive Officers and Corporate Governance319321*11.Executive Compensation*12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*13.Certain Relationships and Related Transactions,and Director Independence*14.Principal Accountant Fees and Services*Part IV 15.Exhibit and Financial Statement Schedules*For additional information regarding Citigroups Directors,see“Corporate Governance”and“Proposal 1:Election of Directors”in the definitive Proxy Statement for Citigroups Annual Meeting of Stockholders scheduled to be held on April 29,2025,to be filed with the SEC(the Proxy Statement),incorporated herein by reference.*See“Compensation Discussion and Analysis,”“The Personnel and Compensation Committee Report,”and“2024 Summary Compensation Table and Compensation Information”and“CEO Pay Ratio”in the Proxy Statement,incorporated herein by reference,other than disclosure under the heading“Pay versus Performance”information responsive to Item 402(v)of Regulation S-K of SEC rules.*See“About the Annual Meeting,”“Stock Ownership”and“Equity Compensation Plan Information”in the Proxy Statement,incorporated herein by reference.*See“Corporate GovernanceDirector Independence,”“Certain Transactions and Relationships,Compensation Committee Interlocks and Insider Participation”and“Indebtedness”in the Proxy Statement,incorporated herein by reference.*See“Proposal 2:Ratification of Selection of Independent Registered Public Accountants”in the Proxy Statement,incorporated herein by reference.2CITIGROUPS 2024 ANNUAL REPORT ON FORM 10-KOVERVIEW4Citigroup Reportable Operating Segments6MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS7Executive Summary7Citis Multiyear Transformation11Summary of Selected Financial Data14Segment Revenues and Income(Loss)16Select Balance Sheet Items by Segment17Services18Markets21Banking23Wealth25U.S.Personal Banking27All OtherDivestiture-Related Impacts(Reconciling Items)29All OtherManaged Basis30CAPITAL RESOURCES33RISK FACTORS50NET ZERO AND SUSTAINABILITY65HUMAN CAPITAL RESOURCES AND MANAGEMENT66Managing Global RiskTable of Contents69MANAGING GLOBAL RISK70SIGNIFICANT ACCOUNTING POLICIES ANDSIGNIFICANT ESTIMATES130DISCLOSURE CONTROLS AND PROCEDURES135MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING136FORWARD-LOOKING STATEMENTS137REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM(PCAOB ID#185)138Financial Statements and NotesTable of Contents141CONSOLIDATED FINANCIAL STATEMENTS142NOTES TO CONSOLIDATED FINANCIAL STATEMENTS150FINANCIAL DATA SUPPLEMENT313SUPERVISION,REGULATION AND OTHER314OTHER INFORMATION317CORPORATE INFORMATION319Executive Officers319Citigroup Board of Directors321GLOSSARY OF TERMS AND ACRONYMS322EXHIBIT INDEX327SIGNATURES3323OVERVIEWCitigroups history dates back to the founding of the City Bank of New York in 1812.Citigroup is a global diversified financial services holding company whose businesses provide consumers,corporations,governments and institutions with a broad,yet focused,range of financial products and services,including consumer banking and credit,corporate and investment banking,securities brokerage,trade and securities services and wealth management.Citi does business in nearly 160 countries and jurisdictions.Citis vision is to be the preeminent banking partner for institutions with cross-border needs,a global leader in wealth management and a valued personal bank in the U.S.At December 31,2024,Citi had approximately 229,000 full-time employees,compared to approximately 239,000 at December 31,2023.For additional information,see“Human Capital Resources and Management”below.Throughout this report,“Citigroup,”“Citi”and“the Company”refer to Citigroup Inc.and its consolidated subsidiaries.All“Note”references correspond to the Notes to the Consolidated Financial Statements herein,unless otherwise indicated.For a list of certain terms and acronyms used in this Annual Report on Form 10-K and other Citigroup presentations,see“Glossary of Terms and Acronyms”at the end of this report.Additional InformationAdditional information about Citigroup is available on Citis website at .Citigroups annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K and proxy statements,as well as other filings with the U.S.Securities and Exchange Commission(SEC)are available free of charge through Citis website by clicking on“SEC Filings”under the“Investors”tab.The SECs website also contains these filings and other information regarding Citi at www.sec.gov.For a discussion of 2023 versus 2022 results of operations of Services,Markets,Banking,Wealth,U.S.Personal Banking and All Other,see each respective businesss results of operations in Citigroups Annual Report on Form 10-K for the year ended December 31,2023(Citigroups 2023 Annual Report on Form 10-K).Certain reclassifications have been made to the prior periods financial statements and disclosures to conform to the current periods presentation,including certain reclassifications to align with Citis organizational simplification and strategy,for all periods presented.Please see“Risk Factors”below for a discussion of material risks and uncertainties that could impact Citigroups businesses,results of operations and financial condition.Non-GAAP Financial Measures Citi prepares its financial statements in accordance with U.S.generally accepted accounting principles(GAAP)and also presents certain non-GAAP financial measures(non-GAAP measures)that exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with U.S.GAAP.These non-GAAP financial measures are not intended to be a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP measures with similar names used by other companies.Citis non-GAAP financial measures in this Form 10-K include:Revenues excluding the Argentina currency devaluation and/or divestiture-related impactsExpenses excluding the Federal Deposit Insurance Corporation(FDIC)special assessment and/or divestiture-related impactsServices and Treasury and Trade Solutions(TTS)revenues and/or non-interest revenues excluding the impact of the Argentina currency devaluationBanking and Corporate Lending revenues excluding gain(loss)on loan hedgesAll Other(managed basis),which excludes divestiture-related impactsTangible common equity(TCE),return on tangible common equity(RoTCE)and tangible book value per share(TBVPS)Non-Markets net interest incomeFor more information on the Argentina currency devaluation and/or the FDIC special assessment,see“Executive Summary”below.Citi believes its results excluding the Argentina currency devaluation and the FDIC special assessment are useful to investors,industry analysts and others in evaluating Citis results of operations and comparing its operational performance between periods,by providing a meaningful depiction of the underlying fundamentals of period-to-period operating results,particularly given the outsized impacts of these items,as well as additional comparability to peer companies.Citis results excluding divestiture-related impacts represent as reported,or GAAP,financial results adjusted for items that are incurred and recognized,which are wholly and necessarily a consequence of actions taken to sell(including through a public offering),dispose of or wind down business activities associated with Citis previously announced exit markets within All OtherLegacy Franchises.Citis Chief Executive Officer,its chief operating decision maker,regularly reviews financial information for All Other on a managed basis that excludes these divestiture-related impacts.For more information on Citis results excluding divestiture-related impacts,see“Executive Summary”and“All Other Divestiture-Related Impacts(Reconciling Items)”below.Citi believes its results excluding divestiture-related impacts are useful to investors,industry analysts and others in evaluating Citis results of operations and comparing its operational performance between periods,by providing a meaningful depiction of the underlying fundamentals of 4period-to-period operating results,particularly given the outsized impacts of the divestiture-related impacts;improved visibility into management decisions and their impacts on operational performance;and additional comparability to peer companies.For more information on Services and TTS revenues and/or non-interest revenues excluding the impact of the Argentina currency devaluation,see“Executive Summary”and“Services”below.For more information on Banking and Corporate Lending revenues excluding gain(loss)on loan hedges,see“Executive Summary”and“Banking”below.Citi believes that Banking and Corporate Lending revenues excluding gain(loss)on loan hedges are useful to investors,industry analysts and others because the gain(loss)on loan hedges are independent of Banking and Corporate Lendings core operations and not indicative of the performance of the business operations.For more information on TCE,RoTCE and TBVPS,see“Capital ResourcesTangible Common Equity,Book Value Per Share,Tangible Book Value Per Share and Return on Equity”below.TCE,RoTCE and TBVPS are used by management,as well as investors,industry analysts and others,in assessing Citis use of equity.Citi believes TCE and RoTCE are useful to investors,industry analysts and others by providing alternative measures of capital strength and performance.Citi believes TBVPS provides additional useful information about the level of tangible assets in relation to Citis outstanding shares of common stock.For more information on non-Markets net interest income,see“Market RiskNon-Markets Net Interest Income”below.Management uses non-Markets net interest income to assess the performance of Citis lending,investing(including asset-liability management)and deposit-raising activities,apart from any volatility associated with Markets activities.Citi believes the use of this non-GAAP measure provides investors,industry analysts and others with an alternative measure to analyze the net interest income trends of Citis lending,investing and deposit-raising activities,by providing a meaningful depiction of the underlying fundamentals of period-to-period operating results of those activities;improved visibility into management decisions and their impacts on operational performance;and additional comparability to peer companies.5Citigroup is managed pursuant to five operating segments:Services,Markets,Banking,Wealth and U.S.Personal Banking.Activities not assigned to the operating segments are included in All Other.For additional information,see the results of operations for each of the operating segments and All Other within“Managements Discussion and Analysis of Financial Condition and Results of Operations”below.Note:Mexico is included in LATAM within International.(1)Within International,Citi is organized into six clusters:United Kingdom;Japan,Asia North and Australia(JANA);Latin America(LATAM);Asia South;Europe;and Middle East and Africa(MEA).Although the chief operating decision maker(CODM)does not manage Citis reportable operating segments by cluster,Citi provides additional selected financial information(revenue and certain corporate credit metrics)below for the six clusters within International.6MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSEXECUTIVE SUMMARYAs described further throughout this Executive Summary,Citi demonstrated improved overall business performance and continued progress on its strategic priorities in 2024:Citi and its five reportable operating segments each achieved positive operating leverage for 2024.Citis positive operating leverage in 2024 was driven by revenue growth of 3%,with record revenues in Services,Wealth and USPB,and disciplined expense management(down 4%),despite higher volume-and transformation-related expenses and other investments in risk and control initiatives.Excluding the impact of the FDIC special assessment in both 2024 and the prior year,expenses decreased 2%.Citi continued to advance its transformation,including its efforts to improve risk management,modernize technology and infrastructure and improve resiliency across the organization.Simultaneously,as a result of the July 2024 Civil Money Penalty Consent Orders and Consent Order Amendment,Citi recognized the need to accelerate progress in certain areas,particularly with regard to data quality management related to governance and regulatory reporting.(See“Citis Multiyear Transformation”below).Citi completed its organizational simplification announced in September 2023,resulting in a simpler management structure that aligns to and facilitates Citis strategy,while improving accountability and decision-making and advancing the execution of Citis transformation.As part of its strategic refresh,Citi continued to make progress on its remaining divestitures,including exits of its consumer banking operations in Korea and Poland and its overall operations in Russia.Additionally,Citi completed the separation of its Services,Markets,Banking and Wealth businesses in Mexico from its consumer banking and small business and middle-market banking operations in Mexico(Mexico Consumer/SBMM)in December 2024,an important milestone toward the planned initial public offering(IPO)of Citis Mexico Consumer/SBMM business.(See“All Other(Managed Basis)”below.)Citi returned$6.7 billion to common shareholders in the form of dividends($4.2 billion)and share repurchases($2.5 billion)in 2024.As previously disclosed,on January 13,2025,Citigroups Board of Directors authorized a new,multiyear$20 billion common stock repurchase program,with planned repurchases of$1.5 billion during the first quarter of 2025,subject to market conditions and other factors.After the first quarter of 2025,Citi will continue to assess the level of common share repurchases on a quarter-by-quarter basis given uncertainty regarding regulatory capital requirements,among other factors.2024 Results SummaryCitigroupCitigroup reported net income of$12.7 billion,or$5.94 per share.This compared to net income of$9.2 billion,or$4.04 per share in the prior year,which included larger impacts from certain notable items,including an Argentina currency devaluation,an FDIC special assessment,restructuring charges related to Citis organizational simplification and an ACL build for transfer risk(see“Cost of Credit”below).Net income increased 37%versus the prior year,driven by the higher revenues,lower expenses and a lower effective tax rate,partially offset by higher cost of credit.Citigroups effective tax rate was 25%in 2024 versus 27%in the prior year,largely driven by the geographic mix of earnings(see Note 10).Citigroup revenues of$81.1 billion in 2024 increased 3%on a reported basis.This increase in revenues largely reflected an increase in non-interest revenue(up 15%),including the benefit of a smaller impact from the Argentina currency devaluation($(253)million in 2024 versus approximately$(1.9)billion in 2023)as well as strength in underlying fee drivers in each of Citis reportable operating segments.The increase in non-interest revenue was partially offset by a decline in net interest income(down 1%).The decrease in net interest income primarily reflected lower revenues in All Other(managed basis),partially offset by higher interest-earning balance growth in U.S.Personal Banking(USPB).Excluding divestiture-related impacts,primarily related to gains on the sales of Citis India and Taiwan consumer banking businesses in the prior year,as well as the Argentina currency devaluation,revenues of$81.4 billion in 2024 also increased 3%versus the prior year.Citigroups end-of-period loans were$694 billion,up 1%versus the prior year,largely driven by loan growth in USPB.Citigroups end-of-period deposits were approximately$1.3 trillion,down 2%versus the prior year,largely due to a decrease in All Other(managed basis).For additional information about Citis deposits by business,including drivers and deposit trends,see each respective businesss results of operations and“Liquidity Risk Deposits”below.ExpensesCitigroups operating expenses of$54.0 billion decreased 4%from the prior year.Excluding the FDIC special assessment($203 million in 2024 versus approximately$1.7 billion in the prior year),expenses of$53.8 billion decreased 2%,driven by savings related to Citis organizational simplification and stranded cost reduction,as well as the lower restructuring charges($259 million in 2024 versus$781 million in the prior year)and repositioning costs.The decrease was partially offset by higher volume-related expenses,investments in Citis transformation and other risk and controls initiatives,as well as the costs of the July 2024 Civil Money Penalty Consent Orders entered into with the Federal Reserve Board(FRB)and the Office of the Comptroller of the Currency(OCC).7Excluding the FDIC special assessment and divestiture-related impacts,expenses of$53.5 billion also decreased 2%.Cost of CreditCitis total provisions for credit losses and for benefits and claims was$10.1 billion,compared to$9.2 billion in the prior year.The increase was driven by higher net credit losses in Branded Cards and Retail Services in USPB,reflecting the continued maturation of multiple cards loan vintages originated in recent years.The maturation was delayed by unprecedented levels of government stimulus during the pandemic.In addition,the increase was due to macroeconomic pressures related to the elevated inflationary and interest rate environment impacting both card portfolios,with lower FICO band customers primarily driving the increase.The higher net credit losses were partially offset by a lower net build in the allowance for credit losses(ACL),primarily due to a smaller build related to transfer risk associated with exposures outside the U.S.(approximately$0.2 billion in 2024 versus$1.9 billion in 2023),driven by safety and soundness considerations under U.S.banking law.For additional information on Citis ACL,see“Significant Accounting Policies and Significant EstimatesCitis Allowance for Credit Losses(ACL)”below.Net credit losses of$9.0 billion increased 40%from the prior year.Consumer net credit losses of$8.6 billion increased 39%,largely reflecting the continued rise in net credit loss rates in Branded Cards and Retail Services.Corporate net credit losses increased to$397 million from$250 million in the prior year.Subject to evolving macroeconomic conditions,Citi expects to continue to experience an elevated net credit loss rate for full-year 2025 in line with 2024,with higher loss rates in the first half of the year in Branded Cards and Retail Services consistent with seasonal patterns.Citi also expects that its future ACL builds will be driven by both the macroeconomic environment and business volumes,among other factors.For additional information on Citis consumer and corporate credit costs,see each respective businesss results of operations and“Credit Risk”below.In January 2025,a series of wildfires affected the Los Angeles metropolitan area and surrounding regions,causing loss of life and the destruction of more than 16,000 structures.While Citi continues to assess the wildfires impact on its customers and clients in the affected areas,Citi does not currently expect the wildfires to have a direct material impact to its consumer or corporate credit portfolios or its overall results of operations.CapitalCitigroups CET1 Capital ratio was 13.6%as of December 31,2024,compared to 13.4%as of December 31,2023,based on the Basel III Standardized Approach for determining risk weighted assets(RWA).The increase was primarily driven by net income and a decrease in RWA,partially offset by the payment of common and preferred dividends,as well as common share repurchases and net adverse movements in Accumulated other comprehensive income(AOCI).In 2024,Citi repurchased$2.5 billion of common shares and paid$4.2 billion of common dividends(see“Unregistered Sales of Equity Securities,Repurchases of Equity Securities and Dividends”below).For additional information on capital-related risks,trends and uncertainties,see“Capital ResourcesRegulatory Capital Standards and Developments”and“Risk FactorsStrategic Risks,”“Operational Risks”and“Compliance Risks”below.Citigroups Supplementary Leverage ratio as of December 31,2024 was 5.8%,largely unchanged from December 31,2023,as higher Tier 1 Capital was offset by an increase in Total Leverage Exposure.For additional information on Citis capital ratios and related components,see“Capital Resources”below.ServicesServices net income of$6.5 billion increased 40%,as higher revenue and lower cost of credit were partially offset by higher expenses.Services revenues of$19.6 billion increased 9%,largely driven by a 28%increase in non-interest revenue and higher net interest income(up 1%).Excluding the impact of the Argentina currency devaluation($(178)million in 2024 versus approximately$(1.2)billion in 2023),Services revenues increased 3%and its non-interest revenue increased 5%.The increase in net interest income reflected the benefit of higher deposit and loan volumes,largely offset by a decline in interest rates in Argentina.TTS revenues of$14.5 billion increased 6%on a reported basis,driven by a 37%increase in non-interest revenue,partially offset by a 1crease in net interest income.Excluding the impact of the Argentina currency devaluation(approximately$(164)million in 2024 and approximately$(1.0)billion in 2023),non-interest revenue increased 3%,driven by an increase in cross-border transaction value,as well as an increase in U.S.dollar clearing and commercial card spend volume.The decrease in TTS net interest income was primarily driven by the decline in interest rates in Argentina.Securities Services revenues of$5.1 billion increased 17%,driven by an 18%increase in non-interest revenue and a 15%increase in net interest income.The growth in non-interest revenue was primarily due to increased fees from higher AUC/AUA balances and continued elevated levels of corporate activity in Issuer Services,as well as the smaller impact from the currency devaluation in Argentina.The increase in net interest income was primarily due to higher spreads and volumes.Services expenses of$10.6 billion increased 6%,primarily driven by continued investments in technology and platform modernization,other risk and controls and product innovation,as well as an Argentina-related transaction tax expense and higher legal expenses,partially offset by the impact of productivity savings.Cost of credit decreased to$276 million from$950 million in the prior year,primarily driven by a smaller ACL build for transfer risk associated with exposures outside of the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on the results of operations of Services in 2024,see“Services”below.8MarketsMarkets net income of$4.9 billion increased 27%,driven by higher revenues,partially offset by higher cost of credit.Markets revenues of$19.8 billion increased 6%,driven by a 26%increase in Equity Markets and a 1%increase in Fixed Income Markets.The increase in Equity Markets was primarily driven by growth in cash equities,due to higher client activity and volumes,and equity derivatives on higher volatility,which also included the impact from an episodic gain related to the Visa B exchange.The increase was also driven by an increase in prime services.The increase in Fixed Income Markets was driven by growth in spread products and other fixed income(up 20%),partially offset by lower revenues in rates and currencies(down 6%).The increase in spread products and other fixed income revenues was largely driven by increased client activity due to growth in asset-backed financing,securitization activity and underwriting fees,partially offset by a decline in commodities revenues.The decline in rates and currencies revenues was primarily due to lower volatility and a strong prior-year performance,partially offset by the smaller impact of the Argentina currency devaluation.Markets expenses of$13.2 billion were largely unchanged versus the prior year,as higher legal and volume-related expenses were offset by productivity savings.Cost of credit increased to$463 million from$438 million in the prior year,primarily driven by higher net credit losses for loans in spread products,partially offset by a smaller ACL build on other assets for transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on the results of operations of Markets in 2024,see“Markets”below.BankingBanking net income was$1.5 billion,compared to a net loss of$35 million in the prior year,driven by higher revenues,lower expenses and a higher benefit from cost of credit.Banking revenues of$6.2 billion increased 32%,including a$180 million loss on loan hedges in 2024 versus a$443 million loss on loan hedges in the prior year.Excluding the losses on loan hedges,Banking revenues of$6.4 billion increased 24%,reflecting higher Investment Banking and Corporate Lending revenues.Investment Banking revenues of$3.6 billion increased 38%,due to a rebound in overall wallet activity and wallet share gains across all products.Corporate Lending revenues increased 23%,including the impact of losses on loan hedges.Excluding the impact of losses on loan hedges,Corporate Lending revenues increased 9%,primarily driven by a smaller impact from the Argentina currency devaluation.Banking expenses of$4.5 billion decreased 8%,primarily driven by benefits of prior repositioning and other actions to lower the expense base,partially offset by higher volume-related expenses.Cost of credit was a benefit of$224 million,compared to a benefit of$143 million in the prior year,driven by an ACL release on other assets,primarily due to lower transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on the results of operations of Banking in 2024,see“Banking”below.WealthWealth net income of$1.0 billion increased 139%,reflecting higher revenues,lower expenses and a higher benefit from cost of credit.Wealth revenues of$7.5 billion increased 7%,largely driven by higher non-interest revenue(up 15%),reflecting higher investment fee revenues in Citigold,Wealth at Work and the Private Bank on growth in client investment assets,as well as an increase in net interest income(up 2%).The increase in net interest income was mainly due to higher average deposit spreads and volumes,partially offset by higher mortgage funding costs in the Private Bank and Wealth at Work.Wealth expenses decreased 2%to$6.4 billion,primarily driven by benefits from prior repositioning and restructuring actions,partially offset by higher volume-related expenses and technology investments focused on risk and controls and platform enhancements.Cost of credit was a net benefit of$126 million,compared to a net benefit of$3 million in the prior year,largely driven by a higher net ACL release due to a change in the ACL associated with the margin lending portfolio.For additional information on the results of operations of Wealth in 2024,see“Wealth”below.U.S.Personal BankingUSPB net income of$1.4 billion decreased 24%,driven by higher cost of credit,partially offset by higher revenues and lower expenses.USPB revenues of$20.4 billion increased 6%,due to higher net interest income(up 5%),driven by strong loan growth,primarily in cards,as well as higher non-interest revenue(up 24%)due to lower partner payments in Retail Services.Branded Cards revenues of$10.7 billion increased 7%,primarily driven by higher net interest income,reflecting interest-earning balance growth(up 9%)from lower payment rates and card spend volume growth.Retail Services revenues of$7.1 billion increased 8%,primarily driven by higher non-interest revenue due to the lower partner payments,as a result of higher net credit losses,as well as higher net interest income on growth in interest-earning balances(up 3%).Retail Banking revenues of$2.6 billion decreased 1%,primarily driven by the impact of the transfers of certain relationships and the associated deposit balances to Wealth,partially offset by higher deposit spreads,as well as mortgage and installment loan growth.USPB expenses of$10 billion decreased 1%,primarily driven by continued productivity savings and lower technology costs,partially offset by higher volume-related expenses.Cost of credit increased to$8.6 billion,compared to$6.7 billion in the prior year.The increase was driven by higher net credit losses(up 45%),primarily reflecting the continued maturation of multiple cards loan vintages originated in recent years,as well as macroeconomic pressures related to the elevated inflationary and interest rate environment impacting both cards portfolios,with lower FICO band customers primarily driving the increase.The higher net 9credit losses were partially offset by a lower ACL build for loans.For additional information on the results of operations of USPB in 2024,see“U.S.Personal Banking”below.All Other(Managed Basis)All Other(managed basis)net loss was$2.4 billion,compared to a net loss of$2.1 billion in the prior year,driven by lower revenues and lower income tax benefits,partially offset by lower expenses and lower cost of credit.All Other(managed basis)revenues decreased 20%,driven by lower revenues in Corporate/Other and Legacy Franchises.The decline in Corporate/Other was largely driven by net investment securities losses due to the repositioning of the investment securities portfolio and higher funding costs.Legacy Franchises(managed basis)revenues declined 6%,due to lower revenues in Asia Consumer(managed basis)and Legacy Holdings Assets,partially offset by higher revenues in Mexico Consumer/SBMM(managed basis).All Other(managed basis)expenses decreased 19%,primarily driven by the lower FDIC special assessment($203 million in 2024 versus approximately$1.7 billion in the prior year)and a reduction from the closed exits and wind-downs,as well as the lower restructuring charges($259 million in 2024 versus$781 million in 2023),partially offset by the civil money penalties imposed by the FRB and OCC in July 2024.Cost of credit was$1.1 billion,compared to$1.3 billion in the prior year,largely driven by a smaller ACL build for transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on the results of operations of All Other(managed basis)in 2024,see“All OtherDivestiture-Related Impacts(Reconciling Items)”and“All Other(Managed Basis)”below.Macroeconomic and Other Risks and UncertaintiesVarious macroeconomic,geopolitical and regulatory uncertainties and challenges pose risks to economic conditions in the U.S.and globally,including,among others,any resurgence in inflation;changes to trade,immigration,energy and other policies resulting from the new U.S.administration;changes in interest rate policies;the RussiaUkraine war;conflicts in the Middle East;and economic conditions and tensions involving China.For example,on February 1,2025 the new U.S.administration announced the imposition of new tariffs on imports from China,Mexico and Canada,although the tariffs for Mexico and Canada were delayed for 30 days.China responded with tariffs against certain imports from the U.S.Additionally,on February 10,2025,the U.S.administration announced global 25%tariffs on steel and aluminum imports.The U.S.administration has also announced plans for reciprocal tariffs on all U.S.trading partners.While the resulting impacts are difficult to predict at this time,these and other tariffs,whether imposed by the U.S.or by any other country,may result in disruption of supply chains,increased inflationary pressures and higher interest rates.These and other risks could negatively impact economic growth rates and unemployment levels in the U.S.and other countries and result in volatility and disruptions in financial markets.Such risks could also adversely affect Citis customers,clients,businesses,funding costs,cost of credit and overall results of operations and financial condition during 2025.For a further discussion of trends,uncertainties and risks that will or could impact Citis businesses,results of operations,capital and other financial condition during 2025,see“Executive Summary”above and“Risk Factors,”each respective businesss results of operations and“Managing Global Risk,”including“Managing Global RiskOther RisksCountry RiskRussia”and“Argentina,”below.10 CITIS MULTIYEAR TRANSFORMATIONOverviewAs previously disclosed,Citis transformation,including the remediation of its consent orders with the FRB and OCC,is a multiyear endeavor that is not linear.Citi is modernizing and simplifying the Company in order to lead in a dynamic,competitive and digital world.Citis transformation is addressing decades of underinvestment in its infrastructure,going beyond remedying regulatory concerns to intentionally transform how the organization operates,and making investments that not only support current needs,but also benefit the Company over the long term.Transformation efforts of this scale involve significant complexities and uncertainties,including ongoing regulatory challenges and risks.As discussed in the“Executive Summary”above,on July 10,2024,the FRB entered into a Civil Money Penalty Consent Order with Citigroup,and the OCC entered into a Civil Money Penalty Consent Order with Citibank(collectively,the 2024 Consent Orders).In addition,the OCC and Citibank entered into an Amendment(the Amendment)to the October 7,2020 Consent Order.For additional information about the 2024 Consent Orders and the Amendment,see Citis July 10,2024 Form 8-K and“Transformation Focus Areas and Status”and“FRB and OCC Consent Orders Compliance”below.Citi may continue to experience significant challenges in progressing the transformation and satisfying the regulators expectations in both sufficiency and timing,particularly with regard to data quality management related to governance and regulatory reporting.The regulators may also identify additional risk and control issues that could result in further regulatory actions.For additional information about these regulatory risks,see“Risk FactorsCompliance Risks”below.Notwithstanding the 2024 Consent Orders and the Amendment,Citis transformation target outcomes remain focused on changing its business and operating models such that they simultaneously(i)strengthen controls,enhance data quality,reduce risk and improve Citis regulatory compliance and its culture,and(ii)enhance Citis value to customers,clients and shareholders.Transformation Focus Areas and StatusOver the last several years,Citi has made key investments to,among other things,consolidate and modernize its infrastructure,simplify and automate manual processes,and enhance technology,data and analytics.In particular,Citis transformation-related expenses include costs related to risk and controls,data and finance programs and other 2020 Consent Order programs,as well as spending on certain other regulatory initiatives unrelated to the 2020 Consent Orders,and spending on enterprise-wide technology infrastructure and the Transformation Bonus Program(see below).Citi completed significant planning and foundational work for the transformation in 2021 and 2022.In 2023,Citi progressed its transformation efforts into implementation mode and those efforts continued in 2024.In 2024,Citis transformation-related expenses increased 1%to approximately$2.9 billion from the prior year,largely driven by increased spending on certain programs,including data,largely offset by a reduction in the payout under the Transformation Bonus Program.Citis transformation initiatives will continue to entail significant investments during 2025 and beyond.Citis transformation initiatives in 2025 will continue to focus on(i)automating regulatory processes and remediating data quality issues,particularly related to regulatory reporting,and(ii)further strengthening stress testing and resolution and recovery capabilities.ProgressNotwithstanding Citis investments and remediation efforts,as set forth in the FRBs 2024 Civil Money Penalty Consent Order,the FRB found that,based on examinations conducted by the Federal Reserve Bank of New York,Citigroup had ongoing deficiencies related to its data quality management program and inadequate measures for managing and controlling its data quality risks.In addition,as set forth in the OCCs 2024 Civil Money Penalty Consent Order and the Amendment,the OCC deemed that Citibank had failed to make sufficient and sustainable progress toward achieving compliance with the OCCs 2020 Consent Order.As a result,Citi has made changes to its governance and structure of its data program as well as increased the level of investment in the program.For additional information about Citis transformation investments,see“Transformation Focus Areas and Status”above.Despite the ongoing regulatory challenges and risks,Citis transformation progress includes the following:Improved Risk Management Closed the 2013 Consent Order with the FRB related to anti-money laundering and Bank Secrecy Act deficienciesBuilt greater efficiency and scale in the risk management of Citis global spread products business,with 99%of risk computations now occurring on cloud-based infrastructureApproximately 90%of derivative trades now subject to full revaluation each month using automated independent price verificationApproximately 76%of all product data onboarded to strategic data redistribution platforms with stronger data quality controlsConsolidated four new activity risk management platforms into one modern platformImplemented key technology capabilities for target state wholesale credit analysis,simplifying the process and execution of policy requirementsFaster and more frequent stress testing for geopolitical risks,natural disasters and industry-specific eventsModernization Retired or replaced 714 legacy applications in 2024 with new,modern applicationsLaunched a new regulatory reporting platform with advanced capabilities to improve quality and efficiency 11Scaled automated controls in Markets,including transaction monitoring(over 750 million trading records monthly)and Regulation W compliance(approximately 400,000 transactions monthly)Consolidated 20 cash equities platforms into one modern platformReduced time to book new or amended loans in North America by over 50%Resiliency Improved resiliency and reduced downtime by simplifying system restoration to a single click for approximately 26%of critical applicationsReduced data center consumption through migration of workload to a private cloud and streamlined and reduced the time involved in the cloud onboarding process from over seven weeks to two weeksUpgraded 100%of Citis more than 2,300 ATMs in North America,Singapore,Hong Kong and the UAE to next-generation software for better customer security and monitoring Organizational SimplificationDuring the first quarter of 2024,Citi completed its organizational simplification announced in September 2023.The result is a simpler management structure that aligns to and facilitates Citis strategy,while improving accountability and decision-making.Citis operating model changes included elimination of the Institutional Clients Group,Personal Banking and Wealth Management and Legacy Franchises operating segments and resulted in the five current reportable operating segmentsServices,Markets,Banking,Wealth and U.S.Personal Bankingand a new financial reporting structure.Activities not assigned to the reportable operating segments are reflected in All Other,including Legacy Franchises and Corporate/Other.Citi also exited certain institutional business lines and consolidated its regional structure from four to two regions,consisting of North America and International.Citis organizational simplification efforts also assist in advancing the execution of the transformation.FRB and OCC Consent Orders ComplianceAs previously disclosed,on July 10,2024,the FRB entered into a Civil Money Penalty Consent Order with Citigroup in the amount of approximately$61 million,and the OCC entered into a Civil Money Penalty Consent Order with Citibank,a wholly owned subsidiary of Citigroup,in the amount of$75 million.The OCC and Citibank also entered into an Amendment to the October 7,2020 OCC Consent Order.The Amendment requires Citibank to formalize a process to determine whether sufficient resources are being appropriately allocated toward achieving timely and sustainable compliance with the OCCs 2020 Consent Order,including any requirements on which Citibank is not making sufficient and sustainable progress(such process,the Resource Review Plan).Copies of the 2024 Consent Orders and the Amendment were included as exhibits to Citis July 10,2024 Form 8-K.For additional information regarding the 2024 Consent Orders and the Amendment,see the July 10,2024 Form 8-K.As discussed above,Citis transformation efforts include effective implementation of the October 7,2020 FRB and OCC Consent Orders issued to Citigroup and Citibank,respectively.The 2020 Consent Orders require Citigroup and Citibank to implement extensive targeted action plans and submit quarterly progress reports on a timely and sufficient basis,detailing the results and status of improvements relating principally to various aspects of(i)enterprise-wide risk management,(ii)compliance risk management,(iii)data quality management related to governance,and(iv)internal controls.Citi continues to work constructively with the FRB and OCC and provide additional information regarding its plans and progress to both regulators on an ongoing basis.Citi will continue to reflect their feedback in its project plans and execution efforts.Although there are no restrictions on Citis ability to serve its clients,the 2020 OCC Consent Order requires Citibank to obtain prior approval of any significant new acquisition,including any portfolio or business acquisition,excluding ordinary course transactions.For additional information about the requirements under the 2020 Consent Orders,see Citis Current Report on Form 8-K filed with the SEC on October 9,2020.GovernanceCiti has built an organization and infrastructure to manage,guide and support its transformation,which spans all businesses and functions to ensure consistency.Additionally,the Citigroup and Citibank Boards of Directors each formed a Transformation Oversight Committee,an ad hoc committee of each Board,to provide oversight of Citis efforts to improve its risk and control environment and managements remediation efforts under the consent orders.While every member of Citis executive management team,or EMT,is involved in the transformation and plays a key,direct role in its implementation,Citis CEO has taken a leading role in managing the effort.As part of this effort,Citis CEO has assembled a team consisting of long-tenured employees and new hires from across various disciplines and areas of expertise and experience,along with representatives from each of Citis businesses and functions,to lead the various transformation programs.Citi is focusing the Companys most senior talent on this effort and has a detailed,integrated approach to execute on the transformation.Citis Transformation Steering Committee,chaired by Citis CEO,sets the overall direction for the transformation and communicates progress to the Citigroup Board of Directors,as well as seeks input and feedback from the Board.In 2023,Citi appointed a Chief Operating Officer,who reports to the CEO and is responsible for running Citis overall transformation efforts,as well as leading Citis efforts to improve operating efficiency and returns along with Citis enterprise-wide effort to strengthen its risk and controls and data quality,and modernize infrastructure,while simplifying the Company.In 2024,Citi hired a new Head of Technology and Business Enablement,who reports to the CEO and works closely with Citis transformation team to drive improvements to data quality and modernize infrastructure,while driving simplification and automation across Citi.12Transformation Bonus ProgramIn 2021,the Compensation,Performance Management and Culture Committee(the Compensation Committee)of Citigroups Board of Directors approved a long-term performance-based bonus program to incentivize effective execution in connection with the transformation and remediation of the consent orders and to drive change in Citis risk and control environment and culture(the Transformation Bonus Program,or the Program).There are approximately 200 senior employees who were deemed critical to the execution of the transformation and are therefore eligible for the Program.Performance is measured,and the bonus,if any,payable pursuant to the Transformation Bonus Program is paid in three tranches,each representing a separate performance period.Well-defined goals and related metrics are established for each of the three tranches,which may reflect qualitative considerations,including regulatory actions.At the end of each year,the Compensation Committee determines the appropriate level of payout given the accomplishments for the performance period relative to the specific goals and related metrics.The maximum portion of the bonus payable for each tranche was 25%for the first tranche,25%for the second tranche and is 50%for the third tranche.For additional information on the Transformation Bonus Program,including the Compensation Committees determination with respect to performance metrics,targets and achievements for the first and second performance measurement periods under the Program,see“Citis Multiyear Transformation”in Citis Second Quarter of 2024 Form 10-Q and Citis 2024 Proxy Statement for Citigroups Annual Meeting of Stockholders.For additional information on the Compensation Committees determination with respect to performance metrics,targets and achievements for the third performance measurement period under the Program covering calendar year 2024,see Citis upcoming 2025 Annual Meeting Proxy Statement to be filed with the SEC in March 2025.13RESULTS OF OPERATIONSSUMMARY OF SELECTED FINANCIAL DATACitigroup Inc.and Consolidated SubsidiariesIn millions of dollars,except per share amounts20242023202220212020Net interest income$54,095$54,900$48,668$42,494$44,751 Non-interest revenue 27,044 23,562 26,670 29,390 30,750 Revenues,net of interest expense$81,139$78,462$75,338$71,884$75,501 Operating expenses 53,984 56,366 51,292 48,193 44,374 Provisions for credit losses and for benefits and claims 10,109 9,186 5,239 (3,778)17,495 Income from continuing operations before income taxes$17,046$12,910$18,807$27,469$13,632 Income taxes 4,211 3,528 3,642 5,451 2,525 Income from continuing operations$12,835$9,382$15,165$22,018$11,107 Income(loss)from discontinued operations,net of taxes(2)(1)(231)7 (20)Net income before attribution of noncontrolling interests$12,833$9,381$14,934$22,025$11,087 Net income attributable to noncontrolling interests 151 153 89 73 40 Citigroups net income$12,682$9,228$14,845$21,952$11,047 Earnings per shareBasicIncome from continuing operations$6.03$4.07$7.16$10.21$4.75 Net income 6.03 4.07 7.04 10.21 4.74 Diluted Income from continuing operations$5.95$4.04$7.11$10.14$4.73 Net income 5.94 4.04 7.00 10.14 4.72 Dividends declared per common share 2.18 2.08 2.04 2.04 2.04 Common dividends$4,218$4,076$4,028$4,196$4,299 Preferred dividends 1,054 1,198 1,032 1,040 1,095 Common share repurchases 2,500 2,000 3,250 7,600 2,925 Table continues on the next page,including footnotes.14SUMMARY OF SELECTED FINANCIAL DATA(Continued)Citigroup Inc.and Consolidated SubsidiariesIn millions of dollars,except per share amounts,ratios and direct staff or as otherwise noted20242023202220212020At December 31:Total assets$2,352,945$2,411,834$2,416,676$2,291,413$2,260,090 Total deposits 1,284,458 1,308,681 1,365,954 1,317,230 1,280,671 Long-term debt 287,300 286,619 271,606 254,374 271,686 Citigroup common stockholders equity 190,748 187,853 182,194 182,977 179,962 Total Citigroup stockholders equity 208,598 205,453 201,189 201,972 199,442 Average assets 2,468,431 2,442,233 2,396,023 2,347,709 2,226,454 Direct staff(in thousands)229 239 240 223 210 Performance metricsReturn on average assets 0.51%0.38%0.62%0.94%0.50%Return on average common stockholders equity(1)6.1 4.3 7.7 11.5 5.7 Return on average total stockholders equity(1)6.1 4.5 7.5 10.9 5.7 Return on tangible common equity(RoTCE)(2)7.0 4.9 8.9 13.4 6.6 Operating leverage(3)764 bps(575)bps(163)bps(1,340)bps(314)bpsEfficiency ratio(total operating expenses/total revenues,net)66.5 71.8 68.1 67.0 58.8 Basel III ratiosCET1 Capital(4)13.63.37.03.25.51%Tier 1 Capital(4)15.31 15.02 14.80 13.91 13.06 Total Capital(4)15.42 15.13 15.46 16.04 15.33 Supplementary Leverage ratio 5.85 5.82 5.82 5.73 6.99 Citigroup common stockholders equity to assets 8.11%7.79%7.54%7.99%7.96%Total Citigroup stockholders equity to assets 8.87 8.52 8.33 8.81 8.82 Dividend payout ratio(5)37 51 29 20 43 Total payout ratio(6)58 76 53 56 73 Book value per common share$101.62$98.71$94.06$92.21$86.43 Tangible book value per share(TBVPS)(2)89.34 86.19 81.65 79.16 73.67(1)The return on average common stockholders equity is calculated using net income less preferred stock dividends divided by average common stockholders equity.The return on average total Citigroup stockholders equity is calculated using net income divided by average Citigroup stockholders equity.(2)RoTCE and TBVPS are non-GAAP financial measures.For information on RoTCE and TBVPS,see“Capital ResourcesTangible Common Equity,Book Value Per Share,Tangible Book Value Per Share and Return on Equity”below.(3)Represents the year-over-year growth rate in basis points(bps)of Total revenues,net of interest expense less the year-over-year growth rate of Total operating expenses.Positive operating leverage indicates that the revenue growth rate was greater than the expense growth rate.(4)Citis binding CET1 Capital and Tier 1 Capital ratios were derived under the Basel III Standardized Approach as of December 31,2024,2023,2022 and 2021,and were derived under the Basel III Advanced Approaches framework as of December 31,2020.Citis binding Total Capital ratio was derived under the Basel III Advanced Approaches framework for all periods presented.(5)Dividends declared per common share as a percentage of net income per diluted share.(6)Total common dividends declared plus common share repurchases as a percentage of net income available to common shareholders(Net income less preferred dividends).See“Consolidated Statement of Changes in Stockholders Equity,”Note 11 and“Equity Security Repurchases”below for the component details.15SEGMENT REVENUES AND INCOME(LOSS)REVENUESIn millions of dollars202420232022%Change2024 vs.2023%Change2023 vs.2022Services$19,649$18,102$15,665 9%Markets 19,836 18,649 19,945 6 (6)Banking 6,201 4,715 5,527 32 (15)Wealth 7,512 7,021 7,355 7 (5)USPB 20,374 19,187 16,872 6 14 All Othermanaged basis(1)7,541 9,442 9,120 (20)4 All Otherdivestiture-related impacts(Reconciling Items)(1)26 1,346 854 (98)58 Total Citigroup net revenues$81,139$78,462$75,338 3%4%INCOMEIn millions of dollars202420232022%Change2024 vs.2023%Change2023 vs.2022Income(loss)from continuing operationsServices$6,584$4,701$4,948 40%(5)%Markets 5,005 3,938 5,852 27 (33)Banking 1,529 (31)334 NMNMWealth 1,002 419 995 139 (58)USPB 1,382 1,820 2,770 (24)(34)All Othermanaged basis(1)(2,460)(2,124)450 (16)NMAll Otherdivestiture-related impacts(Reconciling Items)(1)(207)659 (184)NMNMIncome from continuing operations$12,835$9,382$15,165 37%(38)%Discontinued operations$(2)$(1)$(231)(100)0%Less:Net income attributable to noncontrolling interests 151 153 89 (1)72 Citigroups net income$12,682$9,228$14,845 37%(38)%(1)All Other(managed basis)excludes divestiture-related impacts(Reconciling Items)related to(i)Citis divestitures of its Asia Consumer businesses and(ii)the planned IPO of Mexico Consumer/SBMM within Legacy Franchises.The Reconciling Items are fully reflected in the various line items in Citis Consolidated Statement of Income.See“All OtherDivestiture-Related Impacts(Reconciling Items)”below.NM Not meaningful16SELECT BALANCE SHEET ITEMS BY SEGMENT(1)DECEMBER 31,2024In millions of dollarsServicesMarketsBankingWealthUSPBAll Otherandconsolidatingeliminations(2)Citigroupparent company-issued long-termdebt(3)TotalCitigroupconsolidated Cash and deposits with banks,net of allowance$15,281$80,175$1,350$1,858$2,975$174,893$276,532 Securities borrowed and purchased under agreements to resell,net of allowance 8,886 262,130 360 2,686 274,062 Trading account assets 49 428,656 831 1,126 292 11,793 442,747 Investments,net of allowance 606 120,107 937 1 355,006 476,657 Loans,net of unearned income and allowance for credit losses on loans 87,596 124,253 80,915 146,988 207,571 28,591 675,914 Deposits$807,002$12,713$564$312,795$89,432$61,952$1,284,458 Securities loaned and sold under agreements to repurchase 552 251,852 48 2,303 254,755 Trading account liabilities 1,067 132,097 4 328 193 157 133,846 Short-term borrowings 117 43,439 2 2 4,945 48,505 Long-term debt(3)93,138 392 29,746 164,024 287,300(1)The information presented in the table above reflects select GAAP balance sheet items by reportable segment and component.This table does not include intersegment funding.(2)Consolidating eliminations for total Citigroup and Citigroup parent company items are recorded within All Other.(3)The majority of long-term debt of Citigroup is reflected on the Citigroup parent company balance sheet(see Notes 19 and 31).Citigroup allocates stockholders equity and long-term debt to its businesses.17SERVICESServices includes Treasury and Trade Solutions(TTS)and Securities Services.TTS provides an integrated suite of tailored cash management,payments and trade and working capital solutions to multinational corporations,financial institutions and public sector organizations.Securities Services provides a comprehensive product offering,connecting clients to global markets across the entire investment cycle,including on-the-ground local market expertise,post-trade technologies,customized data solutions and a wide range of securities services solutions that can be tailored to meet clients needs.Services revenue is generated primarily from spreads and fees associated with these activities.Services earns spread revenue through generating deposits,as well as interest on loans.Revenue generated from these activities is primarily recorded in Net interest income.Fee income is earned for assisting clients with transactional services and clearing.Revenue generated from these activities is recorded in Commissions and fees.Revenue is also generated from assets under custody and administration and is recognized when the associated service is provided by Citi.Revenue generated from these activities is primarily recorded in Administration and other fiduciary fees.For additional information on these various types of revenues,see Note 5.Services revenues also include revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.At December 31,2024,Services had$584 billion in assets and$807 billion in deposits.Securities Services managed$25.4 trillion in assets under custody and administration,of which Citi provided both custody and administrative services to certain clients related to$1.9 trillion of such assets.In millions of dollars,except as otherwise noted202420232022%Change2024 vs.2023%Change2023 vs.2022Net interest income(including dividends)$13,423$13,251$10,365 1(e revenueCommissions and fees 3,327 3,125 2,887 6 8 Administration and other fiduciary fees,and other 2,716 2,501 2,483 9 1 Total fee revenue$6,043$5,626$5,370 7%5%Principal transactions 959 1,006 854 (5)18 All other(1)(776)(1,781)(924)56 (93)Total non-interest revenue$6,226$4,851$5,300 28%(8)%Total revenues,net of interest expense$19,649$18,102$15,665 9%Total operating expenses$10,599$10,031$8,734 6%Net credit losses on loans 48 40 51 20 (22)Credit reserve build(release)for loans(130)47 128 NM(63)Provision for credit losses on unfunded lending commitments 17 (18)24 NMNMProvisions for credit losses on other assets and HTM debt securities 341 881 4 (61)NMProvision(release)for credit losses$276$950$207 (71)%NMIncome from continuing operations before taxes$8,774$7,121$6,724 23%6%Income taxes 2,190 2,420 1,776 (10)36 Income from continuing operations$6,584$4,701$4,948 40%(5)%Noncontrolling interests 101 66 36 53 83 Net income$6,483$4,635$4,912 40%(6)lance Sheet data(in billions of dollars)EOP assets$584$586$600%(2)%Average assets 586 583 546 1 7 Efficiency ratio 54UV%Revenue by componentNet interest income$10,923$11,085$8,884 (1)%Non-interest revenue 3,609 2,631 2,954 37 (11)Treasury and Trade Solutions(TTS)$14,532$13,716$11,838 6%Net interest income$2,500$2,166$1,481 15F%Non-interest revenue 2,617 2,220 2,346 18 (5)Securities Services$5,117$4,386$3,827 17%Total Services$19,649$18,102$15,665 9Revenue by geographyNorth America$5,415$5,131$4,782 6%7%International 14,234 12,971 10,883 10 19 Total$19,649$18,102$15,665 9%International revenue by clusterUnited Kingdom$1,972$1,811$1,426 9%Japan,Asia North and Australia(JANA)2,678 2,469 2,097 8 18 LATAM 2,734 2,512 2,193 9 15 Asia South 2,428 2,161 1,779 12 21 Europe 2,283 2,231 1,763 2 27 Middle East and Africa(MEA)2,139 1,787 1,625 20 10 Total$14,234$12,971$10,883 10%Key drivers(2)Average loans by component(in billions of dollars)TTS$84$80$80 5%Securities Services 1 1 2 (50)Total$85$81$82 5%(1)LL as a percentage of EOP loans(3)0.30%0.47%0.46%Average deposits by component(in billions of dollars)TTS$689$688$676%2%Securities Services 130 123 133 6 (8)Total$819$811$809 1%Cross-border transaction value(in billions of dollars)$379.7$358.0$311.6 6%U.S.dollar clearing volume(in millions)(4)168.0 157.3 148.6 7 6 Commercial card spend volume(in billions of dollars)$70.4$66.8$57.4 5 16(1)Includes revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.(2)Management uses this information in reviewing the segments results and believes it is useful to investors concerning underlying segment performance and trends.(3)Excludes loans that are carried at fair value for all periods.(4)Represents the number of U.S.dollar clearing payment instructions processed on behalf of U.S.and foreign-domiciled entities(primarily financial institutions).NM Not meaningful2024 vs.2023Net income of$6.5 billion increased 40%,driven by higher revenues and lower cost of credit,partially offset by higher expenses.Revenues increased 9%,driven by higher non-interest revenue in TTS and Securities Services,as well as higher net interest income.Excluding the impact of the Argentina currency devaluation(approximately$(178)million,compared to approximately$(1.2)billion in the prior year),revenues increased 3%.Non-interest revenue increased 28%,largely due to the smaller impact from the Argentina currency devaluation.Excluding the impact of the Argentina currency devaluation,non-interest revenue increased 5%,driven by continued strength across underlying fee drivers in TTS and Securities Services.Net interest income increased 1%,as the benefit of higher deposit and loan volumes was largely offset by a decline in interest rates in Argentina.Average deposits increased 1%,primarily driven by growth in Securities Services.Citi continued to increase operating deposits in both TTS and Securities Services.TTS revenues increased 6%,primarily driven by a 37%increase in non-interest revenue,partially offset by a 1crease in net interest income.The increase in non-interest revenue was largely driven by the smaller impact from the Argentina currency devaluation(approximately$(164)million,compared to approximately$(1.0)billion in the prior year).Excluding the Argentina currency devaluation,non-interest revenue grew 3%,reflecting growth in underlying fee drivers,including cross-border transaction value(up 6%),U.S.dollar clearing volume(up 7%)and commercial card spend volume(up 5%).The decrease in net interest income was primarily driven by the decline in interest rates in Argentina.Average deposits were largely unchanged,as growth in International was offset by a decrease in North America.For additional information about Citis exposure in Argentina,see“Managing Global RiskOther RiskCountry RiskArgentina”below.Securities Services revenues increased 17%,driven by a 15%increase in net interest income,primarily due to higher spreads and volumes,and an 18%increase in non-interest revenue.The increase in spreads was driven by higher interest rates and deposit mix across currencies.Average deposits increased 6%,driven by growth in both North America and International.The growth in non-interest revenue was primarily driven by increased fees from higher AUC/AUA 19balances and continued elevated levels of corporate activity in Issuer Services,as well as the smaller impact from the Argentina currency devaluation.AUC/AUA balances increased 8%,benefiting from higher market valuations,new client onboarding and deepening share of existing client wallet.Expenses increased 6%,primarily driven by continued investments in technology and platform modernization,other risk and controls and product innovation,as well as an Argentina-related transaction tax expense and higher legal expenses,partially offset by the impact of productivity savings.Provisions were$276 million,compared to$950 million in the prior year,primarily driven by a lower ACL build on other assets.The net ACL build was$228 million,compared to$910 million in the prior year.The lower net ACL build was primarily due to a smaller build for transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on Citis ACL,see“Significant Accounting Policies and Significant Estimates”below.For additional information on Services corporate credit portfolio,see“Managing Global RiskCredit RiskCorporate Credit”below.For additional information on trends in Services deposits and loans,see“Managing Global RiskCredit RiskLoans”and“Managing Global RiskLiquidity RiskDeposits”below.For additional information about trends,uncertainties and risks related to Services future results,see“Executive Summary”above and“Managing Global RiskOther RisksCountry RiskArgentina”and“Russia”below.20MARKETSMarkets provides corporate,institutional and public sector clients around the world with a full range of sales and trading services across equities,foreign exchange,rates,spread products and commodities.The range of services includes market-making across asset classes,risk management solutions,financing and prime brokerage.As a market maker,Markets facilitates transactions,including holding product inventory to meet client demand,and earns the differential between the price at which it buys and sells the products.These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions.Fee revenue is earned through providing clients with a range of services including but not limited to trading,financing,brokerage,securitization and underwriting.Other primarily includes realized gains and losses on available-for-sale(AFS)debt securities,gains and losses on equity securities not held in trading accounts and other non-recurring gains and losses.Interest income earned on assets held,less interest paid on long-and short-term debt,secured funding transactions and customer deposits,is recorded as Net interest income.The amount and types of Markets revenues are impacted by a variety of interrelated factors,including market liquidity;changes in market variables such as interest rates,foreign exchange rates,equity prices,commodity prices and credit spreads,as well as their implied volatilities;investor confidence;and other macroeconomic conditions.Markets revenues include revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.Assuming all other market conditions do not change,increases in client activity levels or bid/offer spreads generally result in increases in revenues.However,changes in market conditions can significantly impact client activity levels,bid/offer spreads and the fair value of product inventory.Management of the Markets businesses involves daily monitoring and evaluation of the above factors.Markets international presence is supported by trading floors in approximately 80 countries and a proprietary network in 95 countries and jurisdictions.In millions of dollars,except as otherwise noted202420232022%Change2024 vs.2023%Change2023 vs.2022Net interest income(including dividends)$7,005$7,233$5,768 (3)%e revenueBrokerage and fees 1,402 1,381 1,452 2 (5)Investment banking fees(1)426 392 482 9 (19)Other(2)238 147 138 62 7 Total fee revenue$2,066$1,920$2,072 8%(7)%Principal transactions 11,201 10,472 12,994 7 (19)All other(2)(436)(976)(889)55 (10)Total non-interest revenue$12,831$11,416$14,177 12%(19)%Total revenues,net of interest expense(3)$19,836$18,649$19,945 6%(6)%Total operating expenses$13,202$13,258$12,453%6%Net credit losses(recoveries)on loans 168 32 (4)425 NMCredit reserve build(release)for loans 213 202 50 5 NMProvision(release)for credit losses on unfunded lending commitments 17 5 3 240 67 Provisions for credit losses on other assets and HTM debt securities 65 199 68 (67)NMProvision(release)for credit losses$463$438$117 6%NMIncome(loss)from continuing operations before taxes$6,171$4,953$7,375 25%(33)%Income taxes(benefits)1,166 1,015 1,523 15 (33)Income(loss)from continuing operations$5,005$3,938$5,852 27%(33)%Noncontrolling interests 75 67 52 12 29 Net income(loss)$4,930$3,871$5,800 27%(33)lance Sheet data(in billions of dollars)EOP assets$949$1,008$963 (6)%5%Average assets 1,063 1,026 999 4 3 Efficiency ratio 67qb%Revenue by componentFixed Income Markets$14,750$14,612$15,494 1%(6)%Equity Markets 5,086 4,037 4,451 26 (9)Total$19,836$18,649$19,945 6%(6)!Rates and currencies$10,152$10,794$11,462 (6)%(6)%Spread products/other fixed income 4,598 3,818 4,032 20 (5)Total Fixed Income Markets revenues$14,750$14,612$15,494 1%(6)%Revenue by geographyNorth America$7,562$6,839$6,726 11%2%International 12,274 11,810 13,219 4 (11)Total$19,836$18,649$19,945 6%(6)%International revenue by clusterUnited Kingdom$4,099$4,383$5,650 (6)%(22)%Japan,Asia North and Australia(JANA)2,546 2,370 2,401 7 (1)LATAM 1,962 1,444 1,584 36 (9)Asia South 1,618 1,404 1,388 15 1 Europe 935 1,086 913 (14)19 Middle East and Africa(MEA)1,114 1,123 1,283 (1)(12)Total$12,274$11,810$13,219 4%(11)%Key drivers(4)(in billions of dollars)Average loans$120$110$111 9%(1)%NCLs as a percentage of average loans 0.14%0.03LL as a percentage of EOP loans(5)0.88%0.71%0.58%Average trading account assets 436 379 334 15 13 Average deposits 21 23 21 (9)10(1)Investment banking fees are primarily composed of underwriting,advisory,loan syndication structuring and other related financing activity.(2)Includes revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.(3)Citi assesses its Markets business performance on a total revenue basis,as offsets may occur across revenue line items.For example,securities that generate Net interest income may be risk managed by derivatives that are recorded in Principal transactions revenue within Non-interest revenue.For a description of the composition of these revenue line items,see Notes 4,5 and 6.(4)Management uses this information in reviewing the segments results and believes it is useful to investors concerning underlying segment performance and trends.(5)Excludes loans that are carried at fair value for all periods.NM Not meaningful2024 vs.2023Net income of$4.9 billion increased 27%,driven by higher revenues,partially offset by higher cost of credit.Revenues increased 6%,driven by higher Equity Markets and Fixed Income Markets revenues.Citi expects that revenues in its Markets businesses will reflect the overall market environment during 2025.Fixed Income Markets revenues increased 1%,driven by spread products and other fixed income,partially offset by lower revenues in rates and currencies.Rates and currencies revenues decreased 6%,largely reflecting lower volatility and a strong prior-year performance,partially offset by the smaller impact of the Argentina currency devaluation.Spread products and other fixed income revenues increased 20%,largely driven by increased client activity due to growth in asset-backed financing,securitization activity and underwriting fees.These increases were partially offset by a decline in commodities revenues on lower overall volatility.Equity Markets revenues increased 26%,driven by growth in cash equities due to higher client activity and volumes.The increase in revenues was also due to growth in equity derivative revenues on higher volatility,which also included the impact from an episodic gain related to the Visa B exchange.The increase in revenues was also driven by growth in prime services,as Equity Markets continued to experience an increase in prime balances.Expenses were largely unchanged,as higher legal expenses and higher volume-related expenses were offset by productivity savings.Provisions were$463 million,compared to$438 million in the prior year,primarily driven by higher net credit losses,partially offset by a lower ACL build on other assets.Net credit losses were$168 million,compared to$32 million in the prior year,largely driven by higher losses on loans in spread products.The net ACL build was$295 million,compared to a net build of$406 million in the prior year.The lower net ACL build was primarily due to a smaller build for transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on Citis ACL,see“Significant Accounting Policies and Significant Estimates”below.For additional information on Markets corporate credit portfolio,see“Managing Global RiskCredit RiskCorporate Credit”below.For additional information on trends in Markets deposits and loans,see“Managing Global RiskCredit RiskLoans”and“Managing Global RiskLiquidity RiskDeposits”below.For additional information about trends,uncertainties and risks related to Markets future results,see“Executive Summary”above and“Managing Global RiskOther RisksCountry RiskArgentina”and“Russia”below.22BANKINGBanking includes Investment Banking,which supports clients capital-raising needs to help strengthen and grow their businesses,including equity and debt capital markets-related strategic financing solutions and loan syndication structuring,as well as advisory services related to mergers and acquisitions,divestitures,restructurings and corporate defense activities;and Corporate Lending,which includes corporate and commercial banking,serving as the conduit for Citis full product suite to clients.Banking revenues include revenues earned by Citi that are subject to a revenue sharing arrangement for Investment Banking,Markets and Services products sold to Corporate Lending clients.At December 31,2024,Banking had$143 billion in assets including$82 billion in loans and$0.6 billion in deposits.In millions of dollars,except as otherwise noted202420232022%Change2024 vs.2023%Change2023 vs.2022Net interest income(including dividends)$2,157$2,161$2,130%1e revenueInvestment banking fees(1)3,857 2,713 3,052 42 (11)Other 174 160 175 9 (9)Total fee revenue$4,031$2,873$3,227 40%(11)%Principal transactions(759)(938)(133)19 NMAll other(2)772 619 303 25 NMTotal non-interest revenue$4,044$2,554$3,397 58%(25)%Total revenues,net of interest expense 6,201 4,715 5,527 32 (15)Total operating expenses$4,477$4,877$4,460 (8)%9%Net credit losses on loans 149 169 107 (12)58 Credit reserve build(release)for loans(200)(345)321 42 NMProvision(release)for credit losses on unfunded lending commitments(128)(354)158 64 NMProvisions(releases)for credit losses on other assets and HTM debt securities(45)387 18 NMNMProvisions(releases)for credit losses$(224)$(143)$604 (57)%NMIncome(loss)from continuing operations before taxes$1,948$(19)$463 NMNMIncome taxes(benefits)419 12 129 NM(91)%Income(loss)from continuing operations$1,529$(31)$334 NMNMNoncontrolling interests 5 4 (3)25%NMNet income(loss)$1,524$(35)$337 NMNMBalance Sheet data(in billions of dollars)EOP assets$143$148$152 (3)%(3)%Average assets 152 153 159 (1)(4)Efficiency ratio 723%Revenue by componentTotal Investment Banking$3,637$2,632$2,608 38%1%Corporate Lending(excluding gain(loss)on loan hedges)(2)(3)2,744 2,526 2,612 9 (3)Total Banking revenues(excluding gain(loss)on loan hedges)(2)(3)$6,381$5,158$5,220 24%(1)%Gain(loss)on loan hedges(2)(3)(180)(443)307 59 NMTotal Banking revenues(including gain(loss)on loan hedges)(2)(3)$6,201$4,715$5,527 32%(15)%Business metricsinvestment banking feesAdvisory$1,245$1,017$1,332 22%(24)%Equity underwriting(Equity Capital Markets(ECM)688 500 621 38 (19)Debt underwriting(Debt Capital Markets(DCM)1,924 1,196 1,099 61 9 Total$3,857$2,713$3,052 42%(11)%Revenue by geographyNorth America$3,097$1,898$2,563 63%(26)#International 3,104 2,817 2,964 10 (5)Total$6,201$4,715$5,527 32%(15)%Intern
2025-04-21
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM10-K ANNUAL REPORT PURSUANT TO SECTION13 OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 29,2024 orTransition Report Pursuant to Section13 or 15(d)of the Securities Exchange Act of 1934for the transition period fromtoCommission file number 1-3215 Johnson&Johnson(Exact name of registrant as specified in its charter)New Jersey22-1024240(State of incorporation)(I.R.S.Employer Identification No.)One Johnson&Johnson PlazaNew Brunswick,New Jersey08933(Address of principal executive offices)(Zip Code)One Johnson&Johnson Plaza New Brunswick,New Jersey 08933(Address of principal executive offices)Registrants telephone number,including area code:(732)524-0400 SECURITIES REGISTERED PURSUANT TO SECTION12(b)OF THE ACTTitle of each classTrading SymbolName of each exchange on which registeredCommon Stock,Par Value$1.00JNJNew York Stock Exchange1.150%Notes Due November 2028JNJ28New York Stock Exchange3.20%Notes Due November 2032JNJ32New York Stock Exchange1.650%Notes Due May 2035JNJ35New York Stock Exchange3.350%Notes Due November 2036JNJ36ANew York Stock Exchange3.550%Notes Due November 2044JNJ44New York Stock ExchangeIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule405 of the Securities Act.YesNooIndicate by check mark if the registrant is not required to file reports pursuant to Section13 or Section15(d)of the Exchange Act.YesoNoIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section13 or 15(d)of the Exchange Act during the preceding 12months(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 90days.YesNooIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of RegulationS-T during the preceding 12months(or for such shorter period that the registrant was required to submit such files).YesNooIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer”,“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filerNon-accelerated filer Smaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.oIndicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.YesNooIf securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.oIndicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).oIndicate by check mark whether the registrant is a shell company(as defined in Rule12b-2 of the Exchange Act).YesNoThe aggregate market value of the Common Stock held by non-affiliates computed by reference to the price at which the Common Stock was last sold as of the last business day of the registrants most recently completed second fiscal quarter was approximately$352 billion.On February 6,2025,there were 2,407,616,693 shares of Common Stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEPart III:Portions of the registrants proxy statement for its 2025 annual meeting of shareholders to be filed within 120days after the close of the registrants fiscal year(the“Proxy Statement”),are incorporated by reference to this report on Form 10-K(this“Report”).ItemPagePartI1Business1General1Segments of business1Geographic areas2Raw materials2Patents2Trademarks3Seasonality3Competition3Environment3Regulation3Employees and human capital management6Available information81A.Risk factors91B.Unresolved staff comments171C.Cybersecurity172Properties183Legal proceedings184Mine safety disclosures18Executive officers of the registrant19PartII5Market for registrants common equity,related stockholder matters and issuer purchases of equitysecurities216(Reserved)217Managements discussion and analysis of results of operations and financial condition227A.Quantitative and qualitative disclosures about market risk428Financial statements and supplementary data439Changes in and disagreements with accountants on accounting and financial disclosure1139A.Controls and procedures1139B.Other information1139C.Disclosure regarding foreign jurisdictions that prevent inspections113PartIII10Directors,executive officers and corporate governance11411Executive compensation11412Security ownership of certain beneficial owners and management and related stockholder matters11413Certain relationships and related transactions,and director independence11514Principal accountant fees and services115PartIV15Exhibits and financial statement schedules11616Form 10-K summary116Signatures117Exhibitindex119Cautionary note regarding forward-looking statementsThis Annual Report on Form 10-K and Johnson&Johnsons other publicly available documents contain“forward-looking statements”within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995.Management and representatives of Johnson&Johnson and its subsidiaries(the Company)also may from time to time make forward-looking statements.Forward-looking statements do not relate strictly to historical or current facts and reflect managements assumptions,views,plans,objectives and projections about the future.Forward-looking statements may be identified by the use of words such as“plans,”“expects,”“will,”“anticipates,”“estimates”and other words of similar meaning in conjunction with,among other things:discussions of future operations;expected operating results and financial performance;impact of planned acquisitions and dispositions;impact and timing of restructuring initiatives,including associated cost savings and other benefits;the Companys strategy for growth;product development activities;regulatory approvals;market position and expenditures.Because forward-looking statements are based on current beliefs,expectations and assumptions regarding future events,theyare subject to uncertainties,risks and changes that are difficult to predict and many of which are outside of the Companys control.Investors should realize that if underlying assumptions prove inaccurate,or known or unknown risks or uncertainties materialize,the Companys actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements.Investors are therefore cautioned not to rely on these forward-looking statements.Risks and uncertainties include,but are not limited to:Risks related to product development,market success and competitionChallenges and uncertainties inherent in innovation and development of new and improved products and technologies on which the Companys continued growth and success depend,including uncertainty of clinical outcomes,additional analysis of existing clinical data,obtaining regulatory approvals,health plan coverage and customer access,and initial and continued commercial success;Challenges to the Companys ability to secure and maintain adequate patent and other intellectual property rights for new and existing products and technologies in the United States and other important markets;The impact of patent expirations,typically followed by the introduction of competing generic,biosimilar or other products and resulting revenue and market share losses;Increasingly aggressive and frequent challenges to the Companys patents by competitors and others seeking to launch competing generic,biosimilar or other products and increased receptivity of courts,the United States Patent and Trademark Office and other decision makers to such challenges,potentially resulting in loss of market exclusivity and rapid decline in sales for the relevant product sooner than expected;Competition in research and development of new and improved products,processes and technologies,which can result in product and process obsolescence;Competition to reach agreement with third parties for collaboration,licensing,development and marketing agreements for products and technologies;Competition based on cost-effectiveness,product performance,technological advances and patents attained by competitors;andAllegations that the Companys products infringe the patents and other intellectual property rights of third parties,which could adversely affect the Companys ability to sell the products in question and require the payment of money damages and future royalties.Risks related to product liability,litigation and regulatory activityProduct efficacy or safety concerns,whether or not based on scientific evidence,potentially resulting in product withdrawals,recalls,regulatory action on the part of the United States Food and Drug Administration(U.S.FDA)(or international counterparts),declining sales,reputational damage,increased litigation expense and share price impact;The impact,including declining sales and reputational damage,of significant litigation or government action adverse to theCompany,including product liability claims and allegations related to pharmaceutical marketing practices and contracting strategies;The impact of an adverse judgment or settlement and the adequacy of reserves related to legal proceedings,including patent litigation,product liability,personal injury claims,securities class actions,government investigations,employment and other legal proceedings;Increased scrutiny of the healthcare industry by government agencies and state attorneys general resulting in investigations and prosecutions,which carry the risk of significant civil and criminal penalties,including,but not limited to,debarment from government business;Failure to meet compliance obligations in compliance agreements with governments or government agencies,which could result in significant sanctions;Potential changes to applicable laws and regulations affecting United States and international operations,including relating to:approval of new products;licensing and patent rights;sales and promotion of healthcare products;access to,and reimbursement and pricing for,healthcare products and services;environmental protection;and sourcing of raw materials;Compliance with local regulations and laws that may restrict the Companys ability to manufacture or sell its products in relevant markets,including requirements to comply with medical device reporting regulations and other requirements such as the European Unions Medical Devices Regulation;Changes in domestic and international tax laws and regulations,increasing audit scrutiny by tax authorities around the world may cause exposures to additional tax liabilities potentially in excess of existing reserves;andThe issuance of new or revised accounting standards by the Financial Accounting Standards Board and regulations by the Securities and Exchange Commission.Risks related to the Companys strategic initiatives and healthcare market trendsPricing pressures resulting from trends toward healthcare cost containment,including the continued consolidation among healthcare providers and other market participants,trends toward managed care,the shift toward governments increasingly becoming the primary payors of healthcare expenses,significant new entrants to the healthcare markets seeking to reduce costs and government pressure on companies to voluntarily reduce costs and price increases;Restricted spending patterns of individual,institutional and governmental purchasers of healthcare products and services due to economic hardship and budgetary constraints;Challenges to the Companys ability to realize its strategy for growth including through externally sourced innovations,such as development collaborations,strategic acquisitions,licensing and marketing agreements,and the potential heightened costs of any such external arrangements due to competitive pressures;The potential that the expected strategic benefits and opportunities from any planned or completed acquisition or divestiture by the Company,including the divestment of Kenvue Inc.,may not be realized or may take longer to realize than expected;andThe potential that the expected benefits and opportunities related to past and ongoing restructuring actions may not be realized or may take longer to realize than expected.Risks related to economic conditions,financial markets and operating internationallyThe risks associated with global operations on the Company and its customers and suppliers,including foreign governments in countries in which the Company operates;The impact of inflation and fluctuations in interest rates and currency exchange rates and the potential effect of such fluctuations on revenues,expenses and resulting margins;Potential changes in export/import and trade laws,regulations and policies of the United States and other countries,including any increased trade restrictions or tariffs and potential drug reimportation legislation,and the impact of such changes on raw material prices,supply chains market volatility and the pace of product development;The impact on international operations from financial instability in international economies,sovereign risk,possible imposition of governmental controls and restrictive economic policies,and unstable international governments and legalsystems;The impact of global public health crises and pandemics;Changes to global climate,extreme weather and natural disasters that could affect demand for the Companys products and services,cause disruptions in manufacturing and distribution networks,alter the availability of goods and services within the supply chain,and affect the overall design and integrity of the Companys products and operations;The impact of global or economic changes or events,including global tensions and war;andThe impact of armed conflicts and terrorist attacks in the United States and other parts of the world,including social and economic disruptions and instability of financial and other markets.Risks related to supply chain and operationsDifficulties and delays in manufacturing,internally,through third-party providers or otherwise within the supply chain,that may lead to voluntary or involuntary business interruptions or shutdowns,product shortages,withdrawals or suspensions of products from the market,and potential regulatory action;Interruptions and breaches of the Companys information technology systems or those of the Companys vendors,which could result in reputational,competitive,operational or other business harm as well as financial costs and regulatory action;Reliance on global supply chains and production and distribution processes that are complex and subject to increasing regulatory requirements that may adversely affect supply,sourcing and pricing of materials used in the Companys products;andThe potential that the expected benefits and opportunities related to restructuring actions may not be realized or may take longer to realize than expected,including due to any required approvals from applicable regulatory authorities.Investors also should carefully read the risk factors described in Item 1A of this Annual Report on Form 10-K for a description of certain risks that could,among other things,cause the Companys actual results to differ materially from those expressed in its forward-looking statements.Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and in Item 1A to be a complete statement of all potential risks and uncertainties.The Company does not undertake to publicly update any forward-looking statement that may be made from time to time,whether as a result of new information or future events or developments.PartIItem 1.BusinessGeneralJohnson&Johnson and its subsidiaries(the Company)have approximately 138,100employees worldwide engaged in the research and development,manufacture and sale of a broad range of products in the healthcare field.Johnson&Johnson is a holding company,with operating companies conducting business in virtually all countries of the world.The Companys primary focus is products related to human health and well-being.Johnson&Johnson was incorporated in the State of New Jersey in1887.The Chief Operating Decision Maker(CODM)is the Companys Chief Executive Officer(Principal Executive Officer).The Executive Committee is Johnson&Johnsons senior leadership team responsible for setting the strategy and priorities of the Company and driving accountability at all levels.Within the strategic parameters provided by the Executive Committee,senior management groups at U.S.and international operating companies are each responsible for their own strategic plans and the day-to-day operations of those companies.Segments of businessThe Company is organized into two business segments:Innovative Medicine and MedTech.Additional information required by this item is incorporated herein by reference to the narrative and tabular descriptions of segments and operating results under:Item 7.Managements discussion and analysis of results of operations and financial condition of this Report;and Note17 Segments of business and geographic areas of the notes to consolidated financial statements included in Item 8 of thisReport.Innovative MedicineThe Innovative Medicine segment is focused on the following therapeutic areas:Immunology(e.g.,rheumatoid arthritis,psoriatic arthritis,inflammatory bowel disease and psoriasis),Infectious Diseases(e.g.,HIV/AIDS),Neuroscience(e.g.,mood disorders,neurodegenerative disorders and schizophrenia),Oncology(e.g.,prostate cancer,hematologic malignancies,lung cancer and bladder cancer),Cardiovascular and Metabolism(e.g.,thrombosis,diabetes and macular degeneration)and Pulmonary Hypertension(e.g.,Pulmonary Arterial Hypertension).Medicines in this segment are distributed directly to retailers,wholesalers,distributors,hospitals and healthcare professionals for prescription use.Key products in the Innovative Medicine segment include:REMICADE(infliximab),a treatment for a number of immune-mediated inflammatory diseases;SIMPONI(golimumab),a subcutaneous treatment for adults with moderate to severe rheumatoid arthritis,active psoriatic arthritis,active ankylosing spondylitis and moderately active to severely active ulcerative colitis;SIMPONI ARIA(golimumab),an intravenous treatment for adults with moderate to severe rheumatoid arthritis,active psoriatic arthritis and active ankylosing spondylitis and active polyarticular juvenile idiopathic arthritis(pJIA)in people 2 years of age and older;STELARA(ustekinumab),a treatment for adults and children with moderate to severe plaque psoriasis,for adults with active psoriatic arthritis,for adults with moderately to severely active Crohns disease and treatment of moderately to severely active ulcerative colitis;TREMFYA(guselkumab),a treatment for adults with moderate to severe plaque psoriasis and active psoriatic arthritis and ulcerative colitis;EDURANT(rilpivirine),PREZISTA(darunavir)and PREZCOBIX/REZOLSTA(darunavir/cobicistat),antiretroviral medicines for the treatment of human immunodeficiency virus(HIV)in combination with other antiretroviral products and SYMTUZA(darunavir/cobicistat/emtricitabine/tenofovir alafenamide),a once-daily single tablet regimen for the treatment of HIV;CONCERTA(methylphenidate HCl)extended-release tablets CII,a treatment for attention deficit hyperactivity disorder;INVEGA SUSTENNA/XEPLION(paliperidone palmitate),for the treatment of schizophrenia and schizoaffective disorder in adults;INVEGA TRINZA/TREVICTA(paliperidone palmitate),for the treatment of schizophrenia in patients after they have been adequately treated with INVEGA SUSTENNA for at least four months;SPRAVATO(Esketamine),a nasal spray,used along with an oral antidepressant,to treat adults with treatment-resistant depression(TRD)and depressive symptoms in adults with major depressive disorder(MDD)with suicidal thoughts or actions;CARVYKTI(ciltacabtagene autoleucel),a chimeric antigen receptor(CAR)-T-cell therapy for the treatment of patients with relapsed/refractory multiple 2024 Annual Report1myeloma;ZYTIGA(abiraterone acetate),a treatment for patients with prostate cancer;ERLEADA(apalutamide),anext-generation androgen receptor inhibitor for the treatment of patients with prostate cancer;IMBRUVICA(ibrutinib),atreatment for certain B-cell malignancies,or blood cancers and chronic graft versus host disease;DARZALEX(daratumumab),a treatment for multiple myeloma;DARZALEX FASPRO(daratumumab and hyaluronidase-fihj),a treatment for multiple myeloma and light chain(AL)Amyloidosis;TECVAYLI(teclistamab-cqyv),a ready-to-use bispecific antibody for adults with relapsed or refractory multiple myeloma who have received at least four prior lines of therapy;XARELTO(rivaroxaban),an oral anticoagulant for the prevention of deep vein thrombosis(DVT),which may lead to pulmonary embolism(PE)in patients undergoing hip or knee replacement surgery,to reduce the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation,and for the treatment and reduction of risk of recurrence of DVT and PE to reduce the risk of major cardiovascular events in patients with coronary artery disease(CAD)and peripheral artery disease(PAD),for the treatment and secondary prevention of thromboembolism in pediatric patients,and for thromboprophylaxis in pediatric patients following the Fontan procedure;OPSUMIT(macitentan)as monotherapy or in combination,indicated for the long-term treatment of pulmonary arterial hypertension(PAH);UPTRAVI(selexipag),the only approved oral and intravenous,selective IP receptor agonist targeting a prostacyclin pathway in PAH.Many of these medicines were developed in collaboration with strategic partners or are licensed from other companies and maintain active lifecycle developmentprograms.MedTechThe MedTech segment includes a broad portfolio of products used in the cardiovascular,orthopaedics,surgery,and vision categories.The Cardiovascular(previously referred to as Interventional solutions)portfolio includes electrophysiology products to treat heart rhythm disorders,the heart recovery portfolio(Abiomed)which includes technologies to treat severe coronary artery disease requiring high-risk PCI or AMI cardiogenic shock,circulatory restoration products(Shockwave)for the treatment of calcified coronary artery disease(CAD)and peripheral artery disease(PAD),and neurovascular care that treats hemorrhagic and ischemic stroke.The Orthopaedics portfolio includes products and enabling technologies that support hips,knees,trauma,spine,sports,and others.The Surgery portfolios include advanced and general surgery technologies,as well as solutions that focus on breast aesthetics and reconstruction(Mentor).Vision products include ACUVUE brand contact lenses and TECNIS intraocular lenses for cataract surgery.These products are distributed to wholesalers,hospitals,and retailers and are used predominantly in the professional fields by physicians,nurses,hospitals,eye care professionals,and clinics.Geographic areasThe Company conducts business in virtually all countries of the world with the primary focus on products related to human health and well-being.The products made and sold in the international business include many of those described above under Segments of Business Innovative Medicine and MedTech.However,the principal markets,products and methods of distribution in the international business vary with the country and the culture.The products sold in the international business include those developed in the U.S.and by subsidiaries abroad.Investments and activities in some countries outside the U.S.are subject to higher risks than comparable U.S.activities because the investment and commercial climate may be influenced by financial instability in international economies,restrictive economic policies and political and legal system uncertainties.Raw materialsRaw materials essential to the Companys business are generally readily available from multiple sources.Where there are exceptions,the temporary unavailability of those raw materials would not likely have a material adverse effect on the financial results of the Company.PatentsThe Companys subsidiaries have made a practice of obtaining patent protection on their products and processes where possible.They own,or are licensed under,a significant number of patents in the U.S.and other countries relating to their products,product uses,formulations and manufacturing processes,which in the aggregate are believed to be of material importance to the Company in the operation of its businesses.The Companys subsidiaries face patent challenges from third parties,including challenges seeking to manufacture and market generic and biosimilar versions of the Companys key pharmaceutical products prior to expiration of the applicable patents covering those products.Significant legal proceedings 2and claims involving the Companys patent and other intellectual property are described in Note 19 Legal proceedingsIntellectual property of the Notes to Consolidated Financial Statements included in Item 8 of this Report.Sales of the Companys largest product,collectively DARZALEX(daratumumab)and DARZALEX FASPRO(daratumumab and hyaluronidase-fihj),accounted for approximately 13.1%of the Companys total revenues for fiscal 2024.Accordingly,the patents related to these products are believed to be material to the Company.Genmab A/S owns two patent families related to DARZALEX,and Janssen Biotech,Inc.has an exclusive license to those patent families.The two patent families both expire in the United States in 2029,and in Europe,compound/use patent protection in select countries extends to 2031/2032.Janssen Biotech,Inc.owns a separate patent portfolio related to DARZALEX FASPRO.Sales of the Companys second largest product,STELARA(ustekinumab)accounted for approximately 11.7%of the Companys total revenues for fiscal 2024.According to patent settlement and license agreements,the Company expects continued launches of biosimilar versions of STELARA in Europe and the United States in 2025 which will impact the Companys sales ofSTELARA.TrademarksThe Companys subsidiaries have made a practice of selling their products under trademarks and of obtaining protection for these trademarks by all available means.These trademarks are protected by registration in the U.S.and other countries where such products are marketed.The Company considers these trademarks in the aggregate to be of material importance in the operation of its businesses.SeasonalityWorldwide sales do not reflect any significant degree of seasonality;however,spending has typically been heavier in the fourth quarter of each year than in other quarters.This reflects increased spending decisions,principally for advertising and research and development activity.CompetitionIn all of their product lines,the Companys subsidiaries compete with companies both locally and globally.Competition exists inall product lines without regard to the number and size of the competing companies involved.Competition in research,bothinternally and externally sourced,involving the development and the improvement of new and existing products and processes,is particularly significant.The development of new and innovative products,as well as protecting the underlying intellectual property of the Companys product portfolio,is important to the Companys success in all areas of its business.Thecompetitive environment requires substantial investments in continuing research.EnvironmentThe Company is subject to a variety of environmental laws and regulations in the United States and other jurisdictions.The Company believes that its operations comply in all material respects with applicable environmental laws and regulations.The Companys compliance with these requirements is not expected to have a material effect upon its capital expenditures,cash flows,earnings or competitive position.RegulationThe Companys businesses are subject to varying degrees of governmental regulation in the countries in which operations are conducted,and the general trend is toward increasingly stringent regulation and enforcement.The Company is subject to costly and complex U.S.and foreign laws and governmental regulations,and any adverse regulatory action may materially adversely affect the Companys financial condition and business operations.In the U.S.,the pharmaceutical product and medical technology industries have long been subject to regulation by various federal and state agencies,primarily as to product safety,efficacy,manufacturing,advertising,labeling and safety reporting.The exercise of broad regulatory powers by the U.S.Food and Drug Administration(the U.S.FDA)continues to result in increases in the amounts of testing and documentation required for U.S.FDA approval of new drugs and devices and a corresponding increase in the expense of product introduction.Similar trends are also evident in major markets outside of the U.S.2024 Annual Report3The medical device regulatory framework and the evolving privacy,data localization,and emerging cyber security laws and regulations around the world are examples of such increased regulation.Within the U.S.,an increasing number of U.S.States have enacted comprehensive privacy laws,and federal regulators(e.g.,the U.S.FDA,FTC and HHS)continue to stress the intersection of health and privacy as a compliance and enforcement priority.In the EU,multiple directives and laws(including NIS2,EHDS,the Data Act,the Cyber Resilience Act,and the AI Act)are rapidly changing privacy and cybersecurity compliance requirements while introducing new enforcement risks.In addition,China has introduced broad personal information protection and data security regulations,with more anticipated,thereby increasing Chinas scrutiny of company compliance and data transfer practices.With other jurisdictions enacting similar privacy laws,local data protection authorities will force greater accountability on the collection,access and use of personal data in the healthcare industry.These laws can also restrict transfers of data across borders,potentially impacting how data-driven health care solutions are developed and deployed globally in a compliant manner.Moreover,as a result of the broad scale release and availability of Artificial Intelligence(AI)technologies such as generative AI,a global trend towards more comprehensive and nuanced regulation to ensure the ethical use,privacy,and security of AI is underway that includes standards for transparency,accountability,and fairness,which will require compliance developments or enhancements.The regulatory agencies under whose purview the Company operates have administrative powers that may subject it to actions such as product withdrawals,recalls,seizure of products and other civil and criminal sanctions.In some cases,the Companys subsidiaries may deem it advisable to initiate product recalls regardless of whether it has been required or directed to.The U.S.FDA and regulatory agencies around the globe are also increasing their enforcement activities.If the U.S.FDA were to conclude that we are not in compliance with applicable laws or regulations,or that any of our pharmaceutical products or medical technologies are ineffective or pose an unreasonable safety risk,the U.S.FDA could ban such products,detain or seize adulterated or misbranded products,order a recall,repair,replacement,or refund of such products,withdraw approval for such products,refuse to grant pending applications for marketing authorization or require certificates of foreign governments for exports,and/or require us to notify health professionals and others that the products present unreasonable risks of substantial harm to the public health.The U.S.FDA may also assess civil or criminal penalties against us,our officers or employees and impose operating restrictions on a company-wide basis,or enjoin and/or restrain certain conduct resulting in violations of applicable law.The U.S.FDA may also recommend prosecution to the U.S.Department of Justice.Any adverse regulatory action,depending on its magnitude,may restrict us from effectively marketing and selling our products and limit our ability to obtain future clearances,classifications or approvals,and could result in a substantial modification to our business practices and operations.Equivalent enforcement mechanisms exist in different countries in which we conduct business.The costs of human healthcare have been and continue to be a subject of study,investigation and regulation by governmental agencies and legislative bodies around the world.In the U.S.,attention has been focused by states,regulatory agencies and Congress on prices,profits,overutilization and the quality and costs of healthcare generally.Laws and regulations have been enacted to require adherence to strict compliance standards and prevent fraud and abuse in the healthcare industry.There is increased focus on interactions and financial relationships between healthcare companies and healthcare providers.Various state and federal transparency laws and regulations require disclosures of payments and other transfers of value made to certain healthcare practitioners,including physicians,teaching hospitals,and certain non-physician practitioners.Federal and foreign laws governing international business practices require strict compliance with anti-bribery standards and certain prohibitions with respect to payments to any foreign government official.Payors and Pharmacy Benefit Managers(PBMs)are a potent force in the marketplace,and increased attention is being paid to the impact of PBM practices on healthcare cost and access in the U.S.Our business has been and continues to be affected by federal and state legislation that alters the pricing,coverage,and reimbursement landscape.At the federal level,in August 2022,President Biden signed into law the Inflation Reduction Act(IRA),which includes provisions that effectively authorize the government to establish prices for certain high-spend single-source drugs and biologics reimbursed by the Medicare program,starting in 2026 for Medicare Part D drugs and 2028 for Medicare Part B drugs.On August 29,2023,the Centers for Medicare&Medicaid Services(“CMS”)published the first“Selected Drug”list,which includes XARELTO and STELARA as well as IMBRUVICA,which is developed in collaboration and co-commercialized in the U.S.with Pharmacyclics LLC,an AbbVie company.The Selected Drug list also included other medicines targeting disease states that are prevalent in the Medicare population.Although CMS published an explanation for how it determined prices for selected drugs in December 2024,uncertainty remains as to the methodology used to determine these prices.The IRA specifies a ceiling price but not a minimum price for selected drugs and does not require CMS to use a specific framework for determining selected drug prices.In any event,we anticipate that the selected products will be subjected to a government-established price for the Medicare population beginning in 2026.4The IRA also contains provisions that impose rebates if certain prices increase at a rate that outpaces the rate of inflation,beginning October 1,2022,for Medicare Part D drugs and January 1,2023,for Medicare Part B drugs.Separate IRA provisions redesign the Medicare Part D benefit in various ways,including by shifting a greater portion of costs to manufacturers within certain coverage phases and replacing the Part D coverage gap discount program with a new manufacturer discounting program.Failure to comply with IRA provisions may subject manufacturers to various penalties,including civil monetarypenalties.In July 2023,Janssen Pharmaceuticals,Inc.(Janssen)filed litigation against the U.S.Department of Health and Human Services as well as the Centers for Medicare and Medicaid Services challenging the constitutionality of the IRAs Medicare Drug Price Negotiation Program.The litigation requests a declaration that the IRA violates Janssens rights under the First Amendment and the Fifth Amendment to the Constitution and therefore that Janssen is not subject to the IRAs mandatory pricing scheme.The impact of the IRA on our business and the broader pharmaceutical industry remains uncertain,as litigation filed by Janssen and other pharmaceutical companies remains ongoing and while CMS has publicly announced the maximum fair price for each of the selected drugs,implementation of the program is still in progress.In April 2024,Janssen appealed the district courts denial of its summary judgment motion to the Third Circuit.Additionally,we expect continued scrutiny on drug pricing and government price reporting from Congress,agencies,and other bodies at the federal and state levels,which may result in additional regulations or other mechanisms to increase pricing transparency and controls.There are a number of additional bills pending in Congress and healthcare reform proposals at the state level that would affect drug pricing,including in the Medicare and Medicaid programs.This changing legal landscape has both positive and negative impacts on the U.S.healthcare industry with much remaining uncertain as to how various provisions of federal and state law,and potential modification or repeal of these laws,will ultimately affect the industry.The IRA and any other federal or state legislative change could affect the pricing and market conditions for our products.In addition,business practices in the healthcare industry have come under increased scrutiny,particularly in the U.S.,by government agencies and state attorneys general,and resulting investigations and prosecutions carry the risk of significant civil and criminal penalties.Of note is the increased enforcement activity by data protection authorities in various jurisdictions,particularly in the European Union,where significant fines have been levied on companies for data breaches,violations of privacy requirements,and unlawful cross-border data transfers.In the U.S.,the Federal Trade Commission has stepped up enforcement of data privacy with several significant settlements(including settlements concerning the downstream sharing of personal information and use and disclosure of personal health data)and there have been a material increase in class-action lawsuits linked to the collection and use of biometric data and use of tracking technologies.Further,the Company relies on global supply chains,and production and distribution processes,that are complex,and subject to increasing regulatory requirements that may affect sourcing,supply and pricing of materials used in the Companys products.These processes also are subject to complex and lengthy regulatory approvals.2024 Annual Report5Employees and human capital managementAs of December29,2024 and December 31,2023 the number of employees was approximately:20242023Employees(1)139,800 134,400 Full-time equivalent(FTE)positions(2)138,100 131,900(1)“Employee”is defined as an individual working full-time or part-time,excluding fixed term employees,interns and co-op employees.Employee data may not include full population from more recently acquired companies and individuals on long-term disability are excluded.Contingent workers,contractors and subcontractors are also excluded.Shockwave has been included in the fiscal 2024 headcount in the above table.(2)FTE represents the total number of full-time equivalent positions and does not reflect the total number of individual employees as some work part-time.Employees by region(in percentages)34.5.5(.0 .0%Asia PacificEMEALatin AmericaNorth AmericaStrategyThe Company believes that its employees are critical to its continued success and are an essential element of its long-term strategy.Management is responsible for ensuring that its policies and processes reflect and reinforce the Companys desired corporate culture,including policies and processes related to strategy,risk management,and ethics and compliance.The Companys human capital management strategy is built on three fundamental focus areas:Attracting and recruiting top talentDeveloping and retaining top talentEmpowering and inspiring talentUnderpinning these focus areas are ongoing efforts to cultivate and foster a culture built on innovation,health,well-being and safety,inclusion and belonging where the Companys employees are encouraged to succeed both professionally and personally while helping the Company achieve its business goals.Culture and employee engagementAt Johnson&Johnson,employees are guided by Our Credo,which sets forth the Companys responsibilities to patients,consumers,customers,healthcare professionals,employees,communities and shareholders.Employees worldwide must adhere to the Companys Code of Business Conduct,which sets fundamental requirements and serves as a foundation for the Company policies,procedures and guidelines,all of which provide additional guidance on expected employee behaviors in every market where it operates.The Company conducts global surveys that offer its employees the ability to provide feedback and valuable insight to help address potential human resources risks and identify opportunities to improve.In 2024,94%of global employees across 73 countries participated in Our Credo Survey which was offered in 36 languages.6Growth and developmentTo lead in the changing healthcare landscape,it is crucial that the Company continue to attract and retain top talent.In 2024,the Companys voluntary turnover rate was 6.3%.The Company believes that its employees must be equipped with the right knowledge and skills and be provided with opportunities to grow and develop in their careers.Accordingly,professional development programs and educational resources are available to all employees.The Companys objective is to foster a learning culture that helps shape each persons unique career path while creating a robust pipeline of talent to deliver on the Companys long-term strategies.In furtherance of this objective,the Company deploys a global approach to ensure development is for everyone,regardless of where they are on their career journey.To prioritize learning,the Company recently held Johnson&Johnsons second Global Learning Day.Employees were encouraged to set aside a full day to explore skill-building courses on J&J Learn,the new state-of-the-art learning platform.Our workforceAs stated in Our Credo,we are responsible to our employees who work with us throughout the world.The Company is committed to cultivating,fostering and advancing an inclusive,credo-based work environment for employees that recognizes and rewards based on merit.The Company is dedicated to the values in Our Credo and strives to meet the needs of its employees and stakeholders through compliance with law and the following evidence based strategies:Sustain a global workforce of individuals with many different backgrounds,abilities,cultures and perspectives Maintain a work environment where each persons dignity is respected and they have an opportunity to advance based on their meritDrive innovation and growth with our business to serve markets around the world Our approach with respect to our workforce is guided by applicable laws,internal and external insights,global best practices and employee feedback.Compensation and benefitsAs part of the Companys total rewards philosophy,the Company offers competitive compensation and benefits to attract and retain top talent.The Company is committed to fair treatment in its compensation and benefits for employees at all levels.The Company observes legal minimum wage provisions and exceeds them where possible.The Companys total rewards offerings include an array of programs to support its employees well-being,including annual performance incentive opportunities,pension and retirement savings programs,health and welfare benefits,paid time off,leave programs,flexible work schedules and employee assistance programs.Health,wellness and safetyThe Companys investment in employee health,well-being and safety is built on its conviction that advancing health for humanity starts with advancing the health of its employees.With the right awareness,focus,practices and tools,the Company works to ensure that all its employees around the world,as well as contingent workers,contractors and visitors to the Companys sites,can work safely.The Company has continuously expanded health and well-being programs throughout the Company and across the globe,incorporating new thinking and technologies to keep its offerings best-in-class and to help employees achieve their personal health goals.The programs and practices the Company providesphysical,mental,emotional and financialhelp promote holistic employee health.The Company continues to address our employees needs through J&J Flex,a hybrid model that empowers the Companys office-based employees to find a balance of in-person and remote work,while preserving the Companys culture and need for face-to-face engagement and leadership.2024 Annual Report7Available informationThe Companys main corporate website address is .The Company makes its SEC filings available on the Companys website at soon as reasonably practicable after having been electronically filed or furnished to the SEC.The Companys SEC filings are also available at the SECs website at www.sec.gov.Investors and the public should note that the Company also announces information through its press releases and media statements at and .We use these websites to communicate with investors and the public about our products,litigation and other matters.It is possible that the information we post to these websites could be deemed to be material information.Therefore,we encourage investors and others interested in the Company to review the information posted to these websites in conjunction with ,the Companys SEC filings,press releases,public conference calls and webcasts.In addition,the Restated Certificate of Incorporation,as amended,Amended and Restated By-Laws,the written charters of the Audit Committee,the Compensation&Benefits Committee,the Nominating&Corporate Governance Committee,the Regulatory Compliance&Sustainability Committee,and the Science&Technology Committee of the Board of Directors,and the Companys Principles of Corporate Governance,Code of Business Conduct(for employees),Code of Business Conduct&Ethics for Members of the Board of Directors and Executive Officers,and other corporate governance materials are available on the Companys website at and will be provided without charge to any shareholder submitting a written request,as provided above.The information on , and is not,and will not be deemed,a part of this Report or incorporated into any other filings the Company makes with the SEC.8Item 1A.Risk factorsAn investment in the Companys common stock or debt securities involves risks and uncertainties.The Company seeks to identify,manage and mitigate risks to our business,but uncertainties and risks are difficult to predict and many are outside of the Companys control and cannot therefore be eliminated.In addition to the other information in this report and the Companys other filings with the SEC,investors should consider carefully the factors set forth below.Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties.If known or unknown risks or uncertainties materialize,the Companys business,results of operations or financial condition could be adversely affected,potentially in a material way.Risks related to our business,industry and operationsThe Companys businesses operate in highly competitive product markets and competitive pressures could adversely affect the Companys earnings.The Company faces substantial competition in its two operating segments and in all geographic markets.The Companys businesses compete with companies of all sizes on the basis of cost-effectiveness,technological innovations,intellectual property rights,product performance,real or perceived product advantages,pricing and availability and rate of reimbursement.The Company also competes with other market participants in securing rights to acquisitions,collaborations and licensing agreements with third parties.Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company.Competitors development of more effective or less costly products,and/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company,could negatively impact sales of the Companys existing products as well as its ability to bring new products to market despite significant prior investment in the related product development.The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products,successfully integrate operations and employees,and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management,operations and financial resources.For the Companys Innovative Medicine businesses,loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic,biosimilar and other competing products and enter the market.For the Companys MedTech businesses,technological innovation,product quality,reputation and customer service are especially important to competitiveness.Development by other companies of new or improved products,processes and technologies could threaten to make the Companys products or technologies less desirable,less economical or obsolete.The Companys business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe,more effective,more effectively marketed or otherwise outperform those of our competitors.Interruptions and delays in manufacturing operations could adversely affect the Companys business,sales andreputation.The Companys manufacturing of products requires the timely delivery of sufficient amounts of complex,high-quality components and materials.The Companys subsidiaries operate 64 manufacturing facilities as well as sourcing from thousands of suppliers around the world.The Company has in the past,and may in the future,face unanticipated interruptions and delays in manufacturing through its internal or external supply chain.Manufacturing disruptions can occur for many reasons including regulatory action,production quality deviations or safety issues,labor disputes,labor shortages,site-specific incidents(such as fires),natural disasters such as hurricanes and other severe weather events,raw material shortages,lack of available inspectors,political unrest,terrorist attacks and epidemics or pandemics.Such delays and difficulties in manufacturing can result in product shortages,declines in sales and reputational impact as well as significant remediation and related costs associated with addressing theshortage.The Company relies on third parties to manufacture and supply certain of our products.Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs,which may adversely affect our business.The Company relies on third parties to manufacture and supply certain of our raw materials,component parts and products.We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs,to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices.However,we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements,which could result in lost sales and have an adverse effect on our business.2024 Annual Report9Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance,misappropriation of the Companys intellectual property,limited ability to manage our inventory,possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us.Moreover,if any of our third-party manufacturers suffers any damage to facilities,loses benefits under material agreements,experiences power outages,encounters financial difficulties,is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency,the Company may experience significant business disruption.In the event of any such disruption,the Company would need to seek and source other qualified third-party manufacturers,likely resulting in further delays and increased costs which could affect our business adversely.Counterfeit versions of our products could harm our patients and have a negative impact on our revenues,earnings,reputation and business.Our industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet.Third parties may illegally distribute and sell counterfeit versions of our products,which do not meet our rigorous manufacturing and testing standards.To distributors and patients,counterfeit products may be visually indistinguishable from the authentic version.Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured often in unregulated,unlicensed,uninspected and unsanitary sites as well as the lack of regulation of their contents.The industrys failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products,potentially resulting in lost sales,product recalls,and an increased threat of litigation.In addition,diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.Global health crises,pandemics,epidemics,or other outbreaks could adversely disrupt or impact certain aspects of the Companys business,results of operations and financial condition.We are subject to risks associated with global health crises,epidemics,pandemics and other outbreaks(such incident(s),a health crisis or health crises).The spread of health crises have caused and may cause the Company to modify its business practices,and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients,customers,employees and business partners under such circumstances.Impacts to the Company have included and may include adverse impacts to results of operations and financial condition,including lower sales and reduced customer demand and usage of certain of our products.While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises,these efforts may not completely prevent our business from being adversely affected in the event of a health crisis.Health crises could adversely impact the Companys operations,including,among other things,our manufacturing operations,supply chain,third-party suppliers,sales and marketing,and clinical trial operations.Any of these factors could adversely affect the Companys business,financial results,and global economic conditions generally.Risks related to government regulation and legal proceedingsGlobal sales in the Companys Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.Sales of the Companys Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs,private insurance plans and managed care organizations.As part of various efforts to contain healthcare costs,these payors are putting downward pressure on prices at which products will be reimbursed.In the U.S.,increased purchasing power of entities that negotiate on behalf of Medicare,Medicaid,and private sector beneficiaries,in part due to continued consolidation among healthcare providers,could result in further pricing pressures.In addition,recent legislation and ongoing political scrutiny on pricing,coverage and reimbursement could result in additional pricing pressures.Specifically,the Inflation Reduction Act of 2022(IRA)has changed Medicare Part D benefit design and has subjected certain of the Companys products to government-established pricing beginning in 2026 and may subject additional products in the future.Failure to adhere to the governments interpretations of the law pending ongoing litigation may expose the Company to penalties.In addition,change to Medicare Part D could have a negative impact on U.S.Innovative Medicine sales.Further,increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute and program abuse may have a negative impact on the Companys financial performance.Outside the U.S.,numerous major markets,including the EU,United Kingdom,Japan and China,have pervasive government involvement in funding healthcare and,in that regard,directly or indirectly impose price controls,limit access to,or reimbursement for,the Companys products,or reduce the value of its intellectual propertyprotection.10We are subject to an increasing number of costly and complex governmental regulations in the countries in which operations are conducted which may materially adversely affect the Companys financial condition and businessoperations.As described in Item 1.Business,the Company is subject to an increasing number of extensive government laws and regulations,investigations and legal action by national,state and local government agencies in the U.S.and other countries in which it operates.For example,changes to the U.S.FDAs timing or requirements for approval or clearance of our products may have a negative impact on our ability to bring new products to market.New and changing laws,regulations,executive orders and other directives may also impose deadlines on the Company,or its third-party suppliers,manufacturers or other partners and providers,for which there may be insufficient time to implement changes to comply with such new regulations and may result in manufacturing delays or other supply chain constraints.If the Company is unable to identify ways to mitigate these delays or constraints,there may be an adverse effect on sales and access to our products.The Company is subject to significant legal proceedings that can result in significant expenses,fines and reputationaldamage.In the ordinary course of business,Johnson&Johnson and its subsidiaries are subject to numerous claims and lawsuits involving various issues such as product liability,patent disputes and claims that their product sales,marketing and pricing practices violate various antitrust,unfair trade practices and/or consumer protection laws.The Companys more significant legal proceedings are described in Note 19 Legal proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report.Litigation,in general,and securities,derivative action,class action and multi-district litigation,in particular,can be expensive and disruptive.Some of these matters may include thousands of plaintiffs,may involve parties seeking large and/or indeterminate amounts,including punitive or exemplary damages,and may remain unresolved for several years.For example,the Company is a defendant in numerous lawsuits arising out of the use of body powders containing talc,primarily JOHNSONS Baby Powder.While the Company believes it has substantial defenses in these matters,it is not feasible to predict the ultimate outcome of litigation.The Company has been and could in the future be required to pay significant amounts as a result of settlements or judgments in these matters,potentially in excess of accruals,including matters where the Company could be held jointly and severally liable among other defendants.The resolution of,or increase in accruals for,one or more of these matters in any reporting period could have a material adverse effect on the Companys results of operations and cash flows for that period.The Company does not purchase third-party product liability insurance;however,the Company utilizes a wholly owned captive insurance company subject to certain limits.Product reliability,safety and effectiveness concerns can have significant negative impacts on sales and results of operations,lead to litigation and cause reputational damage.Product concerns,whether raised internally or by litigants,regulators or consumer advocates,and whether or not based on scientific evidence,can result in safety alerts,product recalls,governmental investigations,regulatory action on the part of the U.S.FDA(or its counterpart in other countries),private claims and lawsuits,payment of fines and settlements,declining sales and reputational damage.These circumstances can also result in damage to brand image,brand equity and consumer trust in the Companys products.Product recalls have in the past,and could in the future,prompt government investigations and inspections,the shutdown of manufacturing facilities,continued product shortages and related sales declines,significant remediation costs,reputational damage,possible civil penalties and criminal prosecution.The Company faces significant regulatory scrutiny,which imposes significant compliance costs and exposes the Company to government investigations,legal actions and penalties.The rapid increase in new government laws and regulations imposes significant compliance costs to the Company and a failure of the Company to timely implement changes to comply with these new laws may expose the Company to investigations,legal actions or penalties.Regulatory issues regarding compliance with current Good Manufacturing Practices(cGMP)(and comparable quality regulations in foreign countries)by manufacturers of drugs and devices can lead to fines and penalties,product recalls,product shortages,interruptions in production,delays in new product approvals and litigation.In addition,the marketing,pricing and sale of the Companys products are subject to regulation,investigations and legal actions including under the Federal Food,Drug,and Cosmetic Act,the Medicaid Rebate Program,federal and state false claims acts,state unfair trade practices acts and consumer protection laws.Scrutiny of healthcare industry business practices by government agencies and state attorneys general in the U.S.,and any resulting investigations and prosecutions,carry risk of significant civil and criminal penalties including,but not limited to,debarment from participation in government healthcare programs.Any such debarment could have a material adverse effect on the Companys business and results of operations.The most significant current investigations and litigation brought by government agencies are described in Note 19 Legal proceedingsGovernment proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report.2024 Annual Report11Changes in tax laws or exposures to additional tax liabilities could negatively impact the Companys operating results.Changes in tax laws or regulations around the world,including in the U.S.and as led by the Organization for Economic Cooperation and Development,such as the enactment by certain EU and non-EU countries,and the anticipated enactment by additional countries,of a global minimum tax,could negatively impact the Companys effective tax rate and results of operations.A change in statutory tax rate or certain international tax provisions in any country would result in the revaluation of the Companys deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted.This change would result in an expense or benefit recorded to the Companys Consolidated Statement of Earnings.The Company closely monitors these proposals as they arise in the countries where it operates.Changes to tax laws or regulations may occur at any time,and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted.See Note 8 Income taxes under Notes to the Consolidated Financial Statements included in Item 8 of this Report for additionalinformation.The Company conducts business and files tax returns in numerous countries and is addressing tax audits and disputes with many tax authorities.In connection with various government initiatives,companies are required to disclose more information to tax authorities on operations around the world,which may lead to greater audit scrutiny of profits earned in other countries.The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves.However,any tax authority could take a position on tax treatment that is contrary to the Companys expectations,which could result in tax liabilities in excess of reserves.Risks related to our intellectual propertyThe Company faces increased challenges to intellectual property rights central to its business.The Company owns or licenses a significant number of patents and other proprietary rights relating to its products and manufacturing processes.These rights are essential to the Companys businesses and the inability of the Company to secure and maintain these rights may have a detrimental impact on the Companys financial results.Public policy,both within and outside the U.S.,has become increasingly unfavorable toward intellectual property rights.The Company cannot be certain that it will secure and maintain adequate patent protection for new products and technologies in the United States and other important markets.Competitors routinely challenge the validity or extent of the Companys owned or licensed patents and proprietary rights through litigation,interferences,oppositions and other proceedings,such as inter partes review(IPR)proceedings before the United States Patent&Trademark Office(USPTO).These proceedings absorb resources and can be protracted as well as unpredictable.In addition,others may claim the Company has infringed their intellectual property rights,including copyrights,patents,or trademarks,and/or has misappropriated their trade secrets,any of which could result in an injunction and/or the need to pay past damages and future royalties and adversely affect the competitive position and sales of our products.The Company has faced increasing patent challenges from third parties seeking to manufacture and market generic and biosimilar versions of the Companys key pharmaceutical products prior to expiration of the applicable patents covering those products.In the event the Company is not successful in defending its patents against such challenges,or upon the“at-risk”launch by the generic or biosimilar firm of its product,the Company can lose a major portion of revenues for the referenced product in a very short period of time.Current legal proceedings involving the Companys patents and other intellectual property rights are described in Note 19 Legal proceedingsIntellectual property under Notes to the Consolidated Financial Statements included in Item 8 of this Report.12Risks related to product development,regulatory approval andcommercializationSignificant challenges or delays in the Companys innovation,development and implementation of new products,technologies and indications could have an adverse impact on the Companys long-term success.The Companys continued growth and success depends on its ability to innovate and develop new and differentiated products and services that address the evolving healthcare needs of patients,providers and consumers.Development of successful products and technologies is also necessary to offset revenue losses when the Companys existing products lose market share due to various factors such as competition and loss of patent exclusivity.New products introduced within the past five years accounted for approximately 25%of 2024 sales.The Company cannot be certain when or whether it will be able to develop,license or otherwise acquire companies,products and technologies,whether particular product candidates will be granted regulatory approval,and,if approved,whether the products will be commercially successful.The Company pursues product development through internal research and development as well as through collaborations,acquisitions,joint ventures and licensing or other arrangements with third parties.In all of these contexts,developing new products,particularly pharmaceutical and biotechnology products and medical devices,requires significant investment of resources over many years.Only a very few biopharmaceutical research and development programs result in commercially viable products.The process depends on many factors including the ability to:discern patients and healthcare providers future needs;develop promising new compounds,strategies and technologies;achieve successful clinical trial results;secure effective intellectual property protection;obtain regulatory approvals on a timely basis;and,if and when they reach the market,successfully differentiate the Companys products from competing products and approaches to treatment.Moreover,the development and regulatory approval of new products may be delayed due to limits on federal agency budgets or personnel,including reductions to the U.S.FDAs budget,employees,and operations,which may lead to slower response times and longer review periods.After approval,new products or enhancements to existing products may not be accepted quickly or significantly in the marketplace due to product and price competition,changes in customer preferences or healthcare purchasing patterns,resistance by healthcare providers or uncertainty over third-party reimbursement.Even following initial regulatory approval,the success of a product can be adversely impacted by safety and efficacy findings in larger real-world patient populations,as well as market entry of competitive products.The Company leverages the use of data science,machine learning and other forms of AI and emerging technologies across varying parts of its business and operations,and the introduction and incorporation of AI may result in unintended consequences or other new or expanded risks and liabilities.AI technology is continuously evolving,and the AI technologies we develop and adopt may become obsolete earlier than planned.Our investments in these technologies may not result in the benefits we anticipate or enable us to obtain or maintain a competitive advantage.The application of AI in our business is emerging and evolving alongside new laws and regulations that may entail significant costs or ultimately limit our ability to continue the use of these technologies.These technologies also carry inherent risks related to data privacy and security further described below.Risks related to financial and economic market conditionsThe Company faces a variety of financial,economic,legal,social and political risks associated with conducting businessinternationally.The Companys extensive operations and business activity throughout the world are accompanied by certain financial,economic,legal,social and political risks,including those listed below.Foreign currency exchange:In fiscal 2024,approximately 43%of the Companys sales occurred outside of the U.S.,with approximately 23%in Europe,5%in the Western Hemisphere,excluding the U.S.,and 15%in the Asia-Pacific and Africa region.Changes in non-U.S.currencies relative to the U.S.dollar impact the Companys revenues and expenses.While the Company uses financial instruments to mitigate the impact of fluctuations in currency exchange rates on its cash flows,unhedged exposures continue to be subject to currency fluctuations.In addition,the weakening or strengthening of the U.S.dollar may result in significant favorable or unfavorable translation effects when the operating results of the Companys non-U.S.business activity are translated into U.S.dollars.Inflation and currency devaluation risks:The Company faces challenges in maintaining profitability of operations in economies experiencing high inflation rates.Specifically,the Company has accounted for operations in Argentina,Turkey,Venezuela and Egypt(beginning in the fiscal fourth quarter of 2024)as highly inflationary,as the prior three-year cumulative inflation rate surpassed 100%.While the Company strives to maintain profit margins in these areas through cost reduction programs,productivity improvements and periodic price increases,it might experience operating losses as a result of continued inflation.2024 Annual Report13In addition,the impact of currency devaluations in countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Companys operating results.Illegal importation of pharmaceutical products:The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Companys sales and profitability in the U.S.and other countries in which the Company operates.With the exception of limited quantities of prescription drugs for personal use,foreign imports of pharmaceutical products are illegal under current U.S.law.However,the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.Anti-bribery and other regulations:The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials.Those laws include the U.S.Foreign Corrupt Practices Act(FCPA),which prohibits U.S.publicly traded companies from promising,offering,or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage.The Companys business is heavily regulated and therefore involves significant interaction with foreign officials.Also,in many countries outside the U.S.,the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities;therefore,the Companys interactions with these prescribers and purchasers are subject to regulation under the FCPA.In addition to the U.S.application and enforcement of the FCPA,various jurisdictions in which the Company operates have laws and regulations,including the U.K.Bribery Act 2010,aimed at preventing and penalizing corrupt and anticompetitive behavior.Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions,which could include claims for civil penalties,criminal sanctions,and administrative remedies,including exclusion from healthcare programs.Other financial,economic,legal,social and political risks.Other risks inherent in conducting business globally include:local and regional economic environments and policies in the markets that we serve,including interest rates,monetary policy,inflation,economic growth,recession,commodity prices,and currency controls or other limitations on the ability to expatriate cash;protective economic policies taken by governments,such as trade protection measures,increased antitrust reporting requirements and enforcement activity,and import/export licensingrequirements;compliance with local regulations and laws including,in some countries,regulatory requirements restricting the Companys ability to manufacture or sell its products in the relevant market;diminished protection of intellectual property and contractual rights in certain jurisdictions;potential nationalization or expropriation of the Companys foreign assets;political or social upheavals,economic instability,repression,or human rights issues;and geopolitical events,including natural disasters,disruptions to markets due to war,armed conflict,terrorism,epidemics orpandemics.Due to the international nature of the Companys business,geopolitical or economic changes or events,including global tensions and war,could adversely affect our business,results of operations or financial condition.As described above,the Company has extensive operations and business activity throughout the world.Global tensions,conflict and/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility,decreased demand for our products in affected countries,and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers.Most recently,we have experienced,and expect to continue to experience,impacts to the Companys business resulting from the Russia-Ukraine war,rising conflict in the Middle East as well as increasing tensions between the U.S.and China.In response to heightened conflict,such as the Russia-Ukraine war,governments may impose export controls and broad financial and economic sanctions.Our business and operations may be further impacted by the imposition of tariffs,trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors.Additional sanctions or other measures may be imposed by the global community,including but not limited to limitations on our ability to file,prosecute and maintain patents,trademarks and other intellectual property rights.Furthermore,in some countries,such as in Russia,action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Companys inventions in Russia or from selling or importing products in and into Russia.In addition,the U.S.government recently announced tariffs on products manufactured in several jurisdictions,including China,Mexico and Canada,and has 14made announcements regarding the potential imposition of tariffs on other jurisdictions.While certain of the announced tariffs have been delayed,the U.S.government may in the future pause,reimpose or increase tariffs,and countries subject to such tariffs have and in the future may impose reciprocal tariffs or other restrictive trade measures in response.Any of these actions could increase uncertainties and associated risks relating to the Companys globaloperations.Weak financial performance,failure to maintain a satisfactory credit rating or disruptions in the financial markets could adversely affect our liquidity,capital position,borrowing costs and access to capital markets.We currently maintain investment grade credit ratings with Moodys Investors Service and Standard&Poors Ratings Services.Rating agencies routinely evaluate us,and their ratings of our long-term and short-term debt are based on a number of factors.Any downgrade of our credit ratings by a credit rating agency,whether as a result of our actions or factors which are beyond our control,can increase the cost of borrowing under any indebtedness we may incur,reduce market capacity for our commercial paper or require the posting of additional collateral under our derivative contracts.There can be no assurance that we will be able to maintain our credit ratings,and any additional actual or anticipated changes or downgrades in our credit ratings,including any announcement that our ratings are under review for a downgrade,may have a negative impact on our liquidity,capital position and access to capital markets.Other risksOur business depends on our ability to recruit and retain talented and highly skilled employees.Our continued growth requires us to recruit and retain talented employees representing many different backgrounds,experiences,and skill sets.The market for highly skilled workers and leaders in our industry is extremely competitive and our ability to compete depends on our ability to hire,develop and motivate highly skilled personnel in all areas of our organization.Maintaining our brand and reputation,as well as a credo-based work environment enables us to attract top talent.If we are less successful in our recruiting efforts,or if we cannot retain highly skilled workers and key leaders,our ability to develop and deliver successful products and services may be adversely affected.In addition,effective succession planning is important to our long-term success.Any unsuccessful implementation of our succession plans or failure to ensure effective transfer of knowledge and smooth transitions involving key employees could adversely affect our business,financial condition,or results of operations.Climate change or legal,regulatory or market measures to address climate change may negatively affect our business and results of operations.Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations,including an adverse impact on global temperatures,weather patterns and the frequency and severity of extreme weather and natural disasters.Natural disasters and extreme weather conditions,such as a hurricane,tornado,earthquake,wildfire or flooding,may pose physical risks to our facilities and disrupt the operation of our supply chain.The impacts of the changing climate on water resources may result in water scarcity,limiting our ability to access sufficient high-quality water in certain locations,which may increase operational costs.Concern over climate change may also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and/or mitigate the effects of climate change on the environment.If such laws or regulations are more stringent than current legal or regulatory obligations,we may experience disruption in,or an increase in the costs associated with sourcing,manufacturing and distribution of our products,which may adversely affect our business,results of operations or financial condition.Further,the impacts of climate change have an influence on customer preferences,and failure to provide climate-friendly products could potentially result in loss of market share.An information security incident,including a cybersecurity breach,could have a negative impact on the Companys business or reputation.To meet business objectives,the Company relies on both internal information technology(IT)systems and networks,and those of third parties and their vendors,to process and store sensitive data(including confidential research,business plans,financial information,intellectual property,and personal data that may be subject to legal protection)to ensure the continuity of the Companys supply chain and operations,and as part of many of the products we deliver to customers.The extensive range of information security and cybersecurity threats,which affect companies globally,pose a persistent risk to the security and availability of these systems and networks,including to customer products that are connected to or rely on such systems and networks,and the confidentiality,integrity,and availability of the Companys sensitive data.The Company assesses these threats,responds to attacks and breaches that it has experienced,and makes investments to increase internal protection,detection,and response capabilities,as well as ensure the Companys third-party providers have required capabilities and 2024 Annual Report15controls,to address this risk.Because of the frequently changing attack techniques,along with the increased volume and sophistication of the attacks,there is the potential for the Company to be adversely impacted.This impact could result in reputational,competitive,operational or other business harm as well as financial costs and regulatory action.Also,increasing use of AI could increase these risks.The Company maintains cybersecurity insurance in the event of an information security or cyber incident;however,the coverage may not be sufficient to cover all financial,legal,business or reputational losses.As a result of increased global tensions,the Company expects there will continue to be,an increased risk of information security or cybersecurity incidents,including cyberattacks perpetrated by adversaries of countries where the Company maintains operations.Given the potential sophistication of these attacks,the Company may not be able to address the threat of information security or cybersecurity incidents proactively or implement adequate preventative measures and we may not be able to detect and address any such disruption or security breach promptly,or at all,which could adversely affect customers that use our products,our business,results of operations or financial condition.Moreover,these threats could also impact our third-party partners resulting in compromise of the Companys IT systems,networks and data which could negatively affect the Company.A breach of privacy laws or unauthorized access,loss or misuse of personal data could have a negative impact on the Companys business or reputation.The Company is subject to privacy and data protection laws and regulations across the globe that impose broad compliance obligations on the collection,possession,use,storage,access,disclosure,transfer,deletion and protection of personal data.Breach of the requirements of these laws and regulations could result in substantial fines,penalties,governmental actions,private right of actions,including class actions,and damage to our reputation and business.New privacy laws are expected globally,together with greater privacy enforcement by governmental authorities globally,particularly on data localization requirements and data transfers including international data flows.The Company has established privacy compliance programs and controls with which our businesses worldwide are required to comply.However,with many technology and data-driven initiatives evolving across the Company,involving multiple vendors and third parties,there are threats that could impact our business operations and research activities,including potential risks of unauthorized access and loss of personal data as well as legislative actions imposing limitations and controls on the use and sharing of personal data as well as on cross border dataflows.16Item 1B.Unresolved staff commentsNot applicable.Item 1C.CybersecurityRisk management and strategyThe Company has documented cybersecurity policies and standards,assesses risks from cybersecurity threats,and monitors information systems for potential cybersecurity issues.To protect the Companys information systems from cybersecurity threats,the Company uses various security tools supporting protection,detection,and response capabilities.The Company maintains a cybersecurity incident response plan to help ensure a timely,consistent response to actual or attempted cybersecurity incidents impacting the Company.The Company also identifies and assesses third-party risks within the enterprise,and through the Companys use of third-party service providers,across a range of areas including data security and supply chain through a structured third-party risk management program.The Company maintains a formal information security training program for all employees that includes training on matters such as phishing and email security best practices.Employees are also required to complete mandatory training on data privacy.To evaluate and enhance its cybersecurity program,the Company periodically utilizes third-party experts to undertake maturity assessments of the Companys information security program.To date,the Company is not aware of any cybersecurity incident that has had or is reasonably likely to have a material impact on the Companys business or operations;however,because of the frequently changing attack techniques,along with the increased volume and sophistication of the attacks,there is the potential for the Company to be adversely impacted.This impact could result in reputational,competitive,operational or other business harm as well as financial costs and regulatory action.Refer to the risk factor captioned An information security incident,including a cybersecurity breach,could have a negative impact to the Companys business or reputation in Part I,Item 1A.Risk factors for additional description of cybersecurity risks and potential related impacts on the Company.Governance-managements responsibilityThe Company takes a risk-based approach to cybersecurity and has implemented cybersecurity controls designed to address cybersecurity threats and risks.The Chief Information Officer(CIO),who is a member of the Companys Executive Committee,and the Chief Information Security Officer(CISO)are responsible for assessing and managing cybersecurity risks,including security incident detection,response,and recovery.The Companys CISO,in coordination with the CIO,is responsible for leading the Companys cybersecurity program and management of cybersecurity risk.The current CISO has over twenty-five years of experience in information security,and his background includes technical experience,strategy and architecture focused roles,cyber and threat experience,and various leadership roles.Governance-board oversightThe Companys Board of Directors oversees the overall risk management process,including cybersecurity risks,directly and through its committees.The Regulatory Compliance&Sustainability Committee(RCSC)of the board is primarily responsible for oversight of risk from cybersecurity threats and oversees compliance with applicable laws,regulations and Company policies related to,among others,privacy and cybersecurity.RCSC meetings include discussions of specific risk areas throughout the year including,among others,those relating to cybersecurity.The CISO provides quarterly updates each year to RCSC on cybersecurity matters.These reports include an overview of the cybersecurity threat landscape,key cybersecurity initiatives to improve the Companys risk posture,changes in the legal and regulatory landscape relative to cybersecurity,and overviews of certain cybersecurity incidents that have occurred within the Company and within the industry.2024 Annual Report17Item 2.PropertiesThe Companys subsidiaries operate 64 manufacturing facilities occupying approximately 9.6million square feet of floor space.The manufacturing facilities are used by the industry segments of the Companys business approximately as follows:SegmentSquare Feet(in thousands)Innovative Medicine4,696MedTech4,911Worldwide Total9,607Within the U.S.,four facilities are used by the Innovative Medicine segment and 19 by the MedTech segment.Outside of the U.S.,14 facilities are used by the Innovative Medicine segment and 27 by the MedTech segment.The locations of the manufacturing facilities by major geographic areas of the world are as follows:Geographic AreaNumber ofFacilitiesSquare Feet(in thousands)United States232,892Europe214,521Western Hemisphere,excluding U.S.7898Africa,Asia and Pacific131,296Worldwide Total649,607In addition to the manufacturing facilities discussed above,the Company maintains numerous office and warehouse facilities throughout the world.The Companys subsidiaries generally seek to own,rather than lease,their manufacturing facilities,although some,principally in non-U.S.locations,are leased.Office and warehouse facilities are often leased.The Company also engages contractmanufacturers.The Company is committed to maintaining all of its properties in good operating condition.Segment information on additions to property,plant and equipment is contained in Note17 Segments of business and geographic areas of the Notes to Consolidated Financial Statements included in Item 8 of this Report.Item 3.Legal proceedingsThe information called for by this item is incorporated herein by reference to the information set forth in Note19 Legal proceedings of the Notes to Consolidated Financial Statements included in Item 8 of this Report.Item 4.Mine safety disclosuresNot applicable.18Executive officers of the registrantListed below are the executive officers of the Company.There are no family relationships between any of the executive officers,and there is no arrangement or understanding between any executive officer and any other person pursuant to which the executive officer was selected.At the annual meeting of the Board of Directors,the executive officers are elected by the Board to hold office for one year and until their respective successors are elected and qualified,or until earlier resignation orremoval.Vanessa Broadhurst,56Member,Executive Committee;Executive Vice President,Global CorporateAffairsMs.V.Broadhurst was named Executive Vice President,Global Corporate Affairs and appointed to the Executive Committee in 2022.Ms.Broadhurst rejoined the Company in 2017 and was appointed Company Group Chairman,Global Commercial Strategy Organization in 2018.From 2013 to 2017,she held General Manager roles at Amgen in Inflammation&Cardiovascular,and Cardiovascular&Bone.Prior to her roles at Amgen,she served in various leadership roles at the Company from 2005-2013.Joaquin Duato,62Chairman of the Board;Chief Executive OfficerMr.J.Duato became Chairman of the Board of Directors in 2023 subsequent to his appointments as Chief Executive Officer and Director in 2022.Mr.Duato was appointed to the Executive Committee in 2016 when he was named Executive Vice President,Worldwide Chairman,Pharmaceuticals and subsequently served as Vice Chairman of the Executive Committee.Mr.Duato first joined the Company in 1989 with Janssen-Farmaceutica S.A.(Spain),a subsidiary of the Company,and held executive positions of increasing responsibility in all business sectors and across multiple geographies and functions.Elizabeth Forminard,54Member,Executive Committee;Executive Vice President,Chief Legal OfficerMs.E.Forminard was appointed Executive Vice President,Chief Legal Officer and a member of the Executive Committee in 2022.Ms.Forminard joined the Company in 2006,serving in roles of increasing responsibility including General Counsel Medical Devices&Diagnostics,General Counsel Consumer Group&Supply Chain,Worldwide Vice President Corporate Governance,and in her immediate past role as General Counsel Pharmaceuticals.Kristen Mulholland,58Member,Executive Committee;Executive Vice President,Chief Human ResourcesOfficerMs.K.Mulholland was appointed Executive Vice President,Chief Human Resources Officer and appointed to the Executive Committee in 2024.She joined the company in 2005 and has held HR leadership positions across the full breadth of the company including MedTech,Innovative Medicines,our Corporate Functions and Corporate HRServices including Performance and Development and most recently,Global TotalRewards.John C.Reed,M.D.,Ph.D.,66Member,Executive Committee;Executive Vice President,Innovative Medicine,R&DDr.J.C.Reed joined the Company in 2023 as Executive Vice President,Innovative Medicine,R&D and a member of the Executive Committee.Prior to joining the Company,Dr.Reed held executive leadership positions at Sanofi(2018-2022)and Roche(2013-2018),serving on their respective executive committees.He also served as CEO of Sanford-Burnham Medical Research Institute(now Sanford Burnham Prebys)where he established multiple therapeutic area-aligned research centers and platform technology centers.2024 Annual Report19Tim Schmid,55Member,Executive Committee;Executive Vice President,Worldwide Chairman,MedTechMr.T.Schmid was appointed Executive Vice President,Worldwide Chairman,MedTech and a member of the Executive Committee in 2023.He joined the Company in 1993 and has served in leadership positions throughout Johnson&Johnson MedTech,including Chief Strategic Customer Officer and President of Ethicon,and most recently served as Company Group Chairman MedTech Asia Pacific from 2018-2023.James Swanson,59Member,Executive Committee;Executive Vice President,Chief Information OfficerMr.J.Swanson was appointed Executive Vice President,Chief Information Officer and a member of the Executive Committee in 2022.He rejoined the Company in 2019 as Chief Information Officer of Johnson&Johnson from Bayer Crop Science,where he served as a member of the Executive Leadership Team and as Chief Information Officer and Head of Digital Transformation.From 1996 to 2005,Mr.Swanson held positions of increasing responsibility at the Company,including Project Manager,Director IT,Sr.Director IT and Vice President,Chief Information Officer.Jennifer L.Taubert,61Member,Executive Committee;Executive Vice President,Worldwide Chairman,InnovativeMedicineMs.J.L.Taubert was appointed Executive Vice President,Worldwide Chairman,Innovative Medicine(formerly Pharmaceuticals)and a member of the Executive Committee in 2018.She joined the Company in 2005 as Worldwide Vice President and held several executive positions of increasing responsibility in the Pharmaceuticals sector,including Company Group Chairman,North America,and Company Group Chairman,The Americas from 2012-2018.Kathryn E.Wengel,59Member,Executive Committee;Executive Vice President,Chief Technical Operations&RiskOfficerMs.K.E.Wengel was appointed Executive Vice President,Chief Technical Operations&Risk Officer in 2023,subsequent to her appointment to the Executive Committee in 2018 when she was named as Executive Vice President,Chief Global Supply Chain Officer.Ms.Wengel first joined the Company in 1988 as Project Engineer and Engineering Supervisor at Janssen,a subsidiary of the Company.During her tenure with the Company,she has held a variety of strategic leadership and executive positions,including in roles within operations,quality,engineering,new products,information technology,and other technical and business functions.Joseph J.Wolk,58Member,Executive Committee;Executive Vice President,Chief Financial OfficerMr.J.J.Wolk was appointed Executive Vice President,Chief Financial Officer and a member of the Executiv
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington,D.C.20549 Form 10-KANNUAL REPORT PURSUAN.
2025-04-21
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2024 ANNUAL REPORTFRONT COVER:Her mother knew early in her life that something in Trinitys body wasn.
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ABBOTT REPORTS FOURTH-QUARTER AND FULL-YEAR 2024 RESULTS;ISSUES2025 FINANCIAL OUTLOOKFourth-quarter .
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON,D.C.20549FORM 10-K(Mark One)ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2024 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission file number 1-9924 Citigroup Inc.(Exact name of registrant as specified in its charter)Delaware52-1568099(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)388 Greenwich Street,New York NY10013(Address of principal executive offices)(Zip code)(212)559-1000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Securities Exchange Act of 1934 formatted in Inline XBRL:See Exhibit 99.01 Securities registered pursuant to Section 12(g)of the Act:none Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes x No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Act.Yes o No xIndicate 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 x No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes x No oIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Yes oIndicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.oIndicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).oIndicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No xThe aggregate market value of Citigroup Imon stock held by non-affiliates of Citigroup Inc.on June 30,2024 was approximately$120.8 billion.Number of shares of Citigroup Imon stock outstanding on January 31,2025:1,884,479,551 Documents Incorporated by Reference:Portions of the registrants proxy statement for the annual meeting of stockholders scheduled to be held on April 29,2025 are incorporated by reference in this Form 10-K in response to Items 10,11,12,13 and 14 of Part III.Available on the web at FORM 10-K CROSS-REFERENCE INDEX Item NumberPage Part I 1.Business432,130135,137,169173,314315 1A.Risk Factors5064 1B.Unresolved Staff CommentsNot Applicable 1C.Cybersecurity5658,1191212.PropertiesNot Applicable 3.Legal ProceedingsSee Note 30 to the Consolidated Financial Statements301308 4.Mine Safety DisclosuresNot Applicable Part II 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities146147,179181,316318 6.Reserved 7.Managements Discussion and Analysis of Financial Condition and Results of Operations732,70129 7A.Quantitative and Qualitative Disclosures About Market Risk70129,174178,198238,245292 8.Financial Statements and Supplementary Data142313 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot Applicable9A.Controls and Procedures135136 9B.Other Information3179C.Disclosure Regarding Foreign Jurisdictions that Prevent InspectionsNot ApplicablePart III 10.Directors,Executive Officers and Corporate Governance319321*11.Executive Compensation*12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters*13.Certain Relationships and Related Transactions,and Director Independence*14.Principal Accountant Fees and Services*Part IV 15.Exhibit and Financial Statement Schedules*For additional information regarding Citigroups Directors,see“Corporate Governance”and“Proposal 1:Election of Directors”in the definitive Proxy Statement for Citigroups Annual Meeting of Stockholders scheduled to be held on April 29,2025,to be filed with the SEC(the Proxy Statement),incorporated herein by reference.*See“Compensation Discussion and Analysis,”“The Personnel and Compensation Committee Report,”and“2024 Summary Compensation Table and Compensation Information”and“CEO Pay Ratio”in the Proxy Statement,incorporated herein by reference,other than disclosure under the heading“Pay versus Performance”information responsive to Item 402(v)of Regulation S-K of SEC rules.*See“About the Annual Meeting,”“Stock Ownership”and“Equity Compensation Plan Information”in the Proxy Statement,incorporated herein by reference.*See“Corporate GovernanceDirector Independence,”“Certain Transactions and Relationships,Compensation Committee Interlocks and Insider Participation”and“Indebtedness”in the Proxy Statement,incorporated herein by reference.*See“Proposal 2:Ratification of Selection of Independent Registered Public Accountants”in the Proxy Statement,incorporated herein by reference.2CITIGROUPS 2024 ANNUAL REPORT ON FORM 10-KOVERVIEW4Citigroup Reportable Operating Segments6MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS7Executive Summary7Citis Multiyear Transformation11Summary of Selected Financial Data14Segment Revenues and Income(Loss)16Select Balance Sheet Items by Segment17Services18Markets21Banking23Wealth25U.S.Personal Banking27All OtherDivestiture-Related Impacts(Reconciling Items)29All OtherManaged Basis30CAPITAL RESOURCES33RISK FACTORS50NET ZERO AND SUSTAINABILITY65HUMAN CAPITAL RESOURCES AND MANAGEMENT66Managing Global RiskTable of Contents69MANAGING GLOBAL RISK70SIGNIFICANT ACCOUNTING POLICIES ANDSIGNIFICANT ESTIMATES130DISCLOSURE CONTROLS AND PROCEDURES135MANAGEMENTS ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING136FORWARD-LOOKING STATEMENTS137REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM(PCAOB ID#185)138Financial Statements and NotesTable of Contents141CONSOLIDATED FINANCIAL STATEMENTS142NOTES TO CONSOLIDATED FINANCIAL STATEMENTS150FINANCIAL DATA SUPPLEMENT313SUPERVISION,REGULATION AND OTHER314OTHER INFORMATION317CORPORATE INFORMATION319Executive Officers319Citigroup Board of Directors321GLOSSARY OF TERMS AND ACRONYMS322EXHIBIT INDEX327SIGNATURES3323OVERVIEWCitigroups history dates back to the founding of the City Bank of New York in 1812.Citigroup is a global diversified financial services holding company whose businesses provide consumers,corporations,governments and institutions with a broad,yet focused,range of financial products and services,including consumer banking and credit,corporate and investment banking,securities brokerage,trade and securities services and wealth management.Citi does business in nearly 160 countries and jurisdictions.Citis vision is to be the preeminent banking partner for institutions with cross-border needs,a global leader in wealth management and a valued personal bank in the U.S.At December 31,2024,Citi had approximately 229,000 full-time employees,compared to approximately 239,000 at December 31,2023.For additional information,see“Human Capital Resources and Management”below.Throughout this report,“Citigroup,”“Citi”and“the Company”refer to Citigroup Inc.and its consolidated subsidiaries.All“Note”references correspond to the Notes to the Consolidated Financial Statements herein,unless otherwise indicated.For a list of certain terms and acronyms used in this Annual Report on Form 10-K and other Citigroup presentations,see“Glossary of Terms and Acronyms”at the end of this report.Additional InformationAdditional information about Citigroup is available on Citis website at .Citigroups annual reports on Form 10-K,quarterly reports on Form 10-Q,current reports on Form 8-K and proxy statements,as well as other filings with the U.S.Securities and Exchange Commission(SEC)are available free of charge through Citis website by clicking on“SEC Filings”under the“Investors”tab.The SECs website also contains these filings and other information regarding Citi at www.sec.gov.For a discussion of 2023 versus 2022 results of operations of Services,Markets,Banking,Wealth,U.S.Personal Banking and All Other,see each respective businesss results of operations in Citigroups Annual Report on Form 10-K for the year ended December 31,2023(Citigroups 2023 Annual Report on Form 10-K).Certain reclassifications have been made to the prior periods financial statements and disclosures to conform to the current periods presentation,including certain reclassifications to align with Citis organizational simplification and strategy,for all periods presented.Please see“Risk Factors”below for a discussion of material risks and uncertainties that could impact Citigroups businesses,results of operations and financial condition.Non-GAAP Financial Measures Citi prepares its financial statements in accordance with U.S.generally accepted accounting principles(GAAP)and also presents certain non-GAAP financial measures(non-GAAP measures)that exclude certain items or otherwise include components that differ from the most directly comparable measures calculated in accordance with U.S.GAAP.These non-GAAP financial measures are not intended to be a substitute for GAAP financial measures and may not be defined or calculated the same way as non-GAAP measures with similar names used by other companies.Citis non-GAAP financial measures in this Form 10-K include:Revenues excluding the Argentina currency devaluation and/or divestiture-related impactsExpenses excluding the Federal Deposit Insurance Corporation(FDIC)special assessment and/or divestiture-related impactsServices and Treasury and Trade Solutions(TTS)revenues and/or non-interest revenues excluding the impact of the Argentina currency devaluationBanking and Corporate Lending revenues excluding gain(loss)on loan hedgesAll Other(managed basis),which excludes divestiture-related impactsTangible common equity(TCE),return on tangible common equity(RoTCE)and tangible book value per share(TBVPS)Non-Markets net interest incomeFor more information on the Argentina currency devaluation and/or the FDIC special assessment,see“Executive Summary”below.Citi believes its results excluding the Argentina currency devaluation and the FDIC special assessment are useful to investors,industry analysts and others in evaluating Citis results of operations and comparing its operational performance between periods,by providing a meaningful depiction of the underlying fundamentals of period-to-period operating results,particularly given the outsized impacts of these items,as well as additional comparability to peer companies.Citis results excluding divestiture-related impacts represent as reported,or GAAP,financial results adjusted for items that are incurred and recognized,which are wholly and necessarily a consequence of actions taken to sell(including through a public offering),dispose of or wind down business activities associated with Citis previously announced exit markets within All OtherLegacy Franchises.Citis Chief Executive Officer,its chief operating decision maker,regularly reviews financial information for All Other on a managed basis that excludes these divestiture-related impacts.For more information on Citis results excluding divestiture-related impacts,see“Executive Summary”and“All Other Divestiture-Related Impacts(Reconciling Items)”below.Citi believes its results excluding divestiture-related impacts are useful to investors,industry analysts and others in evaluating Citis results of operations and comparing its operational performance between periods,by providing a meaningful depiction of the underlying fundamentals of 4period-to-period operating results,particularly given the outsized impacts of the divestiture-related impacts;improved visibility into management decisions and their impacts on operational performance;and additional comparability to peer companies.For more information on Services and TTS revenues and/or non-interest revenues excluding the impact of the Argentina currency devaluation,see“Executive Summary”and“Services”below.For more information on Banking and Corporate Lending revenues excluding gain(loss)on loan hedges,see“Executive Summary”and“Banking”below.Citi believes that Banking and Corporate Lending revenues excluding gain(loss)on loan hedges are useful to investors,industry analysts and others because the gain(loss)on loan hedges are independent of Banking and Corporate Lendings core operations and not indicative of the performance of the business operations.For more information on TCE,RoTCE and TBVPS,see“Capital ResourcesTangible Common Equity,Book Value Per Share,Tangible Book Value Per Share and Return on Equity”below.TCE,RoTCE and TBVPS are used by management,as well as investors,industry analysts and others,in assessing Citis use of equity.Citi believes TCE and RoTCE are useful to investors,industry analysts and others by providing alternative measures of capital strength and performance.Citi believes TBVPS provides additional useful information about the level of tangible assets in relation to Citis outstanding shares of common stock.For more information on non-Markets net interest income,see“Market RiskNon-Markets Net Interest Income”below.Management uses non-Markets net interest income to assess the performance of Citis lending,investing(including asset-liability management)and deposit-raising activities,apart from any volatility associated with Markets activities.Citi believes the use of this non-GAAP measure provides investors,industry analysts and others with an alternative measure to analyze the net interest income trends of Citis lending,investing and deposit-raising activities,by providing a meaningful depiction of the underlying fundamentals of period-to-period operating results of those activities;improved visibility into management decisions and their impacts on operational performance;and additional comparability to peer companies.5Citigroup is managed pursuant to five operating segments:Services,Markets,Banking,Wealth and U.S.Personal Banking.Activities not assigned to the operating segments are included in All Other.For additional information,see the results of operations for each of the operating segments and All Other within“Managements Discussion and Analysis of Financial Condition and Results of Operations”below.Note:Mexico is included in LATAM within International.(1)Within International,Citi is organized into six clusters:United Kingdom;Japan,Asia North and Australia(JANA);Latin America(LATAM);Asia South;Europe;and Middle East and Africa(MEA).Although the chief operating decision maker(CODM)does not manage Citis reportable operating segments by cluster,Citi provides additional selected financial information(revenue and certain corporate credit metrics)below for the six clusters within International.6MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSEXECUTIVE SUMMARYAs described further throughout this Executive Summary,Citi demonstrated improved overall business performance and continued progress on its strategic priorities in 2024:Citi and its five reportable operating segments each achieved positive operating leverage for 2024.Citis positive operating leverage in 2024 was driven by revenue growth of 3%,with record revenues in Services,Wealth and USPB,and disciplined expense management(down 4%),despite higher volume-and transformation-related expenses and other investments in risk and control initiatives.Excluding the impact of the FDIC special assessment in both 2024 and the prior year,expenses decreased 2%.Citi continued to advance its transformation,including its efforts to improve risk management,modernize technology and infrastructure and improve resiliency across the organization.Simultaneously,as a result of the July 2024 Civil Money Penalty Consent Orders and Consent Order Amendment,Citi recognized the need to accelerate progress in certain areas,particularly with regard to data quality management related to governance and regulatory reporting.(See“Citis Multiyear Transformation”below).Citi completed its organizational simplification announced in September 2023,resulting in a simpler management structure that aligns to and facilitates Citis strategy,while improving accountability and decision-making and advancing the execution of Citis transformation.As part of its strategic refresh,Citi continued to make progress on its remaining divestitures,including exits of its consumer banking operations in Korea and Poland and its overall operations in Russia.Additionally,Citi completed the separation of its Services,Markets,Banking and Wealth businesses in Mexico from its consumer banking and small business and middle-market banking operations in Mexico(Mexico Consumer/SBMM)in December 2024,an important milestone toward the planned initial public offering(IPO)of Citis Mexico Consumer/SBMM business.(See“All Other(Managed Basis)”below.)Citi returned$6.7 billion to common shareholders in the form of dividends($4.2 billion)and share repurchases($2.5 billion)in 2024.As previously disclosed,on January 13,2025,Citigroups Board of Directors authorized a new,multiyear$20 billion common stock repurchase program,with planned repurchases of$1.5 billion during the first quarter of 2025,subject to market conditions and other factors.After the first quarter of 2025,Citi will continue to assess the level of common share repurchases on a quarter-by-quarter basis given uncertainty regarding regulatory capital requirements,among other factors.2024 Results SummaryCitigroupCitigroup reported net income of$12.7 billion,or$5.94 per share.This compared to net income of$9.2 billion,or$4.04 per share in the prior year,which included larger impacts from certain notable items,including an Argentina currency devaluation,an FDIC special assessment,restructuring charges related to Citis organizational simplification and an ACL build for transfer risk(see“Cost of Credit”below).Net income increased 37%versus the prior year,driven by the higher revenues,lower expenses and a lower effective tax rate,partially offset by higher cost of credit.Citigroups effective tax rate was 25%in 2024 versus 27%in the prior year,largely driven by the geographic mix of earnings(see Note 10).Citigroup revenues of$81.1 billion in 2024 increased 3%on a reported basis.This increase in revenues largely reflected an increase in non-interest revenue(up 15%),including the benefit of a smaller impact from the Argentina currency devaluation($(253)million in 2024 versus approximately$(1.9)billion in 2023)as well as strength in underlying fee drivers in each of Citis reportable operating segments.The increase in non-interest revenue was partially offset by a decline in net interest income(down 1%).The decrease in net interest income primarily reflected lower revenues in All Other(managed basis),partially offset by higher interest-earning balance growth in U.S.Personal Banking(USPB).Excluding divestiture-related impacts,primarily related to gains on the sales of Citis India and Taiwan consumer banking businesses in the prior year,as well as the Argentina currency devaluation,revenues of$81.4 billion in 2024 also increased 3%versus the prior year.Citigroups end-of-period loans were$694 billion,up 1%versus the prior year,largely driven by loan growth in USPB.Citigroups end-of-period deposits were approximately$1.3 trillion,down 2%versus the prior year,largely due to a decrease in All Other(managed basis).For additional information about Citis deposits by business,including drivers and deposit trends,see each respective businesss results of operations and“Liquidity Risk Deposits”below.ExpensesCitigroups operating expenses of$54.0 billion decreased 4%from the prior year.Excluding the FDIC special assessment($203 million in 2024 versus approximately$1.7 billion in the prior year),expenses of$53.8 billion decreased 2%,driven by savings related to Citis organizational simplification and stranded cost reduction,as well as the lower restructuring charges($259 million in 2024 versus$781 million in the prior year)and repositioning costs.The decrease was partially offset by higher volume-related expenses,investments in Citis transformation and other risk and controls initiatives,as well as the costs of the July 2024 Civil Money Penalty Consent Orders entered into with the Federal Reserve Board(FRB)and the Office of the Comptroller of the Currency(OCC).7Excluding the FDIC special assessment and divestiture-related impacts,expenses of$53.5 billion also decreased 2%.Cost of CreditCitis total provisions for credit losses and for benefits and claims was$10.1 billion,compared to$9.2 billion in the prior year.The increase was driven by higher net credit losses in Branded Cards and Retail Services in USPB,reflecting the continued maturation of multiple cards loan vintages originated in recent years.The maturation was delayed by unprecedented levels of government stimulus during the pandemic.In addition,the increase was due to macroeconomic pressures related to the elevated inflationary and interest rate environment impacting both card portfolios,with lower FICO band customers primarily driving the increase.The higher net credit losses were partially offset by a lower net build in the allowance for credit losses(ACL),primarily due to a smaller build related to transfer risk associated with exposures outside the U.S.(approximately$0.2 billion in 2024 versus$1.9 billion in 2023),driven by safety and soundness considerations under U.S.banking law.For additional information on Citis ACL,see“Significant Accounting Policies and Significant EstimatesCitis Allowance for Credit Losses(ACL)”below.Net credit losses of$9.0 billion increased 40%from the prior year.Consumer net credit losses of$8.6 billion increased 39%,largely reflecting the continued rise in net credit loss rates in Branded Cards and Retail Services.Corporate net credit losses increased to$397 million from$250 million in the prior year.Subject to evolving macroeconomic conditions,Citi expects to continue to experience an elevated net credit loss rate for full-year 2025 in line with 2024,with higher loss rates in the first half of the year in Branded Cards and Retail Services consistent with seasonal patterns.Citi also expects that its future ACL builds will be driven by both the macroeconomic environment and business volumes,among other factors.For additional information on Citis consumer and corporate credit costs,see each respective businesss results of operations and“Credit Risk”below.In January 2025,a series of wildfires affected the Los Angeles metropolitan area and surrounding regions,causing loss of life and the destruction of more than 16,000 structures.While Citi continues to assess the wildfires impact on its customers and clients in the affected areas,Citi does not currently expect the wildfires to have a direct material impact to its consumer or corporate credit portfolios or its overall results of operations.CapitalCitigroups CET1 Capital ratio was 13.6%as of December 31,2024,compared to 13.4%as of December 31,2023,based on the Basel III Standardized Approach for determining risk weighted assets(RWA).The increase was primarily driven by net income and a decrease in RWA,partially offset by the payment of common and preferred dividends,as well as common share repurchases and net adverse movements in Accumulated other comprehensive income(AOCI).In 2024,Citi repurchased$2.5 billion of common shares and paid$4.2 billion of common dividends(see“Unregistered Sales of Equity Securities,Repurchases of Equity Securities and Dividends”below).For additional information on capital-related risks,trends and uncertainties,see“Capital ResourcesRegulatory Capital Standards and Developments”and“Risk FactorsStrategic Risks,”“Operational Risks”and“Compliance Risks”below.Citigroups Supplementary Leverage ratio as of December 31,2024 was 5.8%,largely unchanged from December 31,2023,as higher Tier 1 Capital was offset by an increase in Total Leverage Exposure.For additional information on Citis capital ratios and related components,see“Capital Resources”below.ServicesServices net income of$6.5 billion increased 40%,as higher revenue and lower cost of credit were partially offset by higher expenses.Services revenues of$19.6 billion increased 9%,largely driven by a 28%increase in non-interest revenue and higher net interest income(up 1%).Excluding the impact of the Argentina currency devaluation($(178)million in 2024 versus approximately$(1.2)billion in 2023),Services revenues increased 3%and its non-interest revenue increased 5%.The increase in net interest income reflected the benefit of higher deposit and loan volumes,largely offset by a decline in interest rates in Argentina.TTS revenues of$14.5 billion increased 6%on a reported basis,driven by a 37%increase in non-interest revenue,partially offset by a 1crease in net interest income.Excluding the impact of the Argentina currency devaluation(approximately$(164)million in 2024 and approximately$(1.0)billion in 2023),non-interest revenue increased 3%,driven by an increase in cross-border transaction value,as well as an increase in U.S.dollar clearing and commercial card spend volume.The decrease in TTS net interest income was primarily driven by the decline in interest rates in Argentina.Securities Services revenues of$5.1 billion increased 17%,driven by an 18%increase in non-interest revenue and a 15%increase in net interest income.The growth in non-interest revenue was primarily due to increased fees from higher AUC/AUA balances and continued elevated levels of corporate activity in Issuer Services,as well as the smaller impact from the currency devaluation in Argentina.The increase in net interest income was primarily due to higher spreads and volumes.Services expenses of$10.6 billion increased 6%,primarily driven by continued investments in technology and platform modernization,other risk and controls and product innovation,as well as an Argentina-related transaction tax expense and higher legal expenses,partially offset by the impact of productivity savings.Cost of credit decreased to$276 million from$950 million in the prior year,primarily driven by a smaller ACL build for transfer risk associated with exposures outside of the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on the results of operations of Services in 2024,see“Services”below.8MarketsMarkets net income of$4.9 billion increased 27%,driven by higher revenues,partially offset by higher cost of credit.Markets revenues of$19.8 billion increased 6%,driven by a 26%increase in Equity Markets and a 1%increase in Fixed Income Markets.The increase in Equity Markets was primarily driven by growth in cash equities,due to higher client activity and volumes,and equity derivatives on higher volatility,which also included the impact from an episodic gain related to the Visa B exchange.The increase was also driven by an increase in prime services.The increase in Fixed Income Markets was driven by growth in spread products and other fixed income(up 20%),partially offset by lower revenues in rates and currencies(down 6%).The increase in spread products and other fixed income revenues was largely driven by increased client activity due to growth in asset-backed financing,securitization activity and underwriting fees,partially offset by a decline in commodities revenues.The decline in rates and currencies revenues was primarily due to lower volatility and a strong prior-year performance,partially offset by the smaller impact of the Argentina currency devaluation.Markets expenses of$13.2 billion were largely unchanged versus the prior year,as higher legal and volume-related expenses were offset by productivity savings.Cost of credit increased to$463 million from$438 million in the prior year,primarily driven by higher net credit losses for loans in spread products,partially offset by a smaller ACL build on other assets for transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on the results of operations of Markets in 2024,see“Markets”below.BankingBanking net income was$1.5 billion,compared to a net loss of$35 million in the prior year,driven by higher revenues,lower expenses and a higher benefit from cost of credit.Banking revenues of$6.2 billion increased 32%,including a$180 million loss on loan hedges in 2024 versus a$443 million loss on loan hedges in the prior year.Excluding the losses on loan hedges,Banking revenues of$6.4 billion increased 24%,reflecting higher Investment Banking and Corporate Lending revenues.Investment Banking revenues of$3.6 billion increased 38%,due to a rebound in overall wallet activity and wallet share gains across all products.Corporate Lending revenues increased 23%,including the impact of losses on loan hedges.Excluding the impact of losses on loan hedges,Corporate Lending revenues increased 9%,primarily driven by a smaller impact from the Argentina currency devaluation.Banking expenses of$4.5 billion decreased 8%,primarily driven by benefits of prior repositioning and other actions to lower the expense base,partially offset by higher volume-related expenses.Cost of credit was a benefit of$224 million,compared to a benefit of$143 million in the prior year,driven by an ACL release on other assets,primarily due to lower transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on the results of operations of Banking in 2024,see“Banking”below.WealthWealth net income of$1.0 billion increased 139%,reflecting higher revenues,lower expenses and a higher benefit from cost of credit.Wealth revenues of$7.5 billion increased 7%,largely driven by higher non-interest revenue(up 15%),reflecting higher investment fee revenues in Citigold,Wealth at Work and the Private Bank on growth in client investment assets,as well as an increase in net interest income(up 2%).The increase in net interest income was mainly due to higher average deposit spreads and volumes,partially offset by higher mortgage funding costs in the Private Bank and Wealth at Work.Wealth expenses decreased 2%to$6.4 billion,primarily driven by benefits from prior repositioning and restructuring actions,partially offset by higher volume-related expenses and technology investments focused on risk and controls and platform enhancements.Cost of credit was a net benefit of$126 million,compared to a net benefit of$3 million in the prior year,largely driven by a higher net ACL release due to a change in the ACL associated with the margin lending portfolio.For additional information on the results of operations of Wealth in 2024,see“Wealth”below.U.S.Personal BankingUSPB net income of$1.4 billion decreased 24%,driven by higher cost of credit,partially offset by higher revenues and lower expenses.USPB revenues of$20.4 billion increased 6%,due to higher net interest income(up 5%),driven by strong loan growth,primarily in cards,as well as higher non-interest revenue(up 24%)due to lower partner payments in Retail Services.Branded Cards revenues of$10.7 billion increased 7%,primarily driven by higher net interest income,reflecting interest-earning balance growth(up 9%)from lower payment rates and card spend volume growth.Retail Services revenues of$7.1 billion increased 8%,primarily driven by higher non-interest revenue due to the lower partner payments,as a result of higher net credit losses,as well as higher net interest income on growth in interest-earning balances(up 3%).Retail Banking revenues of$2.6 billion decreased 1%,primarily driven by the impact of the transfers of certain relationships and the associated deposit balances to Wealth,partially offset by higher deposit spreads,as well as mortgage and installment loan growth.USPB expenses of$10 billion decreased 1%,primarily driven by continued productivity savings and lower technology costs,partially offset by higher volume-related expenses.Cost of credit increased to$8.6 billion,compared to$6.7 billion in the prior year.The increase was driven by higher net credit losses(up 45%),primarily reflecting the continued maturation of multiple cards loan vintages originated in recent years,as well as macroeconomic pressures related to the elevated inflationary and interest rate environment impacting both cards portfolios,with lower FICO band customers primarily driving the increase.The higher net 9credit losses were partially offset by a lower ACL build for loans.For additional information on the results of operations of USPB in 2024,see“U.S.Personal Banking”below.All Other(Managed Basis)All Other(managed basis)net loss was$2.4 billion,compared to a net loss of$2.1 billion in the prior year,driven by lower revenues and lower income tax benefits,partially offset by lower expenses and lower cost of credit.All Other(managed basis)revenues decreased 20%,driven by lower revenues in Corporate/Other and Legacy Franchises.The decline in Corporate/Other was largely driven by net investment securities losses due to the repositioning of the investment securities portfolio and higher funding costs.Legacy Franchises(managed basis)revenues declined 6%,due to lower revenues in Asia Consumer(managed basis)and Legacy Holdings Assets,partially offset by higher revenues in Mexico Consumer/SBMM(managed basis).All Other(managed basis)expenses decreased 19%,primarily driven by the lower FDIC special assessment($203 million in 2024 versus approximately$1.7 billion in the prior year)and a reduction from the closed exits and wind-downs,as well as the lower restructuring charges($259 million in 2024 versus$781 million in 2023),partially offset by the civil money penalties imposed by the FRB and OCC in July 2024.Cost of credit was$1.1 billion,compared to$1.3 billion in the prior year,largely driven by a smaller ACL build for transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on the results of operations of All Other(managed basis)in 2024,see“All OtherDivestiture-Related Impacts(Reconciling Items)”and“All Other(Managed Basis)”below.Macroeconomic and Other Risks and UncertaintiesVarious macroeconomic,geopolitical and regulatory uncertainties and challenges pose risks to economic conditions in the U.S.and globally,including,among others,any resurgence in inflation;changes to trade,immigration,energy and other policies resulting from the new U.S.administration;changes in interest rate policies;the RussiaUkraine war;conflicts in the Middle East;and economic conditions and tensions involving China.For example,on February 1,2025 the new U.S.administration announced the imposition of new tariffs on imports from China,Mexico and Canada,although the tariffs for Mexico and Canada were delayed for 30 days.China responded with tariffs against certain imports from the U.S.Additionally,on February 10,2025,the U.S.administration announced global 25%tariffs on steel and aluminum imports.The U.S.administration has also announced plans for reciprocal tariffs on all U.S.trading partners.While the resulting impacts are difficult to predict at this time,these and other tariffs,whether imposed by the U.S.or by any other country,may result in disruption of supply chains,increased inflationary pressures and higher interest rates.These and other risks could negatively impact economic growth rates and unemployment levels in the U.S.and other countries and result in volatility and disruptions in financial markets.Such risks could also adversely affect Citis customers,clients,businesses,funding costs,cost of credit and overall results of operations and financial condition during 2025.For a further discussion of trends,uncertainties and risks that will or could impact Citis businesses,results of operations,capital and other financial condition during 2025,see“Executive Summary”above and“Risk Factors,”each respective businesss results of operations and“Managing Global Risk,”including“Managing Global RiskOther RisksCountry RiskRussia”and“Argentina,”below.10 CITIS MULTIYEAR TRANSFORMATIONOverviewAs previously disclosed,Citis transformation,including the remediation of its consent orders with the FRB and OCC,is a multiyear endeavor that is not linear.Citi is modernizing and simplifying the Company in order to lead in a dynamic,competitive and digital world.Citis transformation is addressing decades of underinvestment in its infrastructure,going beyond remedying regulatory concerns to intentionally transform how the organization operates,and making investments that not only support current needs,but also benefit the Company over the long term.Transformation efforts of this scale involve significant complexities and uncertainties,including ongoing regulatory challenges and risks.As discussed in the“Executive Summary”above,on July 10,2024,the FRB entered into a Civil Money Penalty Consent Order with Citigroup,and the OCC entered into a Civil Money Penalty Consent Order with Citibank(collectively,the 2024 Consent Orders).In addition,the OCC and Citibank entered into an Amendment(the Amendment)to the October 7,2020 Consent Order.For additional information about the 2024 Consent Orders and the Amendment,see Citis July 10,2024 Form 8-K and“Transformation Focus Areas and Status”and“FRB and OCC Consent Orders Compliance”below.Citi may continue to experience significant challenges in progressing the transformation and satisfying the regulators expectations in both sufficiency and timing,particularly with regard to data quality management related to governance and regulatory reporting.The regulators may also identify additional risk and control issues that could result in further regulatory actions.For additional information about these regulatory risks,see“Risk FactorsCompliance Risks”below.Notwithstanding the 2024 Consent Orders and the Amendment,Citis transformation target outcomes remain focused on changing its business and operating models such that they simultaneously(i)strengthen controls,enhance data quality,reduce risk and improve Citis regulatory compliance and its culture,and(ii)enhance Citis value to customers,clients and shareholders.Transformation Focus Areas and StatusOver the last several years,Citi has made key investments to,among other things,consolidate and modernize its infrastructure,simplify and automate manual processes,and enhance technology,data and analytics.In particular,Citis transformation-related expenses include costs related to risk and controls,data and finance programs and other 2020 Consent Order programs,as well as spending on certain other regulatory initiatives unrelated to the 2020 Consent Orders,and spending on enterprise-wide technology infrastructure and the Transformation Bonus Program(see below).Citi completed significant planning and foundational work for the transformation in 2021 and 2022.In 2023,Citi progressed its transformation efforts into implementation mode and those efforts continued in 2024.In 2024,Citis transformation-related expenses increased 1%to approximately$2.9 billion from the prior year,largely driven by increased spending on certain programs,including data,largely offset by a reduction in the payout under the Transformation Bonus Program.Citis transformation initiatives will continue to entail significant investments during 2025 and beyond.Citis transformation initiatives in 2025 will continue to focus on(i)automating regulatory processes and remediating data quality issues,particularly related to regulatory reporting,and(ii)further strengthening stress testing and resolution and recovery capabilities.ProgressNotwithstanding Citis investments and remediation efforts,as set forth in the FRBs 2024 Civil Money Penalty Consent Order,the FRB found that,based on examinations conducted by the Federal Reserve Bank of New York,Citigroup had ongoing deficiencies related to its data quality management program and inadequate measures for managing and controlling its data quality risks.In addition,as set forth in the OCCs 2024 Civil Money Penalty Consent Order and the Amendment,the OCC deemed that Citibank had failed to make sufficient and sustainable progress toward achieving compliance with the OCCs 2020 Consent Order.As a result,Citi has made changes to its governance and structure of its data program as well as increased the level of investment in the program.For additional information about Citis transformation investments,see“Transformation Focus Areas and Status”above.Despite the ongoing regulatory challenges and risks,Citis transformation progress includes the following:Improved Risk Management Closed the 2013 Consent Order with the FRB related to anti-money laundering and Bank Secrecy Act deficienciesBuilt greater efficiency and scale in the risk management of Citis global spread products business,with 99%of risk computations now occurring on cloud-based infrastructureApproximately 90%of derivative trades now subject to full revaluation each month using automated independent price verificationApproximately 76%of all product data onboarded to strategic data redistribution platforms with stronger data quality controlsConsolidated four new activity risk management platforms into one modern platformImplemented key technology capabilities for target state wholesale credit analysis,simplifying the process and execution of policy requirementsFaster and more frequent stress testing for geopolitical risks,natural disasters and industry-specific eventsModernization Retired or replaced 714 legacy applications in 2024 with new,modern applicationsLaunched a new regulatory reporting platform with advanced capabilities to improve quality and efficiency 11Scaled automated controls in Markets,including transaction monitoring(over 750 million trading records monthly)and Regulation W compliance(approximately 400,000 transactions monthly)Consolidated 20 cash equities platforms into one modern platformReduced time to book new or amended loans in North America by over 50%Resiliency Improved resiliency and reduced downtime by simplifying system restoration to a single click for approximately 26%of critical applicationsReduced data center consumption through migration of workload to a private cloud and streamlined and reduced the time involved in the cloud onboarding process from over seven weeks to two weeksUpgraded 100%of Citis more than 2,300 ATMs in North America,Singapore,Hong Kong and the UAE to next-generation software for better customer security and monitoring Organizational SimplificationDuring the first quarter of 2024,Citi completed its organizational simplification announced in September 2023.The result is a simpler management structure that aligns to and facilitates Citis strategy,while improving accountability and decision-making.Citis operating model changes included elimination of the Institutional Clients Group,Personal Banking and Wealth Management and Legacy Franchises operating segments and resulted in the five current reportable operating segmentsServices,Markets,Banking,Wealth and U.S.Personal Bankingand a new financial reporting structure.Activities not assigned to the reportable operating segments are reflected in All Other,including Legacy Franchises and Corporate/Other.Citi also exited certain institutional business lines and consolidated its regional structure from four to two regions,consisting of North America and International.Citis organizational simplification efforts also assist in advancing the execution of the transformation.FRB and OCC Consent Orders ComplianceAs previously disclosed,on July 10,2024,the FRB entered into a Civil Money Penalty Consent Order with Citigroup in the amount of approximately$61 million,and the OCC entered into a Civil Money Penalty Consent Order with Citibank,a wholly owned subsidiary of Citigroup,in the amount of$75 million.The OCC and Citibank also entered into an Amendment to the October 7,2020 OCC Consent Order.The Amendment requires Citibank to formalize a process to determine whether sufficient resources are being appropriately allocated toward achieving timely and sustainable compliance with the OCCs 2020 Consent Order,including any requirements on which Citibank is not making sufficient and sustainable progress(such process,the Resource Review Plan).Copies of the 2024 Consent Orders and the Amendment were included as exhibits to Citis July 10,2024 Form 8-K.For additional information regarding the 2024 Consent Orders and the Amendment,see the July 10,2024 Form 8-K.As discussed above,Citis transformation efforts include effective implementation of the October 7,2020 FRB and OCC Consent Orders issued to Citigroup and Citibank,respectively.The 2020 Consent Orders require Citigroup and Citibank to implement extensive targeted action plans and submit quarterly progress reports on a timely and sufficient basis,detailing the results and status of improvements relating principally to various aspects of(i)enterprise-wide risk management,(ii)compliance risk management,(iii)data quality management related to governance,and(iv)internal controls.Citi continues to work constructively with the FRB and OCC and provide additional information regarding its plans and progress to both regulators on an ongoing basis.Citi will continue to reflect their feedback in its project plans and execution efforts.Although there are no restrictions on Citis ability to serve its clients,the 2020 OCC Consent Order requires Citibank to obtain prior approval of any significant new acquisition,including any portfolio or business acquisition,excluding ordinary course transactions.For additional information about the requirements under the 2020 Consent Orders,see Citis Current Report on Form 8-K filed with the SEC on October 9,2020.GovernanceCiti has built an organization and infrastructure to manage,guide and support its transformation,which spans all businesses and functions to ensure consistency.Additionally,the Citigroup and Citibank Boards of Directors each formed a Transformation Oversight Committee,an ad hoc committee of each Board,to provide oversight of Citis efforts to improve its risk and control environment and managements remediation efforts under the consent orders.While every member of Citis executive management team,or EMT,is involved in the transformation and plays a key,direct role in its implementation,Citis CEO has taken a leading role in managing the effort.As part of this effort,Citis CEO has assembled a team consisting of long-tenured employees and new hires from across various disciplines and areas of expertise and experience,along with representatives from each of Citis businesses and functions,to lead the various transformation programs.Citi is focusing the Companys most senior talent on this effort and has a detailed,integrated approach to execute on the transformation.Citis Transformation Steering Committee,chaired by Citis CEO,sets the overall direction for the transformation and communicates progress to the Citigroup Board of Directors,as well as seeks input and feedback from the Board.In 2023,Citi appointed a Chief Operating Officer,who reports to the CEO and is responsible for running Citis overall transformation efforts,as well as leading Citis efforts to improve operating efficiency and returns along with Citis enterprise-wide effort to strengthen its risk and controls and data quality,and modernize infrastructure,while simplifying the Company.In 2024,Citi hired a new Head of Technology and Business Enablement,who reports to the CEO and works closely with Citis transformation team to drive improvements to data quality and modernize infrastructure,while driving simplification and automation across Citi.12Transformation Bonus ProgramIn 2021,the Compensation,Performance Management and Culture Committee(the Compensation Committee)of Citigroups Board of Directors approved a long-term performance-based bonus program to incentivize effective execution in connection with the transformation and remediation of the consent orders and to drive change in Citis risk and control environment and culture(the Transformation Bonus Program,or the Program).There are approximately 200 senior employees who were deemed critical to the execution of the transformation and are therefore eligible for the Program.Performance is measured,and the bonus,if any,payable pursuant to the Transformation Bonus Program is paid in three tranches,each representing a separate performance period.Well-defined goals and related metrics are established for each of the three tranches,which may reflect qualitative considerations,including regulatory actions.At the end of each year,the Compensation Committee determines the appropriate level of payout given the accomplishments for the performance period relative to the specific goals and related metrics.The maximum portion of the bonus payable for each tranche was 25%for the first tranche,25%for the second tranche and is 50%for the third tranche.For additional information on the Transformation Bonus Program,including the Compensation Committees determination with respect to performance metrics,targets and achievements for the first and second performance measurement periods under the Program,see“Citis Multiyear Transformation”in Citis Second Quarter of 2024 Form 10-Q and Citis 2024 Proxy Statement for Citigroups Annual Meeting of Stockholders.For additional information on the Compensation Committees determination with respect to performance metrics,targets and achievements for the third performance measurement period under the Program covering calendar year 2024,see Citis upcoming 2025 Annual Meeting Proxy Statement to be filed with the SEC in March 2025.13RESULTS OF OPERATIONSSUMMARY OF SELECTED FINANCIAL DATACitigroup Inc.and Consolidated SubsidiariesIn millions of dollars,except per share amounts20242023202220212020Net interest income$54,095$54,900$48,668$42,494$44,751 Non-interest revenue 27,044 23,562 26,670 29,390 30,750 Revenues,net of interest expense$81,139$78,462$75,338$71,884$75,501 Operating expenses 53,984 56,366 51,292 48,193 44,374 Provisions for credit losses and for benefits and claims 10,109 9,186 5,239 (3,778)17,495 Income from continuing operations before income taxes$17,046$12,910$18,807$27,469$13,632 Income taxes 4,211 3,528 3,642 5,451 2,525 Income from continuing operations$12,835$9,382$15,165$22,018$11,107 Income(loss)from discontinued operations,net of taxes(2)(1)(231)7 (20)Net income before attribution of noncontrolling interests$12,833$9,381$14,934$22,025$11,087 Net income attributable to noncontrolling interests 151 153 89 73 40 Citigroups net income$12,682$9,228$14,845$21,952$11,047 Earnings per shareBasicIncome from continuing operations$6.03$4.07$7.16$10.21$4.75 Net income 6.03 4.07 7.04 10.21 4.74 Diluted Income from continuing operations$5.95$4.04$7.11$10.14$4.73 Net income 5.94 4.04 7.00 10.14 4.72 Dividends declared per common share 2.18 2.08 2.04 2.04 2.04 Common dividends$4,218$4,076$4,028$4,196$4,299 Preferred dividends 1,054 1,198 1,032 1,040 1,095 Common share repurchases 2,500 2,000 3,250 7,600 2,925 Table continues on the next page,including footnotes.14SUMMARY OF SELECTED FINANCIAL DATA(Continued)Citigroup Inc.and Consolidated SubsidiariesIn millions of dollars,except per share amounts,ratios and direct staff or as otherwise noted20242023202220212020At December 31:Total assets$2,352,945$2,411,834$2,416,676$2,291,413$2,260,090 Total deposits 1,284,458 1,308,681 1,365,954 1,317,230 1,280,671 Long-term debt 287,300 286,619 271,606 254,374 271,686 Citigroup common stockholders equity 190,748 187,853 182,194 182,977 179,962 Total Citigroup stockholders equity 208,598 205,453 201,189 201,972 199,442 Average assets 2,468,431 2,442,233 2,396,023 2,347,709 2,226,454 Direct staff(in thousands)229 239 240 223 210 Performance metricsReturn on average assets 0.51%0.38%0.62%0.94%0.50%Return on average common stockholders equity(1)6.1 4.3 7.7 11.5 5.7 Return on average total stockholders equity(1)6.1 4.5 7.5 10.9 5.7 Return on tangible common equity(RoTCE)(2)7.0 4.9 8.9 13.4 6.6 Operating leverage(3)764 bps(575)bps(163)bps(1,340)bps(314)bpsEfficiency ratio(total operating expenses/total revenues,net)66.5 71.8 68.1 67.0 58.8 Basel III ratiosCET1 Capital(4)13.63.37.03.25.51%Tier 1 Capital(4)15.31 15.02 14.80 13.91 13.06 Total Capital(4)15.42 15.13 15.46 16.04 15.33 Supplementary Leverage ratio 5.85 5.82 5.82 5.73 6.99 Citigroup common stockholders equity to assets 8.11%7.79%7.54%7.99%7.96%Total Citigroup stockholders equity to assets 8.87 8.52 8.33 8.81 8.82 Dividend payout ratio(5)37 51 29 20 43 Total payout ratio(6)58 76 53 56 73 Book value per common share$101.62$98.71$94.06$92.21$86.43 Tangible book value per share(TBVPS)(2)89.34 86.19 81.65 79.16 73.67(1)The return on average common stockholders equity is calculated using net income less preferred stock dividends divided by average common stockholders equity.The return on average total Citigroup stockholders equity is calculated using net income divided by average Citigroup stockholders equity.(2)RoTCE and TBVPS are non-GAAP financial measures.For information on RoTCE and TBVPS,see“Capital ResourcesTangible Common Equity,Book Value Per Share,Tangible Book Value Per Share and Return on Equity”below.(3)Represents the year-over-year growth rate in basis points(bps)of Total revenues,net of interest expense less the year-over-year growth rate of Total operating expenses.Positive operating leverage indicates that the revenue growth rate was greater than the expense growth rate.(4)Citis binding CET1 Capital and Tier 1 Capital ratios were derived under the Basel III Standardized Approach as of December 31,2024,2023,2022 and 2021,and were derived under the Basel III Advanced Approaches framework as of December 31,2020.Citis binding Total Capital ratio was derived under the Basel III Advanced Approaches framework for all periods presented.(5)Dividends declared per common share as a percentage of net income per diluted share.(6)Total common dividends declared plus common share repurchases as a percentage of net income available to common shareholders(Net income less preferred dividends).See“Consolidated Statement of Changes in Stockholders Equity,”Note 11 and“Equity Security Repurchases”below for the component details.15SEGMENT REVENUES AND INCOME(LOSS)REVENUESIn millions of dollars202420232022%Change2024 vs.2023%Change2023 vs.2022Services$19,649$18,102$15,665 9%Markets 19,836 18,649 19,945 6 (6)Banking 6,201 4,715 5,527 32 (15)Wealth 7,512 7,021 7,355 7 (5)USPB 20,374 19,187 16,872 6 14 All Othermanaged basis(1)7,541 9,442 9,120 (20)4 All Otherdivestiture-related impacts(Reconciling Items)(1)26 1,346 854 (98)58 Total Citigroup net revenues$81,139$78,462$75,338 3%4%INCOMEIn millions of dollars202420232022%Change2024 vs.2023%Change2023 vs.2022Income(loss)from continuing operationsServices$6,584$4,701$4,948 40%(5)%Markets 5,005 3,938 5,852 27 (33)Banking 1,529 (31)334 NMNMWealth 1,002 419 995 139 (58)USPB 1,382 1,820 2,770 (24)(34)All Othermanaged basis(1)(2,460)(2,124)450 (16)NMAll Otherdivestiture-related impacts(Reconciling Items)(1)(207)659 (184)NMNMIncome from continuing operations$12,835$9,382$15,165 37%(38)%Discontinued operations$(2)$(1)$(231)(100)0%Less:Net income attributable to noncontrolling interests 151 153 89 (1)72 Citigroups net income$12,682$9,228$14,845 37%(38)%(1)All Other(managed basis)excludes divestiture-related impacts(Reconciling Items)related to(i)Citis divestitures of its Asia Consumer businesses and(ii)the planned IPO of Mexico Consumer/SBMM within Legacy Franchises.The Reconciling Items are fully reflected in the various line items in Citis Consolidated Statement of Income.See“All OtherDivestiture-Related Impacts(Reconciling Items)”below.NM Not meaningful16SELECT BALANCE SHEET ITEMS BY SEGMENT(1)DECEMBER 31,2024In millions of dollarsServicesMarketsBankingWealthUSPBAll Otherandconsolidatingeliminations(2)Citigroupparent company-issued long-termdebt(3)TotalCitigroupconsolidated Cash and deposits with banks,net of allowance$15,281$80,175$1,350$1,858$2,975$174,893$276,532 Securities borrowed and purchased under agreements to resell,net of allowance 8,886 262,130 360 2,686 274,062 Trading account assets 49 428,656 831 1,126 292 11,793 442,747 Investments,net of allowance 606 120,107 937 1 355,006 476,657 Loans,net of unearned income and allowance for credit losses on loans 87,596 124,253 80,915 146,988 207,571 28,591 675,914 Deposits$807,002$12,713$564$312,795$89,432$61,952$1,284,458 Securities loaned and sold under agreements to repurchase 552 251,852 48 2,303 254,755 Trading account liabilities 1,067 132,097 4 328 193 157 133,846 Short-term borrowings 117 43,439 2 2 4,945 48,505 Long-term debt(3)93,138 392 29,746 164,024 287,300(1)The information presented in the table above reflects select GAAP balance sheet items by reportable segment and component.This table does not include intersegment funding.(2)Consolidating eliminations for total Citigroup and Citigroup parent company items are recorded within All Other.(3)The majority of long-term debt of Citigroup is reflected on the Citigroup parent company balance sheet(see Notes 19 and 31).Citigroup allocates stockholders equity and long-term debt to its businesses.17SERVICESServices includes Treasury and Trade Solutions(TTS)and Securities Services.TTS provides an integrated suite of tailored cash management,payments and trade and working capital solutions to multinational corporations,financial institutions and public sector organizations.Securities Services provides a comprehensive product offering,connecting clients to global markets across the entire investment cycle,including on-the-ground local market expertise,post-trade technologies,customized data solutions and a wide range of securities services solutions that can be tailored to meet clients needs.Services revenue is generated primarily from spreads and fees associated with these activities.Services earns spread revenue through generating deposits,as well as interest on loans.Revenue generated from these activities is primarily recorded in Net interest income.Fee income is earned for assisting clients with transactional services and clearing.Revenue generated from these activities is recorded in Commissions and fees.Revenue is also generated from assets under custody and administration and is recognized when the associated service is provided by Citi.Revenue generated from these activities is primarily recorded in Administration and other fiduciary fees.For additional information on these various types of revenues,see Note 5.Services revenues also include revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.At December 31,2024,Services had$584 billion in assets and$807 billion in deposits.Securities Services managed$25.4 trillion in assets under custody and administration,of which Citi provided both custody and administrative services to certain clients related to$1.9 trillion of such assets.In millions of dollars,except as otherwise noted202420232022%Change2024 vs.2023%Change2023 vs.2022Net interest income(including dividends)$13,423$13,251$10,365 1(e revenueCommissions and fees 3,327 3,125 2,887 6 8 Administration and other fiduciary fees,and other 2,716 2,501 2,483 9 1 Total fee revenue$6,043$5,626$5,370 7%5%Principal transactions 959 1,006 854 (5)18 All other(1)(776)(1,781)(924)56 (93)Total non-interest revenue$6,226$4,851$5,300 28%(8)%Total revenues,net of interest expense$19,649$18,102$15,665 9%Total operating expenses$10,599$10,031$8,734 6%Net credit losses on loans 48 40 51 20 (22)Credit reserve build(release)for loans(130)47 128 NM(63)Provision for credit losses on unfunded lending commitments 17 (18)24 NMNMProvisions for credit losses on other assets and HTM debt securities 341 881 4 (61)NMProvision(release)for credit losses$276$950$207 (71)%NMIncome from continuing operations before taxes$8,774$7,121$6,724 23%6%Income taxes 2,190 2,420 1,776 (10)36 Income from continuing operations$6,584$4,701$4,948 40%(5)%Noncontrolling interests 101 66 36 53 83 Net income$6,483$4,635$4,912 40%(6)lance Sheet data(in billions of dollars)EOP assets$584$586$600%(2)%Average assets 586 583 546 1 7 Efficiency ratio 54UV%Revenue by componentNet interest income$10,923$11,085$8,884 (1)%Non-interest revenue 3,609 2,631 2,954 37 (11)Treasury and Trade Solutions(TTS)$14,532$13,716$11,838 6%Net interest income$2,500$2,166$1,481 15F%Non-interest revenue 2,617 2,220 2,346 18 (5)Securities Services$5,117$4,386$3,827 17%Total Services$19,649$18,102$15,665 9Revenue by geographyNorth America$5,415$5,131$4,782 6%7%International 14,234 12,971 10,883 10 19 Total$19,649$18,102$15,665 9%International revenue by clusterUnited Kingdom$1,972$1,811$1,426 9%Japan,Asia North and Australia(JANA)2,678 2,469 2,097 8 18 LATAM 2,734 2,512 2,193 9 15 Asia South 2,428 2,161 1,779 12 21 Europe 2,283 2,231 1,763 2 27 Middle East and Africa(MEA)2,139 1,787 1,625 20 10 Total$14,234$12,971$10,883 10%Key drivers(2)Average loans by component(in billions of dollars)TTS$84$80$80 5%Securities Services 1 1 2 (50)Total$85$81$82 5%(1)LL as a percentage of EOP loans(3)0.30%0.47%0.46%Average deposits by component(in billions of dollars)TTS$689$688$676%2%Securities Services 130 123 133 6 (8)Total$819$811$809 1%Cross-border transaction value(in billions of dollars)$379.7$358.0$311.6 6%U.S.dollar clearing volume(in millions)(4)168.0 157.3 148.6 7 6 Commercial card spend volume(in billions of dollars)$70.4$66.8$57.4 5 16(1)Includes revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.(2)Management uses this information in reviewing the segments results and believes it is useful to investors concerning underlying segment performance and trends.(3)Excludes loans that are carried at fair value for all periods.(4)Represents the number of U.S.dollar clearing payment instructions processed on behalf of U.S.and foreign-domiciled entities(primarily financial institutions).NM Not meaningful2024 vs.2023Net income of$6.5 billion increased 40%,driven by higher revenues and lower cost of credit,partially offset by higher expenses.Revenues increased 9%,driven by higher non-interest revenue in TTS and Securities Services,as well as higher net interest income.Excluding the impact of the Argentina currency devaluation(approximately$(178)million,compared to approximately$(1.2)billion in the prior year),revenues increased 3%.Non-interest revenue increased 28%,largely due to the smaller impact from the Argentina currency devaluation.Excluding the impact of the Argentina currency devaluation,non-interest revenue increased 5%,driven by continued strength across underlying fee drivers in TTS and Securities Services.Net interest income increased 1%,as the benefit of higher deposit and loan volumes was largely offset by a decline in interest rates in Argentina.Average deposits increased 1%,primarily driven by growth in Securities Services.Citi continued to increase operating deposits in both TTS and Securities Services.TTS revenues increased 6%,primarily driven by a 37%increase in non-interest revenue,partially offset by a 1crease in net interest income.The increase in non-interest revenue was largely driven by the smaller impact from the Argentina currency devaluation(approximately$(164)million,compared to approximately$(1.0)billion in the prior year).Excluding the Argentina currency devaluation,non-interest revenue grew 3%,reflecting growth in underlying fee drivers,including cross-border transaction value(up 6%),U.S.dollar clearing volume(up 7%)and commercial card spend volume(up 5%).The decrease in net interest income was primarily driven by the decline in interest rates in Argentina.Average deposits were largely unchanged,as growth in International was offset by a decrease in North America.For additional information about Citis exposure in Argentina,see“Managing Global RiskOther RiskCountry RiskArgentina”below.Securities Services revenues increased 17%,driven by a 15%increase in net interest income,primarily due to higher spreads and volumes,and an 18%increase in non-interest revenue.The increase in spreads was driven by higher interest rates and deposit mix across currencies.Average deposits increased 6%,driven by growth in both North America and International.The growth in non-interest revenue was primarily driven by increased fees from higher AUC/AUA 19balances and continued elevated levels of corporate activity in Issuer Services,as well as the smaller impact from the Argentina currency devaluation.AUC/AUA balances increased 8%,benefiting from higher market valuations,new client onboarding and deepening share of existing client wallet.Expenses increased 6%,primarily driven by continued investments in technology and platform modernization,other risk and controls and product innovation,as well as an Argentina-related transaction tax expense and higher legal expenses,partially offset by the impact of productivity savings.Provisions were$276 million,compared to$950 million in the prior year,primarily driven by a lower ACL build on other assets.The net ACL build was$228 million,compared to$910 million in the prior year.The lower net ACL build was primarily due to a smaller build for transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on Citis ACL,see“Significant Accounting Policies and Significant Estimates”below.For additional information on Services corporate credit portfolio,see“Managing Global RiskCredit RiskCorporate Credit”below.For additional information on trends in Services deposits and loans,see“Managing Global RiskCredit RiskLoans”and“Managing Global RiskLiquidity RiskDeposits”below.For additional information about trends,uncertainties and risks related to Services future results,see“Executive Summary”above and“Managing Global RiskOther RisksCountry RiskArgentina”and“Russia”below.20MARKETSMarkets provides corporate,institutional and public sector clients around the world with a full range of sales and trading services across equities,foreign exchange,rates,spread products and commodities.The range of services includes market-making across asset classes,risk management solutions,financing and prime brokerage.As a market maker,Markets facilitates transactions,including holding product inventory to meet client demand,and earns the differential between the price at which it buys and sells the products.These price differentials and the unrealized gains and losses on the inventory are recorded in Principal transactions.Fee revenue is earned through providing clients with a range of services including but not limited to trading,financing,brokerage,securitization and underwriting.Other primarily includes realized gains and losses on available-for-sale(AFS)debt securities,gains and losses on equity securities not held in trading accounts and other non-recurring gains and losses.Interest income earned on assets held,less interest paid on long-and short-term debt,secured funding transactions and customer deposits,is recorded as Net interest income.The amount and types of Markets revenues are impacted by a variety of interrelated factors,including market liquidity;changes in market variables such as interest rates,foreign exchange rates,equity prices,commodity prices and credit spreads,as well as their implied volatilities;investor confidence;and other macroeconomic conditions.Markets revenues include revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.Assuming all other market conditions do not change,increases in client activity levels or bid/offer spreads generally result in increases in revenues.However,changes in market conditions can significantly impact client activity levels,bid/offer spreads and the fair value of product inventory.Management of the Markets businesses involves daily monitoring and evaluation of the above factors.Markets international presence is supported by trading floors in approximately 80 countries and a proprietary network in 95 countries and jurisdictions.In millions of dollars,except as otherwise noted202420232022%Change2024 vs.2023%Change2023 vs.2022Net interest income(including dividends)$7,005$7,233$5,768 (3)%e revenueBrokerage and fees 1,402 1,381 1,452 2 (5)Investment banking fees(1)426 392 482 9 (19)Other(2)238 147 138 62 7 Total fee revenue$2,066$1,920$2,072 8%(7)%Principal transactions 11,201 10,472 12,994 7 (19)All other(2)(436)(976)(889)55 (10)Total non-interest revenue$12,831$11,416$14,177 12%(19)%Total revenues,net of interest expense(3)$19,836$18,649$19,945 6%(6)%Total operating expenses$13,202$13,258$12,453%6%Net credit losses(recoveries)on loans 168 32 (4)425 NMCredit reserve build(release)for loans 213 202 50 5 NMProvision(release)for credit losses on unfunded lending commitments 17 5 3 240 67 Provisions for credit losses on other assets and HTM debt securities 65 199 68 (67)NMProvision(release)for credit losses$463$438$117 6%NMIncome(loss)from continuing operations before taxes$6,171$4,953$7,375 25%(33)%Income taxes(benefits)1,166 1,015 1,523 15 (33)Income(loss)from continuing operations$5,005$3,938$5,852 27%(33)%Noncontrolling interests 75 67 52 12 29 Net income(loss)$4,930$3,871$5,800 27%(33)lance Sheet data(in billions of dollars)EOP assets$949$1,008$963 (6)%5%Average assets 1,063 1,026 999 4 3 Efficiency ratio 67qb%Revenue by componentFixed Income Markets$14,750$14,612$15,494 1%(6)%Equity Markets 5,086 4,037 4,451 26 (9)Total$19,836$18,649$19,945 6%(6)!Rates and currencies$10,152$10,794$11,462 (6)%(6)%Spread products/other fixed income 4,598 3,818 4,032 20 (5)Total Fixed Income Markets revenues$14,750$14,612$15,494 1%(6)%Revenue by geographyNorth America$7,562$6,839$6,726 11%2%International 12,274 11,810 13,219 4 (11)Total$19,836$18,649$19,945 6%(6)%International revenue by clusterUnited Kingdom$4,099$4,383$5,650 (6)%(22)%Japan,Asia North and Australia(JANA)2,546 2,370 2,401 7 (1)LATAM 1,962 1,444 1,584 36 (9)Asia South 1,618 1,404 1,388 15 1 Europe 935 1,086 913 (14)19 Middle East and Africa(MEA)1,114 1,123 1,283 (1)(12)Total$12,274$11,810$13,219 4%(11)%Key drivers(4)(in billions of dollars)Average loans$120$110$111 9%(1)%NCLs as a percentage of average loans 0.14%0.03LL as a percentage of EOP loans(5)0.88%0.71%0.58%Average trading account assets 436 379 334 15 13 Average deposits 21 23 21 (9)10(1)Investment banking fees are primarily composed of underwriting,advisory,loan syndication structuring and other related financing activity.(2)Includes revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.(3)Citi assesses its Markets business performance on a total revenue basis,as offsets may occur across revenue line items.For example,securities that generate Net interest income may be risk managed by derivatives that are recorded in Principal transactions revenue within Non-interest revenue.For a description of the composition of these revenue line items,see Notes 4,5 and 6.(4)Management uses this information in reviewing the segments results and believes it is useful to investors concerning underlying segment performance and trends.(5)Excludes loans that are carried at fair value for all periods.NM Not meaningful2024 vs.2023Net income of$4.9 billion increased 27%,driven by higher revenues,partially offset by higher cost of credit.Revenues increased 6%,driven by higher Equity Markets and Fixed Income Markets revenues.Citi expects that revenues in its Markets businesses will reflect the overall market environment during 2025.Fixed Income Markets revenues increased 1%,driven by spread products and other fixed income,partially offset by lower revenues in rates and currencies.Rates and currencies revenues decreased 6%,largely reflecting lower volatility and a strong prior-year performance,partially offset by the smaller impact of the Argentina currency devaluation.Spread products and other fixed income revenues increased 20%,largely driven by increased client activity due to growth in asset-backed financing,securitization activity and underwriting fees.These increases were partially offset by a decline in commodities revenues on lower overall volatility.Equity Markets revenues increased 26%,driven by growth in cash equities due to higher client activity and volumes.The increase in revenues was also due to growth in equity derivative revenues on higher volatility,which also included the impact from an episodic gain related to the Visa B exchange.The increase in revenues was also driven by growth in prime services,as Equity Markets continued to experience an increase in prime balances.Expenses were largely unchanged,as higher legal expenses and higher volume-related expenses were offset by productivity savings.Provisions were$463 million,compared to$438 million in the prior year,primarily driven by higher net credit losses,partially offset by a lower ACL build on other assets.Net credit losses were$168 million,compared to$32 million in the prior year,largely driven by higher losses on loans in spread products.The net ACL build was$295 million,compared to a net build of$406 million in the prior year.The lower net ACL build was primarily due to a smaller build for transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.For additional information on Citis ACL,see“Significant Accounting Policies and Significant Estimates”below.For additional information on Markets corporate credit portfolio,see“Managing Global RiskCredit RiskCorporate Credit”below.For additional information on trends in Markets deposits and loans,see“Managing Global RiskCredit RiskLoans”and“Managing Global RiskLiquidity RiskDeposits”below.For additional information about trends,uncertainties and risks related to Markets future results,see“Executive Summary”above and“Managing Global RiskOther RisksCountry RiskArgentina”and“Russia”below.22BANKINGBanking includes Investment Banking,which supports clients capital-raising needs to help strengthen and grow their businesses,including equity and debt capital markets-related strategic financing solutions and loan syndication structuring,as well as advisory services related to mergers and acquisitions,divestitures,restructurings and corporate defense activities;and Corporate Lending,which includes corporate and commercial banking,serving as the conduit for Citis full product suite to clients.Banking revenues include revenues earned by Citi that are subject to a revenue sharing arrangement for Investment Banking,Markets and Services products sold to Corporate Lending clients.At December 31,2024,Banking had$143 billion in assets including$82 billion in loans and$0.6 billion in deposits.In millions of dollars,except as otherwise noted202420232022%Change2024 vs.2023%Change2023 vs.2022Net interest income(including dividends)$2,157$2,161$2,130%1e revenueInvestment banking fees(1)3,857 2,713 3,052 42 (11)Other 174 160 175 9 (9)Total fee revenue$4,031$2,873$3,227 40%(11)%Principal transactions(759)(938)(133)19 NMAll other(2)772 619 303 25 NMTotal non-interest revenue$4,044$2,554$3,397 58%(25)%Total revenues,net of interest expense 6,201 4,715 5,527 32 (15)Total operating expenses$4,477$4,877$4,460 (8)%9%Net credit losses on loans 149 169 107 (12)58 Credit reserve build(release)for loans(200)(345)321 42 NMProvision(release)for credit losses on unfunded lending commitments(128)(354)158 64 NMProvisions(releases)for credit losses on other assets and HTM debt securities(45)387 18 NMNMProvisions(releases)for credit losses$(224)$(143)$604 (57)%NMIncome(loss)from continuing operations before taxes$1,948$(19)$463 NMNMIncome taxes(benefits)419 12 129 NM(91)%Income(loss)from continuing operations$1,529$(31)$334 NMNMNoncontrolling interests 5 4 (3)25%NMNet income(loss)$1,524$(35)$337 NMNMBalance Sheet data(in billions of dollars)EOP assets$143$148$152 (3)%(3)%Average assets 152 153 159 (1)(4)Efficiency ratio 723%Revenue by componentTotal Investment Banking$3,637$2,632$2,608 38%1%Corporate Lending(excluding gain(loss)on loan hedges)(2)(3)2,744 2,526 2,612 9 (3)Total Banking revenues(excluding gain(loss)on loan hedges)(2)(3)$6,381$5,158$5,220 24%(1)%Gain(loss)on loan hedges(2)(3)(180)(443)307 59 NMTotal Banking revenues(including gain(loss)on loan hedges)(2)(3)$6,201$4,715$5,527 32%(15)%Business metricsinvestment banking feesAdvisory$1,245$1,017$1,332 22%(24)%Equity underwriting(Equity Capital Markets(ECM)688 500 621 38 (19)Debt underwriting(Debt Capital Markets(DCM)1,924 1,196 1,099 61 9 Total$3,857$2,713$3,052 42%(11)%Revenue by geographyNorth America$3,097$1,898$2,563 63%(26)#International 3,104 2,817 2,964 10 (5)Total$6,201$4,715$5,527 32%(15)%International revenue by clusterUnited Kingdom$686$637$635 8%Japan,Asia North and Australia(JANA)524 591 662 (11)(11)LATAM 662 522 502 27 4 Asia South 411 381 423 8 (10)Europe 588 498 468 18 6 Middle East and Africa(MEA)233 188 274 24 (31)Total$3,104$2,817$2,964 10%(5)%Key drivers(4)(in billions of dollars)Average loans$88$92$100 (4)%(8)%NCLs as a percentage of average loans 0.17%0.18%0.11LL as a percentage of EOP loans(5)1.42%1.59%1.88%Average deposits 1 1 1 (1)Investment banking fees are primarily composed of underwriting,advisory,loan syndication structuring and other related financing activity.(2)Includes revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets and Services products sold to Corporate Lending clients.(3)Credit derivatives are used to economically hedge a portion of the corporate loan portfolio that includes both accrual loans and loans at fair value.Gain(loss)on loan hedges includes the mark-to-market on the credit derivatives,partially offset by the mark-to-market on the loans in the portfolio that are at fair value.Hedges on accrual loans reflect the mark-to-market on credit derivatives used to economically hedge the corporate loan accrual portfolio.The fixed premium costs of these hedges are netted against the corporate lending revenues to reflect the cost of credit protection.Citigroups results of operations excluding the impact of gain(loss)on loan hedges are non-GAAP financial measures.(4)Management uses this information in reviewing the segments results and believes it is useful to investors concerning underlying segment performance and trends.(5)Excludes loans that are carried at fair value for all periods.NM Not meaningfulThe discussion of the results of operations for Banking below excludes(where noted)the impact of any gain(loss)on hedges of accrual loans,which are non-GAAP financial measures.For a reconciliation of these metrics to the reported results,see the table above.2024 vs.2023Net income was$1.5 billion,compared to a net loss of$35 million in the prior year,driven by higher revenues,lower expenses and a higher benefit from cost of credit.Revenues increased 32%(including losses on loan hedges),reflecting higher Investment Banking and Corporate Lending revenues,along with a lower loss on loan hedges($180 million versus$443 million in the prior year).Excluding the impact of losses on loan hedges,Banking revenues increased 24%.Investment Banking revenues increased 38%,reflecting a 42%increase in investment banking fees,due to a rebound in overall wallet activity and wallet share gains across all products.DCM underwriting fees increased 61%,benefiting from near record debt issuance,particularly in investment grade and higher leveraged finance activity.Advisory fees increased 22%,due to strong announced deal volume from earlier in the year coming to fruition as those transactions closed.Equity underwriting fees increased 38%,due to stronger follow-on and convertibles activity.Corporate Lending revenues increased 23%,including the impact of gain(loss)on loan hedges.Excluding the impact of losses on loan hedges,Corporate Lending revenues increased 9%,primarily driven by a smaller impact from the currency devaluation in Argentina.Expenses decreased 8%,primarily driven by benefits of prior repositioning actions and other actions to lower the expense base,partially offset by higher volume-related expenses.Provisions reflected a benefit of$224 million,compared to a benefit of$143 million in the prior year,primarily driven by an ACL release on other assets.The net ACL release was$373 million,compared to a net release of$312 million in the prior year,primarily due to lower transfer risk associated with exposures outside the U.S.,driven by safety and soundness considerations under U.S.banking law.The net ACL releases on loans and unfunded lending commitments in 2024 were primarily driven by improved macroeconomic conditions.For additional information on Citis ACL,see“Significant Accounting Policies and Significant Estimates”below.For additional information on Bankings corporate credit portfolio,see“Managing Global RiskCredit RiskCorporate Credit”below.For additional information on trends in Bankings deposits and loans,see“Managing Global RiskCredit RiskLoans”and“Managing Global RiskLiquidity RiskDeposits”below.For additional information about trends,uncertainties and risks related to Bankings future results,see“Executive Summary”above and“Managing Global RiskOther RisksCountry RiskArgentina”and“Russia”below.24WEALTHWealth includes the Private Bank,Wealth at Work and Citigold businesses and provides financial services to a range of client segments including affluent,high net worth and ultra-high net worth clients through banking,lending,mortgages,investment,custody and trust product offerings in 20 countries,including the U.S.,Mexico and four wealth management centers:Singapore,Hong Kong,the UAE and London.Private Bank provides financial services to ultra-high net worth clients through customized product offerings.Wealth at Work provides financial services to professional industries(including law firms,consulting groups,accounting and asset management)through tailored solutions.Citigold and Citigold Private Client provide financial services to affluent and high net worth clients through elevated product offerings and financial relationships.At December 31,2024,Wealth had$313 billion in deposits,$587 billion in client investment assets and$148 billion in loans,including$89 billion in mortgage loans,$29 billion in margin loans,$24 billion in personal,small business and other loans and$5 billion in outstanding credit card balances.In addition,Wealth had net new investment asset flows of$42 billion during 2024.For additional information on Wealths end-of-period consumer loan portfolios and metrics,see“Managing Global RiskCredit RiskConsumer Credit”below.In millions of dollars,except as otherwise noted202420232022%Change2024 vs.2023%Change2023 vs.2022Net interest income$4,508$4,413$4,681 2%(6)e revenueCommissions and fees 1,409 1,204 1,206 17 Other(1)949 802 858 18 (7)Total fee revenue$2,358$2,006$2,064 18%(3)%All other(2)646 602 610 7 (1)Total non-interest revenue$3,004$2,608$2,674 15%(2)%Total revenues,net of interest expense 7,512 7,021 7,355 7 (5)Total operating expenses$6,355$6,485$5,912 (2)%Net credit losses on loans 121 98 103 23 (5)Credit reserve build(release)for loans(236)(85)190 (178)NMProvision(release)for credit losses on unfunded lending commitments(9)(12)12 25 NMProvisions for benefits and claims(PBC),and other assets(2)(4)2 50 NMProvisions(releases)for credit losses and PBC$(126)$(3)$307 NMNMIncome from continuing operations before taxes$1,283$539$1,136 138%(53)%Income taxes 281 120 141 134 (15)Income from continuing operations$1,002$419$995 139%(58)%Noncontrolling interests Net income$1,002$419$995 139%(58)lance Sheet data(in billions of dollars)EOP assets$224$229$256 (2)%(11)%Average assets 231 244 256 (5)(5)Efficiency ratio 85%Revenue by componentPrivate Bank$2,386$2,332$2,811 2%(17)%Wealth at Work 876 862 730 2 18 Citigold 4,250 3,827 3,814 11 Total$7,512$7,021$7,355 7%(5)%Revenue by geographyNorth America$3,628$3,615$3,927%(8)%International 3,884 3,406 3,428 14 (1)Total$7,512$7,021$7,355 7%(5)%International revenue by clusterUnited Kingdom$336$288$356 17%(19)%Japan,Asia North and Australia(JANA)1,365 1,152 1,159 18 (1)LATAM 129 118 203 9 (42)Asia South 1,369 1,199 1,093 14 10 Europe 301 301 310 (3)Middle East and Africa(MEA)384 348 307 10 13 Total$3,884$3,406$3,428 14%(1)%Key drivers(3)(in billions of dollars)EOP client balancesClient investment assets(4)$587$496$441 18posits 313 319 318 (2)Loans 148 151 149 (3)1 Total$1,048$966$908 8%6%Average loans$149$150$150 (1)LL as a percentage of EOP loans 0.36%0.51%0.59%(1)Primarily related to fiduciary and administrative fees.(2)Primarily related to principal transactions revenue including FX translation.(3)Management uses this information in reviewing the segments results and believes it is useful to investors concerning underlying segment performance and trends.(4)Includes assets under management,and trust and custody assets.NM Not meaningful2024 vs.2023 Net income was$1.0 billion,compared to$419 million in the prior year,reflecting higher revenues,lower expenses and a higher benefit from cost of credit.Revenues increased 7%,largely driven by an increase in non-interest revenue(up 15%),reflecting higher investment fee revenues on growth in client investment assets,as well as an increase in net interest income(up 2%).The increase in net interest income was mainly due to higher average deposit spreads and volumes,partially offset by higher mortgage funding costs.Client balances increased 8%,primarily driven by higher client investment assets(up 18%),reflecting strong net new investment assets generation and higher market valuations.Average deposits increased 2%,reflecting the transfers of relationships and the associated deposits from USPB($17 billion at the time of transfer over the last 12 months),partially offset by a shift in deposits to higher-yielding investments on Citis platform.Average loans decreased 1%,as Wealth continued to optimize capital usage.Private Bank and Wealth at Work revenues both increased 2%,driven by the improved deposit spreads and the higher investment fee revenues,partially offset by the higher mortgage funding costs.Citigold revenues increased 11%,driven by the higher investment fee revenues,as well as higher deposit spreads and volumes,reflecting the transfer of relationships and the associated deposits from USPB.Expenses decreased 2%,mainly driven by benefits from prior repositioning and restructuring actions,partially offset by higher volume-related expenses and technology investments focused on risk and controls and platform enhancements.Provisions were a benefit of$126 million,compared to a benefit of$3 million in the prior year,largely driven by a higher net ACL release.The higher net ACL release was primarily due to a change in the ACL associated with the margin lending portfolio.For additional information on Citis ACL,see“Significant Accounting Policies and Significant Estimates”below.For additional information on Wealths loan portfolios,see“Managing Global RiskCredit RiskConsumer Credit”below.For additional information about trends,uncertainties and risks related to Wealths future results,see“Executive Summary”above and“Risk Factors”below.26U.S.PERSONAL BANKINGU.S.Personal Banking(USPB)includes Branded Cards and Retail Services,with proprietary credit card portfolios(Value,Rewards and Cash)and co-branded card portfolios(including Costco and American Airlines)within Branded Cards,and co-brand and private label relationships within Retail Services(including,among others,The Home Depot,Best Buy,Macys and Sears).USPB also includes Retail Banking,which provides traditional banking services to retail and small business customers.In December 2024,Citi announced a 10-year extension and expansion of its co-branded credit card partnership with American Airlines.In addition,Citi reached an agreement to acquire the Barclays American Airlines co-branded card portfolio and will begin transitioning cardmembers to the Citi portfolio in 2026.With the acquisition of the Barclays portfolio,Citi will become American Airlines exclusive credit card issuing partner in 2026.At December 31,2024,USPB had 642 retail bank branches concentrated in the six key metropolitan areas of New York,Chicago,Los Angeles,San Francisco,Washington,D.C.and Miami.USPB had$171 billion in outstanding credit card balances,$89 billion in deposits,$46 billion in mortgages and$5 billion in personal and small business loans.For additional information on USPBs end-of-period consumer loan portfolios and metrics,see“Managing Global RiskCredit RiskConsumer Credit”below.In millions of dollars,except as otherwise noted202420232022%Change2024 vs.2023%Change2023 vs.2022Net interest income$21,103$20,150$18,062 5e revenueInterchange fees 9,910 9,674 9,190 2 5 Card rewards and partner payments(11,226)(11,083)(10,862)(1)(2)Other(1)468 349 462 34 (24)Total fee revenue$(848)$(1,060)$(1,210)20%All other(2)119 97 20 23 NMTotal non-interest revenue$(729)$(963)$(1,190)24%Total revenues,net of interest expense 20,374 19,187 16,872 6 14 Total operating expenses$9,965$10,102$9,782 (1)%3%Net credit losses on loans 7,579 5,234 2,918 45 79 Credit reserve build(release)for loans 1,006 1,464 517 (31)NMProvision for credit losses on unfunded lending commitments 1 (1)(100)NMProvisions for benefits and claims(PBC),and other assets 13 8 14 63 (43)Provisions for credit losses and PBC$8,598$6,707$3,448 28%Income from continuing operations before taxes$1,811$2,378$3,642 (24)%(35)%Income taxes 429 558 872 (23)(36)Income from continuing operations$1,382$1,820$2,770 (24)%(34)%Noncontrolling interests Net income$1,382$1,820$2,770 (24)%(34)lance Sheet data(in billions of dollars)EOP assets$252$242$231 4%5%Average assets 241 231 213 4 8 Efficiency ratio 49SX%Revenue by componentBranded Cards$10,702$9,988$8,962 7%Retail Services 7,114 6,617 5,469 8 21 Retail Banking 2,558 2,582 2,441 (1)6 Total$20,374$19,187$16,872 6%Key Drivers(3)Average loans and deposits(in billions of dollars)Average loans$209$193$171 8LL as a percentage of EOP loans(4)6.38%6.28%6.31%Average deposits 91 110 115 (17)(4)27Credit card spend volume(in billions of dollars)Branded Cards$516.1$497.4$474.6 4%5%Retail Services 90.6 94.9 99.1 (5)(4)New account acquisitions(5)(in thousands of accounts)Branded Cards 4,667 4,546 4,173 3%9%Retail Services 7,882 9,138 9,957 (14)(8)(1)Primarily related to retail banking and credit card-related fees.(2)Primarily related to revenue incentives from card networks and partners.(3)Management uses this information in reviewing the segments results and believes it is useful to investors concerning underlying segment performance and trends.(4)Excludes loans that are carried at fair value for all periods.(5)Represents the number of new credit card accounts opened.NM Not meaningful2024 vs.2023Net income was$1.4 billion,compared to$1.8 billion in the prior year,reflecting higher cost of credit,partially offset by higher revenues and lower expenses.Revenues increased 6%,due to higher net interest income(up 5%),driven by strong loan growth,primarily in cards,as well as higher non-interest revenue(up 24%).The increase in non-interest revenue was largely driven by lower partner payments in Retail Services,due to higher net credit losses,and an increase in interchange fees(see Note 5),driven by higher card spend volume in Branded Cards.The increase in non-interest revenue was partially offset by an increase in rewards costs in Branded Cards,driven by the higher card spend volume.Cards revenues increased 7%.Branded Cards revenues increased 7%,primarily driven by interest-earning balance growth(up 9%),as payment rates continued to moderate,and card spend volume growth.Branded Cards average loans increased 9%,also reflecting the lower card payment rates and higher card spend volume.Branded Cards spend volume increased 4%,driven by higher FICO band customers.Retail Services revenues increased 8%,primarily driven by higher non-interest revenue due to the lower partner payments,driven by the higher net credit losses(see“Provisions”below and Note 5),as well as higher net interest income on growth in interest-earning balances.Retail Services average loans increased 3%,largely reflecting lower card payment rates,partially offset by lower card spend volume.Retail Services card spend volume decreased 5%,primarily due to lower in-store foot traffic.Retail Banking revenues decreased 1%,driven by the impact of the transfers of certain relationships and the associated deposit balances to Wealth,partially offset by higher deposit spreads,as well as mortgage and installment loan growth.Average mortgage loans increased 15%,primarily driven by lower refinancings due to higher interest rates and higher mortgage originations.Average deposits decreased 17%,largely reflecting the transfer of certain relationships and the associated deposit balances to Wealth($17 billion at the time of transfer over the last 12 months).Expenses decreased 1%,driven by continued productivity savings and lower technology costs,partially offset by higher volume-related expenses.Provisions were$8.6 billion,compared to$6.7 billion in the prior year,largely driven by higher net credit losses,partially offset by a lower ACL build for loans.Net credit losses of$7.6 billion increased 45%,primarily reflecting the continued maturation of multiple cards loan vintages originated in recent years.The maturation was delayed by unprecedented levels of government stimulus during the pandemic.In addition,the increase was driven by macroeconomic pressures related to the elevated inflationary and interest rate environment impacting both cards portfolios,with lower FICO band customers primarily driving the increase.Branded Cards net credit losses of$4.0 billion and Retail Services net credit losses of$3.2 billion increased 51%and 39%,respectively.The net ACL build was$1.0 billion,compared to$1.5 billion in the prior year.The net ACL build on loans was primarily driven by the impact of macroeconomic pressures related to the elevated inflationary and interest rate environment,as well as growth in cards balances.For additional information on Citis ACL,see“Significant Accounting Policies and Significant Estimates”below.For additional information on USPBs Branded Cards,Retail Services and Retail Banking loan portfolios,see“Managing Global RiskCredit RiskConsumer Credit”below.For additional information about trends,uncertainties and risks related to USPBs future results,see“Executive Summary”above and“Risk Factors”below.28ALL OTHERDivestiture-Related Impacts(Reconciling Items)All Other includes activities not assigned to the reportable operating segments(Services,Markets,Banking,Wealth and USPB),which are reported within Legacy Franchises and Corporate/Other.For additional information about Legacy Franchises and Corporate/Other,see“All Other(Managed Basis)”below.All Other(managed basis)results exclude divestiture-related impacts(see the“Reconciling Items”column in the table below)related to(i)Citis divestitures of its Asia consumer banking businesses and(ii)the planned IPO of Mexico Consumer Banking(Mexico Consumer)and Mexico Small Business and Middle-Market Banking(Mexico SBMM),collectively known as Mexico Consumer/SBMM,within Legacy Franchises.Legacy Franchises(managed basis)results also exclude these divestiture-related impacts.Certain of the results of operations of All Other(managed basis)and Legacy Franchises(managed basis)are non-GAAP financial measures(see“OverviewNon-GAAP Financial Measures”above).The table below presents a reconciliation from All Other(U.S.GAAP)to All Other(managed basis).All Other(U.S.GAAP),less Reconciling Items,equals All Other(managed basis).The Reconciling Items are fully reflected on each respective line item in Citis Consolidated Statement of Income.202420232022In millions of dollars,except as otherwise notedAll Other(U.S.GAAP)Reconciling Items(1)All Other(managed basis)All Other(U.S.GAAP)Reconciling Items(2)All Other(managed basis)All Other(U.S.GAAP)Reconciling Items(3)All Other(managed basis)Net interest income$5,899$5,899$7,692$7,692$7,662$7,662 Non-interest revenue 1,668 26 1,642 3,096 1,346 1,750 2,312 854 1,458 Total revenues,net of interest expense$7,567$26$7,541$10,788$1,346$9,442$9,974$854$9,120 Total operating expenses$9,386$318$9,068$11,613$372$11,241$9,951$696$9,255 Net credit losses on loans 935 7 928 864 (6)870 614 (156)770 Credit reserve build(release)for loans 73 73 66 (61)127 (250)259 (509)Provision for credit losses on unfunded lending commitments(16)(16)(47)(47)95 (27)122 Provisions for benefits and claims(PBC),other assets and HTM debt securities 130 130 354 354 97 97 Provisions(benefits)for credit losses and PBC$1,122$7$1,115$1,237$(67)$1,304$556$76$480 Income(loss)from continuing operations before taxes$(2,941)$(299)$(2,642)$(2,062)$1,041$(3,103)$(533)$82$(615)Income taxes(benefits)(274)(92)(182)(597)382 (979)(799)266 (1,065)Income(loss)from continuing operations$(2,667)$(207)$(2,460)$(1,465)$659$(2,124)$266$(184)$450 Income(loss)from discontinued operations,net of taxes(2)(2)(1)(1)(231)(231)Noncontrolling interests(30)(30)16 16 4 4 Net income(loss)$(2,639)$(207)$(2,432)$(1,482)$659$(2,141)$31$(184)$215 Asia Consumer revenues$845$26$819$2,870$1,346$1,524$3,780$854$2,926(1)2024 includes approximately$318 million(approximately$220 million after-tax)in operating expenses,primarily related to separation costs in Mexico and severance cos
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Annual Report2024THE GOLDMAN SACHS GROUP,INC.1In my last letter,I wrote that 2023 was a year of exec.
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?UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,DC 20549?FORM 20-F?REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)OR 12(g)OF THE SECURITIESEXCHANGE ACT OF 1934OR?ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2024OR?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF1934OR?SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGEACT OF 1934Date of event requiring this shell company report For the transition period from to Commission file number 1-14700?(Exact Name of Registrant as Specified in Its Charter)?Taiwan Semiconductor Manufacturing Company Limited Republic of China(Translation of Registrants Name Into English)(Jurisdiction of Incorporation or Organization)?No.8,Li-Hsin Road 6Hsinchu Science ParkHsinchu 300-096,TaiwanRepublic of China(Address of Principal Executive Offices)Wendell Huang,Senior Vice President&Chief Financial Officer&SpokespersonTelephone:886-3-5055901/Email:No.8,Li-Hsin Road 6,Hsinchu Science Park,Hsinchu 300-096,Taiwan,Republic of China(Name,Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b)of the Act:?Title of Each Class Trading Symbol(s)Name of Each Exchangeon Which RegisteredCommon Shares,par value NT$10.00 each*TSM The New York Stock Exchange,Inc.Securities registered or to be registered pursuant to Section 12(g)of the Act:None(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d)of the Act:None(Title of Class)?Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by theannual report.As of December 31,2024,25,932,733,242 Common Shares,par value NT$10 each were outstanding.Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.YesNoIf this report is an annual or transition report,indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or15(d)of the Securities Exchange Act of 1934.YesNoIndicate 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 of1934 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 suchfiling requirements for the past 90 days.YesNoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant toRule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required tosubmit such files).YesNoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer or an emerging growthcompany.See definition of“large accelerated filer,”“accelerated filer,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.?Large Accelerated Filer Accelerated Filer Non-Accelerated Filer Emerging Growth CompanyIf an emerging growth company that prepares its financial statements in accordance with U.S.GAAP,indicate by check mark if the registrant haselected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant toSection 13(a)of the Exchange Act.The term“new or revised financial accounting standard”refers to any update issued by the Financial Accounting Standards Board to itsAccounting Standards Codification after April 5,2012.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of itsinternal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firmthat prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant includedin the filing reflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensationreceived by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:?U.S.GAAP International Financial Reporting Standards as issuedby the International Accounting Standards Board OtherIf“Other”has been checked in response to the previous question,indicate by check mark which financial statement item the registrant has electedto follow.Item 17Item 18If this is an annual report,indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).YesNo?*Not for trading,but only in connection with the listing on the New York Stock Exchange,Inc.of American Depositary Shares(“ADS”)representing such Common Shares.?TABLE OF CONTENTSTaiwan Semiconductor Manufacturing Company Limited?Page CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION 1 PART I 3 ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISORS 3 ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE 3 ITEM 3.KEY INFORMATION 3 ITEM 4.INFORMATION ON THE COMPANY 13 ITEM 4A.UNRESOLVED STAFF COMMENTS 25 ITEM 5.OPERATING AND FINANCIAL REVIEWS AND PROSPECTS 25 ITEM 6.DIRECTORS,SENIOR MANAGEMENT AND EMPLOYEES 35 ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 51 ITEM 8.FINANCIAL INFORMATION 52 ITEM 9.THE OFFER AND LISTING 53 ITEM 10.ADDITIONAL INFORMATION 53 ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS 66 ITEM 12D.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 67 PART II 69 ITEM 13.DEFAULTS,DIVIDEND ARREARAGES AND DELINQUENCIES 69 ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 69 ITEM 15.CONTROLS AND PROCEDURES 69 ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT 70 ITEM 16B.CODE OF ETHICS 70 ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES 71 ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 72 ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 72 ITEM 16F.CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT 73 ITEM 16G.CORPORATE GOVERNANCE 73 ITEM 16H.MINE SAFETY DISCLOSURE 77 ITEM 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 77 ITEM 16J.INSIDER TRADING POLICIES 78 ITEM 16K.CYBERSECURITY 78 PART III 79 ITEM 17.FINANCIAL STATEMENTS 79 ITEM 18.FINANCIAL STATEMENTS 79 ITEM 19.EXHIBITS 79 EX-1.1 ARTICLES OF INCORPORATION OF TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED,AS AMENDED ANDRESTATED ON JUNE 4,2024.EX-2a.1 DESCRIPTION OF SECURITIES REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT.?iEX-4.13 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO THE FABS LOCATED INSOUTHERN TAIWAN SCIENCE PARK(EFFECTIVE JANUARY 1,2025 TO DECEMBER 31,2044)(ENGLISH SUMMARY).EX-4.14 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO THE FABS LOCATED INSOUTHERN TAIWAN SCIENCE PARK(EFFECTIVE JANUARY 1,2025 TO DECEMBER 31,2044)(ENGLISH SUMMARY).EX-4.16 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO THE FABS LOCATED INSOUTHERN TAIWAN SCIENCE PARK(EFFECTIVE JANUARY 1,2025 TO DECEMBER 31,2044)(ENGLISH SUMMARY).EX-4.52 TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED GLOBAL EMPLOYEE STOCK PURCHASE PLAN FORADSs.EX-4.64 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP7(EFFECTIVE JUNE 20,2024 TOJUNE 30,2043)(ENGLISH SUMMARY).EX-4.65 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP7(EFFECTIVE AUGUST 1,2024TO JUNE 30,2043)(ENGLISH SUMMARY).EX-4.66 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP8P1(EFFECTIVENOVEMBER 20,2024 TO DECEMBER 31,2044)(ENGLISH SUMMARY).EX-4.67 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP8P1(EFFECTIVE JANUARY 1,2025 TO DECEMBER 31,2044)(ENGLISH SUMMARY).EX-4.68 LAND LEASE WITH KAOHSIUNG CITY GOVERNMENT RELATING TO FAB22(EFFECTIVE SEPTEMBER 1,2024 TODECEMBER 31,2026)(ENGLISH SUMMARY).EX-4.69 LAND LEASE WITH HSINCHU SCIENCE PARK ADMINISTRATION RELATING TO FAB20(EFFECTIVE NOVEMBER 1,2024 TOOCTOBER 31,2044)(ENGLISH SUMMARY).EX-4.70 LAND LEASE WITH HSINCHU SCIENCE PARK ADMINISTRATION RELATING TO FAB20(EFFECTIVE FEBRUARY 3,2025 TODECEMBER 31,2044)(ENGLISH SUMMARY).EX-4.71 LAND LEASE WITH HSINCHU SCIENCE PARK ADMINISTRATION RELATING TO HR TALENTS TRAINING CENTER(EFFECTIVE JANUARY 1,2025 TO DECEMBER 31,2044)(ENGLISH SUMMARY).EX-4.72 LAND LEASE WITH HSINCHU SCIENCE PARK ADMINISTRATION RELATING TO HR TALENTS TRAINING CENTER(EFFECTIVE JANUARY 1,2025 TO DECEMBER 31,2044)(ENGLISH SUMMARY).EX-4.73 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP7(EFFECTIVE MARCH 5,2025TO JUNE 30,2043)(ENGLISH SUMMARY).EX-4.74 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO AP7(EFFECTIVE MARCH 5,2025TO JUNE 30,2043)(ENGLISH SUMMARY).EX-4.75 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO TAINAN ZERO WASTEMANUFACTURING CENTER LOCATED IN TAINAN SCIENCE PARK(EFFECTIVE APRIL 1,2025 TO MARCH 31,2045)(ENGLISHSUMMARY).EX-4.76 LAND LEASE WITH SOUTHERN TAIWAN SCIENCE PARK ADMINISTRATION RELATING TO TAINAN ZERO WASTEMANUFACTURING CENTER LOCATED IN TAINAN SCIENCE PARK(EFFECTIVE APRIL 1,2025 TO MARCH 31,2045)(ENGLISHSUMMARY).EX-8.1 SUBSIDIARIES OF TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED.EX-11.1 INSIDER TRADING RULES OF TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITEDEX-12.1 CERTIFICATION OF CEO-RULE 13A-14(A)EX-12.2 CERTIFICATION OF CFO-RULE 13A-14(A)EX-13.1 CERTIFICATION OF CEO-RULE 13A-14(B)EX-13.2 CERTIFICATION OF CFO-RULE 13A-14(B)EX-15.1 CONSENT OF DELOITTE&TOUCHEEX-101.INS iXBRL INSTANCE DOCUMENT(EMBEDDED WITHIN THE INLINE XBRL DOCUMENT)EX-101.SCH iXBRL TAXONOMY EXTENSION SCHEMA DOCUMENTEX-101.CAL iXBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENTEX-101.DEF iXBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENTEX-101.LAB iXBRL TAXONOMY EXTENSION LABEL LINKBASE DOCUMENTEX-101.PRE iXBRL TAXONOMY EXTENSION PRESENTATION LINKBASE DOCUMENTEX-104 COVER PAGE INTERACTIVE DATA FILE(EMBEDDED WITHIN THE INLINE XBRL DOCUMENT)?ii“TSMC”,“tsmc”,“jasm”,“esmc”,“Open Innovation Platform”,“CyberShuttle”,“CoWoS”,“TSMC-SoIC”,“3DFabric”,“N6e”,and“N12e”are someof our registered and/or pending trademarks used by us in various jurisdictions,including the United States of America.All rights reserved.?iiiCAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATIONThis annual report includes statements that are,or may be deemed to be,“forward-looking statements”within the meaning of U.S.securities laws.Such statements are made under the“safe harbor”provision under Section 21E of the Securities Exchange Act of 1934,as amended(the“ExchangeAct”).The terms“anticipates,”“expects,”“may,”“will,”“could,”“should”and other similar expressions identify forward-looking statements.Thesestatements appear in a number of places throughout this annual report and include statements regarding our intentions,beliefs or current expectationsconcerning,among other things,our results of operations,financial condition,liquidity,prospects,growth,strategies and the industries in which weoperate.By their nature,forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may ormay not occur in the future.Forward-looking statements are not guarantees of future performance and our actual results of operations,financialcondition and liquidity,and the development of the industries in which we operate may differ materially from those made in or suggested by theforward-looking statements contained in this annual report.Important factors that could cause those differences include,but are not limited to:?general local and global economic conditions;?the political stability of our local region;?our ability to deal with the challenges and risks related to our global operations and expansion;?outlook of the major and emerging end markets for our products,such as high performance computing(“HPC”),smartphones,internet ofthings(“IoT”),automotive and digital consumer electronics;?the volatility of the semiconductor and electronics industry;?our ability to develop new technologies successfully and remain a technological leader;?the increased competition from other companies;?overcapacity in the semiconductor industry;?our reliance on certain major customers;?the reliability of our information technology systems and resilience to any cyberattacks;?our ability to maintain control over expansion and facility modifications;?our ability to generate growth and profitability;?our ability to hire and retain qualified personnel;?our ability to acquire required equipment and supplies necessary to meet business needs;?our ability to protect our technologies,intellectual property(“IP”)rights and third-party licenses;?disruptive events or industrial accidents;?shortages or increased prices of power and other utilities;and?fluctuations in foreign currency rates,in particular,any material appreciation of the NT dollar against the U.S.dollar,and our ability tomanage such risks.?1Forward-looking statements include,but are not limited to,statements regarding our strategy and future plans,future business condition andfinancial results,our capital expenditure plans,our capacity management plans,expectations as to the commercial production using 2-nanometer andmore advanced technologies,technological upgrades,investment in research and development,future market demand,future regulatory or otherdevelopments in our industry,business expansion plans or new investments as well as business acquisitions and financing plans.If any one or more ofthe assumptions underlying the industry or market data turns out to be incorrect,actual results may differ from the projections based on theseassumptions.You should not place undue reliance on these forward-looking statements.Please see“Item 3.Key Information Risk Factors”for afurther discussion of certain factors that may cause actual results to differ materially from those indicated by our forward-looking statements.As used in this annual report,all references to“we,”“us,”the“Company”and“TSMC”are to Taiwan Semiconductor Manufacturing CompanyLimited and its consolidated subsidiaries.EXCHANGE RATESWe publish our financial statements in New Taiwan dollars,the lawful currency of the R.O.C.In this annual report,“$,”“US$”and“U.S.dollars”mean United States dollars,the lawful currency of the United States,and“NT$”and“NT dollars”mean New Taiwan dollars.This annual reportcontains translations of certain NT dollar amounts into U.S.dollars at specified rates solely for the convenience of the reader.Unless otherwise noted,alltranslations from NT dollars to U.S.dollars in this annual report were made at NT$32.79 to US$1.00,the exchange rate set forth in the H.10 statisticalrelease of the Federal Reserve Board on December 31,2024.No representation is made that the NT dollar or U.S.dollar amounts referred to herein could have been or could be converted into U.S.dollars orNT dollars,as the case may be,at any particular rate or at all.?2PART I?ITEM1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISORSNot applicable.?ITEM2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.?ITEM3.KEY INFORMATIONCapitalization and IndebtednessNot applicable.Reasons for the Offer and Use of ProceedsNot applicable.Risk FactorsWe wish to caution readers that the following important factors,and those important factors described in other reports submitted to,or filed with,the U.S.Securities and Exchange Commission(“U.S.SEC”),among other factors,could affect our actual results and could cause our actual results todiffer materially from those expressed in any forward-looking statements made by us or on our behalf,and that such factors may adversely affect ourbusiness and financial status and therefore the value of your investment.Risks Relating to Our BusinessAny global systemic political,economic and financial crisis(as well as the indirect effects flowing therefrom)could negatively affect our business,results of operations,and financial condition.In recent times,several major systemic political,economic and financial crises negatively affected global business,banking and financial sectors,including the semiconductor industry and markets.Since 2018,there have been political and trade tensions among a number of the worlds major economies.These tensions have resulted or mayresult in the implementation of tariff,non-tariff trade barriers,sanctions,export controls and other measures that have been particularly impactful to thesemiconductor industry and related markets.Prolonged or increased use of such measures may negatively impact the growth of the global economy andthe semiconductor industry,resulting in declines in electronic products sales from which we generate our income through our products and services.Forexample,U.S.President Donald Trump announced on April 2,2025 a 10seline tariff on imports into the United States from all countries,as well asvarying reciprocal tariffs on certain trading partners,including Taiwan.The varying reciprocal tariffs,except those on Chinese goods,were then pauseduntil July 9,2025;imports subject to variable reciprocal tariffs will instead be subject to the baseline 10%tariff during the period.Semiconductors werenot subject to the reciprocal tariffs announced on April 2,2025.However,given ongoing discussions between the United States and its trading partners,there remains significant uncertainty about whether the United States may further change the scope and level of tariffs it imposes,including anypotential tariffs it may impose on semiconductor imports.Any tariffs imposed on imports of semiconductors and products incorporating chips into theUnited States may result in increased costs for purchasing such products,which may,in turn,lead to decreased demand for our products and servicesand adversely affect our business and future growth.Also,any increase in the use of export control restrictions and sanctions to target certain countriesand entities,any expansion of the extraterritorial jurisdiction of such measures,or complete or partial ban on semiconductor products sales to certainentities could impact not only our ability to continue supplying products to those customers,but also our customers demand for our products,and couldeven lead to changes in semiconductor supply chains.For example,the U.S.tightened its export control measures against Huawei Technology Co.Ltd.and its affiliates(collectively,“Huawei”)in 2020.To comply with relevant laws and regulations,we have discontinued shipment of products to Huaweisince September 2020.In October 2022 and October 2023,the U.S.adopted additional export controls(the“October Rules”)over specified countries(including China)under the U.S.Export Administration Regulations(“U.S.EAR”)on certain advanced computing integrated circuits(“ICs”),computercommodities that contain such ICs,and certain semiconductor manufacturing items,as well as controls on transactions involving items forsupercomputer and semiconductor manufacturing end-uses.The controls impose license requirements for items subject to the U.S.EAR where the itemsare destined to a semiconductor fabrication facility in China that fabricates ICs meeting specified advanced node parameters as well as for U.S.personsactivities supporting such facility or semiconductor manufacturing items.In response,we obtained from the U.S.Department of Commerce a ValidatedEnd-User(the“VEU”)authorization for our fab located in Nanjing,China,which is a permanent authorization that allows our fab in Nanjing to receiveexports of eligible items from the U.S.without separate licenses.However,there is no assurance that the VEU authorization we obtained will not beterminated in the future.The restrictions imposed by the October Rules on exports of advanced computing ICs are further reinforced by the U.S.newrules issued in January 2025.Under the new rules,we may need to obtain an export license prior to shipping products using 16-nanometer or belowprocess to any global destination unless specific conditions are met.As a result,shipments of certain products may be delayed or prohibited due to thelicense requirements and our financial results may be adversely affected.?3On the other hand,measures adopted by an affected country to counteract the impact of another countrys actions or regulations could lead tosignificant legal liability to multinational corporations including our own.For example,in January 2021,China adopted a blocking statute that,amongother matters,entitles Chinese entities incurring damages from a multinationals compliance with foreign laws to seek civil remedies.As of the date ofthis annual report,our current results of operations have not been materially affected by the expanded export control regulations or the novel rules ormeasures adopted to counteract them.Nevertheless,depending on future developments in global trade tensions and military conflicts,such regulations,rules,or measures may have an adverse impact on our business and operations,and we may incur significant legal liability and financial losses as aresult.Please see“Our failure to comply with applicable laws and regulations material to our operations,such as export control,environmental andclimate related laws and regulations,or the inability to timely obtain requisite approvals necessary for the conduct of our business,such as fab land andconstruction approvals,could harm our business and operational results or subject us to potential significant legal liability”for a further discussion.Any future systemic political,economic or financial crisis or market volatility,including but not limited to interest rate and foreign exchange ratefluctuations,inflation or deflation or changes in economic,fiscal and monetary policies in major economies,could cause revenue or profits for thesemiconductor industry as a whole to decline dramatically.If the economic conditions or financial conditions of our customers were to deteriorate,thedemand for our products and services may decrease and additional accounting related allowances may be required,which could reduce our operatingincome and net income.In addition,sufficient external financing may not be available to us on a timely basis,on commercially reasonable terms to us,or at all.If sufficient external financing is not available when we need such financing to meet our capital requirements,we may be forced to curtail ourexpansion,modify plans or delay the deployment of new or expanded services until we obtain such financing.In conclusion,any of these events,including any future global systemic crisis or further escalation of trade tensions as described above,could materially and adversely affect our results ofoperations.Our global manufacturing,design and sales activities subject us to risks associated with political,economic,financial,military or other conditionsor developments in various jurisdictions,including in particular the R.O.C.,as well as in international trade,which could negatively affect ourbusiness and financial status and therefore the market value of your investment.The majority of our principal executive officers and our principal production facilities are located in the R.O.C.,and the majority of our netrevenue is derived from our operations in the R.O.C.In addition,we have operations worldwide and a significant percentage of our revenue comes fromsales to locations outside the R.O.C.Operating in the R.O.C.and overseas exposes us to changes in laws,rules,regulations and the enforcements of suchlaws,rules and regulations in certain key areas that could have a material impact on our operations,such as intellectual property,labor,antitrust,exportcontrol,import restrictions,and trade barriers or disputes.In addition,deterioration in general political,economic,financial or social conditions,militaryconflicts,the risk of outbreak of war or hostilities,terrorism events,security risks,social unrest,health conditions and possible disruptions intransportation networks in the various jurisdictions in which we operate or elsewhere,could have an adverse impact on our business and results ofoperations as well as the market price and the liquidity of our ADSs and common shares.Furthermore,any major change in economic,fiscal and/ortrade policies in the U.S.from which we derive a substantial portion of our revenue or in another major jurisdiction could severely affect our business,financial condition and results of operations.For example,recent political and trade tensions among major economies as well as military conflicts(suchas the conflict in Ukraine since early 2022)have resulted in the imposition of trade barriers,such as sanctions and import and export controls,whichcould increase our manufacturing costs,limit our access to certain supplies,make our pricing less competitive,and limit our ability to offer our productsand services in some markets or source key materials and key production equipment,which may have adverse direct or indirect effects on our sales.Any law or government policy that encourages our customers to relocate their manufacturing capacity or supply chain to their own countries orrequire their respective contractors,subcontractors and relevant agents to do so could also impair our ability to sustain our current level of productivityand manufacturing efficiency.An important aspect of our business operation is an ecosystem of interconnected semiconductor fabs,employees andsuppliers in the R.O.C.that provides us with significant operational synergies,flexibility and efficiencies.For example,we are able to temporarilyreassign thousands of our engineers and other relevant personnel from one manufacturing site to another to refine specific designs and adaptmanufacturing processes in a timely manner.These advantages permit us to operate our manufacturing fabs efficiently and resolve any technical orcommercial difficulties quickly to maintain our competitive edge.Restrictions on our ability to transfer people among our operations in the R.O.C.,theUnited States,the P.R.C.,Japan,and Europe efficiently due to challenges such as regional employment rules and regulations,and immigration or travelrestrictions,may impair or reduce these advantages,and we may not be able to sustain our current ability to supply our customers with goods andservices at the current level of cost,quality,quantity and delivery schedule to which our customers have been accustomed.?4In addition,the financial markets have viewed certain past developments in relations between the R.O.C.and the P.R.C.as occasions to depressgeneral market prices of the securities of R.O.C.companies,including our own.Also,the R.O.C.government has not lifted some trade and investmentrestrictions imposed on R.O.C.companies on the amount and types of certain investments that can be made in the P.R.C.Our plans,investmentapplications and/or any relevant regulatory approvals to establish or possibly expand operations in the P.R.C.may be delayed,interrupted,suspended orcancelled due to unforeseeable social and political factors in the R.O.C.or the P.R.C.,and these potential operational risks can be aggravated byapplicable export controls which impose license requirements on our P.R.C.fabs acquisition of certain manufacturing tools.If we are unable to successfully manage the complexity of our global operations and deal with the challenges and risks related to our globalexpansion,our business,financial condition and results of operations could be adversely affected.We have multiple expansion projects that are currently underway,including the design and construction of new fabs worldwide.Global expansionhas required and will continue to require considerable managerial,financial and other resources.We expect to face particular challenges in globalexpansion and operations,including but not limited to:?higher costs associated with construction of new fabs,establishing supply chains for various materials in different overseas locations,theimpact on our ability to sustain our current level of productivity and manufacturing efficiency provided by our ecosystem ofinterconnected semiconductor fabs,employees and suppliers in the R.O.C.,and recruiting and retaining talent in various overseaslocations;?labor shortages,interruptions in the supply chains for various materials,and construction issues,which could substantially delay thecompletion of our expansion projects,and could further result in substantial additional costs or failure to meet our capacity expansionplans;?disruptions to our operations caused by natural or man-made disasters,including earthquakes,flooding,typhoons,droughts,tsunamis,sandstorms,wildfires,volcanic eruptions,fire,gas/chemical leakage or spill,pandemic,cyberattacks,supply chain disruption,geopoliticaltensions,labor issues,sabotage,failure of critical facilities and equipment and disruptions in utilities,such as water,electricity and naturalgas,etc.;?scarcity of industrial-use land,which could limit our future expansion of operations;?compliance with applicable foreign laws and regulations,and the risk of penalties if our practices are deemed not to be in compliance;?challenges in managing information technology infrastructure in multiple locations and across different systems and risks of ourinformation technology infrastructure succumbing to cyberattacks worldwide;?adverse changes relating to government grants or other government incentives,including non-receipt,delay and potential claw backs ofgovernment subsidies;?challenges in creating an inclusive workplace in new sites to embrace the cultural differences and managing the operation over largegeographic distances and in context of different employment practices and labor laws and regulations;?limited or insufficient intellectual property protection or difficulties enforcing our rights to intellectual property;and?exposure to different tax jurisdictions and potential adverse tax consequences.If we are unable to overcome the above challenges,our business,financial condition and results of operations could be adversely affected.Decreases in demand and average selling prices for products that contain semiconductors may adversely affect demand for our products and mayresult in a decrease in our revenue and earnings.A vast majority of our revenue is derived from customers who use our products in HPC(including AI applications),smartphones,IoT,automotive,and digital consumer electronics.Any deterioration in or a slowdown in the growth of such end markets resulting in a substantial decrease in the demandfor overall global semiconductor foundry services,including our products and services,could adversely affect our revenue.Further,semiconductormanufacturing facilities require substantial investment to construct and are largely fixed cost assets once they are in operation.Because we own most ofour manufacturing capacities,a significant portion of our operating costs is fixed.In general,these costs do not decline when customer demand or ourcapacity utilization rates drop,and thus declines in customer demand,among other factors,may significantly decrease our margins.Conversely,asproduct demand rises and factory utilization increases,the fixed costs are spread over increased output,which can improve our margins.In addition,thehistorical trend of declining average selling prices(“ASP”)of end-use applications places downward pressure on the prices of the components that gointo such applications.Decreases in the ASP of end-use applications may increase pricing pressure on components produced by us,which,in turn,maynegatively impact our revenue,margin and earnings.?5Since we are dependent on the highly cyclical semiconductor and electronics industries,which have experienced significant and sometimesprolonged periods of downturns and overcapacity,our revenue,margins and earnings may fluctuate significantly.The electronics industries and semiconductor market are cyclical and subject to significant and often rapid fluctuations in product demand,whichcould impact our semiconductor foundry business.Variations in customer order levels may result in volatility in our revenue and earnings.From time totime,the electronics and semiconductor industries have experienced significant and occasionally prolonged periods of downturns and overcapacity.Because we are,and will continue to be,dependent on the demand of electronics and semiconductor companies for our services,periods of downturnsand overcapacity in the general electronics and semiconductor industries could lead to reduced demand for overall semiconductor foundry services,including our services.If we are not able to take appropriate actions,such as reducing our costs to sufficiently offset declines in demand,our revenue,margins and earnings will likely suffer during periods of downturns and overcapacity.If we are unable to remain a technological leader in the semiconductor industry,unable to timely respond to fast-changing semiconductor marketdynamics,or unable to maintain our edge in product quality,we may become less competitive.The semiconductor industry and its technologies are constantly changing.We compete by developing process technologies using increasinglyadvanced nodes and manufacturing products with more functions.We also compete by developing new derivative technologies.If we do not anticipatethese changes in technologies and rapidly develop new and innovative technologies,or our competitors unforeseeably gain sudden access to additionaltechnologies,we may not be able to provide foundry services on competitive terms.For example,the global surge in the development of AI has had asignificant impact on customer demand for advanced semiconductor chips and the market dynamics in our industry;thus,our ability to continuouslydevelop relevant technologies,products and services to meet these customer needs and changes in the AI industry will be critical for us to effectivelycompete in this space.We also believe that the effective use of AI in our internal operations is important to our long-term success.As the AItechnologies are rapidly evolving,if we are unable to deploy new AI technologies in our internal operations as effectively as our competitors,it may hurtour competitive position.In addition,our customers have significantly decreased the time in which their products or services are launched into themarket.If we are unable to meet these shorter product time-to-market,we risk losing these customers.These factors have also been intensified by theshift of the global technology market to consumer driven products,such as smartphones,and increasing competition and concentration of customers(allfurther discussed among these risk factors).Also,the uncertainty and instability inherent in advanced technologies impose challenges for achievingexpected product quality and product yield.If we fail to maintain quality,it may result in loss of revenue and additional cost,as well as loss of businessor customer trust.If we are unable to overcome the above factors,we may become less competitive and our revenue may decline significantly.In light of the rise of new foundry service providers worldwide,if we are unable to compete effectively in the highly competitive foundry segment ofthe semiconductor industry,including through equal access to governmental financial incentives,especially those available to our competitors,wemay lose customers and/or our profit margin and earnings may decrease.The competition in the semiconductor foundry segment is fierce.We compete with other foundry service providers,as well as a number ofintegrated device manufacturers.Some of these companies may have access to more advanced or different technologies than us.Other companies mayhave greater financial and other resources than us,such as the possibility of receiving direct or indirect government subsidies,economic stimulus funds,or other incentives that may be unavailable to us.The governments of the United States,China,Europe,South Korea and Japan provide variousincentive programs to promote developments of their domestic semiconductor industries,such as the Creating Helpful Incentives to ProduceSemiconductors and Science Act of 2022(the“U.S.CHIPS Act”),which provides financial incentives to incentivize the development of U.S.semiconductor industry.In November 2024,TSMC Arizona Corporation(“TSMC Arizona”)entered into agreements with the U.S.Department ofCommerce for the receipt of certain incentives pursuant to the U.S.CHIPS Act,which includes up to US$6.6 billion in total direct funding and up toUS$5 billion of proposed loans.Please see“Item 4.Information on The Company Our Subsidiaries and Affiliates.”In December 2024,ESMC,oursubsidiary in Germany,entered into an agreement with the Federal Republic of Germany for the receipt of up to EUR5 billion state aid under theEuropean Chips Act(Regulation(EU)2023/1781).Although governments in certain of the countries or regions where we are currently expanding orplanning to expand our production capacity have extended or may in the future extend certain financial incentives to us,there is no assurance that wewill be able to receive such financial incentives,including pursuant to the U.S.CHIPS Act,at the levels we anticipate or at all.Additionally,anyfinancial incentives we receive may be subject to conditions and requirements imposed by the grantors,such as restrictions on the expansion of facilitiesin foreign countries of concern and on joint research and technology licensing efforts with foreign entities of concern on any technology or product thatraises national security concerns.Noncompliance with the terms and conditions of the grants that we may receive could result in a delay or forfeiture ofall or a portion of any future amounts to be received,as well as obligate us to repay all or a portion of amounts already received pursuant to the grants.Even if we satisfy the conditions and requirements for the funding disbursement,it is possible that the grantor may delay the disbursement or be unableto provide the funding.While we expect to continue benefiting from government incentives,failure to obtain grants that we seek,to fully utilizeavailable grants,or to comply with the terms and conditions of grants could impact our ability to achieve our goals for the projects that would otherwisebenefit from grant funding and could have an adverse effect on our business,results of operations,and financial condition.?6Moreover,our competitors may,from time to time,also decide to undertake aggressive pricing initiatives in one or several technology nodes.Ourcompetitors may also compete for our customers who seek to diversify their supply chains.These competitive activities may decrease our customerbase,our pricing,or both.If we are unable to compete effectively with such competitors on technology,manufacturing capacity,product quality,supplychain diversification and resilience,and customer satisfaction,we risk losing customers or business to such contenders.If we are unable to manage our capacity and production facilities effectively,our competitiveness may be weakened.We perform long-term market demand forecasts on a regular basis for our products and services to manage our overall capacity.Based on marketdemand,we have continued to add capacity to meet market needs for our products and services,including in Taiwan,in Arizona,U.S.,in Kumamoto,Japan and in Dresden,Germany.Implementing these capacity expansion plans will increase our costs,and the increases may be substantial.For example,we would need to buildnew facilities,purchase additional equipment and hire and train personnel to operate the new equipment.If we do not increase our net revenueaccordingly,our financial performance may be adversely affected by these increased costs.See“Item 4.Information on The Company CapacityManagement and Technology Upgrade Plans”for a further discussion.In addition,market conditions are dynamic,and our market demand forecasts may change significantly at any time.During periods of decreaseddemand,certain manufacturing lines or tools in some of our manufacturing facilities may be suspended or shut down temporarily.However,if demandsubsequently increases rapidly over a short period of time,we may not be able to restore the capacity in a timely manner to take advantage of the upturn.In such circumstances,our financial performance and competitiveness may be adversely affected.Having one or more large customers that account for a significant percentage of our revenue may render us vulnerable to the loss of or significantcurtailment of purchases by such customers that could in turn adversely affect our results of operations.Similarly,the increasing consolidation ofour customers may further increase our revenue concentration.Over the years,our customer profile and the nature of our customers business have changed dramatically.While we generate revenue fromhundreds of customers worldwide,our ten largest customers in 2022,2023 and 2024 accounted for approximately,68%,70%and 76%of our netrevenue in the respective year.Our largest customer in 2022,2023 and 2024 accounted for 23%,25%and 22%of our net revenue in the respective year.Our second largest customer in 2022,2023 and 2024 accounted for less than 10%,11%,and 12%of our net revenue in the respective year.A moreconcentrated customer base will subject our revenue to seasonal demand fluctuations from our large customers and cause different seasonal patterns inour business.This customer concentration results in part from the changing dynamics of the electronics industry with the structural shift to mobile andHPC devices and applications and software that provide the content for such devices.There are only a limited number of customers who are successfully exploiting this new business model paradigm.Also,we have seen changes inthe nature of our customers business models in response to this new business model paradigm.For example,there is a growing trend among systemcompanies designing their own semiconductors and working directly with the semiconductor foundries,which makes their products and services moremarketable in a changing consumer market.These shifting business models could lead to significant variations in our sales if the growth of theirproducts and services,particularly in the AI sector,is volatile or not sustainable.Also,since the global semiconductor industry has become increasingly competitive,some of our customers have engaged in industryconsolidations in order to remain competitive.Such consolidations have taken the form of mergers and acquisitions.If more of our major customersconsolidate,this will further decrease the overall number of our customer pool.In addition,regulatory restrictions,such as export controls directed atour major customers,could impact our ability to supply products to those customers or reduce those customers demand for our products and servicesand thus impact their business operations.?7The loss of,or significant curtailment of purchases by,one or more of our top customers including curtailments due to increased competitivepressures,industry consolidation,changes in applicable regulatory restrictions,product designs,manufacturing sourcing or outsourcing policies orpractices of these customers,the timing of customer inventory adjustments,or changes in our major customers business models,may adversely affectour results of operations and financial condition.If our information technology systems or those of our service providers with whom we share our confidential information succumb to cyberattacksby third parties worldwide,our business and operations may be severely interrupted or even shut down,and our results of operations,financialcondition,prospects and reputation may also be materially and adversely affected.Even though we have established a comprehensive internet and computing security network,we cannot guarantee that our computing systemswhich control or maintain vital corporate functions,such as our manufacturing operations and enterprise accounting,would be completely immune tocrippling cyberattacks.In the event of a serious cyberattack,our systems may lose important corporate data or our production lines may be shut downpending the resolution of such attack.Major cyberattacks could also lead to loss or divulgence of trade secrets and other sensitive information,such asproprietary information of our customers and other stakeholders and personal information of our employees.While we seek to continuously review andassess our cybersecurity policies and procedures to ensure their adequacy and effectiveness,we cannot guarantee that we will not be susceptible to newand emerging risks and attacks in the evolving landscape of cybersecurity threats.For example,as AI continues to evolve,cyber-attackers could also useAI to develop malicious codes and sophisticated phishing attempts.Malicious hackers may also try to introduce computer viruses,corrupted software or ransomware into our network systems to disrupt ouroperations,blackmail us to regain control of our computing systems,or spy on us for sensitive information.These attacks may result in us having to paydamages for our delayed or disrupted orders or incur significant expenses in implementing remedial and improvement measures to further enhance ourcybersecurity network,and may also expose us to significant legal liabilities arising from or related to legal proceedings or regulatory investigationsassociated with such breaches.In the past,we experienced and may in the future be subject to attack by malicious software.We have implemented and continually updaterigorous cybersecurity measures to prevent and minimize harm caused by such attacks.See“Item 16K.Cybersecurity”for a further discussion.Whilethese ongoing enhancements further improve our cybersecurity defense solutions,there can be no assurance that we are immune to cyberattacks.In addition,we employ certain third-party service providers for us and our affiliates worldwide with whom we need to share highly sensitive andconfidential information to enable them to provide the relevant services.While we require such third-party service providers to strictly fulfill theconfidentiality and/or internet security requirements in our service agreements with them,there is no assurance that each of them will comply with suchobligations.Moreover,such third-party service providers may also be susceptible to cyberattacks.If we or our service providers are not able to timelyresolve the respective technical difficulties caused by such cyberattacks,or ensure the integrity and availability of our data(and data belonging to ourcustomers and other third parties)or maintain control of our or our service providers computing systems,our commitments to our customers and otherstakeholders may be materially impaired and our results of operations,financial condition,prospects and reputation may also be materially andadversely affected.We may not be able to implement our planned growth and development or maintain our leading position if we are unable to recruit and retain keyexecutives,managers and skilled technical and service personnel.We rely on the continued services and contributions of our management team,as well as skilled technical and professional personnel.Our businesscould suffer from the inability to fulfill personnel needs with high quality professionals in a timely fashion caused by the loss of personnel,talentshortages,illegal talent poaching,immigration controls,or related changes in market demand for our products and services.Since there is fiercecompetition for talent recruitment,we cannot ensure timely fulfillment of our personnel demand.We may be unable to obtain in a timely manner and at a reasonable cost equipment that is necessary for us to remain competitive.Our operations and ongoing expansion plans depend on our ability to obtain necessary equipment and related services available from a limitednumber of suppliers.As a result,we may encounter the situation of limited supply and/or long delivery cycles.To better manage our supply chain,weevaluate and project delivery lead times to minimize the impact of supply chain risks on operating costs.We have also implemented variouscollaborative business models and risk management contingencies with suppliers to ensure supply and shorten the procurement lead time.To enhanceour sourcing capabilities for our global sites,we have also taken steps to strengthen our understanding of local regulations,policies,and supply chains.However,if we are unable to acquire in a timely manner the equipment and parts we need,we may fail to successfully implement capacity expansionplans and exploit time sensitive business opportunities.Additionally,ongoing trade tensions could result in increased prices for,or even unavailabilityof,key equipment,through delay or denial of necessary export licenses,adoption of additional export control measures and other tariff or non-tariffbarriers.If we are unable to obtain equipment in a timely fashion to fulfill our customers demand for technology and production capacity,or unable todo so at a reasonable cost,our financial condition and results of operations could be negatively impacted.?8Our revenue and profitability may decline if we are unable to obtain adequate supplies of raw materials in a timely manner and at commerciallyreasonable prices.Our production operations require that we obtain adequate supplies of raw materials,such as silicon wafers,gases,chemicals,and photoresist,ona timely basis and at commercially reasonable prices.In the past,shortages in the supply of some materials,whether by specific suppliers or by thesemiconductor industry generally,have resulted in occasional industry-wide price adjustments and delivery delays.Moreover,major natural disasters,trade barriers and political or economic turmoil,including military conflicts and inflation,occurring within the country of origin of such raw materialsmay also significantly disrupt the availability of such raw materials or increase their prices.Also,since we procure some of our raw materials from sole-sourced suppliers,there is a risk that our need for such raw materials may not be met or that back-up supplies may not be readily available.Importationand domestic production limitations may also restrict our ability to obtain adequate supplies of raw materials as well as materials of the necessaryquality.In addition,recent trade tensions could result in increased prices or even unavailability of raw materials due to tariffs,export control or othernon-tariff barriers.Our revenue and earnings could be adversely affected if we are unable to obtain adequate supplies of the necessary raw materials in atimely manner or if there are significant increases in the costs of raw materials.Any inability to obtain,preserve,enforce,defend and protect our technologies,intellectual property rights and third-party licenses could harm ourcompetitive position.Our ability to compete successfully and to achieve future growth depends in part on the continued strength of our intellectual property portfolio.While we actively enforce and protect our intellectual property rights,there can be no assurance that our efforts will be adequate to prevent themisappropriation or improper use of our proprietary technologies,software,trade secrets or know-how.Also,we cannot assure you that,as our businessor business models expand into new areas,we will be able to develop independently the technologies,patents,software,trade secrets or know-hownecessary to conduct our business or that we can do so without unknowingly infringing the intellectual property rights of others.As a result,we mayhave to rely on,to a certain degree,licensed technologies and patent licenses from others.To the extent that we rely on licenses from others,there can beno assurance that we will be able to obtain any or all of the necessary licenses in the future on terms we consider reasonable or at all.The lack ofnecessary licenses could expose us to claims for damages and/or injunctions from third parties,as well as claims for indemnification by our customers ininstances where we have contractually agreed to indemnify our customers against damages resulting from infringement claims.We have received,from time to time,communications from third parties,including non-practicing entities and semiconductor companies,asserting that our technologies,our manufacturing processes,or the design IPs of the semiconductors made by us or the use of those semiconductors byour customers may infringe their patents or other intellectual property rights.Because of the nature of the industry,our market position,and theexpansion of our manufacturing operations outside of Taiwan,we may receive an increased number of such communications in the future.Theassertions made and lawsuits initiated by litigious,well-funded,non-practicing entities are particularly aggressive in their monetary demand and inseeking court-issued injunctions.Such lawsuits and assertions may increase our cost of doing business and may potentially be extremely disruptive ifthese asserting entities succeed in blocking the trade of products made and services offered by us.See“Item 8.Financial Information LegalProceedings”for a further discussion.Also,with the expansion of our manufacturing operations into certain non-R.O.C jurisdictions,we have facedincreased challenges in managing risks of intellectual property misappropriation.Despite our efforts to adopt robust measures to mitigate the risk ofintellectual property misappropriation in such new jurisdictions,we cannot guarantee that the protection measures we adopted will be sufficient toprevent us from potential infringements by others,or at all.If we fail to obtain or maintain certain technologies or intellectual property licenses or fail to prevent our intellectual property from beingmisappropriated and,if litigation relating to alleged intellectual property matters occurs,it could:(i)prevent us from manufacturing particular productsor selling particular services or applying particular technologies;and(ii)reduce our ability to compete effectively against entities benefiting from ourmisappropriated intellectual property,which could reduce our opportunities to generate revenue.?9Our operational results could also be materially and adversely affected by disruptive events or industrial accidents,in the locations in which we,ourcustomers or our suppliers operate.Disruptions caused by natural and man-made disasters,including earthquakes,flooding,typhoons,droughts,tsunamis,sandstorms,wildfires,volcanic eruptions,fire,gas/chemical leakage or spill,pandemic,cyberattacks,supply chain disruption,geopolitical tensions,sabotage,terrorism,failureof critical facilities and equipment,disruptions in utilities,such as water,electricity and natural gas,etc.,could interrupt our operations.Most of ourproduction facilities,as well as those of many of our suppliers,customers and upstream providers of complementary semiconductor manufacturingservices,are located in areas susceptible to natural disasters and may face potential shortages of electricity and/or water,which could cause interruptionsto our operations.In April 2024 and January 2025,several earthquakes struck Taiwan,causing damage to our inventories,plant facilities,machinery andequipment.We recognized approximately NT$3 billion and NT$5.3 billion in losses from earthquakes,net of insurance claim,respectively,in thesecond quarter of 2024 and the first quarter of 2025.If one or more natural disasters result in a prolonged disruption to our operations or those of our customers or suppliers,or if any of our fabs orvendor facilities were to be damaged or cease operations as a result of an unforeseen disruptive event,it could reduce our manufacturing capacity andcause the loss of important customers,and thereby have an adverse,material impact on our operational and financial performance.Our operations may be interrupted,and our expansion may be limited,by power or other utility outages or shortages,and our financial results maybe adversely affected by increased prices of power or other utilities.We have occasionally suffered power outages,dips or surges caused by difficulties encountered by our electricity supplier or other powerconsumers on the same power grid.Some of these incidents have resulted in interruptions to our operations.Such outages,shortages or interruptions inelectricity supply could further be exacerbated by changes in the energy policy of the governments.If we are unable to secure reliable and uninterruptedsupply of electricity for our manufacturing fabs,our ability to fill customers orders would be jeopardized.Moreover,we have encountered and maycontinue to encounter increases in the prices of utilities.For example,effective from April 1,2024,we became subject to a higher electricity tariff rate inTaiwan,which increased by 25%as compared to the tariff rate applicable to us in 2023.In October 2024,the electricity tariff rate further increased by14%.The hike in electricity prices could increase our manufacturing costs and therefore adversely impact our financial results.In addition,due to climate change,severe weather events,such as droughts,and any measures taken by governments in response to such severeweather events may materially affect our operations and our suppliers production.For example,the measures taken by governments in response todroughts,including water rationing and conservation,may cause interruption to our operations or our expansion plans.If such events were to occur over prolonged periods of time,our operations and financial performance may be materially adversely affected.Adverse fluctuations in exchange rates could decrease our operating margin and/or revenue.Substantially all of our sales are denominated in U.S.dollars and over half of our capital expenditures are denominated in currencies other than theNT dollar,primarily in U.S.dollars,Euros and Japanese yen.As a result,any significant fluctuations to our disadvantage in the exchange rate of the NTdollar against such currencies,in particular a weakening of the U.S.dollar against the NT dollar,would have an adverse impact on our revenue andoperating profit as expressed in NT dollars.For example,every 1preciation of the U.S.dollar against the NT dollar would result in anapproximately 0.4 percentage point decrease in our operating margin based on our 2024 results.Conversely,if the U.S.dollar appreciates significantly versus other major currencies,the demand for the products and services of our customersand for our goods and services will likely decrease,which will negatively affect our revenue.Please see“Item 11.Quantitative and QualitativeDisclosures About Market Risk”for a further discussion.Our failure to comply with applicable laws and regulations material to our operations,such as export control,environmental and climate relatedlaws and regulations,or the inability to timely obtain requisite approvals necessary for the conduct of our business,such as fab land andconstruction approvals,could harm our business and operational results or subject us to potential significant legal liability.Because we engage in manufacturing activities in multiple jurisdictions and conduct business with our customers located worldwide,suchactivities are subject to a myriad of governmental regulations.For example,the manufacturing,assembling and testing of our products require the use ofequipment that is subject to export control laws and regulations,as well as metals,chemicals,and materials that are subject to environmental,climate-related,health and safety,and humanitarian forced labor prohibition and conflict-free sourcing laws,regulations and guidelines issued worldwide.Ourfailure to comply with any such laws or regulations,as amended from time to time,and our failure to comply with any information and documentsharing requests from the relevant authorities in a timely manner could result in:?10 significant penalties and legal liabilities,such as the denial of import or export permits or third party private lawsuits,criminal oradministrative proceedings;?the temporary or permanent suspension of production of the affected products;?the temporary or permanent inability to procure or use certain production critical chemicals or materials;?unfavorable alterations in our manufacturing,fabrication and assembly and test processes;?challenges from our customers that place us at a significant competitive disadvantage,such as loss of actual or potential sales contracts incase we are unable to satisfy the applicable legal standard or customer requirement;?restrictions on our operations or sales;?loss of tax benefits,including termination of current tax incentives,disqualification of tax credit application and repayment of the taxbenefits that we are not entitled to;and?damages to our goodwill and reputation.Our role in the semiconductor supply chain inherently limits our visibility and information available to us regarding the downstream use or user offinal products that incorporate semiconductors manufactured by us.This constraint impedes our ability to fully ensure that semiconductors manufacturedby us will not be diverted to unintended end use or end-user,including potentially by our business partners,or by third parties with an intent ofcircumvention.In addition,if we or our business partners fail to obtain appropriate import,export or re-export licenses or permits or are found to haveviolated applicable export control or sanctions laws,we may also be adversely affected,through reputational harm as well as other negativeconsequences,including government investigations and penalties resulting from relevant legal proceedings,as described in the above paragraph.InOctober 2024,we notified relevant U.S.and Taiwan authorities that one type of our customers chip manufactured by us might have been diverted to arestricted entity or incorporated into a restricted entitys product,and since then have been cooperating with the authorities requests for additionalinformation and documents.Despite our best efforts to comply with all relevant export control and sanctions laws and regulations,there is no assurancethat our business activities will not be found incompliant with export control laws and regulations.Complying with applicable laws and regulations,such as environmental and climate related laws and regulations,could also require us,amongother things,to do the following:(a)purchase,use or install remedial equipment;(b)implement remedial programs such as climate change mitigationprograms and air pollution reduction plans;(c)modify our product designs and manufacturing processes,or incur other significant expenses such aspaying any incurred carbon fees if our emission levels exceed applicable thresholds,and obtaining renewable energy sources,renewable energycertificates or carbon credits,substitute raw materials or chemicals that may cost more or be less available for our operations.Our inability to timely obtain approvals necessary for the conduct of our business could impair our operational and financial results.For example,if we are unable to timely obtain environmental related approvals needed to undertake the development and construction of a new fab or expansionproject,then such inability may delay,limit,or increase the cost of our expansion plans that could also in turn adversely affect our business andoperational results.In light of increased public interest in environmental issues,our operations and expansion plans may be adversely affected ordelayed in response to public concern and social environmental pressures even if we comply with all applicable laws and regulations.For further details,please see our compliance record with Taiwan and international environmental and climate related laws and regulations as wellas our business continuity management of climate change policy in“Item 4.Information on The Company Environmental and Climate Related Lawsand Regulations”.Any adverse results of potential antitrust proceedings that we may be subject to could harm our business and operational results or subject us topotential significant legal liability.We are subject to antitrust laws and regulations in multiple jurisdictions,and from time to time receive related inquiries from enforcementagencies.With our success in the foundry business and the increasing criticism on the concentration of the semiconductor industry and sometimesdirectly on us,we are subject to heightened risks of antitrust investigations.In September 2017,we were contacted by the European Commission,whichasked us for information and documents concerning alleged anti-competitive practices in relation to semiconductor sales.We cooperated with theEuropean Commission to provide the requested information and documents.The European Commission subsequently decided to close the investigationin May 2020.Any adverse results of potential antitrust proceedings could harm our business and distract our management,and thereby have a materialadverse effect on our results of operations or prospects,and subject us to potential significant legal liability.?11Any impairment charges may have a material adverse effect on our net income.Under IFRSs,we are required to evaluate our tangible assets,right-of-use assets and intangible assets for impairment whenever triggering eventsor changes in circumstances indicate that the asset may be impaired.If certain criteria are met,we are required to record an impairment charge.We arenot able to estimate the extent or timing of any impairment charge for future years.Any impairment charge required may have a material adverse effecton our net income.The determination of an impairment charge at any given time is mainly based on the projected results of operations over several years subsequentto that time.Consequently,an impairment charge is more likely to occur during a period when our operating results are otherwise already depressed.See“Item 5.Operating and Financial Reviews and Prospects Critical Accounting Policies,Judgments and Key Sources of Estimation and Uncertainty”fora discussion of how we assess if an impairment charge is required and,if so,how the amount is determined.Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business and results of operations.Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to effectively preventfraud.If we cannot provide reasonable assurance with respect to our financial reports and effectively prevent fraud and corruption,our reputation andresults of operations could be harmed.We are required to comply with various R.O.C.and U.S.laws and regulations on internal controls,but internal controls may not prevent or detectmisstatements because of their inherent limitations,including the possibility of human error,the circumvention or overriding of controls,fraud orcorruption.Therefore,even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financialstatements.If we fail to maintain the adequacy of our internal controls,our business and operating results could be harmed,we could fail to meet ourreporting obligations,and there could be a material adverse effect on the market price of our common shares and ADSs.Any amendments to existing tax regulations or the implementation of any new tax laws in the R.O.C.,the United States or other jurisdictions inwhich we operate our business may have an adverse effect on our net income.While we are subject to tax laws and regulations in various jurisdictions in which we operate or conduct business,our principal operations are inthe R.O.C.and we are exposed primarily to taxes levied by the R.O.C.government.Any unfavorable changes of tax laws and regulations in thesejurisdictions could increase our effective tax rate and adversely affect our operating results.Further,changes in the tax laws of foreign jurisdictionscould arise as a result of the base erosion and profit shifting(“BEPS”)project that was undertaken by the Organisation for Economic Cooperation andDevelopment(“OECD”).These changes may increase tax uncertainty and have an adverse effect on our operating results.See“Item 5.Operating andFinancial Reviews and Prospects Taxation”for further discussion of significant tax regulation changes.Risks Relating to Ownership of ADSsYour voting rights as a holder of ADSs will be limited.Holders of American Depositary Receipts(“ADRs”)evidencing ADSs may exercise voting rights with respect to the common shares representedby these ADSs only in accordance with the provisions of our ADS deposit agreement.The deposit agreement provides that,upon receipt of notice of anymeeting of holders of our common shares,the depositary bank will,as soon as practicable thereafter,mail to the holders(i)the notice of the meetingsent by us,(ii)voting instruction forms and(iii)a statement as to the manner in which instructions may be given by the holders.ADS holders will not generally be able to exercise the voting rights attaching to the deposited securities on an individual basis.According to theprovisions of our ADS deposit agreement,the voting rights attaching to the deposited securities must be exercised as to all matters subject to a vote ofshareholders collectively in the same manner,except in the case of an election of directors.Election of directors is by means of cumulative voting.See“Item 10.Additional Information Voting of Deposited Securities”for a more detailed discussion of the manner in which a holder of ADSs can exerciseits voting rights.?12You may not be able to participate in rights offerings and may experience dilution of your holdings.We may,from time to time,distribute rights to our shareholders,including rights to acquire securities.Under our ADS deposit agreement,thedepositary bank will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate areeither exempt from registration under the United States Securities Act of 1933,as amended,(the“Securities Act”),with respect to all holders of ADSs,or are registered under the provisions of the Securities Act.Although we may be eligible to take advantage of certain exemptions for rights offerings bycertain foreign companies,we can give no assurance that we can establish an exemption from registration under the Securities Act,and we are under noobligation to file a registration statement with respect to any such rights or underlying securities or to endeavor to have such a registration statementdeclared effective.Accordingly,holders of ADSs may be unable to participate in our rights offerings and may experience dilution of their holdings as aresult.If the depositary bank is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or reasonably practicable,it willallow the rights to lapse,in which case you will receive no value for these rights.The value of your investment may be reduced by possible future sales of common shares or ADSs by us or our shareholders or fluctuations inforeign exchange.One or more of our existing shareholders may,from time to time,dispose of significant numbers of our common shares or ADSs.For example,theNational Development Fund of the R.O.C.,which owned 6.38%of TSMCs outstanding shares as of February 28,2025,had from time to time in thepast sold our shares in the form of ADSs in several transactions.We cannot predict the effect,if any,that future sales of ADSs or common shares,or the availability of ADSs or common shares for future sales,will have on the market price of ADSs or common shares prevailing from time to time.Sales of substantial amounts of ADSs or common shares in thepublic market,or the perception that such sales may occur,could depress the prevailing market price of our ADSs or common shares.In addition,fluctuations in the exchange rate between the U.S.dollar and the NT dollar may affect the U.S.dollar value of our common shares and the market priceof the ADSs and the U.S.dollar value of any cash dividends paid in NT dollars on our common shares represented by ADSs.The market value of our shares may fluctuate due to the volatility of,and government intervention in,the R.O.C.securities market.The Taiwan Stock Exchange has experienced from time to time substantial fluctuations in the prices and volumes of sales of listed securities.There are currently limits on the range of daily price movements on the Taiwan Stock Exchange.In response to past declines and volatility in thesecurities markets in Taiwan,and in line with similar activities by other countries in Asia,the government of the R.O.C.formed the Stabilization Fund,which had purchased and may from time to time purchase shares of Taiwan companies to support these markets.In addition,other funds associated withthe R.O.C.government had in the past purchased,and may from time to time purchase,shares of Taiwan companies on the Taiwan Stock Exchange orother markets.These funds had disposed and may from time to time dispose shares of Taiwan companies so purchased at a later time.In the future,market activity by government entities,or the perception that such activity is taking place,may take place or cease,may cause fluctuations in the marketprices of our ADSs and common shares.?ITEM4.INFORMATION ON THE COMPANYOur History and StructureOur legal and commercial name is?(Taiwan Semiconductor Manufacturing Company Limited).We were foundedin 1987 as a joint venture among the R.O.C.government and other private investors and were incorporated in the R.O.C.as a company limited by shareson February 21,1987.Since our establishment,we have built a strong position in manufacturing capacity as a dedicated foundry.Our common shareshave been listed on the Taiwan Stock Exchange since September 5,1994,and our ADSs have been listed on the New York Stock Exchange(“NYSE”)since October 8,1997.Our Principal OfficeOur principal executive office is located at No.8,Li-Hsin Road 6,Hsinchu Science Park,Hsinchu,Taiwan,Republic of China.Our telephonenumber at that office is(886-3)563-6688.Our website is .Information contained on our website is not incorporated herein by referenceand does not constitute part of this annual report.?13Business Overview of the CompanyAs a foundry,we manufacture semiconductors using our manufacturing processes for our customers based on proprietary integrated circuitdesigns provided by them.We offer a comprehensive range of wafer fabrication processes,including processes to manufacture complementary metal-oxide-semiconductor(“CMOS”)logic,mixed-signal,radio frequency(“RF”),embedded memory,bipolar complementary metal-oxide-semiconductor(“BiCMOS”,which uses CMOS transistors in conjunction with bipolar junction transistor)mixed-signal and others.We also offer design,mask making,TSMC 3DFabric advanced silicon stacking and packaging technologies,and testing services.We produced 34%of the“Foundry 2.0”industry,whichwe define as all logic wafer manufacturing,packaging,testing,mask-making and others,an increase from 28%in 2023.We believe that our scale and capacity,particularly for advanced technologies,is a major competitive advantage.Please see“SemiconductorManufacturing Capacity and Technology”and“Capacity Management and Technology Upgrade Plans”for a further discussion of our capacity.We count among our customers many of the worlds leading semiconductor companies,ranging from fabless semiconductor companies,systemcompanies to integrated device manufacturers,including,but not limited to,Advanced Micro Devices,Inc.,Amazon Web Services,Inc.,Broadcom Inc.,Intel Corporation,MediaTek Inc.,NVIDIA Corporation,NXP Semiconductors N.V.,Qualcomm Inc.,Renesas Electronics Corporation and SonySemiconductor Solutions Corporation.Our Semiconductor FacilitiesWe currently operate one 150mm wafer fab,six 200mm wafer fabs,nine 300mm wafer fabs,and five advanced backend fabs.Our corporateheadquarters and nine of our fabs are located in the Hsinchu Science Park,two fabs are located in the Central Taiwan Science Park,five fabs are locatedin the Southern Taiwan Science Park,two fabs are located in the United States,one fab is located in Shanghai,one fab is located in Nanjing,and one fabis located in Japan.Our corporate headquarters and our nine fabs in Hsinchu Science Park occupy parcels of land of a total of approximately 1,440,012square meters,of which,approximately 1,296,797 square meters of land is leased by us from the Hsinchu Science Park Administration for our eight fabsin Hsinchu Science Park under agreements that will be up for renewal between December 2026 and December 2044,and approximately 143,215 squaremeters of land is owned by us,where Advanced Backend Fab 6 and related offices are located.We have leased from the Central Taiwan Science ParkAdministration a parcel of land of approximately 590,457 square meters for our Taichung fabs under agreements that will be up for renewal betweenSeptember 2029 and June 2041.We have leased from the Southern Taiwan Science Park Administration approximately 2,321,466 square meters of landfor our fabs in the Southern Taiwan Science Park under agreements that will be up for renewal between November 2029 and March 2045.We haveleased from the Kaohsiung City Government approximately 400,177 square meters of land in the Kaohsiung Nanzih Technology Industrial Park,whereFab 22 will be located,under agreements that will be up for renewal by December 2026.TSMC Washington,LLC(“TSMC Washington”)owns a parcelof land of approximately 1,052,186 square meters in the State of Washington in the United States,where the TSMC Washington fab and related officesare located.TSMC China Company Limited(“TSMC China”)owns the land use rights of 369,087 square meters of land in Shanghai,where Fab 10 andrelated offices are located.TSMC Nanjing Company Limited(“TSMC Nanjing”)owns the land use rights of 453,401 square meters of land in Nanjing,where Fab 16 and related offices are located.TSMC Arizona owns a parcel of land of approximately 4,775,885 square meters in the State of Arizonawhere Fab 21 and related offices are located.JASM owns a parcel of land of approximately 476,290 square meters in Kumamoto Prefecture,Japan,where Fab 23 and related offices are located.ESMC owns a parcel of land of approximately 513,557 square meters in the City of Dresden in Germany,where Fab 24 and related facilities will be located.Other than certain equipment under leases located at testing areas,we own all of the buildings andequipment for our fabs.Semiconductor Manufacturing Capacity and TechnologyWe manufacture semiconductors on silicon wafers based on proprietary circuitry designs provided by our customers.Two key factors thatcharacterize a foundrys manufacturing capabilities are output capacity and fabrication process technologies.Since our establishment,we have built astrong position in manufacturing capacity as a dedicated foundry.We also believe that we are the technology leader among the dedicated foundries interms of our net revenue of advanced semiconductors of 7-nanometer and below and are one of the leaders in the semiconductor manufacturing industryfor mainstream and specialty technologies.Our 3-nanometer technology successfully entered volume production in 2022.Also,the development of our2-nanometer technology is on track,and its volume production is expected in 2025.The following table lists our wafer fabs and those of our subsidiaries in operation as of February 28,2025,together with the year ofcommencement of commercial production,wafer size and the most advanced technology for volume production:?14Fab(1)Year ofcommencementof commercialproduction Wafer size The most advanced technology for volume production(2)2 1990 6-inch 4503 1995 8-inch 1505 1997 8-inch 1506 2000 8-inch 1108 1998 8-inch 11010 2004 8-inch 15011 1998 8-inch 15012 2001 12-inch 4014 2004 12-inch 1615 2012 12-inch 716 2018 12-inch 1618 2020 12-inch 321 2024 12-inch 523 2024 12-inch 28?(1)Fabs 2,3,5,8 and Fab 12 are located in Hsinchu Science Park.Fab 6,Fab 14,and Fab 18 are located in the Southern Taiwan Science Park.Fab15 is located in Central Taiwan Science Park.Fab 11 is located in the Washington State,United States.Fab 10 is located in Shanghai,China,Fab16 is located in Nanjing,China,Fab 21 is located in Arizona,U.S.and Fab 23 is located in Kumamoto,Japan.(2)In nanometers,as of 2024 year-end.In 2024,our annual capacity(in 12-inch equivalent wafers)was approximately 17 million wafers,compared to approximately 16 million wafers in2023.This increase was primarily from the expansion of our 3-nanometer and 5-nanometer advanced technologies.Capacity Management and Technology Upgrade PlansWe manage our overall capacity and technology upgrade plans based on long term market demand forecasts for our products and services.According to our current market demand forecasts,we intend to maintain the strategy of expanding manufacturing capacity and upgradingmanufacturing technologies to meet both the fabrication and the technology needs of our customers.Our capital expenditures in 2022,2023 and 2024 were NT$1,082,672 million,NT$949,817 million and NT$956,007 million(US$29,755 million,translated from a weighted average exchange rate of NT$32.13 to US$1.00),respectively.Our capital expenditures in 2025 are expected to be betweenUS$38 billion and US$42 billion,which,depending on market conditions,may be adjusted later.Our capital expenditures for 2022,2023 and 2024 werefunded by our operating cash flow and proceeds from the issuance of corporate bonds,and our capital expenditures for 2025 are also expected to befunded in the same way.In 2025,we anticipate our capital expenditures to focus primarily on the following:?installing and expanding capacity,mainly for 2-nanometer,3-nanometer and 5-nanometer nodes,including building/facility expansion forFab 20,Fab 21 and Fab 22;?expanding capacity for specialty technologies and advanced packaging,including building/facility expansion for Fab 23 and Fab 24;and?investing in research and development projects for new process technologies.We are entering a period of higher growth as the multiyear megatrends of 5G and high performance computing are expected to fuel strong demandfor our semiconductor technologies in the next several years.We are working closely with our customers to address their needs in a sustainable manner.These investment plans are preliminary and may change according to market conditions.?15Markets and CustomersWe categorize our net revenue mainly based on the countries where our customers are headquartered,which may be different from the countries towhich we actually sell or ship our products or different from where products are actually ordered.Under this approach,the following table presents ageographic breakdown of our net revenue during the periods indicated:?Year ended December 31,2022 2023 2024 Geography Net Revenue Percentage Net Revenue Percentage Net Revenue Percentage (NT$in millions,except percentages)North America 1,534,642 68%1,470,215 68%2,031,326 70%China 245,169 11&7,154 1231,673 11%Asia Pacific(1)241,214 114,947 8(4,308 10%EMEA(2)123,767 57,348 62,761 4%Japan 119,099 52,072 64,240 5%Total 2,263,891 100%2,161,736 100%2,894,308 100%?(1)China and Japan are excluded from Asia Pacific.(2)EMEA stands for Europe,Middle East,and Africa.In 2024,our net revenue increased by a total of NT$732,572 million compared to 2023,which was mainly due to an increase in orders from NorthAmerica of NT$561,111 million,or a 38%year-over-year increase and from Asia Pacific of NT$109,361 million,or a 63%year-over-year increase.In2023,our net revenue decreased by a total of NT$102,155 million compared to 2022,which was mainly due to a decrease in orders from Asia Pacific ofNT$66,267 million,or a 27%year-over-year decrease and from North America of NT$64,427 million,or a 4%year-over-year decrease.The decreasewas partially offset by an increase in orders from China of NT$21,985 million,or a 9%year-over-year increase.We provide worldwide customer support.Our office in Hsinchu and subsidiaries in the United States,Canada,Japan,China,Germany,theNetherlands and South Korea are dedicated to serving our customers worldwide.Foundry services,which are both technologically and logisticallyintensive,involve frequent and in-depth interaction with customers.We believe that the most effective means of providing foundry services is bydeveloping direct and close relationships with our customers.Our customer service and technical support managers work closely with the sales force tooffer integrated services to customers.To facilitate customer interaction and information access on a real-time basis,a suite of web-based applicationshave also been offered to provide more active interactions with customers in design,engineering and logistics.Advance Payment by Customers.Because of the fast-changing technology and functionality in semiconductor design,foundry customersgenerally do not place purchase orders far in advance to manufacture a particular type of product.However,some of our customers have entered intoagreements with us to pay temporary receipts in order to retain specified capacity at our fabs.The treatment of advance temporary receipts,either byrefund or by accounts receivable offsetting,will be determined by mutual consent when the terms and conditions set forth in the agreements aresatisfied.See note 22 to our consolidated financial statements for further information.The Semiconductor Fabrication ProcessIn general,the semiconductor manufacturing process begins with a thin silicon wafer on which an array of semiconductor devices is fabricated.The following processes cover assembly,packaging,and testing of the semiconductor devices.Our focus is on wafer fabrication although we alsoprovide other services either directly or through outsourcing arrangements.Our Foundry ServicesRange of Services.Because of our ability to provide a full array of services,we are able to accommodate customers with a variety of needs atevery stage of the overall foundry process.The flexibility in input stages allows us to cater to a variety of customers with different in-house capabilitiesand thus to service a wider class of customers as compared to a foundry that cannot offer design or mask making services,for example.As we serve alarge global customer base that entails a wide range of applications,such customer diversification helps to smooth fluctuations in demand.Fabrication Processes.We manufacture semiconductors mainly using the CMOS process.The CMOS process is currently the mainstreamsemiconductor manufacturing process.We use the CMOS process to manufacture logic semiconductors,mixed-signal/radio frequency semiconductors,which combine analog and digital circuitry in a single semiconductor,micro-electro-mechanical-systems(“MEMS”),which combines micrometerfeatured mechanical parts,analog and digital circuitry in a single semiconductor,and embedded memory semiconductors,which combine logic andmemory in a single semiconductor,etc.?16Types of Semiconductors We Manufacture.We manufacture different types of semiconductors with different specific functions by changing thenumber and the combinations of conducting,insulating and semiconducting layers and by defining different patterns in which such layers are applied onthe wafer.At any given point in time,there are thousands of different products in various stages of fabrication at our fabs.We believe that the keys tomaintaining high production quality and utilization rates are our effective management and control of the manufacturing process technologies whichcomes from our extensive experience as the longest existing dedicated foundry and our dedication to quality control and process improvements.Oursemiconductors are used for a variety of different platforms.The principal platforms include:High Performance Computing(“HPC”):Driven by data explosion and AI application innovation,HPC has become the key growth driver for ourbusiness.We provide customers,including both fabless IC design companies and system companies,with leading-edge logic process technologies suchas 2-nanometer Nanosheet Transistor(“N2”),3-nanometer Fin Field-Effect Transistor(“FinFET”),4-nanometer FinFET,5-nanometer FinFET,6-nanometer FinFET,and 7-nanometer FinFET,as well as comprehensive intellectual properties including high-speed interconnect intellectualproperties to meet customers product requirements for transferring and processing vast amounts of data anywhere at any time.Specifically,weintroduced our HPC-focused technologies,N4X and N3X,representing the ultimate performance and maximum clock frequencies in our 5-nanometerand 3-nanometer families,respectively.Based on advanced process nodes,a variety of HPC products have been launched,such as AI accelerators,including AI graphics processor units(“GPUs”)and AI application specific integrated circuits(“ASICs”),personal computer central processing units(“CPUs”),consumer GPUs,field programmable gate arrays(“FPGAs”),server processors,and high-speed networking chips,etc.These products can beused in current and future 5G/6G infrastructures,AI,Cloud,and enterprise data centers.We also offer multiple TSMC 3DFabric advanced siliconstacking and packaging technologies,such as System on Integrated Chip(“TSMC-SoIC”)manufacturing service,and Integrated Fan-Out(“InFO”)andChip-on-Wafer-on-Substrate(“CoWoS”)advanced packaging service,to enable homogeneous and heterogeneous chip integration to meet customerrequirements for high performance,high compute density and high energy efficiency,low latency,and high integration.We will continue to optimize ourHPC platform and strengthen collaboration with customers to help them capture market growth in HPC markets.Smartphones:For customers premium product applications,we offer leading logic process technologies such as 2-nanometer Nanosheet plus(“N2P”),3-nanometer FinFET enhanced(“N3E”),3-nanometer FinFET,4-nanometer FinFET plus(“N4P”),4-nanometer FinFET,5-nanometer FinFETplus(“N5P”),and 5-nanometer FinFET,as well as comprehensive intellectual properties to further enhance chip performance,reduce powerconsumption,and decrease chip size.For mainstream product applications,we offer a broad range of logic process technologies,including 4-nanometerFinFET compact(“N4C”),6-nanometer FinFET,7-nanometer FinFET plus(“N7 ”),7-nanometer FinFET,12-nanometer FinFET compact plus(“12FFC ”),12-nanometer FinFET compact(“12FFC”),16-nanometer FinFET compact plus(“16FFC ”),16-nanometer FinFET compact(“16FFC”),28-nanometer high performance compact plus(“28HPC ”),28-nanometer high performance compact(“28HPC”),and 22-nanometer ultra-low power(“22ULP”),in addition to comprehensive intellectual properties,to satisfy customer needs for high-performance and low-power chips.Furthermore,forboth premium and mainstream product applications,we offer leading-edge,highly competitive specialty technologies to deliver specialty companionchips for customers logic application processors,including radio frequency(“RF”),RF front-end,embedded non-volatile memory,power managementICs(“PMICs”),sensors,and display chips,as well as TSMC 3DFabric advanced packaging technologies,such as industry-leading InFO technology.Internet of Things(“IoT”):Following the three megatrends of the IoT segment,“Everything Connected,Smart and Green,”we not only providecustomers with solid logic technologies,including 5-nanometer,6-nanometer,7-nanometer,12-nanometer,16-nanometer,and 28-nanometer,but alsobuild a leading,complete and highly integrated ultra-low power(“ULP”)technology platform based on our logic technologies to enable customersproduct innovations for the artificial intelligence of things(“AIoT”,AI IoT).Our industry-leading ULP technologies,including the new FinFET-based6-nanometer technology(“N6e”)and 12-nanometer technology(“N12e”),feature both energy efficiency and high performance.These technologiesprovide more computing power and AI inferencing capability while reducing system power consumption.In addition,the planar transistor basedmainstream technologies,such as 22-nanometer ultra-low leakage(“ULL”),28-nanometer ULP,40-nanometer ULP,and 55-nanometer ULPtechnologies,have been widely adopted by various IoT system-on-a-chip(“SoC”)and battery-powered products to extend battery life.Our ULPtechnology platform also provides customers with comprehensive specialty technologies,covering RF,enhanced analog devices,embedded non-volatilememory,sensors,display devices,and PMICs.For extreme low power product application requirements,we have also extended our low operatingvoltage(“Low Vdd”)offerings and have provided simulation program with integrated circuit emphasis(“SPICE”)models with wide-range operatingvoltages and design guidelines to lower the adoption barrier and reduce lead time to help customers successfully launch innovative products.Automotive:We offer a comprehensive spectrum of technologies and services to support the automotive industrys three megatrends buildingvehicles that are“Safer,Smarter and Greener”.We are also an industry leader in providing a robust automotive intellectual property ecosystem,whichcovers 5-nanometer FinFET,7-nanometer FinFET,and 16-nanometer FinFET technologies,for advanced driver-assistance systems(“ADAS”),advanced in-vehicle infotainment(“IVI”),as well as zonal controllers for new electrical/electronic(“E/E”)architectures in next-generation vehicles,including internal combustion engines(“ICEs”)and electric vehicles(“EVs”).In 2023,we introduced our 3-nanometer Auto Early(“N3AE”)program,providing automotive process design kits(“PDKs”)to support automotive customers.N3AE has since migrated to N3A,with V0.9 PDK released in2024 to support customers in designing automotive application products early on.In addition to our advanced logic platform,we offer a broad array ofcompetitive automotive-grade specialty technologies including 28-nanometer embedded flash memory,28-,22-and 16-nanometer millimeter wave(“mmWave”)RF,high dynamic range(“HDR”),high sensitivity CMOS image sensor(“CIS”)/light detection and ranging(“LiDAR”)sensors,andPMICs.The emerging technology of magnetoresistive random access memory(“MRAM”)demonstrated automotive Grade-1 capability on22-nanometer and passed automotive Grade-1 requirements on 16-nanometer in 2023.All these technologies have been applied to our automotiveprocess qualification standards based on AEC-Q100 standards of Automotive Electronic Council(“AEC”)and/or meeting customers technologyspecifications.?17Digital Consumer Electronics(“DCE”):We provide customers with leading,comprehensive technologies to deliver AI-enabled smart devices forDCE applications,including smart digital TVs(“DTVs”),set-top boxes(“STBs”),AI-embedded smart cameras,and associated wireless local areanetworks(“WLANs”),PMICs,and timing controllers(“T-CONs”).Our leading 6-nanometer FinFET,7-nanometer FinFET,16FFC/12FFC,22ULP/22ULL,and 28HPC technologies have been widely adopted by leading global makers of 8K/4K DTVs,and STBs,4K streaming media devices(“SMDs”)/over-the-top(“OTT”),digital single-lens reflex(“DSLR”)cameras,and so on.We will continue to make these technologies more competitivethrough design-technology co-optimization(“DTCO”)for customers digital intensive chip designs and to drive lower power consumption for morecost-effective packaging.The following table presents a breakdown of our net revenue by platform during the periods indicated:?Year ended December 31,2022 2023 2024 Platform Net Revenue Percentage Net Revenue Percentage Net Revenue Percentage (NT$in millions,except percentages)High Performance Computing 932,384 414,769 43%1,476,891 51%Smartphone 888,879 394,914 38%1,005,130 35%Internet of Things 196,115 91,917 85,516 6%Automotive 116,381 53,654 69,323 5%Digital Consumer Electronics 56,159 3G,000 2G,961 1%Others 73,973 3i,482 3Y,487 2%Total 2,263,891 100%2,161,736 100%2,894,308 100%The increase in our net revenue from 2023 to 2024 mainly came from High Performance Computing of NT$542,122 million,or a 58%year-over-year increase,and from Smartphone of NT$190,216 million,or a 23%year-over-year increase.The decrease in our net revenue from 2022 to 2023mainly came from Smartphone of NT$73,965 million,or an 8%year-over-year decrease,and from Internet of Things of NT$34,198 million,or a 17%year-over-year decrease.The decrease was partially offset by an increase from Automotive of NT$17,273 million,or a 15%year-over-year increase.Design and Technology Platforms.Modern integrated circuit designers need sophisticated design infrastructure to optimize productivity andcycle time.Such infrastructure includes design flow for electronic design automation(“EDA”),silicon proven building blocks such as libraries andintellectual properties,simulation and verification design kits such as PDK and technology files.All of this infrastructure is built on top of thetechnology foundation,and each technology needs its own design infrastructure to be usable for designers.This is the concept of our technologyplatforms.For years,we and our alliance partners have spent considerable effort,time and resources to build our technology platforms.We unveiled an OpenInnovation Platform(“OIP”)initiative in 2008 to further enhance our technologies offerings.More OIP deliverables were introduced over the years,aswell as in 2024.In the design methodology area,we announced EDA and intellectual property readiness of 2-nanometer and 3-nanometer,as well ascontinuous development of solutions to enhance power,performance and area(“PPA”)on existing production technology nodes.In addition,we alsoannounced the openness of 3Dblox Standard to the semiconductor industry,as well as the availability of various 3-Dimensional Integrated Circuit(“3DIC”)reference flows to support TSMC 3DFabric technologies in 3D silicon stacking and advanced packaging which cover a wide range ofsystem-level design applications.?18Multi-project Wafer Program(“CyberShuttle”).To help our customers reduce costs,we offer a dedicated multi-project wafer processing servicethat allows us to provide multiple customers with circuits produced with the same mask.This program reduces mask costs by a very significant amount,resulting in accelerated time-to-market for our customers.We have extended this program to all of our customers and library and intellectual propertypartners using our broad selection of process technologies,ranging from the latest 2-,3-,4-,5-,6-,7-,12-,16-,22-,28-,40-,45-,55-,65-and 90-nanometer processes to 0.13-,0.18-,0.25-,0.35-and 0.5-micron.This extension offers a routinely scheduled multi-project wafer run to customers on ashared-cost basis for prototyping and verification.We developed our multi-project wafer program in response to the current SoC development methodologies,which often require the independentdevelopment,prototyping and validation of several intellectual properties before they can be integrated onto a single device.By sharing mask costsamong
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549_ Form 10-K _ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31,2024orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission file number:1-10864 _ UnitedHealth Group Incorporated(Exact name of registrant as specified in its charter)Delaware41-1321939(State or other jurisdiction ofincorporation or organization)(I.R.S.EmployerIdentification No.)1 Health Drive 55344655 New York Avenue NW20001Eden Prairie,MinnesotaWashington,DC(Address of principal executive offices)(Zip Code)(Address of principal executive offices)(Zip Code)(800)328-5979(Registrants telephone number,including area code)_ Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,$.01 par valueUNHNew York Stock ExchangeSecurities registered pursuant to Section 12(g)of the Act:None _ Indicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes No 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 No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Act).Yes No The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30,2024 was$468,433,146,650(based on the last reported sale price of$509.26 per share on June 30,2024 as reported on the New York Stock Exchange),excluding only shares of voting stock held beneficially by directors,executive officers and subsidiaries of the registrant.As of January 31,2025,there were 914,712,333 shares of the registrants Common Stock,$.01 par value per share,issued and outstanding.DOCUMENTS INCORPORATED BY REFERENCEThe information required by Part III of this report,to the extent not set forth herein,is incorporated by reference from the registrants definitive proxy statement relating to its 2025 Annual Meeting of Shareholders.Such proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.UNITEDHEALTH GROUPTable of Contents PagePart IItem 1.Business .1Item 1A.Risk Factors .10Item 1B.Unresolved Staff Comments .20Item 1C.Cybersecurity .21Item 2.Properties .22Item 3.Legal Proceedings .22Item 4.Mine Safety Disclosures .22Part IIItem 5.Market for Registrants Common Equity,Related Stockholder Matters and Issuer Purchases of Equity Securities .22Item 6.Reserved.23Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations .24Item 7A.Quantitative and Qualitative Disclosures About Market Risk .36Item 8.Financial Statements and Supplementary Data .37Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure .67Item 9A.Controls and Procedures .67Item 9B.Other Information .69Item 9C.Disclosure Regarding Foreign Jurisdictions That Prevent Inspections .69Part IIIItem 10.Directors,Executive Officers and Corporate Governance.69Item 11.Executive Compensation .70Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .70Item 13.Certain Relationships and Related Transactions,and Director Independence .70Item 14.Principal Accountant Fees and Services .70Part IVItem 15.Exhibit and Financial Statement Schedules .71Item 16.Form 10-K Summary .79Signatures .80PART IITEM 1.BUSINESS OUR BUSINESSESOverview The terms“we,”“our,”“us,”“its,”“UnitedHealth Group,”or the“Company”used in this report refer to UnitedHealth Group Incorporated and its subsidiaries.UnitedHealth Group Incorporated is a health care and well-being company with a mission to help people live healthier lives and help make the health system work better for everyone.Our two distinct,yet complementary businesses Optum and UnitedHealthcare are working to help build a modern,high-performing health system through improved access,affordability,outcomes and experiences for the individuals and organizations we are privileged to serve.The ability to analyze complex data and apply deep health care expertise and insights allows us to serve patients,consumers,care providers,businesses,communities and governments with more innovative products and complete,end-to-end offerings for many of the biggest challenges facing health care today.Optum seeks to create a higher-performing,value-oriented and more connected approach to health care.Bringing together clinical expertise,technology and data to make care simpler,more effective and more affordable,we seek to advance whole-person health,creating a seamless consumer experience and supporting clinicians with insights to deliver personalized,evidence-based care.Optum serves the broad health care marketplace,including patients and consumers,payers,care providers,employers,governments and life sciences companies,through its Optum Health,Optum Insight and Optum Rx businesses.These businesses improve overall health system performance by optimizing health care quality and delivery,reducing costs and improving patient,consumer and provider experience,leveraging distinctive capabilities in data and analytics,pharmacy care services,health care operations,population health and health financial services.UnitedHealthcare offers a full range of health benefits,designed to simplify the health care experience and make it more affordable for consumers to access high-quality care.UnitedHealthcare Employer&Individual serves consumers and employers,ranging from sole proprietorships to large,multi-site and national employers and public sector employers.UnitedHealthcare Medicare&Retirement delivers health and well-being benefits to seniors and other Medicare eligible consumers.UnitedHealthcare Community&State serves consumers who are economically disadvantaged,the medically underserved and those without the benefit of employer sponsored health benefits coverage.We have four reportable segments:Optum Health;Optum Insight;Optum Rx;andUnitedHealthcare,which includes UnitedHealthcare Employer&Individual,UnitedHealthcare Medicare&Retirement and UnitedHealthcare Community&State.OptumOptum is an information and technology-enabled health services business serving the broad health care marketplace,including:Those who need care:patients who need the right care,information,resources,products and engagement to improve their health,achieve their health goals and receive an improved patient experience that is personalized,comprehensive and delivered in all care settings,including in-home and virtually.Those who provide care:physicians,hospitals,pharmacies and others seeking to improve the health system and reduce the administrative burden,allowing for providers to focus time on patients leading to the best possible patient care and experiences while achieving better health outcomes at lower costs.Improved health outcomes are achieved by utilizing our clinical expertise,data and analytics to better understand,treat and prevent consumers health conditions and ensure they receive the best evidence-based care.Those who pay for care:consumers;employers;health plans;and state,federal and municipal agencies devoted to ensuring the people they sponsor receive high-quality care,administered and delivered efficiently and effectively,all while driving health equity so that every individual,family and community has access to the care they need.Those who innovate for care:global life sciences organizations dedicated to developing more effective approaches to care,enabling technologies and medicines to improve care delivery and health outcomes.1Optum operates three business segments which combine distinctive capabilities in value-based care,population health,health care operations,data and analytics and pharmacy care services:Optum Health delivers patient-centered care,care management,wellness and consumer engagement,and health financial services;Optum Insight offers data,analytics,research,consulting,technology and managed services solutions;and Optum Rx provides diversified pharmacy care services.Optum HealthOptum Health provides comprehensive and patient-centered care,addressing the physical,mental,social,and financial well-being of 100 million consumers and serves more than 100 health payer partners.We engage people in the most appropriate care settings,including clinical sites,in-home and virtual.Optum Health delivers primary,specialty and surgical care;helps patients and providers navigate and address complex,chronic and behavioral health needs;offers post-acute care planning services;and serves consumers and care providers through advanced,on-demand digital health technologies,such as telehealth and remote patient monitoring,and innovative health care financial services.Optum Health works directly with patients,consumers,care delivery systems,providers,employers,payers,and public-sector entities to provide high quality,accessible and equitable care with improved health outcomes and reduced total cost of care.Optum Health enables care providers to transition from traditional fee-for-service payment models to performance-based delivery and payment models designed to improve patient health outcomes and experience through value-based care.Optum Health offerings include fully accountable value-based arrangements,where Optum Health assumes responsibility for health care costs in exchange for a monthly premium.Offerings also include administrative fee arrangements,where Optum Health manages or administers products and services in exchange for a monthly fee,and fee-for-service arrangements,where Optum Health delivers health-related products and medical services for patients at a contracted fee.Optum Financial,including Optum Bank,serves consumers through more than 27 million consumer accounts with$24 billion in assets under management as of December 31,2024.Organizations across the health system rely on Optum Financial to manage and improve payment flows through its highly automated,scalable,end-to-end digital payment and financing systems and integrated card solutions.For financial services offerings,Optum Financial charges fees and earns investment income on managed funds.Optum Health sells its products primarily through its direct sales force,strategic collaborations and external producers in three key areas:employers,including large,mid-sized and small employers;payers including health plans,third-party administrators(TPAs),underwriter/stop-loss carriers and individual product intermediaries;and public entities,including the U.S.Departments of Health and Human Services(HHS),Veterans Affairs,Defense,and other federal,state and local health care agencies.Optum InsightOptum Insight connects the health care system with services,analytics and platforms that make clinical,administrative and financial processes simpler and more efficient for all participants in the health care system.Hospital systems,physicians,health plans,public entities,life sciences companies and other organizations comprising the health care industry depend on Optum Insight to help them improve performance and reduce costs through administrative efficiency and payment simplification,advance care quality through evidence-based standards built directly into clinical workflows,meet compliance mandates and modernize their core operating systems to meet the changing needs of the health system.Health Systems.Serves hospitals,physicians and other care providers to improve operating performance,better coordinate care and reduce administrative costs through technology and services to improve population health management,patient engagement,revenue cycle management and strategic growth plans.Health Plans.Serves health plans by improving financial performance and enhancing outcomes through proactive analytics,a comprehensive payment integrity portfolio and technology-enabled and staff-supported risk and quality services.Optum Insight helps health plans navigate a dynamic environment defined by shifts in employer vs.public-sector coverage,the demand for affordable benefit plans and the need to leverage new technology to reduce complexity.State Governments.Provides advanced technology and analytics services to modernize the administration of critical safety net programs,such as Medicaid,while improving cost predictability.Life Sciences Companies.Combines data and analytics expertise with comprehensive technologies and health care knowledge to help life sciences companies,including those in pharmaceuticals and medical technology,adopt a more comprehensive approach to advancing therapeutic discoveries and improving clinical outcomes.2Many of Optum Insights software and information products and professional services are delivered over extended periods,often several years.Optum Insight maintains an order backlog to track unearned revenues under these long-term arrangements.The backlog consists of estimated revenue from signed contracts,other legally binding agreements and anticipated contract renewals based on historical experience with Optum Insights customers.Optum Insights aggregate backlog as of December 31,2024 was approximately$32.8 billion,of which$19.8 billion is expected to be realized within the next 12 months.The aggregate backlog includes$12.5 billion related to affiliated agreements.Optum Insights aggregate backlog as of December 31,2023,was$32.1 billion,including$11.9 billion related to affiliated agreements.Optum Insights products and services are sold primarily through a direct sales force.Optum Insights products are also supported and distributed through an array of alliances and business partnerships with other technology vendors,who integrate and interface Optum Insights products with their applications.Optum RxOptum Rx provides a full spectrum of pharmacy care services through its network of more than 65,000 retail pharmacies,through home delivery,specialty and community health pharmacies,the provision of in-home and community-based infusion services and through rare disease and gene therapy support services.It also offers direct-to-consumer solutions.Optum Rx manages a broad range of prescription drug spend,including widely available retail drugs as well as limited and ultra-limited distribution drugs in oncology,HIV,pain management and ophthalmology.Optum Rx serves the growing pharmacy needs of people with behavioral health and substance use disorders.In 2024,Optum Rx managed$178 billion in pharmaceutical spending,including$74 billion in specialty pharmaceutical spending.Optum Rx serves health benefits providers,large national employer plans,unions and trusts,purchasing coalitions and public-sector entities.Optum Rx sells its services through direct sales,health insurance brokers and other health care consultants.Optum Rx offers multiple clinical programs,digital tools and services to help clients manage overall pharmacy and health care costs in a clinically appropriate manner which are designed to deliver improved consumer experiences,better health outcomes and a lower total cost of care.Optum Rx provides various utilization management,medication management,quality assurance,adherence and counseling programs to complement each clients plan design and clinical strategies.Optum Rx is accelerating the integration of medical,pharmacy and behavioral care and treating the whole patient by embedding our pharmacists as key members of the patient care team.UnitedHealthcareThrough its health benefits offerings,UnitedHealthcare is enabling better health,creating a better health care experience for its customers and helping to control rising health care costs.UnitedHealthcares market position is built on:strong local-market relationships;the breadth of product offerings,based upon extensive expertise in distinct market segments in health care;service and advanced technology,including digital consumer engagement;competitive medical and operating cost positions;effective clinical engagement;andinnovation for customers and consumers.UnitedHealthcare arranges for discounted access to care through its extensive networks and uses Optums capabilities to help coordinate and provide patient care,improve affordability of medical care,analyze cost trends,manage pharmacy care services,work with care providers more effectively and create a simpler and more satisfying consumer and physician experience.UnitedHealthcare is subject to extensive government regulation.See further discussion of our regulatory environment below under“Government Regulation”and in Part II,Item 7,“Managements Discussion and Analysis of Financial Condition and Results of Operations.”UnitedHealthcare Employer&IndividualDomestically,UnitedHealthcare Employer&Individual offers a comprehensive array of consumer-oriented health benefit plans and services for large national employers,public sector employers,mid-sized employers,small businesses,and individuals.As of December 31,2024,UnitedHealthcare Employer&Individual provides access to medical services for 29.7 million people.Through its risk-based product offerings,UnitedHealthcare Employer&Individual assumes the risk of both medical and administrative costs for its customers in return for a monthly premium which is typically a fixed rate per individual served for a one-year period.Through its administrative and other management services arrangements to customers who elect to self-fund the health care costs of their employees and employees dependents,UnitedHealthcare Employer&Individual receives a fixed 3monthly service fee per individual served.These customers retain the risk of financing medical benefits for their employees and employees dependents,while UnitedHealthcare Employer&Individual provides services such as coordination and facilitation of medical and related services to customers,consumers and health care professionals,administration of transaction processing and access to a contracted network of physicians,hospitals and other health care professionals,including dental and vision professionals.UnitedHealthcare Employer&Individual is focused on providing informed benefit solutions that create customized plan designs and clinical programs for employers that contribute to well-being and reduce the total cost of care along with providing simpler consumer experiences in response to market dynamics.UnitedHealthcare Employer&Individual typically distributes its products through a variety of channels,dependent upon the specific product,including:through consultants or direct sales,in collaboration with brokers and agents,through wholesale agents or agencies who contract with health insurance carriers to distribute individual or group benefits,through professional employer organizations and associations and through both multi-carrier and its own proprietary private exchange marketplaces.UnitedHealthcare Employer&Individuals major product families include consumer engagement products,such as high-deductible consumer driven benefit plans and a variety of innovative consumer centric products;traditional products;clinical and pharmacy products;and specialty benefits,such as vision,dental,accident protection,critical illness,disability and hospital indemnity offerings.UnitedHealthcare Medicare&RetirementUnitedHealthcare Medicare&Retirement provides health and well-being services to seniors and other Medicare eligible consumers,addressing their unique needs.UnitedHealthcare Medicare&Retirement has distinct benefit designs,pricing,underwriting,clinical program management and marketing capabilities dedicated to health products and services in this market.UnitedHealthcare Medicare&Retirement offers a selection of products allowing people choice in obtaining the health coverage and services they need as their circumstances change.These offerings include care management and health system navigator services,clinical management programs,nurse health line services,24-hour access to health care information,access to discounted health services from a network of care providers and administrative services.UnitedHealthcare Medicare&Retirement has extensive distribution capabilities and experience,including direct marketing to consumers on behalf of its key clients,a membership organization,and state and U.S.government agencies.Products are also offered through agents,employer groups and digital channels.Major product categories include:Medicare Advantage.Provides health care coverage for seniors and other eligible Medicare beneficiaries through the Medicare Advantage program administered by the Centers for Medicare&Medicaid Services(CMS),including Medicare Advantage HMO plans,Preferred Provider Organization(PPO)plans,Point-of-Service plans,Private-Fee-for-Service plans and Special Needs Plans(SNPs).Under the Medicare Advantage program,UnitedHealthcare Medicare&Retirement provides health benefits coverage in exchange for a fixed monthly premium per member from CMS plus,in some cases,monthly consumer premiums.Premium amounts received from CMS vary based on the geographic areas in which individuals reside;demographic factors such as age,gender and institutionalized status;and the health status of the individual.UnitedHealthcare Medicare&Retirement served 7.8 million people through its Medicare Advantage products as of December 31,2024.We have continued to enhance our offerings,focusing on more digital and physical care resources in the home,expanding our concierge navigation services and enabling the home as a safe and effective setting for care.For example,through our HouseCalls program,nurse practitioners performed 2.9 million clinical preventive home care visits in 2024 to address unmet care opportunities and close gaps in care.Medicare Part D.Provides Medicare Part D benefits to beneficiaries through its Medicare Advantage and stand-alone Medicare Part D plans.The stand-alone Medicare Part D plans address a large spectrum of peoples needs and preferences for their prescription drug coverage,including low-cost prescription options.As of December 31,2024,UnitedHealthcare enrolled 10.1 million people in the Medicare Part D programs,including 3.1 million individuals in stand-alone Medicare Part D plans,with the remainder in Medicare Advantage plans incorporating Medicare Part D coverage.Medicare Supplement.Provides a full range of supplemental products at diverse price points.These products cover various levels of coinsurance and deductible gaps to which seniors are exposed in the traditional Medicare program.UnitedHealthcare Medicare&Retirement served 4.3 million seniors nationwide through various Medicare Supplement products as of December 31,2024.Premium revenues from CMS represented 40%of UnitedHealth Groups total consolidated revenues for the year ended December 31,2024,most of which were generated by UnitedHealthcare Medicare&Retirement.4UnitedHealthcare Community&StateUnitedHealthcare Community&State is dedicated to serving state programs caring for the economically disadvantaged,the medically underserved and those without the benefit of employer-funded health care coverage,typically in exchange for a monthly premium per member from the state program.UnitedHealthcare Community&States primary customers oversee Medicaid plans,including Temporary Assistance to Needy Families;Childrens Health Insurance Programs(CHIP);Dual SNPs(DSNPs);Long-Term Services and Supports(LTSS);Aged,Blind and Disabled;and other federal,state and community health care programs.As of December 31,2024,UnitedHealthcare Community&State participated in programs in 33 states and the District of Columbia,and served more than 7.4 million people;including 1.2 million people through Medicaid expansion programs in 20 states under the Patient Protection and Affordable Care Act(ACA).States using managed care services for Medicaid beneficiaries select health plans by using a formal bid process or by awarding individual contracts.These health plans and care programs are designed to address the complex needs of the populations they serve,including the chronically ill,people with disabilities and people with a higher risk of medical,behavioral and social conditions.UnitedHealthcare Community&State administers benefits for the unique needs of children,pregnant women,adults,seniors and those who are institutionalized or are nursing home eligible.These individuals often live in medically underserved areas and are less likely to have a consistent relationship with the medical community or a care provider.They also often face significant social and economic challenges.GOVERNMENT REGULATION Our businesses are subject to comprehensive U.S.federal and state and international laws and regulations.We are regulated by agencies which generally have discretion to issue regulations and interpret and enforce laws and rules.U.S.federal and state and international governments continue to consider and enact various legislative and regulatory proposals which could materially impact certain aspects of the health care system.New laws,regulations and rules,or changes in the interpretation of existing laws,regulations and rules,including as a result of changes in the political environment,could adversely affect our businesses.See Part I,Item 1A,“Risk Factors”for a discussion of the risks related to our compliance with U.S.federal and state and international laws and regulations.U.S.Federal Laws and Regulation When we contract with the federal government,we are subject to federal laws and regulations relating to the award,administration and performance of U.S.government contracts.CMS regulates our UnitedHealthcare businesses and certain aspects of our Optum businesses.Payments by CMS to our businesses are subject to regulations,including those governing fee-for-service and the submission of information relating to the health status of enrollees for purposes of determining the amounts of certain payments to us.CMS also has the right to audit our performance to determine our compliance with CMS contracts and regulations and the quality of care we provide to Medicare beneficiaries.Our commercial business is further subject to CMS audits related to medical loss ratios(MLRs)and risk adjustment data.UnitedHealthcare Community&State has Medicaid and CHIP contracts,which are subject to federal regulations regarding services to be provided to Medicaid enrollees,payment for those services and other aspects of these programs.There are many regulations affecting Medicare and Medicaid compliance,and the regulatory environment with respect to these programs is complex.Our businesses are also subject to laws and regulations relating to consumer protection,anti-fraud and abuse,anti-kickbacks,false claims,prohibited referrals,inappropriate reduction or limitation of health care services,anti-money laundering and securities and antitrust compliance.Privacy,Security and Data Standards Regulation.Certain of our operations are subject to regulation under the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996,as amended(HIPAA),which apply to both the group and individual health insurance markets,including self-funded employee benefit plans.Federal regulations related to HIPAA contain minimum standards for electronic transactions and code sets and for the privacy and security of protected health information.Our businesses must comply with the Health Information Technology for Economic and Clinical Health Act(HITECH),which regulates matters relating to privacy,security and data standards.HITECH imposes requirements on uses and disclosures of health information;includes contracting requirements for HIPAA business associate agreements;extends parts of HIPAA privacy and security provisions to business associates;adds federal data breach notification requirements for covered entities and business associates and reporting requirements to HHS and the Federal Trade Commission(FTC)and,in some cases,to the local media;strengthens enforcement and imposes higher financial penalties for HIPAA violations and,in certain cases,imposes criminal penalties for individuals,including employees.In the conduct of our business,depending on the circumstances,we may act as either a covered entity or a business associate.5The use and disclosure of individually identifiable health data by our businesses are also regulated in some instances by other federal laws,including the Gramm-Leach-Bliley Act(GLBA)or state statutes implementing GLBA.These federal laws and state statutes generally require insurers to provide customers with notice regarding how their non-public personal health and financial information is used and the opportunity to“opt out”of certain disclosures before the insurer shares such information with a third party,and generally prescribe safeguards for the protection of personal information.Neither the GLBA nor HIPAA privacy regulations preempt more stringent state laws and regulations,which may apply to us,as discussed below.Federal consumer protection laws may also apply in some instances to privacy and security practices related to personally identifiable information.ERISA.The Employee Retirement Income Security Act of 1974,as amended(ERISA),regulates how our services are provided to or through certain types of employer-sponsored health benefit plans.ERISA is a set of laws and regulations subject to interpretation by the U.S.Department of Labor(DOL)as well as the federal courts.ERISA sets forth standards on how our business units may do business with employers who sponsor employee health benefit plans,particularly those who maintain self-funded plans.Regulations established by the DOL subject us to additional requirements for administration of benefits,claims payment and member appeals under health care plans governed by ERISA.State Laws and Regulation Health Care Regulation.Our insurance and HMO subsidiaries must be licensed by the jurisdictions in which they conduct business.All of the states in which our subsidiaries offer insurance and HMO products regulate those products and operations.The states require periodic financial reports and establish minimum capital or restricted cash reserve requirements.The National Association of Insurance Commissioners(NAIC)has adopted model regulations,which require expanded governance practices and risk and solvency assessment reporting.Most states have adopted these or similar measures to expand the scope of regulations relating to corporate governance and internal control activities of HMOs and insurance companies.We are required to maintain a risk management framework and file a confidential self-assessment report with state insurance regulators.We file reports annually with Connecticut,our lead regulator,and with New York,as required by the states regulation.Our health plans and insurance companies are regulated under state insurance holding company regulations.Such regulations generally require registration with applicable state departments of insurance and the filing of reports describing capital structure,ownership,financial condition,certain affiliated transactions and general business operations.Most state insurance holding company laws and regulations require prior regulatory approval of acquisitions and material affiliated transfers of assets,as well as transactions between the regulated companies and their parent holding companies or affiliates.These laws may restrict the ability of our regulated subsidiaries to pay dividends to our holding companies.Some of our business activity is subject to other health care-related regulations and requirements,including PPO,Managed Care Organization(MCO),utilization review(UR),TPA,pharmacy care services,durable medical equipment or care provider-related regulations and licensure requirements.These regulations differ from state to state and may contain network,contracting,product and rate,licensing and financial and reporting requirements.Health care-related laws and regulations set specific standards for delivery of services,appeals,grievances and payment of claims,adequacy of health care professional networks,fraud prevention,protection of consumer health information,pricing and underwriting practices and covered benefits and services.State health care anti-fraud and abuse prohibitions encompass a wide range of activities,including kickbacks for referral of members,billing for unnecessary medical services and improper marketing.Certain of our businesses are subject to state general agent,broker and sales distribution laws and regulations.UnitedHealthcare Community&State and certain of our Optum businesses are subject to regulation by state Medicaid agencies which oversee the provision of benefits to our Medicaid and CHIP beneficiaries and to our beneficiaries dually eligible for Medicare and Medicaid.We also contract with state governmental entities and are subject to state laws and regulations relating to the award,administration and performance of state government contracts.State Privacy and Security Regulations.A number of states have adopted laws and regulations which may affect our privacy and security practices,such as state laws governing the use,disclosure and protection of social security numbers and protected health information or which are designed to implement GLBA or protect credit card account data.State and local authorities increasingly focus on the importance of protecting individuals from identity theft,with a significant number of states enacting laws requiring businesses to meet minimum cyber-security standards and notify individuals of security breaches involving personal information.State consumer protection laws may also apply to privacy and security practices related to personally identifiable information,including information related to consumers and care providers.Different approaches to state privacy and insurance regulation and varying enforcement philosophies may materially and adversely affect our ability to standardize our products and services across state lines.See Part I,Item 1A,“Risk Factors”for a discussion of the risks related to compliance with state privacy and security regulations.6Corporate Practice of Medicine and Fee-Splitting Laws.Certain of our businesses function as direct medical service providers and,as such,are subject to additional laws and regulations.Some states have corporate practice of medicine laws prohibiting specific types of entities from practicing medicine or employing physicians to practice medicine.Moreover,some states prohibit certain entities from engaging in fee-splitting practices,which involve sharing in the fees or revenues of a professional practice.These prohibitions may be statutory or regulatory,or may be imposed through judicial or regulatory interpretation.The laws,regulations and interpretations in certain states have been subject to limited judicial and regulatory interpretation and are subject to change.Pharmacy and Pharmacy Benefits Management(PBM)Regulations Optum Rxs businesses include home delivery,specialty and compounding pharmacies,as well as clinic-based pharmacies which must be licensed as pharmacies in the states in which they are located.Certain of our pharmacies must also register with the U.S.Drug Enforcement Administration(DEA)and individual state controlled substance authorities to dispense controlled substances.In addition to adhering to the laws and regulations in the states where our pharmacies are located,we also are required to comply with laws and regulations in some non-resident states where we deliver pharmaceuticals,including those requiring us to register with the board of pharmacy in the non-resident state.These non-resident states generally expect our pharmacies to follow the laws of the state in which the pharmacies are located,but some non-resident states also require us to comply with their laws where pharmaceuticals are delivered.Additionally,certain of our pharmacies which participate in programs for Medicare and state Medicaid providers are required to comply with applicable Medicare and Medicaid provider rules and regulations.Other laws and regulations affecting our pharmacies include federal and state statutes and regulations governing the labeling,packaging,advertising and adulteration of prescription drugs and dispensing of controlled substances.See Part I,Item 1A,“Risk Factors”for a discussion of the risks related to our pharmacy care services businesses.Federal and state legislation regulating PBM activities affects both our ability to limit access to a pharmacy provider network or remove network providers.Additionally,many states limit our ability to manage and establish maximum allowable costs for generic prescription drugs.With respect to formulary services,a number of government entities,including CMS,HHS and state departments of insurance,regulate the administration of prescription drug benefits offered through federal or state exchanges.Many states also regulate the scope of prescription drug coverage,as well as the delivery channels to receive such prescriptions,for insurers,MCOs and Medicaid managed care plans.These regulations could limit or preclude(i)certain plan designs,(ii)limited networks,(iii)use of particular care providers or distribution channels,(iv)copayment differentials among providers and(v)formulary tiering practices.Legislation seeking to regulate PBM activities introduced or enacted at the federal or state level could impact our business practices with others in the pharmacy supply chain,including pharmaceutical manufacturers and network providers.In addition,organizations like the NAIC periodically issue model regulations while credentialing organizations,like the National Committee for Quality Assurance(NCQA)and the Utilization Review Accreditation Commission(URAC),may establish standards impacting PBM pharmacy activities.Although these model regulations and standards do not have the force of law,they may influence states to adopt their recommendations and impact the services we deliver to our clients.Consumer Protection LawsCertain of our businesses participate in direct-to-consumer activities and are subject to regulations applicable to online communications and other general consumer protection laws and regulations such as the Federal Tort Claims Act,the Federal Postal Service Act and the FTCs Telemarketing Sales Rule.Most states also have similar consumer protection laws.Certain laws,such as the Telephone Consumer Protection Act,give the FTC,the Federal Communications Commission(FCC)and state attorneys general the ability to regulate,and bring enforcement actions relating to,telemarketing practices and certain automated outbound contacts such as phone calls,texts or emails.Under certain circumstances,these laws may provide consumers with a private right of action.Violations of these laws could result in substantial statutory penalties and other sanctions.Banking RegulationOptum Bank is subject to regulation by federal banking regulators,including the Federal Deposit Insurance Corporation(FDIC),which performs annual examinations to ensure the bank is operating in accordance with federal safety and soundness requirements,and the Consumer Financial Protection Bureau,which may perform periodic examinations to ensure the bank is in compliance with applicable consumer protection statutes,regulations and agency guidelines.Optum Bank is also subject to supervision and regulation by the Utah State Department of Financial Institutions,which carries out annual examinations to ensure the bank is operating in accordance with state safety and soundness requirements and performs periodic examinations of the banks compliance with applicable state banking statutes,regulations and agency guidelines.In the event of unfavorable examination results from any of these agencies,the bank could become subject to increased operational expenses and capital requirements,enhanced governmental oversight and monetary penalties.7Non-U.S.RegulationCertain of our businesses operate internationally and are subject to regulation in the jurisdictions in which they are organized or conduct business.These regulatory regimes vary from jurisdiction to jurisdiction.In addition,our non-U.S.businesses and operations are subject to U.S.laws regulating the conduct and activities of U.S.-based businesses operating outside the United States,such as the Foreign Corrupt Practices Act(FCPA),which prohibits offering,promising,providing or authorizing others to give anything of value to a foreign government official to obtain or retain business or otherwise secure a business advantage.COMPETITIONAs a diversified health care company,we operate in highly competitive markets across the full expanse of health care benefits and services.Our competitors include organizations ranging from startups to highly sophisticated Fortune 50 global enterprises,for-profit and non-profit companies,and private and government-sponsored entities.New entrants to our markets and business combinations among our competitors and suppliers also contribute to a dynamic and competitive environment.We compete fundamentally on the quality and value we provide to those we serve which can include elements such as product and service innovation;use of technology;consumer and provider engagement and satisfaction;and sales,marketing and pricing.See Part I,Item 1A,“Risk Factors”for additional discussion of our risks related to competition.INTELLECTUAL PROPERTY RIGHTSWe have obtained trademark registration for the UnitedHealth Group,Optum and UnitedHealthcare names and logos.We own registrations for certain of our other trademarks in the United States and abroad.We hold a portfolio of patents and have patent applications pending from time to time.We are not substantially dependent on any single patent or group of related patents.Unless otherwise noted,trademarks appearing in this report are trademarks owned by us.We disclaim any proprietary interest in the marks and names of others.HUMAN CAPITAL RESOURCESOur nearly 400,000 employees,as of December 31,2024,including more than 140,000 clinical professionals,are guided by our mission to help people live healthier lives and help make the health system work better for everyone.Our mission and cultural values of integrity,compassion,inclusion,relationships,innovation,performance and quality align with our long-term business strategy to increase access to care,make care more affordable,enhance the care experience,improve health outcomes and advance health equity.Our mission and values attract individuals who are determined to make a difference individuals whose talent,innovation,engagement and empowerment are critical in our ability to achieve our mission.We are committed to developing our people and culture by creating an inclusive environment where people of diverse talents,backgrounds,experiences and perspectives make us better.Our approach is data-driven and leader-led and uses enterprise and business scorecards to ensure our leaders are accountable for a consistent focus on hiring,developing,advancing and retaining diverse talent.We have embedded inclusion and diversity throughout our culture,including in our talent acquisition and talent management practices;leadership development;careers;learning and skills;and systems and processes.We strive to maintain a skilled,sustainable and diverse talent pipeline by building strong strategic partnerships and outreach through early career programs,internships and apprenticeships.We support career coaching,mentorship and accelerated leadership development programs to ensure mobility and advancement for our diverse talent.To foster an engaged workforce and an inclusive culture,we invest in a broad array of skills-based learning and culture development programs.We rely on a shared leadership framework,which clearly and objectively defines our expectations,enables an environment where everyone has the opportunity to learn and grow,and helps us identify,develop and deploy talent to help achieve our mission.We prioritize pay equity by objectively and regularly evaluating and reviewing our compensation practices by performance,age,experience,gender,ethnicity and race.Receiving on-going feedback from our team members is another way to strengthen and reinforce a culture of inclusion.Our Employee Experience Index measures an employees sense of commitment and belonging to our company and is a metric in the Stewardship section of our annual incentive plan.Our Sustainability Report,which can be accessed on our website at ,provides further information about our people and culture.8INFORMATION ABOUT OUR EXECUTIVE OFFICERSThe following sets forth certain information regarding our executive officers as of February 27,2025,including the business experience of each executive officer during the past five years:NameAgePositionAndrew Witty .60Chief Executive OfficerJohn Rex .63President and Chief Financial OfficerHeather Cianfrocco.51Chief Executive Officer,OptumErin McSweeney .60Executive Vice President and Chief People OfficerTimothy Noel .53Chief Executive Officer,UnitedHealthcareThomas Roos .52Senior Vice President and Chief Accounting OfficerChristopher Zaetta .53Executive Vice President and Chief Legal Officer and Corporate SecretaryOur Board of Directors elects executive officers annually.Our executive officers serve until their successors are duly elected and qualified,or until their earlier death,resignation,removal or disqualification.Andrew Witty has served as Chief Executive Officer and a member of the Board of Directors of UnitedHealth Group since February 2021.Previously,Andrew served as Chief Executive Officer of Optum from July 2018 to April 2021,President of UnitedHealth Group from November 2019 to February 2021 and as a UnitedHealth Group director from August 2017 to March 2018.Prior to joining UnitedHealth Group,he was Chief Executive Officer and a board member of GlaxoSmithKline,a global pharmaceutical company,from 2008 to 2017.John Rex has served as President and Chief Financial Officer of UnitedHealth Group since April 2024.Previously,John served as Chief Financial Officer of UnitedHealth Group since June 2016.From March 2012 to June 2016,he served as Executive Vice President and Chief Financial Officer of Optum.Prior to joining Optum in 2012,John was a Managing Director at JP Morgan,a global financial services firm.Heather Cianfrocco has served as Chief Executive Officer of Optum since April 2024.Previously,Heather served as Optums President and held numerous leadership roles since joining UnitedHealth Group from 2008 until April 2024,including serving as Chief Executive Officer of Optum Rx,Chief Executive Officer for Optums Health Services and Chief Executive Officer of UnitedHealthcare Community&State.Erin McSweeney has served as Executive Vice President and Chief People Officer of UnitedHealth Group since March 2022.From February 2021 to March 2022,Erin served as chief of staff to UnitedHealth Groups Office of the Chief Executive.From January 2017 to February 2021,she served as Executive Vice President and Chief Human Resources Officer at Optum.Prior to joining UnitedHealth Group,Erin was Executive Vice President and Chief Human Resources Officer for EMC Corporation,an international technology company.Tim Noel has served as Chief Executive Officer of UnitedHealthcare since January 2025.Previously,Tim served as Chief Executive Officer of UnitedHealthcares Medicare&Retirement business and held numerous leadership roles since joining UnitedHealth Group from 2007 until January 2025,including serving as Chief Financial Officer and Senior Vice President of federal products for Medicare&Retirement.Tom Roos has served as Senior Vice President and Chief Accounting Officer of UnitedHealth Group since August 2015.Prior to joining UnitedHealth Group,Tom was a Partner at Deloitte&Touche LLP,an independent registered public accounting firm.Chris Zaetta has served as Executive Vice President,Chief Legal Officer and Corporate Secretary of UnitedHealth Group since May 2024.Previously,Chris served as Chief Legal Officer of Optum from September 2020 until May 2024.Prior to joining Optum in 2020,Chris was Vice President at Johnson&Johnson,a pharmaceutical company.Chris also held several leadership roles at UnitedHealth Group from May 2011 to September 2019,including Head of Litigation and General Counsel of the organizations government businesses.ADDITIONAL INFORMATIONOur executive offices are located at 1 Health Drive,Eden Prairie,Minnesota 55344 and 655 New York Avenue,Washington,DC 20001;our telephone number is(800)328-5979.You can access our website at to learn more about our company.We make periodic and current reports and amendments available,free of charge,on our website,as soon as reasonably practicable after we file or furnish these reports to the Securities and Exchange Commission(SEC).Information on or linked to our website is neither part of nor incorporated by reference into this Annual Report on Form 10-K or any other SEC filings.9ITEM 1A.RISK FACTORS CAUTIONARY STATEMENTSThe statements,estimates,projections or outlook contained in this Annual Report on Form 10-K include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995(PSLRA).When used in this Annual Report on Form 10-K and in future filings by us with the SEC,in our news releases,presentations to securities analysts or investors,and in oral statements made by or with the approval of one of our executive officers,the words“believe,”“expect,”“intend,”“estimate,”“anticipate,”“forecast,”“outlook,”“plan,”“project,”“should”or similar words or phrases are intended to identify such forward-looking statements.These statements are intended to take advantage of the“safe harbor”provisions of the PSLRA.These forward-looking statements involve risks and uncertainties which may cause our actual results to differ materially from the expectations expressed or implied in the forward-looking statements.Any forward-looking statement in this report speaks only as of the date of this report and,except as required by law,we undertake no obligation to update any forward-looking statement to reflect events or circumstances,including unanticipated events,after the date of this report.The following discussion contains cautionary statements regarding our business,which investors and others should consider.We do not undertake to address in future filings with the SEC or other communications regarding our business or results of operations how any of these factors may have caused our results to differ from discussions or information contained in our previous filings or communications.In addition,any of the matters discussed below may have affected past,as well as current,forward-looking statements about future results.Any or all forward-looking statements in this Annual Report on Form 10-K and in any other SEC filings or public statements we make may turn out to be wrong.Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties.Many factors discussed below will be important in determining our future results.By their nature,forward-looking statements are not guarantees of future performance or results and are subject to risks,uncertainties and assumptions which are difficult to predict or quantify.Risks Related to Our Business and Our IndustryIf we fail to estimate,price for and manage our medical costs or design benefits in an effective manner,the profitability of our risk-based products and services could decline and could materially and adversely affect our results of operations,financial position and cash flows.Through our risk-based benefit products,we assume the risk of both medical and administrative costs for our customers in return for monthly premiums.The profitability of our products depends in large part on our ability to predict and effectively price for and manage medical costs.Our Optum Health business also enters into fully accountable value-based arrangements with payers.Premium revenues from risk-based products constitute nearly 80%of our total consolidated revenues.Estimates of benefit expense payments involve extensive judgement and are subject to considerable inherent variability.Relatively small differences between predicted and actual medical costs,or utilization rates as a percentage of revenues,have resulted and in the future may result in significant changes in our financial results.If we fail to predict accurately,or effectively price for or manage,the costs of providing care under risk-based arrangements,our results of operations could be materially and adversely affected.We manage medical costs through underwriting criteria,product design,negotiation of competitive provider contracts and care management programs.Total medical costs are affected by the number of individual services rendered,the cost of each service and the type of service rendered.Although we base the premiums we charge on our estimates of future medical costs over the fixed contract period,many factors may cause,and have previously caused,actual costs to exceed those estimated and reflected in premiums or bids.These factors may include medical cost inflation,increased use of services,business mix,unexpected differences among new customer populations,increased cost of individual services,costs to deliver care,large-scale medical emergencies,the potential effects of climate change,pandemics,the introduction of new or costly drugs or increases in drug prices,treatments and technology,new treatment guidelines,newly mandated benefits or other regulatory changes and insured population characteristics.Cost increases in excess of our forecasts typically cannot be recovered in the fixed premium period through higher premiums.For Optum Healths fully accountable value-based care,any inability to provide higher-quality outcomes and better experiences at lower costs or to integrate our care delivery models could impact our results of operations,financial positions and cash flows.In addition,the financial results we report for any particular period include estimates of costs incurred for which claims are still outstanding.These estimates involve an extensive degree of judgment.If these estimates prove inaccurate,our results of operations could be materially and adversely affected.10If we fail to maintain properly the integrity or availability of our data or successfully consolidate,integrate,upgrade or expand our existing information systems,or if our technology products do not operate as intended,our business could be materially and adversely affected.Our business depends on the integrity and timeliness of the data we use to serve our members,customers and health care professionals and to operate our business.If the data we rely upon to run our businesses is found to be inaccurate or unreliable or if we fail to effectively maintain or protect the integrity of our data and information systems,including systems powered by or incorporating artificial intelligence and machine learning(AI/ML),we could experience failures in our health,wellness and information technology products;lose existing customers;have difficulty attracting new customers;experience problems in determining medical cost estimates and establishing appropriate pricing;have difficulty preventing,detecting and controlling fraud;have disputes with customers,physicians and other health care professionals;become subject to regulatory sanctions,penalties,investigations or audits;incur increases in operating expenses;or suffer other adverse consequences.The volume of health care data generated,and the uses of data,including electronic health records,are rapidly expanding.We depend on the integrity of the data in our information systems to implement new and innovative services,automate and deploy new technologies to simplify administrative processes and clinical decision making,price our products and services adequately,provide effective service to our customers and consumers in an efficient and uninterrupted fashion,provide timely payments to care providers,and accurately report our results of operations.In addition,increasing connectivity among technologies and recent trends toward greater consumer engagement in health care require new and enhanced technologies,including more sophisticated applications for mobile devices and new tools and products that leverage AI/ML to improve the customer experience.We anticipate that fast-evolving AI/ML technologies,including generative AI,will play an increasingly important role in our information systems and customer-facing technology products.Our ability to protect and enhance existing systems and develop new systems to keep pace with changes in information processing technology(including AI/ML),regulatory standards and changing customer preferences will require an ongoing commitment of significant development and operational resources.If these commitments fail to provide the anticipated benefits,if we are unable to successfully anticipate future technology developments,or if the cost to keep pace with the technological changes exceeds our estimates,we could be exposed to reputational harm and experience adverse effects on our business.We may not successfully implement our initiatives to consolidate the number of systems we operate,upgrade and expand our information systems capabilities,integrate and enhance our systems and develop new systems to keep pace with recent regulations and changes in information processing technology.Failure to protect,consolidate and integrate our systems successfully could result in higher than expected costs.Some of our businesses sell and install software products which may contain unexpected design defects or may encounter unexpected complications during installation or when used with other technologies utilized by the customer.A failure of our technology products to operate as intended and in a seamless fashion with other products could materially and adversely affect our results of operations,financial position and cash flows.Uncertain and rapidly evolving U.S.federal and state,non-U.S.and international laws and regulations related to health data and health information technologies,including those powered by or incorporating AI/ML,may alter the competitive landscape or impose new compliance requirements and could materially and adversely affect the configuration of our information systems and platforms,and our ability to compete in our markets.If we or third parties we rely on sustain cyberattacks or other privacy or data security incidents resulting in disruption to our operations or the disclosure of protected personal information or proprietary or confidential information,we could suffer a loss of revenue and increased costs,negative operational effects,exposure to significant liability,reputational harm and other serious negative consequences.We routinely process,store and transmit large amounts of data in our operations,including protected personal information subject to privacy,security or data breach notification laws,as well as proprietary or confidential information relating to our business or third parties.Some of the data we process,store and transmit may be outside of the United States due to our information technology systems and international business operations.We are regularly the target of attempted cyberattacks and other security threats and have previously been,and may in the future be,subject to compromises of the information technology systems we use,information we hold,or information held on our behalf by third parties.For example,we previously reported our Change Healthcare business,which we had recently acquired,was subject to a cyberattack in 2024,in which the data involved contained protected health information or personally identifiable information.While we have programs in place to detect,contain and respond to data security incidents and provide employee awareness training regarding phishing,malware and other cyber threats to protect against cybersecurity risks and incidents,we expect that we will continue to experience these incidents,some of which may negatively affect our business.Further,because the techniques used to obtain unauthorized access,disable or degrade service,or sabotage systems change frequently and are increasing in sophistication,in part due to use of evolving AI/ML technologies(including generative AI),and because our businesses are changing as well,we may be unable to anticipate these techniques and threats,timely detect data security 11incidents or implement adequate preventive measures.Threat actors and hackers have previously been,and may in the future be,able to negatively affect our operations by penetrating our security controls and causing system and operational disruptions or shutdowns,accessing,misappropriating or otherwise compromising protected personal information or proprietary or confidential information or that of third parties,and developing and deploying viruses,ransomware and other malware that can attack our systems,exploit any security vulnerabilities,and disrupt or shutdown our systems and operations.In addition,hardware,software,or applications we develop or procure from third parties may contain defects or other problems which could unexpectedly compromise our information security controls.Our systems may also be vulnerable to financial fraud schemes,misplaced or lost data,error,malicious social engineering,or other events which could negatively affect the data or financial accounts,proprietary or confidential information relating to our business or third parties,or our operations.There have previously been and may be in the future heightened vulnerabilities due to recently-acquired or non-integrated businesses.We rely in some circumstances on third-party vendors to process,store and transmit large amounts of data for our business.The operations of these vendors are subject to similar risks,but are outside our direct oversight and control.The costs to eliminate or address the foregoing security threats and vulnerabilities before or after a cybersecurity incident could be material.We have business continuation and resiliency plans which we maintain,update and test regularly in an effort to contain and remediate potential disruptions or cybersecurity events.If our remediation efforts are not successful,we may experience operational interruptions,delays,or cessation of service and loss of existing or potential customers.In addition,compromises of our security measures or the unauthorized dissemination of sensitive personal information,proprietary information or confidential information about us,our customers or other third parties,previously and in the future,could expose us or them to the risk of financial or medical identity theft,negative operational impacts,and loss or misuse of this information,result in litigation and liability,including regulatory penalties,for us,damage our brand and reputation,or otherwise harm our business.If we fail to develop and maintain satisfactory relationships with health care payers,physicians,hospitals and other service providers,our business could be materially and adversely affected.We depend substantially on our continued ability to contract with health care payers(as a service provider to those payers),as well as physicians,hospitals,pharmaceutical benefit service providers,pharmaceutical manufacturers and other care and service providers at competitive prices.If we fail to develop and maintain satisfactory relationships with health care providers,whether in-network or out-of-network,our failure to do so could materially and adversely affect our business,results of operations,financial position and cash flows.In addition,some of our activities related to network design,provider participation in networks and provider payments could result in disputes,which may be costly and attract negative publicity.In any particular market,physicians and health care providers could refuse to contract with us,demand higher payments,or take other actions which could result in higher medical costs,less desirable products for customers or difficulty meeting regulatory or accreditation requirements.In some markets,certain health care providers,particularly hospitals,physician and hospital organizations or multi-specialty physician groups,may have significant market positions which could diminish our bargaining power.In addition,Accountable Care Organizations(ACOs);physician group management services organizations(which aggregate physician practices for administrative efficiency);and other organizational structures adopted by physicians,hospitals and other care providers may change the way in which these providers do business with us and may change the competitive landscape.Such organizations or groups of physicians may compete directly with us,which could adversely affect our business,and our results of operations,financial position and cash flows by impacting our relationships with these providers or affecting the way we price our products and estimate our costs,which might require us to incur costs to change our operations in an effort to mitigate these impacts.In addition,if these providers refuse to contract with us,use their market position to negotiate favorable contracts or place us at a competitive disadvantage,our ability to market products or to be profitable in those areas could be materially and adversely affected.Our health care benefits businesses have risk-based arrangements with some physicians,hospitals and other health care providers.These arrangements limit our exposure to the risk of increasing medical costs,but expose us to risk related to the adequacy of the financial and medical care resources of the health care providers.To the extent a risk-based health care provider organization faces financial difficulties or otherwise is unable to perform its obligations under the arrangement,we may be held responsible for unpaid health care claims which should have been the responsibility of the health care provider and for which we have already paid the provider.Further,payment or other disputes between a primary care provider and specialists with whom the primary care provider contracts could result in a disruption in the provision of services to our members or a reduction in the services available to our members.Health care providers with which we contract may not properly manage the costs of services,maintain financial solvency or avoid disputes with other providers.They may also fail to provide us with the information we need to effectively conduct our businesses,such as information enabling us to estimate costs of care.Any of these events could have a material adverse effect on the provision of services to our members and our operations.Some providers that render services to our members do not have contracts with us.In some instances,those providers may dispute the payment for these services and may institute litigation or arbitration relying on state and federal laws that define the compensation that must be paid to out-of-network providers in some circumstances.12The success of some of our businesses depends on maintaining satisfactory relationships with employed,affiliated,and independently contracted physicians and joint venture partners.The physicians who practice medicine or contract with our affiliated physician organizations could terminate their provider contracts or otherwise become unable or unwilling to continue practicing medicine or contracting with us.We face and will likely continue to face heightened competition to acquire or manage physician practices or to employ or contract with individual physicians.Our revenues could be materially and adversely affected if we are unable to maintain or expand satisfactory relationships with physicians,to acquire,recruit or,in some instances,employ physicians,or to retain enrollees following physician departures.In addition,our affiliated physician organizations contract with competitors of UnitedHealthcare.Our businesses could suffer if our affiliated physician organizations fail to maintain relationships with or fail to adequately price their contracts with these third-party payer competitors.Further,physicians,hospitals,pharmaceutical benefit service providers,pharmaceutical manufacturers and certain health care providers are customers of our Optum businesses.Physicians also provide medical services at facilities owned by our Optum businesses.Given the importance of health care providers and other constituents to our businesses,failure to maintain satisfactory relationships with them could materially and adversely affect our results of operations,financial position and cash flows.If we fail to compete effectively to maintain or increase our market share,including maintaining or increasing enrollments in businesses providing health benefits,our results of operations,financial position and cash flows could be materially and adversely affected.Our businesses face significant competition in all of the markets in which we operate.In many geographies or product segments,our competitors have and may continue to have certain competitive advantages.Our competitive position may also be adversely affected by significant merger and acquisition activity in the industries in which we operate,among both our competitors and suppliers.Consolidation among competitors may make it more difficult for us to retain or increase our customer base,maintain or improve the terms on which we do business with our suppliers,or maintain or increase our profitability.In addition,our success in the health care marketplace and future growth depends on our ability to develop and deliver innovative and potentially disruptive products and services to satisfy evolving market demands.If we do not continue to innovate and provide products and services which are useful and relevant to health care payers,consumers and our customers,we may not remain competitive and risk losing market share to existing competitors and disruptive new market entrants.We may face risks from new technologies and market entrants which could affect our existing relationship with health plan enrollees in the affected markets.We could sustain competitive disadvantages and loss of market share if we fail to continue developing innovative care models,including by accelerating the transition of care to value-based models that achieve higher quality outcomes and better experiences at lower costs and expand access to virtual and in-home care.If health care payers or providers are unwilling or unable to enter into value-based agreements with us,we may be unable to successfully establish or maintain the contractual or employment relationships necessary to achieve the quality and cost objectives we have for value-based contracting.Additionally,our competitive position could be adversely affected by any failure to develop and apply innovative technologies and other effective data and analytics capabilities or to provide services to our clients focused on these technologies and capabilities.Our business,results of operations,financial position and cash flows also could be materially and adversely affected if we do not compete effectively in our markets,if our reputation suffers harm,if we set rates too high or too low in highly competitive markets,if we do not design and price our products properly and competitively,if we are unable to innovate and deliver products and services demonstrating value to our customers,if we do not provide a satisfactory level of services,if membership or demand for other services does not increase as we expect or declines,or if we lose accounts with more profitable products while retaining or increasing membership in accounts with less profitable products.We are routinely subject to various private party and governmental legal actions and investigations,which could damage our reputation and,if resolved unfavorably,could result in substantial penalties or monetary damages and materially and adversely affect our results of operations,financial position and cash flows.We are routinely made party to a variety of private party and governmental legal actions and investigations related to,among other matters,the design,management and delivery of our product and service offerings.Any failure by us to adhere to the laws and regulations applicable to our businesses could subject us to civil and criminal penalties.Legal actions to which we are a party have included and in the future could include matters related to health care benefits coverage and payment of claims(including disputes with enrollees,customers and contracted and non-contracted physicians,hospitals and other health care professionals),tort claims(including claims related to the delivery of health care services,such as medical malpractice by personnel at our affiliates facilities,or by health care practitioners who are employed by us,have contractual relationships with us,or serve as providers to our managed care networks,including as a result of a failure to adhere to applicable clinical,quality and/or patient safety standards),antitrust claims(including as a result of changes in the 13enforcement of antitrust laws),whistleblower claims(including claims under the False Claims Act or similar statutes),matters related to our use of or alleged failure to adequately safeguard personal information or other proprietary data,claims related to alleged failure of our technology products to operate properly or fairly,contract and labor disputes,tax claims and claims related to disclosure of certain business practices.In addition,some of our pharmacy services operations are subject to clinical quality,patient safety and other risks inherent in the dispensing,packaging and distribution of drugs,including claims related to purported dispensing and other operational errors.We may also be party to certain class action lawsuits brought by health care professional groups and consumers.We operate in jurisdictions outside of the United States where contractual rights,tax positions and applicable regulations may be subject to interpretation or uncertainty to a greater degree than in the United States,and therefore subject to dispute by customers,government authorities or others.We are largely self-insured with regard to litigation risks,including claims of medical malpractice against our affiliated physicians and us.Although we record liabilities for our estimates of the probable costs resulting from self-insured matters,it is possible the level of actual losses will significantly exceed the liabilities recorded.Additionally,physicians and other healthcare providers have become subject to an increasing number of legal actions alleging medical malpractice and general professional liabilities.Even in states that have imposed caps on damages for such actions,litigants are seeking recoveries under theories of liability that might not be subject to the caps on damages.These actions involve significant defense costs and could result in substantial monetary damages or damage to our reputation.We cannot predict the outcome of significant legal actions in which we are involved.Even in situations where we engage external insurers,our coverage may be disputed or may not be sufficient to cover the entirety of certain claims.We incur expenses to resolve these matters and current and future legal actions could further increase our cost of doing business,require us to potentially change the way we conduct our business,and materially and adversely affect our results of operations,financial position and cash flows.Moreover,certain legal actions could result in adverse publicity which could damage our reputation and materially and adversely affect our ability to retain our current business or grow our market share in some markets and businesses.Our business could suffer,and our results of operations,financial position and cash flows could be materially and adversely affected,if we fail to successfully manage our strategic alliances,or to complete,manage or integrate acquisitions and other significant strategic transactions or relationships.As part of our business strategy,we frequently engage in discussions with third parties regarding possible investments,acquisitions,divestitures,strategic alliances,joint ventures and outsourcing transactions and often enter into agreements relating to such transactions.If we fail to meet the needs of our alliance or joint venture partners,including by developing additional products and services,providing high levels of service,pricing our products and services competitively or responding effectively to applicable federal and state regulatory changes,our alliances and joint ventures could be damaged or terminated,which in turn could adversely impact our reputation,business and results of operations.Further,governmental actions,such as actions by the FTC or DOJ,may affect our ability to complete strategic transactions,which could adversely affect our future growth.If we fail to identify and successfully complete transactions to meet our strategic objectives,including as a result of antitrust regulatory enforcement actions,such as those that have been brought against us in the past,we may be required to expend resources to develop products and technology internally,be placed at a competitive disadvantage or be adversely affected by negative market perceptions,any of which may have a material adverse effect on our results of operations,financial position or cash flows.Successful acquisitions also require us to effectively integrate the acquired business into our existing operations,including our internal control environment and culture,or otherwise leveraging its operations which may present risks different from those presented by organic growth and may be difficult for us to manage.For example,we have experienced and in the future may encounter more acute information technology system vulnerabilities or different litigation risk profiles in recently acquired business than we have historically managed.We may be unable to address such vulnerabilities,inadequacies,differences,or failures soon after acquiring a business,which could undermine integration activities,delay launch of acquired products,and increase infrastructure risk.In addition,even with appropriate diligence,pre-acquisition practices of an acquired business have exposed us in the past and may expose us in the future to legal challenges and investigations that could subject us to criminal fines or reputational harm.Even if we are ultimately successful in resolving these matters,defending such claims may be costly and result in negative publicity.If we cannot successfully integrate our acquired businesses and realize contemplated revenue growth opportunities,cost savings and other synergies,our business,prospects,results of operations,financial position and cash flows could be materially and adversely affected.14We are subject to risks associated with public health crises arising from large-scale medical emergencies,pandemics,natural disasters and other extreme events,which have had and could have an adverse effect on our business,results of operations,financial condition and financial performance.Large-scale medical emergencies,pandemics,natural disasters,public health crises and other extreme events could have a material adverse effect on our business operations,cash flows,financial conditions and results of operations.For example,disruptions in public and private infrastructure resulting from such events could increase our operating costs and impair our ability to provide services to our clients and customers.In addition,as a result of these events,the premiums and fees we charge may not be sufficient to cover our medical and administrative costs,deferred medical care could be sought in future periods at potentially higher acuity levels,we could experience reduced demand for our services,and our clinical and non-clinical workforce could be affected and sustain a reduced capacity to handle demand for care.Public health crises arising from natural disasters,such as wildfires,hurricanes,and snowstorms,or effects of climate change could impact our business operations and result in increased medical care costs.Government enactment of emergency powers in response to public health crises could disrupt our business operations,including by restricting availability of,or our ability to deliver,pharmaceuticals or other supplies,and could increase the risk of shortages of necessary items.Our sales performance will suffer if we do not adequately attract,retain and provide support to a network of independent producers and consultants.Our products and services are sold in part through nonexclusive producers and consultants for whose services and allegiance we must compete.Our sales could be materially and adversely affected if we are unable to attract,retain and support independent producers and consultants or if our sales strategy is not appropriately aligned across distribution channels.Our relationships with producers could be impaired by changes in our business practices and the terms of our relationships,including commission levels.Our businesses are subject to risks associated with unfavorable economic conditions.Unfavorable economic conditions may have a range of impacts on the demand for our products and services.Such conditions also have caused and in future periods could continue to cause employers to stop offering certain health care coverage as an employee benefit or elect to offer particular coverage on a voluntary,employee-funded basis to reduce their operating costs.In addition,unfavorable economic conditions could adversely impact our ability to increase premiums or result in the cancellation by certain customers of our products and services.These conditions could lead to a decrease in people served and in the premium and fee revenues we generate.A prolonged unfavorable economic environment could constrain state and federal budgets and result in reduced reimbursements or payments in our federal and state government health care coverage programs,including Medicare,Medicaid and CHIP.A reduction in state Medicaid reimbursement rates could be implemented retroactively to apply to payments already negotiated or received from the government.In addition,state and federal budgetary pressures could cause the affected governments to impose new or a higher level of taxes or assessments for our commercial programs,such as premium taxes on health insurance and surcharges or fees on select fee-for-service and capitated medical claims.Any of these developments or actions could materially and adversely affect our results of operations,financial position and cash flows.A prolonged unfavorable economic environment could also adversely impact the financial position of hospitals and other care providers which could negatively affect our contracted rates with these parties and increase our medical costs or materially and adversely affect their ability to purchase our service offerings.Further,unfavorable economic conditions could have a material adverse effect on our financial results by impacting the customers of our Optum businesses,including health plans,hospitals,care providers,employers and others.Our failure to attract,develop,retain,and manage the succession of key employees and executives could adversely affect our business,results of operations and future performance.We depend on our ability to attract,develop and retain qualified employees and executives,including those with diverse talents,backgrounds,experiences and perspectives,to operate and expand our business.While we have development and succession plans in place for our key employees and executives,these plans do not guarantee that the services of our key employees and executives will continue to be available to us.If we are unable to attract,develop,retain and effectively manage the development and succession plans for key employees and executives,our business,results of operations and future performance could be adversely affected.Experienced and highly skilled employees and executives in the health care and technology industries are in high demand and the market for their services is competitive.We may have difficulty in replacing key executives because of the limited number of qualified individuals in these industries with the breadth of skills and experience required to operate and successfully expand our business.Adverse changes to our corporate culture could harm our business operations and our ability to retain key employees and executives.15Our investment portfolio may sustain losses which could adversely affect our profitability.Market fluctuations could impair the value of our investment portfolio and our profitability.Volatility in interest rates affects our interest income and the market value of our investments in debt securities of varying maturities which constitute the substantial majority of the fair value of our investments as of December 31,2024.In addition,a delay in payment of principal or interest by issuers,or defaults by issuers(primarily issuers of our investments in corporate and municipal bonds),could reduce our investment income and require us to write down the value of our investments which could adversely affect our profitability and equity.Our investments may not produce total positive returns and we may sell investments at prices which are less than their carrying values.Changes in the value of our investment assets,as a result of interest rate fluctuations,changes in issuer financial or market conditions,illiquidity or otherwise,could have an adverse effect on our equity.In addition,if it should become necessary for us to liquidate a material portion of our investment portfolio on an accelerated basis,such an action could have an adverse effect on our results of operations and the capital position of our regulated subsidiaries.If the value of our intangible assets is materially impaired,our results of operations,equity and credit ratings could be materially and adversely affected.As of December 31,2024,our goodwill and other intangible assets had a carrying value of$130 billion,representing 44%of our total consolidated assets.We periodically evaluate our goodwill and other intangible assets to determine whether all or a portion of their carrying values may be impaired,in which case a charge to earnings may be necessary.The value of our goodwill may be materially and adversely impacted if businesses we acquire perform in a manner inconsistent with our assumptions.In addition,from time to time we divest businesses,and any such divestiture could result in significant asset impairment and disposition charges,including those related to goodwill and other intangible assets.Any future evaluations requiring an impairment of our goodwill and other intangible assets could materially and adversely affect our results of operations and equity in the period in which the impairment occurs.A material decrease in equity could,in turn,adversely affect our credit ratings.If we are not able to protect our proprietary rights to our databases,software and related products,or other intellectual property,our ability to market our knowledge and information-related businesses could suffer.We rely on our agreements with customers,confidentiality agreements with employees and third parties,and our trademarks,trade secrets,copyrights and patents to protect our proprietary rights.These legal protections and precautions may not prevent misappropriation of our proprietary information.In addition,intellectual property rights inherent in software are the subject of substantial litigation,and we expect our software products to be increasingly subject to third-party infringement claims as the number of products and competitors in the health care-focused software industry segment grows.Such litigation and misappropriation of our proprietary information could hinder our ability to market and sell products and services which could materially and adversely affect our results of operations,financial position and cash flows.Any downgrades in our credit ratings could increase our borrowing and operating costs.Claims paying ability,financial strength and debt ratings by nationally recognized statistical rating organizations are important factors in establishing the competitive position of insurance companies.Ratings information is broadly disseminated and generally used by customers and creditors.We believe our claims paying ability and financial strength ratings are important factors in marketing our products to certain of our customers.Our credit ratings impact both the cost and availability of future borrowings.Each of the credit rating agencies reviews its ratings periodically.Our ratings reflect each credit rating agencys opinion of our financial strength,operating performance and ability to meet our debt obligations or obligations to policyholders.We may not be able to maintain our current credit ratings in the future.Any downgrades in our credit ratings could materially increase our costs of or ability to access funds in the debt capital markets and otherwise materially increase our operating costs.Risks Related to the Regulation of Our BusinessOur business activities in the United States and other countries are highly regulated and new laws or regulations or changes in existing laws or regulations or their enforcement or application could materially and adversely affect our business.We are regulated by federal,state and local governments in the United States and other countries where we do business.Our insurance and HMO subsidiaries must be licensed by and are subject to regulation in the jurisdictions in which they conduct business.For example,states require periodic financial reports and enforce minimum capital or restricted cash reserve requirements.Health plans and insurance companies are also regulated under state insurance holding company regulations and some of our activities may be subject to other health care-related regulations and requirements,including regulations and licensure requirements related to PPOs,MCOs,UR and TPAs.Under state guaranty association laws,certain insurance companies can be assessed(up to prescribed limits)for certain obligations to the policyholders and claimants of impaired or insolvent insurance companies which write the same line or similar lines of business.Any such assessment could expose our 16insurance entities and other insurers to the risk they would be required to pay a portion of an impaired or insolvent insurance companys claims through state guaranty associations.Some of our businesses provide products or services to government agencies.For example,some of our Optum and UnitedHealthcare businesses hold government contracts or provide services related to government contracts and are subject to U.S.federal and state and non-U.S.self-referral,anti-kickback,medical necessity,risk adjustment,false claims and other laws and regulations governing government contractors and the use of government funds.Our relationships with these government agencies are subject to the terms of our contracts with the agencies and to laws and regulations regarding government contracts.Among others,certain laws and regulations restrict or prohibit companies from performing work for government agencies which might be viewed to involve an actual or potential conflict of interest.These laws and regulations may limit our ability to pursue and perform certain types of engagements,thereby materially and adversely affecting our results of operations,financial position and cash flows.Some of our Optum businesses are also subject to regulations distinct from those faced by our insurance and HMO subsidiaries,some of which could impact our relationships with physicians,hospitals and customers.These regulations include state telemedicine regulations;debt collection laws;banking regulations;distributor and producer licensing requirements;state corporate practice of medicine restrictions;fee-splitting rules;and health care facility licensure and certificate of need requirements.These risks and uncertainties may materially and adversely affect our ability to market or provide our products and services,or to achieve targeted operating margins,or may increase the regulatory burdens under which we operate.The laws and rules governing our businesses and interpretations of those laws and rules are subject to frequent and often unpredictable change.For example,legislative,administrative and public policy changes to the ACA have been and likely will continue to be considered,and we cannot predict if the ACA will be further modified.Additionally,changes in tax laws or unfavorable resolutions of exams could create additional tax liabilities.The integration of entities we acquire into our businesses may affect the way in which existing laws and rules apply to us,including by subjecting us to laws and rules which did not previously apply to us.The broad latitude given to the agencies administering,interpreting and enforcing current and future regulations governing our businesses could compel us to change how we do business,renegotiate existing contracts and other arrangements,restrict revenue and enrollment growth,increase our health care and administrative costs and capital requirements,or expose us to increased liability in courts for coverage determinations,resolution of commercial disputes and other actions.We also must obtain and maintain regulatory approvals to market many of our products and services,increase prices for some regulated products and services and complete or integrate strategic transactions.For example,premium rates for our health insurance and managed care products are subject to regulatory review or approval in many states and by the federal government.Additionally,we must submit data on proposed rate increases to HHS on many of our products for monitoring purposes.Geographic and product expansions of our businesses may be subject to state and federal regulatory approvals.Delays in obtaining necessary approvals or our failure to obtain or maintain adequate approvals could materially and adversely affect our results of operations,financial position and cash flows.We also currently operate outside of the United States and in the future may acquire or commence additional businesses based outside of the United States,increasing our exposure to non-U.S.regulatory regimes.Our failure to comply with U.S.or non-U.S.laws and regulations governing our conduct outside the United States or to establish constructive relationships with non-U.S.regulators could adversely affect our ability to market our products and services or to do so at targeted operating margins,which may have a material adverse effect on our business,financial condition and results of operations.Non-U.S.regulatory regimes,which vary by jurisdiction,encompass,among other matters,local and cross-border taxation,licensing,tariffs,intellectual property,investment,capital(including minimum solvency margin and reserve requirements),management control,labor,anti-fraud,anti-corruption and privacy and data protection regulations(including requirements for cross-border data transfers).Any foreign regulator or court may take an approach to the interpretation,implementation and enforcement of industry regulations which could differ from the approach taken by U.S.regulators or courts.In addition,our non-U.S.businesses and operations are subject to U.S.laws regulating the conduct and activities of U.S.-based businesses operating outside the United States,such as the FCPA,which prohibits offering,promising,providing or authorizing others to give anything of value to a foreign government official to obtain or retain business or otherwise secure a business advantage.The health care industry is regularly subject to negative publicity,including as a result of governmental investigations,adverse media coverage and political debate concerning industry regulation.Negative publicity may adversely affect our stock price,damage our reputation,and expose us to unexpected or unwarranted regulatory scrutiny.17As a result of our participation in various government health care programs,both as a payer and as a service provider to payers,we are exposed to additional risks associated with program funding,enrollments,payment adjustments,audits and government investigations which could materially and adversely affect our business,results of operations,financial position and cash flows.We participate in various federal,state and local government health care benefit programs,including as a payer in Medicare Advantage,Medicare Part D,various Medicaid programs and CHIP,and receive substantial revenues from these programs.Some of our Optum businesses also provide services to payers participating in government health care programs.A reduction or less than expected increase,or a protracted delay,in government funding for these programs or change in allocation methodologies,or termination of the contract at the option of the government,has affected and in future periods may materially and adverse
2025-04-21
82页
5星级
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY,LTD Annual Report 20248,Li-Hsin Rd.6,Hsinchu Science Park,Hsinchu 300-096,Taiwan,R.O.C.|https:/Tel: 886-3-5636688|Fax: 886-3-5637000|This report is made with recycled paperC.C.Wei,ChairmanTaiwan Semiconductor Manufacturing Company,Ltd.TSMCAnnual Report 2024Printed on March 12,2025TSE:2330NYSE:TSMTaiwan Stock Exchange Market Observation Post System:https:/.tw TSMC annual report is available at https:/ VisionOur vision is to be the most advanced and largest technology and foundry services provider to fabless companies and IDMs,and in partnership with them,to forge a powerful competitive force in the semiconductor industry.TSMCVision,Mission&Core ValuesTSMCs VisionOur vision is to be the most advanced and largest technology and foundry services provider to fabless companies and IDMs,and in partnership with them,to forge a powerful competitive force in the semicon-ductor industry.To realize our vision,we must have a trinity of strengths:1.Be a technology leader,competitive with the leading IDMs2.Be the manufacturing leader3.Be the most reputable,service-oriented and maxi-mum-total-benefits silicon foundryTSMCs MissionOur mission is to be the trusted technology and ca-pacity provider of the global logic IC industry for years to come.TSMCs Core ValuesIntegrityIntegrity is our most basic and most important core value.We tell the truth.We believe the record of our accomplishments is the best proof of our merit.Hence,we do not brag.We do not make commit-ments lightly.Once we make a commitment,we de-vote ourselves completely to meeting that commit-ment.We compete to our fullest within the law,but we do not slander our competitors and we respect the intellectual property rights of others.With vendors,we maintain an objective,consistent,and impartial attitude.We do not tolerate any form of corrupt be-havior or politicking.When selecting new employees,we place emphasis on the candidates qualifications and character,not connections or access.CommitmentTSMC is committed to the welfare of customers,sup-pliers,employees,shareholders,and society.These stakeholders all contribute to TSMCs success,and TSMC is dedicated to serving their best interests.In return,TSMC hopes all these stakeholders will make a mutual commitment to the Company.InnovationInnovation is the wellspring of TSMCs growth,and is a part of all aspects of our business,from strategic planning,marketing and management,to technology and manufacturing.At TSMC,innovation means more than new ideas,it means putting ideas into practice.Customer TrustAt TSMC,customers come first.Their success is our success,and we value their ability to compete as we value our own.We strive to build deep and enduring relationships with our customers,who trust and rely on us to be part of their success over the long term.Table of Contents15263748Company Profile2.1 An Introduction to TSMC-0142.2 Market/Business Summary-0142.3 Board Members-0202.4 Management Team-030Financial Highlights and Analysis6.1 Financial Status and Operating Results-1226.2 Risk Management-127Corporate Governance3.1 Overview-0423.2 Board of Directors-0423.3 Major Decisions of Shareholders Meeting and Board Meetings-0543.4 Corporate Governance Implementation Status as Required by Taiwan Financial Supervisory Commission-0563.5 Code of Ethics and Business Conduct-059Corporate Sustainability(ESG)7.1 Overview-1487.2 Environmental,Safety and Health(ESH)Management-1527.3 TSMC Education and Culture Foundation-1667.4 TSMC Charity Foundation-1687.5 TSMC i-Charity Platform-1697.6 Sustainability Development Implementation Status as Required by Tai-wan Financial Supervisory Commission-1707.7 Climate-related Information of Listed Companies-172Capital and Shares 4.1 Capital and Shares-0704.2 Issuance of Corporate Bonds-0764.3 Preferred Shares-0824.4 Issuance of American Depositary Shares-082Subsidiary Information and Other Special Notes 8.1 Subsidiaries-1768.2 Special Notes-180Letter to shareholdersOperational Highlights5.1 Business Activities-0965.2 Technology Leadership-0985.3 Manufacturing Excellence-1055.4 Customer Trust-1095.5 Information Security Management-1115.6 Human Capital-1125.7 Material Contracts-1193.6 Regulatory Compliance-0643.7 Internal Control System Execution Status-0663.8 Status of Personnel Responsible for the Companys Financial Operation-0673.9 Information Regarding TSMCs Indepen-dent Auditor-0674.5 Status of Employee Stock Option Plan-0844.6 Status of Employee Restricted Stock-0844.7 Status of New Share Issuance in Connection with Mergers and Acquisitions-0924.8 Funding Plans and Implementation-0930681740121200401460040941TSMCs MissionOur mission is to be the trusted technology and capacity provider of the global logic IC industry for years to come.Letter to Shareholders006007Part of this strategy includes expanding our global manufacturing footprint based on our customers needs,as they value geographic flexibility,and a necessary level of government support.This is to maximize the value for our shareholders.We have made significant progress in our overseas expansion in 2024.In Arizona,our first fab entered high-volume production utilizing N4 process technology in 4Q24,earlier than scheduled.The yields are comparable to our fabs in Taiwan,and with our manufacturing capability and execution,we are confident to deliver the same level of manufacturing quality and reliability as our fabs in Taiwan.In Japan,our first specialty technology fab in Kumamoto began volume production at the end of 2024,with very good yield.In Europe,we held a ground-breaking ceremony in Dresden,Germany in August,and are progressing smoothly with our plans to build a specialty technology fab,focusing on automotive and industrial applications.In Taiwan,we continue to invest in and expand our advanced technology and packaging capacities,including 3nm,2nm and CoWoS technology capacities,across several locations.As the worlds most reliable and effective capacity provider,TSMC will continue to play a critical and integral role in the global semiconductor industry,while supporting our customers growth.Highlights of TSMCs accomplishments in 2024:Total wafer shipments were 12.9 million 12-inch equivalent wafers as compared to 12.0 million 12-inch equivalent wafers in 2023.Advanced technologies(7-nanometer and beyond)accounted for 69 percent of total wafer revenue,up from 58 percent in 2023.We deployed 288 distinct process technologies,and manufactured 11,878 products for 522 customers.TSMC represented 34 percent of the Foundry 2.0 industry,which we define as all logic wafer manufacturing,packaging,testing,mask-making and others,output value in 2024,as compared to 28 percent in the previous year.2024 Financial PerformanceConsolidated revenue reached NT$2,894.31 billion,an increase of 33.9 percent over NT$2,161.74 billion in 2023.Net income was NT$1,173.27 billion and diluted earnings per share were NT$45.25.Both increased 39.9 percent from the 2023 level of NT$838.50 billion net income and NT$32.34 diluted EPS.In US dollar terms,TSMC generated net income of US$36.52 billion on consolidated revenue of US$90.08 billion,which increased 35.9 percent and 30.0 percent respectively from the 2023 level of US$26.88 billion net income and US$69.30 billion consolidated revenue.Dear Shareholders,2024 was an outstanding year for TSMC.Supported by our strong technology leadership and broad customer base,we observed robust AI-related demand from our customers throughout 2024.Other applications experienced only a very mild recovery,as macroeconomic conditions continued to weigh on consumer sentiment.Fueled by strong demand for our leading-edge logic and advanced packaging technologies,TSMCs revenue increased 30%year-over-year in US dollar terms,outperforming the Foundry industrys 6%growth,and both our revenue and EPS reached record highs.We continued to invest in R&D and technology development to support our customers growth.In its second year of volume ramp,demand for our industry-leading 3-nanometer technology continued to be robust,driven by smartphone and High Performance Computing(HPC)applications,and represented 18%of our total wafer revenue in 2024.Our 2-nanometer technology leads the industry in addressing our customers insatiable need for energy-efficient computing,and almost all the IC innovators are working with TSMC.Our N2 process technology is on track for volume production in the second half of 2025.We also introduced A16 as a separate offering that features an innovative,best-in-class backside power delivery solution best-suited for High Performance Computing(HPC)products.Volume production of A16 is scheduled for the second half of 2026.We are also developing advanced packaging and 3D chip stacking technologies,including CoWoS,InFO,TSMC-SoIC(System on Integrated Chips)and silicon photonics,to enable large-scale interconnectivity for lower power consumption at affordable costs to support our customers needs.On mature nodes,we are working closely with strategic customers to develop specialty technology solutions that meet their specific requirement.These partnerships enable us to create technology differentiation and provide long-lasting value to customers.We believe N3,N2,A16 and their derivatives,our specialty technologies,and our advanced packaging and chip stacking solutions,will further extend our technology leadership position,and enable TSMC to capture the growth opportunities well into the future.Our customers look to TSMC not only for the most advanced technologies,but also for the most efficient and cost-effective manufacturing,at scale.To address the structural increase in the long-term market demand profile,TSMC is working closely with our customers to plan our capacity,and investing in leading edge,specialty and advanced packaging technologies to support their demand.We employ a disciplined and thorough capacity planning system to evaluate and judge the structural increase in the long-term market demand profile,to determine the appropriate capacity to build.At the same time,we are committed to earning a sustainable and healthy return that enables us to continue to invest to support our customers growth,while delivering profitable growth for our shareholders.008009Gross profit margin was 56.1 percent as compared with 54.4 percent in 2023,while operating profit margin was 45.7 percent compared with 42.6 percent a year earlier.Net profit margin was 40.5 percent,an increase of 1.7 percentage points from 2023s 38.8 percent.In 2024,the Company further raised its total cash dividend payments to NT$14.0 per share,up from NT$11.25 a year ago.OutlookEntering 2025,we expect the overall foundry industry to continue a sustaining and mild recovery,even as macroeconomic uncertainties persist.At the same time,we expect 2025 to be another healthy growth year for TSMC,as our technology leadership enables TSMC to win business,and further enables our customers to win business in their end markets.Continued AI-related demand in 2025 supports our already-strong conviction that the structural demand for energy-efficient computing will accelerate,as everything around us becomes more intelligent and connected.We are entering an AI-empowered world,where artificial intelligence not only runs in datacenters,but will run in PCs,smartphones,automobiles,and even Internet-of-Things devices in the future.AI also comes in many different forms,including but not limited to Generative AI applications such as ChatGPT,which consumers have become familiar with thanks to its ease of use and expansive range of potential applications.Enterprise is another driver of AI demand.Many companies,including TSMC,are using AI to create more value by driving greater productivity,efficiency,speed and quality gains.As a direct user of AI in our fab and R&D operations,we are deriving tangible ROI benefits from our investments in AI and machine learning.TSMC is by no means the only company in the world doing this,so Enterprise AI is another source of AI demand to support the multi-year structural trends.AI technology is evolving to use ever-increasingly complex AI models,which needs to be supported by more powerful semiconductor hardware.Thus,the value of our technology platform is increasing,as customers rely on TSMC to provide the most advanced process and packaging technologies at scale,in the most efficient and cost-effective manner.By upholding our Trinity of Strengths of Technology Leadership,Manufacturing Excellence,and Customer Trust,we can cast a wide net and work with all the IC innovators,and enable our customers to unleash their innovations in their end markets.Thus,we are well-positioned to address the growth from the industry megatrends of 5G,AI and HPC,with our differentiated technologies.TSMCs mission is to be the trusted technology and capacity provider for the global logic IC industry for years to come.Our success is predicated on our unwavering dedication to the pure-play foundry business model,and our job is to serve our customers and enable them to be successful.As the worlds most reliable and effective capacity provider,we understand our responsibility as critical and integral player in the global semiconductor industry.We will continue to invest in technology and capacity to support our customers growth,while ensuring we earn a sustainable and healthy return for our shareholders.It is TSMCs core values of Integrity,Commitment,Innovation,and Customer Trust that have earned our customers confidence to grow and prosper together.We hope to earn the same confidence from our shareholders,by continuing to deliver profitable growth and maximizing the value for our shareholders in the years to come.C.C.WeiChairman and Chief Executive OfficerAnnual Growth RateCapacity:million 12-inch equivalent wafers202316-176 2416-176 254-18Capacity Plan2024691X 23202570-80 -30%7nm 7nm2025 wafer shipment is expected to be 14-15 million 12-inch equivalent wafers.Wafer Sales Plan42%Consolidated revenue reached a record high of NT$2,894.31 billion,marking an increase of 33.9%compared to 2023Diluted earnings per share reached a record high of NT$45.25.Net income was NT$1,173.27 billion,up 39.9%from 2023.Total cash dividend payments raised to NT$14.0 per share,up from NT$11.25 a year ago.Taichung Zero Waste Manufacturing Center became Taiwans first demonstration site for implementing membrane carbon capture technology.Selected to the Dow Jones Sustainability Indices once again,becoming the only semiconductor company to be included for 24 consecutive years.Subsidized suppliers for carbon reduction,driving green investments worth NT$5.5 billion.Advanced technologies(7-nanometer and beyond)accounted for 69%of total wafer revenueTSMCs total wafer shipments were 12.9 million 12-inch equivalent wafers.Manufactured 11,878different products using 288 distinct technologies for 522 different customers.TSMC represented 34%of the Foundry 2.0 Note industry.Investment in R&D reached US$6.361 billionNet Zeroby 2050Carbon reduction performance as a key supplier selection criterion to accelerate supply chain decarbonizationGross profit margin was56.1%FINANCIAL RESULTSSUSTAINABILITY PERFORMANCEOPERATIONAL ACHIEVEMENTSTSMC Financial,Operational,and Sustainability Performance HighlightsNote:Foundry 2.0 includes packaging,testing,mask-making and others,and all IDM excluding memory manufacturing.0132TSMCs total wafer shipments were 12.9 million 12-inch equivalent wafers in 2024.Company Profile0140152.1 An Introduction to TSMCEstablished in 1987 and headquartered in Hsinchu Science Park,Taiwan,TSMC pioneered the pure-play foundry business model with an exclusive focus on manufacturing its customers products.By choosing not to design,manufacture or market any semiconductor products under its own name,the Company ensures that it never competes with its customers.Based on this founding principle,the key to TSMCs success has always been to enable its customers success.TSMCs foundry business model has led to the rise of the global fabless industry and,since its inception,TSMC has been a world-leading semiconductor foundry.In 2024,the Company manufactured 11,878 different products using 288 distinct technologies for 522 different customers.TSMC-made semiconductors serve a global customer base that is large and diverse,entailing a wide range of applications.These semiconductor products are used in a variety of end markets including high performance computing(HPC),smartphones,the Internet of Things(IoT),automotive,and digital consumer electronics.Such strong diversification helps to smooth fluctuations in demand,which in turn allows TSMC to maintain high levels of capacity utilization and profitability,and generate healthy returns for future investment.The annual capacity of the manufacturing facilities managed by TSMC and its subsidiaries approximately 17 million 12-inch equivalent wafers in 2024.These facilities include four 12-inch wafer GIGAFAB fabs,four 8-inch wafer fabs,and one 6-inch wafer fab all in Taiwan as well as two 12-inch wafer fabs at two wholly owned subsidiaries TSMC Nanjing Company Limited and TSMC Arizona Corporation,one 12-inch wafer fab at a TSMCs majority-owned manufacturing subsidiary Japan Advanced Semiconductor Manufacturing,Inc.(JASM),and two 8-inch wafer fabs at two wholly owned subsidiaries TSMC Washington and TSMC China Company Limited.TSMC Arizonas first fab has entered volume production of 4nm technology in fourth quarter of 2024.The construction of the second fab is already completed.This fab is in the process of installing facility systems and will utilize 3-nanometer process technologies.In 2024,TSMC announced plans to build a third fab at TSMC Arizona to meet strong customer demand leveraging the most advanced semiconductor process technology in the United States.The third fab will produce chips using 2nm or more advanced processes.In addition to its leadership in advanced process and specialty technologies,TSMC offers TSMC 3DFabric,a comprehensive family of 3D silicon stacking and advanced packaging technologies to complement its process technology offerings.TSMC 3DFabric provides customers greater chip design flexibility to unleash innovation and is another differentiating competitive advantage for the Company.2.2.2 Market OverviewTSMC estimates that the worldwide semiconductor market excluding memory reached US$514 billion in revenue in 2024,representing a 7%increase from 2023.As for foundry,TSMC expands our original definition of foundry industry to“Foundry 2.0”,which also includes packaging,testing,mask-making,and other related technologies,as well as all integrated device manufacturing(IDMs)excluding memory.In the subsequence,all instances of“foundry”will refer to the new definition of“Foundry 2.0”as this new definition more accurately reflects TSMCs addressable market opportunities going forward.Under this new definition,the size of the foundry industry was close to US$250 billion in 2023 as compared to US$150 billion under the previous definition,and the growth in 2024 is forecasted to be approximately 6%year-over-year.2.2.3 Industry Outlook,Opportunities and ThreatsFoundry Industry Demand and Supply OutlookIn 2024,TSMCs revenues in the foundry segment rebounded strongly from the decline in 2023.The rapid growth of artificial intelligence(AI)deployments drove strong increases in demand for advanced node semiconductor chips,benefitting foundry player like TSMC with leadership in advanced technologies.In addition,end demand from smartphones and personal computers(PCs)showed a mild recovery from declines in previous year,although other markets such as the Internet of Things(IoT),automotive and industrial remained weak.At the same time,after the widespread severe inventory correction in 2023,the supply chain started to rebuild inventory for some markets like AI and smartphone,which also contributed to the recovery in the foundry segment.Looking ahead to 2025,the global trade war and protectionism are intensifying,incurring risks and uncertainties to the end demand of electronic equipment.However,TSMC expects the strong demand for AI to continue,while smartphone and PC to mildly recovering.TSMC expects inventory correction to continue in the IoT,automotive and industrial sectors,impacting demand for more mature nodes of semiconductors.For the longer term,driven by the megatrends such as AI,5G,digital transformation,and increasing semiconductor content in most electronic equipment,TSMC projects a high single-digit compound annual growth rate for the worldwide semiconductor market excluding memory through 2029.As an upstream supplier in the semiconductor supply chain,the foundry segment is tightly correlated with the market health of all major platforms including high performance computing(HPC),smartphones,IoT,automotive,and digital consumer electronics(DCE).High Performance Computing(HPC)The HPC platform includes PCs,tablets,game consoles,servers,base stations and more.Major HPC unit shipments grew by 1%in 2024 due to a slow recovery in PCs and continued inventory correction for game consoles,both reflecting weak demand on the consumer side.Meanwhile,demand for servers and data centers equipped with AI accelerators was relatively healthy,helped by the proliferation of AI applications,especially generative AI.For 2025,TSMC projects a flattish outlook for both PC and server unit shipments,driven by normalized inventory levels,pent-up PC replacement demand caused by the pandemic,and the ongoing AI arms race,while offsetting by macro-economic uncertainty.Longer term,an increasingly intelligent and more connected 5G world will create demand for massive computing power as well as increasingly energy-efficient computing.Both require higher performance and more power-efficient central processing units(CPUs),graphics processor units(GPUs),network processing units(NPUs),AI accelerators and related application-specific integrated circuits(ASICs),which will drive the overall HPC platform towards richer silicon content,more advanced process technologies and advanced 3D packaging.These trends are all favorable to TSMC given its technology leadership in these areas.Smartphones With gradual recovery of the global economy and the end of the supply chain inventory correction,smartphone unit shipments grew by 4%in 2024,reflecting continued 5G commercialization worldwide and rising demand from emerging countries,as well as cyclical recovery.Smartphone growth is expected to show marginal growth in 2025 considering macro-economic uncertainty.Over the longer term,however,the inevitable migration to 5G along with the Also in 2024,TSMC,along with minority investors Sony Semiconductor Solutions(SSS),DENSO,and Toyota,announced further investment into JASM to build a second fab,which is planned to commence construction in 2025.Together with its first fab,which began volume production at the end of 2024,the overall investment in JASM will exceed US$20 billion.With both fabs,JASMs Kumamoto site plans to offer 40,22/28,12/16 and 6/7 nanometer process technologies for automotive,industrial,consumer electronics and HPC-related applications.The Company began construction on a specialty technology fab in Dresden,Germany,in 2024.This facility will manufacture TSMCs 28/22 nanometer planar CMOS and 16/12 nanometer FinFET process technologies.Outside of Taiwan,TSMC provides customer support,account management and engineering services through its offices in North America,Europe,Japan,China,and South Korea.At the end of 2024,the Company and its subsidiaries employed more than 83,000 people worldwide.The Company is listed on the Taiwan Stock Exchange(TWSE)under ticker number 2330,and its American Depositary Shares(ADSs)are traded on the New York Stock Exchange(NYSE)under the symbol TSM.2.2 Market/Business Summary2.2.1 TSMC AchievementsIn 2024,TSMC maintained its leading position in the IC manufacturing segment of the global semiconductor industry by accounting for 34%of the“Foundry 2.0”industry,which TSMC defines as all logic wafer manufacturing,packaging,testing,mask-making and others,an increase from 28%in 2023.The Companys strong market position stems in great part from its leadership in advanced process technologies.In 2024,69%of TSMCs wafer revenue came from advanced manufacturing processes defined as geometries of 7nm and smaller up from 58%in 2023.TSMC offers a comprehensive technology portfolio and continues to expand its advanced technologies,specialty technologies,and advanced silicon stacking and packaging technologies,to meet customer demand and provide more added value.016017need for improved performance,longer battery life,biosensors and more edge AI features,will all continue to fuel smartphone sales growth.High performance and power efficient IC technologies are essential requirements among handset manufacturers,and highly integrated chips and advanced 3D packaging designs are the preferred solutions to optimize cost,power and form factor(IC footprint and thickness).The migration to advanced process technologies will certainly continue,spurred by the need for higher performance chips to run edge AI applications and various complex software computations as well as higher resolution images and video.TSMC is an acknowledged leader in process technology for manufacturing highly integrated chips and advanced 3D packaging designs and,as such,is very well positioned to serve the evolving needs of the smartphone market.Internet of Things(IoT)The IoT platform includes various types of smart,connected devices ranging from wearables and health monitors to home appliances and industrial automation devices.Since the pandemic,digital transformation has been the main growth driver of IoT,offset to a large degree by continued destocking in the industrial market.As a result,IoT device shipments in 2024 grew a modest 3%with smart wearable,health and retail devices leading the way.As IoT devices incorporate more AI features,the IoT industry is expected to achieve solid long-term growth.Momentum continues for consumer devices,but industrial demand is expected to remain soft in the first half of 2025 with some improvement in the second half.Overall,TSMC projects IoT unit shipments will continue a mid-single-digit growth in 2025.As IoT devices become smarter with the integration of AI,they will require more chips with higher performance and lower power consumption.TSMC offers various manufacturing processes to support these needs,including cost-effective advanced technology,ultra-low power(ULP)and various special process technologies to support customers in providing innovative and competitive products,and fulfill requirements of sustainability development.AutomotiveThe global automotive market was soft in 2024,reflecting the fulfilment of prior pent-up demand and a downturn in macroeconomic conditions.Worldwide car unit production declined by 1%due to reduced demand and higher inventory levels among Original Equipment Manufacturer(OEMs)and dealers.The global automotive market is expected to face continued challenges in 2025 from inflation and macroeconomic uncertainty,TSMC projects a low-to-mid-single-digit decline in car unit production.The megatrends in the automotive industry today are“greener,safer and smarter,”which will accelerate the adoption of electric vehicles(EVs),advanced driver assistance systems(ADAS)and smart cockpit/infotainment systems,along with new electrical/electronic(E/E)architecture.All these will further boost demand for application processor(AP),microcontroller unit(MCU),ASIC processors,in-car networking,sensors,and power management ICs(PMICs),thus continuously increasing the silicon content per car.TSMC is well-positioned to support the automotive industrys transition by providing advanced process technologies and manufacturing solutions that enable customers to develop competitive products.In addition,TSMC also offers a range of automotive-grade manufacturing processes,including those with AEC-Q100 and ISO 26262 certification,to ensure the highest levels of quality and reliability for automotive applications.Digital Consumer Electronics(DCE)The global DCE market experienced a 2cline in 2024,primarily due to weakened demand for set-top boxes(STBs)and other consumer products following the pandemic-induced demand surge.In contrast,TV shipments increased by 4%year-over-year,driven by subsidies in China.Looking ahead to 2025,the DCE market in Europe is expected to recover gradually,potentially following the end of the war in Ukraine.Meanwhile,in China,recovery is also anticipated as the government injects more stimulus through initiatives such as the“Swap Old for New”subsidy.However,macro-economic uncertainty could create headwinds likely leading to moderate decline in 2025.Regardless of the timing of market recovery,TSMCs advanced technologies will continue to empower DCE customers to develop and differentiate their innovative products.Supply ChainThe electronics industry features a long and complex supply chain,the elements of which are correlated and highly interdependent.At the upstream manufacturing level,IC vendors need to have sufficient and flexible supply deliveries to cope with fluctuating demand dynamics.Foundry vendors play an important role in maintaining the health and effectiveness of the supply chain.As a leader in the foundry segment,TSMC provides advanced technologies and large-scale capacity to complement the innovations created in the downstream chain.2.2.4 TSMC Position,Differentiation and StrategyPositionTSMC is a global semiconductor foundry leader in advanced and specialty technologies and in advanced packaging technologies.In 2024,TSMC accounted for 34%of the Foundry 2.0 industry,which TSMC defined as all logic wafer manufacturing,packaging,testing,mask-making and others output value,an increase from 28%in 2023.Net revenue by geography,calculated mainly on the country in which customer companies are headquartered,was:70%from North America;11%from China;10%from the Asia Pacific region,excluding China and Japan;5%from Japan;and 4%from Europe,the Middle East and Africa.Net revenue by platform was:51%HPC;35%smartphones;6%the IoT;and 5%automotive.In addition,1me from DCE,while other segments accounted for the remaining 2%.DifferentiationTSMCs leadership position is based on three defining competitive strengths and a business strategy rooted in the Companys heritage.The Company distinguishes itself from the competition through its technology leadership,manufacturing excellence,and customer trust.As a technology leader,TSMC is consistently first among dedicated foundries to provide leading-edge,next-generation technologies.The Company also maintains a leadership position in more mature technologies by applying the lessons learned in developing advanced technologies to enrich its specialty technologies.Beyond process technology,TSMC has established frontend and backend integration capabilities to create the optimum power/performance/area“sweet spot”to help customers achieve faster time to production.TSMC,well recognized for industry-leading manufacturing capabilities,further extends its leadership through its Open Innovation Platform(OIP)and Grand Alliance initiatives.The Companys OIP initiative accelerates the pace of innovation in the semiconductor design community and among the Companys ecosystem partners,as well as in its own IP,design and technology co-optimization(DTCO)capabilities,process technology and backend services.A key element is a set of ecosystem interfaces and collaborative components initiated and supported by the Company to more efficiently empower innovation throughout the supply chain and drive the creation and sharing of new revenue and profits.The TSMC Grand Alliance is one of the most powerful forces for innovation in the semiconductor industry,bringing together customers,electronic design automation(EDA)partners and IP partners,along with the partners in the new TSMC 3DFabric Alliance,and key equipment and material suppliers all to achieve new,higher levels of collaboration.Through this collaboration,the Grand Alliances objective is to help customers,Alliance members and TSMC improve competitiveness and win business.The foundation for customer trust is a commitment TSMC made when it opened for business in 1987 to never compete with its customers.In keeping this commitment,the Company has never designed,manufactured or marketed any integrated circuits or IC devices under its own name,but instead has focused all of its efforts and resources on becoming the trusted foundry for its customers.StrategyTSMC is confident that its competitive advantages will enable it to prosper from the foundry segments many attractive growth opportunities.For the five major markets,namely high performance computing,smartphones,the Internet of Things,automotive,and digital consumer electronics,and in response to the fact that the focus of customer demand is shifting from a process-technology-centric to a product-application-centric approach,the Company has constructed five corresponding technology platforms to provide customers with comprehensive,competitive logic process technologies,specialty technologies,IPs and packaging and testing technologies to shorten customers time to design and time to market.These five platforms are:High Performance Computing(HPC):Driven by data explosion and AI application innovation,HPC has become the key growth driver for TSMCs business.TSMC provides customers,including both fabless IC design companies and system companies,with leading-edge logic process technologies such as 2nm nanosheet(N2),3nm FinFET(N3),4nm FinFET(N4),5nm FinFET(N5),6nm FinFET(N6),and 7nm FinFET(N7),as well as comprehensive IPs including high-speed 018019interconnect IPs,to meet customers product requirements for transferring and processing vast amounts of data anywhere at any time.Specifically,the Company introduced its HPC-focused technologies,N4X and N3X,representing the ultimate performance and maximum clock frequencies in TSMCs 5nm and 3nm families,respectively.Based on advanced process nodes,a variety of HPC products have been launched,such as AI accelerators,including AI GPUs and AI ASICs,PC CPUs,consumer GPUs,field programmable gate arrays(FPGAs),server processors,and high-speed networking chips,etc.These products can be used in current and future 5G/6G infrastructures,AI,Cloud,and enterprise data centers.The Company also offers multiple TSMC 3DFabric advanced silicon stacking and packaging technologies,such as TSMC-SoIC manufacturing service,and Integrated Fan-Out(InFO)and CoWoS advanced packaging services,to enable homogeneous and heterogeneous chip integration to meet customer requirements for high performance,high compute density and high energy efficiency,low latency,and high integration.TSMC will continue to optimize its HPC platform and strengthen collaboration with customers to help them capture market growth in HPC markets.Smartphones:For customers premium product applications,TSMC offers leading logic process technologies such as N2 Plus(N2P),N3 Enhanced(N3E),N3,N4 Plus(N4P),N4,N5 Plus(N5P),N5,as well as comprehensive IPs to further enhance chip performance,reduce power consumption,and decrease chip size.For mainstream product applications,the Company offers a broad range of logic process technologies,including N4 Compact(N4C),N6,7nm FinFET Plus(N7 ),N7,12nm FinFET Compact Plus(12FFC ),12nm FinFET Compact(12FFC),16nm FinFET Compact Plus(16FFC ),16nm FinFET Compact(16FFC),28nm High Performance Compact Plus(28HPC ),28nm High Performance Compact(28HPC),and 22nm Ultra-Low Power(22ULP),in addition to comprehensive IPs,to satisfy customer needs for high performance and low power chips.Furthermore,for both premium and mainstream product applications,the Company offers leading-edge,highly competitive specialty technologies to deliver specialty companion chips for customers logic application processors,including radio frequency(RF),RF front-end,embedded non-volatile memory,power management ICs,sensors,and display chips,as well as TSMC 3DFabric advanced packaging technologies,such as TSMCs industry-leading InFO technology.Internet of Things:Following the three megatrends of the IoT segment,“Everything Connected,Smart and Green,”TSMC not only provides customers with solid logic technologies,including 5nm,6nm,7nm,12nm,16nm,and 28nm,but also builds a leading,complete and highly integrated ULP technology platform based on its logic technologies to enable customers product innovations for the artificial intelligence of things(AIoT).TSMCs industry-leading ULP technologies,including its new FinFET-based 6nm technology N6e and 12nm technology N12e feature both energy efficiency and high performance.These technologies provide more computing power and AI inferencing capability while reducing system power consumption.In addition,the planar transistor based mainstream technologies,such as 22nm ultra-low leakage(ULL),28nm ULP,40nm ULP,and 55nm ULP technologies,have been widely adopted by various IoT system-on-a-chip(SoC)and battery-powered products to extend battery life.TSMCs ULP technology platform also provides customers with comprehensive specialty technologies,covering RF,enhanced analog devices,embedded non-volatile memory,sensors,display devices and PMICs.For extreme low power product application requirements,TSMC has also extended its low operating voltage(Low Vdd)offerings and has provided simulation program with integrated circuit emphasis(SPICE)models with wide-range operating voltages and design guidelines to lower the adoption barrier and reduce lead time to help customers successfully launch innovative products.Automotive:TSMC offers a comprehensive spectrum of technologies and services to support the automotive industrys three megatrends building vehicles that are“Safer,Smarter and Greener.”The Company is also an industry leader in providing a robust automotive IP ecosystem,which covers 5nm FinFET,7nm FinFET,and 16nm FinFET technologies for ADAS,advanced in-vehicle infotainment(IVI),as well as zonal controllers for new E/E architectures in next-generation vehicles,including internal combustion engines(ICEs)and electric vehicles(EVs).In 2023,TSMC introduced its N3 Auto Early(N3AE)program,providing automotive process design kits(PDKs)to support automotive customers.N3AE has since migrated to N3A with V0.9 PDK released in 2024 to support customers to design automotive application products early on.In addition to its advanced logic platform,TSMC offers a broad array of competitive automotive-grade specialty technologies including 28nm embedded flash memory,28nm,22nm,and 16nm mmWave RF,high dynamic range(HDR),high sensitivity CMOS image sensor(CIS)/light detection and ranging(LiDAR)sensors,and PMICs.The emerging technology of magnetoresistive random access memory(MRAM)demonstrated automotive Grade-1 capability on 22nm and passed automotive Grade-1 requirements on 16nm in 2023.All these technologies have been applied to TSMCs automotive process qualification standards based on AEC-Q100 standards of Automotive Electronic Council(AEC)and/or meeting customers technology specifications.Digital Consumer Electronics(DCE):TSMC provides customers with leading,comprehensive technologies to deliver AI-enabled smart devices for DCE applications,including smart digital TVs(DTVs),set-top boxes(STBs),AI-embedded smart cameras and associated wireless local area networks(WLANs),PMICs,and timing controllers(T-CONs).The Companys leading N6,N7,16FFC/12FFC,22ULP/22ULL and 28HPC technologies have been widely adopted by leading global makers of 8K/4K DTVs and STBs,4K streaming media devices(SMDs)/over-the-top(OTT),digital single-lens reflex(DSLR)cameras,and so on.TSMC will continue to make these technologies more competitive through DTCO for customers digital intensive chip designs and to drive lower power consumption for more cost-effective packaging.TSMC continually strengthens its core competitiveness and deploys both short-and long-term plans for technology and business development and assists customers in tackling the challenges posed by short product cycles and intense competition in the electronic products market to achieve return on investment(ROI)and growth objectives.Short-Term Semiconductor Business Development Plan1.Substantially ramp up the business and sustain advanced technology market segment share by continually increasing capacity and R&D investments.2.Maintain mainstream technology market segment share by expanding business to new customers and market segments.3.Continue to enhance the competitive advantages of the Companys technology platforms in HPC,smartphones,IoT,automotive,and digital consumer electronics to expand TSMCs dedicated foundry services in these product applications.4.Further expand TSMCs business and service infrastructure into emerging and developing markets.Long-Term Semiconductor Business Development Plan1.Continue developing leading-edge technologies at a predictable pace to achieve greater energy-efficient computing.2.Broaden specialty business contributions by further developing derivative technologies.3.Provide more integrated services,covering system-level integration design,design technology definition,design tool preparation,wafer processing,TSMC 3DFabric advanced silicon stacking and packaging technologies,and testing services,etc.,all of which deliver more value to customers through optimized solutions.0200212.3 Board Members2.3.1 Information Regarding Board Members(Note 1)Title/NameGenderAgeNationality or Place of RegistrationDate ElectedTerm ExpiresDate First ElectedShares Held When ElectedShares Currently HeldShares Currently Held by Spouse&Minors Selected Education and Professional QualificationPast PositionsCurrent Positions at Non-profit OrganizationsSelected Current Positions at TSMC and Other CompaniesShares(Note 2)%Shares(Note 2)%Shares(Note 2)%ChairmanC.C.WeiMale71-75R.O.C.06/04/202406/03/202706/08/20176,392,8340.02%6,392,8340.02p0,2610.00%Selected Education and Professional QualificationBachelor and Master Degrees in Electrical Engineering,National Chiao Tung UniversityPh.D.in Electrical Engineering,Yale University,U.S.Honorary Ph.D.,National Yang Ming Chiao Tung UniversityLaureate,Industrial Technology Research Institute(ITRI)Past PositionsSenior Vice President,Technology,Chartered Semiconductor Manufacturing Ltd.,SingaporeSenior Vice President,Mainstream Technology Business,TSMCSenior Vice President,Business Development,TSMCExecutive Vice President and Co-Chief Operating Officer,TSMCPresident and Co-CEO,TSMCVice Chairman,TSMCChairman,Taiwan Semiconductor Industry Association(TSIA)Chief Executive Officer,TSMCDirectorF.C.TsengMale76-80R.O.C.06/04/202406/03/202705/13/199729,472,6750.11),472,6750.11%5,132,8550.02%Selected Education and Professional QualificationBachelor Degree in Electrical Engineering,National Cheng Kung UniversityMaster Degree in Electrical Engineering,National Chiao Tung UniversityPh.D.in Electrical Engineering,National Cheng Kung UniversityHonorary Ph.D.,National Chiao Tung UniversityHonorary Ph.D.,National Tsing Hua UniversityPast PositionsPresident,Vanguard International Semiconductor Corp.President,TSMCDeputy CEO,TSMCVice Chairman,TSMCIndependent Director,Chairman of Audit Committee&Compensation Committee Member,Acer Inc.Director,National Culture and Arts Foundation,R.O.C.Current Positions at Non-profit OrganizationsChairman,TSMC Education and Culture FoundationDirector,Cloud Gate Culture and Arts FoundationDirector,Chu-Ming Medical FoundationChairman,TSMC China Company Ltd.(a non-public company)Chairman,Global UniChip Corp.Vice Chairman,Vanguard International Semiconductor Corp.Director,eMemory Technology,Inc.Director National Development Fund,Executive Yuan(Note 3)Representative:Chin-Ching LiuMale61-65R.O.C.06/04/202406/03/202712/10/198606/06/2024(Note 4)1,653,709,980-6.38%-1,653,709,980-6.38%-Selected Education and Professional Qualification Bachelor Degree in Mathematics,Chung Yuan UniversityMaster Degree in Business Administration,National Taiwan UniversityPast PositionsSCM Consultant leader of IBM Greater ChinaExecutive of IBM Manufacturing Consultant ServiceGeneral Manager of IBM Global Business ServiceGeneral Manager of IBM General Business GroupPartner/Vice Chairman of PwC ConsultantChairman of Tax and Finance Committee Chinese National Federation of IndustriesProfessor level Technical Expert,Depart of Accounting,National ChengChi UniversityChairman,PwC Consultant Service,TaiwanChairman,PwC Business Consultant Service,TaiwanChairman,PwC Group TaiwanCurrent Positions at Non-profit OrganizationsMinister without Portfolio,Executive Yuan&concurrently Minister,National Development CouncilThe Convener of National Development Fund,Executive Yuan NoneAs of 02/28/2025(Continued)022023Title/NameGenderAgeNationality or Place of RegistrationDate ElectedTerm ExpiresDate First ElectedShares Held When ElectedShares Currently HeldShares Currently Held by Spouse&Minors Selected Education and Professional QualificationPast PositionsCurrent Positions at Non-profit OrganizationsSelected Current Positions at TSMC and Other CompaniesShares(Note 2)%Shares(Note 2)%Shares(Note 2)%Independent DirectorSir Peter L.BonfieldMale76-80UK06/04/202406/03/202705/07/2002-Selected Education and Professional QualificationBachelor Degree in Engineering,Loughborough UniversityHonorary Doctorate of Technology,Loughborough UniversityFellow of the Royal Academy of EngineeringKnighted,1996Awarded Commander of the Order of the British Empire(CBE),1989Awarded the Order of the Lion of FinlandAwarded the Gold Medal from the Institute of ManagementAwarded the Mountbatten Medal from the National Electronics CouncilAwarded the FT ODX Outstanding Director Award,201911 Honorary Doctorate Degrees in totalAwarded Commander of the Order of Orange Nassau,2024Past PositionsSemiconductor Engineer,Texas Instruments Inc.(T.I.),U.S.Chairman,NXP Semiconductors N.V.,the NetherlandsChairman and CEO,ICL Plc,UKCEO and Chairman of the Executive Committee,British Telecommunications PlcChairman,GlobalLogic Inc.,U.S.Vice President,the British Quality FoundationDirector,Mentor Graphics Corp.,U.S.Director,Sony Corp.,JapanDirector,L.M.Ericsson,SwedenSenior Independent Director,AstraZeneca,UKChair of Council and Senior Pro-Chancellor,Loughborough University,UKBoard Member,EastWest Institute,New YorkSenior Advisor,Alix Partners LLP,LondonAdvisory Board Member,The Longreach Group Ltd.,HKMember of the International Advisory Board,Citigroup,U.S.Board Mentor,Chairman Mentors International(CMi)Ltd.,LondonNon-Executive Director,Darktrace Plc,UKNon-Executive Director,Imagination Technologies Group Ltd.,UK(a non-public company)Independent DirectorMichael R.SplinterMale71-75U.S.06/04/202406/03/202706/09/2015-Selected Education and Professional Qualification Bachelor and Master Degrees in Electrical Engineering,University of Wisconsin-MadisonHonorary Ph.D.in Engineering,University of Wisconsin-MadisonAwarded 2013 Robert N.Noyce Award by Semiconductor Industry AssociationMember of the National Academy of EngineeringRecognized as NACD(National Association of Corporate Directors)Directorship CertifiedTM,2020Past PositionsExecutive Vice President of Technology and Manufacturing Group,Intel Corp.Executive Vice President of Sales and Marketing,Intel Corp.CEO,Applied Materials,Inc.Chairman,Applied Materials,Inc.Director,The NASDAQ OMX Group,Inc.Director,Silicon Valley Leadership GroupDirector,SEMIDirector,Meyer Burger Technology Ltd.,SwitzerlandChairman of the Board,NASDAQ,Inc.Director,Pica8 Inc.,U.S.Director,University of Wisconsin Foundation,U.S.Chairman of the Board,US-Taiwan Business CouncilIndependent Director and Compensation Committee Chair,Gogoro Inc.,Cayman IslandsChair of Industrial Advisory Committee,National Institute of Standards and Technology,Department of Commerce,U.S.Current Positions at Non-profit OrganizationsChair,Board of Trustees,Natcast,U.S.Lead Independent Director,NASDAQ,Inc.Independent Director,Compensation Committee Chair,and Nominating and Corporate Governance Committee Member,Tigo Energy,Inc.,U.S.Independent Director,Kioxia Holdings Corp.,Japan(a non-public company)General Partner,WISC Partners LP,U.S.General Partner,MRS Business and Technology Advisors,U.S.(a non-public company)Independent DirectorMoshe N.GavrielovMale66-70U.S.06/04/202406/03/202706/05/2019-Selected Education and Professional Qualification Bachelor Degree in Electrical Engineering,Technion-Israel Institute of TechnologyMaster Degree in Computer Science,Technion-Israel Institute of TechnologyPast PositionsIn a variety of engineering and engineering management positions,National Semiconductor Corp.and Digital Equipment Corp.,U.S.In a variety of executive management positions,LSI Logic Corp.for nearly 10 years,U.S.CEO,Verisity,Ltd.,U.S.Executive Vice President and General Manager of the Verification Division,Cadence Design Systems,Inc.,U.S.President and CEO,Xilinx,Inc.,U.S.Director,Xilinx,Inc.,U.S.Executive Chairman,Wind River Systems,Inc.,U.S.Director,San Jose Institute of Contemporary Art,U.S.Advisor,Matrix Capital Management Company LP,U.S.Chairman,SiMa Technologies,Inc.,U.S.(a non-public company)Chairman,Foretellix,Ltd.,Israel(a non-public company)Independent Director,NXP Semiconductors N.V.,the NetherlandsIndependent Director,Cadence Design Systems,Inc.,U.S.(Continued)024025Title/NameGenderAgeNationality or Place of RegistrationDate ElectedTerm ExpiresDate First ElectedShares Held When ElectedShares Currently HeldShares Currently Held by Spouse&Minors Selected Education and Professional QualificationPast PositionsCurrent Positions at Non-profit OrganizationsSelected Current Positions at TSMC and Other CompaniesShares(Note 2)%Shares(Note 2)%Shares(Note 2)%Independent DirectorL.Rafael ReifMale71-75U.S.06/04/202406/03/202707/26/2021-Selected Education and Professional QualificationIngeniero Elctrico Degree,Universidad de Carabobo,Valencia,VenezuelaMaster Degree and Ph.D.in Electrical Engineering,Stanford UniversityHonorary Doctor of Laws Degree,The Chinese University of Hong Kong(2015)Honorary Doctorates from Tsinghua University(2016),the Technion(2017),Arizona State University(2018)and University of Miami(2022)Member of Tau Beta Pi,the Engineering Honor SocietyMember of the Electrochemical Society Fellow of the Institute of Electrical and Electronics Engineers(IEEE)Member of the American Academy of Arts and Sciences,the National Academy of Engineering and the Chinese Academy of EngineeringFellow of the National Academy of InventorsAwarded with United States Presidential Young Investigator Award(1984)Awarded with the Semiconductor Research Corporations Aristotle Award(2000)Awarded the Tribeca Disruptive Innovation Award(2012)Awarded the Frank E.Taplin,Jr.Public Intellectual Award by the Woodrow Wilson National Fellowship Foundation(2015)Awarded with Engineer of the Year from Great Minds in STEM(2018)Awarded the Simon Ramo Founders Award by the U.S.National Academy of Engineering(2022)Inventor or co-inventor on 13 patents,editor or co-editor of 5 books,and supervisor to 38 doctoral thesesPast PositionsAssistant Professor,Universidad Simn Bolvar,Caracas,VenezuelaVisiting Assistant Professor of Electrical Engineering,Stanford UniversityFaculty,Massachusetts Institute of Technology(MIT),since 1980IBM Faculty Fellowship,MIT Center for Materials Science and EngineeringAnalog Devices Career Development Professorship,MIT Electrical EngineeringFariborz Maseeh Professor of Emerging Technology,MIT(2004-2012)Director of Microsystems Technology Laboratories,MITAssociate Department Head of Electrical Engineering,MITHead of the Department of Electrical Engineering and Computer Science(EECS),MITProvost,MITIndependent Director,Alcoa Corp.,U.S.Director,Arconic Inc.,U.S.Director,Schlumberger Ltd.,U.S.President,MIT(2012-2022)Current Positions at Non-profit OrganizationsPresident Emeritus,MIT,since 2023Ray and Maria Stata Professor of Electrical Engineering and Computer Science,MIT,since 2023Member,Board of Trustees,Carnegie Endowment for International Peace,U.S.Director,Council on Foreign Relations,U.S.Director,Waverley Street Foundation,U.S.Member,Board of Trustees,Instituto Tecnolgico de Monterrey,MexicoMember,Board of Trustees,Massachusetts General Hospital,U.S.Co-Chair of Growth Technical Advisory Board,Applied Materials,Inc.Director,Engine No.1 LP,U.S.(a non-public company)Independent DirectorUrsula M.BurnsFemale66-70U.S.06/04/202406/03/202706/04/2024-Selected Education and Professional QualificationBachelor Degree in Mechanical Engineering,Polytechnic Institute of New York UniversityMaster Degree in Mechanical Engineering,Columbia UniversityMember,National Academy of EngineeringMember,American Academy of Arts and SciencesMember,Royal Academy of EngineeringPast PositionsChairwoman,CEO and President,Xerox Corp.,U.S.Chairwoman and CEO,VEON Ltd.,the NetherlandsDirector,Boston Scientific Corp.,U.S.Director,American Express CompanyDirector,Nestl S.A.,SwitzerlandDirector,ExxonMobil Corp.,U.S.Executive Chairwoman,Plum Acquisition Corp.I,U.S.Leader,White House National Program on Science,Technology,Engineering and Math(STEM)Chair,Presidents Export CouncilMember,G7 Gender Equality Advisory CouncilDirector,Endeavor Group Holdings,Inc.,U.S.Vice Chair,Advisory Council on Supply Chain Competitiveness(ACSCC),U.S.Department of Commerce(2022-2024)Current Positions at Non-profit OrganizationsMember,Board of Trustees,Ford Foundation,U.S.Member,Board of Trustees,Massachusetts Institute of Technology(MIT)Corp.Member,Board of Trustees,Metropolitan Museum of Art,U.S.Member,Board of Trustees,Mayo Clinic,U.S.Non-Executive Chairwoman,Teneo Holdings LLC,U.S.(a non-public company)Independent Non-Executive Director,IHS Holding Ltd.,Cayman IslandsDirector,Uber Technologies Inc.,U.S.Founding Partner,Integrum Holdings LP,U.S.(a non-public company)(Continued)026027Note 1:TSMC shareholders elected TSMCs 16th Board of Directors at its 2024 Annual Shareholders Meeting on June 4,2024.The ten Directors(including seven Independent Directors)are:Dr.C.C.Wei,Dr.F.C.Tseng,Dr.Ming-Hsin Kung(Representative of the National Development Fund,Executive Yuan),Sir Peter Leahy Bonfield(Independent Director),Mr.Michael R.Splinter(Independent Director),Mr.Moshe N.Gavrielov(Independent Director),Dr.L.Rafael Reif(Independent Director),Ms.Ursula M.Burns(Independent Director),Ms.Lynn L.Elsenhans(Independent Director),and Dr.Chuan Lin(Independent Director).After the Annual Shareholders Meeting,TSMC held the first meeting of the 16th Board of Directors,where the Board unanimously elected Dr.C.C.Wei as Chairman and Chief Executive Officer.Note 2:Does not include shares held in the form of ADSs.Note 3:Major Shareholders of the Institutional ShareholderInstitutional ShareholderMajor Shareholders(Top 10 Shareholders)of the Institutional ShareholderNational Development Fund,Executive Yuan Not ApplicableNote 4:Mr.Chin-Ching Liu was appointed as the representative of the National Development Fund succeeding Mr.Ming-Hsin Kung on June 6,2024.Title/NameGenderAgeNationality or Place of RegistrationDate ElectedTerm ExpiresDate First ElectedShares Held When ElectedShares Currently HeldShares Currently Held by Spouse&Minors Selected Education and Professional QualificationPast PositionsCurrent Positions at Non-profit OrganizationsSelected Current Positions at TSMC and Other CompaniesShares(Note 2)%Shares(Note 2)%Shares(Note 2)%Independent DirectorLynn L.ElsenhansFemale66-70U.S.06/04/202406/03/202706/04/2024-Selected Education and Professional QualificationBachelor Degree in Applied Mathematics,Rice UniversityMaster Degree in Business Administration,Harvard UniversityPast PositionsChairwoman,President and CEO,Sunoco Inc.,U.S.Chairwoman and CEO,Sunoco Logistics Partners L.P.,U.S.Executive Vice President of Global Manufacturing,Shell Downstream Inc.,U.S.President and CEO,Shell Oil Products,U.S.President of Shell Oil Company and US Country ChairIndependent Director,International Paper Company,U.S.Independent Director,Flowserve Corporation,U.S.Independent Director,GlaxoSmithKline plc,UKCurrent Positions at Non-profit OrganizationsAdvisory Board Member of Whiting School of Engineering,Johns Hopkins UniversityIndependent Director and Governance&Corporate Responsibility Committee Chair,Baker Hughes Company,U.S.Independent Non-Executive Director,Audit Committee Member,and Nomination Committee Member,Saudi Arabian Oil Co.,Kingdom of Saudi ArabiaIndependent Director,Peter Kiewit and Sons Inc.,U.S.(a non-public company)Independent DirectorChuan LinMale71-75R.O.C.06/04/202406/03/202706/04/2024126,8260.006,8260.00,0030.00%Selected Education and Professional QualificationBachelor Degree in Economics,Fu Jen Catholic UniversityMaster Degree in Public Finance,National Chengchi UniversityPh.D.in Economics,University of Illinois Urbana-Champaign,U.S.Past PositionsResearch Fellow,Chung-Hua Institution for Economic ResearchProfessor and Department Chair,Public Finance,National Chengchi UniversityDirector General,Bureau of Finance,Taipei City GovernmentMinister,Directorate General of Budget,Accounting and Statistics of Executive YuanMinister of FinancePremier of Executive YuanChairman,Vanguard International Semiconductor CorporationIndependent Director,Casetek Holdings LimitedIndependent Director,Inotera Memories,Inc.Director,PharmaEngine,Inc.Director,Chartis Taiwan Insurance Co.,Ltd.Chief Executive Officer,New Frontier FoundationCurrent Positions at Non-profit OrganizationsSenior Advisor to the PresidentChairman,TTY Biopharm Company LimitedChairman,TSH Biopharm Corporation Limited(Representative of TTY Biopharm Company Limited)Independent Director,Pegatron CorporationRemarks:1.No member of the Board of Directors held TSMC shares by nominee arrangement.2.Managers or Directors who are spouses or within second-degree relative of consanguinity to the directors:None.3.Rationale for electing the same person as Chairman and Chief Executive Officer(CEO):To navigate the rapidly changing landscape of the highly competitive semiconductor industry,TSMCs Board of Directors elected Dr.C.C.Wei as the Chairman and CEO following the Boards re-election at the Annual Shareholders Meeting on June 4,2024.With Dr.Wei at the helm,the alignment between the Board of Directors and the management team is expected to be more effective,enhancing efficiency in decision-making and execution and maximizing shareholder value.The Company currently has seven independent directors,accounting for 70%of the total board seats.The remaining directors do not hold managerial or employee roles within the Company,ensuring the Boards independence in decision-making while enabling professional oversight and guidance that meet shareholder and market expectations for the Companys stability and long-term value.0280292.3.2 Remuneration of Directors and Independent Directors(Note 1)Unit:NT$Note 1:Directors and Independent Directors remuneration policies,procedures,standards and structure,as well as the linkage to responsibilities,risks and time spent:1.According to TSMCs Articles of Incorporation,the Board of Directors is authorized to determine the salary for the Chairman,Vice Chairman and Directors,taking into account the extent and value of the services provided for the management of the Corporation and the standards of the industry within the R.O.C.and overseas.2.The Articles of Incorporation also provide that the compensation to directors shall be no more than 0.3%of annual profits and directors who also serve as executive officers of TSMC are not entitled to receive compensation to directors.According to TSMCs Compensation and People Development Committee Charter,the distribution of compensation to directors shall be made in accordance with TSMCs“Rules for Distribution of Compensation to Directors”based on the following principles:(1)directors who also serve as executive officers of the Company are not entitled to receive compensation;(2)the compensation for independent directors may be higher than other directors because they serve on multiple Committees,requiring their participation in discussions and resolutions according to each Committees charter;and(3)the compensation for overseas independent directors may be higher than domestic independent directors,as they require additional time to attend quarterly meetings in Taiwan.Note 2:Former Chairman Dr.Mark Liu retired after the Annual Shareholders Meeting on June 4,2024.Note 3:Dr.C.C.Wei was elected as Chairman and Chief Executive Officer(CEO),effective June 4,2024.Note 4:Mr.Chin-Ching Liu was appointed as the representative of the National Development Fund succeeding Mr.Ming-Hsin Kung on June 6,2024.Note 5:The tenures of Independent Directors Ms.Kok-Choo Chen and Mr.Yancey Hai expired on June 4,2024.Note 6:Ms.Ursula M.Burns,Ms.Lynn L.Elsenhans,and Mr.Chuan Lin were elected as TSMCs independent director at TSMCs Annual Shareholders Meeting on June 4,2024.Note 7:Pensions funded according to applicable law.Note 8:The compensation of directors was expensed based on the estimated payment amounts.If the actual amounts subsequently paid differ from the above estimated amounts,the differences will be recorded in the year fully paid as a change in accounting estimate.Note 9:The above-mentioned figures include expenses for Company cars and related reimbursements,but do not include compensation of Company drivers(totaled NT$3,666,280).Note 10:Total remuneration of the directors from TSMC and from all consolidated entities in 2023,including their employee compensation,both accounted for 0.1411%of 2023 net income.Title/NameDirectors RemunerationSum of(A B C D)and Ratio to Net IncomeCompensation to a Director Who is an Employee of TSMC or of TSMCs Consolidated EntitiesSum of(A B C D E F G)and Ratio to Net Income(Note 10)Compensation to Directors from Non-consolidated Affiliates or Parent CompanyBase Compensation(A)Severance Pay and Pensions(B)(Note 7)Compensation to Directors(C)(Note 8)Allowances(D)(Note 9)Base Compensation,Bonuses,and Allowances(E)(Note 9)Severance Pay and Pensions(F)(Note 7)Profit Sharing(G)From TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesCash Stock(Fair Market Value)Cash Stock(Fair Market Value)Former ChairmanMark Liu(Note 2)146,109,128146,109,128116,599116,599199,558,100199,558,100808,030808,030346,591,8570.029646,591,8570.0296%-346,591,8570.029646,591,8570.0296%-Chairman&CEOC.C.Wei(Note 3)-628,180,752628,180,752288,458288,458317,893,824-317,893,824-946,363,0340.08076,363,0340.0807%-DirectorF.C.Tseng-13,337,42513,337,4251,086,9751,086,97514,424,400 0.0012,424,400 0.0012%-14,424,4000.0012,424,4000.0012,715,133DirectorNational Development Fund,Executive YuanRepresentative:Chin-Ching Liu(Note 4)-13,337,42513,337,425-13,337,4250.0011,337,4250.0011%-13,337,4250.0011,337,4250.0011%-Independent Director Sir Peter L.Bonfield-21,397,14721,397,147-21,397,1470.0018!,397,1470.0018%-21,397,1470.0018!,397,1470.0018%-Independent Director Kok-Choo Chen(Note 5)-7,949,0117,949,011-7,949,0110.0007%7,949,0110.0007%-7,949,0110.0007%7,949,0110.0007%-Independent Director Michael R.Splinter-21,397,14721,397,147-21,397,1470.0018!,397,1470.0018%-21,397,1470.0018!,397,1470.0018%-Independent Director Moshe N.Gavrielov-21,397,14721,397,147-21,397,1470.0018!,397,1470.0018%-21,397,1470.0018!,397,1470.0018%-Independent DirectorYancey Hai(Note 5)-7,949,0117,949,011-7,949,0110.0007%7,949,0110.0007%-7,949,0110.0007%7,949,0110.0007%-Independent DirectorL.Rafael Reif-21,397,14721,397,147-21,397,1470.0018!,397,1470.0018%-21,397,1470.0018!,397,1470.0018%-Independent DirectorUrsula M.Burns(Note 6)-11,276,78011,276,780-11,276,7800.0010,276,7800.0010%-11,276,7800.0010,276,7800.0010%-Independent DirectorLynn L.Elsenhans(Note 6)-11,276,78011,276,780-11,276,7800.0010,276,7800.0010%-11,276,7800.0010,276,7800.0010%-Independent DirectorChuan Lin(Note 6)-8,715,9898,715,989-8,715,9890.0007%8,715,9890.0007%-8,715,9890.0007%8,715,9890.0007%-Total146,109,128146,109,128116,599116,599358,989,109358,989,1091,895,0051,895,005507,109,841 0.0432P7,109,841 0.0432b8,180,752628,180,752288,458288,458317,893,8240317,893,82401,453,472,875 0.1239%1,453,472,875 0.1239,715,133*Other than disclosure in the above table,Directors remunerations earned by providing services(e.g.providing consulting services as a non-employee of parent company/all consolidated entities/non-consolidated affiliates)to TSMC and all consolidated entities in the 2024 financial statements:Dr.F.C.Tseng for NT$18,944,515.0300312.4 Management Team2.4.1 Information Regarding Management TeamAs of 02/28/2025Title NameGenderNationalityOn-board Date(Note 1)Shares HeldShares Held by Spouse&MinorsShares Held in the Name of OthersEducation and Selected Past PositionsSelected Current Positions at Other CompaniesManagers Who Are Spouses or within Second-degree Relative of Consanguinity to Each OtherShares(Note 2)%Shares(Note 2)%Shares(Note 2)%TitleNameRelationChairman&Chief Executive OfficerC.C.Wei(Note 3)MaleR.O.C.02/01/19986,392,8340.02p0,261 0.00%-Ph.D.,Electrical Engineering,Yale University,U.S.Chief Executive Officer,TSMCPresident and Co-Chief Executive Officer,TSMCExecutive Vice President and Co-Chief Operating Officer,TSMCSenior Vice President,Business Development,TSMCSenior Vice President,Mainstream Technology Business,TSMCSenior Vice President,Chartered Semiconductor Manufacturing Ltd.NoneNoneNoneNoneExecutive Vice Presidents and Co-Chief Operating OfficerCo-COO Office&OperationsY.P.Chyn(Note 4)MaleR.O.C.01/01/19874,932,9640.02%4,190,1070.02%-Master,Electrical Engineering,National Cheng Kung University,TaiwanSenior Vice President,Operations&Overseas Operations Office,TSMCSenior Vice President,Product Development,TSMCVice President,Advanced Technology and Business,TSMCDirector,TSMC subsidiariesNoneNoneNoneExecutive Vice Presidents and Co-Chief Operating OfficerCo-COO Office&Research and DevelopmentY.J.Mii(Note 4)MaleR.O.C.11/14/19941,016,2730.00%-Ph.D.,Electrical Engineering,University of California,Los Angeles,U.S.Senior Vice President,Research and Development,TSMCVice President,Technology Development,TSMC Senior Director,Platform I Division,TSMCNoneNoneNoneNoneSenior Vice President and Deputy Co-Chief Operating OfficerChief Information Security OfficerCliff Hou(Note 5 and Note 6)MaleR.O.C.12/15/1997447,1170.00,8020.00%-Ph.D.,Electrical Engineering,Syracuse University,U.S.Senior Vice President,Europe&Asia Sales and Research&Development/Corporate Research,TSMCSenior Vice President,Technology Development,TSMCVice President,Design and Technology Platform,TSMCSenior Director,Design and Technology Platform,TSMCDirector,TSMC subsidiaryNoneNoneNoneSenior Vice President and Deputy Co-Chief Operating OfficerBusiness Development&Global Sales Kevin Zhang(Note 5)MaleU.S.11/01/2016115,8670.00%-Ph.D.,Electrical Engineering,Duke University,U.S.Senior Vice President,Business Development&Overseas Operations Office,TSMCVice President,Design and Technology Platform,TSMCVice President,Technology and Manufacturing Group,Intel Corp.NoneNoneNoneNoneSenior Vice President Human Resources Lora Ho FemaleR.O.C.06/01/19994,414,7530.02%2,059,5300.01%-Master,Business Administration,National Taiwan University,TaiwanSenior Vice President,Europe and Asia Sales,TSMCSenior Vice President,Chief Financial Officer/Spokesperson,TSMCSenior Director,Accounting,TSMCVice President&CFO,TI-Acer Semiconductor Manufacturing Corp.Director and/or Supervisor,TSMC subsidiariesNoneNoneNoneSenior Vice President Corporate Strategy DevelopmentWei-Jen Lo MaleR.O.C.07/01/20041,282,3280.00%-Ph.D.,Solid State Physics and Surface Chemistry,University of California,Berkeley,U.S.Senior Vice President,Research and Development,TSMCVice President,Technology Development,TSMCVice President,Manufacturing Technology,TSMCVice President,Advanced Technology Business,TSMCVice President,Operations II,TSMCDirector,Advanced Technology Development and CTM Plant Manager,Intel Corp.NoneNoneNoneNoneSenior Vice President Corporate Strategy DevelopmentChairmanTSMC AZRick Cassidy MaleU.S.11/14/1997-Bachelor,Engineering Technology,United States Military Academy at West Point,U.S.Senior Vice President,Corporate Strategy Office&Overseas Operations Office,TSMCChief Executive Officer,TSMC North AmericaPresident,TSMC North AmericaVice President,TSMC North AmericaDirector,TSMC subsidiaryNoneNoneNoneSenior Vice PresidentCorporate Strategy DevelopmentFormer Chief Information Security OfficerJ.K.Lin(Note 6)MaleR.O.C.01/01/198712,660,5010.05%1,219,9610.00%-Bachelor,Science,National Changhua University of Education,TaiwanSenior Vice President,Information Technology and Materials Management&Risk Management,TSMCVice President,Mainstream Fabs and Manufacturing Technology,TSMCSenior Director,Mainstream Fabs,TSMCNoneNoneNoneNoneSenior Vice President and General Counsel Corporate Governance Officer Legal Sylvia FangFemaleR.O.C.03/20/1995707,793 0.00g,906 0.0084,0000.00%Master,Comparative Law,School of Law,University of Iowa,U.S.Attorney-at-law,TaiwanVice President and General Counsel Corporate Governance Officer,Legal,TSMCAssociate General Counsel,TSMCSenior Associate,Taiwan International Patent and Law Office(TIPLO)Director and/or Supervisor,TSMC subsidiaries NoneNoneNoneSenior Vice President and Chief Financial Officer SpokespersonFinance Wendell Huang MaleR.O.C.05/03/19991,660,2210.01%-Master,Business Administration,Cornell University,U.S.Vice President and Chief Financial Officer,Finance,TSMCDeputy Chief Financial Officer,TSMCSenior Director,Finance Division,TSMCVice President,Corporate Finance,ING BaringsVice President,Corporate Finance,Chase Manhattan BankVice President,Corporate Finance,Bankers Trust CompanyDirector,Supervisor,and/or President,TSMC subsidiariesDirector,TSMC affiliateNoneNoneNone(Continued)032033Title NameGenderNationalityOn-board Date(Note 1)Shares HeldShares Held by Spouse&MinorsShares Held in the Name of OthersEducation and Selected Past PositionsSelected Current Positions at Other CompaniesManagers Who Are Spouses or within Second-degree Relative of Consanguinity to Each OtherShares(Note 2)%Shares(Note 2)%Shares(Note 2)%TitleNameRelationVice PresidentOperations/Fab Operations I CEOTSMC AZY.L.WangMaleR.O.C.06/01/1992226,0430.00%1,135,529 0.00%-Ph.D.,Electrical Engineering,National Chiao Tung University,TaiwanVice President,Fab Operations,TSMCVice President,Technology Development,TSMCVice President,Fab 14B,TSMCSenior Director,Fab 14B,TSMCDirector,TSMC subsidiaryNoneNoneNoneVice President and TSMC Distinguished FellowResearch and Development/Pathfinding for System IntegrationDouglas YuMaleR.O.C.12/28/1994258,4960.00%-Ph.D.,Materials Engineering,Georgia Institute of Technology,U.S.Vice President,Integrated Interconnect&Packaging,TSMCSenior Director,Integrated Interconnect&Packaging Division,TSMCNoneNoneNoneNoneVice President and TSMC FellowOperations/Advanced Technology and Mask EngineeringT.S.ChangMaleR.O.C.02/06/1995181,2890.00%-Ph.D.,Electrical Engineering,National Tsing Hua University,TaiwanVice President,Product Development,TSMCVice President,Fab 12B,TSMCSenior Director,Fab 12B,TSMCNoneNoneNoneNoneVice PresidentResearch and Development/Platform Technology Research and Development/Technology Development Effectiveness OfficeMichael WuMaleR.O.C.12/09/1996493,4040.008,9430.00%-Ph.D.,Electrical Engineering,University of Wisconsin-Madison,U.S.Senior Director,Platform Development,TSMC NoneNoneNoneNoneVice PresidentResearch and Development/Corporate ResearchResearch and Development/PathfindingMin CaoMaleU.S.07/29/2002371,0550.004,4700.00%-Ph.D.,Physics,Stanford University,U.S.Senior Director,Pathfinding Division,TSMCNoneNoneNoneNoneVice PresidentOperations/Fab Operations II CEOJASMY.H.Liaw MaleR.O.C.08/03/1988375,5320.00%-430,0000.00%Master,Chemical Engineering,National Tsing Hua University,TaiwanVice President,Fab Operations,TSMCVice President,Fab 15B,TSMCSenior Director,Fab 15B,TSMCDirector,TSMC subsidiaries Director,TSMC affiliate NoneNoneNoneVice PresidentResearch and Development/Advanced Tool and Module DevelopmentSimon Jang MaleR.O.C.09/01/1993356,8320.00%2,0000.00%-Ph.D.,Materials Science&Engineering,Massachusetts Institute of Technology,U.S.Senior Director,Advanced Tool and Module Development Division,TSMCNoneDeputy DirectorSharon JangSisterVice PresidentResearch and Development/More than Moore TechnologiesC.S.YooMaleR.O.C.06/16/19881,709,6170.01!9,9240.001,9080.00%Ph.D.,Chemical Engineering,Worcester Polytech.Institute,U.S.Vice President,Europe&Asia Sales,TSMCSenior Director,Office of Strategy Customer Program,TSMCSenior Director,E-Beam Operation Division,TSMCDirector,TSMC affiliateNoneNoneNoneVice PresidentOperations/Advanced Packaging Technology and Service Jun HeMaleR.O.C.05/22/201733,3100.00%-Ph.D.,Materials Science and Engineering,University of California,Santa Barbara,U.S.Vice President,Quality and Reliability,TSMCSenior Director,Quality and Reliability,TSMCSenior Director,Head of Quality and Reliability for Technology&Manufacturing Group,Intel Corp.Director,TSMC subsidiariesNoneNoneNoneVice PresidentResearch and Development/Platform Technology Geoffrey Yeap MaleU.S.03/21/201679,5320.00%-Ph.D.,Electrical and Computer Engineering,University of Texas-Austin,U.S.Senior Director,Platform Development,TSMCSenior Director,Advanced Technology,TSMCVice President,Engineering,Silicon Technology,QualcommNoneNoneNoneNoneVice President and Chief Information OfficerCorporate Information TechnologyChris Horng-Dar LinMaleU.S.01/04/202141,1370.00,0000.00%-Ph.D.,Electrical Engineering and Computer Science,University of California,Berkeley,U.S.Vice President,Information Technology,MozillaDirector,Enterprise Platform Infrastructure,FacebookNoneNoneNoneNoneVice PresidentCorporate Planning OrganizationJonathan Lee MaleR.O.C.05/28/2007404,1200.00%6,0000.00%-Master,Business Administration,City University of New York,Baruch College,U.S.Senior Director,Strategic Planning Division,TSMCNoneNoneNoneNoneVice PresidentOperations/FacilityArthur ChuangMaleR.O.C.01/17/19892,608,1180.01%1,993,1400.01%-Ph.D.,Civil Engineering,National Taiwan University,TaiwanSenior Director,Facility Division,TSMCNoneTechnical ManagerGavin ChuangBrotherVice President and TSMC FellowResearch and Development/Design&Technology PlatformL.C.LuMaleR.O.C.08/01/2000180,9570.00,0000.00%-Ph.D.,Computer Science,Yale University,U.S.Senior Director,Digital IPs Solution Division,TSMCDirector,and/or President,TSMC subsidiariesDirector,TSMC affiliateNoneNoneNone(Continued)034035Note 1:On-board date means the official date joining TSMC.Note 2:Dose not include shares held in the form of ADSs.Note 3:Rationale for electing the same person as Chief Executive Officer(CEO)and Chairman:To navigate the rapidly changing landscape of the highly competitive semiconductor industry,TSMCs Board of Directors elected Dr.C.C.Wei as the Chairman and CEO following the Boards re-election at the Annual Shareholders Meeting on June 4,2024.With Dr.Wei at the helm,the alignment between the Board of Directors and the management team is expected to be more effective,enhancing efficiency in decision-making and execution and maximizing shareholder value.The Company currently has seven independent directors,accounting for 70%of the total board seats.The remaining directors do not hold managerial or employee roles within the Company,ensuring the Boards independence in decision-making while enabling professional oversight and guidance that meet shareholder and market expectations for the Companys stability and long-term value.Note 4:Mr.Y.P.Chyn and Dr.Y.J.Mii were appointed as Executive Vice Presidents and Co-Chief Operating Officers,effective March 1,2024.Note 5:Dr.Cliff Hou and Dr.Kevin Zhang were appointed as Senior Vice Presidents and Deputy Co-Chief Operating Officers,effective March 1,2024.Note 6:Dr.Cliff Hou was appointed as Chief Information Security Officer,effective January 1,2025.Note 7:Ms.Vanessa Lee was promoted to Vice President,effective August 13,2024.Note 8:Mr.P.H.Chen was promoted to Vice President,effective February 12,2025.Title NameGenderNationalityOn-board Date(Note 1)Shares HeldShares Held by Spouse&MinorsShares Held in the Name of OthersEducation and Selected Past PositionsSelected Current Positions at Other CompaniesManagers Who Are Spouses or within Second-degree Relative of Consanguinity to Each OtherShares(Note 2)%Shares(Note 2)%Shares(Note 2)%TitleNameRelationVice PresidentResearch and Development/Integrated Interconnect&PackagingK.C.Hsu MaleR.O.C.11/01/202190,9270.00,0000.00%-Master,Technology Management,National Chiao Tung University,TaiwanTaiwan Country Manager,Micron Technology Inc.President,WaferTech LLCNoneNoneNoneNoneVice PresidentOperations/Fab Operations IManaging DirectorESMCRay ChuangMaleR.O.C.12/15/1997180,3180.006,0000.00%-Master,Materials Science&Engineering/Engineering Economics System,Stanford University,U.S.Senior Director,Fab 18A,TSMCDirector,Fab 12B,TSMCDirector,TSMC subsidiaryNoneNoneNoneVice PresidentMaterials ManagementVanessa Lee(Note 7)FemaleR.O.C.05/04/20229,3100.00%-Master,Chemistry,National Taiwan University,TaiwanSenior Director,Materials Management,TSMCGlobal Commodity Manager,GoogleDirector of Procurement,AppleSenior Sourcing Manager,QualcommNoneNoneNoneNoneVice President Human ResourcesP.H.Chen(Note 8)MaleR.O.C.08/01/1990433,4140.00,1430.00%-Master,Chemistry,National Sun Yat-sen University,TaiwanSenior Director,Program Office,TSMCSenior Fab Director,Fab 14A,TSMCNoneNoneNoneNone0360372.4.2 Compensation of CEO and Vice Presidents(Note 1)TitleNameSalary(A)Severance Pay and Pensions(B)(Note 7)Bonuses and Allowances(C)(Note 8)Profit Sharing(D)Sum of(A B C D)and Ratio to Net Income(Note 9)Compensation from Non-consolidated Affiliates or Parent CompanyFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesFrom TSMCFrom All Consolidated EntitiesCashStock(Fair Market Value)CashStock(Fair Market Value)Chairman&Chief Executive OfficerC.C.Wei(Note 2)16,025,45016,025,450288,458288,458612,155,302612,155,302317,893,824-317,893,824-946,363,0340.08076,363,0340.0807%-Senior Vice President,Chief Financial Officer/SpokespersonWendell Huang6,601,5006,601,500118,827118,827112,897,199112,897,19970,738,960-70,738,960-190,356,4860.01620,356,4860.0162%-Executive Vice President and Co-Chief Operating OfficerY.P.Chyn(Note 3)145,025,473184,081,3112,610,4613,306,5682,369,188,1942,547,162,2051,426,724,855-1,426,724,855-3,943,548,9830.3361%4,161,274,9390.3547%-Executive Vice President and Co-Chief Operating OfficerY.J.Mii(Note 3)Senior Vice President and Deputy Co-Chief Operating OfficerCliff Hou(Note 4 and Note 5)Senior Vice President and Deputy Co-Chief Operating OfficerKevin Zhang(Note 4)Senior Vice PresidentLora HoSenior Vice PresidentWei-Jen Lo Senior Vice President/Chairman,TSMC ArizonaRick Cassidy Senior Vice President/Former Chief Information Security OfficerJ.K.LinSenior Vice President and General Counsel/Corporate Governance OfficerSylvia FangVice President/CEO,TSMC ArizonaY.L.WangVice President and TSMC Distinguished FellowDouglas YuVice President and TSMC FellowT.S.ChangVice PresidentMichael WuVice PresidentMin CaoVice President/CEO,JASMY.H.LiawVice PresidentSimon JangVice PresidentC.S.YooVice PresidentJun HeVice PresidentGeoffrey Yeap Vice President and Chief Information OfficerChris Horng-Dar LinVice PresidentJonathan Lee Vice PresidentArthur ChuangVice President and TSMC FellowL.C.LuVice PresidentK.C.HsuVice President/Managing Director,ESMCRay Chuang Vice PresidentVanessa Lee(Note 6)Total167,652,423206,708,2613,017,7463,713,8533,094,240,6953,272,214,7061,815,357,63901,815,357,63905,080,268,5030.4330%5,297,994,4590.4516%-Unit:NT$Note 1:The total compensation of the executive officers is based on their job responsibility,contribution,company performance,and effective risk management.This includes traditional financial measures like company performance(revenue growth,return on equity,alongside risk-indicators).By maintaining a balanced perspective,the company is committed to achieve sustainable growth and risk-conscious performance.It is reviewed by the Compensation and People Development Committee then submitted to the Board of Directors for approval.Note 2:Dr.C.C.Wei was elected as Chairman and Chief Executive Officer(CEO),effective June 4,2024.Note 3:Mr.Y.P.Chyn and Dr.Y.J.Mii were appointed as Executive Vice Presidents and Co-Chief Operating Officers,effective March 1,2024.Note 4:Dr.Cliff Hou and Dr.Kevin Zhang were appointed as Senior Vice Presidents and Deputy Co-Chief Operating Officers,effective March 1,2024.Note 5:Dr.Cliff Hou was appointed as Chief Information Security Officer,Effective January 1,2025.Note 6:Ms.Vanessa Lee was promoted to Vice President,effective August 13,2024.These amounts did not include compensation for the period before his promotion.Note 7:Pensions funded according to applicable law.Note 8:The above-mentioned figures include the expense for the business performance bonuses distributed in May,August,November 2024&February 2025,and Company cars and gasoline reimbursements.Note 9:Total compensation of the executive officers from TSMC in 2023 accounted for 0.3768%of 2023 net income.Total compensation of the executive officers from all consolidated entities in 2023 accounted for 0.4033%of 2023 net income.0380392.4.3 Employees Profit Sharing of Management TeamTitleNameStock (Fair Market Value)CashTotalTotal Profit Sharing of Management Team as a%of Net IncomeChairman&Chief Executive OfficerC.C.Wei(Note 1)-317,893,824317,893,8240.0271%Senior Vice President,Chief Financial Officer/SpokespersonWendell Huang-70,738,96070,738,9600.0060%Executive Vice President and Co-Chief Operating OfficerY.P.Chyn(Note 2)-1,426,724,8551,426,724,8550.1216%Executive Vice President and Co-Chief Operating OfficerY.J.Mii(Note 2)Senior Vice President and Deputy Co-Chief Operating OfficerCliff Hou(Note 3 and Note 4)Senior Vice President and Deputy Co-Chief Operating OfficerKevin Zhang(Note 3)Senior Vice PresidentLora HoSenior Vice PresidentWei-Jen Lo Senior Vice President/Chairman,TSMC ArizonaRick Cassidy Senior Vice President/Former Chief Information Security Officer J.K.LinSenior Vice President and General Counsel/Corporate Governance OfficerSylvia FangVice President/CEO,TSMC ArizonaY.L.WangVice President and TSMC Distinguished FellowDouglas YuVice President and TSMC FellowT.S.ChangVice PresidentMichael WuVice PresidentMin CaoVice President/CEO,JASMY.H.LiawVice PresidentSimon JangVice PresidentC.S.Yoo Vice PresidentJun He Vice PresidentGeoffrey YeapVice President and Chief Information OfficerChris Horng-Dar LinVice PresidentJonathan LeeVice PresidentArthur ChuangVice President and TSMC FellowL.C.LuVice PresidentK.C.HsuVice President/Managing Director,ESMCRay ChuangVice PresidentVanessa Lee(Note 5)Total-1,815,357,6391,815,357,6390.1547%Unit:NT$Note 1:Dr.C.C.Wei was elected as Chairman and Chief Executive Officer(CEO),effective June 4,2024.Note 2:Mr.Y.P.Chyn and Dr.Y.J.Mii were appointed as Executive Vice Presidents and Co-Chief Operating Officers,effective March 1,2024.Note 3:Dr.Cliff Hou and Dr.Kevin Zhang were appointed as Senior Vice Presidents and Deputy Co-Chief Operating Officers,effective March 1,2024.Note 4:Dr.Cliff Hou was appointed as Chief Information Security Officer,Effective January 1,2025.Note 5:Ms.Vanessa Lee was promoted to Vice President,effective August 13,2024.These amounts did not include compensation for the period before her promotion.The Companys Policy,Standards/Packages,Procedures for the Compensation of the CEO and Vice Presidents,and the Linkage to Their Performance Evaluation and the Future Risk Exposure:The Companys Policy,Standards/PackagesThe compensation of the CEO and Vice Presidents takes into account,in a comprehensive manner,aspects of their experience,professional capabilities,managerial skills,and the positions they hold.The said compensation is also closely linked to both the financial and non-financial performance goals,so as to reflect the fulfillment of their responsibilities as well as their work performance.Compensation includes salary,quarterly paid cash bonus,allowances,and profit sharing based on annual profits of the Company.Moreover,since 2021,TSMC has begun to offer Employee Restricted Stock Awards to link their compensation with shareholders interests and ESG achievements.The company places a greater emphasis on variable compensation constituting a larger proportion of the total compensation versus fixed compensation,and prioritizes long-term incentive rewards to better align the compensation of our CEO and executives with the companys sustainable business performance,shareholder interests,and ESG achievements.The Compensation and People Development Committee approves the compensation plan regularly,which is then submitted to the Board of Directors for approval.The ProceduresQuarterly cash bonuses and profit-sharing are for the purpose of rewarding employee contributions,incentivizing employees to continue to work hard,and aligning employee interests with those of TSMCs shareholders.According to Articles of Incorporation,if the Company is profitable for the year,at least 1%of the profits will be allocated as employee compensation.The frequency,date,and conditions of the distribution of employee compensation will be determined according to the Companys bonus policy.The Company further determines the bonus and profit-sharing amounts based on operating results and common domestic industry practice.The amount and distribution of the employee bonuses are recommended by the Compensation and People Development Committee to the Board of Directors for approval.Cash bonuses are paid quarterly,and profit sharing are paid after approval at the Board of Directors meeting and having reported the same at the Shareholders meeting.TSMC established Employee Restricted Stock Awards to link the compensation for CEO and Vice Presidents with ESG achievements and the interests of shareholders.The number of shares granted to the CEO and Vice Presidents will be determined by the Chairman and CEO by taking into account the Companys business performance,the individuals job grade,performance,and other factors as deemed appropriate and approved by Compensation and People Development Committee,and ultimately subject to Board of Directors approval.The Linkage to The Performance EvaluationThe compensation of TSMCs CEO and Vice Presidents is governed by the Companys bonus policy,which covers the achievement of both corporate operational goals and personal annual objectives.Corporate goals include financial indicators and non-financial indicators.Personal annual objectives include operational goals and ESG achievements in focus areas:Drive Green Manufacturing,Build a Sustainable Supply Chain,Create a Healthy and Inclusive Workplace,Develop Talent,and Care for the Disadvantaged.The Employee Restricted Stock Awards provided has a vesting period of three years(for details,please refer to“4.6.1.Status of Employee Restricted Stock”on page 84-91 of this Annual Report).The corporate performance indicators are the relative total shareholder return(TSR)of the company compared to TSR of the S&P 500 IT Index,with the companys ESG achievements as a modifier.Through these two clear quantitative indicators,we strengthen managements long-term and continuous creation of shareholder value while improving ESG performance,which shows a strong correlation with the Companys overall performance.The Future Risk ExposureThe compensation of TSMCs CEO and Vice Presidents is based on the relevant industry benchmarks and the performance of the Company.The standards,structure,and system of compensation are reviewed and adjusted as necessary in response to changes in the Companys actual operating conditions and relevant laws and regulations.The Companys financial incentive programs are tied to meeting risk-related goals and the pursue of Companys objectives are within the Companys risk appetite and tolerance.Clawback PolicyTSMC established the Clawback policy in 2023.(Disclosed on Governance/Major Internal Policies/TSMC Clawback Policy)Compensation of CEO and Vice Presidents2024From TSMCFrom All Consolidated Entities and Non-consolidated AffiliatesNT$0 NT$999,999Rick Cassidy NoneNT$1,000,000 NT$1,999,999NoneNoneNT$2,000,000 NT$3,499,999NoneNoneNT$3,500,000 NT$4,999,999NoneNoneNT$5,000,000 NT$9,999,999NoneNoneNT$10,000,000 NT$14,999,999NoneNoneNT$15,000,000 NT$29,999,999NoneNoneNT$30,000,000 NT$49,999,999Vanessa LeeVanessa LeeNT$50,000,000 NT$99,999,999Jun He,Arthur Chuang,Ray ChuangJun He,Arthur Chuang,Ray ChuangOver NT$100,000,000C.C.Wei,Wendell Huang,Y.P.Chyn,Y.J.Mii,Cliff Hou,Kevin Zhang,Lora Ho,Wei-Jen Lo,J.K.Lin,Sylvia Fang,Y.L.Wang,Douglas Yu,T.S.Chang,Michael Wu,Min Cao,Y.H.Liaw,Simon Jang,C.S.Yoo,Geoffrey Yeap,Chris Horng-Dar Lin,Jonathan Lee,L.C.Lu,K.C.HsuC.C.Wei,Wendell Huang,Y.P.Chyn,Y.J.Mii,Cliff Hou,Kevin Zhang,Lora Ho,Wei-Jen Lo,Rick Cassidy,J.K.Lin,Sylvia Fang,Y.L.Wang,Douglas Yu,T.S.Chang,Michael Wu,Min Cao,Y.H.Liaw,Simon Jang,C.S.Yoo,Geoffrey Yeap,Chris Horng-Dar Lin,Jonathan Lee,L.C.Lu,K.C.HsuTotal28280400413It is TSMCs core values of Integrity,Commitment,Innovation,and Customer Trust that have earned our customers confidence to grow and prosper together.Corporate Governance0420433.1 OverviewTSMC advocates and acts upon the principles of operational transparency and respect for shareholder rights.We believe that the basis for successful corporate governance is a sound and effective Board of Directors.In line with this principle,TSMC Board of Directors delegates various responsibilities and authority to three Board Committees,Audit and Risk Committee,Compensation and People Development Committee,and Nominating,Corporate Governance and Sustainability Committee.Each Committees chairperson regularly reports to the Board on its activities and recommendations.3.2 Board of DirectorsBoard StructureTSMCs Chairman,Dr.Mark Liu,retired from the Company after the Annual Shareholders Meeting on June 4,2024.At the meeting,TSMC shareholders elected a new Board of Directors,which then convened to elect Dr.C.C.Wei as Chairman and Chief Executive Officer(CEO).TSMCs Board of Directors consists of ten distinguished members with a great breadth of experience as world-class business leaders or professionals.We deeply rely on them for their diverse knowledge,personal perspectives,and solid business judgment.These professionals include citizens from Taiwan,Europe and the U.S.with world-class business operating experience.The current board members are:Chairman Dr.C.C.Wei,Dr.F.C.Tseng,Mr.Chin-Ching Liu(Representative of the National Development Fund,Executive Yuan),Sir Peter L.Bonfield(Independent Director),Mr.Michael R.Splinter(Independent Director),Mr.Moshe N.Gavrielov(Independent Director),Dr.L.Rafael Reif(Independent Director),Ms.Ursula M.Burns(Independent Director),Ms.Lynn L Elsenhans(Independent Director),and Dr.Chuan Lin(Independent Director).Board ResponsibilitiesInheriting the spirit of TSMCs Founder,Dr.Morris Changs philosophy on corporate governance,under the leadership of Chairman Dr.C.C.Wei,TSMCs Board of Directors takes a serious and forthright approach to its duties and is a dedicated,competent and independent Board.The Boards primary duty is to supervise the Companys compliance with relevant laws and regulations,financial transparency,timely disclosure of material information,and maintaining of the highest integrity.TSMCs Board of Directors strives to perform these responsibilities through its Audit and Risk Committee,Compensation and People Development Committee,Nominating,Corporate Governance and Sustainability Committee,the hiring of a financial expert consultant for the Audit and Risk Committee,and coordination with our Internal Audit department.The second duty of the Board of Directors is to appoint and dismiss officers of the Company when necessary,to evaluate management performance and to review the succession plan for senior executives.TSMCs management has maintained a healthy and functional communication with the Board of Directors,has been devoted in executing guidance of the Board,and is dedicated in running the business operations,all to achieve the best interests for TSMC shareholders.The third duty of the Board of Directors is to resolve critical matters,such as capital appropriations,investment activities,dividends,etc.The fourth duty of the Board of Directors is to provide guidance to the Companys management team and risk management.In each quarter,TSMCs management reports to the Board on various subjects(including ESG programs)and strategies,and spends substantial time and effort to communicate with the Board.The Board would comment on the risk and probabilities for success of the proposed corporate strategies.The Board also periodically oversees those strategies implementation and outcomes,and may suggest the management team to make adjustments to the strategic goals and objectives if necessary.Nomination and Election of DirectorsTSMC envisions the membership of its esteemed Board of Directors to be composed of highly ethical professionals with the necessary knowledge,experience as world-class business leaders and understanding from diverse backgrounds.TSMCs Board of Directors members are nominated via rigorous selection processes.The Company established the“Guidelines for Nomination of Directors,”which detail the procedures and criteria for the nominating,qualifying and evaluating director candidates for consideration by the Board of Directors.Additionally,the“Corporate Governance Guidelines”outline the criteria for evaluating candidates for election by shareholders.These criteria include professional knowledge,experience,business judgment,commitment to the Companys core values,and reputation for ethical conduct and leadership.Diversity of backgrounds(including gender,age,and culture)of Board members shall also be considered.The“Nominating,Corporate Governance and Sustainability Committee”will recommend Independent Director candidates to the Board of Directors for nomination.The independence of each Independent Director candidate is also considered and assessed under relevant laws.Directors shall be elected pursuant to the candidate nomination system specified in Article 192-1 of the R.O.C.Company Law.The tenure of office for Directors shall be three years.Under R.O.C.law,in which TSMC was incorporated,any shareholders holding one percent or more of our total outstanding common shares may nominate their own candidate to stand for election as a Board member.This democratic mechanism allows our shareholders to become involved in the selection and nomination process of Board candidates.The final slate of candidates is put to the shareholders for voting at the relevant annual shareholders meeting.Taking the position that directors who over time have developed increasing knowledge,experience and insight into the semiconductor industry and deeper understanding of the operations of the Company can better perform their duties and provide an increasing contribution and value to the shareholders of the Company.Except as otherwise provided in applicable regulations regarding the tenure limits of independent directors,there are no limits on the number of terms that a director may serve.The Board will,however,assess director tenure on an on-going basis to ensure the Board continues to benefit from new perspectives.Directors CompensationAccording to TSMCs Articles of Incorporation,the Board of Directors is authorized to determine the salary for the Chairman,Vice Chairman and Directors,taking into account the extent and value of the services provided for the management of the Corporation and the standards of the industry within the R.O.C.and overseas.TSMCs Articles of Incorporation also state that not more than 0.3 percent of our annual profits may be distributed as compensation to our directors.In addition,directors who also serve as executive officers of the Company are not entitled to receive any director compensation.According to TSMCs Compensation and People Development Committee Charter,the distribution of compensation to directors shall be made in accordance with TSMCs“Rules for Distribution of Compensation to Directors”based on the following principles:(1)directors who also serve as executive officers of the Company are not entitled to receive compensation;(2)the compensation for Independent Directors may be higher than other Directors because they serve on multiple Committees,requiring their participation in discussions and resolutions according to each Committees charter;and(3)the compensation for overseas Independent Directors may be higher than domestic Independent Directors,as they require additional time to attend quarterly meetings in Taiwan.044045CriteriaName/TitleProfessional Qualification and ExperienceIndependent Directors Independence StatusNumber of Other Taiwanese Public Companies Concurrently Serving as an Independent DirectorC.C.WeiChairman and Chief Executive OfficerFor Directors professional qualification and experience,please refer to“2.3.1 Information Regarding Board Members”on page 20-27 of this Annual Report.None of the Directors has been in or is under any circumstances stated in Article 30 of the Company Law.(Note 1)Not ApplicableF.C.TsengDirectorChin-Ching LiuDirectorSir Peter L.BonfieldIndependent Director1.All Independent Directors meet the requirements outlined in Article 14-2 of“Securities and Exchange Act”and“Regulations Governing Appointment of Independent Directors and Compliance Matters for Public Companies”(Note 2)issued by Taiwans Financial Supervisory Commission2.For information on Independent Directors(or nominee arrangement)as well as his/her spouse and minor childrens shareholding of TSMC common shares,please refer to“2.3.1 Information Regarding Board Members”on page 20-27 of this Annual Report3.None of the Independent Directors have received compensation or benefits for providing to the Company or its affiliates:(1)any audit service;or(2)commercial,legal,financial,accounting services or other services within the recent two years0Michael R.SplinterIndependent Director0Moshe N.GavrielovIndependent Director0L.Rafael ReifIndependent Director0Ursula M.BurnsIndependent Director0Lynn L.ElsenhansIndependent Director0Chuan LinIndependent Director1Directors Professional Qualifications and Independent Directors Independence StatusNote 1:1.Having committed an offence as specified in the Statute for Prevention of Organizational Crimes and subsequently convicted of a crime,and has not started serving the sentence,has not completed serving the sentence,or five years have not elapsed since completion of serving the sentence,expiration of the probation,or pardon;2.Having committed the offence in terms of fraud,breach of trust or misappropriation and subsequently convicted with imprisonment for a term of more than one year,and has not started serving the sentence,has not completed serving the sentence,or two years have not elapsed since completion of serving the sentence,expiration of the probation,or pardon;3.Having committed the offense as specified in the Anti-corruption Act and subse
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Our CredoWe believe our first responsibility is to the patients,doctors and nurses,to mothers and fathers and all others who use our products and services.In meeting their needs everything we do must be of high quality.We must constantly strive to provide value,reduce our costs and maintain reasonable prices.Customers orders must be serviced promptly and accurately.Our business partners must have an opportunity to make a fair profit.We are responsible to our employees who work with us throughout the world.We must provide an inclusive work environment where each person must be considered as an individual.We must respect their diversity and dignity and recognize their merit.They must have a sense of security,fulfillment and purpose in their jobs.Compensation must be fair and adequate and working conditions clean,orderly and safe.We must support the health and well-being of our employees and help them fulfill their family and other personal responsibilities.Employees must feel free to make suggestions and complaints.There must be equal opportunity for employment,development and advancement for those qualified.We must provide highly capable leaders and their actions must be just and ethical.We are responsible to the communities in which we live and work and to the world community as well.We must help people be healthier by supporting better access and care in more places around the world.We must be good citizens support good works and charities,better health and education,and bear our fair share of taxes.We must maintain in good order the property we are privileged to use,protecting the environment and natural resources.Our final responsibility is to our stockholders.Business must make a sound profit.We must experiment with new ideas.Research must be carried on,innovative programs developed,investments made for the future and mistakes paid for.New equipment must be purchased,new facilities provided and new products launched.Reserves must be created to provide for adverse times.When we operate according to these principles,the stockholders should realize a fair return.Dear shareholders,In 2024,we continued to establish Johnson&Johnson as healthcares leading,most comprehensive innovation powerhouse.With our focus on pharmaceuticals and medical technology,we stand alone in our ability to impact the full spectrum of disease.From cardiology to cancer,mental health to vision,cell therapies to robotics,the depth and breadth of our expertise and capabilities is unique.No company can match our ability to deliver best-in-class solutions for patients at every step of their journeys.Performance and prioritiesJohnson&Johnson delivered robust operational sales growth of 7%1,2.Full year adjusted net earnings were$24.2 billion1.Adjusted diluted net earnings per share was$9.981.We continued to execute against our capital allocation priorities and generated strong free-cash-flow of approximately$20 billion1.This enabled Johnson&Johnson to increase our dividend for the 62nd consecutive year.We know this use of capital is important,and we remain committed to returning value to our shareholders.Our strong balance sheet also allowed Johnson&Johnson to pursue strategic actions that will position us for sustained,differentiated growth through the end of the decade and beyond.Since January 2024,we invested approximately$50 billion in research and development and other inorganic growth opportunities,including the recently announced planned acquisition of Intra-Cellular Therapies.Johnson&Johnson has long been a partner of choice for the next generation of innovators.From major acquisitions,including Shockwave and V-Wave in MedTech and Ambrx,Proteologix,and the NM-26 bispecific antibody in Innovative Medicine,to the more than 40 smaller collaborations,partnerships,and licenses signed in 2024,we are laying the foundation for tomorrows treatments and cures with our investments today.We also continued to strengthen our manufacturing capacity in the United States and around the world.We announced a$2 billion advanced technology facility in North Carolina that will expand production of our biologic portfolio and pipeline,and we broke ground on extensions to our Impella heart pump facilities in Massachusetts and Germany.March 2025Innovative MedicineInnovative Medicine reported$57 billion in sales.DARZALEX became our first brand to exceed$3 billion in sales in a single quarter and SPRAVATO became our 26th platform to generate at least$1 billion in annual revenue.Other key growth drivers include ERLEADA,CARVYKTI,and TREMFYA.Equally impressive is our pace of innovation,which resulted in 27 approvals in major markets.Among the most notable were FDA approvals of TREMFYA for the treatment of ulcerative colitis and RYBREVANT plus LAZCLUZE for first-line treatment of EGFR-mutated advanced non-small cell lung cancer.We reported 18 positive readouts for registrational studies,initiated 17 Phase III studies,and submitted 49 filings across major markets.The FDA granted priority review designations to five indications for our innovative medicines.This includes RYBREVANT plus LAZCLUZE for frontline non-small cell lung cancer,DARZALEX FASPRO for frontline transplant-eligible multiple myeloma with VRd,nipocalimab for generalized myasthenia gravis,SPRAVATO as a monotherapy for drug-resistant depression,and OPSUMIT for pediatric pulmonary arterial hypertension.MedTechFor the second year in a row,we reported more than$30 billion in MedTech sales,with particularly strong momentum in cardiovascular.The pace of our MedTech innovation also remained strong.We launched 15 major products in 2024.Highlights include the approval of our VARIPULSE pulsed field ablation platform in several major markets and FDA clearance of our VELYS system for both robot-assisted spine and partial-knee surgery.We also received an expanded FDA indication for our Impella heart pumps to treat pediatric patients as well as FDA clearance of Shockwaves Javelin peripheral IVL catheter.Looking forward,we progressed 18 clinical trial programs,including securing IDE approval of our Ottava robotic surgical system,which allows clinical trials to begin in the U.S.2024 Annual ReportThe power behind our success and our futureJohnson&Johnson has an unrivaled portfolio and pipeline,with the financial muscle,global reach,and disease expertise to deliver the sustained pace of innovation and growth that is our hallmark.I am proud of the remarkable strides we made in 2024 and energized by our boundless potential to improve and save lives.As we look ahead,we have a strategic advantage that is unmatched in healthcare:the trust in our brand that has been earned over almost 140 years.Today,we remain committed to the principles that have always been at our core.We are a purpose-driven company guided by Our Credo.And our employees around the world fuel everything we do.Whether we are scientists,salespeople,or supply-chain workers,everyone who works at Johnson&Johnson cares deeplyabout each other and about the patients we serve.93%of our employees say they are willing to go the extra mile to help Johnson&Johnson meet its goals,and improve patients lives.As Chairman and CEO and a 36-year veteran of the company,I find this inspiring.Together,we are transforming health for humanity.Sincerely,Joaquin DuatoChairman and CEODelivering forOur Credo stakeholders7%operational sales growth1,2$88.8 billionconsolidated sales$50 billioninvested in research and development and inorganic innovation since January 20243 26products/platforms generating$1 billion in annual sales62consecutive years of increased dividends81years guided by Our Credo15major MedTech products launched27Innovative Medicine approvals in major markets138,000employees2.6 billiondoses of Vermox donated since 2006 to facilitate treatment of intestinal worms1Non-GAAP measure:Operational sales growth excludes the effect of translational currency.Adjusted net earnings and adjusted diluted net earnings per share excludes special items and intangible asset amortization expense.Free cash flow is defined as cash flow from operating activities,less additions to property,plant and equipment.See Non-GAAP reconciliations in this Annual Report.2Excluding the Covid-19 vaccine.3Includes the amount committed toward the planned acquisition of Intra-Cellular Therapies.2024 Annual ReportThe tables below are provided to reconcile certain non-GAAP financial disclosures in the 2024 ChairmansLetter.Reconciliation of Non-GAAP Financial Measures(Dollars in Millions Except Per Share Data)20242023Net Earnings from Continuing Operations,after tax-as reported$14,066$13,326 Pre-tax AdjustmentsLitigation related 5,450 7,152 Intangible Asset Amortization expense 4,526 4,532 COVID-19 Vaccine related costs 100 663 Restructuring related 269 798 Medical Device Regulation 204 311 Acquisition,integration and divestiture related 1,226 339 Losses on securities 306 641 IPR&D impairments 211 313 Tax AdjustmentsTax impact on special item adjustments(2,135)(2,694)Tax legislation and other tax related 19 28 Adjusted Net Earnings from Continuing Operations,after tax$24,242$25,409 Average shares outstanding(Diluted)2,429.4 2,560.4 Adjusted net earnings per share from Continuing Operations(Diluted)$9.98$9.92 Sales Growth 24 vs.2023TotalOperationalCurrencyWorldwide as reported 4.3%5.9%(1.6)%COVID-19 Vaccine impact(1.2)(1.1)(0.1)Worldwide excluding COVID-19 Vaccine 5.5 7.0 (1.5)Free Cash Flow(Dollars in Millions)2024Net cash flows from operating activities$24,266 Less:Additions to property,plant and equipment 4,424 Free cash flow$19,842 UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM10-K ANNUAL REPORT PURSUANT TO SECTION13 OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 29,2024 orTransition Report Pursuant to Section13 or 15(d)of the Securities Exchange Act of 1934for the transition period fromtoCommission file number 1-3215 Johnson&Johnson(Exact name of registrant as specified in its charter)New Jersey22-1024240(State of incorporation)(I.R.S.Employer Identification No.)One Johnson&Johnson PlazaNew Brunswick,New Jersey08933(Address of principal executive offices)(Zip Code)One Johnson&Johnson Plaza New Brunswick,New Jersey 08933(Address of principal executive offices)Registrants telephone number,including area code:(732)524-0400 SECURITIES REGISTERED PURSUANT TO SECTION12(b)OF THE ACTTitle of each classTrading SymbolName of each exchange on which registeredCommon Stock,Par Value$1.00JNJNew York Stock Exchange1.150%Notes Due November 2028JNJ28New York Stock Exchange3.20%Notes Due November 2032JNJ32New York Stock Exchange1.650%Notes Due May 2035JNJ35New York Stock Exchange3.350%Notes Due November 2036JNJ36ANew York Stock Exchange3.550%Notes Due November 2044JNJ44New York Stock ExchangeIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule405 of the Securities Act.YesNooIndicate by check mark if the registrant is not required to file reports pursuant to Section13 or Section15(d)of the Exchange Act.YesoNoIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section13 or 15(d)of the Exchange Act during the preceding 12months(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 90days.YesNooIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule405 of RegulationS-T during the preceding 12months(or for such shorter period that the registrant was required to submit such files).YesNooIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer”,“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filer Accelerated filerNon-accelerated filer Smaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.oIndicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.YesNooIf securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.oIndicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).oIndicate by check mark whether the registrant is a shell company(as defined in Rule12b-2 of the Exchange Act).YesNoThe aggregate market value of the Common Stock held by non-affiliates computed by reference to the price at which the Common Stock was last sold as of the last business day of the registrants most recently completed second fiscal quarter was approximately$352 billion.On February 6,2025,there were 2,407,616,693 shares of Common Stock outstanding.DOCUMENTS INCORPORATED BY REFERENCEPart III:Portions of the registrants proxy statement for its 2025 annual meeting of shareholders to be filed within 120days after the close of the registrants fiscal year(the“Proxy Statement”),are incorporated by reference to this report on Form 10-K(this“Report”).ItemPagePartI1Business1General1Segments of business1Geographic areas2Raw materials2Patents2Trademarks3Seasonality3Competition3Environment3Regulation3Employees and human capital management6Available information81A.Risk factors91B.Unresolved staff comments171C.Cybersecurity172Properties183Legal proceedings184Mine safety disclosures18Executive officers of the registrant19PartII5Market for registrants common equity,related stockholder matters and issuer purchases of equitysecurities216(Reserved)217Managements discussion and analysis of results of operations and financial condition227A.Quantitative and qualitative disclosures about market risk428Financial statements and supplementary data439Changes in and disagreements with accountants on accounting and financial disclosure1139A.Controls and procedures1139B.Other information1139C.Disclosure regarding foreign jurisdictions that prevent inspections113PartIII10Directors,executive officers and corporate governance11411Executive compensation11412Security ownership of certain beneficial owners and management and related stockholder matters11413Certain relationships and related transactions,and director independence11514Principal accountant fees and services115PartIV15Exhibits and financial statement schedules11616Form 10-K summary116Signatures117Exhibitindex119Cautionary note regarding forward-looking statementsThis Annual Report on Form 10-K and Johnson&Johnsons other publicly available documents contain“forward-looking statements”within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995.Management and representatives of Johnson&Johnson and its subsidiaries(the Company)also may from time to time make forward-looking statements.Forward-looking statements do not relate strictly to historical or current facts and reflect managements assumptions,views,plans,objectives and projections about the future.Forward-looking statements may be identified by the use of words such as“plans,”“expects,”“will,”“anticipates,”“estimates”and other words of similar meaning in conjunction with,among other things:discussions of future operations;expected operating results and financial performance;impact of planned acquisitions and dispositions;impact and timing of restructuring initiatives,including associated cost savings and other benefits;the Companys strategy for growth;product development activities;regulatory approvals;market position and expenditures.Because forward-looking statements are based on current beliefs,expectations and assumptions regarding future events,theyare subject to uncertainties,risks and changes that are difficult to predict and many of which are outside of the Companys control.Investors should realize that if underlying assumptions prove inaccurate,or known or unknown risks or uncertainties materialize,the Companys actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements.Investors are therefore cautioned not to rely on these forward-looking statements.Risks and uncertainties include,but are not limited to:Risks related to product development,market success and competitionChallenges and uncertainties inherent in innovation and development of new and improved products and technologies on which the Companys continued growth and success depend,including uncertainty of clinical outcomes,additional analysis of existing clinical data,obtaining regulatory approvals,health plan coverage and customer access,and initial and continued commercial success;Challenges to the Companys ability to secure and maintain adequate patent and other intellectual property rights for new and existing products and technologies in the United States and other important markets;The impact of patent expirations,typically followed by the introduction of competing generic,biosimilar or other products and resulting revenue and market share losses;Increasingly aggressive and frequent challenges to the Companys patents by competitors and others seeking to launch competing generic,biosimilar or other products and increased receptivity of courts,the United States Patent and Trademark Office and other decision makers to such challenges,potentially resulting in loss of market exclusivity and rapid decline in sales for the relevant product sooner than expected;Competition in research and development of new and improved products,processes and technologies,which can result in product and process obsolescence;Competition to reach agreement with third parties for collaboration,licensing,development and marketing agreements for products and technologies;Competition based on cost-effectiveness,product performance,technological advances and patents attained by competitors;andAllegations that the Companys products infringe the patents and other intellectual property rights of third parties,which could adversely affect the Companys ability to sell the products in question and require the payment of money damages and future royalties.Risks related to product liability,litigation and regulatory activityProduct efficacy or safety concerns,whether or not based on scientific evidence,potentially resulting in product withdrawals,recalls,regulatory action on the part of the United States Food and Drug Administration(U.S.FDA)(or international counterparts),declining sales,reputational damage,increased litigation expense and share price impact;The impact,including declining sales and reputational damage,of significant litigation or government action adverse to theCompany,including product liability claims and allegations related to pharmaceutical marketing practices and contracting strategies;The impact of an adverse judgment or settlement and the adequacy of reserves related to legal proceedings,including patent litigation,product liability,personal injury claims,securities class actions,government investigations,employment and other legal proceedings;Increased scrutiny of the healthcare industry by government agencies and state attorneys general resulting in investigations and prosecutions,which carry the risk of significant civil and criminal penalties,including,but not limited to,debarment from government business;Failure to meet compliance obligations in compliance agreements with governments or government agencies,which could result in significant sanctions;Potential changes to applicable laws and regulations affecting United States and international operations,including relating to:approval of new products;licensing and patent rights;sales and promotion of healthcare products;access to,and reimbursement and pricing for,healthcare products and services;environmental protection;and sourcing of raw materials;Compliance with local regulations and laws that may restrict the Companys ability to manufacture or sell its products in relevant markets,including requirements to comply with medical device reporting regulations and other requirements such as the European Unions Medical Devices Regulation;Changes in domestic and international tax laws and regulations,increasing audit scrutiny by tax authorities around the world may cause exposures to additional tax liabilities potentially in excess of existing reserves;andThe issuance of new or revised accounting standards by the Financial Accounting Standards Board and regulations by the Securities and Exchange Commission.Risks related to the Companys strategic initiatives and healthcare market trendsPricing pressures resulting from trends toward healthcare cost containment,including the continued consolidation among healthcare providers and other market participants,trends toward managed care,the shift toward governments increasingly becoming the primary payors of healthcare expenses,significant new entrants to the healthcare markets seeking to reduce costs and government pressure on companies to voluntarily reduce costs and price increases;Restricted spending patterns of individual,institutional and governmental purchasers of healthcare products and services due to economic hardship and budgetary constraints;Challenges to the Companys ability to realize its strategy for growth including through externally sourced innovations,such as development collaborations,strategic acquisitions,licensing and marketing agreements,and the potential heightened costs of any such external arrangements due to competitive pressures;The potential that the expected strategic benefits and opportunities from any planned or completed acquisition or divestiture by the Company,including the divestment of Kenvue Inc.,may not be realized or may take longer to realize than expected;andThe potential that the expected benefits and opportunities related to past and ongoing restructuring actions may not be realized or may take longer to realize than expected.Risks related to economic conditions,financial markets and operating internationallyThe risks associated with global operations on the Company and its customers and suppliers,including foreign governments in countries in which the Company operates;The impact of inflation and fluctuations in interest rates and currency exchange rates and the potential effect of such fluctuations on revenues,expenses and resulting margins;Potential changes in export/import and trade laws,regulations and policies of the United States and other countries,including any increased trade restrictions or tariffs and potential drug reimportation legislation,and the impact of such changes on raw material prices,supply chains market volatility and the pace of product development;The impact on international operations from financial instability in international economies,sovereign risk,possible imposition of governmental controls and restrictive economic policies,and unstable international governments and legalsystems;The impact of global public health crises and pandemics;Changes to global climate,extreme weather and natural disasters that could affect demand for the Companys products and services,cause disruptions in manufacturing and distribution networks,alter the availability of goods and services within the supply chain,and affect the overall design and integrity of the Companys products and operations;The impact of global or economic changes or events,including global tensions and war;andThe impact of armed conflicts and terrorist attacks in the United States and other parts of the world,including social and economic disruptions and instability of financial and other markets.Risks related to supply chain and operationsDifficulties and delays in manufacturing,internally,through third-party providers or otherwise within the supply chain,that may lead to voluntary or involuntary business interruptions or shutdowns,product shortages,withdrawals or suspensions of products from the market,and potential regulatory action;Interruptions and breaches of the Companys information technology systems or those of the Companys vendors,which could result in reputational,competitive,operational or other business harm as well as financial costs and regulatory action;Reliance on global supply chains and production and distribution processes that are complex and subject to increasing regulatory requirements that may adversely affect supply,sourcing and pricing of materials used in the Companys products;andThe potential that the expected benefits and opportunities related to restructuring actions may not be realized or may take longer to realize than expected,including due to any required approvals from applicable regulatory authorities.Investors also should carefully read the risk factors described in Item 1A of this Annual Report on Form 10-K for a description of certain risks that could,among other things,cause the Companys actual results to differ materially from those expressed in its forward-looking statements.Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and in Item 1A to be a complete statement of all potential risks and uncertainties.The Company does not undertake to publicly update any forward-looking statement that may be made from time to time,whether as a result of new information or future events or developments.This page intentionally left blank.PartIItem 1.BusinessGeneralJohnson&Johnson and its subsidiaries(the Company)have approximately 138,100employees worldwide engaged in the research and development,manufacture and sale of a broad range of products in the healthcare field.Johnson&Johnson is a holding company,with operating companies conducting business in virtually all countries of the world.The Companys primary focus is products related to human health and well-being.Johnson&Johnson was incorporated in the State of New Jersey in1887.The Chief Operating Decision Maker(CODM)is the Companys Chief Executive Officer(Principal Executive Officer).The Executive Committee is Johnson&Johnsons senior leadership team responsible for setting the strategy and priorities of the Company and driving accountability at all levels.Within the strategic parameters provided by the Executive Committee,senior management groups at U.S.and international operating companies are each responsible for their own strategic plans and the day-to-day operations of those companies.Segments of businessThe Company is organized into two business segments:Innovative Medicine and MedTech.Additional information required by this item is incorporated herein by reference to the narrative and tabular descriptions of segments and operating results under:Item 7.Managements discussion and analysis of results of operations and financial condition of this Report;and Note17 Segments of business and geographic areas of the notes to consolidated financial statements included in Item 8 of thisReport.Innovative MedicineThe Innovative Medicine segment is focused on the following therapeutic areas:Immunology(e.g.,rheumatoid arthritis,psoriatic arthritis,inflammatory bowel disease and psoriasis),Infectious Diseases(e.g.,HIV/AIDS),Neuroscience(e.g.,mood disorders,neurodegenerative disorders and schizophrenia),Oncology(e.g.,prostate cancer,hematologic malignancies,lung cancer and bladder cancer),Cardiovascular and Metabolism(e.g.,thrombosis,diabetes and macular degeneration)and Pulmonary Hypertension(e.g.,Pulmonary Arterial Hypertension).Medicines in this segment are distributed directly to retailers,wholesalers,distributors,hospitals and healthcare professionals for prescription use.Key products in the Innovative Medicine segment include:REMICADE(infliximab),a treatment for a number of immune-mediated inflammatory diseases;SIMPONI(golimumab),a subcutaneous treatment for adults with moderate to severe rheumatoid arthritis,active psoriatic arthritis,active ankylosing spondylitis and moderately active to severely active ulcerative colitis;SIMPONI ARIA(golimumab),an intravenous treatment for adults with moderate to severe rheumatoid arthritis,active psoriatic arthritis and active ankylosing spondylitis and active polyarticular juvenile idiopathic arthritis(pJIA)in people 2 years of age and older;STELARA(ustekinumab),a treatment for adults and children with moderate to severe plaque psoriasis,for adults with active psoriatic arthritis,for adults with moderately to severely active Crohns disease and treatment of moderately to severely active ulcerative colitis;TREMFYA(guselkumab),a treatment for adults with moderate to severe plaque psoriasis and active psoriatic arthritis and ulcerative colitis;EDURANT(rilpivirine),PREZISTA(darunavir)and PREZCOBIX/REZOLSTA(darunavir/cobicistat),antiretroviral medicines for the treatment of human immunodeficiency virus(HIV)in combination with other antiretroviral products and SYMTUZA(darunavir/cobicistat/emtricitabine/tenofovir alafenamide),a once-daily single tablet regimen for the treatment of HIV;CONCERTA(methylphenidate HCl)extended-release tablets CII,a treatment for attention deficit hyperactivity disorder;INVEGA SUSTENNA/XEPLION(paliperidone palmitate),for the treatment of schizophrenia and schizoaffective disorder in adults;INVEGA TRINZA/TREVICTA(paliperidone palmitate),for the treatment of schizophrenia in patients after they have been adequately treated with INVEGA SUSTENNA for at least four months;SPRAVATO(Esketamine),a nasal spray,used along with an oral antidepressant,to treat adults with treatment-resistant depression(TRD)and depressive symptoms in adults with major depressive disorder(MDD)with suicidal thoughts or actions;CARVYKTI(ciltacabtagene autoleucel),a chimeric antigen receptor(CAR)-T-cell therapy for the treatment of patients with relapsed/refractory multiple 2024 Annual Report1myeloma;ZYTIGA(abiraterone acetate),a treatment for patients with prostate cancer;ERLEADA(apalutamide),anext-generation androgen receptor inhibitor for the treatment of patients with prostate cancer;IMBRUVICA(ibrutinib),atreatment for certain B-cell malignancies,or blood cancers and chronic graft versus host disease;DARZALEX(daratumumab),a treatment for multiple myeloma;DARZALEX FASPRO(daratumumab and hyaluronidase-fihj),a treatment for multiple myeloma and light chain(AL)Amyloidosis;TECVAYLI(teclistamab-cqyv),a ready-to-use bispecific antibody for adults with relapsed or refractory multiple myeloma who have received at least four prior lines of therapy;XARELTO(rivaroxaban),an oral anticoagulant for the prevention of deep vein thrombosis(DVT),which may lead to pulmonary embolism(PE)in patients undergoing hip or knee replacement surgery,to reduce the risk of stroke and systemic embolism in patients with nonvalvular atrial fibrillation,and for the treatment and reduction of risk of recurrence of DVT and PE to reduce the risk of major cardiovascular events in patients with coronary artery disease(CAD)and peripheral artery disease(PAD),for the treatment and secondary prevention of thromboembolism in pediatric patients,and for thromboprophylaxis in pediatric patients following the Fontan procedure;OPSUMIT(macitentan)as monotherapy or in combination,indicated for the long-term treatment of pulmonary arterial hypertension(PAH);UPTRAVI(selexipag),the only approved oral and intravenous,selective IP receptor agonist targeting a prostacyclin pathway in PAH.Many of these medicines were developed in collaboration with strategic partners or are licensed from other companies and maintain active lifecycle developmentprograms.MedTechThe MedTech segment includes a broad portfolio of products used in the cardiovascular,orthopaedics,surgery,and vision categories.The Cardiovascular(previously referred to as Interventional solutions)portfolio includes electrophysiology products to treat heart rhythm disorders,the heart recovery portfolio(Abiomed)which includes technologies to treat severe coronary artery disease requiring high-risk PCI or AMI cardiogenic shock,circulatory restoration products(Shockwave)for the treatment of calcified coronary artery disease(CAD)and peripheral artery disease(PAD),and neurovascular care that treats hemorrhagic and ischemic stroke.The Orthopaedics portfolio includes products and enabling technologies that support hips,knees,trauma,spine,sports,and others.The Surgery portfolios include advanced and general surgery technologies,as well as solutions that focus on breast aesthetics and reconstruction(Mentor).Vision products include ACUVUE brand contact lenses and TECNIS intraocular lenses for cataract surgery.These products are distributed to wholesalers,hospitals,and retailers and are used predominantly in the professional fields by physicians,nurses,hospitals,eye care professionals,and clinics.Geographic areasThe Company conducts business in virtually all countries of the world with the primary focus on products related to human health and well-being.The products made and sold in the international business include many of those described above under Segments of Business Innovative Medicine and MedTech.However,the principal markets,products and methods of distribution in the international business vary with the country and the culture.The products sold in the international business include those developed in the U.S.and by subsidiaries abroad.Investments and activities in some countries outside the U.S.are subject to higher risks than comparable U.S.activities because the investment and commercial climate may be influenced by financial instability in international economies,restrictive economic policies and political and legal system uncertainties.Raw materialsRaw materials essential to the Companys business are generally readily available from multiple sources.Where there are exceptions,the temporary unavailability of those raw materials would not likely have a material adverse effect on the financial results of the Company.PatentsThe Companys subsidiaries have made a practice of obtaining patent protection on their products and processes where possible.They own,or are licensed under,a significant number of patents in the U.S.and other countries relating to their products,product uses,formulations and manufacturing processes,which in the aggregate are believed to be of material importance to the Company in the operation of its businesses.The Companys subsidiaries face patent challenges from third parties,including challenges seeking to manufacture and market generic and biosimilar versions of the Companys key pharmaceutical products prior to expiration of the applicable patents covering those products.Significant legal proceedings 2and claims involving the Companys patent and other intellectual property are described in Note 19 Legal proceedingsIntellectual property of the Notes to Consolidated Financial Statements included in Item 8 of this Report.Sales of the Companys largest product,collectively DARZALEX(daratumumab)and DARZALEX FASPRO(daratumumab and hyaluronidase-fihj),accounted for approximately 13.1%of the Companys total revenues for fiscal 2024.Accordingly,the patents related to these products are believed to be material to the Company.Genmab A/S owns two patent families related to DARZALEX,and Janssen Biotech,Inc.has an exclusive license to those patent families.The two patent families both expire in the United States in 2029,and in Europe,compound/use patent protection in select countries extends to 2031/2032.Janssen Biotech,Inc.owns a separate patent portfolio related to DARZALEX FASPRO.Sales of the Companys second largest product,STELARA(ustekinumab)accounted for approximately 11.7%of the Companys total revenues for fiscal 2024.According to patent settlement and license agreements,the Company expects continued launches of biosimilar versions of STELARA in Europe and the United States in 2025 which will impact the Companys sales ofSTELARA.TrademarksThe Companys subsidiaries have made a practice of selling their products under trademarks and of obtaining protection for these trademarks by all available means.These trademarks are protected by registration in the U.S.and other countries where such products are marketed.The Company considers these trademarks in the aggregate to be of material importance in the operation of its businesses.SeasonalityWorldwide sales do not reflect any significant degree of seasonality;however,spending has typically been heavier in the fourth quarter of each year than in other quarters.This reflects increased spending decisions,principally for advertising and research and development activity.CompetitionIn all of their product lines,the Companys subsidiaries compete with companies both locally and globally.Competition exists inall product lines without regard to the number and size of the competing companies involved.Competition in research,bothinternally and externally sourced,involving the development and the improvement of new and existing products and processes,is particularly significant.The development of new and innovative products,as well as protecting the underlying intellectual property of the Companys product portfolio,is important to the Companys success in all areas of its business.Thecompetitive environment requires substantial investments in continuing research.EnvironmentThe Company is subject to a variety of environmental laws and regulations in the United States and other jurisdictions.The Company believes that its operations comply in all material respects with applicable environmental laws and regulations.The Companys compliance with these requirements is not expected to have a material effect upon its capital expenditures,cash flows,earnings or competitive position.RegulationThe Companys businesses are subject to varying degrees of governmental regulation in the countries in which operations are conducted,and the general trend is toward increasingly stringent regulation and enforcement.The Company is subject to costly and complex U.S.and foreign laws and governmental regulations,and any adverse regulatory action may materially adversely affect the Companys financial condition and business operations.In the U.S.,the pharmaceutical product and medical technology industries have long been subject to regulation by various federal and state agencies,primarily as to product safety,efficacy,manufacturing,advertising,labeling and safety reporting.The exercise of broad regulatory powers by the U.S.Food and Drug Administration(the U.S.FDA)continues to result in increases in the amounts of testing and documentation required for U.S.FDA approval of new drugs and devices and a corresponding increase in the expense of product introduction.Similar trends are also evident in major markets outside of the U.S.2024 Annual Report3The medical device regulatory framework and the evolving privacy,data localization,and emerging cyber security laws and regulations around the world are examples of such increased regulation.Within the U.S.,an increasing number of U.S.States have enacted comprehensive privacy laws,and federal regulators(e.g.,the U.S.FDA,FTC and HHS)continue to stress the intersection of health and privacy as a compliance and enforcement priority.In the EU,multiple directives and laws(including NIS2,EHDS,the Data Act,the Cyber Resilience Act,and the AI Act)are rapidly changing privacy and cybersecurity compliance requirements while introducing new enforcement risks.In addition,China has introduced broad personal information protection and data security regulations,with more anticipated,thereby increasing Chinas scrutiny of company compliance and data transfer practices.With other jurisdictions enacting similar privacy laws,local data protection authorities will force greater accountability on the collection,access and use of personal data in the healthcare industry.These laws can also restrict transfers of data across borders,potentially impacting how data-driven health care solutions are developed and deployed globally in a compliant manner.Moreover,as a result of the broad scale release and availability of Artificial Intelligence(AI)technologies such as generative AI,a global trend towards more comprehensive and nuanced regulation to ensure the ethical use,privacy,and security of AI is underway that includes standards for transparency,accountability,and fairness,which will require compliance developments or enhancements.The regulatory agencies under whose purview the Company operates have administrative powers that may subject it to actions such as product withdrawals,recalls,seizure of products and other civil and criminal sanctions.In some cases,the Companys subsidiaries may deem it advisable to initiate product recalls regardless of whether it has been required or directed to.The U.S.FDA and regulatory agencies around the globe are also increasing their enforcement activities.If the U.S.FDA were to conclude that we are not in compliance with applicable laws or regulations,or that any of our pharmaceutical products or medical technologies are ineffective or pose an unreasonable safety risk,the U.S.FDA could ban such products,detain or seize adulterated or misbranded products,order a recall,repair,replacement,or refund of such products,withdraw approval for such products,refuse to grant pending applications for marketing authorization or require certificates of foreign governments for exports,and/or require us to notify health professionals and others that the products present unreasonable risks of substantial harm to the public health.The U.S.FDA may also assess civil or criminal penalties against us,our officers or employees and impose operating restrictions on a company-wide basis,or enjoin and/or restrain certain conduct resulting in violations of applicable law.The U.S.FDA may also recommend prosecution to the U.S.Department of Justice.Any adverse regulatory action,depending on its magnitude,may restrict us from effectively marketing and selling our products and limit our ability to obtain future clearances,classifications or approvals,and could result in a substantial modification to our business practices and operations.Equivalent enforcement mechanisms exist in different countries in which we conduct business.The costs of human healthcare have been and continue to be a subject of study,investigation and regulation by governmental agencies and legislative bodies around the world.In the U.S.,attention has been focused by states,regulatory agencies and Congress on prices,profits,overutilization and the quality and costs of healthcare generally.Laws and regulations have been enacted to require adherence to strict compliance standards and prevent fraud and abuse in the healthcare industry.There is increased focus on interactions and financial relationships between healthcare companies and healthcare providers.Various state and federal transparency laws and regulations require disclosures of payments and other transfers of value made to certain healthcare practitioners,including physicians,teaching hospitals,and certain non-physician practitioners.Federal and foreign laws governing international business practices require strict compliance with anti-bribery standards and certain prohibitions with respect to payments to any foreign government official.Payors and Pharmacy Benefit Managers(PBMs)are a potent force in the marketplace,and increased attention is being paid to the impact of PBM practices on healthcare cost and access in the U.S.Our business has been and continues to be affected by federal and state legislation that alters the pricing,coverage,and reimbursement landscape.At the federal level,in August 2022,President Biden signed into law the Inflation Reduction Act(IRA),which includes provisions that effectively authorize the government to establish prices for certain high-spend single-source drugs and biologics reimbursed by the Medicare program,starting in 2026 for Medicare Part D drugs and 2028 for Medicare Part B drugs.On August 29,2023,the Centers for Medicare&Medicaid Services(“CMS”)published the first“Selected Drug”list,which includes XARELTO and STELARA as well as IMBRUVICA,which is developed in collaboration and co-commercialized in the U.S.with Pharmacyclics LLC,an AbbVie company.The Selected Drug list also included other medicines targeting disease states that are prevalent in the Medicare population.Although CMS published an explanation for how it determined prices for selected drugs in December 2024,uncertainty remains as to the methodology used to determine these prices.The IRA specifies a ceiling price but not a minimum price for selected drugs and does not require CMS to use a specific framework for determining selected drug prices.In any event,we anticipate that the selected products will be subjected to a government-established price for the Medicare population beginning in 2026.4The IRA also contains provisions that impose rebates if certain prices increase at a rate that outpaces the rate of inflation,beginning October 1,2022,for Medicare Part D drugs and January 1,2023,for Medicare Part B drugs.Separate IRA provisions redesign the Medicare Part D benefit in various ways,including by shifting a greater portion of costs to manufacturers within certain coverage phases and replacing the Part D coverage gap discount program with a new manufacturer discounting program.Failure to comply with IRA provisions may subject manufacturers to various penalties,including civil monetarypenalties.In July 2023,Janssen Pharmaceuticals,Inc.(Janssen)filed litigation against the U.S.Department of Health and Human Services as well as the Centers for Medicare and Medicaid Services challenging the constitutionality of the IRAs Medicare Drug Price Negotiation Program.The litigation requests a declaration that the IRA violates Janssens rights under the First Amendment and the Fifth Amendment to the Constitution and therefore that Janssen is not subject to the IRAs mandatory pricing scheme.The impact of the IRA on our business and the broader pharmaceutical industry remains uncertain,as litigation filed by Janssen and other pharmaceutical companies remains ongoing and while CMS has publicly announced the maximum fair price for each of the selected drugs,implementation of the program is still in progress.In April 2024,Janssen appealed the district courts denial of its summary judgment motion to the Third Circuit.Additionally,we expect continued scrutiny on drug pricing and government price reporting from Congress,agencies,and other bodies at the federal and state levels,which may result in additional regulations or other mechanisms to increase pricing transparency and controls.There are a number of additional bills pending in Congress and healthcare reform proposals at the state level that would affect drug pricing,including in the Medicare and Medicaid programs.This changing legal landscape has both positive and negative impacts on the U.S.healthcare industry with much remaining uncertain as to how various provisions of federal and state law,and potential modification or repeal of these laws,will ultimately affect the industry.The IRA and any other federal or state legislative change could affect the pricing and market conditions for our products.In addition,business practices in the healthcare industry have come under increased scrutiny,particularly in the U.S.,by government agencies and state attorneys general,and resulting investigations and prosecutions carry the risk of significant civil and criminal penalties.Of note is the increased enforcement activity by data protection authorities in various jurisdictions,particularly in the European Union,where significant fines have been levied on companies for data breaches,violations of privacy requirements,and unlawful cross-border data transfers.In the U.S.,the Federal Trade Commission has stepped up enforcement of data privacy with several significant settlements(including settlements concerning the downstream sharing of personal information and use and disclosure of personal health data)and there have been a material increase in class-action lawsuits linked to the collection and use of biometric data and use of tracking technologies.Further,the Company relies on global supply chains,and production and distribution processes,that are complex,and subject to increasing regulatory requirements that may affect sourcing,supply and pricing of materials used in the Companys products.These processes also are subject to complex and lengthy regulatory approvals.2024 Annual Report5Employees and human capital managementAs of December29,2024 and December 31,2023 the number of employees was approximately:20242023Employees(1)139,800 134,400 Full-time equivalent(FTE)positions(2)138,100 131,900(1)“Employee”is defined as an individual working full-time or part-time,excluding fixed term employees,interns and co-op employees.Employee data may not include full population from more recently acquired companies and individuals on long-term disability are excluded.Contingent workers,contractors and subcontractors are also excluded.Shockwave has been included in the fiscal 2024 headcount in the above table.(2)FTE represents the total number of full-time equivalent positions and does not reflect the total number of individual employees as some work part-time.Employees by region(in percentages)34.5.5(.0 .0%Asia PacificEMEALatin AmericaNorth AmericaStrategyThe Company believes that its employees are critical to its continued success and are an essential element of its long-term strategy.Management is responsible for ensuring that its policies and processes reflect and reinforce the Companys desired corporate culture,including policies and processes related to strategy,risk management,and ethics and compliance.The Companys human capital management strategy is built on three fundamental focus areas:Attracting and recruiting top talentDeveloping and retaining top talentEmpowering and inspiring talentUnderpinning these focus areas are ongoing efforts to cultivate and foster a culture built on innovation,health,well-being and safety,inclusion and belonging where the Companys employees are encouraged to succeed both professionally and personally while helping the Company achieve its business goals.Culture and employee engagementAt Johnson&Johnson,employees are guided by Our Credo,which sets forth the Companys responsibilities to patients,consumers,customers,healthcare professionals,employees,communities and shareholders.Employees worldwide must adhere to the Companys Code of Business Conduct,which sets fundamental requirements and serves as a foundation for the Company policies,procedures and guidelines,all of which provide additional guidance on expected employee behaviors in every market where it operates.The Company conducts global surveys that offer its employees the ability to provide feedback and valuable insight to help address potential human resources risks and identify opportunities to improve.In 2024,94%of global employees across 73 countries participated in Our Credo Survey which was offered in 36 languages.6Growth and developmentTo lead in the changing healthcare landscape,it is crucial that the Company continue to attract and retain top talent.In 2024,the Companys voluntary turnover rate was 6.3%.The Company believes that its employees must be equipped with the right knowledge and skills and be provided with opportunities to grow and develop in their careers.Accordingly,professional development programs and educational resources are available to all employees.The Companys objective is to foster a learning culture that helps shape each persons unique career path while creating a robust pipeline of talent to deliver on the Companys long-term strategies.In furtherance of this objective,the Company deploys a global approach to ensure development is for everyone,regardless of where they are on their career journey.To prioritize learning,the Company recently held Johnson&Johnsons second Global Learning Day.Employees were encouraged to set aside a full day to explore skill-building courses on J&J Learn,the new state-of-the-art learning platform.Our workforceAs stated in Our Credo,we are responsible to our employees who work with us throughout the world.The Company is committed to cultivating,fostering and advancing an inclusive,credo-based work environment for employees that recognizes and rewards based on merit.The Company is dedicated to the values in Our Credo and strives to meet the needs of its employees and stakeholders through compliance with law and the following evidence based strategies:Sustain a global workforce of individuals with many different backgrounds,abilities,cultures and perspectives Maintain a work environment where each persons dignity is respected and they have an opportunity to advance based on their meritDrive innovation and growth with our business to serve markets around the world Our approach with respect to our workforce is guided by applicable laws,internal and external insights,global best practices and employee feedback.Compensation and benefitsAs part of the Companys total rewards philosophy,the Company offers competitive compensation and benefits to attract and retain top talent.The Company is committed to fair treatment in its compensation and benefits for employees at all levels.The Company observes legal minimum wage provisions and exceeds them where possible.The Companys total rewards offerings include an array of programs to support its employees well-being,including annual performance incentive opportunities,pension and retirement savings programs,health and welfare benefits,paid time off,leave programs,flexible work schedules and employee assistance programs.Health,wellness and safetyThe Companys investment in employee health,well-being and safety is built on its conviction that advancing health for humanity starts with advancing the health of its employees.With the right awareness,focus,practices and tools,the Company works to ensure that all its employees around the world,as well as contingent workers,contractors and visitors to the Companys sites,can work safely.The Company has continuously expanded health and well-being programs throughout the Company and across the globe,incorporating new thinking and technologies to keep its offerings best-in-class and to help employees achieve their personal health goals.The programs and practices the Company providesphysical,mental,emotional and financialhelp promote holistic employee health.The Company continues to address our employees needs through J&J Flex,a hybrid model that empowers the Companys office-based employees to find a balance of in-person and remote work,while preserving the Companys culture and need for face-to-face engagement and leadership.2024 Annual Report7Available informationThe Companys main corporate website address is .The Company makes its SEC filings available on the Companys website at soon as reasonably practicable after having been electronically filed or furnished to the SEC.The Companys SEC filings are also available at the SECs website at www.sec.gov.Investors and the public should note that the Company also announces information through its press releases and media statements at and .We use these websites to communicate with investors and the public about our products,litigation and other matters.It is possible that the information we post to these websites could be deemed to be material information.Therefore,we encourage investors and others interested in the Company to review the information posted to these websites in conjunction with ,the Companys SEC filings,press releases,public conference calls and webcasts.In addition,the Restated Certificate of Incorporation,as amended,Amended and Restated By-Laws,the written charters of the Audit Committee,the Compensation&Benefits Committee,the Nominating&Corporate Governance Committee,the Regulatory Compliance&Sustainability Committee,and the Science&Technology Committee of the Board of Directors,and the Companys Principles of Corporate Governance,Code of Business Conduct(for employees),Code of Business Conduct&Ethics for Members of the Board of Directors and Executive Officers,and other corporate governance materials are available on the Companys website at and will be provided without charge to any shareholder submitting a written request,as provided above.The information on , and is not,and will not be deemed,a part of this Report or incorporated into any other filings the Company makes with the SEC.8Item 1A.Risk factorsAn investment in the Companys common stock or debt securities involves risks and uncertainties.The Company seeks to identify,manage and mitigate risks to our business,but uncertainties and risks are difficult to predict and many are outside of the Companys control and cannot therefore be eliminated.In addition to the other information in this report and the Companys other filings with the SEC,investors should consider carefully the factors set forth below.Investors should be aware that it is not possible to predict or identify all such factors and that the following is not meant to be a complete discussion of all potential risks or uncertainties.If known or unknown risks or uncertainties materialize,the Companys business,results of operations or financial condition could be adversely affected,potentially in a material way.Risks related to our business,industry and operationsThe Companys businesses operate in highly competitive product markets and competitive pressures could adversely affect the Companys earnings.The Company faces substantial competition in its two operating segments and in all geographic markets.The Companys businesses compete with companies of all sizes on the basis of cost-effectiveness,technological innovations,intellectual property rights,product performance,real or perceived product advantages,pricing and availability and rate of reimbursement.The Company also competes with other market participants in securing rights to acquisitions,collaborations and licensing agreements with third parties.Competition for rights to product candidates and technologies may result in significant investment and acquisition costs and onerous agreement terms for the Company.Competitors development of more effective or less costly products,and/or their ability to secure patent and other intellectual property rights and successfully market products ahead of the Company,could negatively impact sales of the Companys existing products as well as its ability to bring new products to market despite significant prior investment in the related product development.The Company may also experience operational and financial risk in connection with acquisitions if we are unable to fully identify potential risks and liabilities associated with acquired businesses or products,successfully integrate operations and employees,and successfully identify and realize synergies with existing businesses while containing acquisition-related strain on our management,operations and financial resources.For the Companys Innovative Medicine businesses,loss of patent exclusivity for a product often is followed by a substantial reduction in sales as competitors gain regulatory approval for generic,biosimilar and other competing products and enter the market.For the Companys MedTech businesses,technological innovation,product quality,reputation and customer service are especially important to competitiveness.Development by other companies of new or improved products,processes and technologies could threaten to make the Companys products or technologies less desirable,less economical or obsolete.The Companys business and operations will be negatively impacted if we are unable to introduce new products or technological advances that are safe,more effective,more effectively marketed or otherwise outperform those of our competitors.Interruptions and delays in manufacturing operations could adversely affect the Companys business,sales andreputation.The Companys manufacturing of products requires the timely delivery of sufficient amounts of complex,high-quality components and materials.The Companys subsidiaries operate 64 manufacturing facilities as well as sourcing from thousands of suppliers around the world.The Company has in the past,and may in the future,face unanticipated interruptions and delays in manufacturing through its internal or external supply chain.Manufacturing disruptions can occur for many reasons including regulatory action,production quality deviations or safety issues,labor disputes,labor shortages,site-specific incidents(such as fires),natural disasters such as hurricanes and other severe weather events,raw material shortages,lack of available inspectors,political unrest,terrorist attacks and epidemics or pandemics.Such delays and difficulties in manufacturing can result in product shortages,declines in sales and reputational impact as well as significant remediation and related costs associated with addressing theshortage.The Company relies on third parties to manufacture and supply certain of our products.Any failure by or loss of a third-party manufacturer or supplier could result in delays and increased costs,which may adversely affect our business.The Company relies on third parties to manufacture and supply certain of our raw materials,component parts and products.We depend on these third-party manufacturers to allocate to us a portion of their manufacturing capacity sufficient to meet our needs,to produce products of acceptable quality and at acceptable manufacturing yields and to deliver those products to us on a timely basis and at acceptable prices.However,we cannot guarantee that these third-party manufacturers will be able to meet our near-term or long-term manufacturing requirements,which could result in lost sales and have an adverse effect on our business.2024 Annual Report9Other risks associated with our reliance on third parties to manufacture these products include reliance on the third party for regulatory compliance and quality assurance,misappropriation of the Companys intellectual property,limited ability to manage our inventory,possible breach of the manufacturing agreement by the third party and the possible termination or nonrenewal of the manufacturing agreement by the third party at a time that is costly or inconvenient for us.Moreover,if any of our third-party manufacturers suffers any damage to facilities,loses benefits under material agreements,experiences power outages,encounters financial difficulties,is unable to secure necessary raw materials from its suppliers or suffers any other reduction in efficiency,the Company may experience significant business disruption.In the event of any such disruption,the Company would need to seek and source other qualified third-party manufacturers,likely resulting in further delays and increased costs which could affect our business adversely.Counterfeit versions of our products could harm our patients and have a negative impact on our revenues,earnings,reputation and business.Our industry continues to be challenged by the vulnerability of distribution channels to illegal counterfeiting and the presence of counterfeit products in a growing number of markets and over the Internet.Third parties may illegally distribute and sell counterfeit versions of our products,which do not meet our rigorous manufacturing and testing standards.To distributors and patients,counterfeit products may be visually indistinguishable from the authentic version.Counterfeit medicines pose a risk to patient health and safety because of the conditions under which they are manufactured often in unregulated,unlicensed,uninspected and unsanitary sites as well as the lack of regulation of their contents.The industrys failure to mitigate the threat of counterfeit medicines could adversely impact our business and reputation by impacting patient confidence in our authentic products,potentially resulting in lost sales,product recalls,and an increased threat of litigation.In addition,diversion of our products from their authorized market into other channels may result in reduced revenues and negatively affect our profitability.Global health crises,pandemics,epidemics,or other outbreaks could adversely disrupt or impact certain aspects of the Companys business,results of operations and financial condition.We are subject to risks associated with global health crises,epidemics,pandemics and other outbreaks(such incident(s),a health crisis or health crises).The spread of health crises have caused and may cause the Company to modify its business practices,and take further actions as may be required by government authorities or as the Company determines are in the best interests of our patients,customers,employees and business partners under such circumstances.Impacts to the Company have included and may include adverse impacts to results of operations and financial condition,including lower sales and reduced customer demand and usage of certain of our products.While the Company has robust business continuity plans in place across our global supply chain network designed to help mitigate the impact of health crises,these efforts may not completely prevent our business from being adversely affected in the event of a health crisis.Health crises could adversely impact the Companys operations,including,among other things,our manufacturing operations,supply chain,third-party suppliers,sales and marketing,and clinical trial operations.Any of these factors could adversely affect the Companys business,financial results,and global economic conditions generally.Risks related to government regulation and legal proceedingsGlobal sales in the Companys Innovative Medicine and MedTech segments may be negatively impacted by healthcare reforms and increasing pricing pressures.Sales of the Companys Innovative Medicine and MedTech products are significantly affected by reimbursements by third-party payors such as government healthcare programs,private insurance plans and managed care organizations.As part of various efforts to contain healthcare costs,these payors are putting downward pressure on prices at which products will be reimbursed.In the U.S.,increased purchasing power of entities that negotiate on behalf of Medicare,Medicaid,and private sector beneficiaries,in part due to continued consolidation among healthcare providers,could result in further pricing pressures.In addition,recent legislation and ongoing political scrutiny on pricing,coverage and reimbursement could result in additional pricing pressures.Specifically,the Inflation Reduction Act of 2022(IRA)has changed Medicare Part D benefit design and has subjected certain of the Companys products to government-established pricing beginning in 2026 and may subject additional products in the future.Failure to adhere to the governments interpretations of the law pending ongoing litigation may expose the Company to penalties.In addition,change to Medicare Part D could have a negative impact on U.S.Innovative Medicine sales.Further,increased third-party utilization of the 340B Federal Drug Discount Program from expanded interpretations of the statute and program abuse may have a negative impact on the Companys financial performance.Outside the U.S.,numerous major markets,including the EU,United Kingdom,Japan and China,have pervasive government involvement in funding healthcare and,in that regard,directly or indirectly impose price controls,limit access to,or reimbursement for,the Companys products,or reduce the value of its intellectual propertyprotection.10We are subject to an increasing number of costly and complex governmental regulations in the countries in which operations are conducted which may materially adversely affect the Companys financial condition and businessoperations.As described in Item 1.Business,the Company is subject to an increasing number of extensive government laws and regulations,investigations and legal action by national,state and local government agencies in the U.S.and other countries in which it operates.For example,changes to the U.S.FDAs timing or requirements for approval or clearance of our products may have a negative impact on our ability to bring new products to market.New and changing laws,regulations,executive orders and other directives may also impose deadlines on the Company,or its third-party suppliers,manufacturers or other partners and providers,for which there may be insufficient time to implement changes to comply with such new regulations and may result in manufacturing delays or other supply chain constraints.If the Company is unable to identify ways to mitigate these delays or constraints,there may be an adverse effect on sales and access to our products.The Company is subject to significant legal proceedings that can result in significant expenses,fines and reputationaldamage.In the ordinary course of business,Johnson&Johnson and its subsidiaries are subject to numerous claims and lawsuits involving various issues such as product liability,patent disputes and claims that their product sales,marketing and pricing practices violate various antitrust,unfair trade practices and/or consumer protection laws.The Companys more significant legal proceedings are described in Note 19 Legal proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report.Litigation,in general,and securities,derivative action,class action and multi-district litigation,in particular,can be expensive and disruptive.Some of these matters may include thousands of plaintiffs,may involve parties seeking large and/or indeterminate amounts,including punitive or exemplary damages,and may remain unresolved for several years.For example,the Company is a defendant in numerous lawsuits arising out of the use of body powders containing talc,primarily JOHNSONS Baby Powder.While the Company believes it has substantial defenses in these matters,it is not feasible to predict the ultimate outcome of litigation.The Company has been and could in the future be required to pay significant amounts as a result of settlements or judgments in these matters,potentially in excess of accruals,including matters where the Company could be held jointly and severally liable among other defendants.The resolution of,or increase in accruals for,one or more of these matters in any reporting period could have a material adverse effect on the Companys results of operations and cash flows for that period.The Company does not purchase third-party product liability insurance;however,the Company utilizes a wholly owned captive insurance company subject to certain limits.Product reliability,safety and effectiveness concerns can have significant negative impacts on sales and results of operations,lead to litigation and cause reputational damage.Product concerns,whether raised internally or by litigants,regulators or consumer advocates,and whether or not based on scientific evidence,can result in safety alerts,product recalls,governmental investigations,regulatory action on the part of the U.S.FDA(or its counterpart in other countries),private claims and lawsuits,payment of fines and settlements,declining sales and reputational damage.These circumstances can also result in damage to brand image,brand equity and consumer trust in the Companys products.Product recalls have in the past,and could in the future,prompt government investigations and inspections,the shutdown of manufacturing facilities,continued product shortages and related sales declines,significant remediation costs,reputational damage,possible civil penalties and criminal prosecution.The Company faces significant regulatory scrutiny,which imposes significant compliance costs and exposes the Company to government investigations,legal actions and penalties.The rapid increase in new government laws and regulations imposes significant compliance costs to the Company and a failure of the Company to timely implement changes to comply with these new laws may expose the Company to investigations,legal actions or penalties.Regulatory issues regarding compliance with current Good Manufacturing Practices(cGMP)(and comparable quality regulations in foreign countries)by manufacturers of drugs and devices can lead to fines and penalties,product recalls,product shortages,interruptions in production,delays in new product approvals and litigation.In addition,the marketing,pricing and sale of the Companys products are subject to regulation,investigations and legal actions including under the Federal Food,Drug,and Cosmetic Act,the Medicaid Rebate Program,federal and state false claims acts,state unfair trade practices acts and consumer protection laws.Scrutiny of healthcare industry business practices by government agencies and state attorneys general in the U.S.,and any resulting investigations and prosecutions,carry risk of significant civil and criminal penalties including,but not limited to,debarment from participation in government healthcare programs.Any such debarment could have a material adverse effect on the Companys business and results of operations.The most significant current investigations and litigation brought by government agencies are described in Note 19 Legal proceedingsGovernment proceedings under Notes to the Consolidated Financial Statements included in Item 8 of this Report.2024 Annual Report11Changes in tax laws or exposures to additional tax liabilities could negatively impact the Companys operating results.Changes in tax laws or regulations around the world,including in the U.S.and as led by the Organization for Economic Cooperation and Development,such as the enactment by certain EU and non-EU countries,and the anticipated enactment by additional countries,of a global minimum tax,could negatively impact the Companys effective tax rate and results of operations.A change in statutory tax rate or certain international tax provisions in any country would result in the revaluation of the Companys deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted.This change would result in an expense or benefit recorded to the Companys Consolidated Statement of Earnings.The Company closely monitors these proposals as they arise in the countries where it operates.Changes to tax laws or regulations may occur at any time,and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted.See Note 8 Income taxes under Notes to the Consolidated Financial Statements included in Item 8 of this Report for additionalinformation.The Company conducts business and files tax returns in numerous countries and is addressing tax audits and disputes with many tax authorities.In connection with various government initiatives,companies are required to disclose more information to tax authorities on operations around the world,which may lead to greater audit scrutiny of profits earned in other countries.The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves.However,any tax authority could take a position on tax treatment that is contrary to the Companys expectations,which could result in tax liabilities in excess of reserves.Risks related to our intellectual propertyThe Company faces increased challenges to intellectual property rights central to its business.The Company owns or licenses a significant number of patents and other proprietary rights relating to its products and manufacturing processes.These rights are essential to the Companys businesses and the inability of the Company to secure and maintain these rights may have a detrimental impact on the Companys financial results.Public policy,both within and outside the U.S.,has become increasingly unfavorable toward intellectual property rights.The Company cannot be certain that it will secure and maintain adequate patent protection for new products and technologies in the United States and other important markets.Competitors routinely challenge the validity or extent of the Companys owned or licensed patents and proprietary rights through litigation,interferences,oppositions and other proceedings,such as inter partes review(IPR)proceedings before the United States Patent&Trademark Office(USPTO).These proceedings absorb resources and can be protracted as well as unpredictable.In addition,others may claim the Company has infringed their intellectual property rights,including copyrights,patents,or trademarks,and/or has misappropriated their trade secrets,any of which could result in an injunction and/or the need to pay past damages and future royalties and adversely affect the competitive position and sales of our products.The Company has faced increasing patent challenges from third parties seeking to manufacture and market generic and biosimilar versions of the Companys key pharmaceutical products prior to expiration of the applicable patents covering those products.In the event the Company is not successful in defending its patents against such challenges,or upon the“at-risk”launch by the generic or biosimilar firm of its product,the Company can lose a major portion of revenues for the referenced product in a very short period of time.Current legal proceedings involving the Companys patents and other intellectual property rights are described in Note 19 Legal proceedingsIntellectual property under Notes to the Consolidated Financial Statements included in Item 8 of this Report.12Risks related to product development,regulatory approval andcommercializationSignificant challenges or delays in the Companys innovation,development and implementation of new products,technologies and indications could have an adverse impact on the Companys long-term success.The Companys continued growth and success depends on its ability to innovate and develop new and differentiated products and services that address the evolving healthcare needs of patients,providers and consumers.Development of successful products and technologies is also necessary to offset revenue losses when the Companys existing products lose market share due to various factors such as competition and loss of patent exclusivity.New products introduced within the past five years accounted for approximately 25%of 2024 sales.The Company cannot be certain when or whether it will be able to develop,license or otherwise acquire companies,products and technologies,whether particular product candidates will be granted regulatory approval,and,if approved,whether the products will be commercially successful.The Company pursues product development through internal research and development as well as through collaborations,acquisitions,joint ventures and licensing or other arrangements with third parties.In all of these contexts,developing new products,particularly pharmaceutical and biotechnology products and medical devices,requires significant investment of resources over many years.Only a very few biopharmaceutical research and development programs result in commercially viable products.The process depends on many factors including the ability to:discern patients and healthcare providers future needs;develop promising new compounds,strategies and technologies;achieve successful clinical trial results;secure effective intellectual property protection;obtain regulatory approvals on a timely basis;and,if and when they reach the market,successfully differentiate the Companys products from competing products and approaches to treatment.Moreover,the development and regulatory approval of new products may be delayed due to limits on federal agency budgets or personnel,including reductions to the U.S.FDAs budget,employees,and operations,which may lead to slower response times and longer review periods.After approval,new products or enhancements to existing products may not be accepted quickly or significantly in the marketplace due to product and price competition,changes in customer preferences or healthcare purchasing patterns,resistance by healthcare providers or uncertainty over third-party reimbursement.Even following initial regulatory approval,the success of a product can be adversely impacted by safety and efficacy findings in larger real-world patient populations,as well as market entry of competitive products.The Company leverages the use of data science,machine learning and other forms of AI and emerging technologies across varying parts of its business and operations,and the introduction and incorporation of AI may result in unintended consequences or other new or expanded risks and liabilities.AI technology is continuously evolving,and the AI technologies we develop and adopt may become obsolete earlier than planned.Our investments in these technologies may not result in the benefits we anticipate or enable us to obtain or maintain a competitive advantage.The application of AI in our business is emerging and evolving alongside new laws and regulations that may entail significant costs or ultimately limit our ability to continue the use of these technologies.These technologies also carry inherent risks related to data privacy and security further described below.Risks related to financial and economic market conditionsThe Company faces a variety of financial,economic,legal,social and political risks associated with conducting businessinternationally.The Companys extensive operations and business activity throughout the world are accompanied by certain financial,economic,legal,social and political risks,including those listed below.Foreign currency exchange:In fiscal 2024,approximately 43%of the Companys sales occurred outside of the U.S.,with approximately 23%in Europe,5%in the Western Hemisphere,excluding the U.S.,and 15%in the Asia-Pacific and Africa region.Changes in non-U.S.currencies relative to the U.S.dollar impact the Companys revenues and expenses.While the Company uses financial instruments to mitigate the impact of fluctuations in currency exchange rates on its cash flows,unhedged exposures continue to be subject to currency fluctuations.In addition,the weakening or strengthening of the U.S.dollar may result in significant favorable or unfavorable translation effects when the operating results of the Companys non-U.S.business activity are translated into U.S.dollars.Inflation and currency devaluation risks:The Company faces challenges in maintaining profitability of operations in economies experiencing high inflation rates.Specifically,the Company has accounted for operations in Argentina,Turkey,Venezuela and Egypt(beginning in the fiscal fourth quarter of 2024)as highly inflationary,as the prior three-year cumulative inflation rate surpassed 100%.While the Company strives to maintain profit margins in these areas through cost reduction programs,productivity improvements and periodic price increases,it might experience operating losses as a result of continued inflation.2024 Annual Report13In addition,the impact of currency devaluations in countries experiencing high inflation rates or significant currency exchange fluctuations could negatively impact the Companys operating results.Illegal importation of pharmaceutical products:The illegal importation of pharmaceutical products from countries where government price controls or other market dynamics result in lower prices may adversely affect the Companys sales and profitability in the U.S.and other countries in which the Company operates.With the exception of limited quantities of prescription drugs for personal use,foreign imports of pharmaceutical products are illegal under current U.S.law.However,the volume of illegal imports continues to rise as the ability of patients and other customers to obtain the lower-priced imports has grown significantly.Anti-bribery and other regulations:The Company is subject to various federal and foreign laws that govern its international business practices with respect to payments to government officials.Those laws include the U.S.Foreign Corrupt Practices Act(FCPA),which prohibits U.S.publicly traded companies from promising,offering,or giving anything of value to foreign officials with the corrupt intent of influencing the foreign official for the purpose of helping the Company obtain or retain business or gain any improper advantage.The Companys business is heavily regulated and therefore involves significant interaction with foreign officials.Also,in many countries outside the U.S.,the healthcare providers who prescribe human pharmaceuticals are employed by the government and the purchasers of human pharmaceuticals are government entities;therefore,the Companys interactions with these prescribers and purchasers are subject to regulation under the FCPA.In addition to the U.S.application and enforcement of the FCPA,various jurisdictions in which the Company operates have laws and regulations,including the U.K.Bribery Act 2010,aimed at preventing and penalizing corrupt and anticompetitive behavior.Enforcement activities under these laws could subject the Company to additional administrative and legal proceedings and actions,which could include claims for civil penalties,criminal sanctions,and administrative remedies,including exclusion from healthcare programs.Other financial,economic,legal,social and political risks.Other risks inherent in conducting business globally include:local and regional economic environments and policies in the markets that we serve,including interest rates,monetary policy,inflation,economic growth,recession,commodity prices,and currency controls or other limitations on the ability to expatriate cash;protective economic policies taken by governments,such as trade protection measures,increased antitrust reporting requirements and enforcement activity,and import/export licensingrequirements;compliance with local regulations and laws including,in some countries,regulatory requirements restricting the Companys ability to manufacture or sell its products in the relevant market;diminished protection of intellectual property and contractual rights in certain jurisdictions;potential nationalization or expropriation of the Companys foreign assets;political or social upheavals,economic instability,repression,or human rights issues;and geopolitical events,including natural disasters,disruptions to markets due to war,armed conflict,terrorism,epidemics orpandemics.Due to the international nature of the Companys business,geopolitical or economic changes or events,including global tensions and war,could adversely affect our business,results of operations or financial condition.As described above,the Company has extensive operations and business activity throughout the world.Global tensions,conflict and/or war among any of the countries in which we conduct business or distribute our products may result in foreign currency volatility,decreased demand for our products in affected countries,and challenges to our global supply chain related to increased costs of materials and other inputs for our products and suppliers.Most recently,we have experienced,and expect to continue to experience,impacts to the Companys business resulting from the Russia-Ukraine war,rising conflict in the Middle East as well as increasing tensions between the U.S.and China.In response to heightened conflict,such as the Russia-Ukraine war,governments may impose export controls and broad financial and economic sanctions.Our business and operations may be further impacted by the imposition of tariffs,trade protection measures or other policies adopted by any country that favor domestic companies and technologies over foreign competitors.Additional sanctions or other measures may be imposed by the global community,including but not limited to limitations on our ability to file,prosecute and maintain patents,trademarks and other intellectual property rights.Furthermore,in some countries,such as in Russia,action may be taken that allows companies and individuals to exploit inventions owned by patent holders from the United States and many other countries without consent or compensation and we may not be able to prevent third parties from practicing the Companys inventions in Russia or from selling or importing products in and into Russia.In addition,the U.S.government recently announced tariffs on products manufactured in several jurisdictions,including China,Mexico and Canada,and has 14made announcements regarding the potential imposition of tariffs on other jurisdictions.While certain of the announced tariffs have been delayed,the U.S.government may in the future pause,reimpose or increase tariffs,and countries subject to such tariffs have and in the future may impose reciprocal tariffs or other restrictive trade measures in response.Any of these actions could increase uncertainties and associated risks relating to the Companys globaloperations.Weak financial performance,failure to maintain a satisfactory credit rating or disruptions in the financial markets could adversely affect our liquidity,capital position,borrowing costs and access to capital markets.We currently maintain investment grade credit ratings with Moodys Investors Service and Standard&Poors Ratings Services.Rating agencies routinely evaluate us,and their ratings of our long-term and short-term debt are based on a number of factors.Any downgrade of our credit ratings by a credit rating agency,whether as a result of our actions or factors which are beyond our control,can increase the cost of borrowing under any indebtedness we may incur,reduce market capacity for our commercial paper or require the posting of additional collateral under our derivative contracts.There can be no assurance that we will be able to maintain our credit ratings,and any additional actual or anticipated changes or downgrades in our credit ratings,including any announcement that our ratings are under review for a downgrade,may have a negative impact on our liquidity,capital position and access to capital markets.Other risksOur business depends on our ability to recruit and retain talented and highly skilled employees.Our continued growth requires us to recruit and retain talented employees representing many different backgrounds,experiences,and skill sets.The market for highly skilled workers and leaders in our industry is extremely competitive and our ability to compete depends on our ability to hire,develop and motivate highly skilled personnel in all areas of our organization.Maintaining our brand and reputation,as well as a credo-based work environment enables us to attract top talent.If we are less successful in our recruiting efforts,or if we cannot retain highly skilled workers and key leaders,our ability to develop and deliver successful products and services may be adversely affected.In addition,effective succession planning is important to our long-term success.Any unsuccessful implementation of our succession plans or failure to ensure effective transfer of knowledge and smooth transitions involving key employees could adversely affect our business,financial condition,or results of operations.Climate change or legal,regulatory or market measures to address climate change may negatively affect our business and results of operations.Climate change resulting from increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere could present risks to our operations,including an adverse impact on global temperatures,weather patterns and the frequency and severity of extreme weather and natural disasters.Natural disasters and extreme weather conditions,such as a hurricane,tornado,earthquake,wildfire or flooding,may pose physical risks to our facilities and disrupt the operation of our supply chain.The impacts of the changing climate on water resources may result in water scarcity,limiting our ability to access sufficient high-quality water in certain locations,which may increase operational costs.Concern over climate change may also result in new or additional legal or regulatory requirements designed to reduce greenhouse gas emissions and/or mitigate the effects of climate change on the environment.If such laws or regulations are more stringent than current legal or regulatory obligations,we may experience disruption in,or an increase in the costs associated with sourcing,manufacturing and distribution of our products,which may adversely affect our business,results of operations or financial condition.Further,the impacts of climate change have an influence on customer preferences,and failure to provide climate-friendly products could potentially result in loss of market share.An information security incident,including a cybersecurity breach,could have a negative impact on the Companys business or reputation.To meet business objectives,the Company relies on both internal information technology(IT)systems and networks,and those of third parties and their vendors,to process and store sensitive data(including confidential research,business plans,financial information,intellectual property,and personal data that may be subject to legal protection)to ensure the continuity of the Companys supply chain and operations,and as part of many of the products we deliver to customers.The extensive range of information security and cybersecurity threats,which affect companies globally,pose a persistent risk to the security and availability of these systems and networks,including to customer products that are connected to or rely on such systems and networks,and the confidentiality,integrity,and availability of the Companys sensitive data.The Company assesses these threats,responds to attacks and breaches that it has experienced,and makes investments to increase internal protection,detection,and response capabilities,as well as ensure the Companys third-party providers have required capabilities and 2024 Annual Report15controls,to address this risk.Because of the frequently changing attack techniques,along with the increased volume and sophistication of the attacks,there is the potential for the Company to be adversely impacted.This impact could result in reputational,competitive,operational or other business harm as well as financial costs and regulatory action.Also,increasing use of AI could increase these risks.The Company maintains cybersecurity insurance in the event of an information security or cyber incident;however,the coverage may not be sufficient to cover all financial,legal,business or reputational losses.As a result of increased global tensions,the Company expects there will continue to be,an increased risk of information security or cybersecurity incidents,including cyberattacks perpetrated by adversaries of countries where the Company maintains operations.Given the potential sophistication of these attacks,the Company may not be able to address the threat of information security or cybersecurity incidents proactively or implement adequate preventative measures and we may not be able to detect and address any such disruption or security breach promptly,or at all,which could adversely affect customers that use our products,our business,results of operations or financial condition.Moreover,these threats could also impact our third-party partners resulting in compromise of the Companys IT systems,networks and data which could negatively affect the Company.A breach of privacy laws or unauthorized access,loss or misuse of personal data could have a negative impact on the Companys business or reputation.The Company is subject to privacy and data protection laws and regulations across the globe that impose broad compliance obligations on the collection,possession,use,storage,access,disclosure,transfer,deletion and protection of personal data.Breach of the requirements of these laws and regulations could result in substantial fines,penalties,governmental actions,private right of actions,including class actions,and damage to our reputation and business.New privacy laws are expected globally,together with greater privacy enforcement by governmental authorities globally,particularly on data localization requirements and data transfers including international data flows.The Company has established privacy compliance programs and controls with which our businesses worldwide are required to comply.However,with many technology and data-driven initiatives evolving across the Company,involving multiple vendors and third parties,there are threats that could impact our business operations and research activities,including potential risks of unauthorized access and loss of personal data as well as legislative actions imposing limitations and controls on the use and sharing of personal data as well as on cross border dataflows.16Item 1B.Unresolved staff commentsNot applicable.Item 1C.CybersecurityRisk management and strategyThe Company has documented cybersecurity policies and standards,assesses risks from cybersecurity threats,and monitors information systems for potential cybersecurity issues.To protect the Companys information systems from cybersecurity threats,the Company uses various security tools supporting protection,detection,and response capabilities.The Company maintains a cybersecurity incident response plan to help ensure a timely,consistent response to actual or attempted cybersecurity incidents impacting the Company.The Company also identifies and assesses third-party risks within the enterprise,and through the Companys use of third-party service providers,across a range of areas including data security and supply chain through a structured third-party risk management program.The Company maintains a formal information security training program for all employees that includes training on matters such as phishing and email security best practices.Employees are also required to complete mandatory training on data privacy.To evaluate and enhance its cybersecurity program,the Company periodically utilizes third-party experts to undertake maturity assessments of the Companys information security program.To date,the Company is not aware of any cybersecurity incident that has had or is reasonably likely to have a material impact on the Companys business or operations;however,because of the frequently changing attack techniques,along with the increased volume and sophistication of the attacks,there is the potential for the Company to be adversely impacted.This impact could result in reputational,competitive,operational or other business harm as well as financial costs and regulatory action.Refer to the risk factor captioned An information security incident,including a cybersecurity breach,could have a negative impact to the Companys business or reputation in Part I,Item 1A.Risk factors for additional descript
2025-04-21
140页
5星级
UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549 FORM 10-K ANNUAL REPORT PURSUAN.
2025-04-18
151页
5星级
HighPeak Energy,Inc.Announces Fourth Quarter and Year-End 2024 Financial and OperatingResults and Pr.
2025-04-18
9页
5星级
Resolute Annual Report 2024Financial HighlightsAs of or for the year ended December 31,(in millions,except per share,ratio data and employees)2024 2023 2022Selected income statement dataTotal net revenue$177,556(d)$158,104$128,695Total noninterest expense 91,797(d)87,172 76,140Pre-provision profit(a)85,759 70,932 52,555Provision for credit losses 10,678 9,320 6,389 Net income$58,471$49,552$37,676 Per common share data Net income per share:Basic$19.79$16.25$12.10 Diluted 19.75 16.23 12.09Book value per share 116.07 104.45 90.29Tangible book value per share(TBVPS)(a)97.30 86.08 73.12Cash dividends declared per share 4.80 4.10 4.00Selected ratiosReturn on common equity 18%Return on tangible common equity(ROTCE)(a)22 21 18Liquidity coverage ratio(average)(b)113 113 112Common equity Tier 1 capital ratio(c)15.7 15.0 13.2Tier 1 capital ratio(c)16.8 16.6 14.9Total capital ratio(c)18.5 18.5 16.8Selected balance sheet data(period-end)Loans$1,347,988$1,323,706$1,135,647Total assets 4,002,814 3,875,393 3,665,743Deposits 2,406,032 2,400,688 2,340,179Common stockholders equity 324,708 300,474 264,928Total stockholders equity 344,758 327,878 292,332Market data Closing share price$239.71$170.10$134.10Market capitalization 670,618 489,320 393,484Common shares at period-end 2,797.6 2,876.6 2,934.2Employees 317,233 309,926 293,723(a)Pre-provision profit,TBVPS and ROTCE are each non-GAAP financial measures.Refer to Explanation and Reconciliation of the Firms Use of Non-GAAP Financial Measures on pages 6769 for a discussion on these measures.(b)Refer to Liquidity Risk Management on pages 108-115 for additional information on this measure.(c)Refer to Capital Risk Management on pages 97-107 for additional information on these measures.(d)Total net revenue included a$7.9 billion net gain related to Visa shares,and total noninterest expense included a$1.0 billion contribution of Visa shares to the JPMorgan Chase Foundation,both recorded in the second quarter of 2024.Refer to Executive Overview on pages 54-58 and Notes 2 and 6 for additional information on the exchange offer for Visa Class B-1 common stock.JPMorganChase(NYSE:JPM)is a leading financial services firm with assets of$4.0 trillion and operations worldwide.The firm is a leader in investment banking,financial services for consumers and small businesses,commercial banking,financial transaction processing and asset management.Under the J.P.Morgan and Chase brands,the firm serves millions of customers,predominantly in the U.S.,and many of the worlds most prominent corporate,institutional and government clients globally.Information about J.P.Morgans capabilities can be found at and about Chases capabilities at .Information about JPMorganChase is available at .2024Year of FirstsCOMMERCIAL&INVESTMENT BANKGenerated$25 billion of net income on revenue of$70 billion#1#1 IN DEPOSITS AND FOR SMALL BUSINESSESNamed#1 in retail deposit market share and#1 primary bank for U.S.small businessesMIDDLE MARKET SYNDICATED LENDERRanked#1 overall Middle Market Syndicated Lender in the U.S.#1 IN ARTIFICIAL INTELLIGENCERanked#1 for overall artificial intelligence capabilities on the Evident AI Index for the third year in a row#1 IN CUSTOMER SATISFACTIONRanked#1 among self-directed investors in the J.D.Power 2024 U.S.Wealth Management Digital Experience Study#1 MOST ADMIRED COMPANIESRanked in the top 10 on Fortune magazines Most Admired Companies list for the eighth year in a rowTOP 10TOP COMPANIESRanked#1 on LinkedIns 2024 Top Companies list,which ranks the 50 best large U.S.companies for career growth#1PRIVATE BANK AND ASSET MANAGERNamed Best Private Bank in the World by Global Finance magazine and#1 asset manager by active flows#11Dear Fellow Shareholders,Jamie Dimon,Chairman and Chief Executive OfficerAcross the globe,2024 was yet another year of significant challenges,from the terrible ongoing war and violence in Ukraine and conflicts in the Middle East to ongoing terrorist activity and growing geopolitical tensions,importantly with China.Our hearts go out to those whose lives are profoundly affected by these events.JPMorganChase,a company that historically has worked across borders and boundaries,will do its part to ensure that the global economy is safe and secure,but it is not immune to the effects of these events.Two things are absolutely foundational to the long-term success of JPMorganChase:one is whether we run a great company and two,which is maybe more important,is whether the long-term health of America,domestically,and the future of the free and democratic world are strong.In the first two sections of this letter,I deal with these critical issues.And in the third and fourth sections,I talk about specific issues unique to JPMorganChase and how we are addressing them,including constantly fighting complacency,arrogance and bureaucracy.2 2INTRODUCTION1 Represents managed revenue.2 Adjusted ROTCE of 20%excludes$5.4 billion from net income in 2024 as a result of the net gain related to Visa shares and the donation of Visa shares to pre-fund contributions to the Firms Foundation.This is a non-GAAP financial measure.Despite the unsettling landscape,the U.S.economy,at least until recently,continued to be resilient,with consumers still spending(though with some recent weakening)and businesses still healthy.It is important to note that the economy has been fueled by large amounts of government deficit spending and past stimulus.There also remains a growing need for increased expenditure on infrastructure,the restructuring of global supply chains and the military,which may lead to stickier inflation and ultimately higher rates than markets currently expect.The recent tariffs will likely increase inflation and are causing many to consider a greater probability of a recession.And even with the recent decline in market values,prices remain relatively high.These significant and somewhat unprecedented forces cause us to remain very cautious.There is much more detail on all of this in section three.2024 was another strong year for JPMorganChase,with our firm generating record revenue for the seventh consecutive year,as well as setting numerous records in each of our lines of business.We earned revenue in 2024 of$180.6 billion1 and net income of$58.5 billion,with return on tangible common equity(ROTCE)of 20%2,reflecting strong underlying performance across our businesses.We also increased our quarterly common dividend of$1.05 per share to$1.15 per share in the first quarter of 2024 and again to$1.25 per share in the third quarter of 2024 while continuing to reinforce our fortress balance sheet.We grew market share in several of our businesses and contin-ued to make significant investments in products,people and technology while exercising strict risk disciplines.Throughout the year,we demonstrated the power of our investment philosophy and guiding principles,as well as the value of being there for clients as we always are in both good times and bad times.The result was continued broad healthy growth across the firm.The charts on pages 612 show our performance results and illustrate how we have grown our franchises,how we compare with our competitors and how we look at our fortress balance sheet.Please peruse them and the CEO and COO letters in this Annual Report,all of which provide specific details about our businesses and our plans for the future.In 2024,we continued to play a forceful and essential role in advancing economic growth.In total,we extended credit and raised capital totaling$2.8 trillion for our consumer and institutional clients around the world.3 3 INTRODUCTIONOn a daily basis,we move over$10 trillion in 120 currencies and more than 160 countries,as well as safeguard over$35 trillion in assets.After we purchased and effectively fully integrated First Republic Bank,that bank failure disappeared as a negative issue for the U.S.economy.In addition to bringing much-needed stability to the U.S.banking system,we were able to give a new,secure home to approximately half a million First Republic customers.While we have modified our approach to certain corporate responsibilities to conform to new guidance,we remain committed to reaching out to all communities in an effort to create a stronger,more inclusive economy from supporting work skills training programs around the world and financing affordable housing and small businesses to making investments in our people and in cities like Detroit that show how business and government leaders can work together to solve problems.Almost all of these efforts are commercial in nature;i.e.,“profit seeking”and are no different from what businesses,large and small,are trying to do in towns across America.We have achieved our decades-long consistency by adhering to our key principles and strategies(see sidebar on Steadfast Principles on page 5),which allow us to drive good organic growth and promote proper management of our capital(including dividends and stock buybacks).I remain proud of our companys resiliency and of what our hundreds of thousands of employees around the world have achieved,collectively and individually.Throughout these recent challenging years,we have never stopped doing all the things we should be doing to serve our clients and our communities.As you know,we are champions of bankings essential role in a community its potential for bringing people together,for enabling companies and individuals to attain their goals,and for being a source of strength in difficult times.I often remind our employees that the work we do matters and has impact.United by our principles and purpose,we help people and institutions finance and achieve their aspirations,lifting up individuals,homeowners,small businesses,larger corporations,schools,hospitals,cities and countries in all regions of the world.What we have accomplished in the 20 years since the JPMorganChase and Bank One merger is evidence of the importance of our values.4 4INTRODUCTIONSteadfast Principles Worth Repeating Looking back on the past two decades starting from my time as Chairman and CEO of Bank One in 2000 there is one common theme:our unwavering dedication to help clients,communities and countries throughout the world.Clearly our financial disci-pline,constant investment in innova-tion and ongoing development of our people have enabled us to achieve this consistency and commitment.In addi-tion,across the firm,we uphold certain steadfast tenets that are worth repeating.First,our work has very real human impact.While JPMorganChase stock is owned by large institutions,pension plans,mutual funds and directly by single investors,the ultimate beneficia-ries,in almost all cases,are individuals in our communities.More than 100 million people in the United States own stocks;many,in one way or another,own JPMorganChase stock.Frequently,these shareholders are veterans,teach-ers,police officers,firefighters,health-care workers,retirees,or those saving for a home,education or retirement.Often,our employees also bank these shareholders,as well as their families and their companies.Your management team goes to work every day recogniz-ing the enormous responsibility that we have to all of our shareholders.Second,shareholder value can be built only if you maintain a healthy and vibrant company,which means doing a good job of taking care of your custom-ers,employees and communities.Conversely,how can you have a healthy company if you neglect any of these stakeholders?As we have learned over the past few years,there are myriad ways an institution can demonstrate its compassion for its employees and its communities while still strengthening shareholder value.Third,while we dont run the company worrying about the stock price in the short run,in the long run we consider our stock price a measure of our prog-ress over time.This progress is a func-tion of continual investments in our people,systems and products,in good and bad times,to build our capabilities.These important investments will also drive our companys future prospects and position it to grow and prosper for decades.Measured by stock perfor-mance,our progress is exceptional.For example,whether looking back 10 years or even further to 2004,when the JPMorganChase/Bank One merger took place,we have outperformed the Standard&Poors 500 Index and the Standard&Poors Financials Index.Fourth,we are united behind basic prin-ciples and strategies(you can see the principles for How We Do Business on our website and our Purpose statement in my letter from 2022)that have helped build this company and made it thrive.These allow us to maintain a fortress balance sheet,constantly invest and nurture talent,fully satisfy regulators,continually improve risk,governance and controls,and serve customers and clients while lifting up communities worldwide.This philosophy is embed-ded in our company culture and influ-ences nearly every role in the firm.Fifth,we strive to build enduring busi-nesses,which rely on and benefit from one another,but we are not a conglom-erate.This structure helps generate our superior returns.Nonetheless,despite our best efforts,the walls that protect this company are not particularly high and we face extraordinary competi-tion.I have written about this reality extensively in the past and cover it again in this letter.We recognize our strengths and vulnerabilities,and we play our hand as best we can.Sixth,we must be a source of strength,particularly in tough times,for our clients and the countries in which we operate.We must take seriously our role as one of the guardians of the worlds financial systems.Seventh,we operate with a very import-ant silent partner the U.S.government noting,as my friend Warren Buffett points out,that his companys success is predicated upon the extraordinary conditions our country creates.He is right to say to his shareholders that when they see the American flag,they all should say thank you.We should,too.JPMorganChase is a healthy and thriving company,and we always want to give back and pay our fair share.We do pay our fair share and we want it to be spent well and have the greatest impact.To give you an idea of where our taxes and fees go:In the last 10 years,we paid more than$52 billion in federal,state and local taxes in the United States and over$26 billion in taxes out-side of the United States.Additionally,we paid the Federal Deposit Insurance Corporation over$11 billion so that it has the resources to cover failures in the American banking sector.Our partner the federal government also imposes significant regulations upon us,and it is imperative that we meet all legal and regulatory requirements imposed on our company.Eighth and finally,we know the founda-tion of our success rests with our people.They are the front line,both individually and as teams,serving our customers and communities,building the technology,making the strategic decisions,managing the risks,deter-mining our investments and driving innovation.However you view the world its complexity,risks and opportunities a companys prosperity requires a great team of people with guts,brains,integrity,enormous capabilities and high standards of professional excel-lence to ensure its ongoing success.56?Net income?Diluted earnings per share(EPS)?Return on tangible common equity(ROTCE)20242023202220212020201920182017201620152014201320122011201020092008200720062005$8.5$15.4$17.4$19.0$21.3$17.9$21.7$24.4$14.4$24.7$24.4$26.9$38.4$36.4$37.7$49.6$53.0$48.3$58.5$32.5?15$%6#!%?$4.00$4.33$1.35$2.26$3.96$4.48$5.19$4.34$5.29$6.00$6.31$10.72$15.36$12.09$16.23$19.75?$8.88?$9.00$6.19$2.35$5.6$11.7$29.1$39.11 Adjusted net income excludes$2.4 billion from net income in 2017 as a result of the enactment of the Tax Cuts and Jobs Act(TCJA).This a non-GAAP financial measure.2 Effective January 1,2020,the Firm adopted the Financial Instruments Credit Losses accounting guidance.Firmwide results excluding the net impact of reserve release/(build)of$(9.3)billion and$9.2 billion for the years ending December 31,2020 and 2021,respectively,are non-GAAP financial measures.3 Adjusted net income excludes$5.4 billion from net income in 2024 as a result of the net gain related to Visa shares and the donation of Visa shares to pre-fund contributions to the Firms Foundation.This a non-GAAP financial measure.GAAP=Generally accepted accounting principlesNet income excluding TCJA1Net income excluding reserve release/build2ROTCE excluding TCJA1 was 13.6%for 2017ROTCE excluding reserve release/build2 was 19.3%for 2020 and 18.5%for 2021ROTCE excluding Visa gain(net of contribution)3 was 19.9%for 2024Earnings,Diluted Earnings per Share and Return on Tangible Common Equity20052024($in billions,except per share and ratio data)Net income excluding Visa gain(net of contribution)37Tangible Book Value and Average Stock Price per Share20052024High:$254.31 Low:$164.30?Tangible book value?Average stock price 20242023202220212020201920182017201620152014201320122011201020092008200720062005$60.98$66.11$71.53$73.12$86.08$97.30$56.33$16.45$18.88$21.96$22.52$27.09$30.12$33.62$38.68$40.72$44.60$48.13$51.44$53.56$36.07$43.93$47.75$39.83$35.49$40.36$39.36$39.22$51.88$58.17$63.83$65.62$113.80$106.52$155.61$128.13$144.05$205.20$110.72$92.01 CAGR=Compound annual growth rate10GRsince 2005Stock total return analysisBank OneS&P 500 IndexS&P Financials IndexPerformance since becoming CEO of Bank One(3/27/200012/31/2024)Compounded annual gain13.2%7.6%5.8%Overall gain2,065.0Q2.204.3%JPMorganChase S&P 500 IndexS&P Financials IndexPerformance since the JPMorganChase and Bank One merger(7/1/200412/31/2024)Compounded annual gain12.3.5%5.9%Overall gain978.1f8.52.1%Performance for the period ended December 31,2024 Compounded annual gain One year44.3%.00.6%Five years14.7.5.7%Ten years17.6.1.4%This chart shows actual returns of the stock,with dividends reinvested,for heritage shareholders of JPMorganChase and Bank One vs.the Standard&Poors 500 Index(S&P 500 Index)and the Standard&Poors Financials Index(S&P Financials Index).8 2005 2014 2023 2024Consumer&CommunityBankingAverage deposits($B)1Deposits market share2#of top 50 markets where we are#1(top 3)Business Banking primary market share3Client investment assets($B)1Total payments volume($T)4%of digital non-card payments5 Credit card sales($B)Debit card sales($B)Debit and credit card sales volume($B)Credit card sales market share6Credit card loans($B,EOP)Credit card loans market share7Active mobile customers(M)#of branches#of advisors1$187 4.5%6(12)4.0%NA NA 20%$225 NA NA 15%$142 19%NA 2,641 NM$487 7.9%7(22)7.2%$213$1.6 49%$466$241$707 21%$131 17.1 5,602 3,090$1,127 11.4(25)9.5%$951$5.9 79%$1,164$515$1,679 23%$211 17S.8 4,897 5,456$1,064 11.3(25)9.7%$1,088$6.4 81%$1,259$546$1,805 23%$233 17W.8 4,966 5,755 Serve 84M U.S.consumers and 7M small businesses 71M active digital customers8,including 58M active mobile customers9 Primary bank relationships for 80%of consumer checking accounts#1 retail deposit share#1 deposit market share position in 4 out of 5 largest banking markets in the country(NY,LA,CHI and SF)while maintaining branch presence in all 48 contiguous U.S.states#1 primary bank for U.S.small businesses Ranked#1 in J.D.Power 2024 U.S.Wealth Management Digital Experience Satisfaction among full-service and self-directed investors10#1 U.S.credit card issuer based on sales and outstandings11#1 owned mortgage servicer12 Ranked#3 in the J.D.Power 2024 U.S.Mortgage Servicer Satisfaction Study13#3 bank auto lender for loan and lease financing14 Ranked#1 in J.D.Power 2024 Digital Experience for Customer Satisfaction among Non-Captive Automotive Finance Lenders15Commercial&InvestmentBankTotal Markets revenue16 Market share16 FICC16 Market share16 Equities16 Market share16Global investment banking fees17 Market share17Assets under custody($T)Average client deposits($B)18 Average CB client deposits($B)19Payments revenue($B)20Payments revenue rank(share)21Firmwide average daily security purchases and sales($T)#of top 75 MSAs with dedicated teams22Average Banking&Payments loans($B)23 Average CB Loans($B)24 Average GCB&GIB Loans($B)23Multifamily lending25#of Global Banking Bankers26#of CB Bankers#of GCB Bankers#of GIB Bankers 2006#8 6.3%#7 7.0%#8 5.0%#2 8.7%$10.7$220.8$66.1$4.9 NA NA 35$117.0$38.1$75.3#29 NA NA NA NA#1 8.7%#1 9.0%#3 8.0%#1 8.2%$20.5$621.4$124.6$7.9 NA NA 55$219.0$112.5$105.0#1 NA NA NA NA#1 11.2%#1 10.8%#2 12.2%#1 8.6%$32.4$912.9$174.1$18.3#1(9.3%)$3.0 72$340.8$209.2$131.2#1 9,272 3,469 1,408 3,574#1 11.4%#1 10.9%#2 12.4%#1 9.3%$35.3$961.6$179.5$18.4#1(9.5%)$3.4 74$348.8$220.3$128.1#1 9,726 3,700 1,453 3,858 90%of Fortune 500 companies do business with us On-ground presence in 177 locations in the U.S.,60 countries internationally and serving clients in 100 markets#1 in global investment banking fees for the 16th consecutive year and ranked#1 across M&A,ECM and DCM for the first time in a calendar year17 Consistently ranked#1 in Markets revenue since 201116 J.P.Morgan Research ranked as the#1 Global Research Firm,#1 Global Equity Research Team and#1 Global Fixed Income Research Team27#1 in USD payments volume with 28.7%USD SWIFT market share28#1 in U.S.Merchant volume processing29#3 Custodian globally by revenue30 Banking and Payments services to 32K Middle Market clients and 38K real estate owners and investors$2.6B revenue from Middle Market expansion,as well as nearly 2,700 new relationships in Middle Market Banking#1 overall Middle Market Bookrunner in the U.S.with 20 specialized industry coverage teams31 Over 8K incremental affordable housing units financed in 2024 within Global Banking32Asset&Wealth ManagementJPMAM LT funds AUM performed above peer median(10-year)33Client assets($T)34Traditional assets($T)34,35Alternatives assets($B)34,36Average deposits($B)34Average loans($B)34#of Global Private Bank client advisors34 NA$1.1$1.0$74$42$27 1,484 82%$2.3$1.9$221$146$95 2,392 83%$5.0$4.4$421$216$220 3,515 85%$5.9$5.2$504$235$228 3,775 181 funds with a 4/5 star rating37 Business with 57%of the worlds largest pension funds,sovereign wealth funds and central banks#2 in 5-year cumulative net client asset flows38#1 in active flows39 Positive client asset flows in 2024 across all regions,channels and asset classes#1 in active ETF flows and#2 in active ETF AUM39#1 in Institutional Money Market Funds AUM40#1 Private Bank in the World41AUM=Assets under management ETF=Exchange-traded funds LT=Long-Term USD=U.S.dollarCB=Commercial Banking FICC=Fixed income,currencies and commodities M&A=Mergers and acquisitions M=Millions DCM=Debt capital markets GCB=Global Commercial Banking MSA=Metropolitan statistical area B=Billions ECM=Equity capital markets GIB=Global Investment Banking NA=Not available T=TrillionsEOP=End of period JPMAM=J.P.Morgan Asset Management NM=Not meaningful K=ThousandsFor footnoted information,refer to pages 58-59 in this Annual Report.Client Franchises Built Over the Long TermDRAFT 3/7/25,TYPESET:3/17/25 REV.4/6/25_r1 v.25_JD_client franchises_139New and Renewed Credit and Capital for Our Clients20052024($in billions)1 In alignment with the business segment reorganization effective in the second quarter of 2024,Corporate Client Banking activity was moved from Small Business,Middle Market and Commercial clients to Corporate clients starting in 2024.2 Government,government-related and nonprofits available starting in 2019;included in Corporate clients and Small Business,Middle Market and Commercial clients for prior years.?Corporate clients?Small Business,Middle Market and Commercial clients1?Consumers?Government,government-related and nonprofits2 20242023202220212020201920182017201620152014201320122011201020092008200720062005$1,090$165$310$1,120$135$245$1,160$165$250$1,390$220$250$1,260$1,520$280$310$275$275$1,690$400$265$1,620$430$260$1,790$480$225$1,350$440$225$335$290$215$250$615$1,290$465$245$260$640$1,930$1,330$205$240$590$270$250$510$1,230$1,770$330$1,440$370$235$1,620$325$195$1,500$1,575$1,860$1,815$2,105$2,355$2,310$2,495$2,350$3,190$2,410$2,265$2,800$2,260$2,045$2,140$1,565$1,900 estimated101 Represents assets under management,as well as custody,brokerage,administration and deposit accounts.2 Represents activities associated with the safekeeping and servicing of assets.Assets Entrusted to Us by Our Clients20052024Deposits and client assets1($in billions)Assets under custody2($in trillions)?Client assets?Wholesale deposits?Consumer deposits20242023202220212020201920182017201620152014201320122011201020092008200720062005$1,883$730$398$2,061$755$439$2,329$824$464$2,376$861$503$2,353$2,427$722$757$558$618$3,255$3,617$3,740$3,633$3,802$3,781$4,240$1,186$1,209$959$1,132$5,926$6,580$6,383$1,349$1,057$8,789$5,292$1,306$1,095$7,693$4,488$1,314$1,148$6,950$3,258$844$718$4,820$2,740$792$679$4,211$2,783$784$660$4,227$3,011$1,881$558$372$2,811$1,743$573$365$2,681$1,415$648$361$2,424$1,513$520$221$2,254$1,296$425$214$1,935$1,107$364$191$1,66220242023202220212020201920182017201620152014201320122011201020092008200720062005$16.9$18.8$20.5$13.2$10.7$13.9$15.9$14.9$16.1$20.5$19.9$20.5$23.5$23.2$26.8$33.2$32.4$35.3$31.0$28.611JPMorganChase Exhibits Strength in Both Efficiency and Returns When Compared with Large Peers1 and Best-in-Class Peers1Year ended December 31,2024EfficiencyReturnsOverhead ratio2 ROTCEJPMorganChaseEfficiencyReturns JPM overhead ratioBest-in-class peer overhead ratio4JPMROTCEBest-in-class peer ROTCE5,7Best-in-class GSIB peer ROTCE6,7Consumer&Community Banking 53Q%COF-DC&CB 32%C-CB 25C-CBCommercial&Investment Bank 50VC-GB&GM 18%GS-GBM 15%GS-GBMAsset&Wealth Management 67b%NTRS-WM&ALLIANZ-AM 34A%MS-WM&IM 41%MS-WM&IMGSIB=Global systemically important bank ROTCE=Return on tangible common equityFor footnoted information,refer to page 59 in this Annual Report.*FOOTNOTES MOVED TO BACK PAGE25_JD_best-in-class_peers_0925_JD_best-in-class_peers_09.epsDRAFT 2/28/25 TYPESET:3/14/25 REV.4/6/25_r1 v.25_JD_best-in-class_peers_0971feecQ%MSCBACWFCGSJPM7 ACWFCGSMSJPMAdjusted ROTCE excluding Visa gain (net of contribution)325_JD_daily payment_v.0425_JD_daily payment_02.epsDRAFT 3/4/25:TYPESET 3/14/25 REV.4/2/25 v.25_JD_daily payment_v.04Daily Average Cash Management Volume1 and Value1(#in millions,$in trillions)Daily Average Merchant Transactions and Settlement Value(#in millions,$in billions)1 Based on regulatory reporting guidelines prescribed by the Federal Reserve for U.S.Title 1 planning purposes;includes internal settlements,global payments to and through third-party processors and banks,and other internal transfers.20242023202220212020201920182017201655.062.372.182.490.1102.4113.4124.8133.5$2.9$3.3$3.7$4.1$4.4$5.2$5.9$6.6$7.120242023202220212020201920182017201632.734.637.439.345.749.252.656.659.7$6.1$6.7$7.0$7.3$8.6$9.7$9.8$9.7$10.21225_JD_fortress balance_08Our Fortress Balance Sheet20052024Average loans/Liquid assets(%)20242023202220212020201920182017201620152014201320122011201020092008200720062005902622950118760895pcw%$804$547$510$366$450$371$137$146$106$921$745$786$768$755$860$1,652$1,447$1,428$1,437$1,43020242023202220212020201920182017201620152014201320122011201020092008200720062005$124$136$149$80$56$49$63$95$111$161$170$180$185$183$187$203$230$260$191$20410.1.0.7%7.3%7.0%7.0%7.0%8.8%9.8.2.6.2.1.0.4.0.7.1.1.2%?Tangible common equity(average)?CET1(%)2?Liquid assets?Average loans/Liquid assets(%)20242023202220212020201920182017201620152014201320122011201020092008200720062005902622950118760895pcw%$804$547$510$366$450$371$137$146$106$921$745$786$768$755$860$1,652$1,447$1,428$1,437$1,4309GRsince 2005Tangible common equity(average)1($in billions)Liquid assets4($in billions)2005 2006 2007 2008 200920102011201220132014201520162017201820192020202120222023 2024Net income applicable to common stockholders($B)$8$14$15$5$9$16$18$20$17$20$22$23$23$31$35$27$47$36$48$57Capital returned to common stockholders($B)3$6$5$9$(12)$(6)$1$11$4$9$10$11$14$22$28$34$16$29$13$20$31ROTCE(%)15$%6#!%DRAFT 2/28/25 TYPESET:3/16/25 REV.4/5/25_r1 v.25_JD_fortress balance_08*FOOTNOTES MOVED TO BACK PAGELiquid assets from December 31,20052012 defined as cash,cash due from banks and investment securities CAGR=Compound annual growth rateCET1=Common equity Tier 1ROTCE=Return on tangible common equityFor footnoted information,refer to page 59 in this Annual Report.13Within this letter,I discuss the following:Introduction Steadfast principles worth repeatingI.America and the World Are at a Critical Crossroads:Comprehensive Action and Leadership Are Imperative Now Only America has the economic,military and,yes,moral power.Celebrate Americas values and virtues,with humility,in order to restore civic pride,citizenship and purpose.Acknowledge and fix our problems at home by regaining common sense and being resolute.Recognize that the best strategy for Americas success is to implement effective domestic policies that drive robust economic growth for the benefit of all citizens.Initiate comprehensive economic foreign policy to win the new global“economic”war.America will be first but not if it is alone.Affirm that our national security and the worlds best military,at whatever cost,are paramount and necessary for peace.II.A Compendium of Critical Domestic Policies to Drive Growth,Opportunity and Well-Being We need consistent and responsible tax and fiscal policies.Our education system is in deep need of reform to create skills,jobs and opportunity.We must remedy the healthcare system,both to reduce costs and improve outcomes.We can improve effective regulations while reducing crippling rules,demoralization,and arbitrary and expensive litigation.We could do a better job supporting small businesses.We should have permanent plans to consistently drive the building of great infrastructure.We can make it easier to build a more affordable housing supply.We can strengthen our financial system and markets.Local democracy works:Let it shine and learn from it.Page 2Page 5 Page 15 Page 16 Page 17 Page 20 Page 21 Page 26 Page 28Page 29 Page 31 Page 33 Page 33Page 34 Page 35Page 35Page 35Page 39Page 40Page 40Page 40Page 41 Page 41Page 42 Page 44Page 46Page 48Page 48Page 49 Page 51Page 52Page 52Page 53Page 54Page 55Page 55Page 56Page 5714III.Specific Issues Facing Our Company We take a long view in dealing with our excess capital.We bring an investor/owner mindset to drive organic growth.Our largest risk is geopolitical risk.Were not in Kansas anymore:economy,inflation,interest rates,asset prices,trade wars,oh my!Consumer payments have become a new battleground.We devote significant resources to strategic intelligence to inform change and share our knowledge.Powering economic growth in TexasIV.Management Learnings Why complacency,arrogance,bureaucracy and BS kill companies.You have to get the numbers right.You need a full and constant assessment.You better have great controls.You must kill bureaucracy all the time and relentlessly.Mistakes I made.What the heck is culture?Leading the team.Why its hard to achieve good growth and innovate.Management tricks and tools.In ClosingI.America and the World Are at a Critical Crossroads:Comprehensive Action and Leadership Are Imperative NowOnly America Has the Economic,Military and,Yes,Moral PowerI am writing about this topic,both as a patriot who cares about Americas and the free worlds future and as the CEO of our company,because it may be the most critical factor affecting the future of JPMorganChase itself.The success of JPMorganChase has always been predicated on the success of the United States of America and the health of the world,particularly the strength of free and democratic countries.Whether you call them adversaries or major competitors,they have made their goal clear.We must act now.The brutal invasion of Ukraine and the inde-scribable terrorist acts on Israel should have dis-pelled any illusion that the world is a safe place.We do not need another Pearl Harbor or 9/11 to shatter any false sense of security based on the hopeful notion that dictators,terrorists and oppressive nations wont use their economic and military powers to advance their aims particularly against what they perceive as weak,incompetent and disorganized Western democ-racies.Global peace and world order are vital American interests.We also need to answer the question:What kind of world do we want to live in?And do we believe that we can,or should,try to make the world a better place?Practically,what is the other choice?Our international adversaries and major com-petitors have made it clear that their goal is to dismantle American hegemony,which means dismantling the rules-based system led by America in concert with our allies(essentially the Bretton Woods system and the North Atlantic Treaty Organization,as well as the International Monetary Fund and the United Nations).Since the end of World War II,this system has brought forth the longest period of peace and prosperity among the great powers.Today,it is clear this system needs serious reform and strengthen-ing,not total destruction.Yet,if given the oppor-tunity,that is exactly what our adversaries want to happen:Tear asunder the extensive military and economic alliances that America and its allies have forged.In the multipolar world that follows,it will be every nation for itself giving our adversaries the opportunity to set the rules and use military and economic coercion to get what they want.That is what is at stake here.We need to bring the whole of government and the private sector together to build the world we want while dealing with the cold realities of the world we have.We face the most perilous and complicated geo-political and economic environment since World War II.Todays world is more complex and more interconnected than ever before.Comprehen-sive strategies,diligently deployed,are required to address challenges on many fronts:the war in Ukraine;terrorism in the Middle East and the real possibility that Iran may develop a nuclear weapon;Europes potential fragmentation;and ongoing trade disputes and the rise of China.If Iran acquires a nuclear weapon,many other nations around the world will seek to acquire nuclear weapons,presenting us with a cata-strophic situation.A global nuclear arms race is the worst outcome that could happen to our world and this may be the greatest threat to mankinds survival.Lastly,it is extremely important to recognize that security and economics are interconnected “economic”warfare has caused military warfare in the past.Not only is Americas global leadership role being challenged outside our borders by other nations but also inside our borders by our polarized electorate.1515AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWThe actions taken in the next decade may prove,depending on how our country and our allies per-form,the most consequential of our lives and may very well determine the fate of the free and demo-cratic world over the next century.America has always had an amazing ability to confront enor-mous challenges and we did so by facing them head-on with superb leadership from Abraham Lincoln to FDR to Dwight Eisenhower.We should remember that America,“conceived in liberty and dedicated to the proposition that all men are created equal,”still remains a shining beacon of hope to citizens around the world.Here are five things our nation needs to do well in order to secure the future we should want for our country and our companies.I fear that if we fail at one of them,we may fail overall:1.Celebrate Americas values and virtues,with humility,in order to restore civic pride,citizenship and purpose.2.Acknowledge and fix our problems at home by regaining common sense and being resolute.3.Recognize that the best strategy for Americas success is to implement effective domestic policies that drive robust economic growth for the benefit of all citizens.4.Initiate comprehensive economic foreign policy to win the new global“economic”war.America will be first but not if it is alone.5.Affirm that our national security and the worlds best military,at whatever cost,are paramount and necessary for peace.These are my prescriptions,and I understand that some people may disagree with them and,on some issues,I may ultimately be wrong.What I am not wrong about,however,is the urgent need to face these issues head-on we should not assume that America will overcome them.We have always been a resilient nation and have overcome significant adversity in the past because we faced our challenges and dealt with them properly.Problems dont age well.And the consequences of not dealing with this properly range from bad to catastrophic.CELEBRATE AMERICAS VALUES AND VIRTUES,WITH HUMILITY,IN ORDER TO RESTORE CIVIC PRIDE,CITIZENSHIP AND PURPOSE.To be able to attack our problems at home and abroad,we must be strong.And our core strength is based upon our commitment to our values,as well as our ability to work hard and think intelligently about our problems.If the soul of America is not strong,then the rest will be weak.While we should acknowledge Americas flaws,they should not be used to pull apart our country.Our values transcend any political stance libertarian,conservative,progressive,Democrat or Republican.We need to believe in ourselves and get back to work(in the office!),not tear each other down.Americas strength is not a divine right it is earned by citizens committed to a common purpose.Many of the blind ideologies being bandied about run counter to our fundamental principles.Our principles of freedom of speech,religion and enterprise allow individuals to pursue life as they lawfully see fit.Ideologues often adhere to rigid beliefs and seek to impose those beliefs on others;in extreme forms of fanaticism,there is no room for individual differences.I applaud many traditional Democratic values,such as a commitment to try to lift up all of our citizens and to provide more justice and equal opportunity.I also deeply respect many tradi-tional Republican values,such as a dedication to provide a strong national defense,to promote free enterprise and encourage a pro-business environment,and to emphasize the importance of the Constitution.And we should all support other core values,such as family,country,self-reliance,respect for workers and common sense.These values are not mutually exclusive and should be embraced and upheld by both parties.We,the people,need to be able to embody all these values.Even with all of our current problems,billions of people,if they could,would leave their country and move to ours.Similarly,if most people could only invest in one country,they would choose the United States.Our exceptionalism is based 1616AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWon our freedoms,our liberties,our opportunities and our rule of law,all under the protection of the Constitution(and the military)of the United States of America.You need only to witness the deep appreciation of new citizens,who often made enormous sacrifices to be here,to feel what it must be like when they take the Oath of Allegiance to the United States of America it would bring you to tears.It is incumbent on us to educate ourselves,our fellow citizens and future generations about American values and our ongoing pursuit of a more perfect democracy.This education should start in grammar school our civic roles and responsibilities need to be taught.Our common values are transcendent.ACKNOWLEDGE AND FIX OUR PROBLEMS AT HOME BY REGAINING COMMON SENSE AND BEING RESOLUTE.Facts are often used by people to justify what they already think,and then populists on both sides distort the facts and use them to jazz up citi-zens around their grievances.But,as former U.K.Prime Minister Tony Blair asserts,we need to sep-arate the populists from the grievances because many of these grievances are partially rooted in truth and must be addressed.The following are issues that I believe are causing legitimate frustra-tion and anger in the country today.This list is not complete,but lets acknowledge some of these profound challenges.In this section and the next,I discuss some possible solutions:Lack of control of our borders.Uncontrolled immigration is highly disturbing to affected populations around the world and reduces the ability to manage legal and needed immigra-tion.In the United States,the number of immi-grants has increased by approximately 50%over the last 20 years.Once we gain control of our borders,I believe most Americans would support increasing merit-based immigration,including allowing anyone who earns a degree here to stay,ensuring there are proper visas for seasonal workers,enabling children born in this country to remain and providing a rigor-ous path to citizenship for law-abiding,undoc-umented immigrants.Healthy and proper immigration would bring great talent to our country and has been shown to actually help grow the economy.Too many left behind.Our fellow citizens at the lowest income tier have,in fact,been left behind,a trend were seeing globally.From 1979 to 2019,wage growth of the top 10%income tier was nearly 10 times that of the bottom 10%which,basically,did not increase at all.Our very low-income citizens experience higher school dropout rates,greater joblessness,increased drug use and crime in their neighborhoods,and signifi-cantly worse health outcomes.They often reside in rural areas and in inner cities.So while enormous wealth has been created in the country,the promise of equal opportunity seems unfulfilled for too many for too long.Education,some of the best and some of the worst.We have many of the best universities(including research universities)in the world.However,over the last 20 years,the cost of college has more than doubled for both public and private colleges,while household median incomes have gone up only 18%.Many inner-city schools graduate under 50%of their stu-dents.And in both high schools and colleges,we dont teach enough skills that lead to well-paying jobs.Again,this affects the bot-tom income tier far more.Equal opportunity is clearly not fairly shared.Ineffective and incompetent government.Most people do not believe that the govern-ment,regardless of party control,is doing a good job.For some,its the constant bureau-cracy,lack of permitting and failing schools;for others,its the constant anti-business sentiment.We struggle to build pipelines,upgrade our electrical grid,develop high-speed rails and accomplish other necessary goals.Our government seems unable to reform and reorganize itself,which is a prob-lem.This is amplified by the fact that many of our career politicians have little real-world experience,and it shows.We have failed at basic common sense.And lets stipulate here that this is not about blaming individual workers.We all know that many government employees are hard-working,ethical and caring citizens doing very important jobs that support and protect their fellow Americans.1717AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOW Profligate fiscal management.Most people do not believe that giving the government more money leads to better outcomes.In fact,most people perceive government actions,such as special tax breaks,as patronage for favored interest groups.Many people think the tax system itself is littered with unfair loopholes.Government has been fiscally irre-sponsible and profligate and even with all the money spent,grievances increased.Our government estimates that it makes over$200 billion in“improper”payments per year.Somehow,we have huge deficits and bad outcomes.A leviathan both too weak and too strong.Our state is paradoxically both too weak ineffective at accomplishing essential tasks and overly strong overreaching in ways that undermine fundamental democratic princi-ples like individual freedom and autonomy.Over the last few decades,many have felt violated by the governments increasing inter-ventions.This heavy-handedness often prescribes not only how we should act but also how we should think and feel.Culture wars and virtue signaling.In the past,the elite often insulted traditional values of family,God and individual success,lecturing about their superior values from their com-fortable perches and imposing all of this on people who believed differently.We have implemented many climate policies that do not effectively address climate change and raise the cost of living.We have stopped teaching some important parts of American history.Instead of acknowledging Americas significant virtues,we denigrate them and tear them down.We engage too frequently in class warfare and excessively in identity poli-tics;i.e.,using race,sex or creed inappropri-ately.And state laws were passed that actually increase crime instead of preventing it.Many of these policies hurt the very people they were meant to protect most.Many cities that paid a high price for their misguided policies are now returning to obvious policy goals safe streets,better schools,more housing.Unfortunately,more and more people are being disrespectful,condescending and unwilling to listen to one another.While adjustments are needed,it is quite predict-able that the pendulum will swing too far in the other direction.When all is said and done,lets hope we can all treat each other with a little more respect.An imperfect healthcare system.While in some ways our healthcare is the best in the world,it is also expensive,essentially costing almost twice as much as the average health-care in OECD(Organisation for Economic Co-operation and Development)countries.Our healthcare system is also lacking in preventive care,transparency and proper incentives,and leaves too many uninsured.Crippling litigation,bureaucracy and regula-tion.An effective legal environment,upheld by a dependable judiciary,is essential for eco-nomic health,protecting rights,ensuring jus-tice,resolving disputes,maintaining checks and balances,and supporting innovation.However,the current environment is demoral-izing and slowing growth.While we all want justice through the legal system,our litigation system is expensive(far more than most other countries),capricious,arbitrary and slow.All of this leads to extreme risk aversion mostly on the part of government but often on the part of business as well.It is concerning that some politicians have grown increasingly beholden to the interests of tort lawyers,posing real risk to balanced policymaking.In some ways,this could be Americas Achilles heel.Red tape 2.0.Red tape has always meant excessive paperwork,bureaucracy and regulations.But its been taken to a whole new level by people who really like it and want even more of it.They have doubled down on regula-tions and bureaucracy,which also dramati-cally increased red tape.In so doing,they made sure that new rules were written by academics with no pragmatic experience,guaranteeing that they would be excessive,confusing,contradictory and infused with ideology.So we need to give credit where credit is due.Therefore,I have renamed it“BLUE”tape.Even when“blue”tape has been shown to slow down economic growth and make it hard for businesses and individuals to thrive,those who created it excuse the out-come and refuse to change(see Europe).1818AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOW Damaging trade practices,particularly with China.While trade has greatly benefited the world and many if not most American citizens,the damage that was done to some,while acknowledged,was never rectified.Those who suffered felt the sting both in lost jobs and lower wages.We also allowed too much unfair trade.Finally,and most import-ant,we failed to protect our national security,becoming too reliant on potential adversaries for critical products that the military needs(more on this later).Selfishness on the part of our citizens and elected officials.Whether it is unions fighting new technologies or businesses getting tax breaks,the focus on“what am I going to get”needs to stop.There are 13,000 groups lobby-ing in Washington,D.C.,defending their“spe-cial interest.”Rarely do they fight for what is good for America.When Americas future hangs in the balance or when special interest groups wield undue influence,it is time to pri-oritize principle over profit and put country before company or union.Many in our country do this our uniformed officers in the military are an ideal example as they put their lives on the line out of a deep belief in our values and our country.America is still the exceptional nation,but its problems demand that we adjust our strategies.America has carried the burden of keeping the world safe and has made extraordinary efforts,including through trade,to improve the lives of the citizens of other nations.It is time to rebal-ance and rebuild but not retreat from the post-world order.A U.S.retreat from international leadership will leave a vacuum that may be filled by China or other actors that seek to promote an alternate set of international rules and norms.Both parties contributed to our failures(and the media amplifies it).Many of the grievances Ive noted existed and grew under both parties leadership.These grievances are frequently amplified by media,both traditional and new,that often adheres to only one partys views,which leaves audiences blind to all of the issues and consequences of flawed policies.For example,when conducting interviews,reporters many times reveal their biases whether through subtle support or open skepticism.Interview subjects may be discred-ited because of who they are,not because of the content of their argument.Much of this is making us meaner to each other a little more kindness and understanding would go a long way.I am a firm believer that we should constantly talk with each other,air our views,hold each other accountable and try to respect all sides of an argument.Social media has made this worse,in fact,delib-erately worse by using algorithms to manipulate as opposed to educate.Networks and platforms could meaningfully improve the quality of dis-course on the town square both by offering a menu of algorithms,as opposed to ones that are addictive,and by requiring all users to authenti-cate their identities,whether they choose to speak anonymously or not.In banking,we have“know your customer”requirements social media should have them as well.Verifying iden-tities would go a long way toward eliminating foreign influence and bots,and would make individuals,not the platform,subject to the law.We also exist in a nation awash with inaccurate and unfair labeling and scapegoating;i.e.,Wall Street versus Main Street.Who exactly is Wall Street in this comparison with Main Street?Large business and small business are symbiotic.Shouldnt we respect jobs and workers and the companies that create those jobs?And some give voice to the view that public sector jobs are more virtuous than private sector jobs.Less than 25 million people work in the public sector and we should hold them in high regard teachers,police,firefighters,military,sanitation workers and others.All jobs have dignity and purpose,and add to the general well-being of the country.It is good to remember that the 135 million people who work in the private sector generate the income that funds the public sector.All of these are among the reasons why I believe the body politic may be tired and ready to see bold disruption.While we need to take proper actions,we also need reform and reconstruction.In addition,our adversaries mistake our appar-ent disarray as a sign that we are lazy,weak and decadent.Anyone who knows America its work ethic,innovation and morality of most citizens knows this is not true.1919AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWRECOGNIZE THAT THE BEST STRATEGY FOR AMERICAS SUCCESS IS TO IMPLEMENT EFFECTIVE DOMESTIC POLICIES THAT DRIVE ROBUST ECONOMIC GROWTH FOR THE BENEFIT OF ALL CITIZENS.We need to address the underlying issues caus-ing the grievances that are tearing us apart and holding the nation back.By enacting meaningful policy reforms to resolve these issues,I believe our gross domestic product(GDP)would grow by over 3%a year benefiting all Americans and especially those in our lower-income communi-ties.From 2000 to 2024,GDP grew by just over 2%a year.Had it grown by 3%,which should be easily achievable with the right policy decisions,our GDP per person would be approximately$16,000 higher this year.In this section and in the following,I describe many of the policies that we need to fix and,in some cases,how to do it.Some of the fixes are easy,while others are more challenging.They run the gamut from improving the supply side,such as education,infrastructure,permitting,production capability and technology,to addressing the demand side,including fiscal and tax policy.All of these are domestic policies,which we can fix on our own.Later in this section,I talk about foreign economic policies,including trade,foreign investment and the U.S.dollar as the worlds reserve currency,all of which are essential to our country and the world.Policy needs to be detailed,comprehensive and coordinated to be successful how you describe it politically is a separate matter.As someone once said,“If you are going to do what you already did,you are going to get what you already got.”We have the best economy in the world,but we must confront our extensive flaws and fault lines.We need to build our own capabilities and stop the constant under-and over-reaction.Our policies must foster healthy,sustainable growth,and its essential that we unite the entire nation government and busi-ness alike to achieve it.Around the world,we observe both effective and counterproductive policies.For example,well-intentioned labor laws can backfire,as seen in parts of Europe where rigid labor regulations have contributed to persistently high unemployment.Similarly,certain safety net programs may inadvertently discourage paid work.On the other hand,stream-lined permitting policies show how smart gover-nance can accelerate development and get projects built in short order and safely.Nations that implement sound policies are capable of achieving remarkable outcomes;consider Ireland,Singapore,South Korea and Sweden.Even Greece,which used to be Europes perennial basket case,has managed to turn itself around,driven by an exceptional political leader.Good political leaders get both the politics and the policies,in detail,right.They are constantly educating the public instead of just responding to it.Our country needs leaders who can guide their parties away from catering to the extremes and who can collaborate effectively with our allies to craft integrated policies that address both economic and security challenges in the short and long term.Most important,on the home front,we need lawmakers on both sides of the aisle to commit to the serious work of governing setting aside partisan divides to develop policies that foster economic growth and expand opportunities for all Americans to succeed.Running for any executive office(mayor,governor or president)and running the government are completely different things.Some quickly figure that out,and some dont.While a good politician must communicate policies in a clear,compelling way that resonates with the American public,the policies them-selves must be well designed to be truly effec-tive.And this is more important today than ever before because the future,for both foreign policy and economic policy,is fraught with extreme risk.We need to promote,not denigrate,businesses,large and small.On economic policy,the Republicans are right to champion business and free enterprise,limit excessive government intervention,establish an international tax system that has made America competitive for the first time in over 15 years,and cut back on needless,mind-numbing,job-killing regulations.And all of this could be done while still maintaining the proper regula-tion necessary to prevent market abuses and safeguard the economic environment.Recent Democratic policies,driven by often-misguided narratives and an often-2020AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWdismissive tone,have left much of the business community frustrated and disillusioned.Many government agencies and regulators frequently criticize business by relying on oversimplified and dishonest concepts like“price gouging”to justify their stance.They tend to take the iso-lated missteps of a few companies and use them to paint the broader business community as unethical.This fuels rhetoric that undermines free enterprise and leads to regulatory over-reach that frequently exceeds the intent of the law.Few in the previous administration actually understood business or had any experience run-ning a business and it showed.Other import-ant policies(for example,infrastructure,the CHIPS and Science Act,the Inflation Reduction Act),while well-intentioned,were laden with vir-tue-signaling and uninformed rules,which limit their effectiveness.And instead of fixing endless regulations,like permitting,government effec-tively made them worse.It would be wiser to properly educate the public about the role of business,large and small.The private sector is the engine for investing our countrys capital into high-returning areas it is our most effective tool for promoting innovation,sustainable growth,productivity and jobs.There are more than 30 million businesses in America,but within the private sector,it is large compa-nies that are responsible for 85%of the research and development(R&D)and nearly half of all nonresidential capital investment.Big compa-nies generally have excellent healthcare,well-ness,retirement and training programs.Every time a new plant is built somewhere,it cre-ates four or five times more jobs in that area,usually in small businesses.Small business and large business are truly symbiotic.INITIATE COMPREHENSIVE ECONOMIC FOREIGN POLICY TO WIN THE NEW GLOBAL“ECONOMIC”WAR.AMERICA WILL BE FIRST BUT NOT IF IT IS ALONE.Americas extraordinary standing in world affairs is predicated on our economic,military and moral strengths.Our exceptional relation-ships with our allies largely exist both because of the security they receive from Americas mili-tary umbrella and our strong economic ties.But we are in a new world defined by shifting power dynamics,rapid technological disruption and rising geopolitical tensions,including Chinas growing assertiveness.This economic competi-tion and conflict will likely go on far longer than the wars on the battlefield.The autocratic nations of the world,and some of the nonaligned nations,would like to see a fragmentation of Americas economic alliances and a weakening of our global economic posi-tion,including our status as the worlds most powerful economy,a leader in innovation and holder of the worlds reserve currency.This competition has many players,using many tac-tics,over many years.But our long-term strate-gic goals should be crystal clear:to maintain the cohesion and strength of the Western world,including their economies.If the Western worlds military and economic alliances were to frag-ment,America itself would inevitably weaken over time.Economic fragmentation from our allies may be disastrous in the long run.Keeping our alliances together,both militarily and economically,is essential.The opposite is precisely what our adversaries want.Europe has some serious issues to fix.Since 2008,the euro-zones GDP per person has gone from over 75%of U.S.GDP per person to approximately 50%.While Europe has received some tough mes-sages from U.S.leaders recently,what European leaders should do is seize the moment.Euro-pean nations know what they need to do:signifi-cantly reform their economies so they can grow;e.g.,finish the economic union to make com-merce across their countries easier and more efficient,and initiate labor reform and tax reform to incent more business growth and more labor participation(see the Draghi report).They also recognize that they need to materially increase their military spend and capabilities.This is going to be hard,but our countrys goal should be to help make European nations stronger and keep them close.If Europes economic weakness leads to frag-mentation,the landscape will look a lot like the world before World War II.Each nation will need to seek out its own relationships to secure its future,and that may very well mean closer rela-tionships with Russia and Iran for energy and China for trade and economics.Such moves would ultimately make these countries far more reliant on China and Russia over time effectively 2121AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWmaking them vassal states.Economics is the longtime glue,and America First is fine,as long as it doesnt end up being America alone.We do not need to fear China we just need to get our act together.Comprehensive economic policy is critical to compete with China.There is no more conse-quential relationship for the world,and this rela-tionship will affect the whole Indo-Pacific region,especially our allies:Australia,Japan,the Philip-pines,South Korea and others.Over the last 20 years,China has been executing a more comprehensive economic strategy than we have.The countrys leaders have success-fully grown their nation and,depending on how you measure it,have made China the largest or second-largest economy in the world.That said,many people question Chinas current economic focus it continues to be beset by many eco-nomic and domestic issues,particularly capital misallocation,which have resulted in large real estate problems,a weakened financial system,policies that inhibit entrepreneurs in their own country and an urgent need to accommodate a rapidly aging population.China has its own national security concerns,as it is located in a very politically complex part of the world.Many of Chinas actions have caused its neighbors(e.g.,Japan,Korea,the Philippines,among others)to start to re-arm and draw closer to the United States.It also surprises many Americans to hear that while our country is 100%energy sufficient,China needs to import 10 million barrels of oil a day.It is clear that Chi-nas new leadership has set a different course,with a much more intense focus on national security,military capability and internal devel-opment.That is its right,and we simply need to adjust to it.America still has an enormously strong hand plenty of food,water and energy;peaceful neighbors;and what remains the most prosper-ous and dynamic economy the world has ever seen,with a per person GDP of over$86,000 a year(this compares with Chinas GDP per per-son of$13,000 in 2024).Most important,our nation is blessed with the benefit of true free-dom and liberty.Starting well over a decade ago,both business and government should have focused on certain problems with China:unfair trade across multi-ple dimensions and our reliance on China for critical national security-related components.While we may always have a complex relation-ship with China(made all the more complicated and serious by its actions in supporting Russia in the ongoing war with Ukraine),the countrys vast size and importance to so many other nations(China is the largest trading partner to almost every other nation)require us to stay engaged thoughtfully and without fear.At the same time,we need to build and execute our own long-term,comprehensive economic secu-rity strategy to keep our position safe and secure.For example,we need to remain com-petitive with China in the artificial intelligence(AI)race by bolstering our technological advancements and reducing our reliance on Tai-wan for semiconductor chips.Most of the actions we can take to protect our country are unilateral and do not need Chinas agreement.Overall,I believe that respectful,strong and con-sistent engagement would be best for both the United States and China,as well as the rest of the world.Whether you view China as a competitor or a potential adversary,we should work with our allies to firmly negotiate an ongoing relationship.Tough but thoughtful negotiations over strate-gic,military and economic concerns including unfair competition should lead to a better situ-ation for all.If America provides strong leader-ship,and keeps the Western world together,China will be better off forming partnerships with a strong Western world than with nations like Russia,Iran and others.We should also rec-ognize what critical common interests with China we share in combating nuclear prolifera-tion,climate change and terrorism.What China does so well is manage its country as a whole coordinating government and business so that they are able to further some of their stra-tegic goals.We must improve our ability to act in a more organized and strategic way to succeed in this new global landscape.Simply put,if we keep our economy the strongest and maintain the strength of our alliances,we will thrive.2222AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWWe should promote healthy economic alliances,which includes fair trade.Global trade is enormous,amounting to approxi-mately$20 trillion a year,of which only$2.5 tril-lion is with the United States.And global trade will take place with or without us.We should remember that other nations have choices,both in the short term and in the long term,and they will make these choices in their own self-interest based on economics,security and reliability.Many countries need trade to help grow their economies.The European Union,for example,has the largest trade network with 40 individual agreements.China has applied for and signed several new trade agreements(e.g.,the Regional Comprehensive Economic Partnership,Digital Economy Partnership Agreement,and Compre-hensive and Progressive Agreement for Trans-Pacific Partnership).The United States lacks trade agreements with some of its closest allies,many of whom have signed trade deals with China.We should more actively be seeking free(and,of course,fair)trade agreements,par-ticularly with strong allies like Australia,Japan,the United Kingdom and we hope one day the European Union.These can be done in a way that is clearly beneficial to both sides.We already trade with most nations on the planet and,of course,we should always be trying to make it better and fairer for America.Deepening high-standard trade with key trading partners is good economics and great geopolitics.And we dont need to ask many nonaligned nations,like India and Brazil,to align with us but we can bring them closer to us by simply extending a friendly hand with trade and investment.There are many ways to combat unfair trade industrial policy is one of them,but it should be done right or not at all.For hundreds of years,countries have used trade practices to get a leg up on other coun-tries.This economic competition is often exer-cised through industrial and trade policy,and it comes in many forms:banning or limiting trade(quotas),tariffs,subsidies,grants,tax credits or accelerated depreciation,loan guarantees,long-term purchase agreements and capital controls.These tools are generally intended to give a company or an industry an unfair competitive advantage,and when used together,they can create unbeatable economies of scale.In their harshest form,they can be used by countries as a tactic to try to unfairly dominate whole industries.This should not be allowed.There are other unfair trade practices that need to be mentioned;e.g.,nontrade barriers,such as regulations that effectively stop specific types of trade and various unfair tax policies that range from value-added taxes to a particular countrys tax schemes.Many countries use some of these tools in various forms(including the United States).So trade agreements have many flaws and need to be carefully negotiated.Practices such as permitting countries to circumvent trade restric-tions imposed on them for example,allowing China to use agreements that it has with other nations to bypass tariffs on Chinese goods can and should be stopped.Obviously,where the United States is treated unfairly,we should demand that those agreements be fixed.It would also be good to acknowledge that we have sometimes treated others unfairly(for example,parts of the Inflation Reduction Act unfairly favor American business).Industrial policy mechanisms,when used,should be as targeted and as simple as possible.The cleanest of these is tax credits in various forms.Whatever the policy,two rules should not be violated:(1)there should be no social engi-neering and(2)markets should allocate capital,not the government lest the result is a buffet where corporate America gorges.The govern-ment is simply not good at allocating capital in a free market.One example should suffice:In our attempt to create a more competitive chip man-ufacturing industry in the United States(it costs two times more to manufacture these chips in America,and,therefore,our manufacturers would fail if they tried to compete),the govern-ment could have given land grants for the land,accelerated depreciation and lowered taxes or offered tax credits for an extended period.Then the companies and the capital markets would have competed to decide how best to do this.Nonetheless,we need to acknowledge that there have been real negative job impacts as a result of trade(in 1990,manufacturing created 18 million jobs in this country versus 13 million today),which are usually concentrated around certain geographic areas and businesses.So 2323AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWany new trade policy should be combined with a greatly enhanced and effective Trade Adjustment Assistance program,which provides retraining,income assistance and relocation for those workers directly impacted by trade.America already trades with more than 200 countries,territories and regional associations.We should strike the best and,of course,the most fair trade agreements that we can.And we should do this while maintaining our close economic relations with our allies.Whats the truth about trade deficits?Trade deficits,by their nature,are not necessar-ily good or bad.Even if our country had no net trade deficit,it would likely be running deficits with some countries and surpluses with others.Sometimes a high trade deficit results from a countrys extraordinary attractiveness as an open investment destination,and these invest-ments help that country grow and prosper.This may be true for part of Americas trade deficit.However,trade deficits for pure consumption may mean a country is slowly selling parts of itself to someone else,and Im not sure thats a good idea.Our trade deficit over the last 20 years has totaled over$12 trillion,and this is probably too large.The other side to the trade deficit is an investment surplus,which has resulted over the years in foreign investors owning$30 trillion of U.S.securities,while U.S.investors own only$16 trillion of foreign securities.In 2005,these numbers were$6.3 trillion and$4.3 trillion,respectively.You can see that,over time,foreign investors have come to own an increasing share of the United States.(For your information,Chinas holdings of U.S.assets are approximately$1.5 trillion,of which half is U.S.Treasury securities.)It is good to remember that our trade deficit is also driven by our large government deficit.Therefore,it is perfectly reasonable for us to focus on our“twin”deficits:our$2 trillion fiscal deficit and our$1 trillion trade deficit.While the numbers in the above paragraph highlight the attractiveness of the American economy,they also reveal certain underlying risks:If America,for whatever reason,becomes a less-attractive investment destination,the U.S.dollar and the economy could suffer if foreigners sold their U.S.assets.Our extraordinary energy position is a massive competitive advantage,ensuring affordable,reliable,safe and ever cleaner energy,both for us and critically for our allies.The United States has a huge competitive advantage in that it is essentially self-sufficient on energy and will be for decades.This reduces the cost of so many things in our country(e.g.,up to 40%of the cost of food is related to energy)and makes it much easier for American compa-nies to compete.Its also an enormous geopoliti-cal benefit for us to be able to export safe,afford-able,secure liquefied natural gas overseas to our allies.This binds them to us,gives them greater security and is economically beneficial for the United States.It also has the virtue of being good for the climate as cleaner liquefied natural gas replaces dirtier coal.America should lead the way in generating more energy to meet greater demand,including from AI,which will require huge amounts of energy.And we need an“all of the above”strategy for developing renewable energy,as well as tapping conventional energy sources.We should not forget that to make energy ever more efficient and cleaner,we also need more rapid permit-ting,investment in the grid and access to critical minerals.I am convinced that,over time,our innovative capabilities will make energy cleaner and solve the carbon emissions problem.In this country,we have made many mistakes around climate policy and I believe a lot of money will ultimately be wasted.We also made many bad decisions.For example,we failed to build the pipeline that would bring gas from Pennsylvania to New York this would have replaced coal(in a cleaner way)and dramatically decreased the cost of energy for New Yorkers.Its also important to remember that pollution in the United States was significantly reduced because we effectively outsourced the produc-tion of“dirty”manufacturing,like steel,to other nations that have lower emissions standards than we do.One last point:Billions of people around the world still lack access to affordable and reliable energy,a fundamental driver of higher and healthier living standards.Meeting this demand improves lives on a global scale.2424AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWThere are many other critical foreign economic policies that could be used to promote the American economy and protect our allies.Essentially,they are:We must keep Americas tax system interna-tionally competitive so as not to drive capital,companies,intellectual property or people overseas.There is a complexity to this because so many countries play games with their tax systems but staying competitive can be done.It would be a huge mistake for America to put itself at a disadvantage there are better ways to collect taxes(more on taxes in the next section).U.S.development finance institutions,includ-ing the two main ones(the U.S.International Development Corporation and the Export-Import Bank of the United States),are gener-ally used to develop projects in and support exports from developing nations.Our devel-opment finance is very small relative to the size of our country in total,Americas devel-opment finance investment is approximately$60 billion.We are virtually absent compared with China.By contrast,Chinas government-led Belt and Road initiative has lent or invested$1.4 trillion in 155 different countries.China does this to promote its business expansion overseas and to enhance its own energy,minerals or supply chains.In addition to the Belt and Road initiative,China has foreign direct investment of approximately$3 trillion in the rest of the world.This invest-ment was virtually zero in 2000.By compari-son,Americas foreign direct investment totals$6.7 trillion.In my travels in Africa and Latin America,the absence of American business or government investment is palpable.African and Latin American nations want more of America,but they are getting what they need from China.Done right,America could dramat-ically increase its development finance it is not a giveaway,it can be quite profitable,and it has the virtue of promoting America and its businesses overseas.We need to do a better job,in general,of pro-moting American business overseas.Ameri-cas development institutions can work with American businesses far more effectively,for instance,by providing political insurance on large capital investments.This insurance would protect businesses and enable them to make investments in unstable regions by covering risks like government takeovers or political unrest.At the same time,while laws like the Foreign Corrupt Practices Act have helped reduce corruption and level the playing field abroad,such laws often put firms at a disadvantage,including American firms and international firms with a U.S.nexus.The rules can be vague,the guidelines are ambiguous and the penalties are steep making impacted companies hesitant to compete.This needs to be fixed.We need to constantly educate and inform the world about Americas values and virtues.We dont need to be condescending or lecturing,just consistently educating and sharing the lore of freedom and democracy combined with a gentle assist will eventually win the day.Americas strong economy plays a critical role in preserving the U.S.dollar as the worlds reserve currency.The U.S.dollar is a“fiat”currency.Some say this makes the dollar purely a matter of trust.This is simply not true.The Federal Reserve,which issues dollars,owns assets(mostly U.S.Treasuries)supporting each dollar it issues.Those assets carry the full faith of the U.S.government,backed by its taxing power on the most prosperous nation the world has ever seen.If you have U.S.dollars,you are essentially free to do with them as you see fit that is not true in many autocratic nations.The U.S.dollar is the worlds reserve currency because of Americas open markets,the strength of our economy and our rule of law upholding property rights all protected by the U.S.military.These are also the reasons why the United States is such an attrac-tive investment destination for anyone wanting to invest their money.A well-functioning international monetary sys-tem is good for the United States and for our allies,particularly since the rules are set by us and our allies(although some reform is needed).The U.S.dollar is foundational to a healthy global economic system,and its the cornerstone of Americas commanding global influence.The strength of our financial system gives America considerable clout,not only in allocating capital 2525AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWefficiently but also in creating a huge informa-tional advantage for our country.The U.S.finan-cial system writ large is the best in the world with extraordinary knowledge and capabilities,it is a critical flywheel of the American economy.To protect the status of our global economic influence and of our reserve currency,America also needs to be broadly trusted and reliable.Good trade should be enabled to flourish.Sanc-tions are a powerful tool(against not just finan-cial corruption but global bad actors)but they should only be used judiciously and for the right purpose and,generally,done in concert with our allies.In addition to the benefits mentioned above,being the reserve currency saves the United States$100 billion a year at current inter-est rates.People around the world actually carry approximately$2.5 trillion of paper U.S.dollars,which,in effect,is borrowing without paying interest.There is a correlation between the strength of our economic and military alliances and our status as reserve currency:The stronger our alli-ances,the stronger our reserve currency status.However,the opposite is also true.History has shown that as countries become weaker,their currency loses reserve currency status.AFFIRM THAT OUR NATIONAL SECURITY AND THE WORLDS BEST MILITARY,AT WHATEVER COST,ARE PARAMOUNT AND NECESSARY FOR PEACE.In todays troubled world,weve seen several stark reminders that national security is and always will be paramount even if that idea seems to recede in tranquil times.America remains the arsenal of democracy and the bastion of free-dom for the whole world.We must explain to the American public,over and over,how Ukraine and the terrorist activity in Israel,fueled mainly by the Iranian regime,are the actual battlefields of freedom.It is our hope that these terrible events have awakened all of us to the fact that the world is never safe.As President Ronald Reagan once wisely said,“The only way to stay safe is peace through strength.”Having the best military is expensive,but it is not nearly as expensive as dealing with what would happen without it.We must maintain the worlds strongest military,without question.Of course,it is reasonable to expect allies to pay their fair share of global military expenses but we should also recognize that it is in our own strategic self-interest to keep our allies together.The U.S.military presence around the world should not be viewed as mere protection for hire its a critical pillar of global stability and a reflection of our leadership.We hope one day there will be a lasting and per-manent peace for Israel and the Middle East.Ukraine needs a proper resolution one that provides it with sovereignty,stability and secu-rity putting their country on a path to healthy growth.Sovereignty means that they are a free nation left to make their own decisions.If Ukraine is left in a weakened position(meaning,essentially,that Russia succeeded),we will see a fracturing of Americas military alliances as countries,Europe in particular,search for better security arrangements.One more point about military security:There was always a thought that America was far from European wars,even though we have been dragged into them many times.With the advent of cyber war,satellites and hypersonic missiles,the world has changed;other countries military capabilities are already on our doorstep.We need to employ all instruments of national power.The exercise of power isnt measured by military force alone but also includes other instruments of national power:diplomacy,economic devel-opment,foreign assistance(all done in a strate-gic,efficient and accountable way)and constant education about the benefits of freedom.Again,as President Reagan said,“Freedom is special and rare.Its fragile;it needs protection.”Funda-mentally,we need to realize that power is also based on trust:trust that we will do the right thing,that we can do the right thing and that we are not just strong but reliable.We need to immediately change certain policies to secure and enhance our military capabilities.Sustaining Americas position of power requires major changes in the funding and planning of our military.This includes major changes in trade,production capacity and supply chains to make our military as resilient and capable as possible.Some specifics will suffice:2626AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOW We dont have multi-year plans for critical military expenditures and often rely on short-term continuing resolutions to fund our mili-tary.This costs the military billions of dollars a year and creates instability and uncertainty for the defense industry.Switching to multi-year plans could potentially provide$40 billion in savings a year(out of a 2024 Defense Department budget of almost$850 billion)and greater stability for the military.We need to allow greater flexibility on the reallocation of money;i.e.,to continuously innovate(buy the newest drones and other items).Our stockpiles of vital munitions are seriously inadequate if there was a war in the South China Sea,we would run out of missiles in seven days.If it were up to me,I would be stockpiling ammunition,air and missile defense,rare earths and other critical com-ponents,importantly to preserve peace.We dont maintain sufficient excess produc-tion capacity in our defense industrial base to ramp up the production of weapons,if neces-sary.We dont even have the proper capacity to build battleships anymore.It would be rather easy for the government to work with the private sector to help maintain factories capable of producing military materials that would be required at a wartime pace.We also lack sufficient labor necessary to do everything outlined above.It can take up to six years to train workers on the complex skills that are needed to manufacture this equip-ment and we dont have six years.We need to immediately restructure some of our trade and supply chains.Surprisingly,many of the essential items we would need in case of war would come from potential adver-saries.These products range from rare earths to penicillin and other pharmaceutical ingredi-ents to certain types of steel,semiconductors and even some manufactured components.We need to use all of the tools at our disposal to do this as expeditiously as possible.Taking the proper unilateral actions on very targeted investment and export restrictions(chip making equipment,advanced chips and other hard-to-duplicate technology used for military purposes)is essential.However,we should only expect these kinds of actions to slow down our competition,not necessarily stop it.Finally,the extraordinary science that comes out of our national labs and our exceptional universities has been critical to creating and maintaining our scientific discoveries and advances,which have not only fueled Americas economy but have also maintained our military superiority.There are lots of complaints some legitimate about Americas elite universities,but this cannot and should not be one of them.Protecting our country goes way beyond just the military and includes,among other items,grid security,data centers,communications and cybersecurity in general.Foreign policy is realpolitik.Americas alliance system is the foundation of our geopolitical advantage and is the special sauce of American leadership.Foreign policy must be grounded in realpolitik a pragmatic approach that prioritizes national interest over ideological considerations.Realpolitik means that many decisions are properly subordinated to national security.For example,while address-ing global challenges,like climate change,is important,such efforts should not overshadow the strategic imperatives of our foreign relations.We need to bring our allies along and help them build their own capabilities.A weak Europe is ultimately very bad for America.Among other things,our allies need reliable,safe,secure and affordable energy or they will be in a terrible position.Diplomacy and our economic relation-ships,including trade,are a critical part of main-taining these alliances.While we should educate other nations about the virtues of our values,we should stop lecturing we dont need them to have all our values,but we do need them to be strong allies.2727AMERICA AND THE WORLD ARE AT A CRITICAL CROSSROADS:COMPREHENSIVE ACTION AND LEADERSHIP ARE IMPERATIVE NOWWe should do everything we can to drive healthy growth in the economy.By doing so,we create the resources to constantly reinvest in our country,and we create the conditions to pro-mote greater opportunity and well-being for all our citizens.In this section,I describe nine criti-cal policies that I believe are essential to making our economy strong putting us in the best position to deal with any issue in front of us,economic or geopolitical,and guaranteeing our ongoing military and economic predominance.In compiling this list,I tried to look at the United States as I would any large complex company that we might acquire.(Of course,our country is much more complicated than any one com-pany.)A full assessment of all critical issues allows you to develop a game plan.The issues Ive highlighted and there may be more are those that I believe are holding us back and causing much of the“grievances”I wrote about in the first section.In all cases,I tried to be prac-tical in my approach,and,in some cases,I offer ideas for potential fixes.I tried to look at this without regard to how posi-tions might be labeled;i.e.,conservative,liberal,progressive,red or blue.Whether my views are right or wrong,it is critical that we start to fix that which is broken.Government as a whole needs to demonstrate to the American public that it is effective,efficient,competent and principled as any institution should do in developing policies that are conducive to maximizing long-term growth,jobs,competitiveness and fairness without micromanaging the economy.The government,like all institutions,should continuously prioritize and allocate resources to streamline its operations and reduce red tape to improve service delivery,enhance responsive-ness and achieve cost efficiencies.Every department should focus not just on the amount of money spent but on what it expects the out-comes should be,what the outcomes actually are and how it can deliver more at a lower cost.Instead,we have a broken bureaucracy that fails to fully acknowledge or effectively deal with our biggest problems.Even worse,the power of the government over the years has been used to attack parties,businesses and individuals,par-ticularly those not in favor by the party in power.This needs to stop.It begins by always remind-ing the American public about the founding principles of the United States of America the principles embedded in our Declaration of Inde-pendence and the Constitution liberty,free-dom,individual rights and justice for all.The economic machine is extraordinarily complex.We need to focus on proper policies that are conducive to growth.Micromanaging coupled with misguided,ill-informed policies not based on reality and pragmatism often have huge unintended consequences.People frequently twist accurate data with bad logic to kill good policy.Many times,it is easier to throw money at a problem,mostly on the demand side(i.e.,spend more money),than to formulate good policy or spend money appropriately to help the supply side.Good supply-side policies,such as those promoting job creation and infrastructure development,are critical to achieving productiv-II.A Compendium of Critical Domestic Policies to Drive Growth,Opportunity and Well-BeingA COMPENDIUM OF CRITICAL DOMESTIC POLICIES TO DRIVE GROWTH,OPPORTUNITY AND WELL-BEING28ity and,therefore,to maximizing long-term growth.While innovation is the cosmological constant always driving growth,sometimes its downside is used to block it.This is a huge mis-take.We should foster innovation and then cre-ate policies that help those who are negatively affected.WE NEED CONSISTENT AND RESPONSIBLE TAX AND FISCAL POLICIES.America could benefit from a bipartisan,binding mechanism to achieve fiscal responsibility,simi-lar to a Simpson-Bowles type of commission but with real congressional authority.Some countries,such as Sweden,have implemented a fiscal policy framework with specific guidelines.Swedens framework establishes a debt-to-GDP ratio of 35%plus or minus 5%.This allows the country to run deficit financing at the same rate as its economic growth and still maintain a debt-to-GDP ratio of 35%.Adhering to this kind of consistent fiscal standard makes it easier to manage the country in general.The United States should eventually establish similar guide-lines that would make it easier to run this“ship of state”and reduce the uncertainty that results from constant flip-flopping between sometimes radically different fiscal policies.Additionally,we should eliminate the debt ceil-ing.The debt ceiling is essentially a“weapon of mass destruction”that can be misused by politi-cians who dont understand the damage it can do.Its hard to even contemplate the harm that would be done to the trust in America and in our economy if we actually failed to meet our debt obligations.We must learn to account for investments differently from the way we account for expenses,particularly in areas such as infrastructure.The lack of proper accounting by the U.S.govern-ment is astounding and is almost laughable.Unfortunately,the practice drives terrible deci-sion making.For example,in determining the deficit,the government treats investments in infrastructure(roads,hospitals,ports)the same way that it treats expenses.But we should put them in completely different budgetary catego-ries.Good investment spending has long-term productivity benefits that many expenses do not.The United States now spends only 0.55%of its GDP on infrastructure.The OECD average is at 0.81%,and Chinas is a staggering 5.56%.We need to spend more money on productive infra-structure,not less.Borrowing to invest is funda-mentally different from borrowing to consume.The government also makes a lot of loans,but it doesnt have to account for them in the same way that a bank does which makes bad lending easy to do.For example,the government contin-ues to extend a significant amount of student loans with improper or no underwriting.When the student loan system was taken over by the government in 2010,loan losses had been rea-sonable,and loans outstanding were$750 bil-lion.Through the magic of government account-ing,the government actually forecasted more than$60 billion in profit from when they took over the program.Thirteen years later,the out-standing debt from student loans has more than doubled to$1.6 trillion,and we estimate that the government has lost,with proper accounting,at least$500 billion.Yet the government continues to make many of these bad loans.The stakes are even higher regarding the gov-ernments control of two of the largest financial institutions in the world,Fannie Mae and Freddie Mac,whose combined assets of$7.7 trillion largely represent mortgages these organiza-tions have guaranteed.It is incumbent on our government to properly manage institutions like these to protect U.S.taxpayers from tremen-dous losses(they lost$265 billion in the great financial crisis)and to shield U.S.and global economies from severe damage.To make the U.S.tax system conducive to economic growth and job creation,we should incorporate these overall objectives:Be agnostic to specific industries,setting aside favoritism.Offer a system that is stable with standards consistently applied.Ensure that our practices keep the United States competitive with other countries.Provide effective incentives for growth and innovation.A COMPENDIUM OF CRITICAL DOMESTIC POLICIES TO DRIVE GROWTH,OPPORTUNITY AND WELL-BEING29The 2017 Tax Cuts and Jobs Act(TCJA)took significant steps toward achieving these goals by(1)broadening the tax base,(2)reducing the federal corporate rate to 21%(which is approxi-mately the OECD average)and(3)reforming the international tax rules.The first point is some-times forgotten:While the reduction of the head-line tax rate from 35%to 21%was projected to reduce corporate taxes by$1.4 trillion(over 10 years),the broadening of the base offset$1 trillion of that reduction.Regarding international tax rules,a key part of that reform was the removal of gimmicks that allowed U.S.corpora-tions to indefinitely defer tax rules on their over-seas earnings.As a result,our international tax system strikes about the right balance between recognizing the importance to U.S.companies of serving overseas markets while not incentiv-izing them to move capital,skills and R&D outside the country.Although there is certainly room for improve-ment,overall,the changes made by the TCJA recognize that reducing and rationalizing taxes on business income are critical to spurring eco-nomic growth and producing more“bang for the buck”than cutting taxes on individual income.Importantly,these reforms benefited most Americans.In the first two years after the TCJA went into effect,we saw real median income rise more than in the previous 10 years and the low-est unemployment rate for adults without a high school diploma.In the year following enactment,we also saw GDP growth of 3%and a 20%increase in domes-tic investment for affected firms.Corporate taxes paid have risen to record levels not because the tax burden on corporations was increased,but because corporations were more profitable;they were doing more business,hiring more people,making more investments.None of this would have been possible without a competitive corporate tax rate.Our Internal Revenue Code can be further amended to incentivize growth and ensure a fairer tax system overall.On the first point,our tax system should provide effective incentives for growth and innovation to support entrepreneurs and small businesses.Two such examples were in the tax code for decades before Congress recently phased them out:(1)recognizing the importance of capital investments and(2)increasing expenditures for R&D.Both are proven ways of growing the econ-omy and creating jobs.As to ensuring a fairer system,there are still numerous provisions for Congress to go after.On the business side,the rules intended to pre-vent artificial shifting of taxable income outside the United States need strengthening and a number of specific industry tax breaks need eliminating.On the individual side,there are also many tax breaks that primarily benefit a certain segment of the population:the wealthy.These include carried interest,the ability to deduct up to$10,000 of state and local taxes,and too many creative estate tax planning techniques.These tax breaks not only cost revenue but also have the additional stigma of being perceived by the American public as just another example of institutional bias and favoritism toward a special interest group.And consistent with ensuring a fairer system,the U.S.tax code should incorpo-rate the“Buffett Rule”so that high-income earners pay a minimum tax on realized income.Everyone,including the wealthy,would benefit enormously from the increased growth that would follow if we amended our system the right way.I think many people would have fewer objections to paying a slightly higher tax rate if they thought the money was being used wisely to attack Americas biggest problems.Finally,the tax code plays an important role in helping to raise up those at the bottom of the economic ladder.This includes incentives to ensure an adequate and affordable housing supply,such as the credit provision for building affordable housing.Its important that any tax credit and social benefit program be properly phased in so that it doesnt dis-incent work.One way the code could incentivize labor force par-ticipation is to expand and reform the Earned Income Tax Credit(EITC).The EITC gives an A COMPENDIUM OF CRITICAL DOMESTIC POLICIES TO DRIVE GROWTH,OPPORTUNITY AND WELL-BEING30individual earning$14,000 a year with two chil-dren a$5,600 tax credit(and with no children a$350 tax credit).I would almost double this tax credit and remove the child requirement.While this would cost a lot of money,it has many vir-tues.It would give those with lower income far more money to spend,without government interference,on what they and their families need education,food,better housing and more.And much of it would be spent locally,in lower-income neighborhoods.It has the virtue of rewarding work,which would grow the GDP.Jobs not only bring dignity but better social out-comes in terms of less homelessness and crime,improved health outcomes and more household formation,among other benefits.For many peo-ple,that first job is just the first rung on the lad-der of a career.I hav
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