UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________________________________________

FORM 10-Q

_______________________________________________________________________________________

(Mark One)


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

For the quarterly period ended September 30, ~~2021~~2022


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

For the transition period from to

Commission File Number 001-14818

_______________________________________________________________________________________

Federated Hermes, Inc.

(Exact name of registrant as specified in its charter)

_______________________________________________________________________________________


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

1001 Liberty Avenue

15222-3779

Pittsburgh,

Pennsylvania

(Address of principal executive offices)

(Zip Code)

(~~Registrant's~~Registrant’s telephone number, including area code) 412-288-1900

Securities registered pursuant to Section 12(b) of the Act:


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

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 x No o.

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 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 o.

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~~“large accelerated filer,~~" "accelerated~~” “accelerated filer,~~" "smaller~~” “smaller reporting company,"” and ~~"emerging~~“emerging growth ~~company"~~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 financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x

Indicate the number of shares outstanding of each of the ~~issuer's~~issuer’s classes of common stock, as of the last practicable date: As of October ~~22, 2021,~~21, 2022, the Registrant had outstanding 9,000 shares of Class A ~~Common Stock~~common stock and ~~96,843,698~~88,986,067 shares of Class B ~~Common Stock.~~common stock.

Table of Contents



Table of Contents

FORWARD-LOOKING STATEMENTS

Certain statements in this report on Form 10-Q constitute forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that could cause the actual results, levels of activity, performance or achievements of Federated Hermes, Inc. and its consolidated subsidiaries (collectively, Federated Hermes), or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are typically identified by words or phrases such as "trend," "potential," "opportunity," "believe," "expect," "anticipate," "current," "intention," "estimate," "position," "projection," "assume," "continue," "remain," "maintain," "sustain," "seek," "achieve,"“forecast,” “project,” “predict,” “trend,” “approximate,” “potential,” “opportunity,” “believe,” “expect,” “anticipate,” “current,” “intention,” “estimate,” “position,” “projection,” “plan,” “assume,” “continue,” “remain,” “maintain,” “sustain,” “seek,” “achieve,” and similar expressions, or future or conditional verbs such as ~~"will," "would," "should," "could," "can," "may,"~~“will,” “would,” “should,” “could,” “can,” “may,” and similar expressions.Among other forward-looking statements, such statements include certain statements relating to, or, as applicable, statements concerning ~~management's~~management’s assessments, beliefs, expectations, assumptions, judgments, projections or estimates regarding: the ~~coronavirus~~pandemic and ~~pandemic, their impact~~its impact; Russia’s invasion of Ukraine and ~~status, and plans in response;~~its impact; asset flows, levels, values and mix orand their impact; the possibility of impairments; business mix; the level, timing, degree and impact of changes in interest rates or gross or net yields; rates of inflation; fee rates and recognition; sources, levels and ~~levels~~recognition of revenues, expenses, gains, losses, income and earnings; the level and impact of reimbursements, rebates or assumptions of fund-related expenses ~~(Consideration Payable to Customers)~~ and fee waivers for competitive reasons such as to maintain positive or zero net yields (Voluntary Yield-related Fee Waivers), to maintain certain fund expense ratios, to meet regulatory requirements or to meet contractual requirements (collectively, Fee Waivers); whether, under what circumstances and the degree to which Fee Waivers will be implemented; the impact of market volatility, liquidity, and other market conditions; whether and when revenue or expense is recognized; ~~whether performance fees or carried interest will be earned or repaid or clawed-back;~~ whether and when capital contributions could be made; the components and level of, and prospect for, distribution-related expenses; guarantee and indemnification obligations; the impact of acquisitions on Federated Hermes’ growth; the timing and ~~nature~~amount of acquisition-related payment obligations; ~~acquisition-related matters, including future contingent consideration payments;~~ payment obligations pursuant to employment or incentive ~~compensation~~ arrangements; vesting rights and requirements; business and market expansion opportunities, including ~~anticipated, or~~ acceleration of global growth; interest and principal payments ~~expenses and repayment obligations;~~or expenses; taxes, tax rates and the impact of tax law changes; borrowing, debt, future cash needs and principal uses of cash, cash flows and liquidity; the ability to raise additional capital; type, classification and consolidation of investments; uses of treasury stock; Federated ~~Hermes'~~Hermes’ product and market performance and Federated ~~Hermes'~~Hermes’ performance indicators; investor preferences; ~~market conditions,~~ product and strategy demand, distribution, development and restructuring initiatives and related planning and timing; the effect, and degree of impact, of changes in customer relationships; legal proceedings; regulatory matters, including the pace, timing, impact, effects and other consequences of the current regulatory ~~environment, regulatory developments and continuing regulatory oversight by United States (U.S.) and foreign regulators and other authorities;~~environment; the attractiveness and resiliency of money market funds; dedication of resources; ~~the adoption and impact of accounting policies, new accounting pronouncements and accounting treatment~~accounting-related determinations; compliance, and related legal, compliance and other professional services expenses; ~~level~~ and ~~impact of changes in currency exchange rates;~~ interest rate, concentration, market, currency and other ~~risks;~~risks and ~~various~~their impact. Any forward-looking statement is inherently subject to significant business, economic, competitive, regulatory and other ~~items set forth under Item 1A - Risk Factors in~~risks and uncertainties, many of which are difficult to predict and beyond Federated ~~Hermes' Annual Report on Form 10-K for the year ended December 31, 2020.~~Hermes’ control. Among other risks and uncertainties, market conditions can change

significantly and impact Federated ~~Hermes'~~Hermes’ business and results, including by changing Federated ~~Hermes'~~Hermes’ asset flows, levels, and mix, and business mix, which could cause a decline in revenues and net

income, result in impairments and ~~increase~~change the amount of Fee Waivers incurred by Federated Hermes. The obligation to make purchase price payments in connection with acquisitions is subject to certain adjustments and conditions, and the obligation to make contingent payments is based on net revenue growth levels and will be affected by the achievement of such levels.The obligation to make additional payments pursuant to employment or incentive ~~compensation~~ arrangements can be based on satisfaction of certain conditions set forth in those arrangements. Future cash needs, cash flows and uses of cash will be impacted by a variety of factors, including the number and size of any acquisitions, Federated ~~Hermes'~~Hermes’ success in developing, structuring and distributing its products and strategies, potential changes in assets under management (AUM) and/or changes in the terms of distribution and shareholder services contracts with intermediaries who offer Federated ~~Hermes'~~Hermes’ products to intermediary customers, and potential increased legal, compliance and other professional services expenses stemming from additional or modified regulation or the dedication of such resources to other initiatives. Federated ~~Hermes'~~Hermes’ risks and uncertainties also include liquidity and credit risks in Federated ~~Hermes'~~Hermes’ money market funds and revenue risk, which will be affected by yield levels in money market fund products, Fee Waivers, changes in fair values of AUM, any additional regulatory reforms, investor preferences and confidence, ~~Fee Waivers,~~ and the ability of Federated Hermes to collect fees in connection with the management of such products. Many of these factors could be more likely to occur as a result of continued scrutiny of the mutual fund industry by domestic or foreign regulators, and any disruption in global financial markets. As a result, no assurance can be given as to future results, levels of activity, performance or achievements, and neither Federated Hermes nor any other person assumes responsibility for the accuracy and completeness, or updating, of such statements in the future. For more information on these items and additional risks that could impact the forward-looking statements, see Item 1A - Risk Factors included in Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021 and Part II, Item 1A - Risk Factors.

Table of Contents

Part I. Financial Information

Item 1. Financial Statements


Consolidated Balance Sheets	Consolidated Balance Sheets					Consolidated Balance Sheets
(dollars in thousands)	(dollars in thousands)					(dollars in thousands)
(unaudited)	(unaudited)					(unaudited)
		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Current Assets	Current Assets					Current Assets
Cash and Cash Equivalents	Cash and Cash Equivalents	$	201,692	$	301,819	Cash and Cash Equivalents	$	304,520	$	233,327
Investments—Consolidated Investment Companies	Investments—Consolidated Investment Companies	54,075		91,359		Investments—Consolidated Investment Companies	107,277		105,542
Investments—Affiliates and Other	Investments—Affiliates and Other	89,318		45,593		Investments—Affiliates and Other	69,399		87,805
Receivables, net of reserve of $16 and $16, respectively		67,374		64,857
Receivables, net of reserve of $21 and $21, respectively						Receivables, net of reserve of $21 and $21, respectively	48,586		65,317
Receivables—Affiliates	Receivables—Affiliates	31,381		41,107		Receivables—Affiliates	33,000		30,956
Prepaid Expenses	Prepaid Expenses	27,445		22,130		Prepaid Expenses	26,112		29,322
Other Current Assets	Other Current Assets	6,757		8,478		Other Current Assets	41,389		7,178
Total Current Assets	Total Current Assets	478,042		575,343		Total Current Assets	630,283		559,447
Long-Term Assets	Long-Term Assets					Long-Term Assets
Goodwill	Goodwill	798,258		800,267		Goodwill	774,570		798,871

Intangible Assets, net of accumulated amortization of $36,076 and $26,372, respectively		472,920		481,753
Property and Equipment, net of accumulated depreciation of $110,322 and $106,317, respectively		49,421		52,610
Intangible Assets, net of accumulated amortization of $40,949 and $39,618, respectively						Intangible Assets, net of accumulated amortization of $40,949 and $39,618, respectively	406,813		471,209
Property and Equipment, net of accumulated depreciation of $114,535 and $113,624, respectively						Property and Equipment, net of accumulated depreciation of $114,535 and $113,624, respectively	37,928		46,965
Right-of-Use Assets, net	Right-of-Use Assets, net	111,718		122,078		Right-of-Use Assets, net	93,271		108,306
Other Long-Term Assets	Other Long-Term Assets	36,050		28,788		Other Long-Term Assets	29,705		33,389
Total Long-Term Assets	Total Long-Term Assets	1,468,367		1,485,496		Total Long-Term Assets	1,342,287		1,458,740
Total Assets	Total Assets	$	1,946,409	$	2,060,839	Total Assets	$	1,972,570	$	2,018,187
LIABILITIES	LIABILITIES					LIABILITIES
Current Liabilities	Current Liabilities					Current Liabilities
Accounts Payable and Accrued Expenses	Accounts Payable and Accrued Expenses	$	62,648	$	61,736	Accounts Payable and Accrued Expenses	$	72,037	$	64,019
Accrued Compensation and Benefits	Accrued Compensation and Benefits	133,123		170,646		Accrued Compensation and Benefits	118,143		162,203
Lease Liabilities	Lease Liabilities	17,181		15,845		Lease Liabilities	17,839		17,447

Other Current Liabilities	Other Current Liabilities	21,760		17,219		Other Current Liabilities	30,910		27,038
Total Current Liabilities	Total Current Liabilities	234,712		265,446		Total Current Liabilities	238,929		270,707
Long-Term Liabilities	Long-Term Liabilities					Long-Term Liabilities
Long-Term Debt	Long-Term Debt	102,150		75,000		Long-Term Debt	397,514		223,350
Long-Term Deferred Tax Liability, net	Long-Term Deferred Tax Liability, net	205,317		187,937		Long-Term Deferred Tax Liability, net	188,884		205,206
Long-Term Lease Liabilities	Long-Term Lease Liabilities	109,290		121,922		Long-Term Lease Liabilities	88,402		105,270
Other Long-Term Liabilities	Other Long-Term Liabilities	34,617		36,550		Other Long-Term Liabilities	32,826		36,435
Total Long-Term Liabilities	Total Long-Term Liabilities	451,374		421,409		Total Long-Term Liabilities	707,626		570,261
Total Liabilities	Total Liabilities	686,086		686,855		Total Liabilities	946,555		840,968
Commitments and Contingencies (Note (15))		0		0
Commitments and Contingencies (Note (17))						Commitments and Contingencies (Note (17))
TEMPORARY EQUITY	TEMPORARY EQUITY					TEMPORARY EQUITY
Redeemable Noncontrolling Interest in Subsidiaries		55,472		236,987
Redeemable Noncontrolling Interests in Subsidiaries						Redeemable Noncontrolling Interests in Subsidiaries	54,586		63,202
PERMANENT EQUITY	PERMANENT EQUITY					PERMANENT EQUITY
Federated Hermes, Inc. Shareholders' Equity
Federated Hermes, Inc. Shareholders’ Equity						Federated Hermes, Inc. Shareholders’ Equity
Common Stock:	Common Stock:					Common Stock:
Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding	Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding	189		189		Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding	189		189
Class B, No Par Value, 900,000,000 Shares Authorized, 109,505,456 Shares Issued		441,924		418,669
Additional Paid-In Capital from Treasury Stock Transactions		30		0
Class B, No Par Value, 900,000,000 Shares Authorized, 99,505,456 and 109,505,456 Shares Issued, respectively						Class B, No Par Value, 900,000,000 Shares Authorized, 99,505,456 and 109,505,456 Shares Issued, respectively	433,842		448,929

Retained Earnings	Retained Earnings	1,153,539		1,027,699		Retained Earnings	1,002,201		1,187,001
Treasury Stock, at Cost, 12,531,058 and 10,174,013 Shares Class B Common Stock, respectively		(403,807)		(324,731)
Treasury Stock, at Cost, 10,519,389 and 16,094,488 Shares Class B Common Stock, respectively						Treasury Stock, at Cost, 10,519,389 and 16,094,488 Shares Class B Common Stock, respectively	(377,387)		(538,464)
Accumulated Other Comprehensive Income (Loss), net of tax	Accumulated Other Comprehensive Income (Loss), net of tax	12,976		15,171		Accumulated Other Comprehensive Income (Loss), net of tax	(87,416)		16,362

Total Permanent Equity	Total Permanent Equity	1,204,851		1,136,997		Total Permanent Equity	971,429		1,114,017
Total Liabilities, Temporary Equity and Permanent Equity	Total Liabilities, Temporary Equity and Permanent Equity	$	1,946,409	$	2,060,839	Total Liabilities, Temporary Equity and Permanent Equity	$	1,972,570	$	2,018,187

(The accompanying notes are an integral part of these Consolidated Financial Statements.)


Consolidated Statements of Income	Consolidated Statements of Income									Consolidated Statements of Income
(dollars in thousands, except per share data)	(dollars in thousands, except per share data)									(dollars in thousands, except per share data)
(unaudited)	(unaudited)									(unaudited)
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Revenue	Revenue									Revenue
Investment Advisory Fees, net—Affiliates	Investment Advisory Fees, net—Affiliates	$	163,806	$	202,978	$	496,747	$	573,242	Investment Advisory Fees, net—Affiliates	$	206,394	$	163,806	$	574,081	$	496,747
Investment Advisory Fees, net—Other	Investment Advisory Fees, net—Other	66,404		57,111		195,441		172,633		Investment Advisory Fees, net—Other	57,250		66,404		180,600		195,441
Administrative Service Fees, net—Affiliates	Administrative Service Fees, net—Affiliates	76,853		83,028		228,904		238,960		Administrative Service Fees, net—Affiliates	75,021		76,853		218,710		228,904
Other Service Fees, net—Affiliates	Other Service Fees, net—Affiliates	15,377		17,952		46,439		87,765		Other Service Fees, net—Affiliates	38,265		15,377		85,120		46,439
Other Service Fees, net—Other	Other Service Fees, net—Other	4,149		3,386		11,271		11,750		Other Service Fees, net—Other	4,213		4,149		13,404		11,271
Total Revenue	Total Revenue	326,589		364,455		978,802		1,084,350		Total Revenue	381,143		326,589		1,071,915		978,802
Operating Expenses	Operating Expenses									Operating Expenses
Compensation and Related	Compensation and Related	131,996		126,186		408,385		365,104		Compensation and Related	126,668		131,996		388,719		408,385
Distribution	Distribution	38,486		73,726		120,990		258,925		Distribution	91,032		38,486		223,837		120,990
Systems and Communications	Systems and Communications	18,537		16,193		56,086		46,179		Systems and Communications	19,294		18,537		57,234		56,086
Professional Service Fees	Professional Service Fees	14,294		14,006		44,052		41,162		Professional Service Fees	14,203		14,294		41,647		44,052
Office and Occupancy	Office and Occupancy	11,036		10,578		33,358		32,539		Office and Occupancy	10,622		11,036		32,457		33,358
Advertising and Promotional	Advertising and Promotional	4,660		2,921		12,107		10,981		Advertising and Promotional	6,496		4,660		13,965		12,107
Travel and Related	Travel and Related	1,643		542		2,838		4,026		Travel and Related	3,421		1,643		8,543		2,838
Other	Other	7,535		6,922		23,297		22,058		Other	12,627		7,535		32,466		23,297
Total Operating Expenses	Total Operating Expenses	228,187		251,074		701,113		780,974		Total Operating Expenses	284,363		228,187		798,868		701,113
Operating Income	Operating Income	98,402		113,381		277,689		303,376		Operating Income	96,780		98,402		273,047		277,689
Nonoperating Income (Expenses)	Nonoperating Income (Expenses)									Nonoperating Income (Expenses)
Investment Income, net	Investment Income, net	686		770		2,466		3,171		Investment Income, net	2,599		686		5,270		2,466
Gain (Loss) on Securities, net	Gain (Loss) on Securities, net	(644)		5,852		6,980		3,840		Gain (Loss) on Securities, net	(6,825)		(644)		(39,406)		6,980
Debt Expense	Debt Expense	(476)		(494)		(1,313)		(2,211)		Debt Expense	(3,302)		(476)		(7,873)		(1,313)
Other, net	Other, net	(1,319)		103		(1,158)		8,426		Other, net	(38)		(1,319)		31		(1,158)
Total Nonoperating Income (Expenses), net	Total Nonoperating Income (Expenses), net	(1,753)		6,231		6,975		13,226		Total Nonoperating Income (Expenses), net	(7,566)		(1,753)		(41,978)		6,975
Income Before Income Taxes	Income Before Income Taxes	96,649		119,612		284,664		316,602		Income Before Income Taxes	89,214		96,649		231,069		284,664
Income Tax Provision	Income Tax Provision	23,163		32,928		83,353		81,852		Income Tax Provision	21,640		23,163		58,140		83,353
Net Income Including the Noncontrolling Interests in Subsidiaries	Net Income Including the Noncontrolling Interests in Subsidiaries	73,486		86,684		201,311		234,750		Net Income Including the Noncontrolling Interests in Subsidiaries	67,574		73,486		172,929		201,311
Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries	Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries	2,124		862		(419)		3,554		Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries	(1,905)		2,124		(10,070)		(419)
Net Income	Net Income	$	71,362	$	85,822	$	201,730	$	231,196	Net Income	$	69,479	$	71,362	$	182,999	$	201,730
Amounts Attributable to Federated Hermes, Inc.	Amounts Attributable to Federated Hermes, Inc.									Amounts Attributable to Federated Hermes, Inc.
Earnings Per Common Share—Basic	Earnings Per Common Share—Basic	$	0.73	$	0.86	$	2.05	$	2.30	Earnings Per Common Share—Basic	$	0.78	$	0.73	$	2.02	$	2.05
Earnings Per Common Share—Diluted	Earnings Per Common Share—Diluted	$	0.73	$	0.85	$	2.04	$	2.29	Earnings Per Common Share—Diluted	$	0.78	$	0.73	$	2.02	$	2.04
Cash Dividends Per Share	Cash Dividends Per Share	$	0.27	$	0.27	$	0.81	$	0.81	Cash Dividends Per Share	$	0.27	$	0.27	$	0.81	$	0.81

(The accompanying notes are an integral part of these Consolidated Financial Statements.)


Consolidated Statements of Comprehensive Income	Consolidated Statements of Comprehensive Income									Consolidated Statements of Comprehensive Income
(dollars in thousands)	(dollars in thousands)									(dollars in thousands)
(unaudited)	(unaudited)									(unaudited)
		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net Income Including the Noncontrolling Interests in Subsidiaries	Net Income Including the Noncontrolling Interests in Subsidiaries	$	73,486	$	86,684	$	201,311	$	234,750	Net Income Including the Noncontrolling Interests in Subsidiaries	$	67,574	$	73,486	$	172,929	$	201,311

Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax									Other Comprehensive Income (Loss), net of tax
Permanent Equity	Permanent Equity									Permanent Equity

Foreign Currency Translation Gain (Loss)	Foreign Currency Translation Gain (Loss)	(7,248)		16,239		(2,195)		(9,333)		Foreign Currency Translation Gain (Loss)	(43,760)		(7,248)		(103,778)		(2,195)

Temporary Equity	Temporary Equity									Temporary Equity
Foreign Currency Translation Gain (Loss)	Foreign Currency Translation Gain (Loss)	(9,953)		7,316		(7,655)		(4,573)		Foreign Currency Translation Gain (Loss)	(1,713)		(9,953)		(3,238)		(7,655)
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax	(17,201)		23,555		(9,850)		(13,906)		Other Comprehensive Income (Loss), net of tax	(45,473)		(17,201)		(107,016)		(9,850)
Comprehensive Income Including the Noncontrolling Interests in Subsidiaries	Comprehensive Income Including the Noncontrolling Interests in Subsidiaries	56,285		110,239		191,461		220,844		Comprehensive Income Including the Noncontrolling Interests in Subsidiaries	22,101		56,285		65,913		191,461
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interest in Subsidiaries		(7,829)		8,178		(8,074)		(1,019)
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests in Subsidiaries										Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests in Subsidiaries	(3,618)		(7,829)		(13,308)		(8,074)

Comprehensive Income Attributable to Federated Hermes, Inc.	Comprehensive Income Attributable to Federated Hermes, Inc.	$	64,114	$	102,061	$	199,535	$	221,863	Comprehensive Income Attributable to Federated Hermes, Inc.	$	25,719	$	64,114	$	79,221	$	199,535

(The accompanying notes are an integral part of these Consolidated Financial Statements.)


Consolidated Statements of Changes in Equity	Consolidated Statements of Changes in Equity											Consolidated Statements of Changes in Equity
(dollars in thousands)
(unaudited)	(unaudited)											(unaudited)
		Federated Hermes, Inc. Shareholders' Equity																Federated Hermes, Inc. Shareholders’ Equity
		Common Stock		Additional Paid-in Capital from Treasury Stock Transactions		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss), net of tax			Total Permanent Equity		Redeemable Noncontrolling Interest in Subsidiaries/ Temporary Equity			Common Stock		Additional Paid-in Capital from Treasury Stock Transactions		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss), net of tax		Total Permanent Equity		Redeemable Noncontrolling Interest in Subsidiaries/ Temporary Equity
Balance at December 31, 2020		$	418,858	$	0	$	1,027,699	$	(324,731)	$	15,171		$	1,136,997	$	236,987
Balance at December 31, 2021																	Balance at December 31, 2021	$	449,118	$	0	$	1,187,001	$	(538,464)	$	16,362	$	1,114,017	$	63,202

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

Balance at March 31, 2022																	Balance at March 31, 2022	$	458,406	$	3,518	$	1,191,575	$	(594,806)	$	(772)	$	1,057,921	$	48,569

Net Income (Loss)																	Net Income (Loss)	0		0		57,657		0		0		57,657		(6,899)
Other Comprehensive Income (Loss), net of tax																	Other Comprehensive Income (Loss), net of tax	0		0		0		0		(42,884)		(42,884)		(1,068)
Subscriptions—Redeemable Noncontrolling Interest Holders																	Subscriptions—Redeemable Noncontrolling Interest Holders	0		0		0		0		0		0		15,314

Stock Award Activity																	Stock Award Activity	9,430		(46)		0		62		0		9,446		0
Dividends Declared																	Dividends Declared	0		0		(24,705)		0		0		(24,705)		0
Distributions to Noncontrolling Interests in Subsidiaries																	Distributions to Noncontrolling Interests in Subsidiaries	0		0		0		0		0		0		(1,185)

Purchase of Treasury Stock																	Purchase of Treasury Stock	0		0		0		(89,542)		0		(89,542)		0

Balance at June 30, 2022																	Balance at June 30, 2022	$	467,836	$	3,472	$	1,224,527	$	(684,286)	$	(43,656)	$	967,893	$	54,731

Net Income (Loss)	Net Income (Loss)	0		0		74,484		0		0			74,484		(138)		Net Income (Loss)	0		0		69,479		0		0		69,479		(1,905)
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax	0		0		0		0		3,558			3,558		1,430		Other Comprehensive Income (Loss), net of tax	0		0		0		0		(43,760)		(43,760)		(1,713)
Subscriptions—Redeemable Noncontrolling Interest Holders	Subscriptions—Redeemable Noncontrolling Interest Holders	0		0		0		0		0			0		25,762		Subscriptions—Redeemable Noncontrolling Interest Holders	0		0		0		0		0		0		4,494
Consolidation (Deconsolidation)	Consolidation (Deconsolidation)	0		0		0		0		0			0		(16,237)		Consolidation (Deconsolidation)	0		0		0		0		0		0		15,599
Stock Award Activity	Stock Award Activity	9,216		0		(15,234)		15,249		0			9,231		2,481		Stock Award Activity	8,895		0		0		0		0		8,895		0
Dividends Declared	Dividends Declared	0		0		(26,788)		0		0			(26,788)		0		Dividends Declared	0		0		(24,141)		0		0		(24,141)		0
Distributions to Noncontrolling Interest in Subsidiaries	Distributions to Noncontrolling Interest in Subsidiaries	0		0		0		0		0			0		(1,898)		Distributions to Noncontrolling Interest in Subsidiaries	0		0				0		0		0		(16,620)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests		0		0		2,670		0		0			2,670		(2,670)
Purchase of Treasury Stock		0		0		0		(45,030)		0			(45,030)		0

Balance at March 31, 2021		$	428,074	$	0	$	1,062,831	$	(354,512)	$	18,729		$	1,155,122	$	245,717

Net Income (Loss)		0		0		55,884		0		0			55,884		(2,405)
Other Comprehensive Income (Loss), net of tax		0		0		0		0		1,495			1,495		868
Subscriptions—Redeemable Noncontrolling Interest Holders		0		0		0		0		0			0		899,962
Consolidation (Deconsolidation)		0		0		0		0		0			0		(894,175)
Stock Award Activity		7,760		0		(189)		205		0			7,776		2,518
Dividends Declared		0		0		(26,550)		0		0			(26,550)		0
Distributions to Noncontrolling Interest in Subsidiaries		0		0		0		0		0			0		(1,016)

Retirement of Treasury Stock																	Retirement of Treasury Stock	(42,700)		(3,472)		(267,664)		313,836		0		0		0

Purchase of Treasury Stock	Purchase of Treasury Stock	0		0		0		(31,797)		0			(31,797)		0		Purchase of Treasury Stock	0		0		0		(6,937)		0		(6,937)		0

Balance at June 30, 2021		$	435,834	$	0	$	1,091,976	$	(386,104)	$	20,224		$	1,161,930	$	251,469

Net Income (Loss)		0		0		71,362		0		0			71,362		2,124
Other Comprehensive Income (Loss), net of tax		0		0		0		0		(7,248)			(7,248)		(9,953)
Subscriptions—Redeemable Noncontrolling Interest Holders		0		0		0		0		0			0		66,903
Consolidation (Deconsolidation)		0		0		0		0		0			0		(74,836)
Stock Award Activity		6,279		30		0		0		0			6,309		2,557
Dividends Declared		0		0		(26,301)		0		0			(26,301)		0
Distributions to Noncontrolling Interest in Subsidiaries		0		0		0		0		0			0		(1,178)
Acquisition of Additional Equity of HFML		0		0		0		0		0			0		(165,112)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests		0		0		16,502		0		0			16,502		(16,502)
Purchase of Treasury Stock		0		0		0		(17,703)		0			(17,703)		0

Balance at September 30, 2021		$	442,113	$	30	$	1,153,539	$	(403,807)	$	12,976		$	1,204,851	$	55,472
Balance at September 30, 2022																	Balance at September 30, 2022	$	434,031	$	0	$	1,002,201	$	(377,387)	$	(87,416)	$	971,429	$	54,586


Consolidated Statements of Changes in Equity
(dollars in thousands)
(unaudited)
	Federated Hermes, Inc. Shareholders’ Equity
	Common Stock		Additional Paid-in Capital from Treasury Stock Transactions		Retained Earnings		Treasury Stock		Accumulated Other Comprehensive Income (Loss), net of tax		Total Permanent Equity		Redeemable Noncontrolling Interest in Subsidiaries/ Temporary Equity
Balance at December 31, 2020	$	418,858	$	0	$	1,027,699	$	(324,731)	$	15,171	$	1,136,997	$	236,987

Net Income (Loss)	0		0		74,484		0		0		74,484		(138)
Other Comprehensive Income (Loss), net of tax	0		0		0		0		3,558		3,558		1,430
Subscriptions—Redeemable Noncontrolling Interest Holders	0		0		0		0		0		0		25,762
Consolidation (Deconsolidation)	0		0		0		0		0		0		(16,237)
Stock Award Activity	9,216		0		(15,234)		15,249		0		9,231		2,481
Dividends Declared	0		0		(26,788)		0		0		(26,788)		0
Distributions to Noncontrolling Interests in Subsidiaries	0		0		0		0		0		0		(1,898)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests	0		0		2,670		0		0		2,670		(2,670)
Purchase of Treasury Stock	0		0		0		(45,030)		0		(45,030)		0

Balance at March 31, 2021	$	428,074	$	0	$	1,062,831	$	(354,512)	$	18,729	$	1,155,122	$	245,717

Net Income (Loss)	0		0		55,884		0		0		55,884		(2,405)
Other Comprehensive Income (Loss), net of tax	0		0		0		0		1,495		1,495		868
Subscriptions—Redeemable Noncontrolling Interest Holders	0		0		0		0		0		0		899,962
Consolidation (Deconsolidation)	0		0		0		0		0		0		(894,175)
Stock Award Activity	7,760		0		(189)		205		0		7,776		2,518
Dividends Declared	0		0		(26,550)		0		0		(26,550)		0
Distributions to Noncontrolling Interests in Subsidiaries	0		0		0		0		0		0		(1,016)


Purchase of Treasury Stock	0		0		0		(31,797)		0		(31,797)		0

Balance at June 30, 2021	$	435,834	$	0	$	1,091,976	$	(386,104)	$	20,224	$	1,161,930	$	251,469

Net Income (Loss)	0		0		71,362		0		0		71,362		2,124
Other Comprehensive Income (Loss), net of tax	0		0		0		0		(7,248)		(7,248)		(9,953)
Subscriptions—Redeemable Noncontrolling Interest Holders	0		0		0		0		0		0		66,903
Consolidation (Deconsolidation)	0		0		0		0		0		0		(74,836)
Stock Award Activity	6,279		30		0		0		0		6,309		2,557
Dividends Declared	0		0		(26,301)		0		0		(26,301)		0
Distributions to Noncontrolling Interests in Subsidiaries	0		0		0		0		0		0		(1,178)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests	0		0		16,502		0		0		16,502		(16,502)
Acquisition of Additional Equity of FHL	0		0		0		0		0		0		(165,112)
Purchase of Treasury Stock	0		0		0		(17,703)		0		(17,703)		0

Balance at September 30, 2021	$	442,113	$	30	$	1,153,539	$	(403,807)	$	12,976	$	1,204,851	$	55,472

(The accompanying notes are an integral part of these Consolidated Financial Statements.)

Consolidated Statements of Changes in Equity
(dollars in thousands)
(unaudited)
Federated Hermes, Inc. Shareholders' Equity
Common
Stock Retained
Earnings Treasury
Stock Accumulated
Other
Comprehensive Income (Loss), net of
tax Total
Permanent
Equity Redeemable
Noncontrolling
Interest in
Subsidiaries/
Temporary
Equity
Balance at December 31, 2019 $ 392,210 $ 930,351 $ (281,032) $ (249) $ 1,041,280 $ 212,086
Net Income (Loss) 0 64,178 0 0 64,178 (913)
Other Comprehensive Income (Loss), net of tax 0 0 0 (24,859) (24,859) (11,454)
Subscriptions—Redeemable Noncontrolling Interest Holders 0 0 0 0 0 5,577
Consolidation (Deconsolidation) 0 0 0 0 0 (4,019)
Stock Award Activity 7,467 (16,146) 16,146 0 7,467 2,153
Dividends Declared 0 (27,304) 0 0 (27,304) 0
Distributions to Noncontrolling Interest in Subsidiaries 0 0 0 0 0 (6,039)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 (1,870) 0 0 (1,870) 1,870
Purchase of Treasury Stock 0 0 (15,959) 0 (15,959) 0
Balance at March 31, 2020 $ 399,677 $ 949,209 $ (280,845) $ (25,108) $ 1,042,933 $ 199,261
Net Income (Loss) 0 81,196 0 0 81,196 3,605
Other Comprehensive Income (Loss), net of tax 0 0 0 (713) (713) (435)
Subscriptions—Redeemable Noncontrolling Interest Holders 0 0 0 0 0 6,225
Stock Award Activity 6,456 (678) 829 0 6,607 2,087
Dividends Declared 0 (27,243) 0 0 (27,243) 0
Distributions to Noncontrolling Interest in Subsidiaries 0 0 0 0 0 (4,058)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 2,013 0 0 2,013 (2,013)
Purchase of Treasury Stock 0 0 (18,126) 0 (18,126) 0
Balance at June 30, 2020 $ 406,133 $ 1,004,497 $ (298,142) $ (25,821) $ 1,086,667 $ 204,672
Net Income (Loss) 0 85,822 0 0 85,822 862
Other Comprehensive Income (Loss), net of tax 0 0 0 16,239 16,239 7,316
Subscriptions—Redeemable Noncontrolling Interest Holders 0 0 0 0 0 3,212
Stock Award Activity 6,281 0 67 0 6,348 2,164
Dividends Declared 0 (27,044) 0 0 (27,044) 0
Distributions to Noncontrolling Interest in Subsidiaries 0 0 0 0 0 (358)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 3,567 0 0 3,567 (3,567)
Purchase of Treasury Stock 0 0 (20,023) 0 (20,023) 0
Balance at September 30, 2020 $ 412,414 $ 1,066,842 $ (318,098) $ (9,582) $ 1,151,576 $ 214,301


Consolidated Statements of Cash Flows	Consolidated Statements of Cash Flows					Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)	(unaudited)					(unaudited)
		Nine Months Ended					Nine Months Ended
		September 30,					September 30,
		2021		2020			2022		2021
Operating Activities	Operating Activities					Operating Activities
Net Income Including the Noncontrolling Interests in Subsidiaries	Net Income Including the Noncontrolling Interests in Subsidiaries	$	201,311	$	234,750	Net Income Including the Noncontrolling Interests in Subsidiaries	$	172,929	$	201,311
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities	Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities					Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities

Depreciation and Amortization	Depreciation and Amortization	22,639		22,431		Depreciation and Amortization	21,197		22,639
Share-Based Compensation Expense	Share-Based Compensation Expense	23,283		20,224		Share-Based Compensation Expense	27,619		23,283
Subsidiary Share-Based Compensation Expense	Subsidiary Share-Based Compensation Expense	7,556		6,404		Subsidiary Share-Based Compensation Expense	707		7,556
(Gain) Loss on Disposal of Assets	(Gain) Loss on Disposal of Assets	(6,975)		1,590		(Gain) Loss on Disposal of Assets	3,986		(6,975)
Provision (Benefit) for Deferred Income Taxes	Provision (Benefit) for Deferred Income Taxes	19,495		11,907		Provision (Benefit) for Deferred Income Taxes	(6,969)		19,495

Consolidation/(Deconsolidation) of Other Entities	Consolidation/(Deconsolidation) of Other Entities	10,379		(3,051)		Consolidation/(Deconsolidation) of Other Entities	(20)		10,379

Net Unrealized (Gain) Loss on Investments	Net Unrealized (Gain) Loss on Investments	27		(5,397)		Net Unrealized (Gain) Loss on Investments	35,425		27
Net Sales (Purchases) of Investments—Consolidated Investment Companies	Net Sales (Purchases) of Investments—Consolidated Investment Companies	(129,647)		(7,516)		Net Sales (Purchases) of Investments—Consolidated Investment Companies	(26,216)		(129,647)

Other Changes in Assets and Liabilities:	Other Changes in Assets and Liabilities:					Other Changes in Assets and Liabilities:
(Increase) Decrease in Receivables, net	(Increase) Decrease in Receivables, net	3,914		5,998		(Increase) Decrease in Receivables, net	4,537		3,914
(Increase) Decrease in Prepaid Expenses and Other Assets	(Increase) Decrease in Prepaid Expenses and Other Assets	3,887		(9,317)		(Increase) Decrease in Prepaid Expenses and Other Assets	(23,734)		3,887
Increase (Decrease) in Accounts Payable and Accrued Expenses	Increase (Decrease) in Accounts Payable and Accrued Expenses	(36,769)		(27,411)		Increase (Decrease) in Accounts Payable and Accrued Expenses	(22,984)		(36,769)
Increase (Decrease) in Other Liabilities	Increase (Decrease) in Other Liabilities	(18,144)		(7,154)		Increase (Decrease) in Other Liabilities	5,058		(18,144)
Net Cash Provided (Used) by Operating Activities	Net Cash Provided (Used) by Operating Activities	100,956		243,458		Net Cash Provided (Used) by Operating Activities	191,535		100,956
Investing Activities	Investing Activities					Investing Activities
Purchases of Investments—Affiliates and Other	Purchases of Investments—Affiliates and Other	(7,221)		(19,050)		Purchases of Investments—Affiliates and Other	(18,606)		(7,221)
Cash Paid for Business Acquisitions, Net of Cash Acquired	Cash Paid for Business Acquisitions, Net of Cash Acquired	(5,324)		2,697		Cash Paid for Business Acquisitions, Net of Cash Acquired	0		(5,324)
Proceeds from Redemptions of Investments—Affiliates and Other	Proceeds from Redemptions of Investments—Affiliates and Other	33,291		6,415		Proceeds from Redemptions of Investments—Affiliates and Other	21,389		33,291
Cash Paid for Property and Equipment	Cash Paid for Property and Equipment	(7,753)		(8,559)		Cash Paid for Property and Equipment	(4,094)		(7,753)

Net Cash Provided (Used) by Investing Activities	Net Cash Provided (Used) by Investing Activities	12,993		(18,497)		Net Cash Provided (Used) by Investing Activities	(1,311)		12,993
Financing Activities	Financing Activities					Financing Activities
Dividends Paid	Dividends Paid	(79,668)		(81,612)		Dividends Paid	(73,804)		(79,668)
Purchases of Treasury Stock	Purchases of Treasury Stock	(92,426)		(53,145)		Purchases of Treasury Stock	(211,216)		(92,426)
Distributions to Noncontrolling Interest in Subsidiaries		(4,092)		(10,455)
Contributions from Noncontrolling Interest in Subsidiaries		101,297		15,014
Payments to Acquire Additional Equity in HFML		(163,696)		0
Distributions to Noncontrolling Interests in Subsidiaries						Distributions to Noncontrolling Interests in Subsidiaries	(22,144)		(4,092)
Contributions from Noncontrolling Interests in Subsidiaries						Contributions from Noncontrolling Interests in Subsidiaries	50,148		101,297
Payments to Acquire Additional Equity in FHL						Payments to Acquire Additional Equity in FHL	0		(163,696)
Cash paid for Business Acquisitions						Cash paid for Business Acquisitions	(7,053)		(2,008)
Proceeds from New Borrowings						Proceeds from New Borrowings	488,300		82,150

Proceeds from New Borrowings		82,150		100,000

Payments on Debt	Payments on Debt	(55,000)		(110,000)		Payments on Debt	(311,650)		(55,000)

Other Financing Activities	Other Financing Activities	(1,948)		(1,616)		Other Financing Activities	(2,571)		60
Net Cash Provided (Used) by Financing Activities	Net Cash Provided (Used) by Financing Activities	(213,383)		(141,814)		Net Cash Provided (Used) by Financing Activities	(89,990)		(213,383)
Effect of Exchange Rates on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	Effect of Exchange Rates on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	(2,758)		(3,408)		Effect of Exchange Rates on Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	(29,980)		(2,758)
Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	(102,192)		79,739		Net Increase (Decrease) in Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	70,254		(102,192)
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period	308,635		249,511		Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period	238,052		308,635
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period	206,443		329,250		Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period	308,306		206,443
Less: Restricted Cash Recorded in Other Current Assets	Less: Restricted Cash Recorded in Other Current Assets	4,449		6,091		Less: Restricted Cash Recorded in Other Current Assets	3,516		4,449
Less: Restricted Cash and Restricted Cash Equivalents Recorded in Other Long-Term Assets	Less: Restricted Cash and Restricted Cash Equivalents Recorded in Other Long-Term Assets	302		312		Less: Restricted Cash and Restricted Cash Equivalents Recorded in Other Long-Term Assets	270		302
Cash and Cash Equivalents	Cash and Cash Equivalents	$	201,692	$	322,847	Cash and Cash Equivalents	$	304,520	$	201,692

(The accompanying notes are an integral part of these Consolidated Financial Statements.)

Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

Federated Hermes, Inc. and its consolidated subsidiaries (collectively, Federated Hermes) provide investment advisory, administrative, distribution and other services to various investment products, including sponsored investment companies, collective funds and other funds (Federated Hermes Funds) and ~~Separate Accounts~~separate accounts (which include separately managed accounts, institutional accounts, certain sub-advised funds and other managed ~~products)~~products, collectively Separate Accounts) in both domestic and international markets. In addition, Federated Hermes markets and provides stewardship and real estate development services to various domestic and international companies. The interim ~~Consolidated Financial Statements~~consolidated financial statements of Federated Hermes included herein (Consolidated Financial Statements) have been prepared in accordance with ~~U.S.~~United States (U.S.) generally accepted accounting principles (GAAP). In the opinion of management, the financial statements reflect all adjustments that are of a normal recurring nature and necessary for a fair presentation of the results for the interim periods presented.

In preparing the ~~financial statements,~~Consolidated Financial Statements, management is required to make estimates and assumptions that affect the amounts reported therein and in the ~~Consolidated Financial Statements and~~ accompanying notes. Actual results may differ from those estimates, and such differences may be material to the Consolidated Financial Statements.

~~These financial statements~~The Consolidated Financial Statements should be read in conjunction with Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. Certain items reported in previous periods have been reclassified to conform to the current ~~period's~~period’s presentation.

(2) Significant Accounting Policies

For a listing of Federated ~~Hermes'~~Hermes’ significant accounting policies, please refer to Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020. The following accounting policy has been updated as a result of newly consolidated variable interest entities (VIEs).~~

~~Consolidation of Variable Interest Entities~~

Federated Hermes has a controlling financial interest in a VIE and is, therefore, deemed to be the primary beneficiary of a VIE if it has (1) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Financial information for certain entities, whose primary purpose is to collect and distribute carried interest paid by foreign private equity and infrastructure funds, is not available timely and is therefore consolidated on a one quarter lag, adjusted for any known material carried interest revenue and compensation transactions occurring through the balance sheet date.2021.

(3) Business Combination and Equity Acquisition ~~and~~ ~~Business Combination~~

~~2021 Acquisition of HFML Noncontrolling Interest~~

~~On August 31, 2021 (Closing Date),~~Effective October 1, 2022, Federated Hermes completed the acquisition of substantially all of the assets of C.W. Henderson and Associates, Inc. (CWH), a ~~29.5%~~Chicago-based registered investment advisor specializing in the management of tax-exempt municipal securities (CWH Acquisition). This acquisition will enhance Federated Hermes’ existing separately managed accounts business. An initial closing purchase price of $28.0 million was paid on September 30, 2022 and was recorded in Other Current Assets on the Consolidated Balance Sheets. The purchase agreement provides for a series of contingent purchase price payments, which can total as much as $17.6 million in the aggregate and can become payable annually over the next five years based on certain levels of net revenue growth. Due to the timing of the CWH Acquisition, the information necessary to complete the preliminary purchase price allocation is not yet available. Federated Hermes expects to disclose the preliminary purchase price allocation in its Annual Report on Form 10-K for the year ended December 31, 2022.

On March 14, 2022, Federated Hermes completed a tender offer resulting in the acquisition of the remaining approximate 10% noncontrolling ~~interest~~interests in Federated Hermes Limited (FHL, formerly known as Hermes Fund Managers ~~Limited (HFML)~~Limited) from ~~BT Pension Scheme (BTPS) for £116.5 million ($160.2 million) pursuant to the terms~~a trustee of a certain Put and Call Option Deed, dated July 2, 2018 (the Option Deed), between BTPS and Federated Hermes (2021 Acquisition of HFML Noncontrolling Interest). Because Federated Hermes had previously acquired a 60% controlling interest in HFML from BTPS as of July 1, 2018 (2018 HFML Acquisition), the 2021 Acquisition of HFML Noncontrolling Interest was accounted for as an acquisition of additional equity. The difference between the carrying value of the BTPS noncontrolling interest and the purchase price was reclassified from temporary equity to permanent equity. The remaining approximate 10% of the equity interests of HFML is held in annon-U.S. domiciled employee benefit trust established for the benefit of certain members of ~~HFML's~~FHL’s management, a non-U.S. resident former FHL employee and other non-U.S. resident key FHL employees under a long-term incentive plan established in connection with the 2018 ~~HFML Acquisition.~~

acquisition of FHL (2022 Acquisition of FHL Noncontrolling Interests). Pursuant to the ~~Option Deed,~~2022 Acquisition of FHL Noncontrolling Interests, FHL became a 100% indirect, wholly-owned subsidiary of Federated Hermes.

The 2022 Acquisition of FHL Noncontrolling Interests was transacted in shares whereby Federated Hermes issued awards of restricted Class B common stock under Federated Hermes Stock Incentive Plan and ~~BTPS agreed upon~~Federated Hermes UK Sub-Plan, as amended, and treasury Class B common stock, in exchange for the beneficial interests in shares of FHL. The FHL shares were exchanged at fair value for Federated Hermes shares valued at £36.4 million or $47.5 million, which was based on a third-party valuation ~~company, which determined~~of FHL. See Note (12) for additional information regarding the fair value of HFML for purposes of the Option Deed. The Option Deed provided that the consideration to be paid for BTPS' remaining interest in HFML would be based on BTPS' equity proportion of the fair value of HFML as determined in accordance with the terms of the Option Deed. Federated Hermes paid the purchase price by using a combination of cash on hand and borrowings under its corporate credit facility. Upon completion of the acquisition on the Closing Date, BTPS no longer has any ownership interest in HFML nor any representation on HFML's board of directors.share exchange.

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

~~HCL Acquisition~~

On March 5, 2020, Federated Hermes acquired, effective as of March 1, 2020, 100 percent ownership of HGPE Capital Limited (HCL Acquisition) for £15.9 million ($20.4 million). The principal activity of HGPE Capital Limited is that of a holding company for an infrastructure and private equity investment management business. As a result of the HCL Acquisition, Federated Hermes gained control of Hermes GPE LLP (HGPE) (collectively with HGPE Capital Limited, HCL). The addition of London-based HCL provides the opportunity to further accelerate and broaden Federated Hermes' global growth.

The HCL Acquisition included upfront cash payments that totaled £11.2 million ($14.3 million). The transaction also includes contingent purchase price payments payable through December 2024 that were deposited into escrow. The maximum contingent purchase price payments, recorded in Other Long-Term Liabilities, totaled £3.5 million ($4.5 million as of March 1, 2020), which represents the payment of certain future carried interest.

Prior to March 1, 2020, Federated Hermes accounted for its partial ownership interest in HGPE (through its ownership of HFML) as an equity-method investment recorded in Other Long-Term Assets on the Consolidated Balance Sheets. Management used an independent valuation expert to assist in estimating the fair value of this equity interest in HGPE using primarily the discounted cash flow methodology under the income approach. The acquisition-date fair value of this previous equity interest was $34.5 million. In the first quarter 2020, Federated Hermes recognized a gain of $7.5 million as a result of remeasuring the prior equity interest in HGPE held before the business combination and the consolidation of HGPE. This gain is included in Nonoperating Income (Expenses) - Other, net on the Consolidated Statements of Income.

Federated Hermes performed a valuation of the fair market value of acquired assets and assumed liabilities of the HCL Acquisition. The accounting for this acquisition was finalized in the first quarter 2021. During the first quarter 2021, Federated Hermes recorded adjustments that primarily resulted from the consolidation of certain foreign subsidiaries not previously consolidated. The provisional amounts recognized for certain acquired assets and incurred liabilities were adjusted by $25.8 million and $17.2 million, respectively, with the net offset of $8.6 million recorded to the related redeemable noncontrolling interest in subsidiary. This adjustment reflected facts and circumstances that existed as of the acquisition date. As a result of the consolidation of these subsidiaries, Federated Hermes recorded revenue of $6.9 million offset by $6.9 million of Compensation and Related expense, which represented the income and expense that would have been recorded had these entities been consolidated on March 1, 2020. There was no change to net income or earnings per share for the three-month period ended March 31, 2021 as a result of these adjustments.

~~The following table summarizes the final purchase price allocation determined as of the purchase date:~~


~~(in millions)~~
~~Cash and Cash Equivalents~~	$	~~32.7~~
~~Other Current Assets~~1	~~11.8~~
~~Goodwill~~2	~~19.1~~
~~Intangible Assets~~3	~~27.6~~
~~Other Long-Term Assets~~	~~16.4~~

~~Less: Liabilities Acquired~~	~~(44.1)~~
~~Less: Fair Value of Redeemable Noncontrolling Interest in Subsidiary~~4	~~(43.1)~~
~~Total Purchase Price Consideration~~	$	~~20.4~~

~~1 Includes $5.0 million of accounts receivable.~~

2 The goodwill recognized is attributable to enhanced revenue and AUM growth opportunities from future investors and the assembled workforce of HGPE. In this instance, goodwill is not deductible for tax purposes.

3 Includes $20.3 million for rights to manage fund assets for private equity funds with a weighted-average useful life of 9.0 years and $6.9 million for rights to manage fund assets for infrastructure funds with a weighted-average useful life of 11.0 years, all of which are recorded in Intangible Assets, net on the Consolidated Balance Sheets.

~~4 The fair value of the noncontrolling interest was determined utilizing primarily the discounted cash flow methodology under the income approach.~~

Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

(4) Revenue from Contracts with Customers

The following table presents Federated ~~Hermes'~~Hermes’ revenue disaggregated by asset class:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Equity	Equity	$	172,349	$	138,590	$	510,302	$	399,208	Equity	$	127,183	$	172,349	$	406,642	$	510,302
Money market										Money market	170,542		55,726		402,639		185,704
Fixed-income	Fixed-income	60,622		49,407		175,115		139,705		Fixed-income	49,197		60,622		159,025		175,115
Money market		55,726		143,391		185,704		452,240
Other1	Other1	37,892		33,067		107,681		93,197		Other1	34,221		37,892		103,609		107,681
Total Revenue	Total Revenue	$	326,589	$	364,455	$	978,802	$	1,084,350	Total Revenue	$	381,143	$	326,589	$	1,071,915	$	978,802

1 Primarily includes Alternative / Private Markets (including but not limited to private equity, real estate and infrastructure), multi-asset and stewardship services revenue.

The following table presents Federated ~~Hermes'~~Hermes’ revenue disaggregated by performance obligation:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Asset Management1	Asset Management1	$	230,210	$	260,089	$	692,188	$	745,875	Asset Management1	$	263,644	$	230,210	$	754,681	$	692,188
Administrative Services	Administrative Services	76,853		83,028		228,904		238,960		Administrative Services	75,021		76,853		218,710		228,904
Distribution2	Distribution2	12,460		15,273		37,679		79,786		Distribution2	36,026		12,460		78,285		37,679
Other3	Other3	7,066		6,065		20,031		19,729		Other3	6,452		7,066		20,239		20,031
Total Revenue	Total Revenue	$	326,589	$	364,455	$	978,802	$	1,084,350	Total Revenue	$	381,143	$	326,589	$	1,071,915	$	978,802

1 The performance obligation may include administrative, distribution and other services recorded as a single asset management fee under Topic 606, as it is part of a unitary fee arrangement with a single performance obligation.

2 The performance obligation is satisfied at a point in time. A portion of this revenue relates to a performance obligation that has been satisfied in a prior period.

3 Primarily includes shareholder service fees and stewardship services revenue.

The following table presents Federated ~~Hermes'~~Hermes’ revenue disaggregated by geographical market:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Domestic	Domestic	$	237,543	$	295,422	$	718,316	$	884,569	Domestic	$	311,254	$	237,543	$	849,570	$	718,316
Foreign1	Foreign1	89,046		69,033		260,486		199,781		Foreign1	69,889		89,046		222,345		260,486
Total Revenue	Total Revenue	$	326,589	$	364,455	$	978,802	$	1,084,350	Total Revenue	$	381,143	$	326,589	$	1,071,915	$	978,802

1 This represents revenue earned by non-U.S. domiciled subsidiaries.

The following table presents Federated ~~Hermes'~~Hermes’ revenue disaggregated by product type:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Federated Hermes Funds	Federated Hermes Funds	$	256,036	$	303,958	$	772,090	$	899,967	Federated Hermes Funds	$	319,680	$	256,036	$	877,910	$	772,090
Separate Accounts	Separate Accounts	66,404		57,111		195,441		172,633		Separate Accounts	57,250		66,404		180,600		195,441
Other1	Other1	4,149		3,386		11,271		11,750		Other1	4,213		4,149		13,405		11,271
Total Revenue	Total Revenue	$	326,589	$	364,455	$	978,802	$	1,084,350	Total Revenue	$	381,143	$	326,589	$	1,071,915	$	978,802

1 Primarily includes stewardship services revenue.

For nearly all revenue, Federated Hermes is not required to disclose certain estimates of revenue expected to be recorded in future periods as a result of applying the following exemptions: (1) contract terms are short-term in nature (i.e., expected duration of one year or less due to termination provisions) and (2) the expected variable consideration would be allocated entirely to future service periods.

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Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

~~duration of one year or less due to termination provisions) and (2) the expected variable consideration would be allocated entirely to future service periods.~~

Federated Hermes expects to recognize revenue in the future related to the unsatisfied portion of the stewardship services and real estate development performance obligations at September 30, ~~2021.~~2022. Generally, contracts are billed in arrears on a quarterly basis and have a ~~three year~~three-year duration, after which the customer can terminate the agreement with notice, generally from three to 12 months. Based on existing contracts and the applicable foreign exchange rates as of September 30, ~~2021,~~2022, Federated Hermes may recognize future fixed revenue from these services as presented in the following table:


(in thousands)	(in thousands)			(in thousands)
Remainder of 2021		$	4,418
2022		9,057
Remainder of 2022				Remainder of 2022	$	3,176
2023	2023	4,486		2023	6,778
2024 and Thereafter		2,687
2024				2024	2,878
2025 and Thereafter				2025 and Thereafter	1,086
Total Remaining Unsatisfied Performance Obligations	Total Remaining Unsatisfied Performance Obligations	$	20,648	Total Remaining Unsatisfied Performance Obligations	$	13,918

(5) Concentration Risk

(a) Revenue Concentration by Asset Class

The following table presents Federated ~~Hermes'~~Hermes’ significant revenue concentration by asset class:


		Nine Months Ended					Nine Months Ended
		September 30,					September 30,
		2021		2020			2022		2021
Equity Assets	Equity Assets	52	%	37	%	Equity Assets	38	%	52	%
Money Market Assets	Money Market Assets	19	%	42	%	Money Market Assets	37	%	19	%
Fixed-Income Assets	Fixed-Income Assets	18	%	13	%	Fixed-Income Assets	15	%	18	%

The change in the relative proportion of Federated ~~Hermes'~~Hermes’ revenue attributable to money market assets for the nine months ended September 30, ~~2021,~~2022 as compared to the same period in ~~2020,~~2021, was primarily the result of an increase in money market revenue due to a decrease in fee ~~waivers.~~waivers in order for certain money market funds to maintain positive or zero net yields (Voluntary Yield-related Fee Waivers). See section below entitled Low Short-Term Interest Rates.

The change in the relative proportion of Federated ~~Hermes'~~Hermes’ revenue attributable to equity and fixed-income assets for the nine months ended September 30, ~~2021,~~2022 as compared to the same period in ~~2020,~~2021, was primarily the result of ~~decreased~~increased money market revenue due to the decrease in Voluntary Yield-related Fee Waivers and ~~higher average~~decreased equity and fixed-income revenue from lower average equity assets and fixed-income asset mix in ~~2021.~~2022.

Low Short-Term Interest Rates

In March 2020, in response to disrupted economic activity as a result of the outbreak of a novel coronavirus ~~(Covid-19, or the~~(the Pandemic), the Federal Open Market Committee of the Federal Reserve Board (FOMC) decreased the federal funds target rate range to 0% - 0.25%. The federal funds target rate drives short-term interest rates. As a result of the near-zero interest-rate environment, the gross yield earned by certain money market funds iswas not sufficient to cover all of the ~~fund's~~fund’s operating expenses. Beginning in the first quarter 2020, Federated Hermes began to ~~waive fees in order for certain money market funds to maintain positive or zero net yields (Voluntary~~implement Voluntary Yield-related Fee ~~Waivers).~~Waivers. These Voluntary Yield-related Fee Waivers have been partially offset by related reductions in distribution expense as a result of Federated ~~Hermes'~~Hermes’ mutual understanding and agreement with third-party intermediaries to share the impact of the Voluntary Yield-related Fee Waivers. In response to global economic activity and elevated inflation levels, the FOMC has raised the federal funds target rate multiple times in 2022. The range is currently 3.00% - 3.25% as of the September 2022 FOMC meeting. These rate increases have eliminated the net negative pre-tax impact of the Voluntary Yield-related Fee Waivers.

There were no material Voluntary Yield-related Fee Waivers during the quarter ended September 30, 2022. During the nine months ended September 30, 2022, Voluntary Yield-related Fee Waivers totaled $85.3 million. These fee waivers were partially offset by related reductions in distribution expenses of $66.5 million, such that the net negative pre-tax impact to Federated Hermes was $18.8 million for the nine months ended September 30, 2022. During the three and nine months ended September 30, 2021, Voluntary Yield-related Fee Waivers totaled $109.2 million and $310.2 million, respectively. These fee waivers were partially offset by related reductions in distribution expenses of $72.3 million and $204.9 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $36.9 million and $105.3 million for the three and nine months ended September 30, 2021, respectively. During the three and nine months ended September 30, 2020, Voluntary Yield-related Fee Waivers totaled $36.8 million and $56.9 million, respectively. These fee waivers were partially offset by related reductions in distribution expenses of $33.0 million and $51.0 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $3.8 million and $5.9 million for the three and nine months

1211

Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

ended September 30, 2020, respectively. See Management's Discussion and Analysis under the caption Business Developments - Low Short-Term Interest Rates for additional information on management's expectations regarding Voluntary Yield-related Fee Waivers.

(b) Revenue Concentration by Investment Fund Strategy

The following table presents Federated ~~Hermes'~~Hermes’ revenue concentration by investment fund strategy:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
		2021		2020		2021		2020			2022		2021		2022		2021

Federated Hermes Government Obligations Fund										Federated Hermes Government Obligations Fund	14	%	5	%	11	%	5	%
Federated Hermes Kaufmann Fund and Federated Hermes Kaufmann Fund II	Federated Hermes Kaufmann Fund and Federated Hermes Kaufmann Fund II	12	%	9	%	11	%	9	%	Federated Hermes Kaufmann Fund and Federated Hermes Kaufmann Fund II	6	%	12	%	7	%	11	%

Federated Hermes Government Obligations Fund		5	%	14	%	5	%	13	%

A significant and prolonged decline in the AUM in these funds could have a material adverse effect on Federated ~~Hermes'~~Hermes’ future revenues and, to a lesser extent, net income, due to a related reduction in distribution expenses associated with these funds.

Approximately 14% and 11% of Federated Hermes’ total revenue for the three- and nine-month periods ended September 30, 2022, respectively, and 3% for both the three- and nine-month periods ended September 30, 2021 was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary. The increase in 2022 was primarily due to the decrease in Voluntary Yield-related Fee Waivers. An increase in Voluntary Yield-related Fee Waivers or a negative change in Federated Hermes’ relationship with this intermediary may have a material adverse effect on Federated Hermes’ future revenues and, to a lesser extent, net income due to a related reduction in distribution expenses associated with this intermediary.

(6) Consolidation

The Consolidated Financial Statements include the accounts of Federated Hermes, certain Federated Hermes Funds and other entities in which Federated Hermes holds a controlling financial interest. Federated Hermes is involved with various entities in the normal course of business that may be deemed to be voting rights entities (VREs) or ~~VIEs.~~variable interest entities (VIEs). From time to time, Federated Hermes invests in Federated Hermes Funds for general corporate investment purposes or, in the case of newly launched products, in order to provide investable cash to establish a performance history. Federated ~~Hermes'~~Hermes’ investment in, and/or receivables from, these Federated Hermes Funds represents its maximum exposure to loss. The assets of each consolidated Federated Hermes Fund are restricted for use by that Federated Hermes Fund. Generally, neither creditors of, nor equity investors in, the Federated Hermes Funds have any recourse to Federated ~~Hermes'~~Hermes’ general credit. Given that the entities consolidated by Federated Hermes generally follow investment company accounting, which prescribes fair-value accounting, a deconsolidation generally does not result in the recognition of gains or losses for Federated Hermes.

In the ordinary course of business, Federated Hermes may implement fee waivers, rebates or expense reimbursements for various Federated Hermes Funds for competitive reasons (such as Voluntary Yield-related Fee Waivers or to maintain certain fund expense ratios/yields), to meet regulatory requirements or to meet contractual requirements (collectively, Fee Waivers). For the three and nine months ended September 30, 2022, Fee Waivers totaled $118.2 million and $444.7 million, respectively, of which $89.1 million and $351.0 million, respectively, related to money market funds which meet the scope exception of the consolidation guidance. For the three and nine months ended September 30, 2021, Fee Waivers totaled $233.9 million and $680.0 million, respectively, of which $197.2 million and $573.5 million, respectively, related to money market funds which meet the scope exception of the consolidation guidance. For the three and nine months ended September 30, 2020, Fee Waivers totaled $174.6 million and $490.0 million, respectively, of which $145.1 million and $386.8 million, respectively, related to money market funds which meet the scope exception of the consolidation guidance.

Like other sponsors of investment companies, Federated Hermes in the ordinary course of business may make capital contributions to certain affiliated money market Federated Hermes Funds in connection with the reorganization of such funds into certain other affiliated money market Federated Hermes Funds or in connection with the liquidation of a money market Federated Hermes ~~Fund.~~Funds. In these instances, such capital contributions typically are intended to either offset realized losses or other permanent impairments to a ~~fund's~~fund’s net asset value (NAV), increase the market-based NAV per share of the ~~fund's~~fund’s portfolio that is being reorganized to equal the market-based NAV per share of the acquiring fund or to bear a portion of expenses relating to a fund liquidation. Under current money market fund regulations and Securities and Exchange Commission (SEC) guidance, Federated Hermes is required to report these types of capital contributions to U.S. money market mutual funds ~~to the SEC~~ as financial support to the investment company that is being reorganized or liquidated. There were no contributions for the ~~three~~nine months ended September 30, ~~2021~~2022 and no material contributions for the nine months ended September 30, 2021. ~~There were no contributions for the three and nine months ended September 30, 2020.~~

Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

In accordance with Federated ~~Hermes'~~Hermes’ consolidation accounting policy, Federated Hermes first determines whether the entity being evaluated is a VRE or a VIE. Once this determination is made, Federated Hermes proceeds with its evaluation of whether to consolidate the entity. The disclosures below represent the results of such evaluations as of September 30, ~~2021~~2022 and December 31, ~~2020.~~

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

2021.

(a) Consolidated Voting Rights Entities

Although most of the Federated Hermes Funds meet the definition of a VRE, Federated Hermes consolidates VREs only when it is deemed to have control. Consolidated VREs are reported on Federated ~~Hermes'~~Hermes’ Consolidated Balance Sheets primarily in Investments—Consolidated Investment Companies and Redeemable Noncontrolling ~~Interest~~Interests in Subsidiaries.

(b) Consolidated Variable Interest Entities

As of the periods ended September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Federated Hermes was deemed to be the primary beneficiary of, and therefore consolidated, certain entities as a result of its controlling financial interest. The following table presents the balances related to the consolidated VIEs that were included on the Consolidated Balance Sheets as well as Federated ~~Hermes'~~Hermes’ net interest in the consolidated VIEs for each period ~~presented.~~presented:

(in millions) September 30, 2021 December 31, 2020
Cash and Cash Equivalents $ 3.3 $ 0.2
Investments—Consolidated Investment Companies 35.3 12.1
Other Assets 0.5 0.1
Long-Term Investments 12.0 0.0
Less: Liabilities 1.7 0.1
Less: Redeemable Noncontrolling Interest in Subsidiaries 27.2 0.0
Federated Hermes' Net Interest in VIEs $ 22.2 $ 12.3


(in millions)	September 30, 2022		December 31, 2021
Cash and Cash Equivalents	$	7.1	$	3.0
Investments—Consolidated Investment Companies	45.9		35.9
Other Current Assets	0.5		0.1
Other Long-Term Assets	12.5		13.8
Less: Other Current Liabilities	4.8		1.4
Less: Redeemable Noncontrolling Interests in Subsidiaries	46.0		33.3
Federated Hermes’ Net Interest in VIEs	$	15.2	$	18.1

Federated ~~Hermes'~~Hermes’ net interest in the consolidated VIEs represents the value of Federated ~~Hermes'~~Hermes’ economic ownership interest in that VIE.

During the ~~first quarter~~nine months ended September 30, 2022, there was one new consolidation of ~~2021, as~~ a ~~result of the HCL Acquisition,~~VIE when Federated Hermes consolidated certain VIEs not previously consolidated. See Note (3) for additional information. During the second quarter of 2021, Federated Hermes consolidated a Federated Hermes Fund VIE in which it was the primary beneficiary.Hermes’ ownership increased due to redemptions from third-party investors. There was no material impact to the Consolidated Statements of Income as a result of ~~these consolidations.~~this consolidation. There were no ~~other consolidations or~~new deconsolidations of VIEs during the nine months ended September 30, ~~2021.~~2022.

Federated ~~Hermes'~~Hermes’ involvement with certain Federated Hermes Funds that are deemed to be VIEs includes serving as investment manager, or at times, holding a minority interest or both. Federated ~~Hermes'~~Hermes’ variable interest is not deemed to absorb losses or receive benefits that could potentially be significant to the VIE. Therefore, Federated Hermes is not the primary beneficiary of these VIEs and has not consolidated these entities.

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Federated ~~Hermes'~~Hermes’ maximum risk of loss related to investments in variable ~~interest~~interests in non-consolidated VIEs was ~~$150.7~~$82.4 million and ~~$106.0~~$170.6 million, respectively, (primarily recorded in Cash and Cash Equivalents on the Consolidated Balance Sheets) and was entirely related to Federated Hermes Funds. AUM for these non-consolidated Federated Hermes Funds totaled ~~$9.3~~$6.9 billion and ~~$9.1~~$8.0 billion at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Of the Receivables—Affiliates at September 30, ~~2021~~2022 and December 31, ~~2020, $0.6~~2021, $1.0 million and ~~$0.4~~$0.7 million, respectively, related to non-consolidated VIEs and represented Federated ~~Hermes'~~Hermes’ maximum risk of loss from non-consolidated VIE receivables.

(7) Investments

At September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, Federated Hermes held investments in non-consolidated fluctuating-value Federated Hermes Funds of ~~$78.8~~$60.6 million and ~~$36.0~~$77.6 million, respectively, primarily in mutual funds which predominantly invest in equity securities, and held investments in Separate Accounts of ~~$10.5~~$8.8 million and ~~$9.6~~$10.2 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, that were included in Investments—Affiliates and Other on the Consolidated Balance Sheets. Federated ~~Hermes'~~Hermes’ investments held in Separate Accounts as of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021 were primarily composed of domestic debt securities ($~~5.3~~4.5 million and $5.2 million, respectively) and stocks of large domestic and foreign companies ($~~3.5~~3.1 million and ~~$3.1~~$3.4 million, respectively).

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Notes to the Consolidated Financial Statements

(unaudited)

Federated Hermes consolidates certain Federated Hermes Funds into its Consolidated Financial Statements as a result of its controlling financial interest in these Federated Hermes Funds (see Note (6)). All investments held by these consolidated Federated Hermes Funds were included in Investments—Consolidated Investment Companies on Federated ~~Hermes'~~Hermes’ Consolidated Balance Sheets.

The investments held by consolidated Federated Hermes Funds as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were primarily composed of domestic and foreign debt securities ($~~23.6~~55.8 million and ~~$48.6~~$65.2 million, respectively), stocks of large domestic and foreign companies ($~~22.8~~47.2 million and ~~$35.2~~$28.5 million, respectively) and stocks of small and mid-sized domestic and foreign companies ($~~7.1~~3.0 million and ~~$6.4~~$7.4 million, respectively).

The following table presents gains and losses recognized in Gain (Loss) on Securities, net on the Consolidated Statements of Income in connection with Federated ~~Hermes'~~Hermes’ investments:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(in thousands)	(in thousands)	2021		2020		2021		2020		(in thousands)	2022		2021		2022		2021
Investments—Consolidated Investment Companies	Investments—Consolidated Investment Companies									Investments—Consolidated Investment Companies
Net Unrealized Gains (Losses)	Net Unrealized Gains (Losses)	$	(391)	$	4,451	$	(1,197)	$	3,987	Net Unrealized Gains (Losses)	$	1,137	$	(391)	$	(16,446)	$	(1,197)
Net Realized Gains (Losses)1	Net Realized Gains (Losses)1	184		(47)		1,786		(1,151)		Net Realized Gains (Losses)1	(4,568)		184		(6,047)		1,786
Net Gains (Losses) on Investments—Consolidated Investment Companies	Net Gains (Losses) on Investments—Consolidated Investment Companies	(207)		4,404		589		2,836		Net Gains (Losses) on Investments—Consolidated Investment Companies	(3,431)		(207)		(22,493)		589
Investments—Affiliates and Other	Investments—Affiliates and Other									Investments—Affiliates and Other
Net Unrealized Gains (Losses)	Net Unrealized Gains (Losses)	(2,077)		1,816		1,170		1,410		Net Unrealized Gains (Losses)	(3,248)		(2,077)		(18,979)		1,170
Net Realized Gains (Losses)1	Net Realized Gains (Losses)1	1,640		(368)		5,221		(406)		Net Realized Gains (Losses)1	(146)		1,640		2,066		5,221
Net Gains (Losses) on Investments—Affiliates and Other	Net Gains (Losses) on Investments—Affiliates and Other	(437)		1,448		6,391		1,004		Net Gains (Losses) on Investments—Affiliates and Other	(3,394)		(437)		(16,913)		6,391
Gain (Loss) on Securities, net	Gain (Loss) on Securities, net	$	(644)	$	5,852	$	6,980	$	3,840	Gain (Loss) on Securities, net	$	(6,825)	$	(644)	$	(39,406)	$	6,980

1 Realized gains and losses are computed on a specific-identification basis.

(8) Fair Value Measurements

Fair value is the price that would be received to sell an asset or the price that would be paid to transfer a liability as of the measurement date. A fair-value reporting hierarchy exists for disclosure of fair value measurements based on the observability of the inputs to the valuation of financial assets and liabilities. The levels are:

Level 1 – Quoted prices for identical instruments in active markets. Level 1 assets may include equity and debt securities that are traded in an active exchange market, including shares of mutual funds.

Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 assets and liabilities may include debt and equity securities, purchased loans and over-the-counter derivative contracts whose fair value is determined using a pricing model without significant unobservable market data inputs.

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active markets.

NAV Practical Expedient – Investments that calculate NAV per share (or its equivalent) as a practical expedient. These investments have been excluded from the fair value hierarchy.

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Notes to the Consolidated Financial Statements

(unaudited)

(a) Fair Value Measurements on a Recurring Basis

The following table presents fair value measurements for classes of Federated ~~Hermes'~~Hermes’ financial assets and liabilities measured at fair value on a recurring basis:


(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total		(in thousands)	Level 1		Level 2		Level 3		Total
September 30, 2021
September 30, 2022										September 30, 2022
Financial Assets	Financial Assets									Financial Assets
Cash and Cash Equivalents	Cash and Cash Equivalents	$	201,692	$	0	$	0	$	201,692	Cash and Cash Equivalents	$	304,520	$	0	$	0	$	304,520
Investments—Consolidated Investment Companies	Investments—Consolidated Investment Companies	28,955		25,120		0		54,075		Investments—Consolidated Investment Companies	44,061		62,965		251		107,277
Investments—Affiliates and Other	Investments—Affiliates and Other	83,656		5,343		319		89,318		Investments—Affiliates and Other	64,426		4,948		25		69,399
Other1	Other1	7,095		2		0		7,097		Other1	6,130		0		0		6,130
Total Financial Assets	Total Financial Assets	$	321,398	$	30,465	$	319	$	352,182	Total Financial Assets	$	419,137	$	67,913	$	276	$	487,326

Total Financial Liabilities2	Total Financial Liabilities2	$	71	$	2,099	$	11,856	$	14,026	Total Financial Liabilities2	$	141	$	11,291	$	4,381	$	15,813

December 31, 2020
December 31, 2021										December 31, 2021
Financial Assets	Financial Assets									Financial Assets
Cash and Cash Equivalents	Cash and Cash Equivalents	$	301,819	$	0	$	0	$	301,819	Cash and Cash Equivalents	$	233,327	$	0	$	0	$	233,327
Investments—Consolidated Investment Companies	Investments—Consolidated Investment Companies	13,622		77,737		0		91,359		Investments—Consolidated Investment Companies	38,799		66,743		0		105,542
Investments—Affiliates and Other	Investments—Affiliates and Other	40,010		5,247		336		45,593		Investments—Affiliates and Other	82,594		5,165		46		87,805
Other1	Other1	9,188		5,143		0		14,331		Other1	7,105		0		0		7,105
Total Financial Assets	Total Financial Assets	$	364,639	$	88,127	$	336	$	453,102	Total Financial Assets	$	361,825	$	71,908	$	46	$	433,779

Total Financial Liabilities2	Total Financial Liabilities2	$	0	$	89	$	12,896	$	12,985	Total Financial Liabilities2	$	0	$	1,644	$	11,652	$	13,296

1 Amounts primarily consist ofof restricted cash and security deposits as of September 30, ~~2021~~2022 and ~~restricted cash, security deposits and derivative assets as of~~ December 31, ~~2020.~~2021.

2 Amounts primarily consist of ~~acquisition-related future contingent consideration liabilities and~~ derivative ~~liabilities as of~~ ~~September 30, 2021~~ and acquisition-related future contingent consideration liabilities as of September 30, 2022 and December 31, ~~2020~~2021.

The following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value on a recurring basis. Federated Hermes did not hold any nonfinancial assets or liabilities measured at fair value on a recurring basis at September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

Cash and Cash Equivalents

Cash and Cash Equivalents include deposits with banks and investments in money market funds. Investments in money market funds totaled ~~$161.9~~$258.4 million and ~~$244.3~~$183.4 million at September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Cash investments in publicly available money market funds are valued under the market approach through the use of quoted market prices in an active market, which is the NAV of the funds, and are classified within Level 1 of the valuation hierarchy.

Investments—Consolidated Investment Companies

Investments—Consolidated Investment Companies represent securities held by consolidated Federated Hermes Funds. For publicly traded securities available in an active market, the fair value of these securities is classified as Level 1 when the fair value is based on quoted market prices. The fair ~~value~~values of certain securities held by consolidated Federated Hermes Funds are determined by third-party pricing services which utilize observable market inputs of comparable investments (Level 2).

Investments—Affiliates and Other

Investments—Affiliates and Other primarily represent investments in fluctuating-value Federated Hermes Funds, as well as investments held in Separate Accounts. For investments in fluctuating-value Federated Hermes Funds that are publicly available, the securities are valued under the market approach through the use of quoted market prices available in an active market, which is the NAV of the funds, and are classified within Level 1 of the valuation hierarchy. For publicly traded securities available in an active market, the fair value of these securities is classified as Level 1 when the fair value is based on quoted market prices. The fair ~~value~~values of certain securities are determined by third-party pricing services which utilize observable market inputs of comparable investments (Level 2).

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Notes to the Consolidated Financial Statements

(unaudited)

Acquisition-related future contingent consideration liabilities

From time to time, pursuant to agreements entered into in connection with certain business combinations and asset acquisitions, Federated Hermes may be required to make future consideration payments if certain contingencies are met. In connection with certain business combinations, Federated Hermes records a liability representing the estimated fair value of future consideration payments as of the acquisition date. The liability is subsequently re-measured at fair value on a recurring basis with changes in fair value recorded in earnings. As of September 30, ~~2021,~~2022, acquisition-related future consideration liabilities of ~~$11.9~~$4.4 million were primarily related to business combinations made in the first quarter of 2020 and were recorded in Other Current Liabilities ($~~7.5~~0.9 million) and Other Long-Term Liabilities ($~~4.4~~3.5 million) on the Consolidated Balance Sheets. Management estimated the fair value of future consideration payments based primarily upon expected future cash flows using an income approach valuation methodology with unobservable market data inputs (Level 3).

The following table presents a reconciliation of the beginning and ending balances for Federated ~~Hermes'~~Hermes’ liability for future consideration payments related to these business combinations/asset acquisitions:


(in thousands)
Balance at December 31, ~~2020~~2021	$	~~12,896~~11,652

Changes in Fair Value	~~1,206~~ (218)
Contingent Consideration Payments	~~(2,246)~~(7,053)
Balance at September 30, ~~2021~~2022	$	~~11,856~~4,381

Investments using Practical Expedients

For investments in mutual funds that are not publicly available but for which the NAV is calculated monthly and for which there are redemption restrictions, the investments are valued using NAV as a practical expedient and are excluded from the fair value hierarchy. As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, these investments totaled ~~$17.2~~$16.5 million and ~~$6.9~~$17.5 million, respectively, and were recorded in Other Long-Term Assets.

(b) Fair Value Measurements on a Nonrecurring Basis

Federated Hermes did not hold any assets or liabilities measured at fair value on a nonrecurring basis at September 30, ~~2021.~~2022.

The fair value of Federated ~~Hermes'~~Hermes’ debt is estimated by management using observable market data (Level 2). Based on this fair value estimate, the carrying value of debt appearing on the Consolidated Balance Sheets approximates fair value.

(9) Derivatives

During the third quarter of 2021, Federated Hermes entered into a foreign currency forward transaction in order to hedge against foreign exchange rate fluctuations associated with the payment for the 2021 Acquisition of HFML Noncontrolling Interest. The forward was not designated as a hedging instrument for accounting purposes. The forward transaction settled in the third quarter of 2021 and Federated Hermes recorded $1.3 million of expense in Nonoperating Income (Expenses) - Other, net on the Consolidated Statements of Income as a result of the change in fair value of this derivative.

~~HFML,~~FHL, a British Pound Sterling-denominated ~~majority-owned~~ subsidiary of Federated Hermes, enters into foreign currency forward transactions in order to hedge against foreign exchange rate fluctuations in the U.S. Dollar. None of the forwards have been designated as hedging instruments for accounting purposes. As of September 30, ~~2021,~~2022, this subsidiary held foreign currency ~~forward derivative instruments~~forwards with a combined notional amount of ~~£67.6~~£64.4 million and expiration dates ranging from December ~~2021~~2022 through June ~~2022.~~2023. Federated Hermes recorded ~~$2.1~~$11.3 million in Other Current Liabilities on the Consolidated Balance Sheets, which represented the fair value of these derivative instruments as of September 30, ~~2021.~~2022.

As of December 31, ~~2020, HFML~~2021, FHL held foreign currency ~~forward derivative instruments~~forwards with a combined notional amount of ~~£47.3~~£69.6 million and expiration dates ranging from March ~~2021~~2022 through September ~~2021.~~2022. Federated Hermes recorded ~~$5.1~~$1.6 million in ~~Receivables~~Other Current Liabilities on the Consolidated Balance Sheets, which represented the fair value of these derivative instruments as of December 31, ~~2020.~~2021.

For the three and nine months ended September 30, 2022, Federated Hermes recorded $6.1 million and $11.5 million, respectively, to Operating Expenses - Other on the Consolidated Statements of Income for realized losses on foreign currency forward transactions. For the three and nine months ended September 30, 2021, Federated Hermes recorded $1.0 million and $5.2 million, respectively, to Operating Expenses - Other on the Consolidated Statements of Income for realized gains on foreign currency forward transactions.

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Notes to the Consolidated Financial Statements

(unaudited)

(10)Intangible Assets, including Goodwill

Intangible Assets, net at September 30, ~~2021~~2022 decreased ~~$8.8~~$64.4 million from December 31, ~~2020~~2021 primarily due to ~~$10.4 million of amortization expense and~~ a ~~$4.7~~$55.8 million decrease in the value of intangible assets denominated in a foreign currency as a result of foreign exchange rate ~~fluctuations. These decreases were partially offset by $5.3~~fluctuations and $9.3 million of ~~intangible assets recorded in connection with an asset purchase during 2021.~~amortization expense.

Goodwill at September 30, ~~2021~~2022 decreased ~~$2.0~~$24.3 million from December 31, ~~2020~~2021 primarily as a result of foreign exchange rate fluctuations on goodwill denominated in a foreign currency.

(11) Debt

Unsecured Senior Notes

On March 17, 2022, Federated Hermes entered into a Note Purchase Agreement (Note Purchase Agreement) by and among Federated Hermes and the purchasers of certain unsecured senior notes in the aggregate amount of $350.0 million (Notes), at a fixed interest rate of 3.29% per annum, payable semiannually in arrears on the 17th day of March and September in each year of the agreement. Citigroup Global Markets Inc. and PNC Capital Markets LLC acted as lead placement agents in relation to the Notes and certain subsidiaries of Federated Hermes are guarantors of the obligations owed under the Note Purchase Agreement. As of September 30, 2022, $347.5 million, net of unamortized issuance costs in the amount of $2.5 million, was recorded in Long-Term Debt on the Consolidated Balance Sheets.

The entire principal amount of the Notes will become due March 17, 2032, subject to certain prepayment requirements under limited conditions. Federated Hermes may elect to prepay the Notes under certain limited circumstances including with a make-whole amount if mandatorily prepaid without the consent of the holders of the Notes. The Note Purchase Agreement does not feature a facility for the further issuance of additional notes or borrowing of any other amounts and there is no commitment fee payable in connection with the Notes.

The Note Purchase Agreement includes an interest coverage ratio covenant and a leverage ratio covenant as well as other customary terms and conditions. Federated Hermes was in compliance with all of its covenants at and during the period ended September 30, 2022. See the Liquidity and Capital Resources section of Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

The Note Purchase Agreement includes certain stated events of default and cross default provisions which would permit the lenders/counterparties to accelerate the repayment of the Notes if not cured within the applicable grace periods. The events of default generally include breaches of contract, failure to make required payments, insolvency, certain material misrepresentations and other proceedings, whether voluntary or involuntary, that would require the repayment of Notes prior to their stated date of maturity. Any such accelerated amounts would accrue interest at a default rate and could include an additional make-whole amount upon repayment. The Notes rank without preference or priority, with other unsecured and senior indebtedness of Federated Hermes.

Revolving Credit Facility

On July 30, 2021, Federated Hermes entered into an unsecured Fourth Amended and Restated Credit Agreement by and among Federated Hermes, certain of its subsidiaries as guarantors party thereto, a syndicate of 11eleven banks as Lenders party thereto, PNC Bank, National Association as administrative agent, PNC Capital Markets LLC, as sole bookrunner and joint lead arranger, Citigroup Global Markets, Inc., as joint lead arranger, Citibank, N.A. as syndication agent, and Toronto-Dominion Bank, New York Branch as documentation agent (Credit Agreement). The Credit Agreement ~~amended and restated Federated Hermes' Third Amended and Restated Credit Agreement, which was dated June 5, 2017 and scheduled to mature on June 5, 2022 (Prior Credit Agreement).~~

~~The Credit Agreement~~ consists of a ~~$350~~$350.0 million revolving credit facility with an additional ~~$200~~$200.0 million available via an optional increase (or accordion) feature. The interest on the borrowings from the revolving credit facility is calculated at the ~~monthly~~ London Interbank Offering Rate (LIBOR) based on the tenor selection plus a spread unless a base rate option is elected. The borrowings under the revolving credit facility may include up to $50 million for which interest is calculated at the daily LIBOR plus a spread unless a base rate option is elected (Swing Line). The Credit Agreement provides for a replacement reference interest rate index upon the eventual discontinuation of LIBOR, ~~each having a benchmark adjustment applied based on its historical relationship to LIBOR,~~ which can be either the term Secured Overnight Financing Rate (SOFR) plus a spread, daily simple SOFR plus a spread, each having a benchmark adjustment applied based on its historical relationship to LIBOR, or another alternative interest rate index (selected by the administrative agent and Federated Hermes) plus a spread.

The Credit Agreement, which expires on July 30, 2026, has no principal payment schedule, but instead requires that any outstanding principal be repaid by the expiration date. Federated Hermes, however, may elect to make discretionary principal

Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

payments. During the ~~first~~ nine months ~~of 2021,~~ended September 30, 2022, Federated Hermes borrowed ~~$82.2~~$138.3 million and repaid ~~$55.0~~$311.7 million ~~of the revolving credit facility under the Credit Agreement and Prior Credit Agreement.~~

~~As of September 30, 2021, the amount outstanding~~ on the revolving credit facility under the Credit ~~Agreement was $102.2~~Agreement.

As of September 30, 2022 and December 31, 2021, the amounts outstanding under the revolving credit facility were $50.0 million and ~~was~~$223.4 million, respectively, and were recorded as Long-Term Debt on the Consolidated Balance Sheets. The interest rate was ~~1.084%~~1.354% and 1.161% as of September 30, ~~2021.~~2022 and December 31, 2021, respectively, which was calculated at LIBOR plus a spread. The commitment fee under the Credit Agreement is 0.10% per annum on the daily unused portion of each ~~Lender's~~Lender’s commitment. As of September 30, ~~2021,~~2022, Federated Hermes has ~~$247.8~~$300.0 million available for borrowings under the revolving credit facility and an additional ~~$200~~$200.0 million available via its optional accordion feature.

As of December 31, 2020, the amount outstanding on the revolving credit facility under the Prior Credit Agreement was $75 million and was recorded as Long-Term Debt on the Consolidated Balance Sheets. The ~~interest rate was 1.277% as of December 31, 2020 which was calculated at LIBOR plus a spread.~~

~~The Credit Agreement, similar to the Prior~~ Credit Agreement includes representations and warranties, affirmative and negative financial covenants, including an interest coverage ratio covenant and a leverage ratio covenant, reporting requirements and other non-financial covenants. Federated Hermes was in compliance with all covenants at and during the nine months ended September 30, ~~2021.~~2022. See the Liquidity and Capital Resources section of ~~Management's~~Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

The Credit Agreement also has certain stated events of default and cross default provisions which would permit the lenders/counterparties to accelerate the repayment of debt outstanding if not cured within the applicable grace periods. The events of default generally include breaches of contract, failure to make required loan payments, insolvency, cessation of business, notice of lien or assessment, and other proceedings, whether voluntary or involuntary, that would require the repayment of amounts borrowed. The Credit Agreement also requires certain subsidiaries to enter into a Third Amended and Restated Continuing Agreement of Guaranty and Suretyship to guarantee payment of all obligations incurred through the Credit Agreement.

(12) Share-Based Compensation Plans

In connection with the 2022 Acquisition of FHL Noncontrolling Interests, Federated Hermes granted 1,183,066 shares of restricted Federated Hermes Class B common stock pursuant to award agreements to certain FHL employees in exchange for their beneficial interests in awards of restricted FHL shares held on March 14, 2022. These shares of Federated Hermes Class B common stock were reserved for issuance under the Federated Hermes Stock Incentive Plan. Federated Hermes also issued a combined 318,807 shares of treasury Federated Hermes Class B common stock to a non-U.S. resident former FHL employee, and to the trustee of a non-U.S. domiciled employee benefit trust, in exchange for beneficial interests in the FHL shares held by them on March 14, 2022. The Federated Hermes shares now held by the employee benefit trust are to be used for future restricted stock awards for FHL management and key employees. See Note (3) for additional information.

During the nine months ended September 30, 2022, Federated Hermes awarded 509,043 shares of restricted Federated Hermes Class B common stock, nearly all of which was granted in connection with a bonus program in which certain key employees received a portion of their bonus in the form of restricted stock under Federated Hermes’ Stock Incentive Plan. This restricted stock, which was granted on the bonus payment date and issued out of treasury, generally vests over a three-year period.

During 2021, Federated Hermes awarded 1,218,613 shares of restricted Federated Hermes Class B common stock under its Stock Incentive Plan. Of this amount, 726,613 shares were awarded in connection with the aforementioned bonus program. The remaining shares were awarded to certain key employees and generally vest over a 10-year period.

(13) Equity

In December 2021, the board of directors authorized a share repurchase program with no stated expiration date that allowed the repurchase of up to 7.5 million shares of Class B common stock. This program was fulfilled in September 2022. In June 2022, the board of directors authorized a share repurchase program with no stated expiration date that allows the repurchase of up to 5.0 million shares of Class B common stock. No other program existed as of September 30, 2022. The program authorizes executive management to determine the timing and the amount of shares for each purchase. The repurchased stock is to be held in treasury for employee share-based compensation plans, potential acquisitions and other corporate activities, unless Federated Hermes’ board of directors subsequently determines to retire the repurchased stock and restore the shares to authorized but unissued status (rather than holding the shares in treasury). During the nine months ended September 30, 2022, Federated Hermes repurchased approximately 6.1 million shares of its Class B common stock for $199.0 million, nearly all of which were repurchased in the open market. At September 30, 2022, approximately 5.0 million shares remain available to be repurchased under this share repurchase program.

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Notes to the Consolidated Financial Statements

(unaudited)

~~(12) Share-Based Compensation Plans~~

~~During the nine months ended September 30, 2021,~~In July 2022, Federated Hermes awarded 727,924 shares of restricted Federated Hermes Class B common stock, nearly all of which was granted in connection with a bonus program in which certain key employees receive a portion of their bonus in the form of restricted stock under Federated Hermes' Stock Incentive Plan. This restricted stock, which was granted on the bonus payment date and issued out of treasury, generally vests over three years.

During 2020, Federated Hermes awarded 1,134,581 shares of restricted Federated Hermes Class B common stock under its Stock Incentive Plan. Of this amount, 649,581 shares were awarded in connection with the aforementioned bonus program. The remaining shares were awarded to certain key employees and generally vest over ten years.

~~(13) Equity~~

~~In April 2021, the~~Hermes’ board of directors authorized ~~a share repurchase program with no stated expiration date that allows~~ the ~~repurchase~~retirement of ~~up to 4.0~~10 million treasury shares of Class B common stock. No other program existed as of September 30, 2021. The program authorizes executive management to determine the timing and the amount of shares for each purchase. The repurchased stock is to be held in treasury for employee share-based compensation plans, potential acquisitions and other corporate activities, unless Federated Hermes' board of directors subsequently determines to retire the repurchased stock and restore thewhich restored these shares to authorized but unissued ~~status (rather than holding the shares in treasury). During the first nine months of 2021,~~status. Federated Hermes ~~repurchased approximately 3.1~~recorded a $313.8 million ~~shares of its~~reduction to Treasury Stock, at cost using the specific-identification method and a $42.7 million reduction to Class B common stock, ~~for $94.5 million ($3.2 million~~at cost using the average cost method. The difference was recorded as a reduction to Retained Earnings and Additional Paid-In Capital from Treasury Stock Transactions. There was no impact to total equity as a result of which was accrued in Other Current Liabilities as of September 30, 2021), nearly all of which were repurchased in the open market. At September 30, 2021, approximately 2.6 million shares remained available to be repurchased under this ~~share repurchase program.~~non-cash transaction.

The following table presents the activity for the Class B common stock and Treasury stock for the three and nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Class A shares have been excluded as there was no activity during these same periods.


		Three Months Ended		Nine Months Ended			Three Months Ended		Nine Months Ended
		September 30,		September 30,			September 30,		September 30,
		2021	2020	2021	2020		2022	2021	2022	2021
Class B Shares	Class B Shares					Class B Shares
Beginning Balance	Beginning Balance	97,558,017	100,279,043	99,331,443	101,130,379	Beginning Balance	89,197,952	97,558,017	93,410,968	99,331,443
Stock Award Activity	Stock Award Activity	10,000	22,500	734,674	728,831	Stock Award Activity	0	10,000	1,704,592	734,674
Purchase of Treasury Stock	Purchase of Treasury Stock	(593,619)	(866,900)	(3,091,719)	(2,424,567)	Purchase of Treasury Stock	(211,885)	(593,619)	(6,129,493)	(3,091,719)
Ending Balance	Ending Balance	96,974,398	99,434,643	96,974,398	99,434,643	Ending Balance	88,986,067	96,974,398	88,986,067	96,974,398

Treasury Shares	Treasury Shares					Treasury Shares
Beginning Balance	Beginning Balance	11,947,439	9,226,413	10,174,013	8,375,077	Beginning Balance	20,307,504	11,947,439	16,094,488	10,174,013
Stock Award Activity	Stock Award Activity	(10,000)	(22,500)	(734,674)	(728,831)	Stock Award Activity	0	(10,000)	(1,704,592)	(734,674)
Purchase of Treasury Stock	Purchase of Treasury Stock	593,619	866,900	3,091,719	2,424,567	Purchase of Treasury Stock	211,885	593,619	6,129,493	3,091,719
Retirement of Treasury Stock						Retirement of Treasury Stock	(10,000,000)	0	(10,000,000)	0
Ending Balance	Ending Balance	12,531,058	10,070,813	12,531,058	10,070,813	Ending Balance	10,519,389	12,531,058	10,519,389	12,531,058

(14) Earnings Per Share Attributable to Federated Hermes, Inc. Shareholders

The following table sets forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Federated Hermes:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share data)	2022		2021		2022		2021
Numerator
Net Income Attributable to Federated Hermes, Inc.	$	69,479	$	71,362	$	182,999	$	201,730
Less: Total Net Income Available to Participating Unvested Restricted Shareholders1	(3,713)		(2,989)		(9,479)		(8,363)
Total Net Income Attributable to Federated Hermes Common Stock - Basic	$	65,766	$	68,373	$	173,520	$	193,367
Less: Total Net Income Available to Unvested Restricted Shareholders of a Nonpublic Consolidated Subsidiary	0		(443)		0		(1,273)
Total Net Income Attributable to Federated Hermes Common Stock - Diluted	$	65,766	$	67,930	$	173,520	$	192,094
Denominator


Basic and Diluted Weighted-Average Federated Hermes Common Stock2	84,341		93,320		85,909		94,160
Earnings Per Share
Net Income Attributable to Federated Hermes Common Stock - Basic2	$	0.78	$	0.73	$	2.02	$	2.05
Net Income Attributable to Federated Hermes Common Stock - Diluted2	$	0.78	$	0.73	$	2.02	$	2.04

1 Includes dividends paid on unvested restricted Federated Hermes Class B common stock and their proportionate share of undistributed earnings attributable to Federated Hermes shareholders.

2Federated Hermes common stock excludes unvested restricted stock which are deemed participating securities in accordance with the two-class method of computing earnings per share.

Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

~~(14) Earnings Per Share Attributable to Federated Hermes, Inc. Shareholders~~

~~The following table sets forth the computation of basic and diluted earnings per share using the two-class method for amounts attributable to Federated Hermes:~~

Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except per share data) 2021 2020 2021 2020
Numerator
Net Income Attributable to Federated Hermes, Inc. $ 71,362 $ 85,822 $ 201,730 $ 231,196
Less: Total Net Income Available to Participating Unvested Restricted Shareholders1
(2,989) (3,378) (8,363) (8,937)
Total Net Income Attributable to Federated Hermes Common Stock - Basic $ 68,373 $ 82,444 $ 193,367 $ 222,259
Less: Total Net Income Available to Unvested Restricted Shareholders of a Nonpublic Consolidated Subsidiary (443) (391) (1,273) (786)
Total Net Income Attributable to Federated Hermes Common Stock - Diluted $ 67,930 $ 82,053 $ 192,094 $ 221,473
Denominator
Basic and Diluted Weighted-Average Federated Hermes Common Stock2
93,320 96,039 94,160 96,726
Earnings Per Share
Net Income Attributable to Federated Hermes Common Stock – Basic2
$ 0.73 $ 0.86 $ 2.05 $ 2.30
Net Income Attributable to Federated Hermes Common Stock – Diluted2
$ 0.73 $ 0.85 $ 2.04 $ 2.29

~~1 Includes dividends paid on unvested restricted Federated Hermes Class B Common Stock and their proportionate share of undistributed earnings attributable to Federated Hermes shareholders.~~

2~~Federated Hermes Common Stock excludes unvested restricted stock which are deemed participating securities in accordance with the two-class method of computing earnings per share.~~

(15) ~~Commitments and Contingencies~~

~~(a) Contractual~~

From time to time, pursuant to agreements entered into in connection with certain business combinations and asset acquisitions, Federated Hermes is obligated to make future payments under various agreements to which it is a party. See Note (8) for additional information regarding these payments.

~~(b)Contingencies~~

Federated Hermes previously recorded as revenue certain carried interest, subject to clawback provisions, from certain funds (Carried Interest). As of September 30, 2021, approximately $11 million of Carried Interest is subject to clawback. As a result of the impact of the Pandemic on certain markets, management concluded it was reasonably possible that the market value of the assets held by these funds would be reduced at future valuation dates, which could result in a portion or all of this Carried Interest being repaid. As of September 30, 2021, management estimates that clawbacks will not occur based on the current valuation of the assets held by these funds. Future reductions in the valuation of the assets held by these funds may result in a clawback of a portion or all of this Carried Interest.

~~(c) Guarantees and Indemnifications~~

On an intercompany basis, various subsidiaries of Federated Hermes guarantee certain financial obligations of Federated Hermes, Inc., and of other consolidated subsidiaries, and Federated Hermes, Inc. guarantees certain financial and performance-related obligations of various wholly owned subsidiaries. In addition, in the normal course of business, Federated Hermes has entered into contracts that provide a variety of indemnifications. Typically, obligations to indemnify third parties arise in the context of contracts entered into by Federated Hermes, under which Federated Hermes agrees to hold the other party harmless against losses arising out of the contract, provided the other party's actions are not deemed to have breached an agreed-upon standard of care. In each of these circumstances, payment by Federated Hermes is contingent on the other party making a claim for indemnity, subject to Federated Hermes' right to challenge the claim. Further, Federated Hermes' obligations under these

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

agreements may be limited in terms of time and/or amount. It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of Federated Hermes' obligations and the unique facts and circumstances involved in each particular agreement. As of September 30, 2021, management does not believe that a material loss related to any of these matters is reasonably possible.

~~(d)Legal Proceedings~~

Like other companies, Federated Hermes has claims asserted and threatened against it in the ordinary course of business. As of September 30, 2021, Federated Hermes does not believe that a material loss related to these claims is reasonably possible.

~~(16)~~ Accumulated Other Comprehensive Income (Loss) Attributable to Federated Hermes, Inc. Shareholders

Accumulated Other Comprehensive Income (Loss), net of tax, attributable to Federated ~~Hermes~~Hermes’ shareholders resulted from foreign currency translation gain (loss):


(in thousands)
Balance at December 31, 2021	$	16,362
Other Comprehensive Income (Loss)	(103,778)




Balance at September 30, 2022	$	(87,416)

Balance at December 31, 2020	$	15,171
Other Comprehensive Income (Loss)	(2,195)




Balance at September 30, 2021	$	12,976

~~Balance at December 31, 2019~~	$	~~(249)~~
~~Other Comprehensive Income (Loss)~~	~~(9,333)~~




~~Balance at September 30, 2020~~	$	~~(9,582)~~

(16)Redeemable Noncontrolling Interests in Subsidiaries

The following table presents the changes in Redeemable Noncontrolling Interests in Subsidiaries:


(in thousands)	Consolidated Investment Companies		FHL and other entities		Total
Balance at December 31, 2021	$	24,659	$	38,543	$	63,202
Net Income (Loss)	(1,744)		478		(1,266)
Other Comprehensive Income (Loss), net of tax	0		(457)		(457)
Subscriptions—Redeemable Noncontrolling Interest Holders	29,577		763		30,340
Consolidation/(Deconsolidation)	(16,034)		0		(16,034)
Stock Award Activity	0		707		707
Distributions to Noncontrolling Interests in Subsidiaries	(771)		(3,568)		(4,339)

Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL	0		14,221		14,221
Acquisition of Additional Equity of FHL	0		(37,805)		(37,805)
Balance at March 31, 2022	$	35,687	$	12,882	$	48,569
Net Income (Loss)	(7,616)		717		(6,899)
Other Comprehensive Income (Loss), net of tax	0		(1,068)		(1,068)
Subscriptions—Redeemable Noncontrolling Interest Holders	14,977		337		15,314


Distributions to Noncontrolling Interests in Subsidiaries	(1,024)		(161)		(1,185)


Balance at June 30, 2022	$	42,024	$	12,707	$	54,731
Net Income (Loss)	(2,104)		199		(1,905)
Other Comprehensive Income (Loss), net of tax	0		(1,713)		(1,713)
Subscriptions—Redeemable Noncontrolling Interest Holders	3,591		903		4,494
Consolidation/(Deconsolidation)	15,599		0		15,599

Distributions to Noncontrolling Interests in Subsidiaries	(15,512)		(1,108)		(16,620)


Balance at September 30, 2022	$	43,598	$	10,988	$	54,586

Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

~~(17)Redeemable Noncontrolling Interest in Subsidiaries~~

~~The following table presents the changes in Redeemable Noncontrolling Interest in Subsidiaries:~~


(in thousands)	(in thousands)	Consolidated Investment Companies		HFML and other entities		Total		(in thousands)	Consolidated Investment Companies		FHL and other entities		Total
Balance at December 31, 2020	Balance at December 31, 2020	$	24,246	$	212,741	$	236,987	Balance at December 31, 2020	$	24,246	$	212,741	$	236,987
Net Income (Loss)	Net Income (Loss)	(1,091)		953		(138)		Net Income (Loss)	(1,091)		953		(138)
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax	0		1,430		1,430		Other Comprehensive Income (Loss), net of tax	0		1,430		1,430
Subscriptions—Redeemable Noncontrolling Interest Holders	Subscriptions—Redeemable Noncontrolling Interest Holders	25,762		0		25,762		Subscriptions—Redeemable Noncontrolling Interest Holders	25,762		0		25,762
Consolidation/(Deconsolidation)	Consolidation/(Deconsolidation)	(25,419)		9,182		(16,237)		Consolidation/(Deconsolidation)	(25,419)		9,182		(16,237)
Stock Award Activity	Stock Award Activity	0		2,481		2,481		Stock Award Activity	0		2,481		2,481
Distributions to Noncontrolling Interest in Subsidiaries		(1,320)		(578)		(1,898)
Distributions to Noncontrolling Interests in Subsidiaries								Distributions to Noncontrolling Interests in Subsidiaries	(1,320)		(578)		(1,898)

Change in Estimated Redemption Value of Redeemable Noncontrolling Interests		0		(2,670)		(2,670)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL								Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL	0		(2,670)		(2,670)
Balance at March 31, 2021	Balance at March 31, 2021	$	22,178	$	223,539	$	245,717	Balance at March 31, 2021	$	22,178	$	223,539	$	245,717
Net Income (Loss)	Net Income (Loss)	682		(3,087)		(2,405)		Net Income (Loss)	682		(3,087)		(2,405)
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax	0		868		868		Other Comprehensive Income (Loss), net of tax	0		868		868
Subscriptions—Redeemable Noncontrolling Interest Holders	Subscriptions—Redeemable Noncontrolling Interest Holders	899,250		712		899,962		Subscriptions—Redeemable Noncontrolling Interest Holders	899,250		712		899,962
Consolidation/(Deconsolidation)	Consolidation/(Deconsolidation)	(894,175)		0		(894,175)		Consolidation/(Deconsolidation)	(894,175)		0		(894,175)
Stock Award Activity	Stock Award Activity	0		2,518		2,518		Stock Award Activity	0		2,518		2,518
Distributions to Noncontrolling Interest in Subsidiaries		(622)		(394)		(1,016)
Distributions to Noncontrolling Interests in Subsidiaries								Distributions to Noncontrolling Interests in Subsidiaries	(622)		(394)		(1,016)

Balance at June 30, 2021	Balance at June 30, 2021	$	27,313	$	224,156	$	251,469	Balance at June 30, 2021	$	27,313	$	224,156	$	251,469
Net Income (Loss)	Net Income (Loss)	(108)		2,232		2,124		Net Income (Loss)	(108)		2,232		2,124
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax	0		(9,953)		(9,953)		Other Comprehensive Income (Loss), net of tax	0		(9,953)		(9,953)
Subscriptions—Redeemable Noncontrolling Interest Holders	Subscriptions—Redeemable Noncontrolling Interest Holders	66,506		397		66,903		Subscriptions—Redeemable Noncontrolling Interest Holders	66,506		397		66,903
Consolidation/(Deconsolidation)	Consolidation/(Deconsolidation)	(74,836)		0		(74,836)		Consolidation/(Deconsolidation)	(74,836)		0		(74,836)
Stock Award Activity	Stock Award Activity	0		2,557		2,557		Stock Award Activity	0		2,557		2,557
Distributions to Noncontrolling Interest in Subsidiaries		(575)		(603)		(1,178)
Acquisition of Additional Equity of HFML		0		(165,112)		(165,112)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests		0		(16,502)		(16,502)
Distributions to Noncontrolling Interests in Subsidiaries								Distributions to Noncontrolling Interests in Subsidiaries	(575)		(603)		(1,178)
Acquisition of Additional Equity of FHL								Acquisition of Additional Equity of FHL	0		(165,112)		(165,112)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL								Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL	0		(16,502)		(16,502)
Balance at September 30, 2021	Balance at September 30, 2021	$	18,300	$	37,172	$	55,472	Balance at September 30, 2021	$	18,300	$	37,172	$	55,472

The activity in 2021 includes $892.1 million of contributions from noncontrolling interests in subsidiaries as a result of a purchase-in-kind investment into a previously consolidated VRE. This was a noncash transaction and was therefore excluded from the Consolidated Statements of Cash Flows.

(17) Commitments and Contingencies

(a) Contractual

(b) Guarantees and Indemnifications

On an intercompany basis, various subsidiaries of Federated Hermes guarantee certain financial obligations of Federated Hermes, Inc. and of other consolidated subsidiaries, and Federated Hermes, Inc. guarantees certain financial and performance-related obligations of various wholly-owned subsidiaries. In addition, in the normal course of business, Federated Hermes has entered into contracts that provide a variety of indemnifications. Typically, obligations to indemnify third parties arise in the context of contracts entered into by Federated Hermes, under which Federated Hermes agrees to hold the other party harmless against losses arising out of the contract, provided the other party’s actions are not deemed to have breached an agreed-upon standard of care. In each of these circumstances, payment by Federated Hermes is contingent on the other party making a claim for indemnity, subject to Federated Hermes’ right to challenge the claim. Further, Federated Hermes’ obligations under these agreements may be limited in terms of time and/or amount. It is not possible to predict the maximum potential amount of future

Table of Contents

Notes to the Consolidated Financial Statements

(unaudited)

(in thousands) Consolidated Investment Companies HFML and other entities Total
Balance at December 31, 2019 $ 19,872 $ 192,214 $ 212,086
Net Income (Loss) (2,802) 1,889 (913)
Other Comprehensive Income (Loss), net of tax 0 (11,454) (11,454)
Subscriptions—Redeemable Noncontrolling Interest Holders 5,577 0 5,577
Consolidation/(Deconsolidation) (4,019) 0 (4,019)
Stock Award Activity 0 2,153 2,153
Distributions to Noncontrolling Interest in Subsidiaries (6,039) 0 (6,039)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 1,870 1,870
Balance at March 31, 2020 $ 12,589 $ 186,672 $ 199,261
Net Income (Loss) 2,560 1,045 3,605
Other Comprehensive Income (Loss), net of tax 0 (435) (435)
Subscriptions—Redeemable Noncontrolling Interest Holders 6,225 0 6,225
Stock Award Activity 0 2,087 2,087
Distributions to Noncontrolling Interest in Subsidiaries (4,058) 0 (4,058)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 (2,013) (2,013)
Balance at June 30, 2020 $ 17,316 $ 187,356 $ 204,672
Net Income (Loss) 1,473 (611) 862
Other Comprehensive Income (Loss), net of tax 0 7,316 7,316
Subscriptions—Redeemable Noncontrolling Interest Holders 3,212 0 3,212
Stock Award Activity 0 2,164 2,164
Distributions to Noncontrolling Interest in Subsidiaries (358) 0 (358)
Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 (3,567) (3,567)
Balance at September 30, 2020 $ 21,643 $ 192,658 $ 214,301
payments under these or similar agreements due to the conditional nature of Federated Hermes’ obligations and the unique facts and circumstances involved in each particular agreement. As of September 30, 2022, management does not believe that a material loss related to any of these matters is reasonably possible.

(c)Legal Proceedings

Like other companies, Federated Hermes has claims asserted and threatened against it in the ordinary course of business. As of September 30, 2022, Federated Hermes does not believe that a material loss related to any of these claims is reasonably possible.

(18) ~~Income Taxes~~Subsequent Events

~~As a result of legislation previously enacted in the United Kingdom (UK) that increases the UK corporate income tax rate from 19% to 25% effective April~~Effective October 1, ~~2023,~~2022, Federated Hermes ~~recorded an~~completed the CWH Acquisition. See Note (3) for additional ~~$14.5 million to the Income Tax Provision in the second quarter 2021 as a result of the revaluation of the foreign deferred tax assets and liabilities associated with the change.~~

~~(19) Subsequent Events~~information.

On October ~~28, 2021, the~~27, 2022, Federated Hermes’ board of directors declared a $0.27 per share dividend to Federated Hermes’ Class A and Class B common stock shareholders of record as of November 8, ~~2021~~2022 to be paid on November 15, ~~2021.~~2022.

2322


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

The discussion and analysis below should be read in conjunction with the ~~consolidated financial statements~~Consolidated Financial Statements appearing elsewhere in this report. Management has presumed that the readers of this interim financial information have read or have access to ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

General

Federated Hermes is ~~one of the largest investment managers~~a global leader in ~~the U.S.~~active, responsible investing with ~~$634.1~~$624.4 billion in managed assets as of September 30, ~~2021.~~2022. The majority of Federated ~~Hermes'~~Hermes’ revenue is derived from advising Federated Hermes Funds and Separate Accounts in both domestic and international public and private markets. Federated Hermes also derives revenue from providing administrative and other fund-related services (including distribution and shareholder servicing) as well as stewardship and real estate development services.

Investment advisory fees, administrative service fees and certain fees for other services, such as distribution and shareholder service fees, are contract-based and are generally calculated as a percentage of the average net assets of managed investment portfolios. Federated ~~Hermes'~~Hermes’ revenue is primarily dependent upon factors that affect the value of ~~managed~~managed/serviced assets including market conditions and the ability to attract and retain assets. Generally, managed assets in Federated ~~Hermes'~~Hermes’ public market investment products and strategies can be redeemed or withdrawn at any time with no advance notice ~~requirement.~~requirement, while managed assets in Federated Hermes private market investment products and strategies are subject to restrictions on withdrawals. Fee rates for Federated ~~Hermes'~~Hermes’ services generally vary by asset and service type and may vary based on changes in asset levels. Generally, advisory fees charged for services provided to equity and multi-asset products and strategies are higher than advisory fees charged to fixed-income and alternative/private markets products and strategies, which in turn are higher than advisory fees charged to money market products and strategies. Likewise, Federated Hermes Funds typically have higher advisory fees than Separate Accounts. Similarly, revenue is also dependent upon the relative composition of average AUM across both asset and product types. Federated Hermes may implement Fee Waivers for competitive reasons such as Voluntary Yield-related Fee Waivers, to maintain certain fund expense ratios, to meet regulatory requirements or to meet contractual requirements. Since Federated ~~Hermes'~~Hermes’ public market products are largely distributed and serviced through financial intermediaries, Federated Hermes pays a portion of fees earned from sponsored products to the financial intermediaries that sell these products and strategies. These payments are generally calculated as a percentage of net assets attributable to the applicable financial intermediary and represent the vast majority of Distribution expense on the Consolidated Statements of Income. Certain components of Distribution expense can vary depending upon the asset type, distribution channel and/or the size of the customer relationship. Federated Hermes generally pays out a larger portion of the revenue earned from managed assets in money market and multi-asset funds than the revenue earned from managed assets in equity, fixed-income and alternative/private markets funds.

Federated ~~Hermes'~~Hermes’ most significant operating expenses are Compensation and Related expense and Distribution expense. Compensation and Related expense includes base salary and wages, incentive compensation and other employee expenses including payroll taxes and benefits. Incentive compensation, which includes stock-based compensation, can vary depending on various factors including, but not limited to, the overall results of operations of Federated Hermes, investment management performance and sales performance.

The discussion and analysis of Federated ~~Hermes'~~Hermes’ financial condition and results of operations are based on Federated ~~Hermes'~~Hermes’ Consolidated Financial Statements. Management evaluates Federated ~~Hermes'~~Hermes’ performance at the consolidated level. Therefore, Federated Hermes operates in one operating segment, the investment management business. Management analyzes all expected revenue and expenses and considers market demands in determining an overall fee structure for services provided and in evaluating the addition of new business. Federated ~~Hermes'~~Hermes’ growth and profitability are dependent upon its ability to attract and retain AUM and upon the profitability of those assets, which is impacted, in part, by Fee Waivers. Fees for mutual fund-related services are ultimately subject to the approval of the independent directors or trustees of the mutual ~~funds.~~funds and, as required by law, fund shareholders. Management believes that meaningful indicators of Federated ~~Hermes'~~Hermes’ financial performance include AUM, gross and net product sales, total revenue and net income, both in total and per diluted share.

2423

Table of Contents



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

Business Developments

Business Combination

Effective October 1, 2022, Federated Hermes completed the CWH Acquisition. See Note (3) to the Consolidated Financial Statements for additional information.

Equity Acquisition

On ~~August 31, 2021,~~March 14, 2022, Federated Hermes completed the ~~2021~~2022 Acquisition of ~~HFML~~FHL Noncontrolling ~~Interest.~~Interests. See Note (3) to the Consolidated Financial Statements for additional information.

Pandemic

Federated Hermes continues to actively monitor the ongoing Pandemic and resulting developments and their potential impact on Federated Hermes’ employees, business, and operations. The ~~outbreak~~Pandemic has adversely impacted the global economy and contributed to significant volatility in financial markets. Over the course of the ~~Covid-19 respiratory disease was first detected in China in late 2019, spread globally in 2020~~Pandemic, many jurisdictions instituted quarantines, imposed limitations on travel, and ~~continues~~restricted access to ~~spread in 2021. The Pandemic initially resulted in travel bans, closing~~offices and public venues, some of ~~borders, changes to the ways in~~ which ~~healthcare workers prepare~~are ongoing or may reoccur, and deliver services, enhanced monitoring and increased health screenings/testing, increased data analytics, efforts to develop effective vaccines without harmful side effects and identify effective therapeutics, enhanced disinfection and contamination procedures, stay-at-home orders, quarantines, cancellations and disruptions to supply chains, workflow, operations and customer activity,many businesses implemented similar precautionary measures. Such measures, as well as the general ~~concern~~uncertainty surrounding the containment and ~~uncertainty. The~~impact of the Pandemic, ~~also initially resulted~~have created significant disruption in economic ~~uncertainty, market volatility, trading halts, market illiquidity and declining and variable stock prices, among other effects. See Item 1A - Risk Factors under~~activity. Throughout the caption General Risk Factors - Other General Risks - Potential Adverse Effects of Unpredictable Events or Consequences (including Covid-19) in Federated Hermes' Annual Report on Form 10-K for the year ended December 31, 2020 for additional information regarding the impacts, and potential impacts, resulting from the Pandemic.

Policymakers responded to certain apparent and acute economic and market consequences with multiple monetary and fiscal policy actions. Regulators pursued and, to a lesser degree, have continued actions focused on facilitating market function and preserving market integrity, as well as providing guidance and relief to market participants affected by the Pandemic. See the Business Developments - Current Regulatory Environment sections of Management's Discussion and Analysis for additional information regarding the monetary and fiscal policy actions taken by governmental authorities.

As of September 30, 2021, economies of various countries have rebounded from the global economic shutdown that began in the late first quarter and early second quarter 2020. With the world vaccination rate at over 46%, and vaccination rates nearing or exceeding 50% or greater in several jurisdictions, including the United States, economies in many jurisdictions have reopened as national, state/provincial and local governments have removed or lessened travel restrictions and requirements for staying-at-home and quarantining, as well as other Pandemic-imposed restrictions. Spikes of coronavirus cases, however, continue to occur in certain jurisdictions. These spikes are reportedly being driven by more contagious and potentially more deadly variants of the initial strain of the coronavirus, including the Delta variant. Breakthrough infections of vaccinated individuals are also prevalent in certain jurisdictions. These variants, spikes and breakthrough infections have resulted in certain jurisdictions continuing or re-imposing certain restrictions, although in many cases not to the extent of those initially imposed. As a result, while many governments have taken action to open economies, economic, market, regulatory and other uncertainty persists as a result of the Pandemic. While economic uncertainty and market volatility have continued, in many cases it is not to the degree initially seen late in the first quarter and early in the second quarter 2020.

~~Federated Hermes has not instituted its business continuity plans in its U.S. offices as~~Pandemic, there has not been a significant disruption of ~~its~~Federated Hermes’ business processes, allowing it to remain fully operational and to continue to provide services to its customers. Federated Hermes' London office, which includes the international business of Federated Hermes, did implement its business continuity plans on March 20, 2020 to support the transition to a remote working environment per the advice of the UK's government and regulators.

Federated Hermes designated an internal task force (which meets as necessary) to address events related to the Pandemic that have impacted or that can potentially impact Federated Hermes' business. With input and guidance from senior management and this task force, increased vaccinations, and the removal of Pandemic-related restrictions, beginning in April 2021, Federated Hermes encouraged (but did not require) its employees to begin to return to working from its U.S. offices. Beginning on July 6, 2021, Federated Hermes has implemented a structured return to office plan that requires most of its U.S. employees to work from Federated Hermes' offices at least two days a week, or at least three days every other week, depending on their work location and office or work station configuration. Federated Hermes has extended this structured return to office plan through year-end 2021, and has advised its employees that it is delaying, until sometime in the fourth quarter 2021, decisions regarding a further and more significant return to the office for U.S. employees. In the UK, in line with the "gradual return" principle outlined by the UK government, a hybrid office, remote working plan has been implemented under which UK employees work in the office two to three days a week, with occupancy restricted to 50% of office capacity. Any structured return to office plans for Federated Hermes' non-U.S. employees will be consistent with applicable government requirements.

~~Table of Contents~~



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

Federated Hermes has developed and implemented a series of return to office protocols intended to assure employees that it is taking the safety and well-being of its employees seriously as return to office plans are implemented. Federated Hermes continues to review and, in certain cases, revise or enhance these protocols to provide for the safety of its employees, to seek to ensure the resiliency of Federated Hermes' business and to keep its customers informed.

~~Among other actions, Federated Hermes has taken the following steps:~~

•Federated Hermes has made technology investments, including laptops for employees, expanded internet bandwidth, video conferencing and collaboration software, and additional video equipment. Federated Hermes also has increased usage and reliance on virtual meeting tools and prioritized the deployment of additional equipment and technology. These actions have allowed Federated Hermes to remain fully operational, support a remote and current hybrid working environment and continue to deliver Federated Hermes' investment products and services to customers.

•Federated Hermes continues to undertake to comply with any remaining requirements applicable to Federated Hermes under relevant Federal, state and local government orders or laws, as well as remaining requirements applicable to Federated Hermes under the Center for Disease Control and Prevention's (CDC) and state health departments' guidance and cleaning procedures.

•In addition to continuing cleaning protocols and other measures, Federated Hermes continues to make available hand sanitizer stations and disinfectant wipes for employees in the office, and continues to encourage employees to take standard precautions such as washing their hands with soap and water and staying home if sick.

•As a result of a travel advisory issued by the CDC, the company instituted a travel ban on February 27, 2020 to certain countries, including those designated as high risk by the CDC. Federated Hermes now recommends that employees follow national, state/provincial, local and CDC recommendations when traveling, as well as specific venue requirements when planning or attending conferences or other events. Planning activity for conferences and events scheduled for later in 2021 and 2022 further increased in the third quarter 2021 over the first and second quarters 2021. Air travel and car and hotel reservations also further increased in the third quarter 2021 over the first and second quarters 2021, but remain below pre-Pandemic levels.

•Federated Hermes Fund Board meetings, Federated Hermes corporate Board meetings, and offshore fund and subsidiary Board meetings, are being held in person as well as via teleconference allowing those who prefer to participate remotely to do so.

•~~Federated Hermes has continued to on-board new hires, providing necessary equipment to them and conducting training remotely when necessary.~~

•~~Federated Hermes investment professionals and strategists continue to publish fresh content to the Insights section of Federated Hermes' website, offering their unique perspectives to investors.~~

Federated Hermes continues to take a measured approach that involves implementing procedures aimed at safeguarding employee health while maintaining a high level of customer service. Federated Hermes expects those procedures and related timelines to vary by location in order to meet local regulatory requirements and support community health practices. Federated Hermes is also prepared to continue to implement a variety of other strategies to ensure the resiliency of its business. Examples include transferring processes to alternate personnel, prioritizing technology resources to service critical processing, and leveraging service providers and counterparties to promote efficient delivery of services.

Federated Hermes continues to monitor the ongoing global health situation through resources provided by, or contact with, the CDC, the SEC, the World Health Organization and the Securities Industry and Financial Markets Association (SIFMA), a financial services industry trade association, among others. As of September 30, ~~2021,~~2022, while Federated ~~Hermes'~~Hermes’ stock price has fluctuated amidst the volatility in stock prices on major exchanges, and Federated ~~Hermes'~~Hermes’ business operations have had to adapt to a remote and current hybrid working environment, the Pandemic has not materially affected Federated ~~Hermes' financial condition or cash flows~~Hermes’ Financial Condition (as defined below) except to the extent that the ~~increased~~ net Voluntary Yield-related Fee Waivers ~~discussed below~~ resulting from the near-zero interest rate environment that existed throughout 2021 and into the second quarter 2022 can be attributed to the Pandemic. With the increase in short-term interest rates beginning in March 2022, net Voluntary Yield-related Fee Waivers were greatly diminished in the second quarter 2022 and ceased early in the third quarter 2022. See ~~Item 1A - Risk Factors under~~“Low Short-Term Interest Rates” below for additional information on Voluntary Yield-related Fee Waivers. A further prolonged period of economic and financial distress and volatility as a result of the ~~caption General Risk Factors - Other General Risks - Potential Adverse Effects~~Pandemic could exacerbate human resource capital management, economic, market and other risks, and could impact, including in a material way, Federated Hermes’ Financial Condition. The aggregate extent to which the Pandemic, including existing and new variants, and its related impact on the global economy and financial markets, affects Federated Hermes’ Financial Condition, will depend on future developments that are highly uncertain and cannot be predicted, including the scope and duration of ~~Unpredictable Events~~ the Pandemic and any recovery period, the emergence and spread of variants, any prevalence of severe, unconstrained and/or ~~Consequences (including Covid-19)~~escalating rates of infection in ~~Federated Hermes' Annual Report on Form 10-K for~~certain countries and regions, the ~~year ended December 31, 2020 for information regarding the risks~~availability, adoption and efficacy of treatments and vaccines, and future actions taken by governmental authorities, central banks and other third parties in response to ~~Federated Hermes presented by~~ the Pandemic.

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

Low Short-Term Interest Rates

In March 2020, in response to disrupted economic activity as a result of the Pandemic, the FOMC decreased the federal funds target rate range to 0% - 0.25%. The federal funds target rate drives short-term interest rates. As a result of the near-zero interest-rate environment, the gross yield earned by certain money market funds iswas not sufficient to cover all of the ~~fund's~~fund’s operating expenses. Beginning in the first quarter 2020, Federated Hermes ~~has~~ implemented Voluntary Yield-related Fee Waivers. These waivers ~~have been~~were partially offset by related reductions in distribution expense as a result of Federated ~~Hermes'~~Hermes’ mutual understanding and agreement with third-party intermediaries to share the impact of the Voluntary Yield-related Fee Waivers. In response to global economic activity and elevated inflation levels, the FOMC has raised the federal funds target rate multiple times in 2022. The range is currently 3.00% - 3.25% as of the September 2022 FOMC meeting. These rate increases have eliminated the net negative pre-tax impact of the Voluntary Yield-related Fee Waivers.

Table of $33.0 million and $51.0 million, respectively, such that the net negative pre-tax impact to Federated Hermes was $3.8 million and $5.9 million for the three and nine months ended September 30, 2020, respectively.Contents

Assuming asset levels and mix remain constant and based on recent and projected market conditions, including potential additional government measures to further stimulate the economy, Voluntary Yield-related Fee Waivers for the fourth quarter of 2021 may result in a net negative pre-tax impact on income of approximately $39 million. While the level of these fee waivers is impacted by various factors, increases in short-term interest rates that result in higher yields on securities purchased in money market fund portfolios would likely reduce the negative pre-tax impact of these fee waivers. Similarly, a decrease in short-term interest rates would likely increase the negative pre-tax impact of these fee waivers. The actual amount of future Voluntary Yield-related Fee Waivers and the resulting negative impact of these fee waivers could vary, including in a material way, from management's estimates as they are contingent on a number of variables including, but not limited to, changes in assets within the money market funds, changes in yields on instruments available for purchase by the money market funds, including changes due to the level of government measures to further stimulate the economy which could result in the issuance of additional Treasury debt instruments, actions by the FOMC, the U.S. Department of Treasury, the SEC, Financial Stability Oversight Council (FSOC) and other governmental entities, changes in fees and expenses of the money market funds, changes in the mix of money market customer assets, changes in customer relationships, changes in money market product structures and offerings, demand for competing products, changes in distribution models, changes in the distribution fee arrangements with third parties, Federated Hermes' willingness to continue the Voluntary Yield-related Fee Waivers and changes in the extent to which the impact of these fee waivers is shared by any one or more third parties. As fund portfolio yields decrease, the impact of the Voluntary Yield-related Fee Waivers on Federated Hermes generally accelerates as the ability of distributors to share the impact of these fee waivers is reduced or exhausted.



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

Current Regulatory Environment

~~Domestic~~

~~In 2020,~~The following discussion focuses on various aspects of the ~~Pandemic shifted the~~current regulatory environment in which Federated Hermes operated its business during the ~~U.S.,~~third quarter 2022. Please see Federated Hermes’ prior public filings, including the discussions under Item 1 – Business – Current Regulatory Environment – Domestic and ~~globally, toward the adoption of measures intended to provide regulatory flexibility and market stabilization. See~~ Item ~~1A - Risk Factors under the caption General Risk Factors - Other General Risks - Potential Adverse Effects of Unpredictable Events or Consequences (including Covid-19)~~1 – Business – Current Regulatory Environment – International, in Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020 for a discussion~~2021, and Part I, Item 2 of the ~~risks posed~~Quarterly Report on Form 10-Q for the quarters ended March 31, 2022 and June 30, 2022, for historical information on the regulatory environment, and related regulatory developments, for periods prior to June 30, 2022, which also includes further background information relevant to certain of the matters discussed below.

Federated Hermes and its investment management business are subject to extensive regulation both within and outside the U.S. Federated Hermes and its products, such as the Federated Hermes Funds, and strategies are subject to: various federal securities laws, such as the 1933 Act, 1934 Act, 1940 Act, and Advisers Act; state laws regarding securities fraud and registration; regulations or other rules promulgated by ~~the Pandemic. Through the third quarter of 2021, the SEC (among other~~various regulatory authorities, self-regulatory organizations, or ~~exchanges) continued~~exchanges; and various foreign laws, regulations or other rules promulgated by foreign regulatory or other authorities. Regulatory actions taken to address the effects of the Pandemic, any other laws and regulations that have or are expected to be re-examined, modified, or reversed, or that become effective, and any new proposed laws, rules, regulations and directives or consultations (collectively, both domestically and internationally, as applicable, Regulatory Developments) continue to impact the investment management industry generally, and will continue to impact, to various degrees, Federated Hermes’ business, results of operations, financial condition, cash flows and/or stock price (collectively, Financial Condition).

Domestic

The pace of new proposed and final laws, rules and regulations and other regulatory activity has increased (and is expected to continue to increase) in 2022. According to the SEC’s 53-item Spring 2022 Unified Agenda of Regulatory and Declaratory Actions (Spring Reg Flex Agenda), the SEC indicated that it expected to issue final rules on 16 previously-promulgated proposed rules by October 2022, including rules regarding money market fund reform, tailored shareholder reports, listing standards for erroneously awarded compensation, pay versus performance, proxy voting advice, share repurchase disclosure modernization, enhanced reporting of proxy votes by registered management investment companies, and the securities transaction settlement cycle, among others. The SEC further indicated that it expects to issue final rules on an additional 10 previously-promulgated proposed rules by April 2023, including rules regarding Rule 10b5-1 and insider trading, cybersecurity risk governance, modernization of beneficial ownership reporting, amendments to Form PF relating to large equity advisor and large liquidity fund advisor disclosure and reporting, private fund advisors, short sale disclosure reforms, and loan or borrowing of securities, among others. The Spring Reg Flex Agenda also signals additional upcoming proposals on, among others, corporate board diversity, Rule 144A holding periods, human capital management disclosure, special purpose acquisition companies (SPACs), amendments to the custody rules pertaining to investment advisors, open-end fund liquidity and dilution management, and fund fee disclosure and reform. On October 7, 2022, due to technology issues with its internet comment form between June 2022 and August 2022, the SEC issued a release reopening the comment period on 12 proposed regulatory rules and eight proposed self-regulatory organization rules, including its proposals on money market fund reform, share repurchase disclosure modernization, reporting on securities loans, cybersecurity risk management, strategy, governance and incident disclosure, private fund advisor documentation of registered investment advisor compliance reviews, the enhancement and standardization of climate-related disclosures for investors, SPACs, investment company names, and enhanced disclosures by certain investment advisors and investment companies about environmental, social, and governance investment practices, among others. The comment period on these proposals reopened for 14 days on October 19, 2022, and will end on November 1, 2022. With the reopening of these comment periods, to the extent the SEC intended to issue final rules based on these proposals in October 2022, the issuance of such final rules will be delayed until later in 2022 or the first quarter 2023.

Regulators continue to focus on ~~maintaining~~ the ~~continuity~~market conditions that existed in March 2020, and their impact on open-end funds, including institutional prime and municipal (or tax-exempt) money market funds. For example, similar to other regulatory or government bodies, in its May 2022 “Financial Stability Report” the Board of ~~its operations (including enforcement~~Governors of the Federal Reserve System (Governors) reported that certain money market funds continue to have structural vulnerabilities that make them prone to withdrawal of assets (or runs) and ~~investor protection efforts), monitoring~~redemption risks. As noted above, the SEC has issued a proposed rule on money market ~~functions and risks, and providing or extending regulatory relief in response~~fund reforms. According to the ~~Pandemic, while at~~SEC, the ~~same time continuing~~proposed money market fund reforms would improve the resilience and transparency of money market funds by: (1) increasing minimum liquidity requirements for daily and weekly liquid assets to 25% and 50%, respectively, to provide a more substantial buffer in the event of rapid redemptions; (2) removing the ability of money market funds to impose liquidity fees and redemption gates when they fall below certain liquidity thresholds, which would eliminate an incentive for preemptive redemptions; (3) requiring certain money market funds (e.g., institutional prime and institutional municipal (or tax-exempt) money market funds) to implement ~~"physical distancing" requirements for its personnel by continuing in~~swing pricing, which involves a full telework posture with limited exceptions, which is expected to last at least through January 3, 2022. The SEC has indicated that it continues to advance rulemaking initiatives, conduct risk-based examinations, bring enforcement actions, and review and comment on issuer and fund filings.

~~The full impact~~process of the continuing Pandemic on the regulatory environment in the U.S., and globally, remains uncertain. It is possible that the impact of the Pandemic could continue to decrease (but likely not completely dissipate) as 2021 concludes due to the continued distribution of vaccines onadjusting a larger scale, continued, but lessened, market intervention from the U.S. Federal Reserve Board (Fed), and additional stimulus packages, similar to the $900 billion Consolidated Appropriations Act, 2021,fund’s

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

~~passed by Congress~~current NAV such that the transaction price effectively passes on costs stemming from shareholder redemptions to redeeming shareholders, so that they bear the liquidity costs of their redemptions; (4) enhancing certain reporting requirements (e.g., Form N-MFP and Form N-CR) to improve the SEC’s ability to monitor and analyze money market fund data; and (5) requiring stable NAV money market funds to convert to a floating NAV if future market conditions result in ~~December 2020 and~~negative money market fund yields. The comment period for the ~~$1.9 trillion American Rescue Plan Act of 2021 passed by Congress in March 2021.~~SEC’s proposed money market fund reforms ended on April 11, 2022 but has been reopened as noted above. While the number of new or proposed laws, rules and regulations affecting the investment management industry continued to be slow in the third quarter 2021 in the U.S., with the SEC's aggressive rulemaking schedule announcedSEC initially indicated in its Spring ~~2021 Unified Agenda of Regulatory and Declaratory Actions (Spring~~ Reg Flex ~~Agenda),~~Agenda that it intended to finalize its proposed money market fund reforms by October 2022, it is expected that a final rule on money market fund reform will not be issued until later in 2022 or the ~~expectation remains that~~first quarter 2023.

On March 3, 2022, the ~~pace~~SEC also requested comment on the information collection and reporting requirements applicable to money market funds under Rule 2a-7 under the 1940 Act. Among other comment requests, the SEC invited comments on: (1) whether the proposed collection of ~~new~~information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (2) ways to enhance the quality, utility, and clarity of the information collected; and (3) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. The comment period ended on May 9, 2022 and was not reopened.

After the SEC’s issuance of its proposed ~~and final laws, rules and regulations and~~money market fund reforms, other ~~regulatory activity will increase during the remainder of 2021 and into 2022. U.S. and global~~ regulators ~~also continue~~continued to ~~focus on~~discuss the impact of ~~the Pandemic~~money market funds on the ~~markets~~market turmoil, decreased liquidity, and ~~re-examine existing laws, rules and regulations. The regulatory actions to address the Pandemic, any~~ other laws and regulations that have or are expected to be re-examined, modified or reversed, or that become effective, and any new proposed laws, rules and regulations, continue to impact the investment management industry (collectively, both domestically and abroad, as applicable, Regulatory Developments).

Asfactors in March 2020. At a joint meeting of ~~September 30, 2021, the Fed's balance sheet was approaching $8.5 trillion. On July 28, 2021,~~ the FOMC ~~announced~~and Governors on January 25, 2022, the ~~establishment~~potential vulnerabilities of ~~two standing repurchase agreement (repo) facilities—~~prime money market funds to a ~~domestic repo facility against Treasury securities, agency debt securities,~~sudden withdrawal of liquidity were discussed. At its February 4, 2022 meeting, the Financial Stability Oversight Council (FSOC) recognized that open-end funds were not the sole or primary cause of market turmoil in 2020 but concluded that the size of their asset liquidations indicates that they were one of the significant contributors to the market stress. At the same meeting, the FSOC reviewed the SEC’s proposed money market fund reforms and ~~agency mortgage-backed securities with a $500 billion daily limit,~~indicated that the FSOC supports the SEC’s efforts to reform money market funds and ~~a repo facility for foreign and international monetary authorities against their holdings of Treasury securities maintained in custody at~~to strengthen short-term funding markets.

The FSOC’s conclusion that open-end funds were significant contributors to the Federal Reserve Bank of New York with a $60 billion per counterparty limit. Facilities such as the Secondary Market Corporate Credit Facility (SMCCF), Commercial Paper Funding Facility (CPFF), Money Market Mutual Fund Liquidity Facility (MMLF) and Term Asset-Backed Securities Loan Facility (TALF) established by the Fed in March 2020 ~~expired or ceased funding during~~turmoil contradicts the ~~first half~~Investment Company Institute’s (ICI) November 2020 report titled, “Experiences of 2021. These facilities, among others, were established in order to address market inefficiencies and provide financial backstops totaling more than $2.3 trillion. The Fed has announced that, as of August 31, 2021, all of the SMCCF's holdings or corporate bonds and ETFs had either been sold off or matured. As of September 30, 2021, the Federal Reserve Bank of New York had no loans outstanding under the SMCCF, approximately $1.5 billion in loans outstanding under the TALF, which ceased extending credit on December 31, 2020, and no loans outstanding under the CPFF. The CPFF ceased purchasing commercial paper on March 31, 2021 and is no longer operational. As of September 30, 2021, the Federal Reserve Bank of Boston had no loans outstanding under the MMLF as the MMLF ceased extending credit on March 31, 2021 and is no longer operational. According to a report entitled "Experiences of USU.S. Money Market Funds During the Covid-19 ~~Crisis" published by the Investment Company Institute (ICI) in November 2020~~Crisis” (ICI MMF Report), prime money market funds' use of the MMLF in 2020 (peaking at approximately $53 billion) was much less than a similar facility that was created and utilized during the 2008 financial crisis (peaking at approximately $152 billion).

In March 2020, in response to disrupted economic activity as a result of the Pandemic, the FOMC also decreased the federal funds target rate range to 0% - 0.25%. The federal funds target rate drives short-term interest rates. During its April 27–28, 2021 meeting, the FOMC indicated that the federal funds rate would likely stay at or near zero at least until the first quarter of 2023. During its June 15-16, 2021 meeting, the FOMC indicated that the median respondent to the FOMC Desk's survey of primary dealers and market participants continued to expect the first federal funds rate increase to occur in the third quarter 2023. At that same meeting, the FOMC raised the rate on its Reverse Repurchase Agreement Facility and Interest on Excess Reserves by five basis points each, to five basis points and 15 basis points, respectively, which helped to increase interest rates on short-term securities to slightly above near-zero levels. During its July 27-28, 2021 and September 21-22, 2021 meetings, the FOMC announced that it would hold the target range until labor market conditions and inflation stabilizes to levels consistent with the FOMC's assessments. Nevertheless, these low interest rates, and the possibility of negative interest rates, have caused the investment management industry to engage with the SEC (and other regulators globally), to discuss regulatory guidance permitting the implementation of reverse distribution mechanisms or share cancellation methodologies, reverse stock splits, and other tools to maintain the stability of money market fund NAVs in a negative rate environment, and to develop disclosures regarding the possible use of these tools. Any solution to the difficulties presented by a negative interest rate environment can require significant internal and external resources to implement necessary changes, including system programming and implementing disclosure changes, both for money market funds and their service providers or vendors (service providers).

U.S. and global regulators continue to focus on the market conditions that existed in March 2020, and their impact on open-end funds, including institutional prime and municipal (or tax-exempt), money market funds. In its 2020 Annual Report, the Financial Stability Oversight Council (FSOC) noted that, "[s]tresses on prime and tax-exempt [money market funds] revealed continued structural vulnerabilities that led to increased redemptions and, in turn, contributed to and increased the stress in short-term funding markets." It has been reported that, during her testimony prior to her confirmation by the Senate on January 25, 2021, Treasury Secretary Janet Yellen expressed comfort with the idea of looking at whether activities of asset managers represent a systemic risk rather than whether asset management firms pose systemic risk. It has been reported that, at the June 11, 2021 meeting of FSOC, Treasury Secretary Yellen recounted the "extreme policy interventions" by the Fed and Treasury Department to support short-term funding markets, including money market funds. It has been reported that fellow

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

FSOC member and Fed Chair Jerome Powell cited rapid redemptions in money market funds as a catalyst for liquidity pressures, which, according to Chair Powell, alleviated only after the Fed intervened with the MMLF that included $10 billion in backing from the Treasury Department. It has been further reported that, during closed-door sessions, FSOC heard reform proposals from the SEC staff intended to improve the resilience of short-term funding markets during times of financial crisis. In a prepared statement for the June 11, 2021 FSOC meeting, SEC Chair Gary Gensler indicateddemonstrated that the March 2020 market ~~"events brought particular focus to prime money market funds,~~turmoil resulted from the Pandemic and ~~their interrelation with investments in commercial paper~~the unprecedented global response and ~~certificates of deposit [which] have limited liquidity in good times,~~economic shut-down, and in critical weeks of stress last spring virtually disappeared." He indicated that he was "directing SEC staff to look into these issues, and to consider any further reforms needed." On October 5, 2021, while testifying before the House Financial Services Committee, SEC Chair Gensler reiterated that he has asked SEC staff for recommendations to address the challenges to money market funds experienced in the spring of 2020, and stated that he believes "it is time to reflect upon the reforms of 2014 and 2010 to see if we can further improve resiliency, particularly in times of stress." It has been reported that FSOC Chairperson Yellen stated that she fully supported the SEC's reform efforts. In the open session of FSOC's June 11, 2021 meeting, FSOC voted to approve a statement highlighting the importance of money market fund reform and supporting the SEC's focus on money market funds. In FSOC's Statement on Money Market Fund Reform, FSOC indicated that "the [FSOC] is encouraged by the SEC's engagement on this critical issue" and, "[g]iven the interconnectedness of financial institutions and markets, the [FSOC] will continue to monitor this initiative in the broader context of efforts by financial regulators to strengthen short-term funding markets and support orderly market functioning, including during periods of heightened market stress."

On April 15, 2021, the SEC Division of Investment Management's Analytics Office issued an article "Prime MMFs at the Onset of the Pandemic: Asset Flows, Liquidity Buffers, and NAVs," which concluded (among other things) that March 2020 outflows reduced prime money market funds' liquidity buffers and that volatility of prime money market funds' NAV per share increased at the onset of the Pandemic. On December 22, 2020, the President's Working Group on Financial Markets (PWG) issued a report titled "Overview of Recent Events and Potential Reform Options for Money Market Funds" (PWG Report). The PWG Report outlines ten possible money market fund reforms, including: (1) removing the tie between the 30% weekly liquid asset threshold for money market fund liquidity and redemption gates and liquidity fees; (2) reforming the conditions for imposing redemption gates; (3) utilizing a minimum balance at risk mechanism for shareholder accounts; (4) requiring certain liquidity management changes, such as an additional weekly liquid asset threshold; (5) permitting weekly liquid asset requirements the flexibility to automatically decline in certain circumstances, such as when redemptions are large; (6) requiring a floating NAV for all prime and municipal (or tax-exempt), money market funds, including retail funds; (7) requiring swing pricing; (8) imposing capital buffer requirements; (9) requiring membership in a private liquidity exchange bank capitalized by the money market funds and their sponsors; and (10) establishing requirements for fund sponsor support to a money market fund.

~~Contrary to the focus placed by the PWG Report and regulators on money market funds as a cause of the market turmoil in March 2020, the ICI MMF Report supports the view~~ that the Treasury securities markets, rather than money market funds, triggered the market turmoil. The ICI MMF Report ~~rebukes~~rebuked suggestions that money market funds, particularly institutional prime money market funds, were a primary, if not the sole, cause of market distress in March 2020, noting that, "[“[t]hese suggestions are inconsistent with the data and early press reports."” The ICI MMF Report points to the fact that the market dislocations were widespread, including in markets in which institutional prime money market funds are not significant players, such as the U.S. Treasury bonds, longer-term U.S. agency securities, municipal securities, corporate bonds, and foreign exchange markets. The ICI MMF Report also studied institutional prime money market fund asset flows and spreads in the Treasury bond market, concluding, ~~"by~~“by March 11[, 2020] these spreads had widened substantially, yet prime money market funds had seen virtually no outflows."” The ICI MMF Report also ~~notes~~noted that, ~~"press~~“press reports do not support the theory that money market funds were at the forefront of the market ~~stress"~~stress” and that, ~~"Treasury~~“Treasury markets were in the news several days before any real mention of money market funds . . ~~.".~~.”

On ~~December 23, 2020,~~April 11, 2022, Federated Hermes submitted two comment letters, a Primary Comment Letter (115 pages) and a separate Swing Pricing Comment Letter (45 pages). These comment letters strongly oppose a majority of the SEC's Division of Investment Management released a statement on the PWG Report requesting comments to assist the SEC staff in providing recommendations to the SEC. The SEC staff requested comments in regard to three specific areas: (1) potential stress points for funds and short-term funding markets; (2) measures that can enhance the resilience and function of short-term funding markets; and (3) measures that can reduce the likelihood of future official sector interventions. On February 4, 2021, the SEC staff reissued a request for comment on the PWG Report, including the effectiveness of previously-enactedSEC’s money market fund ~~reforms~~reform proposals.

In its Primary Comment Letter, Federated Hermes concurred with the ICI that money market funds are critically important for (1) over 50 million retail investors, as well as corporations, municipalities, and other institutional investors, who rely on the ~~implementation of the potential policy measures described in the PWG Report. The SEC staff also requested comments on other topics that are relevant to potential~~$5 trillion money market fund ~~reforms, including other approaches for improving the resilience~~industry as a low cost, efficient, transparent, cash management investment vehicle that offers market-based rates of return, and (2) governments (federal, state and local), businesses, and financial institutions who utilize money market funds as an important source of financing. Federated Hermes also agreed (with only a few differences) with the ICI’s comments on the SEC’s money market fund reform proposal regarding: (1) the application of liquidity fees; (2) availability of discretionary redemption gates; (3) increases to the required daily and ~~short-term funding markets generally.~~weekly liquidity requirements; (4) support of reverse distribution mechanisms (RDMs) as the most appropriate means to manage money market funds in a negative interest rate environment; and (5) opposition to swing pricing.

Federated Hermes specifically agreed with the SEC that the link between liquidity fees and redemption gates and the 30 percent weekly liquid asset requirement in Rule 2a-7 under the 1940 Act should be eliminated. Federated Hermes asserted that, unlike the SEC’s proposal, it supports the retention of a fund board’s ability to impose either a liquidity fee or a redemption gate, in its

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discretion and in accordance with its fiduciary duty, when doing so is in the best interest of the fund and its shareholders, without reference to any specific level of liquidity. Federated Hermes ~~along with~~opposed increasing required daily and weekly liquidity requirements for money market funds because of the ~~ICI~~negative effect such increased requirements would have on money market fund yields, and ~~other industry participants, have submitted comment letters that strongly disagree with~~once unencumbered from the ~~conclusions reached in the PWG Report. In its first comment letter, dated April 12, 2021,~~perils of an inappropriate linkage between liquidity levels and liquidity fees and redemption gates, Federated Hermes ~~emphasized, among other points,~~believes that money market funds ~~did not cause or exacerbate~~have sufficient liquidity levels currently to protect investors from dilution. Federated Hermes opposed the ~~turmoil in~~SEC’s prohibition on the ~~financial markets in March 2020, and~~use of RDMs to maintain the stable NAVs of government money market funds ~~have no "structural vulnerabilities" warranting~~because, among other reasons, the ~~more significant policy options outlined in~~SEC’s prohibition on the ~~PWG Report, such~~use of RDMs: (1) does not reflect any formal investment management industry feedback; and (2) will eliminate the use of government money market funds as ~~capital buffers and holdbacks.~~sweep investments. Federated Hermes ~~stressed~~also asserted that, due to the significant technology investments that would be necessary for market participants to modify transaction systems to process transactions in a hypothetical negative yield scenario without using RDMs, the absence of RDMs could lead to material outflows in U.S. government money market funds to bank deposits or non-regulated investment products, consistent with the notion of regulating government money market funds out of existence. Federated Hermes argued that the use of RDMs is the clear investor preference and would preserve money market ~~turmoil~~funds as an investment product for all stakeholders, and that the SEC’s concerns over investor confusion regarding the operation of RDMs can be addressed through disclosure. Federated Hermes concluded its Primary Comment Letter on the SEC’s proposed money market fund reforms by asserting that: (1) the SEC’s final rule should be limited to (a) delinking compliance with daily and weekly liquidity levels to considerations on imposition of liquidity fees and redemption gates, (b) requiring fluctuating NAV money market funds to use bid prices on portfolio assets to calculate NAV and purchase and redemption prices, and (c) specifying criteria upon which a money market fund board’s independent trustees/directors could impose a discretionary liquidity fee or redemption gate; and (2) the remaining aspects of the SEC’s proposed money market fund reforms should not be adopted, including in ~~March 2020 was created by~~particular the ~~Pandemic~~swing pricing proposal, as they will (a) not achieve the desired result to reduce investor redemptions in stressed market conditions, but instead will be harmful to investors in money market funds and those who use money market funds to obtain short-term financing, and (b) interfere with capital formation and the ~~unprecedented global government response~~stability and ~~economic shut-down~~efficiency of short-term markets.

In its Swing Pricing Comment Letter, Federated Hermes opposed the SEC’s proposal for the mandatory use of swing pricing because, among other reasons, swing pricing would eliminate a fundamental tenet of money market funds – the ability for investors to ~~stem~~transact intra-day and same day. Federated Hermes asserted that swing pricing for money market funds is deeply flawed, and investors would be damaged, not protected, by its implementation. Federated Hermes asserted that swing pricing will fail to reduce systemic risk while creating other significant adverse consequences. Among other things, Federated Hermes argued that swing pricing would cause investors to pre-emptively redeem from money market funds, as they did before the ~~spread~~effective date of the coronavirus. In its comment letter, Federated Hermes supported the SEC eliminating the requirement for a fund's board to consider imposing redemption gates and liquidity fees if weekly liquid assets drop below 30% of the fund's total assets. This is one of the requirements that was imposed under the SEC'sSEC’s structural, operational, and other money market fund reforms adopted through amendments to Rule 2a-7, and certain other regulations, on July 23, 2014 (2014 Money Fund Rules) and related guidance (collectively, the 2014 Money Fund Rules and Guidance). ~~Compliance with the 2014 Money Fund Rules and Guidance was required on October 14, 2016. In its second comment letter, dated June 1, 2021,~~ Federated Hermes ~~recommended certain structural reforms~~further asserted that ~~address~~this would cause more short-term commercial paper to be directly owned, or owned through less regulated vehicles, without the ~~root causes~~professional management provided through regulated money market funds that seek safety and stability of money market fund NAVs. Federated Hermes also asserted that swing pricing would inevitably lead to efforts to market-time or “game” trading in a manner that would harm investors and the integrity of money market funds generally, based, among other things, on known heavy redemptions at month and quarter ends, and at tax payment dates, and other factors. Federated Hermes identified significant new operational and compliance costs to implement swing pricing or to mitigate the new risks created by it, which would be borne by money market fund shareholders with no corresponding benefit. Federated Hermes identified significant market impacts that could result from implementing swing pricing, including the potential that institutional prime and tax-exempt money market funds could no longer qualify to be designated as “cash and cash equivalents,” and the elimination of the ~~failure of critical funding markets in March 2020~~impacted money market funds from use as sweep investments. Federated Hermes also set forth several recommendations and ~~the consequent systematic risks, including:~~conclusions, including, among others, that: (1) the ~~provision~~SEC should abandon its swing pricing proposal, and eliminate the link between the 30 percent weekly liquid asset requirement and mandatory liquidity fees and redemption gates; (2) discretionary liquidity fees are preferable to swing pricing; (3) mandatory liquidity fees, as contemplated by some commenters, would have the effect of ~~liquidity~~triggering preemptive redemptions in stressed markets as ~~well as reforms~~investors would try to ~~promote market-making in stressed conditions; (2) amendments to rule 2a-7 to delink~~ascertain the ~~consideration of redemption gates and~~criteria for triggering the mandatory liquidity fees from publicly available data; (4) discretionary liquidity fees are preferable to mandatory liquidity fees because they preserve the ~~30%~~role and responsibility of the money market funds’ board to act to prevent material dilution or other unfair results for all fund shareholders based on actual circumstances; (5) the SEC should not be ensnared in a ~~fund's total assets threshold; (3)~~redirection or usurpation of its defined mission toward goals that cannot be reconciled with its statutory mandate; and (6) Congress should require that banking regulators fix the problems created by the array of post-financial crisis reforms tothat materially impaired market-making, particularly in stressed market conditions.

Following a May 24, 2022 meeting with the ~~short-term market structure itself to improve liquidity in times of stress;~~SEC Chairman and ~~(4) considerations for balancing the SEC's statutory mandate with liquidity and financial stability concerns. In~~SEC staff, on May 26, 2022, Federated Hermes submitted a third comment letter in which it emphasized that: (1) swing pricing will regulate institutional prime money market funds out of

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existence; (2) discretionary fees and gates administered by fund boards through the exercise of their fiduciary duty are the best answer for money market funds; (3) eliminating the link between mandatory fees and gates and a 30% liquid asset requirement is the right thing to do; and (4) a four digit NAV for government money market funds to deal with the possibility of negative interest rates is not a better solution than allowing the use of RDMs. In letters dated June 9, 2022, June 14, 2022, August 10, 2022, and September ~~21, 2021,~~22, 2022, Federated Hermes submitted similar comments to SEC Commissioners Pierce, Crenshaw, Uyeda, and Lizárraga after meetings with them on June 3, 2022, June 7, 2022, August 2, 2022, and September 20 2022, respectively.

Following a July 22, 2022 meeting with the SEC staff, on July 28, 2022, Federated Hermes submitted another comment letter in which Federated Hermes expressed its ~~belief~~concern that the ~~combination~~SEC’s proposal to mandate U.S. Government money market funds move to a four-digit NAV in a negative rate environment would lead to a loss of ~~delinking~~at least $1 trillion in investments into U.S. Government money market funds via sweep accounts and potentially an additional $1 trillion in investments into U.S. Government money market funds made as position trades. In that letter, Federated Hermes argued that properly disclosed RDMs can both accomplish the SEC’s goals and prevent negative consequences to U.S. investors and markets in a negative interest rate environment. On August 30, 2022, Federated Hermes followed-up on its July 28, 2022 comment letter by submitting to the SEC further information and examples of how RDMs could be utilized in a negative interest rate environment in such a way as to minimize any potential ~~imposition~~investor confusion. On September 15, 2022, the Securities Industry and Financial Markets Association (SIFMA) and ICI jointly submitted a similar letter to the SEC that provided an example of ~~redemption gates and liquidity fees with~~language that a money market ~~fund's weekly liquid asset requirements, adoption~~fund could use to describe how RDMs work and how they would impact an individual investor in a negative interest rate environment.

On August 3, 2022, Federated Hermes submitted a response to the SEC’s Director of ~~certain liquidity fee procedures,~~the Division of Investment Management regarding remarks the Director made regarding swing pricing and ~~enhancements to~~the SEC’s pending money market ~~funds' ability~~fund reforms at a July 26, 2022 industry seminar. In this response, Federated Hermes noted: (1) European money market funds have never used swing pricing for money market funds; (2) there is no data supporting the need for swing pricing to ~~"know their customer" via an amendment to Rule 22c-2 under the 1940 Act, when combined~~deal with ~~consideration of and improvements~~potential material dilution caused by redeeming shareholders; (3) Federal Reserve Regulation Q, which formerly forbid price competition in the ~~short-term markets generally, can address~~banking industry for deposits, did not cause money market funds to succeed and grow; (4) adopting money market fund reforms that will reduce competition for cash balances, harm investors, negatively impact capital raising and impede market efficiency would be clearly contrary to the ~~concerns identified in~~SEC’s statutory directive; and (5) money market funds did not cause the ~~PWG Report without adversely impacting~~financial crises of 2007-2009 and March-April 2020.

On September 19, 2022, Federated Hermes also responded to questions received from the ~~viability~~General Accounting Office (GAO) as part of the GAO’s review of the effects of the Pandemic on money market funds and ~~their benefits to investors, issuers and capital formation.~~liquidity risks. Among other topics, in its responses, Federated Hermes ~~also has expended, and will continue to expend, significant internal and external resources to engage with regulators on potential~~reiterated many of the points regarding the proposed money market fund reforms ~~including through additional comment letters and meetings with U.S. and global regulators, the ICI and other industry participants.~~noted above.

Management believes money market funds provide a more attractive investment opportunity than other competing products, such as insured deposit account alternatives. Management also believes that money market funds are resilient investment products that have proven their resiliency during the Pandemic. While Federated Hermes believes that some regulations could be improved, such improvements should be measured and appropriate, preserving ~~investors'~~investors’ ability to invest in all types of money market funds. Federated Hermes believes that regulators should look closely at the redemption gates and liquidity fee requirement from the 2014 Money Fund Rules and Guidance and supports efforts to reduce regulation, including the PWG Report's recommendation to eliminate the redemption gates and liquidity fee requirement. Federated Hermes also continues to support efforts to permit the use of amortized cost valuation by, and override the floating NAV and certain other requirements imposed under the 2014 Money Fund Rules and Guidance for, institutional and municipal (or tax-exempt) money market funds. Legislation has been re-introduced in both the Senate and ~~is being reintroduced in~~ the House of Representatives in a continuing effort to get these ~~revisions to~~ money market fund reform revisions regarding the use of amortized cost passed and signed into law.

~~With~~On August 16, 2022, the ~~transition~~Inflation Reduction Act of ~~Presidential administrations, and new agency leadership, certain regulations promulgated by~~2022 became law in the SEC or Department of Labor (DOL) in 2020 are being re-examined and could be reversed or modified. On January 20, 2021, the new administration issued a number of regulatory directives freezing regulatory rulemaking, rescinding various executive orders concerning the regulatory process issued by the previous administration, and establishing a framework for modernizing the review of regulatory actions. On June 11, 2021, in its Spring Reg Flex Agenda, the DOL indicated that it would be proposing another new fiduciary rule; however, as of September 30, 2021, a new fiduciary rule is not enumerated among the DOL's list of regulations open for comment.U.S. It has been reported that ~~a proposed new fiduciary rule will be issued~~the law aims to curb inflation by reducing the ~~end~~deficit, lowering prescription drug prices, and investing into domestic energy production while promoting clean energy. It also has been reported that the law is expected to raise $738 billion and authorize $391 billion in spending on energy and climate change, $238 billion in deficit reduction, three years of ~~2021.~~Affordable Care Act subsidies, prescription drug reform to lower prices, and certain tax reforms (discussed below). The ~~DOL's April 2016 fiduciary rule was vacated~~law’s emphasis on clean energy is consistent with regulatory efforts to enhance ESG-related (or climate) disclosures.

As indicated in ~~June 2018 by~~ the ~~United States Court of Appeals for~~SEC’s Spring Reg Flex Agenda discussed above, the ~~Fifth Circuit. On December 15, 2020,~~SEC has also increased its focus on ESG-related disclosures. Following the ~~DOL issued the final version~~SEC’s creation of a ~~re-proposed fiduciary rule to regulate "investment advice fiduciaries" (Final DOL Fiduciary Rule), which became effective~~Climate Change and ESG Task Force in the SEC’s Division of Enforcement (DOE) on ~~February 16, 2021. On February 12,~~March 4, 2021, the ~~DOL announced~~SEC’s Division of Examinations’ April 9, 2021 ESG product and service risk alert, the FSOC’s recognition that ~~its temporary enforcement policy, under which~~climate change is an emerging and increasing threat to U.S. financial stability, and other regulatory actions, statements and industry commentary, on March 21, 2022, the ~~DOL will not pursue prohibited transaction claims against investment advice fiduciaries who are working diligently on compliance with relevant components~~SEC issued a climate disclosure proposal titled, “The Enhancement and Standardization of ~~the Final DOL Fiduciary Rule, will remain in place until December 20, 2021. On October 25, 2021, the DOL issued Field Assistance Bulletin No. 2021-02 in which the DOL announced that,~~Climate-Related Disclosures for the period from December 21, 2021 through January 31, 2022, it will not pursue prohibited transaction claims against investment advice fiduciaries who are working diligently and in good faith to comply with the Impartial Conduct Standards for exempt transactions under the Final DOL Fiduciary Rule or treat such fiduciaries as violating the applicable prohibited transaction rules. In this Field Assistance Bulletin, the DOL also announced that, for the period from December 21, 2021 through June 30, 2022, it will not pursue prohibited transactions claims against investment advice fiduciaries who are otherwise in compliance with the Final DOL Fiduciary Rule but for their failure to comply with theInvestors.” The proposal mandates, among other things,

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certain climate-risk disclosures by public companies, including on Form 10-K, about a company’s governance, risk management, and strategy with respect to climate-related risks. The proposal incorporates certain concepts and vocabulary from the Task Force on Climate-related Financial Disclosures (TCFD) and the Greenhouse Gas Protocol (GHG Protocol) as part of the proposed disclosure regime. For example, the proposal would require disclosure of quantitative metrics to assess a company’s exposure to greenhouse gas emissions. A company would be required to disclose its Scope 1 and ~~documentation requirements set forth~~Scope 2 greenhouse gas emissions, which would be emissions under the GHG Protocol that “result directly or indirectly from facilities owned or activities controlled by a registrant.” Certain registrants also would be required to disclose Scope 3 emissions, which would be the emissions from upstream and downstream activities in a company’s value chain, if such emissions were material to investors or if the company had made a commitment that included reference to Scope 3 emissions. On May 9, 2022, the SEC extended the comment period on the proposal from May 9, 2022, to June 17, 2022. On June 17, 2022, Federated Hermes submitted a comment letter to the SEC in which it supported the ICI’s comments to the SEC on the proposal, including, among other comments, that: (1) any final rule should only require companies to provide material climate risk-related information in a company’s Form 10-K, with any non-material information required by any amendments to Regulation S-K to be provided in a new climate report; (2) the SEC not amend Regulation S-X to require a company to provide material financial metrics in footnotes to its financial statements; and (3) it is premature to require disclosure of Scope 3 emissions data. As noted above, the SEC has reopened the comment period on this proposal for 14 days due to a technology issue with its internet comment form.

On October 3, 2022, the FSOC established the Climate-related Financial Risk Advisory Committee to aid in the assessment of climate-related financial risk. This followed FSOC Chairperson Yellen’s praise for the SEC’s climate risk disclosure proposal on March 21, 2022: “The SEC’s proposal is an important step to protect investors and strengthen the overall resilience of the financial system. Investors and businesses have for years asked for reliable information that can be used to assess climate-related risks and opportunities. I commend Chair Gensler and the SEC for their work on this critical issue.” On April 5, 2022, certain Republican senators, including members of the Senate Banking and Environment and Public Works Committees, issued a letter to SEC Chair Gensler calling on the SEC to withdraw the proposal. Consistent with its June 14, 2021 comment letter submitted in response to then acting SEC Chair Allison Herren Lee’s request for public comment on the SEC’s disclosure rules and guidance as they apply to climate change and other ESG-related disclosures, Federated Hermes believes that any SEC rule on climate disclosure should: (1) supplement its principles-based disclosure regime, not replace it with prescriptive metrics; (2) focus on material disclosures; and (3) maintain the global competitiveness of U.S. capital markets.

The SEC’s aggressive rulemaking and Final Rules, particularly regarding money market fund reform, and climate/ESG disclosure, may be challenged by legislators and in the courts by investment management industry participants and other industry groups. Particularly in the context of climate/ESG disclosures, the likely success of any challenge may be bolstered in light of the U.S. Supreme Court’s decision in West Virginia vs. Environmental Protection Agency, in which the Supreme Court weakened the deference given to an administrative agency’s regulatory authority by applying the “Major Questions Doctrine,” which the Supreme Court has used to require courts to defer to Congress rather than administrative agencies regarding matters that it concludes have significant economic and/or political impact if it believes that Congress did not specifically grant such powers to an agency.

In addition to the SEC and the FSOC, regulations adopted, and actions taken, by the Department of Labor (DOL) impact the investment management industry, including Federated Hermes. The DOL’s April 2016 fiduciary rule was vacated in June 2018 by the United States Court of Appeals for the Fifth Circuit. On December 15, 2020, the DOL issued the final version of a re-proposed fiduciary rule to regulate “investment advice fiduciaries” (Final DOL Fiduciary Rule), which became effective on February 16, 2021. On February 12, 2021, the DOL announced that its temporary enforcement policy, under which the DOL would not pursue prohibited transaction claims against investment advice fiduciaries who are working diligently on compliance with relevant ~~provisions~~components of the Final DOL Fiduciary Rule, ~~or treat such fiduciaries as violating~~would remain in place until December 20, 2021. In Field Assistance Bulletin No. 2021-02, the ~~applicable~~DOL provided further transition relief by extending its position on pursuing prohibited transaction ~~rules.~~claims through January 31, 2022. The DOL also stated that it would not enforce the specific documentation and disclosure requirements for individual retirement account rollovers through June 30, 2022, but that all other requirements of the Final DOL Fiduciary Rule would be subject to full enforcement as of February 1, 2022. In its Spring 2022 Agency Rule List (DOL’s Spring Reg Flex Agenda), the DOL indicated that it would be proposing another new fiduciary rule by December 2022. According to the ~~DOL's~~DOL’s Spring Reg Flex Agenda, the new proposed fiduciary rule will amend the regulatory definition of the term ~~"fiduciary"~~“fiduciary” to more appropriately define when persons who render investment advice for a fee to employee benefit plans and individual retirement accounts (IRA) are fiduciaries for purposes of ERISA and the Internal Revenue Code. The DOL also has indicated that, in conjunction with this rulemaking, the Employee Benefits Security Administration (EBSA) will evaluate available prohibited transaction class exemptions and propose amendments or new exemptions to ensure consistent protection of employee benefit plan and IRA investors. It has been reported that a proposed new fiduciary rule will not be forwarded to the Office of Management and Budget (OMB) for consideration until the first quarter of 2023. In ~~its~~the DOL’s Spring Reg Flex

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Agenda, the DOL ~~also~~ indicated that ~~as required~~it expects to issue a final “Prudence and Loyalty in Selection Plan Investments and Exercising Shareholder Rights” rule (New DOL ESG/Proxy Voting Rule) by ~~Executive Order 14030,~~December 2022. On October 6, 2022, the DOL submitted a final rule to the OMB for review, and it has been reported that the final New DOL ESG/Proxy Voting Rule will be published in November 2022. The DOL had previously issued its proposed New DOL ESG/Proxy Voting Rule on October 13, 2021. The New DOL ESG/Proxy Voting Rule would ~~undertake a review of, and propose new rules regarding,~~replace the ~~DOL's~~DOL’s final proxy voting and shareholder rights rule (Final DOL Proxy Voting Rule), which was issued on December 11, 2020, and its final rule restricting fiduciaries from selecting plan investments on the basis of non-pecuniary factors, such as ESG factors (Final DOL ESG Rule), which was issued on October 30, 2020. ~~Executive Order 14030, which was issued~~Previously, on ~~May 20, 2021, also directs the Secretary of Labor to consider publishing, by September 2021, a proposed rule to suspend, revise, or rescind the Final DOL Proxy Voting Rule and Final DOL ESG Rule. On~~ March 10, 2021, the DOL issued an indefinite non-enforcement policy with respect to the Final DOL ESG Rule and the Final DOL Proxy Voting Rule.

On October 13, 2021, the DOL issued for comment, its proposed "Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights" rule, which would replace the Final DOL ESG Rule and Final DOL Proxy Voting Rule (New DOL Proposed ESG/Proxy Voting Rule). The New DOL ~~Proposed~~ ESG/Proxy Voting Rule, ~~would~~if enacted as proposed, would: (1) amend the ~~"Investment Duties"~~“Investment Duties” regulation, which addresses the duties of prudence and loyalty in selecting plan investments and exercising of shareholder rights, including proxy ~~voting. The New DOL Proposed ESG/Proxy Voting Rule would~~voting; (2) retain the core principle that the duties of prudence and loyalty require ERISA plan fiduciaries to focus on material risk-return factors and not subordinate the interests of participants and beneficiaries to objectives unrelated to the provision of benefits under the plan, but clarify that, when considering investment returns, a ~~fiduciary's~~fiduciary’s duty of prudence may require an evaluation of the economic effects of climate change and other ESG factors on a particular investment or investment course of ~~action. The New DOL Proposed ESG/Proxy Voting Rule also would~~action; and (3) apply the same standards to qualified default investment alternatives as apply to other investments.

In a change from the Final DOL ESG Rule, if enacted as proposed, the New DOL ~~Proposed~~ ESG/Proxy Voting Rule also ~~would~~would: (1) amend the ~~"tie-breaker"~~“tie-breaker” standard by: ~~(1)~~(a) imposing a standard that would require a fiduciary to conclude prudently that competing investments, or competing investment courses of action, equally serve the financial interests of the plan over the appropriate time horizon; and ~~(2)~~(b) permitting a fiduciary to select an investment, or an investment course of action, based on economic or non-economic benefits other than investment ~~returns. The New DOL Proposed ESG/Proxy Voting Rule also would~~returns; and (2) adjust the Final DOL Proxy Voting ~~Rule's~~Rule’s requirements for the exercise of shareholder rights, including proxy voting, by: ~~(1)~~(a) removing from the current regulation the statement that ~~"the~~“the fiduciary duty to manage shareholder rights appurtenant to shares of stock does not require the voting of every proxy or the exercise of every shareholder right;~~" (2)~~” (b) removing from the current regulation safe harbors relating to proxy voting that permit ~~(a)~~(i) a policy to limit voting resources to particular types of proposals that a fiduciary has prudently determined are substantially related to the ~~issuer's~~issuer’s business activities or are expected to have a material effect on the value of the investment and ~~(b)~~(ii) a policy of refraining from voting on proposals or particular types of proposals when a ~~plan's~~plan’s holding in a single issuer relative to the ~~plan's~~plan’s total investment assets is below a quantitative threshold; and ~~(3) eliminating from~~(c) the ~~current regulation~~elimination of the requirement that, when deciding whether to exercise, and in exercising, shareholder rights, a plan fiduciary must maintain records on proxy voting activities and other exercises of shareholder rights. In a December 10, 2021 comment letter, Federated Hermes ~~intends to comment~~commented on the ~~New DOL Proposed ESG/Proxy Voting Rule~~DOL’s October 13, 2021 proposed rule with respect to, among other points, the ~~interrelation~~interrelationship between the ~~New~~Final DOL ~~Proposed~~Fiduciary Rule and Final DOL ESG/Proxy Voting Rule and the exclusive benefit rule under a relevant ~~fiduciary law~~fiduciary’s own prudent analysis, which in Federated Hermes’ view would unnecessarily subject fiduciaries to regulatory and litigation risk and expose any final rulemaking to further scrutiny over time.

Federated Hermes, like other investment managers, also has prepared to comply with Rule 2a-5 under the ~~United States.~~1940 Act. The ~~comment period for the New DOL Proposed ESG/Proxy Voting~~SEC adopted Rule ~~ends~~2a-5 on December ~~13, 2021.~~

On3, 2020, it went effective on March 258, 2021, and ~~26, 2021, joint resolutions were introduced~~compliance was required by September 8, 2022. Rule 2a-5 establishes an updated regulatory framework for fund valuation practices by establishing requirements for determining fair value in good faith for purposes of the ~~Senate~~1940 Act. The rule expressly permits boards, subject to continued board oversight and ~~House of Representatives~~certain other conditions, to rescind the amendments adopted in September 2020 to the SEC's proxy voting rules that, among other things, raised eligibility and resubmission thresholds for shareholder proposals. Under the Congressional Review Act, Congress can rescind rules that were sent to Congress in the previous 60 legislative days (or, in this case, beginning August 21, 2020). As of September 30, 2021, these resolutions have not progressed in Congress. The SEC also has been adjusting, or terminating, the targeted, temporary Pandemic-related relief and assistance it provided to the investment management industry. The SEC staff also is considering issuing updated guidance to enable broader use of electronic delivery of disclosure documents and indicated support for related issuesdesignate certain parties, such as ~~remote work, e-authorization~~fund investment advisors, to perform the fair value determinations. The rule also defines when market quotations are “readily available” for purposes of the 1940 Act, the threshold under Rule 2a-4 under the 1940 Act for determining whether a fund must fair value a security. Under Rule 2a-5, a market quotation is “readily available” only when that quotation is a quoted price (unadjusted) in active markets for identical investments that the fund can access at the measurement date. The rule further provides that a quotation will not be readily available if it is not reliable. This definition contradicts common practices for cross-trades between affiliated funds under Rule 17a-7 under the 1940 Act. Rule 17a-7 permits cross trades of securities for which market quotations are readily available between affiliated funds, which allows funds to transfer such securities without incurring trading costs. The definition of “readily available” in Rule 2a-5 essentially limits Rule 17a-7 to equity securities because fixed-income securities are not traded on an exchange and ~~dematerialization of physical security certificates.~~would not have a “quoted price (unadjusted) in active markets.” Federated Hermes ~~supports many~~is relying on previously-issued SEC no-action letters to continue to conduct cross trades in its fixed-income funds (unless and until the SEC rescinds those no-action letters). The inability to conduct cross-trades between Federated Hermes fixed-income funds can increase trading expenses and have a negative impact on fund performance.

Since the beginning of ~~these recommended actions, particularly allowing for increased use of electronic delivery of disclosure documents.~~

~~The number of new or proposed laws, rules and regulations remained low in~~ the third quarter ~~of 2021 in the U.S. On June 11, 2021, the SEC set forth in its Spring Reg Flex Agenda an aggressive schedule for proposing (or in certain cases, re-proposing) and/~~2022, other proposed rules, new guidance and other actions have been issued or ~~finalizing 49 separate rules and regulations in the next year, several of which will~~taken that impact ~~the~~ U.S. investment management industry participants, including Federated Hermes. For ~~example, it includes~~example:

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•On October 26, 2022, the SEC held an Open Meeting during which the SEC Commissioners voted to adopt a final rule, “Tailored Shareholder Reports for Mutual Funds and Exchange Traded Funds; Fee Information in Investment Company Advertisements,” and related form amendments, that purportedly will require open-end management investment companies to transmit concise and visually engaging annual and semi-annual reports directly to shareholders that highlight key information for investors, and amend certain advertising rules for registered investment companies and ~~regulations on: climate risk disclosure; human capital management disclosure; cybersecurity risk governance; special purpose acquisition companies; proxy voting advice; custody~~business development companies. The SEC adopted the rule largely as proposed although with some changes from the proposal, most notably the SEC did not adopt proposed amendments to registration statement disclosures. The SEC adopted a “layered approach” to disclosure, whereby registered funds are required to make available summary information to retail shareholders directly, while providing more detailed information online (e.g., schedule of investments, other financial statement elements) that may be more relevant to investors and financial professionals who desire more in-depth information. The SEC Commissioners also voted to adopt a final rule, “Listing Standards for Recovery of Erroneously Awarded Compensation,” which implements Section 10D of the 1934 Act, as added by Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) by requiring securities exchanges to adopt listing standards that require issuers to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers. The rule also requires a listed issuer to file the policy as an exhibit to its annual report and to include disclosures related to its recovery policy and recovery analysis where a recovery is triggered. The SEC proposed the rule in 2015 and reopened the comment periods in 2021 and 2022. Most of the changes from the proposal are non-substantial, although one important change is that the SEC narrowed the scope of compensation for recovery to only those amounts earned while the subject individual was an executive officer. Finally, the SEC voted to propose a new rule under the Advisers ~~Act; rule 17a-7 amendments under the 1940 Act; money market reforms; matters~~Act, “Outsourcing by Investment Advisers,” purportedly to ~~address~~seek to establish minimum and consistent oversight requirements for registered investment advisors that outsource certain services or functions to service providers, and to amend certain related ~~to ESG factors for investment companies~~recordkeeping and ~~investment advisers; open end-fund liquidity and dilution management; market structure modernization; and tailored shareholder reports. Other~~Form ADV reporting requirements. Federated Hermes is reviewing these newly adopted final rules and ~~regulations~~the new proposed rule.

•On October 13, 2022, the SEC staff issued an Frequently Asked Questions (FAQ) relating to investment advisor consideration of diversity, equity and inclusion (“DEI”) factors when recommending or selecting other investment advisors for clients. The FAQ states that an advisor may consider DEI factors among a variety of factors, provided that the use of such factors is consistent with a client’s objectives, the scope of the relationship, and the advisor’s disclosures. The SEC staff also stated that advisors are not required to pre-qualify consideration of DEI factors on the basis of minimum AUM or length of track record.

•On October 12, 2022, the SEC adopted amendments to the electronic recordkeeping requirements for broker-dealers, security-based swap dealers and major security-based swap participants that purport to modernize recordkeeping requirements and make the requirements adaptable to new technologies in electronic recordkeeping. The amendments also are intended to facilitate examinations of these entities by the SEC.

•On September 19, 2022, the SEC Division of Examinations published a risk alert to inform SEC-registered investment advisors (investment advisors or advisors), including advisors to private funds, about upcoming review areas during examinations focused on amended Advisers Act Rule 206(4)-1 (Marketing Rule), which comes into effect on November 4, 2022.

•On September 14, 2022, the SEC proposed amendments to the standards applicable to covered clearing agencies for U.S. Treasury securities to require that such covered clearing agencies have written policies and procedures reasonably designed to require that every direct participant of the covered clearing agency submit for clearance and settlement all eligible secondary market transactions in U.S. Treasury securities to which it is a counterparty. The SEC also proposed additional amendments to the standards with respect to risk management, and proposed to amend the broker-dealer customer protection rule to permit margin required and on deposit with covered clearing agencies for U.S. Treasury securities to be included as a debit in the reserve formulas for accounts of customers and proprietary accounts of broker-dealers subject to certain conditions. The comment period for the proposed amendments ends 60 days after the publication of the proposed amendments in the Federal Register. These proposed amendments followed the SEC issuing on August 8, 2022, proposed rules to establish new governance requirements for all registered clearing agencies, including requirements for board composition and independent directors, conflict of interest identification and mitigation, and board oversight of service providers, among others. The comment period for these proposed requirements ended on October 7, 2022.

•On August 25, 2022, the SEC adopted final rules amending Item 402 of Regulation S-K to implement the “pay versus performance” requirement as required by Congress in the Dodd-Frank Act. The final rules require registrants to disclose, in

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Management's Discussion and Analysis (continued)
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~~included~~proxy or information statements in which executive compensation disclosure is required, how executive compensation actually paid by the registrants related to the financial performance of the registrants over the time horizon of the disclosure. Registrants are required to comply with the final rules in proxy and information statements for fiscal years ending on or after December 16, 2022.

•On August 10, 2022, the SEC and Commodity Futures Trading Commission (CFTC) jointly proposed amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisors to private funds, to: (1) enhance reporting; (a) by hedge fund advisors on qualifying hedge funds, (b) on certain basic information about investment advisors and the private funds they advise, and (c) regarding hedge funds; (2) amend how investment advisors report complex structures; and (3) remove aggregate reporting for large hedge fund advisors. The comment period for the proposed amendments ended on October 11, 2022.

•On July 27, 2022, the DOL proposed amendments to Prohibited Transaction Class Exemption 84-14 (the QPAM Exemption) clarifying how the restrictions against individuals who have been convicted or released from imprisonment apply in the context of a foreign crime. The proposed amendments also would require QPAMs to report their reliance on the ~~SEC's Spring Reg Flex Agenda~~QPAM exemption to the DOL and introduce: (1) language requiring that ~~will likely impact Federated Hermes as~~QPAMs have sole responsibility for transactions; (2) a ~~public company include,~~new contractual indemnity of the plan by the manager; and (3) new recordkeeping requirements, among other things. The comment period for ~~example, corporate board diversity, erroneously-awarded compensation, share repurchase disclosure, reporting of proxy votes~~the proposed amendments ended on ~~executive compensation, incentive-based compensation and pay versus performance. On April 16, 2021,~~October 11, 2022, but the ~~SEC voted to~~DOL has announced that it will reopen the comment period after a public hearing on the proposed amendments is held on November 17, 2022.

•On July 13, 2022, the SEC adopted amendments to the proxy rules for the use of universal proxy cards in all non-exempt solicitations for contested director elections. On June 1, 2021, SEC Chair Gensler issued a statement directing the staff to consider whether to recommend further regulatory action regardinggoverning proxy voting ~~advice.~~

advice as proposed in 2021. These final amendments undo rules promulgated during the prior Presidential administration that required proxy advisory firms to deliver their shareholder advice about issuers to those companies at the same time the proxy advisory firm sends the information to its clients and to provide clients with access to any response the company provides on voting advice before those clients vote (Prior Requirements). According to the SEC, these final amendments purportedly enhance proxy advisory firms’ ability to deliver independent proxy voting advice to their clients in a timely manner. The ~~SEC has~~final amendments rescind certain conditions from the proxy rule exemptions for proxy voting advice and related guidance to investment advisors. They also ~~increased its focus on ESG-related disclosure. On April 9, 2021,~~remove a note that provided examples of situations in which the ~~SEC's Division of Examinations issued a risk alert~~failure to highlight observations from recent exams of investment advisers, registered investment companies, and private funds offering ESG products and services. On March 15, 2021, SEC Commissioner and then acting SEC Chair Allison Herren Lee issued a statement reminding issuersdisclose certain information in proxy voting advice may be considered misleading within the meaning of the ~~SEC's 2010 climate change disclosure guidance and soliciting public comment~~proxy rules’ prohibition on material misstatements or omissions. These final amendments to the ~~SEC's disclosure~~proxy rules ~~and guidance as they apply~~became effective on September 19, 2022. Federated Hermes is currently reviewing these final amendments to ~~climate change and other ESG-related disclosures. In its June 4, 2021 comment letter,~~ the ~~ICI called on~~proxy rules. On July 21, 2022, two trade groups filed a lawsuit against the SEC to mandate disclosure of greenhouse gas emissions and workforce diversity to give fund managers the consistent, comparable, and reliable data they need to better assess current and future sustainability-related risks. However, the ICI also warned against an overly prescriptive approach to ESG disclosure, statingalleging that the SEC ~~should develop~~exceeded its authority in an arbitrary and capricious manner by rescinding the Prior Requirements. A proxy advisor firm also is continuing a ~~regulatory framework~~lawsuit against the SEC alleging that designating proxy advice as solicitation under the proxy rules exceeds the SEC’s authority and is ~~flexible enough~~arbitrary and capricious.

•On July 13, 2022, the SEC staff proposed amendments to ~~allow disclosure practices~~Exchange Act Rule 14a-8, the shareholder proposal rule, which requires companies subject to ~~develop organically over time. In its June 14, 2021~~the federal proxy rules to include shareholder proposals in their proxy statements, subject to certain procedural and substantive requirements. The proposed amendments would: (1) revise three substantive bases for exclusion of shareholder proposals under Rule 14a-8-the substantial implementation exclusion, the duplication exclusion, and the resubmission exclusion; (2) purportedly provide greater certainty and transparency to shareholders and companies as they evaluate whether these bases for exclusion would apply to particular shareholder proposals; and (3) purportedly facilitate communication between shareholders and the companies they own, as well as among a company’s shareholders, on important issues. The comment ~~letter,~~period for these proposals ended on September 12, 2022. Federated Hermes ~~urged~~is currently reviewing the ~~SEC to:~~proposed amendments.

Federated Hermes continues to monitor developments regarding previously issued regulatory proposals and developments, including: (1) ~~supplement, not replace, its principles-based disclosure regime with prescriptive metrics;~~the SEC’s proposed rule on “Enhanced Disclosures by Certain Investment Advisers and Investment Companies about Environmental, Social, and Governance Investment Practices” (SEC ESG Disclosure Rule); (2) ~~focus~~the SEC’s proposed rule on ~~material disclosures;~~“Investment Company Names,” which would amend Rule 35d-1 (Names Rule) under the 1940 Act; and (3) ~~maintain~~ the ~~global competitiveness of U.S. capital markets. EOS at~~SEC’s request for comment on certain information providers acting as investment advisors. On August 16, 2022, Federated Hermes ~~also~~ submitted a comment letter ~~that supported~~to the SEC requiring companies to report on material climate-related information that may impact the long-term value of companies to allow investors the ability to access timely, accurate, comprehensive, consistent and comparable information.

In a July 28, 2021 speech, SEC Chair Gensler outlined his views on likely components of the SEC's forthcoming climate disclosure rulemaking proposal. Chair Gensler discussed that the proposal could include: (i) mandatory climate risk disclosure; (ii) qualitative and quantitative data disclosures; (iii) climate-related risk management and strategy disclosures; and (iv) disclosure of metrics related to greenhouse gas emissions, financial impacts of climate change, and progress towards climate-related goals. Chair Gensler indicated that he asked for SEC staff to consider recommendations regarding ~~emission disclosures, industry-specific disclosures, whether fund managers should disclose the criteria and underlying data they use to make ESG-related claims about their products, and whether~~ the SEC ~~should review~~ESG Disclosure Rule ~~35d-1~~in which Federated Hermes expressed concerns regarding the new proposed disclosure requirements and endorsed the ICI’s comments on the proposed rule. Also, on August 16, 2022, Federated Hermes submitted a comment letter to the SEC regarding the proposed amendments to the Names Rule in which, among other comments, Federated Hermes advocated to retain the current approach for the 80% investment policy requirement and temporary investment exceptions under the ~~1940 Act (Names Rule) holistically. Chair Gensler also indicated that~~Names Rule and endorsed the ~~proposal may consider which data or metrics companies might use~~ICI’s comments on the proposed amendments. In addition, on August 16, 2022, Federated Hermes submitted a comment letter to ~~inform investors about how they are meeting their climate-related pledges. He also noted that~~ the SEC ~~will likely develop~~in response to its ~~own disclosure requirements rather than rely~~request for comment on external standard setters, and may look to existing frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) for guidance. On September 1, 2021, Chair Gensler stated that he has instructed SEC staff to prepare a "proposal for climate risk disclosure requirements" and that the proposal should be informed by other frameworks, including the TCFD. On September 14, 2021, Chair Gensler reiterated that "[t]oday's investors are looking for consistent, comparable, and decision-useful disclosures around climate risk," and that the SEC should "step in" when there is high demand for relevant information. Chair Gensler further noted that proposals developed by the SEC will be "informed by economic analysis" and will be available for public comment. On September 22, 2021, the SEC's Division of Corporation Finance published a sample comment letter that the SEC staff intends to issue to public companies regarding their climate change disclosures in SEC filings. In his remarks to the House Financial Services Committee at the October 5, 2021 SEC oversight hearing, SEC Chair Gary Gensler signaled a phased-in climate disclosure approach that would take into account company size and the types of disclosure required.In his fireside chat on October 19, 2021, SEC Chair Gensler reaffirmed his previous remarks to the UN Principles for Responsible Investment that the SEC may look to international standard setters when setting climate change disclosure requirements, but will promulgate US-specific disclosure requirements. On October 21, 2021, the FSOC released a report on climate-related risks to financial stabilityinformation providers in which, ~~it recognizes that climate change is an emerging and increasing threat to U.S. financial stability and,~~ among other ~~recommendations, recommends that FSOC members issuing requirements for climate-related disclosures consider~~comments, Federated Hermes questioned whether ~~such disclosures should include disclosure of greenhouse gas emissions,~~any regulatory purpose would be served by treating information providers as ~~appropriate and practicable, to help determine exposure to material climate-related financial risks.~~

~~Since the beginning of the third quarter 2021, other proposed rules, new guidance and other actions have been issued or taken that impact U.S.~~ investment ~~management industry participants, including Federated Hermes. For example:~~

•On October 14, 2021, the SEC re-opened the comment period for its proposal to implement the provisions of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The proposed rule and rule amendments would direct the national securities exchanges and national securities associations to establish listing standards that would require each issuer to develop and implement a policy providing for the recovery (or claw back), under certain circumstances, of incentive-based compensation based on financial information required to be reportedadvisors under the ~~securities laws that is~~Advisers Act,

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Management's Discussion and Analysis (continued)
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~~received by current or former executive officers, and require disclosure of the policy. The proposal was initially issued by the SEC in 2015. The comment period ends on November 22, 2021.~~

•~~On September 29, 2021, the SEC proposed changes~~opposed deeming information providers to Form N-PX to enhance disclosure for mutual fund and ETF proxy voting records. The SEC indicated that the purpose of the proposal is to enhance the scope of N-PX reporting and to impose structured data reporting so that investors can more easily compare and analyze mutual fund and ETF proxy voting decisions, particularly in the areas of say-on-pay votes, and votes on ESG-related issues. The comment period ends on December 14, 2021.

Investment management industry participants, such as Federated Hermes, also continued, and will continue, to monitor, plan for and implement certain changes in response to previously-issued, new, proposed or adopted rules and guidance. Previously proposed and final rules and guidance included, among others: (1) final rules and amendments to thebe investment advisor advertising and solicitation rules; (2) a final rule providing an updated regulatory framework for fund valuation practices; (3) a final rule regulating the use of derivatives in mutual funds and other funds registeredadvisors under the 1940 ~~Act; (4) final rules~~Act, and ~~amendments~~expressed concern that any proposed rule could be construed to ~~the existing regulatory framework governing~~apply beyond index providers, model portfolio providers and pricing services, have unintended consequences and further increase upfront and ongoing costs that would likely be passed on to clients or fund of funds arrangements among investment funds governed by the 1940 Act; (5) proposed extensive changes to fund shareholder reports and other fund disclosure documents; (6) SEC staff statements and other communications related to registered investment companies investing in Bitcoin futures; (7) rule changes intended to enhance the ability to clear certain trades, particularly those involving repurchase agreements through the Fixed Income Clearing Corporation; and (8) the Presidential executive order prohibiting investment in companies linked to the Republic of China's military and state security apparatus, and related SEC risk alerts and other staff statements. The SEC also has requested comment on the Names Rule to determine whether it can be improved to help ensure that fund names inform and do not mislead investors.

~~It remains uncertain the degree to which regulators will change,~~shareholders with little or Congress will require regulators to change, certain recent Regulatory Developments. It also remains unclear whether, or to what degree, investment advisors, broker/dealers or other intermediaries will roll-back, modify or continue changes made prior to the original, vacated DOL fiduciary rule, or make new or additional changes in light of the Final DOL Fiduciary Rule, the DOL's final investment duty amendments, Final DOL Proxy Voting Rule, Final DOL ESG Rule, Regulation Best Interest, Form CRS, or SEC fiduciary duty interpretations. As noted above, the DOL has taken non-enforcement positions with respect to the Final DOL Fiduciary Rule, and has proposed the New DOL Proposed ESG/Proxy Voting Rule, which increases this uncertainty.

Federated Hermes continues to analyze the potential impact of these Regulatory Developments on Federated Hermes' business, results of operations, financial condition and/or cash flows. Please refer to our prior public filings for more detailed discussions of these, and other, previously-issued proposed and final rules and guidance.no benefit.

In addition to the above Regulatory Developments, the SEC staff continues to engage in a series of investigations, enforcement actions and/or examinations involving investment management industry participants, including investment advisors and investment management companies such as Federated ~~Hermes'~~Hermes’ investment ~~management~~advisory subsidiaries and the Federated Hermes Funds. It has been reported that the SEC's enforcement focus under the new administration could shift back to publicly-traded company matters (such as insider trading, issuer reporting, and accounting fraud), and to a more aggressive investor protection stance with a reinstitution of a "broken windows" enforcement philosophy under which enforcement actions are brought for minor violations. On October 13, 2021, the SEC's new Director of Enforcement announced that he intends to recommend aggressive use of available remedies in enforcement actions, including, among other tools, requiring admissions of wrongdoing in certain cases. On March ~~3, 2021,~~30, 2022, the ~~SEC Division of Enforcement (DOE)~~SEC’s DOE released its examination priorities for ~~2021, which include,~~2022, including, among other priorities: (1) private funds; (2) ESG investing; (3) retail investors; (4) cybersecurity; (5) fintech; and (6) digital assets. The DOE’s focus in the areas of investment advisors and investment companies remains largely on perennial issues such as marketing practices, advisory fee calculations, portfolio management, brokerage and execution, conflicts of interest, compliance with Regulation Best Interest and Form CRS, as well as investment advisor fiduciary duties; (2) information security and operational resilience; (3) financial technology innovation; (4) anti-money laundering programs; (5) the transition from the London Inter-Bank Offered Rate (LIBOR) to an alternate reference rate; (6) investment advisor and fund ESG disclosures and practices; (7) fund valuationprograms, service provider oversight, and other disclosures and fund governance practices; (8) the design, implementation and maintenance of investment advisor and fund compliance programs and fund liquidity risk management programs; and (9) money market fund compliance with stress-testing requirements. On March 4, 2021, the SEC announced the creation of a Climate Change and ESG Task Force in the SEC's DOE to develop initiatives to proactively identify ESG-related misconduct, with an initial focus on identifying any material gaps or misstatements in issuers' disclosure of climate risks under existing rules. The task force will also analyze disclosure and compliance issues relating to investment advisors' and funds' ESG strategies.related matters. In addition to routine examinations, additional sweep examinations addressing various topics have been conducted. For example, the SEC ~~examinations have included~~has been conducting sweep examinations ~~involving various topics. For example, as previously announced in June 2021,~~regarding ETF revenue sharing payments, ESG practices and disclosures, and approval of registered investment company advisory fees, among others. The SEC DOE is taking a more aggressive stance on enforcement and is signaling a return to a “broken windows” philosophy under which the SEC ~~conducted~~would likely seek to enforce every violation big and small. The SEC has begun to bring enforcement actions based on ESG disclosures not matching actual investment processes, and the SEC and CFTC have brought enforcement actions involving conducting business on personal devices without proper monitoring and recordkeeping. On September 27, 2022, the SEC entered into a ~~sweep exam regarding the cyberattack involving the compromise~~series of ~~software created~~settlement orders with 15 broker-dealers and one affiliated investment advisor for widespread failures by the ~~SolarWinds Corp. In addition~~firms to ~~its Pandemic-related actions~~preserve electronic communications. The firms were required to pay combined penalties exceeding $1.1 billion. One broker-dealer agreed to pay the SEC $125 million and ~~guidance,~~ the CFTC $75 million to resolve probes into employee communications on messaging platforms that had not been approved by the company. Another financial institution has reserved approximately $200 million for a regulatory matter connected to the unauthorized use of personal phones for employees’ work-related communications, such as text messages and emails, during the work-from-home period of the Pandemic. The SEC also has entered into nine settlement orders with investment advisors relating to failures to comply with requirements for safekeeping client assets and to timely update SEC required disclosures, (i.e., Form ADV), to reflect the status of audits of financial statements for private funds. The SEC staff has also issued various guidance statements, investor bulletins and risk alerts on a variety of compliance issues, including private funds and crypto asset interest-bearing accounts, among ~~others, fixed income principal~~others. On September 8, 2022, SEC Chair Gensler stated in a speech to the Practicing Law Institute that he believes that “the vast majority [of crypto tokens] are securities.” He noted that it is important that investors receive disclosure on these tokens so they can make sound investment decisions and ~~cross trades, managing client assets in wrap programs, ESG investing~~be protected against “fraud and ~~product offerings, anti-money laundering, suspicious activity monitoring~~manipulation,” and, ~~reporting, digital assets,~~

~~Table~~therefore, he has asked the SEC staff to work with entrepreneurs to have their tokens registered and regulated as securities, where appropriate. He also stated that, depending on their attributes, the mechanisms used to maintain value or how they are offered, sold, or used, stablecoins may be considered shares of ~~Contents~~



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

~~securities issued by special purpose acquisition companies (or SPACs), the Executive Order on Securities Investments~~a money market fund or another kind of security that ~~Finance Communist Chinese Military Companies, cyber-security, large trader obligations, investment advisor compliance~~would need to be registered and ~~the transition from LIBOR.~~provide investor protections.

These investigations, examinations and actions have led, and can lead, to further regulation, guidance statements and scrutiny of the investment management industry. The degree to which regulatory investigations, actions and examinations will continue, as well as their frequency and scope, can vary and is uncertain.

Regulation or potential regulation by regulators other than the SEC and DOL also continued, and can continue, to affect investment management industry participants, including Federated Hermes. For example, on ~~October 8, 2021, the Financial Industry Regulatory Authority (FINRA) issued~~May 24, 2022, FINRA adopted amendments to Rule 6730 (Transaction Reporting) to require members to append a ~~regulatory notice encouraging FINRA member firms~~modifier to ~~incorporate government-wide anti-money laundering~~a corporate bond trade that is part of a portfolio trade when reporting to FINRA’s Trade Reporting and ~~countering financing of terrorism priorities into their anti-money laundering programs. On August 13, 2021, FINRA issued a regulatory notice reminding firms of their supervisory obligations related~~Compliance Engine (TRACE). The amendments to ~~outsourcing to third party vendors.~~Rule 6730 will take effect on May 15, 2023. On June ~~23, 2021,~~17, 2022, FINRA ~~issued~~solicited comments on a ~~regulatory~~proposal to establish a new trade reporting requirement for transactions in over-the-counter options on securities with terms that are identical or substantially similar to listed options. Changes to reporting requirements for over-the-counter equity securities will take effect on November 14, 2022. These FINRA actions follow its March 8, 2022 publication of its Regulatory Notice 22-08 regarding complex products and options in which FINRA expressed concerns about retail investors trading these products without understanding their characteristics and risks. On May 9, 2022, Federated Hermes submitted comments to FINRA regarding Regulatory Notice 22-08 in which Federated Hermes generally supported the ICI’s comments to FINRA on the notice ~~reminding firms of~~and asserted, among other comments, that: (1) “complex products” should be defined narrowly as not to cover mutual funds, ETFs, tender offer funds, and closed-end funds with traditional investment strategies; and (2) investment companies, including mutual funds, ETFs, tender offer funds, and closed-end funds, are already sufficiently regulated under the ~~requirements concerning best execution~~1940 Act and payment for order flow. On March 4, 2021, FINRA issued a regulatory notice regarding common sales charge discounts and waivers for mutual funds. FINRA has also undertaken, and continues to undertake, examinations. FINRA continues to review firms' systems and procedures for providing customer waivers and rebates available through rights of reinstatement on mutual fund purchases. Other FINRA examinations have included, among others, options trading, bank sweep programs, zero commission and cyber-security sweep examinations.SEC regulation, such as Regulation Best Interest. In ~~a 2021~~its 2022 Report on its Examination and Risk Monitoring Program, published on February 9, 2022, FINRA identified, among other areas of concern, ~~anti-money laundering, outside business activities, private securities transactions,~~ Regulation Best Interest and Form CRS, ~~compliance, misrepresentation relating to cash management accounts and digital assets,~~the Consolidated

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Management's Discussion and Analysis (continued)
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Audit Trail, order handling, best execution, and ~~liquidity risk management controls as areas~~conflicts of ~~focus~~interest, mobile apps, SPACs, cybersecurity, complex products, anti-money-laundering, outside business activities, net capital, books and ~~potential examination.~~records, firm short positions and fails-to-receive in municipal securities, trusted contact persons, funding portals and crowdfunding offerings, disclosure of order routing information, portfolio margining, and intraday trading. In addition to federal regulation, various state legislatures or regulators also have adopted or are beginning to adopt state-specific cyber-security and/or privacy requirements that can apply to varying degrees to investment management industry participants, including Federated Hermes.

The activities of the FSOC also continue to be monitored by the investment management industry, including Federated Hermes. In December 2019, FSOC changed its systemically important designation approach for non-bank financial companies from an entity-based approach to an activities-based approach under which an individual firm would only be so designated if it were determined that efforts to address the financial stability risks of that firm's activities by its primary federal and state regulators have been insufficient. Since then, FSOC has been required first to focus on regulating activities that pose systemic risk through actions by primary regulators.The FSOC has focused on potential risks in the asset management industry, including money market funds, and other types of cash management vehicles (such as local government investment pools), that continue to use amortized cost or have a stable NAV but are not subject to the 2014 Money Fund Rules and Guidance. As discussed above, the market volatility and liquidity stress onthat money market funds experienced as a result of the Pandemic beginning in March 2020 has drawn the attention of U.S. and global regulators, including the FSOC. Certain policy advocates ~~are beginning to call~~have called for the FSOC to reverse its 2019 decision to change its approach to designating individual firms as ~~outlined above~~systemically important (from its current activities-based approach, under which an individual firm would be designated only if it were determined that efforts to address the financial stability risks of that firm’s activities by its primary federal and state regulators have been insufficient, to the FSOC’s prior entity-based approach) in order to better fulfill its statutory mandate to mitigate risks to financial stability. Any possibility of the FSOC reverting to its ~~pre-December 2019~~prior systemically important designation practices and recommending new or heightened regulation for ~~non-bank~~nonbank financial ~~companies,~~institutions, which the ~~Fed's Board of~~ Governors ~~(Governors)~~ have indicated can include open-end investment companies, such as money market funds and other mutual funds, increases the potential for further regulation of the investment management industry, including Federated Hermes and the Federated Hermes Funds.

As On February 4, 2022, the FSOC issued a ~~candidate,~~Statement on Nonbank Financial Intermediation in which the ~~current President stated~~FSOC recounted that, ~~he is open~~in 2021, it had made it a priority to: (1) evaluate and address the risks to U.S. financial stability posed by hedge funds, open-end funds and money market funds; (2) indicated that at its February 4, 2022, meeting it had received updates on these three types of nonbank financial institutions; and (3) announce that it will continue in 2022 to evaluate, monitor, and address the risks that these institutions pose to financial stability. According to the ~~idea~~summary of the most recent FSOC meeting on April 8, 2022, FSOC also is shifting its focus to asset valuations, nonfinancial and financial leverage, and funding risk in the commodities and derivatives markets, and on the development of the digital asset markets.

While a U.S. financial transactions tax (FTT) ~~on securities transactions,~~, an ~~idea proposed by certain former Democratic candidates, including the current Vice President. Prior federal legislative attempts~~increase to ~~enact an FTT would have imposed~~ a ~~0.1%~~28% corporate income tax, and a wealth tax on ~~stock, bond and derivative transactions, which would have applied~~unrealized investment income on individuals with net wealth over $100 million continue to ~~sales made in the U.S. or by U.S. persons, while initial securities issuances and short-term debt would~~be discussed to varying degrees, as of September 30, 2022, none of these proposed tax changes have been exempt. A later proposal would have taxed stock trades at 0.5%, bond trades at 0.1%, and derivatives transactions at 0.005% coupled with an income tax credit for individuals with income of less than $50,000 ($75,000 for married couples), which was intended to offset the burdenenacted. As part of the Inflation Reduction Act of 2022, however, among other tax reforms, a 15 percent minimum tax on corporate book income for ~~such individuals.~~corporations with average annual adjusted financial statement income that exceeds $1 billion for any three consecutive prior tax years and a one percent tax on corporate share repurchases have been enacted. These taxes will apply beginning in 2023. The ~~Wall Street Tax Act,~~law also includes a large expansion and modernization effort for the Internal Revenue Service (IRS).

International

UK regulators are continuing with the process of rationalizing the EU legislation and regulatory requirements that were quickly “on-shored” upon Brexit taking effect. On September 22, 2022, the UK government introduced in the ~~House~~UK Parliament the previously announced Retained EU Law (Revocation and Reform) Bill (i.e., the Brexit Freedoms Bill), among other legislation, to implement a renewed regulatory framework in the UK. Among other things, under the Brexit Freedoms Bill, all EU legislation will be amended, repealed or replaced, which will end the special status of ~~Representatives on January 15, 2021 together~~all retained EU law and re-categorize all remaining retained EU law as “assimilated law” by December 31, 2023, and enable the UK government to create regulations to fit the UK’s needs, cut administrative obstacles to support business investment and stimulate the UK economy. The December 31, 2023, deadline may be extended until June 23, 2026. The Brexit Freedoms Bill applies to all EU law, including the area of financial services, with ~~its companion Senate bill introduced on March 18, 2021,~~certain exceptions that exclude certain legislation identified in the 2022-23 Financial Services and Markets Bill and certain amendments to revoked instruments from the revocation deadline. The revocation deadline also will not apply to any rules of the Prudential Regulation Authority (PRA), Financial Conduct Authority (FCA) or Bank of England (BoE) or to any Payment Systems Regulator that are generally applicable requirements or directions of general application. The Brexit Freedoms Bill will ensure that it is no longer possible for EU case law to override UK legislation, subject to a relevant national authority’s right to reinstate certain rights, powers, or obligations, including to apply interpretative principles to produce an effect that is equivalent to the effects of EU interpretive principles. The Brexit Freedoms Bill also grants relevant national authorities the power until June 23, 2026 to specify that certain UK laws are to be read in a way which is “compatible” with retained EU law and subject to retained EU law to the extent “incompatible.” Absent any use of the power to require compatibility with retained EU legislation, the Brexit Freedoms Bill would impose ~~if enacted,~~ a ~~0.1% tax on stock, bond and derivatives transactions and reportedly would raise an estimated $777 billion over a decade.~~new priority rule under which standard UK legislation will trump retained EU legislation. The Tax on Wall Street Speculation Act, introduced in the Senate and House of Representatives on April 21, 2021, would impose an FTT of 0.5% on stock trades, 0.1% on bond trades, and 0.005% on derivative transactions. These proposals are being introduced for a variety of reasons, including to fund infrastructure programs and college education programs or in an attempt to reduce speculation on Wall Street. While Congressional hearings have taken place during which the FTT proposals have been discussed, none of the bills introduced to date have progressed in Congress. The President has proposed a 15% minimum corporate tax rate and the President has proposed (and the House Ways and Means Committee has approved a reconciliation tax bill) raising the corporate income tax rate to 26.5%. The President hasBrexit Freedoms Bill also ~~proposed a "wealth tax" on the~~will end free movement

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Management's Discussion and Analysis (continued)
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investment income of Americans with at least $1 billion in assets, which reportedly is supported by certain Senators who initially opposed the President's budget proposals. While these tax increases, among others, are being proposed to fund a $1 trillion infrastructure plan and a roughly $1.75 trillion to $2 trillion budget proposal, the President has not proposed a specific FTT for broad application. Legislation also has been introduced in various states, such as New York, New Jersey and Illinois, that, if enacted, would have imposed FTTs on various types of securities, commodities or other financial transactions. In March 2021, a bill was re-introduced into the U.S. House of Representatives that would prohibit states from imposing FTTs on security industry participants. As of September 30, 2021, that bill has not progressed in Congress. Management believes that an FTT, particularly if enacted with broad application, would be detrimental to investors and Federated Hermes' business and could adversely affect, potentially in a material way, Federated Hermes' business, results of operations, financial condition and/or cash flows.

The regulatory environment has impacted, and will continue to impact, to various degrees, Federated Hermes' business, results of operations, financial condition and/or cash flows. For example, Regulatory Developments can result in shifts in product structures, as well as changes in asset flows and mix and customer relationships. It remains uncertain whether, and to what degree, investment advisors, broker/dealers or other intermediaries will roll-back, modify or continue changes made in response to the original, vacated DOL fiduciary rule, the New DOL Fiduciary Rule, any changes to the New DOL Fiduciary Rule proposed by the DOL and other Regulatory Developments. If intermediaries continue to reduce the number of Federated Hermes Funds offered on their platforms, mutual fund-related sales and distribution fees earned by Federated Hermes can decrease. In that case, similar to other investment management industry participants, Federated Hermes could experience a further shift in asset mix and AUM, and a further impact on revenues and operating income. On the other hand, management continues to believe that Federated Hermes' business can be positively affected because separately managed account/wrap-fee strategies work well in level wrap-fee account structures and can provide transparency and potential tax advantages to clients, while Federated Hermes' experience with bank trust departments and fiduciary experience and resources presents an opportunity to add value for customers.

Federated Hermes has dedicated, and continues to dedicate, significant and additional internal and external resources to monitor, analyze and address regulatory responses to the impact from the Pandemic and Regulatory Developments generally, and their effect on Federated Hermes' business, results of operations, financial condition and/or cash flows. Additional internal and external resources have been, and will continue to be, devoted to technology, legal, compliance, operations and other efforts to address regulatory-related matters. These efforts included, and will continue to include, having conversations internally, and with intermediaries, customers, service providers, counsel and other advisors regarding Regulatory Developments, and analyzing and/or affecting legislative, regulatory, product offering, development and structure adjustments, technology or information system development, reporting capabilities, business processes and other options, in an effort to comply, and/or to assist Federated Hermes' intermediaries and customers to comply, with new Regulatory Developments or minimize the potential impact of any adverse consequences stemming therefrom. As appropriate, Federated Hermes also participated, and will continue to participate, either individually or with industry groups, in the comment process for proposed regulations. Federated Hermes continues to expend legal and compliance resources to examine corporate governance, public company and other disclosure proposals and final rules issued by the SEC, to adopt, revise and/or implement policies and procedures, and to respond to examinations, inquiries and other matters involving its regulators, including the SEC, customers or other third parties. Federated Hermes also has devoted, and will continue to devote, resources to technology and system investment, business continuity, cybersecurity and information governance, and the development of other investment management and compliance tools, to enable Federated Hermes to, among other benefits, be in a better position to address Regulatory Developments. In connection with the Pandemic, Federated Hermes has devoted internal and external resources to complying with the requirements of federal and state orders imposing work- and travel-related restrictions, and the requirements under the CDC's and state and local health departments' guidance, as well as enhanced disinfection and contamination procedures.

Federated Hermes is unable to fully assess at this time whether, or the degree to which, any continuing efforts or potential options being evaluated in connection with modified or new Regulatory Developments ultimately will be successful. The degree of impact of Regulatory Developments on Federated Hermes' business, results of operations, financial condition and/or cash flows can vary, including in a material way, and is uncertain.

Management also continues to monitor and assess the potential impact of the Pandemic generally, and the impact of the low interest rate environment on money market fund and other fund asset flows, and related asset mixes, as well as the degree to which these factors impact Federated Hermes' prime and municipal (or tax-exempt) money market business and Federated Hermes' business, results of operations, financial condition and/or cash flows generally. Management also continues to monitor, and expend resources in connection with, the potential for additional regulatory scrutiny of money market funds, including prime and municipal (or tax-exempt) money market funds.

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

The Regulatory Developments discussed above, and related regulatory oversight, also impacted, and/or can impact, Federated Hermes' intermediaries, other customers and service providers, their preferences and their businesses. For example, these developments have caused, and/or can cause, certain product line-up, structure, pricing and product development changes, as well as money market, equity, fixed-income, alternative/private markets or multi-asset fund products to be less attractive to institutional and other investors, reductions in the number of Federated Hermes Funds offered by intermediaries, changes in the fees Federated Hermes, retirement plan advisors and intermediaries will be able to earn on investment products and services sold to retirement plan clients, changes in work arrangements and facility-related expenses, and reductions in AUM, revenues and operating profits. In addition, these developments have caused, and/or can cause, changes in asset flows, levels and mix, as well as customer and service provider relationships.

Federated Hermes will continue to monitor regulatory actions in response to the Pandemic and other Regulatory Developments as necessary and can implement additional changes to its business and practices as it deems necessary or appropriate. Further analysis and planning, or additional refinements to Federated Hermes' product line and business practices, can be required in response to market conditions, customer preferences or new or modified Regulatory Developments, such as the new investment advisor advertising, valuation, derivatives, and fund of funds rules, any proposed changes to the Final DOL Fiduciary Rule, the New DOL Proposed ESG/Proxy Voting Rule and other Regulatory Developments, or any additional regulation or guidance issued by the SEC, DOL or other regulatory authorities.

In addition to the impact on Federated Hermes' AUM, revenues, operating income and other aspects of Federated Hermes' business described above, Federated Hermes' regulatory, product development and restructuring, and other efforts in response to the Regulatory Developments discussed above, including the internal and external resources dedicated to such efforts, have had, and can continue to have, on a cumulative basis, a material impact on Federated Hermes' expenses and, in turn, financial performance.

As of September 30, 2021, given the regulatory environment, the Pandemic and the possibility of future additional modified or delayed regulation or oversight, Federated Hermes is unable to fully assess the impact of regulatory actions in response to the Pandemic or other adopted or proposed regulations, and other Regulatory Developments, and Federated Hermes' efforts related thereto, on its business, results of operations, financial condition and/or cash flows. Modified or new Regulatory Developments in the current regulatory environment, and Federated Hermes' efforts in responding to them, could have a material and adverse effect on Federated Hermes' business, results of operations, financial condition and/or cash flows. As of September 30, 2021, management also believes that any designation as a systemically important non-bank financial company, or any reforms ultimately put into effect by FSOC, would be detrimental to Federated Hermes' money market fund business and could materially and adversely affect Federated Hermes' business, results of operations, financial condition and/or cash flows.

~~International~~

Similar to the U.S., in 2020, the outbreak of the Pandemic shifted the regulatory environment in the UK and European Union (EU) toward the adoption of measures intended to provide regulatory flexibility and market stabilization. While the full impact of the Pandemic remains unclear through the third quarter of 2021, regulators in the UK and EU are continuing to allow certain regulatory relief granted in 2020 to expire, while extending other relief, and to advance new and proposed consultations, directives, regulations and laws while generally remaining in a remote working environment. These Regulatory Developments continue to impact the investment management industry in the UK and EU.

~~In the UK, the transition period under the European Union Withdrawal Agreement Bill (Withdrawal Agreement Bill), which implemented the withdrawal agreement reached~~ between the UK and other European nations, The Brexit Freedoms Bill will maintain all of the ~~other 27~~UK’s international commitments and build on the UK government’s progress post-Brexit, which include, among others, restoring democratic control over law making within the UK Parliament, restoring the UK Supreme Court as the final arbiter of the law that applies to the UK, striking new trade agreements with over 70 countries, and certain value-added-tax reforms. The Brexit Freedoms Bill also prescribes a new test to be applied by higher courts when considering whether to depart from retained EU ~~Member States~~case law or whether to depart from retained UK case law, establishes a new reference procedure enabling a lower court which is bound by retained case law to refer a point of law to a higher court (which is not so bound) to decide, and ~~set out~~establishes a new procedure for a law officer of the ~~arrangements for~~UK government or the ~~UK's withdrawal from~~devolved administrations to refer a point of retained case law to a relevant higher court and certain rights of intervention.

On July 22, 2022, the 2022-23 Financial Services and Markets Bill (FSM Bill) also was introduced in the UK Parliament. The FSM Bill would revoke retained EU ~~(Brexit)~~law relating to financial services and empower His Majesty’s Treasury (HM Treasury), ~~ended on December 31, 2020. On December 30, 2020,~~relevant national authorities (i.e., financial service regulators), and the ~~EU–UK Trade and Cooperation Agreement (TCA) became effective.~~BoE to modify or replace existing retained EU laws or to prepare new transitional amendments to bring about a new UK-specific regulatory regime. Among other things, the ~~TCA provides for free trade for goods and limited mutual market access for services, creates certain border checkpoints, imposes visa requirements on UK nationals staying more than 90 days in~~FSM Bill is intended to: (1) implement the ~~EU in a 180-day period, removes any role for the European Court~~outcomes of Justice in the UK, and eliminates the requirement for the UK to comply with EU data protection directives. The TCA also provides for cooperation between the UK and EU regarding a range of policy areas and UK participation in certain EU programs.

Political, economic, legal and regulatory uncertainty continues regarding the impact of Brexit on a post-Brexit UK. See Item 1A - Risk Factors under the captions General Risk Factors - Economic and Market Risks - Potential Adverse Effects of a Decline or Disruption in the Economy or Markets and General Risk Factors - Regulatory and Legal Risks - Potential Adverse Effects of Changes in Laws, Regulations and Other Rules in Federated Hermes' Form 10-K for the year ended December 31, 2020 for further discussion of the risks of political instability, currency abandonment and other market disruptions on Federated Hermes and its business. Brexit has affected, and will likely continue to affect, the requirements and/or timing of implementation of

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

legislation and regulations applicable to doing business in the EU and UK, including the laws and regulations applicable to Federated Hermes, as well as to the sponsoring, management, operation and distribution of Federated Hermes' products and services, both within and outside the EU and UK. On October 1, 2020, the European Securities and Markets Authority (ESMA) issued an updated statement on the consequences of Brexit under the Benchmark Regulation, which indicates that EU-supervised entities can continue to use third-country UK benchmarks until December 31, 2021 and that this transition period is also recognized in the UK. On September 20, 2021, the UK House of Commons Treasury Committee published the UK Government's response (Response) to its report on the Future Regulatory Framework (FRF) Review, which included consultations that concluded on February 9, 2022, (2) maintain the UK’s position as an open and global financial hub, (3) harness the opportunities of ~~Financial Services, which was published on June 30, 2021. Among other key points, the Response expresses support for incorporating into UK law EU~~innovative technologies in financial services, ~~rules that were "on-shored" into~~and (4) bolster the competitiveness of UK markets and promote the effective use of capital.

On February 21, 2022, the UK government published regulations that made the overseas funds regime (OFR) effective as of February 23, 2022. The OFR is targeted at Undertakings for the Collective Investment in Transferable Securities (UCITS) and is a ~~result of Brexit, and indicates that~~long-term replacement to the ~~UK Government will be setting forth more detailed proposals in the fall of 2021,~~

While the TCA addresses the financial services industry, it does so on a limited basis and does not provide for passporting rights nor address equivalence decisions. Passporting ended at the expiration of the Brexit transition period and firms now must rely on temporary permission regimes and comply with the local laws of each country. The UK Financial Conduct Authority (FCA) has implemented a temporary permissions regime ~~that allows European Economic Area (EEA)-domiciled investment~~which enabled Federated Hermes’ Irish UCITS funds ~~that were marketed in the UK under a passport~~ to continue ~~temporarily~~ to be marketed in the UK after December 31, 2020. Federated Hermes has received permission from the FCA to allow certain Irish-domiciled UCITS funds and ~~allows EEA-based firms that passported into the UK~~Luxembourg-based direct lending funds to continue ~~new and existing regulated business within the scope of their permissions~~to be marketed in the UK ~~for up to five years, while they seek full FCA authorization. On March 4, 2021,~~under the temporary permissions regime. HM Treasury is working with the FCA ~~provided further guidance on the UK temporary permissions regime by advising firms of the opening~~to undertake equivalence assessments for different countries and ~~closing dates during which firms must either apply for full permission or cancel their temporary permission and then cease any regulated financial conduct~~different fund types in ~~the UK. The UK also has created a financial services contracts regime~~order to identify those that ~~allows, for a limited time, EEA-based firms not taking~~can take advantage of the ~~temporary permissions regime in the UK to continue to service UK customers under contracts entered into prior to the end~~OFR. An assessment of the ~~transition period~~European Economic Area’s (EEA) assessment commenced in order for them to conduct an orderly exit from the UK. In addition to the UK, EU governments, such as, among others, France, the Netherlands, Italy and Germany, also have adopted similar temporary permission regimes or other laws to permit UK products to be sold, and EU-UK financial transactions to continue, for a period of time in their countries. Pursuant to amendments implemented by the Withdraw of the United Kingdom from the European Union (Consequential Provisions) Bill 2020, a firm that is authorized in the UK and/or Gibraltar, which has previously passported into Ireland, will be deemed to be authorized for specific and limited purposes in Ireland for a 15 year period following the end of the transition period, subject to the fulfillment of certain conditions.

October 2022. The FCA ~~ESMA~~is continuing to consider the requirements that will apply under the OFR and ~~EU regulators previously signed memoranda~~whether those funds will need to put in place some form of understandings (MoUs) covering cooperation and exchange of information that came into effect at the end of the transition period (i.e., on December 31, 2020) and provide for some level of regulatory coordination until a new regime is agreed and in place. In a joint declaration dated December 24, 2020, the EU and UK committed to agreeing to a framework for regulatory cooperation and mutual equivalence which would be set forth in a subsequent MoU by March 2021. On March 26, 2021, Her Majesty's Treasury (HM Treasury) announced that technical discussions had concluded, and that the UK and the EU agreed to a MoU that creates a framework for voluntary regulatory cooperation in financial services and establishes a Joint UK-EU Financial Regulatory Forum, which will serve as a platform to facilitate dialogue on financial services matters. The MoU, however, does not reflect progress on equivalency determinations. In addition to a few other equivalency decisions, such as two time-limited equivalency decisions in connection with the UK relating to central counterparty clearing and settlement of Irish securities, on June 26, 2021, the European Commission issued two adequacy decisions recognizing the level of protection of the UK's data protection laws as "essentially equivalent" with EU laws. These adequacy decisions allow EU to UK data flow to continue after Brexit. In September 2021, as part of a broader announcement on the future of the UK's data protection regime, the UK Government announced plans to work on granting adequacy decisions regarding the data protection laws of other countries, including the U.S., Australia, Singapore and others. HM Treasury has granted over 25 equivalency decisions to the EU, in addition to those granted to 32 other jurisdictions. UK regulators also are continuing with an "onshoring" process of amending EU legislation and regulatory requirements so that they work in the UK. In October 2020, the FCA, the Bank of England (BoE) and other UK regulators granted firms until March 31, 2022 to comply with certain of these regulatory changes including, among others, certain reporting obligations and market abuse requirements.value assessment process.

~~Despite these developments, there~~There remains a risk of regulatory divergence between the UK and the ~~EU. On July 1, 2021, Rishi Sunak,~~EU post-Brexit. For example, the UK Chancellor of the Exchequer, called an end to negotiations with the EU on regulatory equivalence (or common regulations) with EU financial services regulation. This decision means that the UK is electinghas elected to have its own financial rules. EU investment firms in EU Member States ~~were~~are required to comply with the Investment Firms Directive (IFD) and Investment Firms Regulation (IFR) ~~by June 26, 2021, the effective date of~~; however, the IFD and IFR in the EU. On March 5, 2021, the European Banking Authority (EBA) published draft standards on supervisory reporting and disclosures for investment firms as defined in the IFR, which are intended to ensure a proportionate implementation of the new prudential framework for investment firms

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

taking into account their different activities, sizes and complexity. On May 31, 2021, the EBA, together with ESMA, published a provisional list of instruments and funds that EU national competent authorities (NCAs) may use as own-funds for small investment firms. The IFD and IFR, however, do not bind the UK, and a new UK prudential regime for Markets in Financial Instruments (MiFID) firms titled Investment Firms Prudential Regime (IFPR) ~~was~~is included in the Financial Services Bill 2019-2021, which was based on the IFD and IFR. On December 14, 2020, the FCA issued "Consultation Paper 20/24: A new UK prudential regime for MiFID investment firms," in which the FCA solicited comment on its proposed rules on the IFPR. The consultation period closed on February 5, 2021. On April 19, 2021, the FCA issued "Consultation Paper 21/7: A new UK prudential regime for MiFID investment firms" in which the FCA solicited comment on its second set of proposed rules on IFPR. The consultation period closed on May 28, 2021. On April 29, 2021, the Financial Services Bill 2019-2021 received Royal Assent and became UK law as theUK’s Financial Services Act 2021. ~~Among other things, this Act introduces the~~The IFPR, aswhich became effective on January 1, 2022, introduced a ~~new UK~~single prudential regime, and represents a significant change for FCA-authorized investment firms ~~amends~~in the ~~UK's on-shored Packaged Retail and Insurance-based Investment Products Regulation (PRIIPs) to provide~~UK that are authorized under MiFID, including alternative investment fund managers with MiFID top-up permissions. On March 4, 2022, the FCA ~~with additional powers~~released a Consultation Paper setting out proposed amendments to ~~clarify~~ the ~~scope of the regulations and amend the requirements within the PRIIPs Key Information Document (KID), increases the power~~Prudential sourcebook for MiFID investment firms (MIFIDPRU) section of the FCA Handbook. The proposed amendments provide for a MIFIDPRU TP 7, which is the form that firms must use to ~~ensure a smooth transition away from LIBOR, simplifies the process enabling non-UK investment~~count their existing instruments as own funds if they were not previously subject to ~~be marketed in~~ the UK ~~and requires~~Capital Requirements Regulation (CRR). The FCA-proposed amendments provided more flexibility for firms to come into compliance by June 29, 2022. In its Quarterly Consultation Paper No. 36, issued on October 6, 2022, the FCA proposed updates to ~~consult on whether it should make general rules providing that authorized persons owe a duty of care~~its IFPR reporting forms and accompanying guidance for MiFID firms to ~~consumers. On June 29, 2021,~~assist firms in completing the ~~FCA issued its first of three policy statements based on its first consultation on~~forms, fully conform the IFPR that sets forth "near final" rules on consolidation, own-fund requirements, and concentration risk, which will apply to UK-authorized MiFID firms. On July 26, 2021, the FCA issued its second policy statement, which sets forth industry feedbackforms to the ~~first policy statement,~~FCA’s systems, and additional "near-final" rules to supplement and amplify those rules that were set forth in the first policy statement. On August 6, 2021, the FCA published its third and final consultation on the IFPR with additional disclosure requirements and other technical changes.make certain corrections. The consultation period ~~closed~~for this Quarterly Consultation ended on ~~September 17, 2021. UK regulators are targeting an implementation date for the IFPR of January 1,~~July 18, 2022.

As another example, EU regulators have previously issued or proposed directives, rules, and laws regarding sustainable finance, including the Sustainability-Related Disclosures Regulation or Sustainable Finance Disclosure Regulation (SFDR) and the Taxonomy Regulation. The Taxonomy Regulation establishes a framework to facilitate sustainable investment, including when Member States establish measures (e.g., labels or standards), setting requirements regarding financial products or corporate bonds presented as ~~"environmentally~~“environmentally sustainable.~~" On November 5, 2020, ESMA published a consultation setting out draft advice~~” Pursuant to the Sustainable Finance Package issued by the European Commission, ~~on Article 8 of the Taxonomy Regulation specifying the content, methodology and presentation of the key performance indicators for sustainable activities~~firms had a 12-month period that ~~non-financial undertakings and asset managers are required~~ended in October 2022 to disclose. The consultation period ended on December 4, 2020. On February 4, 2021, the European Supervisory Authorities (ESAs) published a final report containing draft regulatory technical standards on the content, methodologies and presentation of sustainability-related disclosures (the proposed "Level 2" requirements). On March 17, 2021, the ESAs published a consultation package setting out the proposed standards on content and presentation for disclosures under the SFDR. The consultation period ended on May 12, 2021. On April 21, 2021, the European Commission issued a Sustainable Finance Package that contains: (1) an EU Taxonomy Climate Delegated Act, which aims to support sustainable investment by clarifying which economic activities most contribute to meet the EU's environmental objectives; (2) a proposal for a Corporate Sustainability Reporting Directive (CSRD) and revisions to the Non-Financial Reporting Directive, which aim to makeimplement certain sustainability reporting by companies more consistent, so that financial firms, investors, and the broader public can use comparable and reliable sustainability information; and (3) amendments to delegated acts to better reflect sustainability preferences in insurancerequirements and investment advice and sustainability considerations in connection with product governance and fiduciary duties. The amendments are subject to scrutiny by the European Parliament and the Council of the EU for a period of three months, which can be extended once by three additional months, and provide for a 12-month implementation period that is expected to end in October 2022.

~~On May 7,~~Following its 2021 the European Commission published a draft delegated act setting out definitive standards for the disclosure of information on environmental sustainability that certain large companies must make, as required under the Taxonomy Regulation. On June 8, 2021, ESMA published a "Trends,“Trends, Risks and Vulnerabilities (TRV) ~~Report" in which it assesses EU investment funds' exposure to climate-sensitive economic sectors and identifies certain key risks. On July 6, 2021,~~Report,” on February 15, 2022, the European ~~Commission adopted~~Securities and Markets Authority (ESMA) published a ~~delegated regulation that supplements certain disclosure requirements under~~revised TRV which, for the ~~Taxonomy Regulation which specify the content, methodology and presentation~~first time, designated environmental risk as a distinct category of information that certain large financial and non-financial entities must disclose concerning their environmentally-sustainable economic activities. By letter dated July 23, 2021, addressed to the ESAs,risk. On March 24, 2022, the European Commission stated that, due to the length and technical detail of the Level 2 technical standards, their late submissions to the European Commission, and forthcoming amendments to the draft Level 2 technical standards by the European Commission, the European Commission will bundle all of the regulatory technical standards inSupervisory Authorities (ESAs) issued a single delegated act and defer the date of application from January 1, 2022 to July 1, 2022. On July 26, 2021, the European Commission published updated Questions and Answers concerning a number of questions raised by the ESAs regardingrevised joint supervisory statement on the application of the SFDR, which includes a new timeline for compliance, expectations about the explicit quantification of the product disclosures under Article 5 and 6 of the Taxonomy Regulation, and the use of estimates. The ESAs recommended that national competent authorities (NCAs) and market participants utilize the period to January 1, 2023 to prepare for the

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

~~including the~~ application of the European Commission’s delegated regulation, which will contain SFDR ~~to AIFMs and AIFs.~~Level 2 regulatory technical standards (RTS). On ~~August 2, 2021,~~April 6, 2022, the European Commission adopted the final RTS supplementing the SFDR, specifying the mandatory website, pre-contractual, and periodic reporting templates for financial market participants and in-scope financial products. On May 31, 2022, ESMA published ~~additional~~a Supervisory Briefing covering disclosures under SFDR and integration of sustainability risks for alternative investment fund managers (AIFMs) and UCITS. On May 25, 2022, the European Commission released a new Questions and Answers document providing its responses to questions raised by the ESAs in relation to the interpretation of the SFDR and the EU Taxonomy Regulation. On June 2, 2022, the ESAs published further clarification on the draft RTS for the SFDR. The ESAs statements include a clarification that the reference to “sustainability indicators” relates to a different set of disclosures from the reference to “principal adverse impact” indicators, and clarifications regarding the principal adverse impact indicator calculation methodology and the “look through” approach regarding when indirect investments ought to be included in the calculation. The final RTS were published in the Official Journal of the EU on July 25, 2022 and will apply beginning on January 1, 2023. On July 28, 2022, the ESAs published a report on the extent of voluntary disclosure of principal adverse impact under the SFDR. The report’s findings are that: (1) voluntary compliance varies significantly across jurisdictions and financial market participants under the scope of SFDR, and it is difficult to identify definite trends; (2) to the extent that voluntary disclosures were made, they lack sufficient detail; and (3) there is an overall low level of disclosure of the degree of alignment with the objective of the international treaty on climate referred to as the “Paris Agreement.”

Various delegated Directives and Regulations to the Alternative Investment Fund Managers Directive (“AIFMD”), UCITS and MIFID regulations arising from SFDR also began to apply beginning in August 2022. For AIFMs, beginning on August 1, 2022, a Delegated Regulation on sustainability risks and factors requires AIFMs to: (1) take into account sustainability risks (and principal adverse impacts, if they consider them) in the investment due diligence process and sustainability risks in their risk management policy; (2) update conflicts of interest policies for conflicts that may arise from the integration of sustainability risks; and (3) take into account sustainability risks in overall organizational requirements, including responsibilities of their governing body. For MiFID firms, beginning on August 2, 2022, a ~~directive~~new MiFID Delegated Regulation on integration of sustainability factors and preferences into firms’ organizational requirements and operating conditions requires MiFID firms to: (1) take into account a client’s sustainability preferences as part of ~~its sustainable finance initiatives regarding~~a suitability check where a MiFID firm provides investment advice or portfolio management to a client; and (2) take into account sustainability risks in overall organizational requirements, in risk management policies and in conflicts of interest policies (where a conflict may affect the sustainability factors to be taken into account by AIFs, UCITS and investment firms, among other regulated entities. On August 3, 2021, the Platform on Sustainable Finance: Technical Working Group published a draft report on preliminary recommendations for technical screening criteria for the Taxonomy Regulation. Comments on the report were due by September 24, 2021, with a final report expected in November 2021. On October 7, 2021, the European Parliament issued a press release announcing the rejectionpreferences of a supplement to the Taxonomy Regulation that would have specified the technical screening criteria under which certain economic activities qualify as contributing substantially to climate change mitigation and climate change adaptation and for determining whether those activities cause significant harm to any other relevant environmental objectives.client).

Rather than adopt the SFDR, the UK ~~announced on November 9, 2020 that it will introduce ESG disclosure rules aligning~~decided to align with the ~~TCFD, making the UK the first country to adopt that approach.~~Task Force on Climate-Related Financial Disclosure (TCFD). On December 22, 2020, the Financial Stability Board (FSB) issued a statement encouraging the International Financial Reporting Standards Foundation and financial authorities to use the TCFD's recommendations as the basis for standards for climate-related financial disclosures. In a consultation launched on March 24, 2021, the UK government solicited views on proposals to require that UK companies with more than 500 employees that are traded on a UK-regulated market disclose TCFD-aligned climate-related information. The consultation stated that new regulations would come into force on April 6, 2022. It also has been reported that an ESG Template for funds to explain their ESG features is expected to be proposed in 2021, to supplement the MiFID Template, which is being revised to include ESG fields. On June 22,November 3, 2021, the FCA published ~~"Consultation~~a Discussion Paper, ~~21/17: Enhancing climate-related disclosures by asset managers, life insurers~~“Sustainability Disclosure Requirements (SDR) and ~~FCA-regulation pension providers"~~investment labels” in which the FCA ~~proposes to introduce TCFD-aligned~~sought views on new sustainability disclosure requirements for asset managers ~~life insurers~~ and FCA-regulated ~~pension providers, with~~asset owners, as well as a ~~focus on the information needs of clients~~new classification and ~~consumers. The FCA also proposed to extend the TCFD-aligned climate disclosure requirements to all companies with standard listed equity shares, except~~labelling system for ~~standard listed~~sustainable investment ~~entities and shell companies.~~products. The consultation period ended on ~~September 10, 2021.~~January 7, 2022. On ~~June 7, 2021,~~October 13, 2022, the Financial Stability Board’s (FSB) Task Force on Climate-Related Financial Disclosures issued its “2022 Status Report” in which it provided an overview of current disclosure practices in terms of their alignment with the TCFD’s prior recommendations and highlights progress firms are making toward disclosures aligned with the TCFD ~~began~~over the past five years.

On March 31, 2022, the International Sustainability Standards Board (ISSB) published a Consultation Paper setting forth its first two draft sustainability disclosure standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (“General Disclosure Proposals”) and IFRS S2 Climate-related Disclosures (“Climate Disclosure Proposals”), and a six-point plan for how it will build on Sustainability Accounting Standards Board (SASB) standards and embed SASB’s industry-based standards development approach into its own. The two draft standards propose disclosure of (among other things): (1) all material information about all significant sustainability-related risks and opportunities to ~~seek public comment~~which a company is exposed; (2) information regarding a company’s governance and risk management processes, controls and procedures used to monitor and manage climate-related risks and opportunities; (3) sustainability-related financial information as part of a company’s general-purpose financial reporting; (4) a company’s strategy for managing and making decisions in light of climate-related risks and opportunities; (5) performance and outcome measures that support the qualitative disclosures across governance, risk management, and strategy disclosure requirements; and (6) targets that a company uses to measure its performance goals related to significant climate-related risks and opportunities. These draft standards build upon TCFD recommendations and incorporate industry-based disclosure requirements derived from SASB standards. IOSCO has issued a statement welcoming the publication of these two draft standards for proposed climate and general sustainability disclosure requirements. The consultation period ended on ~~two documents, Proposed Guidance~~July 29, 2022. The ISSB received nearly 700 comments on ~~Climate-related Metrics, Targets,~~its General Disclosure Proposals and ~~Transition Plans~~more than 600 comments on its Climate Disclosure Proposals, and is now in the process of assessing those comments.

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

On September 7, 2022, the Central Bank of Ireland (CBI) published a Financial Stability Note regarding “Climate Risks in the Financial System: An Overview of Channels, Impact, and Heterogeneity,” in which physical and transition climate risks, their translation to the real economy, and their impact on the financial sector are discussed. If the Brexit Freedoms Bill and the ~~associated Measuring Portfolio Alignment: Technical Supplement,~~FSM Bill are enacted as introduced, the broad powers given to relevant national authorities under them to amend, repeal or replace EU laws in ~~order to update its final recommendations on climate-related financial disclosures~~the UK, as ~~disclosure practices~~well as the other changes contemplated under that legislation, will likely increase the risk of regulatory divergence and the ~~use~~complexity of ~~disclosures by financial~~doing business in the UK and ~~non-financial organizations have continued to progress since 2017. In~~EU from a July 10, 2021 statement, the G20 Finance Ministers indicated that, "[w]e will work to promote implementation of disclosure requirements or guidance, building on the [TCFD] framework, in line with domestic regulatory ~~frameworks, to pave the way for future global coordination efforts, taking into account jurisdictions' circumstances, aimed at developing a baseline global reporting standard."~~perspective.

The post-Brexit regulatory environment (particularly the need to obtain full authorizations on a country-by-country basis), also creates a level of uncertainty regarding the ability and requirements to distribute products and provide investment management services between the UK and EU, increasing regulatory burdens and compliance and other costs for UK funds being distributed in the EU and EU funds (such as Irish-domiciled funds) being distributed in the UK. The ability to engage investment managers for EU funds and UK funds also could be impacted, resulting in structural and other changes for UK- and EU-domiciled funds.

~~In March 2020, HM Treasury released a consultation paper proposing an Overseas Fund Regime (OFR) which~~ The impact of Brexit on Federated Hermes’ UK domiciled funds is ~~targeted at Undertakings for~~difficult to quantify and remains uncertain given the ~~Collective Investment in Transferable Securities (UCITS)~~overlap with the Pandemic and ~~would be a long-term replacement to the temporary permissions regime which enabled Federated Hermes' Irish UCITS funds to continue to be marketed~~recent surge in the number of ESG-related money market funds in both the EU and UK. As of September 30, 2022, EU-resident shareholders in Federated Hermes’ UK ~~after December 31, 2020. HM Treasury proposed this equivalence regime which will determine countries which are equivalent~~domiciled funds and the UK-resident shareholders in Federated Hermes’ Irish-domiciled funds were permitted to remain in the ~~UK and will work with~~funds. Subscriptions also can continue as long as there is not a proactive sales effort. Regarding the FCA to determine countries of equivalence. HM Treasury used the Financial Services Act 2021 to formally introduce the OFR as an equivalence regime for overseas retail funds to be able to market to UK investors, including retail investors, on appropriate terms. HM Treasury has also proposed a separate regimeregulatory environment for money market funds post-Brexit, UK-domiciled money market funds remain on par with current EU regulatory requirements; however, it is possible that the UK may deviate from, or simply not adopt, any new or amended EU money market fund laws, rules or regulations that may be adopted in the future.

On May 23, 2022, the FCA and BoE, with endorsement of HM Treasury, issued a joint Discussion Paper on reforming money market funds and published finalized guidance on the UK Money Market Fund Regulation (MMFR). The Discussion Paper is intended to contribute to an assessment of the vulnerabilities of money market funds and how they contribute to risks to UK financial stability and investor protection. The Discussion Paper aims to solicit, among other things, feedback that will strengthen the resilience of money market funds and the financial system in supporting the UK economy. Among other things, the finalized guidance reminds market participants that as per UK MMFR articles 24 and 25, if a money market fund’s liquidity ceases to meet the portfolio requirements, then the money market fund manager needs to prioritize the correction of that situation, taking due account of the fund investors’ interests, and balance the speed at which it can return the money market fund to a position where the relevant portfolio requirements are satisfied against investor outcomes. The consultation period ended on July 23, 2022. On July 23, 2022, Federated Hermes submitted a response to the Discussion Paper in which Federated Hermes advocated for: (1) delinking liquid asset thresholds and the potential imposition of a fee or gate (“delinking”); (2) increasing the required liquidity levels of variable NAV (VNAV) money market funds from 7.5% daily and 15% weekly liquidity, to 10% daily and 30% weekly liquidity requirements (consistent with other UK, EU and U.S. money market funds); (3) removing the arbitrary 17.5% restriction on including high quality government securities as weekly liquid assets for money market funds as, through both the financial crisis in 2008 and the March 2020 market turmoil, high quality government securities proved to be ~~able~~the most liquid; (4) permitting UK money market funds to include in their weekly liquid assets, investments in five-day repurchase agreements; (5) enhancing “Know Your Customer” requirements by amending UK MMFR (or UK MiFID) to impose an obligation on intermediaries (distributors) to provide information regarding the profile of individual end investors to enable money market fund managers to ~~all investors, noting that~~understand the ~~process will be different if~~money market funds’ liquidity risk; and (6) addressing the ~~fund wants to~~vulnerability in the short-term markets, which impacted the functioning of the entire money markets, by conducting a broad and thorough review which addresses the root causes of the pressures experienced in the short-term markets during the March 2020 market ~~to retail or professional investors. These regimes will function similarly to~~turmoil.

The activities of the ~~existing EU approach to equivalence. Federated Hermes has received permission from~~IOSCO and the ~~FCA to allow certain Irish-domiciled UCITS funds and Luxembourg-based direct lending funds to~~FSB also continue to be ~~marketed in~~monitored by the ~~UK post-Brexit under~~investment management industry, including Federated Hermes. Building on consultations and other reports published from 2015 through 2021 regarding methodologies for identifying nonbank, noninsurance company global systemically important financial institutions, recommendations to address structural vulnerabilities from asset management activities, and liquidity risk management, IOSCO and the ~~temporary permissions regime.~~

~~Despite negative deposit interest rates, euro-denominated European~~FSB have continued, and will continue, to assess, recommend and implement regulatory reforms affecting open-end funds, including money market funds, ~~have successfully operated~~liquidity risk management, derivatives, leverage, and ~~provided investors with high quality diversified investments~~other aspects of the investment management industry. On April 13, 2022, the FSB and IOSCO publicly invited submissions of papers for a conference on the financial stability risks arising from liquidity mismatches in open-ended funds and on policies to address them. According to the FSB and IOSCO, the conference, which ~~continue~~will form part of the FSB’s 2022 work program to enhance the resilience of nonbank financial intermediation, will provide ~~same day liquidity, first through~~an opportunity for participants to discuss the ~~use~~findings of ~~an approved share cancellation methodology and more recently through the use of accumulating share classes. Federated Hermes has worked with the FCA~~IOSCO’s and the ~~Central Bank~~FSB’s work on the experience of ~~Ireland (CBI) on appropriate permissions~~open-end funds in the March 2020 market turmoil as well as provide input to ~~operate~~ongoing work by the FSB and IOSCO to assess their respective recommendations in ~~each jurisdiction, in a manner similar to euro-denominated money market funds, should official rates in U.S. dollars or British pound sterling become negative.~~this area.

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~~The activities~~Consistent with remarks by the Chair of the ~~International Organization of Securities Commissions (IOSCO)~~FSB to the G20 Finance Ministers and Central Bank Governors on February 14, 2022, the FSB ~~also continue to be monitored by~~included the ~~investment management industry, including Federated Hermes. Building on consultations~~following areas and other reports published from 2015 through 2020 regarding methodologies for identifying non-bank, non-insurance company global systemically important financial institutions, recommendations to address structural vulnerabilities from asset management activities, and liquidity risk management, IOSCO and FSB have continued, and will continue, to assess, recommend and implement regulatory reforms affecting money market funds, liquidity risk management, derivatives, leverage, and other aspectsinitiatives (among others) in its 2022 work program: (1) enhancing the resilience of the ~~investment management industry.~~nonbank intermediation sector, while preserving its benefits; (2) harnessing the benefits of digital innovation while containing its risks; (3) addressing risks from climate change; and (4) cyber and operational resiliency. In its 2021-2022 work program, published February 26, 2021, IOSCO indicated that ~~among other priorities,~~ its priorities include financial stability and systemic risks of ~~non-bank~~nonbank financial intermediation activities, as well as risks exacerbated by the Pandemic, such as misconduct risks, fraud, and operational resilience. IOSCO also indicated that, among other efforts, it will continue efforts (headed by the Sustainable Finance Task Force) to improve the completeness, consistency, and comparability of sustainability reporting. ~~On June 30,~~IOSCO also previously published on November 2, 2021 ~~IOSCO published~~ a ~~consultation report~~Final Report setting forth its “Recommendations on ~~"Recommendations for~~ Sustainability-Related Practices, Policies, Procedures and Disclosure in Asset ~~Management" in~~Management,” which ~~IOSCO focuses on asset managers and investor protection issues with an aim at improving~~aims to improve sustainability-related practices, policies, procedures, and disclosures. In this consultation report, IOSCO also encourages asset managers to take sustainability-related risks and opportunities into account in their investment decision-making and risk management processes and address greenwashing risk through transparency. IOSCO's recommendationsdisclosures in the ~~report also cover product disclosures, supervision~~asset management industry.

Following various consultations, reports, and ~~enforcement, terminology, and financial and investor education.~~

~~On November 20, 2020,~~speeches by representatives of IOSCO published its final report providing a thematic review of the consistency in implementation of money market reforms across the nine largest money market fund jurisdictions. In this report, IOSCO concluded that these jurisdictions generally implemented money market fund reforms in line with 2012 IOSCO policy recommendations for money market funds, but that market conditions in March 2020 highlighted continuing vulnerabilities in certain types of money market funds and the ~~need for further reforms. Similar to the PWG Report~~FSB in the U.S., IOSCO issued a paper on "Money Market Funds during the March-April Episode" (IOSCO Paper) in November 2020. The IOSCO Paper calls for further consideration of the functioning of money market funds, investor behavior2020 and ~~elements of the existing regulatory framework for money market funds which could have played a role in accelerating the outflow of assets from non-government money market funds in March 2020.~~

In a speech, the Vice Chair for Supervision of the Fed, who also serves as Chair of the FSB, identified nonbank financial intermediation, money market funds and cross-border payments as the FSB's priorities for 2021. In its 2020 Annual Report regarding the "Implementation and Effects of the G20 Financial Regulatory Reforms", among other topics, the FSB reviewed the status of money market fund reforms across G20 jurisdictions, ongoing vulnerabilities from liquidity and leverage in asset management, and measures taken by financial regulators relating to funds (including money market funds) in response to the Pandemic. The FSB also issued a report on its "Holistic Review of the March Market Turmoil" (FSB Review) on November 17, 2020, in which it specifically reviewed the impact of the markets in March 2020 on open-end funds, including money market funds. In its FSB Review, among other conclusions, the FSB concluded that redemptions from money market funds were "exacerbated by certain fund structures and regulations that could have created perceptions of first-mover advantage." Among other recommendations, the FSB Review calls for an examination of risk factors, including "liquidity risks, core functions and aspects of the structure or regulations in non-government [money market funds], which experienced large outflows and contributed to the stress in short-term funding markets." In its December 16, 2020 "Global Monitoring Report on Non-Bank Financial Intermediation", the FSB further examined the impact of the Pandemic on the markets and the role of non-bank financial intermediaries, including the importance of money market funds in this sector, particularly in the U.S. and UK. In this report, the FSB noted that U.S. regulations allow fund boards to impose redemption gates and liquidity fees if a money market fund's weekly liquid assets fall below 30% of the fund's total assets, and that a concern that redemptions could be limited or suspended might have led to additional outflows. On June 30, 2021, the FSB published a consultation report, "Policy Proposals to Enhance Money Market Fund Resilience," in which it identified characteristics of money market funds that, in their view, make them susceptible to vulnerabilities, such as sudden and disruptive redemptions and the forced sale of assets to meet significant redemptions. The FSB also evaluated policy proposals purporting to enhance funds' resilience, including: (1) swing pricing; (2) minimum balance at risk; (3) capital buffers; (4) removing ties between regulatory thresholds and imposition of fees and gates; (5) removing stable NAVs; (6) limiting eligible assets; and (7) imposing additional liquidity requirements and escalation procedures. The FSB held a virtual workshop on the policy proposals on July 12, 2021.

~~As a result of these IOSCO and FSB reports,~~ similar to the SEC in the U.S., UKESMA, the BoE, the European Systemic Risk Board (ESRB), the European Banking Authority (EBA), and EUthe International Monetary Fund (IMF), among other regulators, ~~are~~have been re-examining existing money market fund regulation, soliciting public comment on proposed money market fund reforms, and issuing reports and recommendations.

On February 16, 2022, ESMA published an opinion, “ESMA Opinion on the review of Money Market Fund Regulation,” which makes recommendations to improve the resiliency of money market funds. Among other recommendations, it recommends: (1) addressing the threshold effects for constant NAV money market funds by removing the possibility to use amortized cost for low volatility NAV money market funds; (2) decoupling regulatory thresholds from suspensions, gates and redemption fees for low volatility NAV and constant NAV money market funds; (3) addressing liquidity concerns by ensuring mandatory availability of at least one liquidity management tool for all money market funds; (4) amending daily liquid asset and weekly liquid asset ratios; (5) adjusting the pool of eligible assets to require money market funds to hold public debt assets, which could be used to satisfy the daily and weekly asset liquidity ratios; (6) reinforcing the possibility of temporarily using liquidity buffers in ~~2021.~~times of stress; and (7) enhancing reporting and disclosure requirements and the stress testing framework for money market funds. On ~~March 26, 2021,~~February 14, 2022, ESMA published a ~~consultation paper~~separate final report, “Guidelines on stress test scenarios under the MMF Regulation,” in which it sets forth updated guidelines and specifications on the ~~legislative review~~types of ~~the EU~~ money market ~~regulation. Similar~~fund stress tests and their calibration in order to ~~the PWG Report, IOSCO Paper and FSB Review, this consultation reviews the role played by money market funds in the March 2020 market turmoil, perceived structural vulnerabilities~~allow managers of money market funds to have the information needed to complete the reporting required under the EU Money Market Fund Regulation. ESMA has sent its opinion to the European Commission and ~~possible~~is expected to work closely together throughout the Review of the EU’s Money Market Fund Regulation.

While money market fund ~~regulatory~~reform continues to be discussed in the UK and the EU, new proposals for reform have not been promulgated. Management believes that a final SEC rule on money market fund reforms could influence the UK and EU regulators, but that ~~could~~new UK and EU reform proposals will likely not be ~~adopted. Most~~issued until 2023 or 2024.

As discussed above, Federated Hermes believes that money market funds are resilient investment products that have proven their resiliency during the Pandemic. Federated Hermes intends to continue to engage with UK and EU (as well as U.S.) regulators in 2022, 2023 and beyond, both individually and through industry groups, to shape any further money market fund reforms to avoid overly burdensome requirements or the erosion of benefits that money market funds provide.

Since the beginning of the third quarter 2022, UK and EU regulators issued, proposed, ~~reforms~~or adopted other new consultations, directives, rules, laws, and guidance that impact UK and EU investment management industry participants, including Federated Hermes. For example:

•On October 13, 2022, the FSB published a “Progress Report on Climate-Related Disclosures” and a “Final Report on supervisory and regulator approaches to client-related risks.” In the Progress Report, the FSB covers, among other topics: (1) the progress made by the ISSB in developing its global baseline climate reporting standard and the work of other international standard-setters on assurance over sustainability-related reporting; (2) the progress made in the area of assurance, including the work of the International Auditing and Assurance Standards Board (IAASB) and International Ethics Standards Board for Accountants (IESBA), and the work by IOSCO to support the work on both disclosure and assurance standards; (3) the progress made by jurisdictions on climate-related disclosure practices, including implementing FSB recommendations, as well as steps being taken by jurisdictions to prepare for adopting, applying or otherwise making use of the ISSB climate-related disclosure reporting standard; and (4) the progress made by firms on disclosure and reporting. In the Final Report, the FSB provides recommendations regarding, among other topics: (1) the collection of climate-related data from financial institutions; (2) system-wide supervisory and regulatory approaches and the extent to which supervisory and regulatory tools and policies address climate-related risk; and (3) early considerations of other potential macroprudential policies and tools relating to client risk and disclosure.

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• On October 11, 2022, the ESMA published a Call for Evidence regarding the “Implementation of [Shareholder Rights Directive 2 (SRD2)] provisions on proxy advisors and the investment chain,” in which it seeks to gather information on how market participants perceive the appropriateness of the scope and the effectiveness of the SRD2 provisions on the identification of shareholders, transmission of information and facilitation of the exercise of shareholder rights, as well as on transparency of proxy advisors. The comment period ends on November 28, 2022. Federated Hermes is currently reviewing this Call for Evidence.

• On October 11, 2022, the FSB published a Consultative Document regarding “Regulation, Supervision and Oversight of Crypto-Asset Activities and Markets,” a Consultation Report regarding “Review of the FSB High-level recommendations of the Regulation, Supervision and Oversight of ‘Global Stablecoin’ Arrangements,” and a related request for comment regarding “International Regulation of Crypto-asset activities: A proposed framework – questions for consultation,” in which the FSB: (1) analyzes the interconnectedness of crypto-asset markets; (2) provides an overview of applicable international standards and regulatory and supervisory approaches; (3) identifies issues, challenges and gaps, and provides high-level recommendations, relating to supervisory and oversight approaches to crypto-asset activities; and (4) proposes revisions to the FSB’s high-level recommendations regarding stablecoin arrangements. The FSB also invites comments on: (1) proposed recommendations to promote the consistency and comprehensiveness of regulatory, supervisory and oversight approaches to crypto-asset activities and markets and to strengthen international cooperation, coordination and information sharing; and (2) a review of the previous 10 FSB high-level recommendations from 2020 for the regulation, supervision and oversight of “global stablecoin” arrangements. The comment period ends on December 15, 2022. Federated Hermes is currently reviewing this consultation request. This consultation request followed a July 11, 2022 FSB “Statement on International Regulation and Supervision of Crypto-asset Activities.”

• On October 3, 2022, the FCA issued a Consultation Paper regarding “Creation of baseline financial resilience regulatory return,” in which the FCA seeks to rationalize and standardize baseline financial resilience data collection with a view to increasing the quality and consistency of financial resilience data. The FCA seeks to reduce the burden of the existing survey by changing the collection of financial resilience data from an ad-hoc survey to a specific (and shortened) quarterly return within the FCA’s data collection system. The consultation period ends on December 2, 2022. Federated Hermes is currently reviewing the Consultation Paper.

• On October 3, 2022, the CBI published a Discussion Paper regarding its “Consumer Protection Code Review,” in which the CBI sets forth proposals regarding securing, and acting in, the best interests of consumers. Against the backdrop of technological innovation, changing consumer preferences and the important role that the financial system will play in the transition to carbon neutral, the CBI seeks feedback on a number of key topics, including, but not limited to: (1) availability and choice of financial products; (2) firms acting in the best interests of consumers; (3) innovation and disruption; (4) digitalization; (5) vulnerability; and (6) financial literacy. The comment period ends on March 31, 2023. Federated Hermes is currently reviewing the Discussion Paper.

• On September 22, 2022, the FCA issued a Consultation Paper regarding “Guidance on the trading venue perimeter,” in which the FCA proposed new guidance on the regulatory perimeter for trading venues. The FCA issued the new guidance to provide firms with greater certainty about the permissions required to carry on their business to maintain a level playing field and to assist with the protection of the integrity of the UK’s financial system. The consultation period ends on November 25, 2022. Federated Hermes is currently reviewing the Consultation Paper.

• On September 22, 2022, the ESMA issued a Consultation Paper regarding “Market Outages,” in which it seeks comments on its proposed guidance regarding how trading venues should communicate with market participants in the case of an outage. The comment period ends on December 1, 2022. Federated Hermes is currently reviewing the Consultation Paper.

• On September 15, 2022, the IOSCO issued a paper “IOSCO encourages standard-setters’ work on assurance of sustainability-related corporate reporting,” in which IOSCO reviewed the current landscape of sustainability-related assurance reporting and certain considerations as that landscape develops, promoted a focus on transparency in reporting, and encouraged the IAASB and the IESBA to work towards high-quality, global assurance and ethics standards that are ~~similar~~profession-agnostic and can support limited, and ultimately reasonable, assurance of sustainability-related information.

• On August 3, 2022, the FCA confirmed new rules to ~~those~~improve oversight of, and make authorized firms more responsible for, appointed representatives, who are permitted to offer certain financial services or products under the responsibility of FCA-authorized firms. The new rules are intended to prevent mis-selling and other misconduct by authorized representatives by requiring: (1) enhanced oversight; (2) assessment and monitoring of risks that authorized representatives pose to consumers and markets; (3) review of information regarding authorized representative activities, business and senior management

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annually; (4) notification to the FCA of future authorized representative appointments thirty days before such appointment becomes effective; and (5) provision of complaints and certain revenue information for each authorized representative annually. The FCA also indicated that it will undertake targeted supervision of registered firms relating to use of authorized representatives. Federated Hermes is currently reviewing these new rules.

• On August 1, 2022, the FCA issued a Consultation Paper regarding “Broadening retail access to the long-term asset fund,” in which the FCA sets forth proposals for extending the retail distribution of long-term asset funds with certain restrictions and including further investor protections. Among other proposals, the FCA proposes to remove the 35% restrictions on illiquid assets in unit-linked products, where the investor is a qualifying default pension scheme. The consultation period ended on October 10, 2022. Federated Hermes is currently reviewing the Consultation Paper.

• On August 1, 2022, the FCA finalized stronger rules addressing misleading advertisements that encourage consumers to invest in high-risk investments. Under these rules, FCA-authorized firms must have appropriate expertise and, for certain high-risk investments, conduct better suitability reviews. Such FCA-authorized firms also are required to use clearer and more prominent risk warnings, and certain incentives to invest, such as “refer a friend” have been banned. Federated Hermes is currently reviewing these new rules. These rules do not apply to crypto-asset promotions pending resolution as to how crypto-assets will be governed by the FCA, at which time the FCA indicated that additional crypto-asset-related rules will be published.

• On July 29, 2022, the ESMA issued a Call for Evidence regarding “Pre-Hedging,” in which it reviews arguments in favor and against such practice, and requests comments on the permissibility of the practice in the context of the Market Abuse Regulation and MiFID and Markets in Financial Instruments Regulation (MiFIR). According to the ESMA, “pre-hedging” can be characterized as any trading activity undertaken by an investment firm, where: (1) the investment firm is dealing in its own account, and the transaction activity is (2) undertaken to mitigate an inventory risk which is foreseen due to a possible incoming transaction, (3) undertaken before that foreseeable transaction has been executed, and (4) undertaken, at least partially, in the interest and benefit of the client or to facilitate the trade. The comment period ended on September 30, 2022. Federated Hermes is currently reviewing the Call for Evidence.

• On July 29, 2022, the EBA issued a final report containing guidelines specifying the criteria under which NCAs may exempt certain investment firms from the IFR liquidity requirements. These guidelines specify the set of investment services and activities that are provided by an investment firm to be eligible for the exemption from liquidity requirements. The guidelines also specify that NCAs should have due consideration for ancillary services provided by an investment firm as well as for on- and off-balance-sheet positions, because such services or positions may give rise to liquidity risk.

• On July 27, 2022, the FCA published a policy statement accompanied by finalized guidance and confirmed its plans to establish a new “Consumer Duty” intended to prove how FCA-registered firms service consumers by setting higher and clearer standards of consumer protection and require firms to put their customers’ needs first. The new “Consumer Duty” will include requirements for: (1) ending certain charges (referred to as “rip-off charges”); (2) improving the ability for consumers to switch or cancel products; (3) providing helpful and assessable customer support; (4) providing timely and clear information for financial decision-making; (5) providing suitable products; and (6) focusing on customer needs and circumstances. Firms generally have 12 months (or until July 31, 2023) to implement the new rules for all new and existing products, and an additional 12 months to implement the new rules for closed products that are no longer offered for sale. On October 5, 2022, the FCA issued additional guidance on the new “Consumer Duty.” Federated Hermes is currently reviewing the requirement of this new “Consumer Duty.”

•On July 21, 2022, the BoE, PRA and FCA published a Discussion Paper setting forth potential measures to oversee critical third parties (CTPs) to strengthen the resilience of services provided by such CTPs to the UK financial sector. The Discussion Paper sets out potential measures for how supervisory authorities could use their proposed powers to establish: (1) a framework for identifying potential CTPs; (2) minimum resilience standards; and (3) a framework for testing the resilience of material services provided by CTPs. The comment period ends on December 23, 2022. Federated Hermes is currently reviewing the Discussion Paper.

• On July 20, 2022, ESMA published an updated Questions and Answers (Q&A) on cross-border marketing and cross-border management of alternative investment funds and UCITS. The Q&A confirmed that the responsibility for ensuring that marketing communications comply with the requirements of the regulation on the cross-border distribution of collective investment funds lies with the AIFM or the UCITS management company irrespective of any contractual relationship with a third-party distributor that distributes the fund. Federated Hermes continues to review this Q&A.

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~~forth in the PWG Report, including decoupling the link between regulatory liquid asset thresholds and redemption fees and gates. The consultation period closed on June 30, 2021.~~• On July 18, 2022, ESMA ~~is expected to consider responses from the consultation in~~published an ~~opinion~~updated Q&A on the MiFIR. The Q&A clarifies that trades placed with the assistance of automated trade order management qualify as logarithmic trading and firms that use such trading must comply with Article 17 of MiFID II and RTS 6. Federated Hermes continues to review this Q&A.

• On July 12, 2022, the FCA issued a Consultation Paper on “Margin requirements for non-centrally cleared derivatives: Amendments to BTOS 2016/2251” in which it sets out the PRA’s and FCA’s proposals to update the list of instruments as eligible collateral for bilateral margin, to introduce fallback transitional provisions for certain firms who come into the scope requirements for the first time, and to update the application of the ~~EU money market regulations in the second half of 2021.~~

~~The BoE also published a May 12, 2021 speech by BoE Governor Andrew Bailey in which he advocated for reforms~~requirements to money market regulations in response to the March 2020 "dash for cash". The proposals outlined by Mr. Bailey in that speech align to the proposals of other global regulators, including U.S. regulators. The five proposals discussed were: (1) redemption terms should be aligned with the underlying liquidity of assets; (2) running minimal maturity mismatch risk; (3) money market funds should not hold less liquid assets on a scale that would make them more suitable to be traditional investment funds; (4) money market funds should not be designed with regulatory thresholds or cliff-edges which create adverse incentives and amplify first-mover advantage behavior; and (5) reforms should improve the ability of funds to support short-term funding markets, including by making them more resilient. On July 13, 2021, the BoE published a report, "Assessing the resilience of market-based finance," which sets forth the conclusions from a joint BoE and FCA review of the vulnerabilities associated with liquidity mismatch in open-end funds, including money market funds. Regarding money market funds, the report states: "To address vulnerabilities in the global money market fund sector, a robust and coherent package of international reforms needs to be identified. As noted in a speech by the Governor of the [BoE], it is important that any package removes the adverse incentives introduced by liquidity thresholds related to the use of suspensions, gates and redemption fees." The report identifies the following three priorities for remediating vulnerabilities in market-based finance: (1) limiting the demand for liquidity rising unduly in stress periods; (2) increasing the resilience of the supply of liquidity in stress periods; and (3) agreeing upon appropriate options for central banks to backstop market function. The report also discusses possible frameworks for consistently and realistically classifying the liquidity of fund assets and enhancing the calculation and use of swing pricing.

On July 1, 2021, the European Systemic Risk Board (ESRB) published an "Issues note on systemic vulnerabilities of and preliminary policy considerations to reform money market funds (MMFs)," in which the ESRB provides an overview of the money market fund sector in the EU, sets out its analysis of systemic vulnerabilities in money market funds, and identifies a broad set of preliminary policy options for money market fund reform. The Issues note, which primarily focuses on non-public debt money market funds (i.e., non-Government money market funds), identifies the following systemic vulnerabilities: (1) the large footprint for these money market funds in the commercial paper and certificate of deposit markets; (2) high portfolio overlap; (3) lack of reliable asset liquidity in the commercial paper and certificate of deposit markets; and (4) interconnectedness and the pressure a low interest rate environment places on liquidity. The Issues note also identifies the following initial policy options for money market fund reform, among others: (1) decoupling regulatory thresholds; (2) capital requirements and buffers; (3) implementing redemption holdbacks; (4) imposing notice periods for redemptions; (5) removing stable NAV money market funds; and (6) improved availability and use of swing pricing.

On July 26, 2021, the EBA published a consultation paper "Draft Regulatory Technical Standards [(RTS)] on criteria for the identification of shadow banking entities under Article 394(4) of Regulation (EU) No 575/2013" that purports to set out criteria for the identification of shadow banking entities for the purposes of reporting large exposures. In the consultation, the EBA discusses money market UCITS funds as conducting shadow banking, which the EBA defines as entities that offer banking services and perform banking activities as defined in the draft RTS but are not regulated and are not being supervised in accordance with any of the acts that form the regulated framework for banking. Among other things, the consultation solicits comments on whether money market funds should be considered shadow banking entities.counterparties. The consultation period ended on October ~~26, 2021.~~12, 2022. Federated Hermes continues to review the Consultation Paper.

• On ~~September 17, 2021, the Managing Director~~July 11, 2022, ESMA issued a Consultation Paper on “The Clearing and Derivative Trading Obligations in View of the ~~International Monetary Fund released a report stating that~~2022 Status of the March 2020 global financial crisis exposed fundamental vulnerabilities that could affect global financial stability, and advocating that global financial regulators work together to boost the resilience of investment funds. The Managing Director identified money market funds as particularly vulnerable to redemptions triggered by economic shocks and advocated for certain policy measures to address the identified vulnerabilities.

On October 11, 2021, the FSB issued its "Policy Proposals to Enhance Money Market Fund Resilience: Final Report" ("FSB Final Report") in which the FSB set forth its final policy proposals for money market fund reform.Benchmark Transition.” In the ~~FSB Final Report, the FSB finds that money market funds are subject to two broad types~~Consultation Paper, ESMA builds an initial set of vulnerabilities that can be mutually reinforcing: (1) susceptibility to sudden and disruptive redemptions, and (2) challenges in selling assets, particularly under stressed conditions. The proposals include mechanisms to: (1) impose on redeeming fund investors the cost of their redemptions; (2) absorb credit losses; (3) address regulatory thresholds that may give rise to cliff effects; and (4) reduce liquidity transformation. In the FSB Final Report, the FSB notes that it will be working with IOSCO to review progress made by member jurisdictions in adopting reforms to enhance MMF resilience, which are to be completed by the end of 2023, and then to assess the effectiveness of those measures in addressing risks to financial stability by 2026.

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

Federated Hermes does not believe money market funds are shadow banking entities. As discussed above, Federated Hermes believes that money market funds are resilient investment products that have proven their resiliency during the Pandemic. In an August 16, 2021 comment letter to the FSB, among other comments, Federated Hermes expressed its belief that the combination of delinking the potential imposition of redemption gates and liquidity fees with a money market fund's weekly liquid asset requirements and enhancing money market funds' ability to "know their customer", when combined with consideration of and improvementschanges created in the short-term funding markets generally, can address the FSB's concerns without adversely impacting the viability of money market funds and their benefits to investors, issuers and capital formation. In June 2021, among other comments, Federated Hermes provided similar comments to ESMA in response to its consultation. Federated Hermes intends to continue to engage with UK and EU (as well as U.S.) regulators in 2021, both individually and through industry groups, to shape any further money market fund reforms to avoid overly burdensome requirements or the erosion of benefits that money market funds provide.

~~Since the beginning~~framework of the ~~third quarter 2021, UK~~benchmark transition, with the discontinuation of rates such as LIBOR and EU regulators issued, proposed or adopted other new consultations, directives, rules, laws and guidance that impact UK and EU investment management industry participants, including Federated Hermes. For example:

•~~On September 24, 2021, ESMA published a "Consultation Paper: Review of~~ the MiFID II framework on best execution reports," in which ESMA requests comments from execution venues, investment firms and other market participants regarding standards for the content, format and data required by a best execution reporting regime required under MiFID II. The consultation period ends on December 23, 2021.

•~~On September 21, 2021, ESMA published a "Consultation Paper: Review of certain aspects of the Short Selling Regulation," in which ESMA requests, as part~~development of a ~~systematic review~~new set of the Short Selling Regulation, comments from issuers, investment firms and other market participants who engage in short sales or transactions resulting in net short positions. The consultation period ends on November 19, 2021.

•On September 9, 2021, the FCA and Prudential Regulation Authority (PRA) published a Dear CEO letter to firms that carry on trade finance activity to reiterate the FCA's and PCA's expectations of such firms, including an expectation to demonstrate that they have taken a risk sensitive approach to their control environment to ensure that the inherent risks within trade finance activity are effectively mitigated.

•On September 7, 2021, the European Commission adopted a delegated regulation that amended the technical standards regarding the KIDs for retail and insurance-based investment products. Among other amendments, the regulation amends the technical standards regarding the methodology and presentation of performance scenarios, cost presentation, the methodology for the calculation of summary cost indicators, past performance presentation and information, and the presentation of costs by PRIIPs offering a range of investment options. The delegated regulation becomes effective on July 1, 2022.

•On September 7, 2021, IOSCO published a "Final Report" on the use of artificial intelligence and machine learning by market intermediaries and asset managers. In addition to recognizing the significant efficiencies and benefits that can be derived from the use of technology, IOSCO notes that this use can also create or amplify risks. IOSCO also proposes six measures reflecting expected standards of conduct by intermediaries and asset managers, including considering requiring firms to have a designated senior manager responsible for the oversight of the development, testing, deployment, monitoring and controls of such technology.

•On August 18, 2021, ESMA published the final guidelines on Markets in Financial Instruments Directive II (MiFID II) applicable to market data providers. National Competent Authorities (NCAs) must within two months of publication notify ESMA whether they (1) comply, (2) do not comply but intend to comply, or (3) do not comply and do not intend to comply with the guidelines.

•~~On August 2, 2021, ESMA published its final guidelines for marketing communications under the new EU Cross-Border Distribution of Funds Regulation, which applies to EU UCITS and AIFs.~~

•~~On July 26, 2021, IOSCO published a consultation report soliciting feedback on~~risk-free rates through a set of proposed recommendations regarding ESG Ratings and Data Products Providers. The consultation requests comments on a set of proposed recommendations to address challenges faced by users of products and services from ESG ratings and data providers, and the companies that are the subject of these ESG ratings and data products. The consultation period ended on September 6, 2021.

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

•On July 20, 2021, the FCA published a consultation titled "PRIIPs - Proposed scope rules and amendments to Regulatory Technical Standards," in which the FCA requests comments on proposed amendments to the PRIIPs disclosure regime. The amendments are intended to, among other things, clarify the scope of PRIIPs and address misleading performance scenarios and summary risk indicators.draft RTS. The consultation period ended on September 30, ~~2021.~~2022. Federated Hermes continues to review the Consultation Paper.

•On July 11, 2022, ESMA issued a Consultation Paper regarding “Amendment of Article 19 ~~2021, the FCA published a "Dear Chair" letter to AFMs setting forth the FCA's guidance~~of CSDR RTS on ~~the design, delivery and disclosures of ESG and sustainable investment funds.~~

•~~On July 19, 2021, ESMA published a "Consultation Paper: Guidelines on certain aspects of the MiFID II remuneration requirements,"~~Settlement Discipline” in which ESMA ~~requests comments~~solicits views on ~~certain aspects~~a possible amendment to the Commission Delegated Regulation (EU) 2018/12291 with the aim of simplifying the process of collection and distribution of cash penalties for settlement fails relating to cleared transactions under Regulation (EU) No 909/2014 on Central Securities Depositories (CSDR). The consultation period ended on September 9, 2022. Federated Hermes continues to review the Consultation Paper.

• On July 8, 2022, ESMA issued a Consultation Paper regarding “Consultation on Review of the Guidelines on MiFID II ~~remuneration requirements for~~Product Governance Requirements” in which ESMA proposes to update the ~~purposes of enhancing clarity and fostering convergence~~2017 product governance guidelines. The main proposals in the ~~application~~draft guidelines relate to: (1) the specification of any sustainability-related objectives with which a product is compatible; (2) the ~~requirements.~~practice of identifying a target market per cluster of products instead of per individual product (clustering approach); (3) the determination of a compatible distribution strategy where a distributor considers that a more complex product can be distributed under non-advised sales; and (4) the periodic review of products. The consultation period ended on October ~~19, 2021.~~7, 2022. Federated Hermes continues to review the Consultation Paper.

•On July ~~15, 2021,~~5, 2022, the FCA ~~published its 2021-2022 business plan,~~issued a Consultation Paper on “Improving Equity Secondary Markets” in which ~~indicate that~~ the ~~FCAs priorities for the coming business year include,~~FCA sets forth proposals intended to improve how UK equity-based markets operate by changing, among other things, (1) adapting the regulatory framework to facilitate a market-based transition to net-zero carbon emissions; (2) amendments to the regulatory framework for money market funds; (3) adapting legacy EU regulatory regimes;aspects of trade reporting and ~~(4) LIBOR transition.~~

•~~On July 15, 2021, the European Commission published a draft directive that would extend the exemption~~waivers from ~~the KID requirement under the PRIIPs Regulation for an additional six months from December 31, 2021 to June 30,~~pre-trade transparency. The consultation period ended on August 16, 2022. On July 27, 2021, the European Commission then invited the Joint Committee of the ESAs to provide advice on certain areas concerning the PRIIPs Regulation, including, among others, the use of KIDs across the EU, the practical application of the rules under the PRIIPs Regulation, and the amount and nature of costs per PRIIP to various market participants. The European Commission asked the Joint Committee of the ESAs for responses by April 30, 2022.

•On July 7, 2021, the FSB published the "FSB Roadmap for Addressing Client-Related Financial Risks," in which the FSB sets forth considerations to support and promote international coordination on disclosures, data collection, vulnerabilities analysis and regulation, and purports to set out a comprehensive and coordinated plan for addressing climate-related financial risks.

~~Investment management industry participants, such as~~ Federated Hermes ~~also have continued and will continue,~~continues to monitor, plan for and implement certain changes in response to previously issued new, proposed or adopted consultations, directives, rules, laws and guidance. Previously proposed and final consultations, directives, rules, laws and guidance included, among others: (1)review the ongoing amendment and implementation of MiFID II; (2) HM Treasury's ongoing review of the UK retail disclosure regime and the PRIIPs Regulation; (3) efforts by ESMA to update and modify collection of information for monitoring systemic risk among AIFMs; (4) ESMA guidance on marketing communications under the Regulation on Cross-Border Distribution of Funds; (5) ESMA regulation of financial institutions, including AIFMs, UCITs management companies, and MiFID investment firms, outsourcing to cloud service providers; (6) the FCA's expected framework for long-term asset funds; (7) proposals to amend the FCA financial promotion rules for high-risk investments; (8) ESMA's updated guidelines for money market fund stress tests under the Money Market Fund Regulation; (9) the FCA's proposed rules on the IFPR, which is the new prudential regime for UK firms authorized under MiFID II; (10) ESMA's report regarding the preparedness of investment funds with significant exposure to corporate debt and real estate assets for potential future adverse liquidity conditions and valuation shocks; (11) a call for input from HM Treasury on its review of the UK funds regime to identify options that will make the UK a more attractive location to set up, manage and administer funds; and (12) the CBI's draft cross-industry guidance on outsourcing, which was published in February 2021, remained open for consultation until July 26, 2021, and, when finalized by the CBI later in 2021, will require Irish management companies to assess functions that are outsourced and maintain and submit to the CBI, beginning in January 2022, a register of all outsourcing arrangements.Consultation Paper.

In addition to the above Regulatory Developments, the FCA, CBI and other global regulators continue to monitor investment management industry participants by examining various reports, financial statements and annual reports and conducting regular review meetings and inspections. They also continue to take enforcement action when determined necessary. ~~Examples~~For example, the FCA has recently fined broker-dealers and other investment-related firms for failures relating to the detection of ~~recent reviews include reviews regarding closet index fund managers, CP86 compliance, fitness~~market abuse and ~~probity, best execution, client asset arrangements, and operational resilience. It has been reported that FCA enforcement priorities for 2021 will include~~ financial crime market abuse, non-financial misconduct and alternative investment managers. On February 8, 2021, the CBI published a Securities Market Risk Outlook Report that identifies key conduct risks to securities markets, actions investment firms should take to identify, mitigate and manage those risks, and the CBI's supervisory priorities. The CBI's priorities for 2021 include, among others, dealing with the Pandemic and Brexit, fund governance, money market fund reform, diversity and

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

~~inclusion, climate change, and bolstering systems to identify, mitigate and manage misconduct risk, including market abuse risk.~~

An EU FTT also continues to be discussed, although it remains unclear if or when an agreement will be reached regarding its adoption. Since the European Commission first proposed an EU FTT in 2011, proponents of the FTT have sought the widest possible application of the FTT with low tax rates. In December 2019, Germany proposed a draft directive that would impose a 0.2% tax on purchases of shares of large companies worth more than €1 billion, which would cover over 500 companies. Initial public offerings (IPOs) would be excluded, and each Member State would be free to tax equity funds and similar products for private pensions. Under the GermanThe last proposal the five countries with the highest incomes would share a small part of their revenues with the other countries, so that each participating country would receive at least €20 million of FTT revenue. No formal action has been taken on this German proposal.

~~On February 24, 2021, Portugal, the successor to the German Presidency of the EU Council, proposed at a meeting of the Working Party on Tax Questions~~was to begin discussions at the EU level regarding the design of an EU FTT involving a gradual implementation by Member States based on the FTTs already implemented in France and Italy. Member States that would want to implement an FTT more quickly would behave been permitted to do so. Member States were invited to provide input on the proposed approach to the EU FTT design, whether the FTTs in France and Italy would be a solid basis for an EU FTT, and whether an EU FTT should apply to equity derivative transactions. Subject to certain exemptions, the French FTT levies a tax of up to 0.3% on stock purchases of French publicly traded companies with a market value over €1 billion, American and European depository receipts of covered company securities, high frequency trades, credit default swaps against EU sovereign debt, and certain corporate actions. Subject to certain exemptions, the Italian FTT levies a tax on equity transactions, certain derivative transactions on equities and certain high frequency trades of up to 0.2% of the value of the net balance of purchase and sale transactions executed on the same day on the same financial instrument by the same party. The Italian FTT applies to shares issued by Italian companies with a capitalization of at least €500 million, cash equity contracts, equity derivative contracts, and certain other equity transactions. It has been reported that Austria's Finance Minister has spoken out against the Portuguese proposal on the basis that an EU FTT would harm business. The Portuguese proposal on an EU FTT invited Member States electing not to participate in the enhanced cooperation initiative to provide input on whether the need to find additional sources for financing the EU recovery effort might increase their interest in further working on an EU FTT.

As attention ~~turns to~~continues on a post-Pandemic economy and as the EU and EU Member States continue to look to fund their budgets and the Pandemic-related measures that have been adopted, an EU FTT on securities transactions, or even bank account transactions, remains a potential additional source of revenue. On May 18, 2021, the European Commission issued a communication on "Business Taxation for the 21st Century," in which the European Commission indicated that, after July 2021, it would make certain additional proposals, which could include an FTT. In a meeting of theThe Council of the EU ~~on June 3, 2021, the Council~~has recognized that the European Commission ~~recently~~has clarified that, if there is no agreement by the end of 2022, the European Commission will, based on impact assessments, propose a new resource for the EU budget based on a new FTT and that the European Commission will endeavor to make those proposals by June 2024 with the ~~FTT's~~FTT’s planned introduction by January 1, 2026. The Council also has indicated ~~at its June 3, 2021 meeting~~ that further work will be required before final policy choices are made and an agreement on a possible FTT can be reached.

The exact time needed to reach a final agreement on an EU FTT, implement any agreement and enact legislation is not known at this time. As discussed above, certain individual EU Member States, such as Italy and France, have implemented FTTs at the Member State-level. Spain's 0.2% FTT on certain securities transactions, effective on January 16, 2021, is another example. The weakened economy in Europe can increase the risk that additional jurisdictions propose to implement single-country FTTs. ~~The Labour Party in the UK has also previously proposed a UK FTT (in addition to the existing UK stamp duty), but it has not been advanced to date.~~ The Pandemic also could further delay agreement on, and the implementation of, an FTT in the EU, UK, or other European countries.

Notwithstanding the impact of the Pandemic, global securities regulators are urging the adoption of new risk free reference rates as alternatives to LIBOR. Separate working groups have been formed in the UK, the U.S., the EU, and other jurisdictions (e.g., Japan and Switzerland), to recommend an alternative to LIBOR for their respective markets. The FCA, the BoE and the PRA, as well as other global regulators, continue efforts started in September 2018 regarding the transition from LIBOR to the Sterling Overnight Index Average (SONIA) by the end of 2021. On March 5, 2021, Intercontinental Exchange, Inc. (ICE) published a feedback statement from the ICE Benchmark Administration Limited, a wholly-owned subsidiary of ICE and the

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

The transition from LIBOR also continues. On March 5, 2021, Intercontinental Exchange, Inc. (ICE) published a feedback statement from ICE Benchmark Administration Limited, a wholly-owned subsidiary of ICE and the administrator of LIBOR, formally confirming its intention to: (1) cease the publication of the one-week and two-month USD LIBOR after December 31, 2021; (2) cease publication of the EUR, CHF, JPY and GBP LIBOR for all tenors after December 31, 2021; and (3) cease the publication of all other tenors of USD LIBOR after June 30, 2023. ~~On June 2, 2021, IOSCO issued a statement urging all global market participants~~The LIBOR tenors specified in (1) and (2) above ceased to ~~"discontinue new use~~be published as of USD LIBOR-linked contracts, as soon as practicable and no later than the end of 2021, to avoid the safety and soundness risks associated with the continued use." On June 2, 2021, the FSB released statements and reports that set out recommendations for financial and non-financial sector firms, as well as the authorities, to consider as they seek to transition away from LIBOR by the end of 2021. The statements and reports include: (1) a summary of high-level steps firms will need to take now and over the course of 2021 to complete their transition; (2) a paper reviewing overnight risk-free rates and term rates; (3) a statement on the use of the International Swaps and Derivatives Association's (ISDA) spread adjustments in cash products; and (4) a statement encouraging authorities to set globally consistent expectations that regulated entities should cease the new use of USD LIBOR in line with the relevant timelines for that currency, regardless of where those trades are booked. On May 13, 2021, the FCA and BoE published a statement encouraging market users and liquidity providers in the sterling exchange-traded derivatives market to switch the default-traded instrument from LIBOR to SONIA from June 17, 2021. On April 19, 2021, the Working Group on Sterling-Free Rates, of which the BoE and FCA are ex-officio members, published a paper supporting the transition of legacy structured products where GBP LIBOR is used and encouraging market participants to amend existing structured products now and to issue new structured products based on compounded-in-arrears SONIA. On March 26, 2021, the FCA and BoE issued a "Dear CEO" letter urging firms to meet the deadlines for the transition away from LIBOR to alternative reference rates and advising that they are intensifying their focus on firms' management and oversight of the risks associated with the transition. In September 2021, the FCA issued a "Feedback Statement: FCA use of powers over use of critical benchmarks," in which the FCA discussed, among other topics, its authority to prohibit some or all new uses of a critical benchmark, which includes LIBOR in the UK.January 1, 2022. On September 9,29, 2021, the FCA also updated its website, and issued a consultation titled 'Proposed decisions on the use of LIBOR (Articles 23C and 21A BMR)," setting forth further guidance and requests for comment regarding further arrangements for the orderly wind-down of LIBOR by the end of 2021. Although the FCA found that market participants have made good progress in actively transitioning contracts away from LIBOR, the FCA concluded that it will not be practicable to convert all outstanding sterling and Japanese yen LIBOR contracts by year-end. Consequently, to avoid disruption to legacy contracts that reference the ~~1 month, 3 month~~1-month, 3-month and ~~6 month sterling~~6-month GBP and ~~Japanese yen~~JPY LIBOR ~~settings,~~tenors, the FCA required the LIBOR benchmark administrator to publish these ~~settings~~tenors under a ~~'synthetic'~~‘synthetic’ methodology, based on term risk-free rates, for the duration of 2022. The synthetic panels are not intended for new issues, as the FCA also proposed to prohibit new use of overnight, ~~1 month, 3 month, 6~~1-month, 3-month, 6- month and ~~12 month U.S. dollar~~12-month USD LIBOR, which will continue to be published through June 30, 2023. On April 5, 2022, the FSB issued a statement, “FSB Statement Welcoming a Smooth Transition Away from LIBOR,” in which it advised that (among other things): (1) given the significant use of USD LIBOR globally, firms must have plans in place to ensure their preparedness for the cessation of USD LIBOR; and (2) firms should have ceased new use of USD LIBOR, as the continued use of some USD LIBOR tenors through June 30, 2023 is intended only to allow legacy contracts to mature. On August 16, 2022, the FCA issued a statement (1) encouraging issuers of remaining LIBOR-linked bonds issued under English or other non-U.S. laws which make consent solicitation practicable to schedule consent solicitations to covert to fair alternative rates, (2) reminding issuers and bondholders that the publication of yen LIBOR will cease at the end of 2022, 1- and 6-month synthetic sterling LIBOR will cease at the end of March 2023, and U.S. dollar LIBOR will end at the end of June 2023, and (3) reminding issuers and bondholders that certain bonds issued under U.S. law may benefit from U.S. legislation to convert LIBOR rates at the end of June 2023.

Legislators and regulators in the U.S. and other countries are also working on the transition from LIBOR, with particular emphasis on legacy financial agreements that lack sufficient ~~"fallback"~~“fallback” language to transition to a new reference rate in the event of ~~LIBOR's~~LIBOR’s cessation. ~~The~~In addition to efforts by the SEC, the Governors, the International Swaps and ~~other regulators~~Directives Association (ISDA), the New York legislature, and others, on March 15, 2022, the Adjustable Interest Rate (LIBOR) Act of 2021 became law in the U.S. ~~are undertaking efforts~~This legislation is the first U.S. federal law addressing the cessation of LIBOR and is similar to identify risks and prepare for the transition from LIBOR to the Secured Overnight Financing Rate (SOFR) by the end of 2021. The SOFR was selected as the preferred LIBOR replacement in the U.S. by the Alternative Reference Rates Committee (ARRC) at the Federal Reserve Bank of New York. On May 6, 2021, the ARRC published market indicators that would support a recommendation of term SOFR and confirmed that "a recommended term rate is now in clear sight" and the recent guidance "would allow the ARRC to recommend a SOFR-based term rate relatively soon." Despite the extension of the transition deadline to June 30, 2023 for certain tenors of USD LIBOR, U.S. regulators continue to urge financial institutions to stop entering into new LIBOR transactions by the end of 2021. The Governors have indicated that, "[n]ew contracts entered into before December 31, 2021 should either utilize a reference rate other than LIBOR or have robust fallback language that includes a clearly defined alternative reference rate after LIBOR's discontinuation." On October 23, 2020, ISDA published its ISDA 2020 IBOR Fallbacks Protocol, which enables parties to protocol-covered documents to amend their terms to: (1) regarding a protocol-covered document which incorporates, or references, a rate as defined in a Covered ISDA Definitions Booklet, include either the terms of, or a particular defined term included in, the Supplement to the 2006 ISDA Definitions; and (2) in respect of a protocol-covered document which otherwise references a relevant interbank lending rate (IBOR), include new fallbacks for that relevant IBOR. This protocol became effective January 25, 2021. On March 24, 2021, New York legislation passed ~~a law~~in 2021 that implements fallback provisions that favor the transition to ~~SOFR plus~~SOFR-plus a spread adjustment for contracts without effective fallback provisions ~~that are written under New York law. The New York law also provides~~to provide for a ~~safe harbor from litigation where SOFR is selected as a replacement rate for USD LIBOR. Regulators have also taken note of the growing market demand for credit sensitive rates as alternatives~~smooth transition process to SOFR because term SOFR is not yet available and credit sensitive rates have a term component built in, which is operationally similar to LIBOR. During the open session of the June 11, 2021 FSOC meeting, SEC Chair Gensler delivered prepared remarks regardingreplace the LIBOR ~~transition~~reference rate in ~~which he specifically condemned one such rate,~~legacy contracts. The law directed the ~~Bloomberg Short Term Bank Yield Index (BSBY), as featuring many of~~Governors to issue a rule to be approved by September 9, 2022, leaving only a small opportunity for comment and engagement with the ~~same flaws as LIBOR,~~financial industry. The Governors issued a proposed rule on July 28, 2022, and ~~generally advocated~~the comment period for ~~term SOFR over BSBY.~~

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

the proposed rule ended on August 29, 2022.

The phase-out of LIBOR can cause the renegotiation or re-pricing of certain credit facilities, derivatives or other financial transactions to which investment management industry participants, including Federated Hermes and its products, customers or service providers, are parties, alter the accounting treatment of certain instruments or transactions, or have other unintended consequences, which, among other effects, could require additional internal and external resources, and can increase operating expenses. The extent of such renegotiation or re-pricing could be mitigated by the adoption of, or advocacy for, a historical five-year median difference spread adjustment methodology by certain regulators, self-regulatory organizations, and trade groups (including, for example, the ~~ARRC~~Alternate Reference Rates Committee and ISDA). Federated Hermes has closely monitored regulatory statements and industry developments regarding the obligations of registered investment advisors and funds when recommending and purchasing securities or other investments that use LIBOR as a reference rate or benchmark. Federated Hermes has focused on identifying LIBOR-linked securities or other investments, including, but not limited to: derivatives contracts; floating-rate notes; municipal securities; and tranches of securitizations, including collateralized loan obligations. With respect to LIBOR-linked securities or other investments with maturities after the applicable LIBOR tenor cessation date, Federated Hermes has sought to proactively address transition-related questions with the issuers or lead arrangers of such securities and other investments, as applicable, including, for example, questions regarding transition events, benchmark replacement, and benchmark replacement adjustments. As necessary, Federated Hermes has sought to negotiate modifications to benchmark fallback language for such securities and other instruments to contemplate the permanent cessation of LIBOR. Federated Hermes will be continuing these efforts with respect to any remaining securities or other investments held by Federated Hermes’ products and strategies that continue to use a USD LIBOR tenor with a cessation date of June 30, 2023. For example, Federated Hermes has sent over 550 letters to issuers or lead arrangers setting forth its expectations regarding the transition from LIBOR. Federated Hermes also negotiated fall back language that provides for the use of an alternative reference rate or benchmark in its corporate credit facility and has an interest rate-based on SOFR-plus a spread in its U.S.-registered Federated Hermes Funds’ credit facility. Federated Hermes continues to ~~assess~~monitor the impact that the transition from LIBOR will have on Federated Hermes and Federated ~~Hermes'~~Hermes’ products and strategies, customers, and service providers.

~~While Brexit~~EU policymakers and regulators have also sought to establish a global corporate tax rate of 15 percent. The proposal has been hampered by resistance from numerous countries, including certain EU member states. On June 30, 2022, it was reported that

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

the French Prime Minister stated that the EU is working on alternative ways to implement a global corporate tax rate of 15 percent within the coming months despite the opposition of Hungary, Poland and potentially other EU Member States. On September 9, 2022, the finance ministers of Germany, France, Italy, Spain and the Netherlands pledged to swiftly introduce a minimum 15 percent effective corporate tax rate in their countries and indicated a desire to have the corporate tax rate in place by 2023.

With the transition to a new Prime Minister in the UK in the third quarter 2022, and market conditions, including continuing market volatility and inflation rates, the BoE and the UK government have taken actions aimed at addressing market and economic concerns. For example, on September 28, 2022, the BoE launched a market intervention plan aimed at restoring order to the UK’s bond market by increasing its purchase of UK government bonds. After the UK’s now former finance minister announced, on September 23, 2022, a £45 billion (or $50.5 billion) tax-cutting program and that the planned increase in the UK corporate tax rate from 19% to 25% from April 2023 would not ~~had a significant~~occur, the then new (and recently resigned) UK prime minister announced on October 14, 2022, that the increase in the UK corporate tax rate to 25% would proceed in April 2023 as previously scheduled in order to increase public finances by approximately £18 billion (or $20 billion).

Federated Hermes continues to monitor, analyze, and assess the potential impact of current and previous Regulatory Developments, both domestic and international, on its Financial Condition, as well as plan for and implement certain changes in response to such Regulatory Developments. Federated ~~Hermes' business as of September 30, 2021, given~~Hermes also continues to monitor, analyze, and assess the ~~post-Brexit regulatory environment and~~ potential ~~continuing~~ impact of the Pandemic, ~~Federated Hermes remains unable to fully assess the degree that any potential Brexit impact~~Russia’s invasion of Ukraine, and resulting changes could have on Federated Hermes' business, results of operations, financial condition and/or cash flows. The 2018 HFML Acquisition and the 2021 Acquisition of HFML Noncontrolling Interest (together the HFML Acquisition), the HCL Acquisition, and HFML's acquisition of MEPC Limited effective as of January 1, 2020 (MEPC Acquisition), each increased the potential Brexit impact to Federated Hermes. Management also believes that a UK FTT or EU FTT, particularly if enacted with broad application, would be detrimental to Federated Hermes' business and could adversely affect, potentially in a material way, Federated Hermes' business, results of operations, financial condition and/or cash flows.

~~Management continues to monitor and evaluate~~ the impact of ~~Regulatory Developments (including potential new~~an increasing interest rate environment on money market fund ~~reforms) on Federated Hermes' business, results of operations, financial condition and/or cash flows. Regulatory changes stemming from Brexit, money market~~and other fund ~~reform, a EU or UK FTT, or FCA, CBI, ESMA, FSB, IOSCO or other initiatives or Regulatory Developments,~~asset flows, and related asset mixes, as well as the ~~potential political~~degree to which these factors impact Federated Hermes’ institutional prime and ~~economic uncertainty surrounding Brexit~~municipal (or tax-exempt) money market business and ~~the Pandemic, also can adversely affect, potentially in a material way,~~ Federated ~~Hermes' business, results of operations, financial condition and/or cash flows. Similar to its efforts in the U.S.,~~ Hermes’ Financial Condition.

Federated Hermes has dedicated, and continues to dedicate, significant internal and external resources to monitor, analyze, assess, and address ~~European reforms~~Regulatory Developments (including, without limitation, the potential for additional regulatory scrutiny of money market funds), its responses to the impact from the Pandemic and Regulatory Developments, and their effect on Federated Hermes’ Financial Condition. Additional internal and external resources have been, and will continue to be, devoted to technology, legal, compliance, operations, and other ~~international~~efforts to address Regulatory Development-related matters. These efforts included, and will continue to include, having conversations internally, and with intermediaries, customers, service providers, counsel and other advisors regarding Regulatory Developments, ~~that~~and analyzing and/or affecting legislative, regulatory, product offering, development and structure adjustments, technology or information system development, reporting capabilities, business processes and other options, in an effort to comply, and/or to assist Federated Hermes’ intermediaries and other customers to comply, with new Regulatory Developments or minimize the potential impact of any adverse consequences stemming therefrom. As appropriate, Federated ~~Hermes'~~Hermes also participated, and will continue to participate, either individually or with industry groups, in the comment process for proposed Regulatory Developments. Federated Hermes continues to expend legal and compliance resources to examine disclosure proposals and final rules issued by the SEC and other regulators, to adopt, revise and/or implement policies and procedures, and to respond to examinations, inquiries and other matters involving its regulators, including the SEC, customers or other third parties. Federated Hermes also has devoted, and will continue to devote, resources to technology and system investment, business continuity, cybersecurity and information governance, and the development of other investment management and ~~stewardship business.~~compliance tools, to enable Federated Hermes to, among other benefits, be in a better position to address Regulatory Developments. Federated Hermes has also expended, and will continue to expend, significant internal and external resources to engage with regulators on potential money market fund reforms, including through meetings with U.S. and global regulators and legislators, the ICI and other industry participants.

~~European~~The Regulatory Developments discussed above, and related regulatory oversight, also impacted, and/or can impact, Federated ~~Hermes' efforts relating thereto,~~Hermes’ intermediaries, other customers and service providers, their preferences, and their businesses. For example, these developments have ~~had,~~caused, and/or can cause, certain product line-up, structure, pricing and product development changes, as well as money market, equity, fixed-income, alternative/private markets or multi-asset fund products to be less attractive to institutional and other investors, reductions in the number of Federated Hermes Funds offered by intermediaries, changes in the fees Federated Hermes, retirement plan advisors and intermediaries will be able to earn on investment products and services sold to retirement plan or other clients, changes in work arrangements and facility-related expenses, and reductions in AUM, revenues and operating profits. In addition, these developments have caused, and/or can cause, changes in asset flows, levels, and mix, as well as customer and service provider relationships.

Federated Hermes will continue to monitor regulatory actions in response to the Pandemic and other Regulatory Developments as necessary and can ~~continue~~implement additional changes to ~~have, an impact on Federated Hermes' expenses~~its business and practices as it deems necessary or appropriate in ~~turn, financial performance.~~ response thereto.

Table of Contents



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

As of September 30, ~~2021,~~2022, given the regulatory environment, the continuing Pandemic and the possibility of future additional regulation or oversight, Federated Hermes is unable to fully assess the ~~potential~~ impact ~~that an FTT or other international~~of Regulatory Developments, ~~can have~~and Federated Hermes’ efforts related thereto, on its ~~business, results of operations, financial condition and/or cash flows.~~Financial Condition. Federated Hermes is also is unable to fully assess at this time whether, or the degree to which, any continuing efforts or potential options being evaluated in connection with modified or new Regulatory Developments ultimately will be successful. Modified or new Regulatory Developments in the current regulatory environment, and Federated ~~Hermes, any of its investment management subsidiaries or any of the Federated Hermes Funds, including money market funds, or any of its other products,~~Hermes’ efforts in responding to them, could ~~ultimately be determined to be~~have a ~~non-bank, non-insurance company global systemically important financial institution. The HFML Acquisition, HCL Acquisition~~material and ~~MEPC Acquisition each increased the potential impact that the above matters can have~~adverse effect on Federated ~~Hermes' business, results of operations, financial condition and/or cash flows.~~

Hermes’ Financial Condition.

4644

Table of Contents



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

Asset Highlights

Managed Assets at Period End

September 30, Percent
Change
(in millions) 2021 2020
By Asset Class
Equity $ 97,425 $ 80,405 21 %
Fixed-Income 97,226 79,546 22
Alternative / Private Markets 22,064 18,146 22
Multi-Asset 3,692 3,737 (1)
Total Long-Term Assets 220,407 181,834 21
Money Market 413,713 432,952 (4)
Total Managed Assets $ 634,120 $ 614,786 3 %
By Product Type
Funds:
Equity $ 58,218 $ 46,093 26 %
Fixed-Income 60,262 49,779 21
Alternative / Private Markets 14,299 11,393 26
Multi-Asset 3,518 3,546 (1)
Total Long-Term Assets 136,297 110,811 23
Money Market 292,311 325,940 (10)
Total Fund Assets 428,608 436,751 (2)
Separate Accounts:
Equity 39,207 34,312 14
Fixed-Income 36,964 29,767 24
Alternative / Private Markets 7,765 6,753 15
Multi-Asset 174 191 (9)
Total Long-Term Assets 84,110 71,023 18
Money Market 121,402 107,012 13
Total Separate Account Assets 205,512 178,035 15
Total Managed Assets $ 634,120 $ 614,786 3 %


	September 30,				Percent Change
(in millions)	2022		2021
By Asset Class
Equity	$	74,684	$	97,425	(23)	%
Fixed-Income	85,365		97,226		(12)
Alternative / Private Markets	20,182		22,064		(9)
Multi-Asset	2,902		3,692		(21)
Total Long-Term Assets	183,133		220,407		(17)
Money Market	441,294		413,713		7
Total Managed Assets	$	624,427	$	634,120	(2)	%

By Product Type
Funds:
Equity	$	40,633	$	58,218	(30)	%
Fixed-Income	44,896		60,262		(25)
Alternative / Private Markets	12,680		14,299		(11)
Multi-Asset	2,784		3,518		(21)
Total Long-Term Assets	100,993		136,297		(26)
Money Market	309,859		292,311		6
Total Fund Assets	410,852		428,608		(4)
Separate Accounts:
Equity	34,051		39,207		(13)
Fixed-Income	40,469		36,964		9
Alternative / Private Markets	7,502		7,765		(3)
Multi-Asset	118		174		(32)
Total Long-Term Assets	82,140		84,110		(2)
Money Market	131,435		121,402		8
Total Separate Account Assets	213,575		205,512		4
Total Managed Assets	$	624,427	$	634,120	(2)	%

4745

Table of Contents



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

Average Managed Assets


		Three Months Ended								Nine Months Ended													Three Months Ended										Nine Months Ended
		September 30,				Percent Change				September 30,								Percent Change					September 30,							Percent Change			September 30,					Percent Change
(in millions)	(in millions)	2021		2020				2021				2020				(in millions)				2022				2021				2022					2021
By Asset Class	By Asset Class																			By Asset Class
Equity	Equity	$	100,076	$	80,403			24	%			$	98,136			$	78,930				24	%	Equity		$	81,809			$		100,076		(18)		%	$	86,543	$	98,136		(12)	%
Fixed-Income	Fixed-Income	93,685		76,798		22				89,676				71,823				25		Fixed-Income			87,042			93,685				(7)			90,419			89,676		1
Alternative / Private Markets1		21,446		18,270		17				20,257				18,091				12
Alternative / Private Markets																				Alternative / Private Markets			21,193			21,446				(1)			22,090			20,257		9
Multi-Asset	Multi-Asset	3,713		3,786		(2)				3,918				3,808				3		Multi-Asset			3,144			3,713				(15)			3,368			3,918		(14)
Total Long-Term Assets	Total Long-Term Assets	218,920		179,257		22				211,987				172,652				23		Total Long-Term Assets			193,188			218,920				(12)			202,420			211,987		(5)
Money Market	Money Market	414,141		448,795		(8)				418,285				442,381				(5)		Money Market			438,601			414,141				6			429,878			418,285		3
Total Average Managed Assets	Total Average Managed Assets	$	633,061	$	628,052	1	%			$	630,272			$	615,033			2	%	Total Average Managed Assets			$	631,789		$	633,061			0		%	$	632,298		$	630,272	0		%

By Product Type	By Product Type																			By Product Type
Funds:	Funds:																			Funds:
Equity	Equity	$	59,918	$	46,020	30	%			$	58,471			$	44,106			33	%	Equity			$	45,135		$	59,918			(25)		%	$	48,353		$	58,471	(17)		%
Fixed-Income	Fixed-Income	59,618		48,418		23				57,346				45,221				27		Fixed-Income			47,489			59,618				(20)			52,025			57,346		(9)
Alternative / Private Markets1		13,704		11,539		19				12,882				11,342				14
Alternative / Private Markets																				Alternative / Private Markets			13,432			13,704				(2)			14,158			12,882		10
Multi-Asset	Multi-Asset	3,533		3,590		(2)				3,732				3,619				3		Multi-Asset			3,012			3,533				(15)			3,222			3,732		(14)
Total Long-Term Assets	Total Long-Term Assets	136,773		109,567		25				132,431				104,288				27		Total Long-Term Assets			109,068			136,773				(20)			117,758			132,431		(11)
Money Market	Money Market	289,566		338,814		(15)				293,320				328,730				(11)		Money Market			301,940			289,566				4			289,577			293,320		(1)
Total Average Fund Assets	Total Average Fund Assets	426,339		448,381		(5)				425,751				433,018				(2)		Total Average Fund Assets			411,008			426,339				(4)			407,335			425,751		(4)
Separate Accounts:	Separate Accounts:																			Separate Accounts:
Equity	Equity	40,158		34,383		17				39,665				34,824				14		Equity			36,674			40,158				(9)			38,190			39,665		(4)
Fixed-Income	Fixed-Income	34,067		28,380		20				32,330				26,602				22		Fixed-Income			39,553			34,067				16			38,394			32,330		19
Alternative / Private Markets	Alternative / Private Markets	7,742		6,731		15				7,375				6,749				9		Alternative / Private Markets			7,761			7,742				0			7,932			7,375		8
Multi-Asset	Multi-Asset	180		196		(8)				186				189				(2)		Multi-Asset			132			180				(27)			146			186		(22)
Total Long-Term Assets	Total Long-Term Assets	82,147		69,690		18				79,556				68,364				16		Total Long-Term Assets			84,120			82,147				2			84,662			79,556		6
Money Market	Money Market	124,575		109,981		13				124,965				113,651				10		Money Market			136,661			124,575				10			140,301			124,965		12
Total Average Separate Account Assets	Total Average Separate Account Assets	206,722		179,671		15				204,521				182,015				12		Total Average Separate Account Assets			220,781			206,722				7			224,963			204,521		10
Total Average Managed Assets	Total Average Managed Assets	$	633,061	$	628,052	1	%			$	630,272			$	615,033			2	%	Total Average Managed Assets			$	631,789		$	633,061			0		%	$	632,298		$	630,272	0		%

1 The average balance for the nine months ended September 30, 2020 includes $8.2 billion of fund assets managed by a previously non-consolidated entity, HGPE, in which Federated Hermes held an equity method investment. Effective March 1, 2020, HGPE became a consolidated subsidiary. See Note (3) to the Consolidated Financial Statements for additional information.

4846

Table of Contents



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

Changes in Equity Fund and Separate Account Assets


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Equity Funds	Equity Funds									Equity Funds
Beginning Assets	Beginning Assets	$	59,933	$	43,723	$	54,312	$	48,112	Beginning Assets	$	44,207	$	59,933	$	57,036	$	54,312
Sales	Sales	2,655		2,937		11,758		10,423		Sales	2,581		2,655		10,210		11,758
Redemptions	Redemptions	(3,522)		(3,299)		(11,717)		(12,431)		Redemptions	(3,033)		(3,522)		(11,122)		(11,717)
Net Sales (Redemptions)	Net Sales (Redemptions)	(867)		(362)		41		(2,008)		Net Sales (Redemptions)	(452)		(867)		(912)		41
Net Exchanges	Net Exchanges	3		31		(360)		(56)		Net Exchanges	9		3		(145)		(360)
Acquisitions/(Dispositions)	Acquisitions/(Dispositions)	408		0		408		0		Acquisitions/(Dispositions)	0		408		0		408
Impact of Foreign Exchange1	Impact of Foreign Exchange1	(283)		306		(463)		61		Impact of Foreign Exchange1	(667)		(283)		(1,635)		(463)
Market Gains and (Losses)2	Market Gains and (Losses)2	(976)		2,395		4,280		(16)		Market Gains and (Losses)2	(2,464)		(976)		(13,711)		4,280
Ending Assets	Ending Assets	$	58,218	$	46,093	$	58,218	$	46,093	Ending Assets	$	40,633	$	58,218	$	40,633	$	58,218

Equity Separate Accounts	Equity Separate Accounts									Equity Separate Accounts
Beginning Assets	Beginning Assets	$	40,573	$	33,136	$	37,476	$	40,899	Beginning Assets	$	36,781	$	40,573	$	39,680	$	37,476
Sales3	Sales3	1,677		1,249		5,700		4,422		Sales3	2,552		1,677		8,510		5,700
Redemptions3	Redemptions3	(2,185)		(2,253)		(7,938)		(8,243)		Redemptions3	(1,918)		(2,185)		(8,463)		(7,938)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	(508)		(1,004)		(2,238)		(3,821)		Net Sales (Redemptions)3	634		(508)		47		(2,238)
Net Exchanges	Net Exchanges	0		0		403		(6)		Net Exchanges	0		0		0		403
Acquisitions/(Dispositions)		0		0		0		(71)

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(227)		272		(471)		188		Impact of Foreign Exchange1	(520)		(227)		(1,205)		(471)
Market Gains and (Losses)2	Market Gains and (Losses)2	(631)		1,908		4,037		(2,877)		Market Gains and (Losses)2	(2,844)		(631)		(4,471)		4,037
Ending Assets	Ending Assets	$	39,207	$	34,312	$	39,207	$	34,312	Ending Assets	$	34,051	$	39,207	$	34,051	$	39,207

Total Equity	Total Equity									Total Equity
Beginning Assets	Beginning Assets	$	100,506	$	76,859	$	91,788	$	89,011	Beginning Assets	$	80,988	$	100,506	$	96,716	$	91,788
Sales3	Sales3	4,332		4,186		17,458		14,845		Sales3	5,133		4,332		18,720		17,458
Redemptions3	Redemptions3	(5,707)		(5,552)		(19,655)		(20,674)		Redemptions3	(4,951)		(5,707)		(19,585)		(19,655)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	(1,375)		(1,366)		(2,197)		(5,829)		Net Sales (Redemptions)3	182		(1,375)		(865)		(2,197)
Net Exchanges	Net Exchanges	3		31		43		(62)		Net Exchanges	9		3		(145)		43
Acquisitions/(Dispositions)	Acquisitions/(Dispositions)	408		0		408		(71)		Acquisitions/(Dispositions)	0		408		0		408
Impact of Foreign Exchange1	Impact of Foreign Exchange1	(510)		578		(934)		249		Impact of Foreign Exchange1	(1,187)		(510)		(2,840)		(934)
Market Gains and (Losses)2	Market Gains and (Losses)2	(1,607)		4,303		8,317		(2,893)		Market Gains and (Losses)2	(5,308)		(1,607)		(18,182)		8,317
Ending Assets	Ending Assets	$	97,425	$	80,405	$	97,425	$	80,405	Ending Assets	$	74,684	$	97,425	$	74,684	$	97,425

1 Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

2 Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

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

Table of Contents



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

Changes in Fixed-Income Fund and Separate Account Assets


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2022		2021		2022		2021
Fixed-Income Funds
Beginning Assets	$	48,215	$	58,486	$	59,862	$	53,557
Sales	3,956		7,273		13,711		24,724
Redemptions	(6,058)		(5,587)		(22,614)		(18,434)
Net Sales (Redemptions)	(2,102)		1,686		(8,903)		6,290
Net Exchanges	(17)		43		79		(10)
Acquisitions/(Dispositions)	0		17		0		17
Impact of Foreign Exchange1	(161)		(71)		(409)		(90)
Market Gains and (Losses)2	(1,039)		101		(5,733)		498
Ending Assets	$	44,896	$	60,262	$	44,896	$	60,262

Fixed-Income Separate Accounts
Beginning Assets	$	38,038	$	32,315	$	37,688	$	30,720
Sales3	3,725		5,662		8,385		9,982
Redemptions3	(526)		(1,017)		(2,357)		(3,872)
Net Sales (Redemptions)3	3,199		4,645		6,028		6,110
Net Exchanges	0		(50)		(1)		(48)

Impact of Foreign Exchange1	(70)		(18)		(151)		(34)
Market Gains and (Losses)2	(698)		72		(3,095)		216
Ending Assets	$	40,469	$	36,964	$	40,469	$	36,964

Total Fixed-Income
Beginning Assets	$	86,253	$	90,801	$	97,550	$	84,277
Sales3	7,681		12,935		22,096		34,706
Redemptions3	(6,584)		(6,604)		(24,971)		(22,306)
Net Sales (Redemptions)3	1,097		6,331		(2,875)		12,400
Net Exchanges	(17)		(7)		78		(58)
Acquisitions/(Dispositions)	0		17		0		17
Impact of Foreign Exchange1	(231)		(89)		(560)		(124)
Market Gains and (Losses)2	(1,737)		173		(8,828)		714
Ending Assets	$	85,365	$	97,226	$	85,365	$	97,226

1 Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

2 Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

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

Table of Contents



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

Changes in Alternative / Private Markets Fund and Separate Account Assets


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2022		2021		2022		2021
Alternative / Private Markets Funds
Beginning Assets	$	13,911	$	13,225	$	14,788	$	12,100
Sales	537		1,140		1,637		2,325
Redemptions	(835)		(494)		(2,020)		(1,483)
Net Sales (Redemptions)	(298)		646		(383)		842
Net Exchanges	3		0		7		(2)
Acquisitions/(Dispositions)	0		81		0		81
Impact of Foreign Exchange1	(1,013)		(345)		(2,390)		(225)
Market Gains and (Losses)2	77		692		658		1,503
Ending Assets	$	12,680	$	14,299	$	12,680	$	14,299

Alternative / Private Markets Separate Accounts
Beginning Assets	$	7,874	$	7,737	$	8,132	$	6,984
Sales3	409		179		1,069		802
Redemptions3	(94)		(39)		(505)		(227)
Net Sales (Redemptions)3	315		140		564		575


Impact of Foreign Exchange1	(625)		(209)		(1,440)		(136)
Market Gains and (Losses)2	(62)		97		246		342
Ending Assets	$	7,502	$	7,765	$	7,502	$	7,765

Total Alternative / Private Markets
Beginning Assets	$	21,785	$	20,962	$	22,920	$	19,084
Sales3	946		1,319		2,706		3,127
Redemptions3	(929)		(533)		(2,525)		(1,710)
Net Sales (Redemptions)3	17		786		181		1,417
Net Exchanges	3		0		7		(2)
Acquisitions/(Dispositions)	0		81		0		81
Impact of Foreign Exchange1	(1,638)		(554)		(3,830)		(361)
Market Gains and (Losses)2	15		789		904		1,845
Ending Assets	$	20,182	$	22,064	$	20,182	$	22,064

1 Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

2 Reflects the approximate changes in the fair value of the securities held by portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

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

Table of Contents



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

Changes in ~~Fixed-Income Fund and Separate Account Assets~~

Three Months Ended Nine Months Ended
September 30, September 30,
(in millions) 2021 2020 2021 2020
Fixed-Income Funds
Beginning Assets $ 58,486 $ 46,046 $ 53,557 $ 44,223
Sales 7,273 7,183 24,724 21,811
Redemptions (5,587) (4,497) (18,434) (17,474)
Net Sales (Redemptions) 1,686 2,686 6,290 4,337
Net Exchanges 43 (36) (10) (5)
Acquisitions/(Dispositions) 17 0 17 0
Impact of Foreign Exchange1
(71) 105 (90) (23)
Market Gains and (Losses)2
101 978 498 1,247
Ending Assets $ 60,262 $ 49,779 $ 60,262 $ 49,779
Fixed-Income Separate Accounts
Beginning Assets $ 32,315 $ 27,097 $ 30,720 $ 24,800
Sales3
5,662 2,676 9,982 6,426
Redemptions3
(1,017) (400) (3,872) (2,618)
Net Sales (Redemptions)3
4,645 2,276 6,110 3,808
Net Exchanges (50) 0 (48) 0
Acquisitions/(Dispositions) 0 0 0 (1)
Impact of Foreign Exchange1
(18) 30 (34) 32
Market Gains and (Losses)2
72 364 216 1,128
Ending Assets $ 36,964 $ 29,767 $ 36,964 $ 29,767
Total Fixed-Income
Beginning Assets $ 90,801 $ 73,143 $ 84,277 $ 69,023
Sales3
12,935 9,859 34,706 28,237
Redemptions3
(6,604) (4,897) (22,306) (20,092)
Net Sales (Redemptions)3
6,331 4,962 12,400 8,145
Net Exchanges (7) (36) (58) (5)
Acquisitions/(Dispositions) 17 0 17 (1)
Impact of Foreign Exchange1
(89) 135 (124) 9
Market Gains and (Losses)2
173 1,342 714 2,375
Ending Assets $ 97,226 $ 79,546 $ 97,226 $ 79,546

~~1 Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.~~

~~2 Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.~~

~~3 For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.~~

~~Table of Contents~~



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

~~Changes in Alternative / Private Markets Fund and Separate Account Assets~~

Three Months Ended Nine Months Ended
September 30, September 30,
(in millions) 2021 2020 2021 2020
Alternative / Private Markets Funds
Beginning Assets1
$ 13,225 $ 11,037 $ 12,100 $ 11,389
Sales 1,140 471 2,325 1,799
Redemptions (494) (386) (1,483) (1,511)
Net Sales (Redemptions) 646 85 842 288
Net Exchanges 0 0 (2) (1)
Acquisitions/(Dispositions) 81 0 81 0
Impact of Foreign Exchange2
(345) 440 (225) (258)
Market Gains and (Losses)3
692 (169) 1,503 (25)
Ending Assets $ 14,299 $ 11,393 $ 14,299 $ 11,393
Alternative / Private Markets Separate Accounts
Beginning Assets $ 7,737 $ 6,448 $ 6,984 $ 6,713
Sales4
179 115 802 467
Redemptions4
(39) (25) (227) (443)
Net Sales (Redemptions)4
140 90 575 24
Acquisitions/(Dispositions) 0 0 0 452
Impact of Foreign Exchange2
(209) 268 (136) (188)
Market Gains and (Losses)3
97 (53) 342 (248)
Ending Assets $ 7,765 $ 6,753 $ 7,765 $ 6,753
Total Alternative / Private Markets
Beginning Assets1
$ 20,962 $ 17,485 $ 19,084 $ 18,102
Sales4
1,319 586 3,127 2,266
Redemptions4
(533) (411) (1,710) (1,954)
Net Sales (Redemptions)4
786 175 1,417 312
Net Exchanges 0 0 (2) (1)
Acquisitions/(Dispositions) 81 0 81 452
Impact of Foreign Exchange2
(554) 708 (361) (446)
Market Gains and (Losses)3
789 (222) 1,845 (273)
Ending Assets $ 22,064 $ 18,146 $ 22,064 $ 18,146

1 The beginning assets for the nine months ended September 30, 2020 includes $8.2 billion of fund assets managed by a previously non-consolidated entity, HGPE, in which Federated Hermes held an equity method investment. Effective March 1, 2020, HGPE became a consolidated subsidiary. See Note (3) to the Consolidated Financial Statements for additional information.

~~2 Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.~~

~~3 Reflects the approximate changes in the fair value of the securities held by the portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.~~

~~4 For certain accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.~~

~~Table of Contents~~



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

~~Changes in~~ Multi-Asset Fund and Separate Account Assets


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Multi-Asset Funds	Multi-Asset Funds									Multi-Asset Funds
Beginning Assets	Beginning Assets	$	3,517	$	3,516	$	3,744	$	4,000	Beginning Assets	$	3,001	$	3,517	$	3,608	$	3,744
Sales	Sales	71		44		224		164		Sales	54		71		170		224
Redemptions	Redemptions	(99)		(146)		(779)		(538)		Redemptions	(130)		(99)		(397)		(779)
Net Sales (Redemptions)	Net Sales (Redemptions)	(28)		(102)		(555)		(374)		Net Sales (Redemptions)	(76)		(28)		(227)		(555)
Net Exchanges	Net Exchanges	9		(4)		27		(23)		Net Exchanges	0		9		6		27
Acquisitions/(Dispositions)	Acquisitions/(Dispositions)	54		0		54		0		Acquisitions/(Dispositions)	0		54		0		54

Market Gains and (Losses)1	Market Gains and (Losses)1	(34)		136		248		(57)		Market Gains and (Losses)1	(141)		(34)		(603)		248
Ending Assets	Ending Assets	$	3,518	$	3,546	$	3,518	$	3,546	Ending Assets	$	2,784	$	3,518	$	2,784	$	3,518

Multi-Asset Separate Accounts	Multi-Asset Separate Accounts									Multi-Asset Separate Accounts
Beginning Assets	Beginning Assets	$	182	$	189	$	204	$	199	Beginning Assets	$	134	$	182	$	172	$	204
Sales2	Sales2	0		1		2		27		Sales2	0		0		1		2
Redemptions2	Redemptions2	(4)		(9)		(38)		(20)		Redemptions2	(2)		(4)		(10)		(38)
Net Sales (Redemptions)2	Net Sales (Redemptions)2	(4)		(8)		(36)		7		Net Sales (Redemptions)2	(2)		(4)		(9)		(36)
Net Exchanges	Net Exchanges	0		0		1		0		Net Exchanges	0		0		0		1

Impact of Foreign Exchange3	Impact of Foreign Exchange3	0		1		(1)		1		Impact of Foreign Exchange3	0		0		0		(1)
Market Gains and (Losses)1	Market Gains and (Losses)1	(4)		9		6		(16)		Market Gains and (Losses)1	(14)		(4)		(45)		6
Ending Assets	Ending Assets	$	174	$	191	$	174	$	191	Ending Assets	$	118	$	174	$	118	$	174

Total Multi-Asset	Total Multi-Asset									Total Multi-Asset
Beginning Assets	Beginning Assets	$	3,699	$	3,705	$	3,948	$	4,199	Beginning Assets	$	3,135	$	3,699	$	3,780	$	3,948
Sales2	Sales2	71		45		226		191		Sales2	54		71		171		226
Redemptions2	Redemptions2	(103)		(155)		(817)		(558)		Redemptions2	(132)		(103)		(407)		(817)
Net Sales (Redemptions)2	Net Sales (Redemptions)2	(32)		(110)		(591)		(367)		Net Sales (Redemptions)2	(78)		(32)		(236)		(591)
Net Exchanges	Net Exchanges	9		(4)		28		(23)		Net Exchanges	0		9		6		28
Acquisitions/(Dispositions)	Acquisitions/(Dispositions)	54		0		54		0		Acquisitions/(Dispositions)	0		54		0		54
Impact of Foreign Exchange3	Impact of Foreign Exchange3	0		1		(1)		1		Impact of Foreign Exchange3	0		0		0		(1)
Market Gains and (Losses)1	Market Gains and (Losses)1	(38)		145		254		(73)		Market Gains and (Losses)1	(155)		(38)		(648)		254
Ending Assets	Ending Assets	$	3,692	$	3,737	$	3,692	$	3,737	Ending Assets	$	2,902	$	3,692	$	2,902	$	3,692

1 Reflects the approximate changes in the fair value of the securities held by ~~the~~ portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

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

3 Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

5250

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

~~Total~~ Changes in Total Long-Term Assets


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Total Long-Term Fund Assets	Total Long-Term Fund Assets									Total Long-Term Fund Assets
Beginning Assets1		$	135,161	$	104,322	$	123,713	$	107,724
Beginning Assets										Beginning Assets	$	109,334	$	135,161	$	135,294	$	123,713
Sales	Sales	11,139		10,635		39,031		34,197		Sales	7,128		11,139		25,728		39,031
Redemptions	Redemptions	(9,702)		(8,328)		(32,413)		(31,954)		Redemptions	(10,056)		(9,702)		(36,153)		(32,413)
Net Sales (Redemptions)	Net Sales (Redemptions)	1,437		2,307		6,618		2,243		Net Sales (Redemptions)	(2,928)		1,437		(10,425)		6,618
Net Exchanges	Net Exchanges	55		(9)		(345)		(85)		Net Exchanges	(5)		55		(53)		(345)
Acquisitions/(Dispositions)	Acquisitions/(Dispositions)	560		0		560		0		Acquisitions/(Dispositions)	0		560		0		560
Impact of Foreign Exchange2		(699)		851		(778)		(220)
Market Gains and (Losses)3		(217)		3,340		6,529		1,149
Impact of Foreign Exchange1										Impact of Foreign Exchange1	(1,841)		(699)		(4,434)		(778)
Market Gains and (Losses)2										Market Gains and (Losses)2	(3,567)		(217)		(19,389)		6,529
Ending Assets	Ending Assets	$	136,297	$	110,811	$	136,297	$	110,811	Ending Assets	$	100,993	$	136,297	$	100,993	$	136,297

Total Long-Term Separate Accounts Assets	Total Long-Term Separate Accounts Assets									Total Long-Term Separate Accounts Assets
Beginning Assets	Beginning Assets	$	80,807	$	66,870	$	75,384	$	72,611	Beginning Assets	$	82,827	$	80,807	$	85,672	$	75,384
Sales4		7,518		4,041		16,486		11,342
Redemptions4		(3,245)		(2,687)		(12,075)		(11,324)
Net Sales (Redemptions)4		4,273		1,354		4,411		18
Sales3										Sales3	6,686		7,518		17,965		16,486
Redemptions3										Redemptions3	(2,540)		(3,245)		(11,335)		(12,075)
Net Sales (Redemptions)3										Net Sales (Redemptions)3	4,146		4,273		6,630		4,411
Net Exchanges	Net Exchanges	(50)		0		356		(6)		Net Exchanges	0		(50)		(1)		356
Acquisitions/(Dispositions)		0		0		0		380
Impact of Foreign Exchange2		(454)		571		(642)		33
Market Gains and (Losses)3		(466)		2,228		4,601		(2,013)

Impact of Foreign Exchange1										Impact of Foreign Exchange1	(1,215)		(454)		(2,796)		(642)
Market Gains and (Losses)2										Market Gains and (Losses)2	(3,618)		(466)		(7,365)		4,601
Ending Assets	Ending Assets	$	84,110	$	71,023	$	84,110	$	71,023	Ending Assets	$	82,140	$	84,110	$	82,140	$	84,110

Total Long-Term Assets	Total Long-Term Assets									Total Long-Term Assets
Beginning Assets1		$	215,968	$	171,192	$	199,097	$	180,335
Sales4		18,657		14,676		55,517		45,539
Redemptions4		(12,947)		(11,015)		(44,488)		(43,278)
Net Sales (Redemptions)4		5,710		3,661		11,029		2,261
Beginning Assets										Beginning Assets	$	192,161	$	215,968	$	220,966	$	199,097
Sales3										Sales3	13,814		18,657		43,693		55,517
Redemptions3										Redemptions3	(12,596)		(12,947)		(47,488)		(44,488)
Net Sales (Redemptions)3										Net Sales (Redemptions)3	1,218		5,710		(3,795)		11,029
Net Exchanges	Net Exchanges	5		(9)		11		(91)		Net Exchanges	(5)		5		(54)		11
Acquisitions/(Dispositions)	Acquisitions/(Dispositions)	560		0		560		380		Acquisitions/(Dispositions)	0		560		0		560
Impact of Foreign Exchange2		(1,153)		1,422		(1,420)		(187)
Market Gains and (Losses)3		(683)		5,568		11,130		(864)
Impact of Foreign Exchange1										Impact of Foreign Exchange1	(3,056)		(1,153)		(7,230)		(1,420)
Market Gains and (Losses)2										Market Gains and (Losses)2	(7,185)		(683)		(26,754)		11,130
Ending Assets	Ending Assets	$	220,407	$	181,834	$	220,407	$	181,834	Ending Assets	$	183,133	$	220,407	$	183,133	$	220,407

2 Reflects the impact of translating non-U.S. dollar denominated AUM into U.S. dollars for reporting purposes.

32 Reflects the approximate changes in the fair value of the securities held by ~~the~~ portfolios and, to a lesser extent, reinvested dividends, distributions and net investment income.

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

5351

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

Changes in Federated ~~Hermes'~~Hermes’ average asset mix period-over-period across both asset classes and product types have a direct impact on Federated ~~Hermes'~~Hermes’ operating income. Asset mix impacts Federated ~~Hermes'~~Hermes’ total revenue due to the difference in the fee rates earned on each asset class and product type per invested dollar and certain components of distribution expense can vary depending upon the asset class, distribution channel and/or the size of the customer relationship. The following table presents the relative composition of average managed assets and the percent of total revenue derived from each asset class and product type for the periods presented:


		Percent of Total Average Managed Assets				Percent of Total Revenue					Percent of Total Average Managed Assets				Percent of Total Revenue
		Nine Months Ended				Nine Months Ended					Nine Months Ended				Nine Months Ended
		September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020			September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
By Asset Class	By Asset Class									By Asset Class
Money Market	Money Market	66	%	72	%	19	%	42	%	Money Market	68	%	66	%	37	%	19	%
Equity	Equity	16	%	13	%	52	%	37	%	Equity	14	%	16	%	38	%	52	%
Fixed-Income	Fixed-Income	14	%	12	%	18	%	13	%	Fixed-Income	14	%	14	%	15	%	18	%
Alternative / Private Markets	Alternative / Private Markets	3	%	3	%	8	%	5	%	Alternative / Private Markets	3	%	3	%	7	%	8	%
Multi-Asset	Multi-Asset	1	%	0	%	2	%	2	%	Multi-Asset	1	%	1	%	2	%	2	%
Other	Other	—	%	--		1	%	1	%	Other	—	%	—	%	1	%	1	%
By Product Type	By Product Type									By Product Type
Funds:	Funds:									Funds:
Money Market	Money Market	46	%	53	%	16	%	39	%	Money Market	46	%	46	%	34	%	16	%
Equity	Equity	9	%	7	%	41	%	29	%	Equity	8	%	9	%	29	%	41	%
Fixed-Income	Fixed-Income	9	%	8	%	15	%	11	%	Fixed-Income	8	%	9	%	12	%	15	%
Alternative / Private Markets	Alternative / Private Markets	2	%	2	%	5	%	3	%	Alternative / Private Markets	2	%	2	%	5	%	5	%
Multi-Asset	Multi-Asset	1	%	0	%	2	%	2	%	Multi-Asset	1	%	1	%	2	%	2	%

Separate Accounts:	Separate Accounts:									Separate Accounts:
Money Market	Money Market	20	%	19	%	3	%	3	%	Money Market	22	%	20	%	3	%	3	%
Equity	Equity	7	%	6	%	11	%	8	%	Equity	6	%	7	%	9	%	11	%
Fixed-Income	Fixed-Income	5	%	4	%	3	%	2	%	Fixed-Income	6	%	5	%	3	%	3	%
Alternative / Private Markets	Alternative / Private Markets	1	%	1	%	3	%	2	%	Alternative / Private Markets	1	%	1	%	2	%	3	%

Other	Other	—	%	—	%	1	%	1	%	Other	—	%	—	%	1	%	1	%

Total managed assets represent the balance of AUM at a point in time, while total average managed assets represent the average balance of AUM during a period of time. Because substantially all revenue and certain components of distribution expense are generally calculated daily based on AUM, changes in average managed assets are typically a key indicator of changes in revenue earned and asset-based expenses incurred during the same period.

~~As of September 30, 2021, total~~Total average managed assets increased 3% from September 30, 2020, primarily due to increases in fixed-income and equity assets, partially offset by a decrease in money market assets. Total average money market assets decreased 8% and 5%remained flat for the three and nine months ended September 30, ~~2021, respectively,~~2022, as compared to the same periods in ~~2020. Period-end~~2021. As of September 30, 2022, total managed assets decreased 2% from September 30, 2021. Average money market assets ~~decreased 4% at September 30, 2021 as compared to September 30, 2020. Average equity assets~~ increased ~~24% for both the three~~6% and nine months ended September 30, 2021, respectively, as compared to the same periods in 2020. Period-end equity assets increased 21% at September 30, 2021 as compared to September 30, 2020 primarily due to market appreciation. Average fixed-income assets increased 22% and 25%3% for the three and nine months ended September 30, ~~2021,~~2022, respectively, as compared to the same periods in ~~2020.~~2021. Period-end ~~fixed-income~~money market assets increased ~~22%~~7% at September 30, ~~2021~~2022 as compared to September 30, ~~2020~~2021. Average equity assets decreased 18% and 12% for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. Period-end equity assets decreased 23% at September 30, 2022 as compared to September 30, 2021 primarily due to market depreciation, net ~~sales~~redemptions and foreign exchange rate fluctuations. Average fixed-income assets decreased 7% and increased 1% for the three and nine months ended September 30, 2022, respectively, as compared to ~~a lesser extent,~~the same periods in 2021. Period-end fixed-income assets decreased 12% at September 30, 2022 as compared to September 30, 2021 primarily due to market depreciation and net redemptions. Average alternative/private market assets decreased 1% and increased 9% for the three and nine months ended September 30, 2022, respectively, as compared to the same periods in 2021. Period-end alternative/private market assets decreased 9% at September 30, 2022 as compared to September 30, 2021 primarily due to foreign exchange rate fluctuations, partially offset by market appreciation.

~~Equity markets continued to rally the first two months of the third quarter before taking a volatile turn in September as uncertainties ranging from the Delta variant's spread~~Continuing elevated inflation, rapid and stubborn inflation to a slowing China and political brinkmanship in Washington, D.C., weighed on markets. Despite posting its worst month since March 2020, the Standard and Poor's 500 index managed to eke out a 0.6% return for the quarter, while both the Nasdaq Composite Index and Dow Jones Industrial Average slipped 0.2% and 1.5%, respectively, for the three months. Overseas markets were similar with the MSCI World ex USA Index down 1.2% for the quarter and the MSCI All Country World ex USA down 3.6%. In the fixed-income markets, a July 2021 rally reversedlarge increases in the ~~subsequent two months~~fed funds target rate and ~~particularly near quarter-end, when~~signs of softening in the ~~Fed signaled~~economy undercut equity and bond returns for a ~~slightly more aggressive policy tilt, leaving longer yields largely unchanged~~third straight quarter for the three months ~~despite intra-period volatility. The yield~~ended September 30, 2022. August headline and core personal consumption expenditure prices accelerated, while overseas, eurozone consumer prices increased an annualized 10% in September 2022 and are expected to worsen as the Russian-Ukraine war puts further upward pressure on ~~the 10-year~~

5452

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

~~Treasury ended~~already high energy prices. Against the backdrop of a strong labor market where job openings outnumber the unemployed, the FOMC focused on attempts to rein in inflation with back-to-back 75 basis-point increases at its July and September 2022 meetings. The central bank in September 2022 also indicated that additional increases totaling 125 basis points are likely by the end of the year. For the third quarter, the Dow Jones Industrial Average returned -6.7%, the S&P returned -5.3% and the Nasdaq Composite returned -4.1%. Overseas, the MSCI World ex USA Index returned -9.8% and the MSCI All Country World ex USA Index returned -10.6%. In fixed-income markets, the combination of interest rates at generational lows to start the year and the biggest spike in inflation in decades saw all sectors within the taxable bond market post negative returns, with the broad-based Bloomberg US Aggregate Bond Index returning -4.8% during the quarter, ~~at 1.49%~~lowering its year-to-date return to -14.6%, ~~up 2 basis points from where it started, while~~a record decline for the ~~yield on the 30-year Treasury dipped 4 basis points to end the quarter at 2.05%.~~first nine months of a year.

Results of Operations

Revenue. Revenue ~~decreased $37.9~~increased $54.6 million for the three-month period ended September 30, ~~2021~~2022 as compared to the same period in ~~2020~~2021 primarily due to ~~an increase~~a decrease of ~~$72.4~~$109.2 million in Voluntary Yield-related Fee Waivers (see Business Developments - Low Short-Term Interest Rates for additional information, including the impact to expense and the net pre-tax impact) ~~and a decrease in money market revenue of $17.5 million due to lower average money market assets. These decreases were~~. This increase was partially offset by ~~an increase~~a decrease in equity and fixed-income revenue of ~~$34.5~~$45.9 million and ~~$11.9~~$10.8 million, respectively, due to ~~higher~~lower average assets.

Revenue ~~decreased $105.5~~increased $93.1 million for the nine-month period ended September 30, ~~2021~~2022 as compared to the same period in ~~2020~~2021 primarily due to ~~an increase~~a decrease of ~~$253.3~~$224.9 million in Voluntary Yield-related Fee Waivers (see Business Developments - Low Short-Term Interest Rates for additional information, including the impact to expense and the net pre-tax impact). This increase was partially offset by (1) a decrease in ~~money market~~equity revenue of ~~$32.9~~$100.2 million due to lower average ~~money market assets. These decreases were partially offset by an increase~~assets, (2) a decrease in ~~equity and~~ fixed-income revenue of ~~$110.4~~$12.5 million due to a change in the mix of average assets, (3) a decrease in performance fees of $6.7 million and ~~$37.7~~(4) a decrease of $5.5 million ~~respectively, due~~in carried interest (including the impact of foreign exchange rate fluctuations) primarily related to ~~higher average assets, an increase of $9.3 million~~carried interest recorded in the first quarter 2021 as a result of the initial consolidation of certain VIEs not previously consolidated prior to the first quarter of 2021 related to the HCL Acquisition (see Note (3) to the Consolidated Financial Statements) and an increase in alternative/private market revenue of $7.3 million primarily due to the revenue of a previously nonconsolidated entity being recorded to operating revenue beginning in March 2020.VIEs.

For the nine-month ~~period~~periods ended September 30, 2022 and 2021, ~~and 2020,~~ Federated ~~Hermes'~~Hermes’ ratio of revenue to average managed assets was ~~0.21%~~0.22% and ~~0.23%~~0.21%, respectively. The ~~decrease~~increase in the rate was primarily due to the ~~reduction of~~increase in revenue from ~~higher~~lower Voluntary Yield-related Fee Waivers, partially offset by a ~~higher proportion of~~decrease in revenue ~~earned on~~from lower average equity ~~and fixed-income~~ assets during the first nine months of ~~2021~~2022 compared to the same period in ~~2020.~~2021.

Operating Expenses. Total Operating Expenses for the three-month period ended September 30, ~~2021 decreased $22.9~~2022 increased $56.2 million as compared to the same period in ~~2020~~2021 primarily due to ~~a decrease~~an increase of ~~$35.2~~$52.5 million in Distribution expense ~~primarily~~ related ~~to a decrease in expense of $39.3 million due~~ to an increase of $72.3 million resulting from a decrease in Voluntary Yield-related Fee Waivers (see Business Developments - Low Short-Term Interest Rates for additional information, including the impact to revenue and the net pre-tax impact)~~. This was~~, partially offset by ~~an increase~~a decrease in ~~Compensation~~competitive payments ($8.1 million), a decrease due to lower average equity fund assets ($5.2 million) and Related expense of $5.8 million driven primarily by the increase in the average Great British Pound (GBP)/United States Dollar (USD) exchange rate for the three-month period ended September 30, 2021 as compareda decrease due to the ~~same period in 2020.~~mix of average money market fund assets ($4.8 million).

Total Operating Expenses for the nine-month period ended September 30, ~~2021 decreased $79.9~~2022 increased $97.8 million as compared to the same period in ~~2020~~2021. Distribution expense increased $102.8 million primarily related to an increase of $138.4 million due to a decrease ~~of $137.9 million in Distribution expense primarily related to a decrease in expense of $153.9 million due to an increase~~ in Voluntary Yield-related Fee Waivers (see Business Developments - Low Short-Term Interest Rates for additional information, including the impact to revenue and the net pre-tax impact)~~. This was~~, partially offset by ~~an increase~~a decrease due to a change in the mix of average money market fund assets ($12.3 million), a decrease due to lower average equity fund assets ($12.2 million) and a decrease in competitive payments ($7.2 million). Compensation and Related expense decreased $19.7 million primarily due to (1) a decrease of ~~$43.3 million driven primarily by (1) an increase of $12.9~~$13.9 million due to the ~~increase~~decrease in the average GBP/USD exchange rate for the nine-month period ended September 30, ~~2021~~2022 as compared to the same period in ~~2020,~~2021 and (2) ~~an increase~~a decrease of ~~$9.2~~$4.7 million related primarily to the compensation expense recorded in the first quarter 2021 as a result of the initial consolidation of certain VIEs not previously consolidated prior to 2021 related to the HCL Acquisition (see Note (3) to the Consolidated Financial Statements), (3) an increase of $6.1 million related to the compensation expenses of a previously nonconsolidated entity being recorded to Compensation and Related expense beginning in March 2020 and (4) an increase of $5.2 million related to an increase in staff. Systems and Communications expense increased $9.9 million primarily due to technology-related projects.VIEs.

Nonoperating Income (Expenses). Nonoperating Income (Expenses), net decreased ~~$8.0~~$5.8 million for the three-month period ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021. The decrease is primarily due to a ~~$6.5~~$6.2 million decrease in Gain (Loss) on Securities, net primarily due to a larger decrease in the market value of investments in the third quarter ~~2020 including~~2022 as compared to the same period in 2021.

Nonoperating Income (Expenses), net decreased $49.0 million for the nine-month period ended September 30, 2022 as compared to the same period in 2021. The decrease is primarily due to a $46.4 million decrease in Gain (Loss) on Securities, net primarily due to a decrease in the market value of investments in the first nine months of 2022 as compared to an increase in the market value of investments compared to a slight decrease in the third quarter 2021 and a $1.3 million loss recorded to Nonoperating Income (Expenses) - Other, net related to a derivative financial instrument associated with the 2021 Acquisition of HFML Noncontrolling Interest in the third quarter of 2021 (FX Forward Loss).

~~Nonoperating Income (Expenses), net decreased $6.3 million for the nine-month period ended September 30, 2021 as compared to~~during the same period in 2020. The decrease is primarily due to a $7.5 million gain from a fair value adjustment to an equity investment of a previously nonconsolidated entity recorded in Nonoperating Income (Expenses) - Other, net in March 2020 and the $1.3 million FX Forward Loss recorded in the third quarter of 2021. ~~These decreases were partially offset by a $3.1 million~~

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

increase in Gain (Loss) on Securities, net primarily due to higher gains recorded from the increase in the market value of investments in the first nine months of 2021 as compared to the same period in 2020.

Income Taxes. The income tax provision was ~~$23.2~~$21.6 million for the three-month period ended September 30, ~~2021~~2022 as compared to ~~$32.9~~$23.2 million for the same period in ~~2020.~~2021. The effective tax rate was 24.3% for the three-month period ended September 30, 2022 as compared to 24.0% for the same period in 2021.

The income tax provision was $58.1 million for the nine-month period ended September 30, 2022 as compared to $83.4 million for the same period in 2021. The decrease in the income tax provision was primarily due to (1) ~~higher taxes in 2020 due~~a $14.5 million increase to ~~an increased~~ deferred tax expense recorded in the second quarter 2021 associated with the change in the UK tax rate from ~~17%~~19% to ~~19% ($3.3 million)~~25% effective April 1, 2023 and (2) lower ~~taxable~~ income before income taxes ($~~6.2~~10.6 million). The effective tax rate was ~~24.0%~~25.2% for the ~~three-month~~nine-month period ended September 30, ~~2021~~2022 as compared to ~~27.5%~~29.3% for the same period in ~~2020.~~2021. The decrease in the effective tax rate was primarily due to the increase in deferred tax expense recorded in ~~2020~~the second quarter 2021 associated with ~~the 2020 UK tax rate increase from 17% to 19%.~~

The income tax provision was $83.4 million for the nine-month period ended September 30, 2021 as compared to $81.9 million for the same period in 2020. The increase in the income tax provision was primarily due to the net increase in deferred taxes associated with the change in the UK tax rate in 2020 from 17% to 19% and in 2021 from 19% to 25% effective April 1, 2023 ($11.2 million), partially offset by a decrease in taxable income ($8.3 million). The effective tax rate was 29.3% for the nine-month period ended September 30, 2021 as compared to 25.9% for the same period in 2020. The increase in the effective income tax rate was primarily due to the increase in deferred tax expense associated with the aforementioned UK tax rate increase from 19% to 25%.increase.

Net Income Attributable to Federated Hermes, Inc. Net income decreased ~~$14.5~~$1.9 million for the three-month period ended September 30, ~~2021~~2022 as compared to the same period in ~~2020,~~2021, primarily as a result of the changes in revenues, expenses, nonoperating income (expenses) and income taxes noted above. Diluted earnings per share for the three-month period ended September 30, ~~2021 decreased $0.12~~2022 increased $0.05 as compared to the same period in ~~2020~~2021 primarily due to a decrease in shares outstanding resulting from share repurchases ($0.07), partially offset by decreased net ~~income.~~income ($0.02).

Net income decreased ~~$29.5~~$18.7 million for the nine-month period ended September 30, ~~2021~~2022 as compared to the same period in ~~2020,~~2021, primarily as a result of the changes in revenues, expenses, nonoperating income (expenses) and income taxes noted above. Diluted earnings per share for the nine-month period ended September 30, ~~2021~~2022 decreased ~~$0.25~~$0.02 as compared to the same period in ~~2020~~2021 primarily due to decreased net ~~income.~~income ($0.19), partially offset by a decrease in shares outstanding resulting from share repurchases ($0.17).

Liquidity and Capital Resources

Liquid Assets. At September 30, ~~2021,~~2022, liquid assets, net of noncontrolling interests, consisting of cash and cash equivalents, investments and receivables, totaled ~~$411.8~~$508.2 million as compared to ~~$432.5~~$492.7 million at December 31, ~~2020.~~2021. The change in liquid assets is discussed below.

At September 30, ~~2021,~~2022, Federated ~~Hermes'~~Hermes’ liquid assets included investments in certain money market and fluctuating-value Federated Hermes Funds that may have direct and/or indirect exposures to international sovereign debt and currency risks. Federated Hermes continues to actively monitor its investment portfolios to manage sovereign debt and currency risks with respect to certain European countries (such as the UK in light of Brexit), Russia, China and certain other countries subject to economic sanctions. Federated ~~Hermes'~~Hermes’ experienced portfolio managers and analysts work to evaluate credit risk through quantitative and fundamental analysis. Further, regarding international exposure, certain money market funds (representing approximately ~~$152~~$251 million in AUM) that meet the requirements of Rule 2a-7 or operate in accordance with requirements similar to those in Rule 2a-7, include holdings with indirect short-term exposures invested primarily in high-quality international bank names that are subject to Federated ~~Hermes'~~Hermes’ credit analysis process.

Cash Provided by Operating Activities. Net cash provided by operating activities totaled ~~$101.0~~$191.5 million for the nine months ended September 30, ~~2021~~2022 as compared to ~~net cash provided totaling $243.5~~$101.0 million for the same period in ~~2020.~~2021. The ~~decrease of $142.5 million~~increase in cash provided was primarily due to (1) a net ~~increase~~decrease of ~~$122.1~~$103.4 million in cash paid for trading securities for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020,~~2021, (2) ~~a decrease~~an increase in cash received related to the ~~$105.5~~$93.1 million ~~decrease~~increase in revenue previously discussed, ~~and~~ (3) ~~an increase~~a decrease of ~~$24.0~~$9.0 million in cash paid for incentive compensation for the nine months ended September 30, ~~2021~~2022 as compared to the same period in ~~2020.~~2021 and (4) a decrease of $6.0 million in cash paid for taxes for the nine months ended September 30, 2022 as compared to the same period in 2021. These ~~decreases~~increases in cash were partially offset by ~~a decrease~~(1) an increase in cash paid related to the ~~$137.9~~$102.8 million ~~decrease~~increase in Distribution expense previously ~~discussed.~~discussed, (2) the $28.0 million initial closing payment for the CWH acquisition (see Note (3)) and (3) an increase of $6.2 million in cash paid for interest for the nine months ended September 30, 2022 as compared to the same period in 2021 primarily related to the $350.0 million Notes issued in March 2022.

Cash ~~Provided~~Used by Investing Activities. During the nine-month period ended September 30, ~~2021,~~2022, net cash ~~provided~~used by investing activities was ~~$13.0~~$1.3 million, which ~~primarily~~ represented ~~$33.3~~$18.6 million paid for purchases of Investments—Affiliates and Other and $4.1 million paid for property and equipment, partially offset by $21.4 million in cash received from redemptions of Investments—Affiliates and ~~Other partially offset by $7.8 million paid for property and equipment, $7.2 million paid for purchases of Investments—Affiliates and Other and $5.3 million paid for an asset purchase during 2021.~~

~~Cash Used by Financing Activities.~~ ~~During the nine-month period ended September 30, 2021, net cash used by financing activities was $213.4 million due primarily to the payment to acquire additional equity of HFML (see Note (3) to the~~Other.

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

~~Consolidated Financial Statements), $92.4~~Cash Used by Financing Activities. During the nine-month period ended September 30, 2022, net cash used by financing activities was $90.0 million ~~paid for~~due primarily to (1) $311.7 million of debt payments, (2) $211.2 million of treasury stock purchases ~~$79.7~~and (3) $73.8 million or $0.81 per share of dividends paid ~~in dividends~~ to holders of ~~its~~Federated Hermes common ~~shares and $55.0 million paid~~shares. These decreases in ~~connection with its debt obligations. This was~~cash were partially offset by ~~$101.3~~(1) $488.3 million of new borrowings, including amounts borrowed under Federated Hermes’ revolving credit facility and the proceeds from the $350.0 million in Notes issued in March 2022 and (2) $50.1 million of contributions from noncontrolling interests in ~~subsidiaries and $82.2 million borrowed from~~subsidiaries.

Long-term Debt. On March 17, 2022, pursuant to a Note Purchase Agreement, Federated Hermes ~~revolving credit facility.~~

~~Borrowings.~~issued unsecured senior Notes in the aggregate amount of $350.0 million at a fixed interest rate of 3.29% per annum, payable semiannually in arrears on the 17th day of March and September in each year of the agreement. The entire principal amount of the Notes will become due March 17, 2032. Citigroup Global Markets Inc. and PNC Capital Markets LLC acted as lead placement agents in relation to the Notes and certain subsidiaries of Federated Hermes are guarantors of the obligations owed under the Note Purchase Agreement. As of September 30, ~~2021,~~2022, the outstanding balance of Federated ~~Hermes'~~Hermes’ Notes Payable was $347.5 million, net of unamortized issuance costs in the amount of $2.5 million, and was recorded in Long-Term Debt on the Consolidated Balance Sheets. The proceeds were or will be used to supplement its cash flow from operations, to fund share repurchases and potential acquisitions, to partially pay down Federated Hermes’ debt under the Credit Agreement and for other general corporate purposes. See Note (11) to the Consolidated Financial Statements for additional information on the Note Purchase Agreement.

As of September 30, 2022, Federated Hermes’ Credit Agreement consists of a ~~$350~~$350.0 million revolving credit facility with an additional ~~$200~~$200.0 million available via an optional increase (or accordion) feature. The original proceeds were used for general corporate purposes including cash payments related to acquisitions, dividends, investments and share repurchases. As of September 30, ~~2021,~~2022, Federated Hermes has ~~$247.8~~$300.0 million available to borrow under the Credit Agreement. See Note (11) to the Consolidated Financial Statements for additional information on the Credit Agreement.

~~The~~Both the Note Purchase Agreement and Credit Agreement ~~includes~~include an interest coverage ratio covenant (consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) to consolidated interest expense) and a leverage ratio covenant (consolidated debt to consolidated EBITDA) as well as other customary terms and conditions. Federated Hermes was in compliance with all of its covenants, including its interest coverage and leverage ratios at and during the nine months ended September 30, ~~2021.~~2022. An interest coverage ratio of at least 4 to 1 is required and, as of September 30, ~~2021,~~2022, Federated ~~Hermes'~~Hermes’ interest coverage ratio was ~~386~~57 to 1. A leverage ratio of no more than 3.0 to 1 is required and, as of September 30, ~~2021,~~2022, Federated ~~Hermes'~~Hermes’ leverage ratio was ~~0.23~~0.9 to 1. ~~The~~

Both the Note Purchase Agreement and the Credit Agreement ~~also has~~have certain stated events of default and cross default provisions which would permit the lenders/counterparties to accelerate the repayment of debt outstanding if not cured within the applicable grace periods. The events of default generally include breaches of contract, failure to make required loan payments, insolvency, cessation of business, notice of lien or assessment, and other proceedings, whether voluntary or involuntary, that would require the repayment of amounts borrowed.

Future Cash Needs. Management expects that principal uses of cash will include funding business acquisitions and global expansion, funding distribution expenditures, paying incentive and base compensation, paying shareholder dividends, repaying debt obligations, paying taxes, repurchasing company stock, ~~purchasing ordinary shares of a subsidiary,~~ developing and seeding new products and strategies, modifying existing products, strategies and relationships, and funding property and equipment (including technology). Any number of factors may cause Federated ~~Hermes'~~Hermes’ future cash needs to increase. As a result of the highly regulated nature of the investment management business, management anticipates that aggregate expenditures for compliance and investment management personnel, compliance systems and technology and related professional and consulting fees may continue to increase.

After evaluating Federated ~~Hermes'~~Hermes’ projected liquid assets, expected continuing cash flow from operations, cash available from the Note Purchase Agreement, its borrowing capacity under the ~~Amended~~ Credit Agreement and its ability to obtain additional financing arrangements and issue debt or stock, management believes it will have sufficient liquidity to meet both its ~~present~~short-term and reasonably foreseeable long-term cash needs.

~~Financial Position~~

The following discussion summarizes significant changes in assets and liabilities that are not discussed elsewhere in Management's Discussion and Analysis of Financial Condition and Results of Operations. This discussion excludes certain material fluctuations primarily due to the HCL Acquisition (see Note (3) to the Consolidated Financial Statements).

Investments—Consolidated Investment Companies at September 30, 2021 decreased $37.3 million from December 31, 2020 primarily due to a decrease of $73.0 million related to the deconsolidation of three VREs and the liquidation of a VRE during the first nine months of 2021. This decrease was partially offset by an increase of $34.5 million due to the consolidation of a VRE and a VIE in the first nine months of 2021.

Investments—Affiliates and Other at September 30, 2021 increased $43.7 million from December 31, 2020 primarily due to the deconsolidation of two VREs in the first nine months of 2021 which reclassified Federated Hermes' investment into Investments—Affiliates and Other.

Accrued Compensation and Benefits at September 30, 2021 decreased $37.5 million from December 31, 2020 primarily due to the 2020 accrued annual incentive compensation being paid in the first quarter of 2021 ($133.9 million), partially offset by 2021 incentive compensation accruals recorded at September 30, 2021 ($95.9 million).

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

~~Long-Term Deferred Tax Liability,~~Financial Position

The following discussion summarizes significant changes in assets and liabilities that are not discussed elsewhere in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Investments—Consolidated Investment Companies at September 30, 2022 increased $1.7 million from December 31, 2021 primarily due to an increase of (1) $23.1 million related to the consolidation of a VIE and a VRE and (2) $14.8 million in net purchases in existing consolidated funds during the first nine months of 2022. These increases were partially offset by a decrease of (1) $20.3 million net depreciation on existing consolidated funds during the first nine months of 2022 and (2) $15.9 million related to the deconsolidation of VREs.

Investments—Affiliates and Other at September 30, 2022 decreased $18.4 million from December 31, 2021 primarily due to (1) $17.8 million in net depreciation, (2) a decrease of $4.3 million related to the consolidation of a VIE and a VRE which reclassified Federated Hermes' investments into Investments—Consolidated Investment Companies, (3) a decrease of $3.6 million due to foreign exchange rate fluctuations on existing investments and (4) $2.9 million in net redemptions. These decreases were partially offset by an increase of $10.1 million related to the deconsolidation of a VRE in the first nine months of 2022 which reclassified Federated Hermes’ investment into Investments—Affiliates and Other.

Intangible Assets, net at September 30, ~~2021 increased $17.4~~2022 decreased $64.4 million from December 31, ~~2020~~2021 primarily due to a $55.8 million decrease in the value of intangible assets denominated in a foreign currency as a result of foreign exchange rate fluctuations and $9.3 million of amortization expense.

Right-of-Use Assets, net at September 30, 2022 decreased $15.0 million from December 31, 2021 due primarily to annual amortization and Long-Term Lease Liabilities at September 30, 2022 decreased $16.9 million from December 31, 2021 primarily due to payments made on leases during 2022.

Accrued Compensation and Benefits at September 30, 2022 decreased $44.1 million from December 31, 2021 primarily due to the ~~revaluation of the foreign net deferred tax liability associated with the change~~2021 accrued annual incentive compensation being paid in the ~~UK tax rate~~first quarter 2022 ($123.4 million), partially offset by 2022 incentive compensation accruals recorded at September 30, 2022 ($78.3 million).

In July 2022, Federated Hermes’ board of directors authorized the retirement of 10 million treasury shares which restored these shares to authorized but unissued status. Federated Hermes recorded a $313.8 million reduction to Treasury Stock, at cost using the specific-identification method and a $42.7 million reduction to Class B common stock, at cost using the average cost method. The difference was recorded as a reduction to Retained Earnings and Additional Paid-In Capital from ~~19%~~Treasury Stock Transactions. There was no impact to ~~25% effective April 1, 2023.~~total equity as a result of this non-cash transaction.

Legal Proceedings

Federated Hermes has claims asserted against it from time to time. See Note ~~(15)~~(17) to the Consolidated Financial Statements for additional information.

Critical Accounting Policies

Federated ~~Hermes'~~Hermes’ Consolidated Financial Statements have been prepared in accordance with GAAP. In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Management continually evaluates the accounting policies and estimates it uses to prepare the Consolidated Financial Statements. In general, ~~management's~~management’s estimates are based on historical experience, information from third-party professionals and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results may differ from those estimates made by management and those differences may be material.

Of the significant accounting policies described in Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, management believes that ~~its policies regarding accounting for asset acquisitions and business combinations, goodwill and~~indefinite-lived intangible assets included in its Goodwill and ~~Hermes redeemable noncontrolling interest involve~~Intangible Assets policy involves a higher degree of judgment and complexity. See Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, Item 7 - ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section Critical Accounting Policies for a complete discussion of ~~these policies.~~this policy.

The ~~continued~~ uncertainty caused by the Pandemic resulted in management determining that an indicator of potential impairment existed beginning in the first quarter of 2020 for certain indefinite-lived intangible assets totaling £150.3 million ($~~202.5~~167.8 million as of September 30, ~~2021)~~2022) acquired in connection with the 2018 ~~HFML Acquisition.~~acquisition of a controlling interest in FHL. A discounted cash flow

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

analysis resulted in no impairment as of each quarter end ~~for 2020 and~~since the first ~~and second quarters~~quarter of ~~2021 since~~2020 as the estimated fair value of these intangible assets exceeded the carrying value. An additional discounted cash flow analysis prepared as of September 30, ~~2021~~2022 resulted in the estimated fair value exceeding the carrying value by less than 5%10%. The key assumptions in the discounted cash flow analysis include revenue growth rates, pre-tax profit margins and the discount rate applied to the projected cash flows. The risk of future impairment increases with a decrease in projected cash flows and/or an increase in the discount rate. As of September 30, ~~2021,~~2022, assuming all other assumptions remain static, an increase or decrease of 10% in projected revenue growth rates would result in a corresponding change to estimated fair value of approximately ~~6% and~~ 5%~~, respectively.~~. An increase or decrease of 10% in pre-tax profit margins would result in a corresponding change to estimated fair value of approximately 12%. An increase or decrease in the discount rate of 25 basis points would result in an inverse change to estimated fair value of approximately 3%2%. ~~The market volatility and other events related~~Further reductions to ~~the Pandemic could further reduce~~ the AUM, revenues and earnings or increases in the discount rate associated with these intangible assets ~~and~~ may result in subsequent impairment tests being based upon updated assumptions and future cash flow projections, which may result in an impairment. For additional information on risks related to the Pandemic, see Item 1A - Risk Factors included in Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Part I, Item 3. Quantitative and Qualitative Disclosures About Market Risk

Federated Hermes has certain investments in foreign operations, whose net assets and results of operations are exposed to foreign currency risk when translated into U.S. dollars upon consolidation. During 2021, a British Pound Sterling-denominated, majority-owned subsidiary of Federated Hermes entered into foreign currency forward transactions in order to hedge against foreign exchange rate fluctuations in the U.S. Dollar (combined notional amount of £67.6 million as of September 30, 2021). This subsidiary is exposed to foreign currency exchange risk as a result of a portion of its revenue being earned in U.S. Dollars. Management considered a hypothetical 20% fluctuation in the currency exchange rate and determined that the impact of such a fluctuation could impact Federated Hermes’ financial condition and results of operations by approximately $10 million.

As of September 30, ~~2021,~~2022, there were no ~~other~~ material changes to Federated ~~Hermes'~~Hermes’ exposures to market risk that would require an update to the disclosures provided in Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Part I, Item 4. Controls and Procedures

(a)Federated Hermes carried out an evaluation, under the supervision and with the participation of management, including Federated ~~Hermes'~~Hermes’ President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of Federated ~~Hermes'~~Hermes’ disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, ~~2021.~~2022. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that Federated ~~Hermes'~~Hermes’ disclosure controls and procedures were effective at September 30, ~~2021.~~2022.

(b)There has been no change in Federated ~~Hermes'~~Hermes’ internal control over financial reporting that occurred during the quarter ended September 30, ~~2021~~2022 that has materially affected, or is reasonably likely to materially affect, Federated ~~Hermes'~~Hermes’ internal control over financial reporting.

Part II, Item 1. Legal Proceedings

Information regarding this Item is contained in Note ~~(15)~~(17) to the Consolidated Financial Statements.

Part II, Item 1A. Risk Factors

~~There are no material changes to~~As discussed in Item 1A – Risk Factors – General Risk Factors – Economic and Market Risks – Potential Adverse Effects of a Decline or Disruption in the ~~risk factors included~~Economy or Markets in Federated ~~Hermes'~~Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021, geopolitical tensions or military escalation or other instability in certain countries or regions, and technology-related interruptions or cyber-attacks, can cause or contribute to volatility, illiquidity, economic or market downturns, loss of value, market and supply-chain disruptions or other conditions and have potentially adverse effects. See also Item 1A – Risk Factors – General Risk Factors – Other General Risks – Potential Adverse Effects of Unpredictable Events or Consequences (including the Pandemic) in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2021. Russia’s February 24, 2022 invasion of Ukraine and annexation of Ukrainian territory has generated substantial geopolitical uncertainty in Europe that has disrupted the European and global energy and other markets.Russia’s aggression also has led to sanctions being imposed against Russia, certain Russian nationals, and Belarus. Based on the Russian government’s aggression in Ukraine, many countries around the world - including the U.S., UK, Canada, Germany, and France - reduced Russia’s access to the world’s financial system through sanctions ranging from freezing assets to removing Russian banks from the SWIFT global transactions banking network, among others. Sanctions can result, among other effects, in the devaluation of Russian currency, downgrades in the country’s credit rating, and/or a decline in the value and liquidity of Russian securities, property or interests. These sanctions can also result in the freeze of Russian securities and/or funds invested in prohibited assets, impairing the ability to buy, sell, receive, or deliver those securities and/or assets. These sanctions or the threat of additional sanctions could also result in Russia taking counter measures or retaliatory actions, which may further impair the value and liquidity of Russian securities. For example, the Russian invasion of Ukraine has increased, or created the possibility of increased, cybersecurity attacks. Economic sanctions and other actions against Russian institutions, companies,

and individuals resulting from the ongoing conflict can also have a substantial negative impact on other economies and securities markets both regionally and globally, as well as on companies with operations in the conflict region. Any further sanctions, actions or escalation of cyber-attacks can exacerbate these risks. The impact of these geopolitical tensions and escalation, and resulting sanctions, actions, and escalation of cyber-attacks, is uncertain and can vary, including in material ways. Federated Hermes’ will continue to monitor developments regarding these geopolitical tensions and military escalation, and the resulting sanctions, actions, and escalation of cyber activity, and assess their impact on Federated Hermes’ Financial Condition.

Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) not applicable.

(b) not applicable.

(c) The following table summarizes stock repurchases under Federated ~~Hermes'~~Hermes’ share repurchase program during the third quarter ~~of 2021.~~2022.


		Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs1		Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs1
July2	July2	1,900	$	3.00	0	3,166,755	July2	90,300	$	31.91	85,000	5,077,000
August		130,000	32.58		130,000	3,036,755
September2		461,719	29.16		425,000	2,611,755
August2							August2	2,000	3.00		0	5,077,000
September							September	119,585	33.86		119,585	4,957,415
Total	Total	593,619	$	29.82	555,000	2,611,755	Total	211,885	$	32.74	204,585	4,957,415

1 In ~~April~~December 2021, the board of directors authorized a share repurchase program with no stated expiration date that allowed the repurchase of up to 7.5 million shares of Class B common stock. This program was fulfilled in September 2022. In June 2022, the board of directors authorized a share repurchase program with no stated expiration date that allows the repurchase of up to ~~4.0~~5.0 million shares of Class B common stock. No other program existed as of September 30, ~~2021.~~2022. See Note (13) to the Consolidated Financial Statements for additional information on ~~this program.~~these programs.

2 In July and ~~September 2021, 1,900~~August 2022, 5,300 and ~~36,719~~2,000 shares, respectively, of Class B common stock with a weighted-average price of $3.00 ~~and $0.87~~ per share ~~respectively,~~ were repurchased as employees forfeited restricted stock.

Part II, Item 6. Exhibits

The following exhibits required to be filed or furnished by Item 601 of Regulation S-K are filed or furnished herewith and incorporated by reference herein:

Exhibit 31.1 – Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

Exhibit 31.2 – Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)

Exhibit 32 – Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith)

Exhibit 101.INS – Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

Exhibit 101.SCH – Inline XBRL Taxonomy Extension Schema Document

Exhibit 101.CAL – Inline XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit 101.DEF – Inline XBRL Taxonomy Extension Definition Linkbase Document

Exhibit 101.LAB – Inline XBRL Taxonomy Extension Label Linkbase Document

Exhibit 101.PRE – Inline XBRL Taxonomy Extension Presentation Linkbase Document

Exhibit 104 – Cover Page Interactive Data File (embedded within the Inline XBRL document)

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Table of Contents

SIGNATURES

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

Federated Hermes, Inc.

(Registrant)

Date

~~October 29, 2021~~November 1, 2022

By:

/s/ J. Christopher Donahue

J. Christopher Donahue

President and Chief Executive Officer

Date

~~October 29, 2021~~November 1, 2022

By:

/s/ Thomas R. Donahue

Thomas R. Donahue

Chief Financial Officer

6159


Part I. Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets	4
		Consolidated Statements of Income	5
		Consolidated Statements of Comprehensive Income	6
		Consolidated Statements of Changes in Equity	7
		Consolidated Statements of Cash Flows	8
		Notes to the Consolidated Financial Statements	9
	Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	2423
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5857
	Item 4.	Controls and Procedures	5957
Part II. Other Information
	Item 1.	Legal Proceedings	5957
	Item 1A.	Risk Factors	5957
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5958

	Item 6.	Exhibits	6058
Signatures			6159