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, 2023~~March 31, 2024


☐			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 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 accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised 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 classes of common stock, as of the last practicable date: As of ~~October 20, 2023,~~April 19, 2024, the Registrant had outstanding 9,000 shares of Class A common stock and ~~86,245,850~~84,149,976 shares of Class B 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 “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,” and similar expressions. Among other forward-looking statements, such statements include certain statements relating to, or, as applicable, statements concerning management’s assessments, beliefs, expectations, assumptions, judgments, projections or estimates regarding: ~~the pandemic and its impact;~~ asset flows, levels, values and mix and their impact; the possibility and potential impact 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 recognition of revenues, expenses, gains, losses, income and earnings; the level and impact of reimbursements, rebates or assumptions of fund-related expenses 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 performance fees or carried interest will be earned or clawed back; the possibility of a recession occurring; whether and when revenue or expense is recognized; whether and when capital contributions could be made, the availability of insurance and probability of insurance reimbursements or recoveries in connection with ~~regard to~~ indemnification obligations or other claims; 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 amount of acquisition-related payment obligations; the results of negotiations involving consideration in business transactions; payment obligations pursuant to employment or incentive and business arrangements; vesting rights and requirements; business and market expansion opportunities, including acceleration of global growth; interest and principal payments 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;~~liquidity, including the amount and timing of expected future capital expenditures; the ability to raise additional capital; type, classification and consolidation of investments; uses of treasury stock; Federated Hermes’ product, strategy, and other service (as applicable, offering) and market performance and Federated Hermes’ performance indicators; investor preferences; ~~product and strategy~~offering demand, distribution, development and restructuring initiatives and related planning and timing; the effect, and degree of impact, of changes in customer relationships; ~~the probability of insurance recoveries,~~ the outcome and impact of legal proceedings; regulatory matters, including the pace, timing, impact, effects and other consequences of the current regulatory environment; the attractiveness and resiliency of money market funds; dedication of resources; accounting-related assessments, judgements and determinations; compliance, and related legal, compliance and other professional services

expenses; ~~and~~ interest rate, concentration, market, currency and other risks and their ~~impact.~~impact; and the impact of the special dividend on earnings per share and projected liquid assets. Any forward-looking statement is inherently subject to significant business, economic, competitive, regulatory and

other risks and uncertainties, many of which are difficult to predict and beyond Federated Hermes’ control. Among other risks and uncertainties, market conditions can change significantly and impact Federated Hermes’ business and results, including by changing Federated Hermes’ asset flows, levels, and mix, and business mix, which could cause a decline in revenues and net income, result in impairments and 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 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’ success in developing, structuring and distributing its ~~products and strategies,~~offerings, 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’ ~~products~~offerings to intermediary customers, opportunities to repurchase shares, 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’ risks and uncertainties also include liquidity and credit risks in Federated Hermes’ money market funds and revenue risk, which will be affected by yield levels in money market fund ~~products,~~offerings, Fee Waivers, changes in fair values of AUM, any additional regulatory reforms, investor preferences and confidence, and the ability of Federated Hermes to collect fees in connection with the management of such ~~products.~~offerings. 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’ Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

September 30,
2023

December 31,
2022

(unaudited)

March 31,
2024

December 31,
2023

ASSETS

Current Assets

Cash and Cash Equivalents

376,960

336,782

Investments—Consolidated Investment Companies

118,201

108,448

Investments—Affiliates and Other

59,272

76,524

Receivables, net of reserve of $21 and $21, respectively

72,524

58,068

Receivables—Affiliates

52,659

35,941

Prepaid Expenses

25,726

27,004

Other Current Assets

6,318

8,264

Total Current Assets

711,660

651,031

Long-Term Assets

Goodwill

801,556

800,417

Goodwill

Intangible Assets, net of accumulated amortization of $58,100 and $47,650, respectively

401,971

409,157

Property and Equipment, net of accumulated depreciation of $117,235 and $119,640, respectively

31,409

35,743

Intangible Assets, net of accumulated amortization of $66,747 and $64,112, respectively

Property and Equipment, net of accumulated depreciation of $121,187 and $119,852, respectively

Right-of-Use Assets, net

101,159

92,860

Other Long-Term Assets

32,585

31,271

Total Long-Term Assets

1,368,680

1,369,448

Total Assets

2,080,340

2,020,479

LIABILITIES

Current Liabilities

Accounts Payable and Accrued Expenses

79,733

73,901

Accrued Compensation and Benefits

124,602

149,760

Lease Liabilities

15,869

18,394

Income Taxes Payable

Other Current Liabilities

35,383

15,358

Total Current Liabilities

255,587

257,413

Long-Term Liabilities

Long-Term Debt

347,777

347,581

Long-Term Deferred Tax Liability, net

176,707

180,410

Long-Term Lease Liabilities

95,995

86,809

Other Long-Term Liabilities

33,605

40,753

Total Long-Term Liabilities

654,084

655,553

Total Liabilities

909,671

912,966

Commitments and Contingencies (Note (17))

TEMPORARY EQUITY

Redeemable Noncontrolling Interests in Subsidiaries

70,631

61,821

Redeemable Noncontrolling Interests in Subsidiaries

PERMANENT EQUITY

Federated Hermes, Inc. Shareholders’ Equity

Common Stock:

Class A, No Par Value, 20,000 Shares Authorized, 9,000 Shares Issued and Outstanding

189

Class B, No Par Value, 900,000,000 Shares Authorized, 99,505,456 Shares Issued

468,073

440,953

Additional Paid-In Capital from Treasury Stock Transactions

Retained Earnings

1,148,486

1,015,589

Treasury Stock, at Cost, 13,257,106 and 10,229,521 Shares Class B Common Stock, respectively

(473,332)

(365,363)

Treasury Stock, at Cost, 15,355,480 and 14,664,467 Shares Class B Common Stock, respectively

Accumulated Other Comprehensive Income (Loss), net of tax

(43,393)

(45,676)

Total Permanent Equity

1,100,038

1,045,692

Total Permanent Equity

Total Liabilities, Temporary Equity and Permanent Equity

2,080,340

2,020,479

(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
			March 31,
			March 31,
			March 31,
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2023		2022		2023		2022
Revenue	Revenue
Revenue
Revenue
Investment Advisory Fees, net—Affiliates
Investment Advisory Fees, net—Affiliates
Investment Advisory Fees, net—Affiliates	Investment Advisory Fees, net—Affiliates		$	215,673	$	206,394	$	666,983	$	574,081
Investment Advisory Fees, net—Other	Investment Advisory Fees, net—Other		61,098		57,250		184,106		180,600
Investment Advisory Fees, net—Other
Investment Advisory Fees, net—Other
Administrative Service Fees, net—Affiliates
Administrative Service Fees, net—Affiliates
Administrative Service Fees, net—Affiliates	Administrative Service Fees, net—Affiliates		88,023		75,021		252,402		218,710
Other Service Fees, net—Affiliates	Other Service Fees, net—Affiliates		33,507		38,265		102,364		85,120
Other Service Fees, net—Affiliates
Other Service Fees, net—Affiliates
Other Service Fees, net—Other
Other Service Fees, net—Other
Other Service Fees, net—Other	Other Service Fees, net—Other		4,355		4,213		12,222		13,404
Total Revenue	Total Revenue		402,656		381,143		1,218,077		1,071,915
Total Revenue
Total Revenue
Operating Expenses
Operating Expenses
Operating Expenses	Operating Expenses
Compensation and Related	Compensation and Related		139,123		126,668		435,884		388,719
Compensation and Related
Compensation and Related
Distribution
Distribution
Distribution	Distribution		89,838		91,032		280,258		223,837
Systems and Communications	Systems and Communications		21,213		19,294		63,259		57,234
Systems and Communications
Systems and Communications
Professional Service Fees
Professional Service Fees
Professional Service Fees	Professional Service Fees		17,561		14,203		52,881		41,647
Office and Occupancy	Office and Occupancy		10,632		10,622		34,910		32,457
Office and Occupancy
Office and Occupancy
Advertising and Promotional
Advertising and Promotional
Advertising and Promotional	Advertising and Promotional		3,857		6,496		13,308		13,965
Travel and Related	Travel and Related		4,034		3,421		11,101		8,543
Travel and Related
Travel and Related
Intangible Asset Related
Intangible Asset Related
Intangible Asset Related	Intangible Asset Related		3,451		2,894		10,194		9,319

Other	Other		11,523		9,733		31,303		23,147

Other

Other
Total Operating Expenses
Total Operating Expenses
Total Operating Expenses	Total Operating Expenses		301,232		284,363		933,098		798,868
Operating Income	Operating Income		101,424		96,780		284,979		273,047
Operating Income
Operating Income
Nonoperating Income (Expenses)
Nonoperating Income (Expenses)
Nonoperating Income (Expenses)	Nonoperating Income (Expenses)
Investment Income, net	Investment Income, net		6,160		2,599		16,228		5,270
Investment Income, net
Investment Income, net
Gain (Loss) on Securities, net
Gain (Loss) on Securities, net
Gain (Loss) on Securities, net	Gain (Loss) on Securities, net		(3,438)		(6,825)		2,094		(39,406)
Debt Expense	Debt Expense		(3,133)		(3,302)		(9,377)		(7,873)
Debt Expense
Debt Expense
Other, net
Other, net
Other, net	Other, net		(8)		(38)		101		31
Total Nonoperating Income (Expenses), net	Total Nonoperating Income (Expenses), net		(419)		(7,566)		9,046		(41,978)
Total Nonoperating Income (Expenses), net
Total Nonoperating Income (Expenses), net
Income Before Income Taxes
Income Before Income Taxes
Income Before Income Taxes	Income Before Income Taxes		101,005		89,214		294,025		231,069
Income Tax Provision	Income Tax Provision		26,739,000		21,640,000		75,291,000		58,140,000
Income Tax Provision
Income Tax Provision
Net Income Including the Noncontrolling Interests in Subsidiaries
Net Income Including the Noncontrolling Interests in Subsidiaries
Net Income Including the Noncontrolling Interests in Subsidiaries	Net Income Including the Noncontrolling Interests in Subsidiaries		74,266		67,574		218,734		172,929
Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries	Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries		(760)		(1,905)		1,932		(10,070)
Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries
Less: Net Income (Loss) Attributable to the Noncontrolling Interests in Subsidiaries
Net Income
Net Income
Net Income	Net Income		$	75,026	$	69,479	$	216,802	$	182,999
Amounts Attributable to Federated Hermes, Inc.	Amounts Attributable to Federated Hermes, Inc.
Amounts Attributable to Federated Hermes, Inc.
Amounts Attributable to Federated Hermes, Inc.
Earnings Per Common Share—Basic and Diluted
Earnings Per Common Share—Basic and Diluted
Earnings Per Common Share—Basic and Diluted	Earnings Per Common Share—Basic and Diluted		$	0.86	$	0.78	$	2.44	$	2.02

Cash Dividends Per Share	Cash Dividends Per Share		$	0.28	$	0.27	$	0.83	$	0.81

Cash Dividends Per Share

Cash Dividends Per Share

(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
			March 31,
			March 31,
			March 31,
			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2023		2022		2023		2022
Net Income Including the Noncontrolling Interests in Subsidiaries	Net Income Including the Noncontrolling Interests in Subsidiaries		$	74,266	$	67,574	$	218,734	$	172,929
Net Income Including the Noncontrolling Interests in Subsidiaries
Net Income Including the Noncontrolling Interests in Subsidiaries

Other Comprehensive Income (Loss), net of tax

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
Permanent Equity

Foreign Currency Translation Gain (Loss)

Foreign Currency Translation Gain (Loss)

Foreign Currency Translation Gain (Loss)	Foreign Currency Translation Gain (Loss)		(21,814)		(43,760)		2,283		(103,778)

Temporary Equity	Temporary Equity

Temporary Equity

Temporary Equity
Foreign Currency Translation Gain (Loss)
Foreign Currency Translation Gain (Loss)
Foreign Currency Translation Gain (Loss)	Foreign Currency Translation Gain (Loss)		(454)		(1,713)		106		(3,238)
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax		(22,268)		(45,473)		2,389		(107,016)
Other Comprehensive Income (Loss), net of tax
Other Comprehensive Income (Loss), net of tax
Comprehensive Income Including the Noncontrolling Interests in Subsidiaries	Comprehensive Income Including the Noncontrolling Interests in Subsidiaries		51,998		22,101		221,123		65,913
Comprehensive Income Including the Noncontrolling Interests in Subsidiaries
Comprehensive Income Including the Noncontrolling Interests in Subsidiaries
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests in Subsidiaries
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests in Subsidiaries
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests in Subsidiaries	Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests in Subsidiaries		(1,214)		(3,618)		2,038		(13,308)

Comprehensive Income Attributable to Federated Hermes, Inc.	Comprehensive Income Attributable to Federated Hermes, Inc.		$	53,212	$	25,719	$	219,085	$	79,221

Comprehensive Income Attributable to Federated Hermes, Inc.

Comprehensive Income Attributable to Federated Hermes, Inc.

(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 Interests 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 Interests in Subsidiaries/ Temporary Equity
Balance at December 31, 2022		$	441,142	$	0	$	1,015,589	$	(365,363)	$	(45,676)		$	1,045,692	$	61,821

Balance at December 31, 2023
Net Income (Loss)	Net Income (Loss)	0		0		69,601		0		0			69,601		1,865
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax	0		0		0		0		9,620			9,620		232
Subscriptions—Redeemable Noncontrolling Interest Holders	Subscriptions—Redeemable Noncontrolling Interest Holders	0		0		0		0		0			0		12,776
Consolidation (Deconsolidation)	Consolidation (Deconsolidation)	0		0		0		0		0			0		(33,962)
Stock Award Activity	Stock Award Activity	10,677		0		(9,950)		9,950		0			10,677		0
Dividends Declared	Dividends Declared	0		0		(24,145)		0		0			(24,145)		0
Distributions to Noncontrolling Interests in Subsidiaries	Distributions to Noncontrolling Interests in Subsidiaries	0		0		0		0		0			0		(3,224)

Purchase of Treasury Stock	Purchase of Treasury Stock	0		0		0		(4,742)		0			(4,742)		0

Balance at March 31, 2023		$	451,819	$	0	$	1,051,095	$	(360,155)	$	(36,056)		$	1,106,703	$	39,508

Net Income (Loss)		0		0		72,175		0		0			72,175		827
Other Comprehensive Income (Loss), net of tax		0		0		0		0		14,477			14,477		328
Subscriptions—Redeemable Noncontrolling Interest Holders		0		0		0		0		0			0		19,684
Consolidation (Deconsolidation)		0		0		0		0		0			0		12,119
Stock Award Activity		8,970		0		(39)		20		0			8,951		0
Dividends Declared		0		0		(25,084)		0		0			(25,084)		0
Distributions to Noncontrolling Interests in Subsidiaries		0		0		0		0		0			0		(14,454)

Purchase of Treasury Stock

Purchase of Treasury Stock	Purchase of Treasury Stock	0		0		0		(43,366)		0			(43,366)		0

Balance at June 30, 2023		$	460,789	$	0	$	1,098,147	$	(403,501)	$	(21,579)		$	1,133,856	$	58,012

Net Income (Loss)		0		0		75,026		0		0			75,026		(760)
Other Comprehensive Income (Loss), net of tax		0		0		0		0		(21,814)			(21,814)		(454)
Subscriptions—Redeemable Noncontrolling Interest Holders		0		0		0		0		0			0		35,323
Consolidation (Deconsolidation)		0		0		0		0		0			0		(6,601)
Stock Award Activity		7,473		15		0		0		0			7,488		0
Dividends Declared		0		0		(24,687)		0		0			(24,687)		0
Distributions to Noncontrolling Interest in Subsidiaries		0		0		0		0		0			0		(14,889)
Balance at March 31, 2024
Balance at March 31, 2024
Balance at March 31, 2024

Purchase of Treasury Stock		0		0		0		(69,831)		0			(69,831)		0

Balance at September 30, 2023		$	468,262	$	15	$	1,148,486	$	(473,332)	$	(43,393)		$	1,100,038	$	70,631

																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 Interests in Subsidiaries/ Temporary Equity
Balance at December 31, 2021		$	449,118	$	0	$	1,187,001	$	(538,464)	$	16,362	$	1,114,017	$	63,202

Balance at December 31, 2022

Balance at December 31, 2022

Balance at December 31, 2022

Net Income (Loss)
Net Income (Loss)
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		0		0		(14,221)		0		0		(14,221)		14,221
Acquisition of Additional Equity of FHL		0		3,518		0		34,048		0		37,566		(37,805)
Purchase of Treasury Stock		0		0		0		(102,537)		0		(102,537)		0
Balance at March 31, 2022		$	458,406	$	3,518	$	1,191,575	$	(594,806)	$	(772)	$	1,057,921	$	48,569

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

Stock Award Activity		9,430		(46)		0		62		0		9,446		0
Dividends Declared		0		0		(24,705)		0		0		(24,705)		0
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		$	467,836	$	3,472	$	1,224,527	$	(684,286)	$	(43,656)	$	967,893	$	54,731

Net Income (Loss)		0		0		69,479		0		0		69,479		(1,905)
Other Comprehensive Income (Loss), net of tax		0		0		0		0		(43,760)		(43,760)		(1,713)
Subscriptions—Redeemable Noncontrolling Interest Holders		0		0		0		0		0		0		4,494
Consolidation (Deconsolidation)		0		0		0		0		0		0		15,599
Stock Award Activity		8,895		0		0		0		0		8,895		0
Dividends Declared		0		0		(24,141)		0		0		(24,141)		0
Distributions to Noncontrolling Interest in Subsidiaries		0		0		0		0		0		0		(16,620)

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		(6,937)		0		(6,937)		0

Balance at September 30, 2022		$	434,031	$	0	$	1,002,201	$	(377,387)	$	(87,416)	$	971,429	$	54,586
Purchase of Treasury Stock
Balance at March 31, 2023

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


Consolidated Statements of Cash Flows	Consolidated Statements of Cash Flows						Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)	(unaudited)						(unaudited)
			Nine Months Ended
			September 30,
			2023		2022
		Three Months Ended							Three Months Ended
		March 31,							March 31,
		2024						2024		2023
Operating Activities	Operating Activities
Net Income Including the Noncontrolling Interests in Subsidiaries
Net Income Including the Noncontrolling Interests in Subsidiaries
Net Income Including the Noncontrolling Interests in Subsidiaries	Net Income Including the Noncontrolling Interests in Subsidiaries		$	218,734	$	172,929
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		20,817		21,197

Depreciation and Amortization

Depreciation and Amortization
Share-Based Compensation Expense	Share-Based Compensation Expense		27,165		27,619
Subsidiary Share-Based Compensation Expense			0		707

(Gain) Loss on Disposal of Assets
(Gain) Loss on Disposal of Assets
(Gain) Loss on Disposal of Assets	(Gain) Loss on Disposal of Assets		(157)		3,986
Provision (Benefit) for Deferred Income Taxes	Provision (Benefit) for Deferred Income Taxes		(3,984)		(6,969)

Consolidation/(Deconsolidation) of Other Entities	Consolidation/(Deconsolidation) of Other Entities		3,490		(20)

Consolidation/(Deconsolidation) of Other Entities

Consolidation/(Deconsolidation) of Other Entities

Net Unrealized (Gain) Loss on Investments
Net Unrealized (Gain) Loss on Investments
Net Unrealized (Gain) Loss on Investments	Net Unrealized (Gain) Loss on Investments		(1,920)		35,425
Net Sales (Purchases) of Investments—Consolidated Investment Companies	Net Sales (Purchases) of Investments—Consolidated Investment Companies		(36,311)		(26,216)

Other Changes in Assets and Liabilities:	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
(Increase) Decrease in Receivables, net	(Increase) Decrease in Receivables, net		(30,981)		4,537
(Increase) Decrease in Prepaid Expenses and Other Assets	(Increase) Decrease in Prepaid Expenses and Other Assets		19,389		(23,734)
Increase (Decrease) in Accounts Payable and Accrued Expenses	Increase (Decrease) in Accounts Payable and Accrued Expenses		(23,942)		(22,984)
Increase (Decrease) in Other Liabilities	Increase (Decrease) in Other Liabilities		(10,101)		5,058
Net Cash Provided (Used) by Operating Activities	Net Cash Provided (Used) by Operating Activities		182,199		191,535
Investing Activities	Investing Activities
Purchases of Investments—Affiliates and Other	Purchases of Investments—Affiliates and Other		(13,600)		(18,606)
Purchases of Investments—Affiliates and Other
Purchases of Investments—Affiliates and Other

Proceeds from Redemptions of Investments—Affiliates and Other
Proceeds from Redemptions of Investments—Affiliates and Other
Proceeds from Redemptions of Investments—Affiliates and Other	Proceeds from Redemptions of Investments—Affiliates and Other		27,967		21,389
Cash Paid for Property and Equipment	Cash Paid for Property and Equipment		(5,803)		(4,094)

Net Cash Provided (Used) by Investing Activities	Net Cash Provided (Used) by Investing Activities		8,564		(1,311)

Net Cash Provided (Used) by Investing Activities

Net Cash Provided (Used) by Investing Activities
Financing Activities	Financing Activities
Dividends Paid
Dividends Paid
Dividends Paid	Dividends Paid		(73,963)		(73,804)
Purchases of Treasury Stock	Purchases of Treasury Stock		(112,013)		(211,216)
Distributions to Noncontrolling Interests in Subsidiaries	Distributions to Noncontrolling Interests in Subsidiaries		(32,567)		(22,144)
Contributions from Noncontrolling Interests in Subsidiaries	Contributions from Noncontrolling Interests in Subsidiaries		67,783		50,148

Cash paid for Business Acquisitions	Cash paid for Business Acquisitions		(857)		(7,053)
Proceeds from New Borrowings			0		488,300
Cash paid for Business Acquisitions
Cash paid for Business Acquisitions

Payments on Debt			0		(311,650)

Other Financing Activities

Other Financing Activities

Other Financing Activities	Other Financing Activities		15		(2,571)
Net Cash Provided (Used) by Financing Activities	Net Cash Provided (Used) by Financing Activities		(151,602)		(89,990)
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		1,120		(29,980)
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		40,281		70,254
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, Beginning of Period		340,955		238,052
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period	Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents, End of Period		381,236		308,306
Less: Restricted Cash Recorded in Other Current Assets	Less: Restricted Cash Recorded in Other Current Assets		3,886		3,516
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		390		270
Cash and Cash Equivalents	Cash and Cash Equivalents		$	376,960	$	304,520

(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 (which include separately managed accounts, institutional accounts, certain sub-advised funds and other managed 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 of Federated Hermes included herein (Consolidated Financial Statements) have been prepared in accordance with 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 Consolidated Financial Statements, management is required to make estimates and assumptions that affect the amounts reported therein and in the accompanying notes. Actual results may differ from those estimates, and such differences may be material to the Consolidated Financial Statements.

The Consolidated Financial Statements should be read in conjunction with Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023. Certain items reported in previous periods have been reclassified to conform to the current period’s presentation.

(2) Recent Accounting Pronouncements

Recently Issued Accounting Guidance Not Yet Adopted

Segment Reporting

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU updates reportable segment disclosures by expanding the frequency and extent of segment disclosures. The update is effective for Federated Hermes for the December 31, 2024 Form 10-K, and for interim periods starting in fiscal year 2025. Early adoption is permitted and requires the retrospective adoption method. Management is currently evaluating this ASU to determine its impact on Federated Hermes’ disclosures.

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU updates income tax disclosures by requiring annual disclosures of disaggregated information, based on meeting a quantitative threshold, about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The update is effective for Federated Hermes for the December 31, 2025 Form 10-K, with early adoption permitted, and allows for either the prospective or retrospective adoption method. Management is currently evaluating this ASU to determine its impact on Federated Hermes’ disclosures.

(3) Significant Accounting Policies

For a complete listing of Federated Hermes’ significant accounting policies, please refer to Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2022. The following previously disclosed significant accounting policy has been updated.~~

~~Principles of Consolidation~~

~~Consolidation of Variable Interest Entities~~

Federated Hermes has a controlling financial interest in variable interest entities (VIEs) 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.

Federated Hermes manages carried interest vehicles (CIVs), whose primary purpose is to collect and distribute carried interest paid by foreign private equity and infrastructure funds, that have been determined to be VIEs. As the primary beneficiary, Federated Hermes consolidates certain CIVs. As a result, when carried interest is recognized as revenue, a portion of this revenue is allocated to current and former employee limited partners and is recorded to Compensation and Related expense. Financial information for the CIVs 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.

~~(3) Business Combination~~

~~CWH Acquisition~~

Effective October 1, 2022, Federated Hermes completed the acquisition of substantially all of the assets of C.W. Henderson and Associates, Inc. (CWH), a Chicago-based registered investment advisor specializing in the management of tax-exempt municipal securities (CWH Acquisition). This acquisition enhanced Federated Hermes’ existing separately managed accounts business. The CWH Acquisition included an upfront cash payment of $28.1 million. The purchase agreement also provides for a series of contingent purchase price payments, which can total as much as $17.6 million in the aggregate and is payable annually over the first five years if certain levels of net revenue growth are achieved.

~~Federated Hermes performed a valuation of the fair value of the CWH Acquisition. The accounting for this acquisition was finalized in the third quarter~~ 2023. ~~There were no changes to provisional amounts for the acquired assets and assumed liabilities.~~

Table of Contents

Notes to the Consolidated Financial Statements (continued)

(unaudited)

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

~~(in millions)~~

~~Right-of-Use Asset~~

~~0.8~~

~~Intangible Assets~~1

~~15.4~~

~~Goodwill~~2

~~16.4~~

~~Less: Lease Liability Assumed~~

~~0.8~~

~~Less: Fair Value of Contingent Consideration~~

~~3.7~~

~~Total Upfront Purchase Price Consideration~~

~~28.1~~

1 Includes $14.8 million for customer relationships with an estimated useful life of 12 years and $0.6 million for a trade name with an estimated useful life of five years, all of which are recorded in Intangibles Assets, net on the Consolidated Balance Sheets.

2 The goodwill recognized is attributable to enhanced revenue and AUM growth opportunities from future investors and the assembled workforce of the CWH business and is deductible for tax purposes.

(4) Revenue from Contracts with Customers

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


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in thousands)
(in thousands)
(in thousands)	(in thousands)	2023		2022		2023		2022
Money market	Money market	$	186,760	$	170,542	$	559,622	$	402,639
Money market
Money market
Equity
Equity
Equity	Equity	123,485		127,183		371,282		406,642
Fixed-income	Fixed-income	47,142		49,197		142,590		159,025
Fixed-income
Fixed-income
Other1
Other1
Other1	Other1	45,269		34,221		144,583		103,609
Total Revenue	Total Revenue	$	402,656	$	381,143	$	1,218,077	$	1,071,915
Total Revenue
Total Revenue

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’ revenue disaggregated by performance obligation:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in thousands)
(in thousands)
(in thousands)	(in thousands)	2023		2022		2023		2022
Asset Management1	Asset Management1	$	276,771	$	263,644	$	851,089	$	754,681
Asset Management1
Asset Management1
Administrative Services
Administrative Services
Administrative Services	Administrative Services	88,023		75,021		252,402		218,710
Distribution2	Distribution2	31,466		36,026		96,360		78,285
Distribution2
Distribution2
Other3
Other3
Other3	Other3	6,396		6,452		18,226		20,239
Total Revenue	Total Revenue	$	402,656	$	381,143	$	1,218,077	$	1,071,915
Total Revenue
Total Revenue

1 The performance obligation can 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’ revenue disaggregated by geographical market:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in thousands)
(in thousands)
(in thousands)	(in thousands)	2023		2022		2023		2022
Domestic	Domestic	$	322,028	$	311,254	$	971,077	$	849,570
Domestic
Domestic
Foreign1
Foreign1
Foreign1	Foreign1	80,628		69,889		247,000		222,345
Total Revenue	Total Revenue	$	402,656	$	381,143	$	1,218,077	$	1,071,915
Total Revenue
Total Revenue

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

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

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


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in thousands)
(in thousands)
(in thousands)	(in thousands)	2023		2022		2023		2022
Federated Hermes Funds	Federated Hermes Funds	$	337,203	$	319,680	$	1,021,748	$	877,910
Federated Hermes Funds
Federated Hermes Funds
Separate Accounts
Separate Accounts
Separate Accounts	Separate Accounts	61,098		57,250		184,106		180,600
Other1	Other1	4,355		4,213		12,223		13,405
Other1
Other1
Total Revenue	Total Revenue	$	402,656	$	381,143	$	1,218,077	$	1,071,915
Total Revenue
Total Revenue

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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Notes to the Consolidated Financial Statements (continued)
(unaudited)

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, 2023.~~March 31, 2024. Generally, contracts are billed in arrears on a quarterly basis and have a three-year duration, after which the customer can terminate the agreement with notice, generally from three to twelve months. Based on existing contracts and the applicable foreign exchange rates as of ~~September 30, 2023,~~March 31, 2024, Federated Hermes may recognize future fixed revenue from these services as presented in the following table:


(in thousands)	(in thousands)
Remainder of 2023		$	3,454
2024		7,243
Remainder of 2024
Remainder of 2024
Remainder of 2024
2025	2025	2,225
2026 and Thereafter		1,121
2026
2027 and Thereafter
Total Remaining Unsatisfied Performance Obligations	Total Remaining Unsatisfied Performance Obligations	$	14,043

(5) Concentration Risk

(a) Revenue Concentration by Asset Class

The following table presents Federated Hermes’ significant revenue concentration by asset class:
Nine Months Ended
September 30,
2023 2022
Money Market Assets 46 % 37 %
Equity Assets 30 % 38 %
Fixed-Income Assets 12 % 15 %

The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily the result of an increase in money market revenue due to the elimination of fee waivers in order for certain money market funds to maintain positive or zero net yields (Voluntary Yield-related Fee Waivers) and higher average assets. See section below entitled Low Short-Term Interest Rates.

The change in the relative proportion of Federated Hermes’ revenue attributable to equity and fixed-income assets for the nine months ended September 30, 2023, as compared to the same period in 2022, was primarily the result of increased money market revenue described above, as well as decreased equity revenue from lower average equity assets and decreased fixed-income revenue from lower average fixed-income assets and asset mix in 2023.

~~Low Short-Term Interest Rates~~

In March 2020, in response to disrupted economic activity as a result of the outbreak of a novel coronavirus (the Pandemic), the Federal Open Market Committee (FOMC) of the Federal Reserve Board (Fed) 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 was not sufficient to cover all of the fund’s operating expenses. Beginning in the first quarter 2020, Federated Hermes had implemented Voluntary Yield-related Fee Waivers. These waivers

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

had been partially offset by related reductions in distribution expense as a result of Federated 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 raised the federal funds target rate multiple times in 2022 and 2023. The range is currently at 5.25% - 5.50% as of the September 2023 FOMC meeting. These rate increases eliminated the net negative pre-tax impact of the Voluntary Yield-related Fee Waivers in the second half of 2022.

There were no Voluntary Yield-related Fee Waivers during the three and nine months ended September 30, 2023. There were no material Voluntary Yield-related Fee Waivers during the three months 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.


	Three Months Ended
	March 31,
	2024		2023
Money Market Assets	51	%	47	%
Equity Assets	30	%	33	%
Fixed-Income Assets	12	%	13	%

(b) Revenue Concentration by Investment Fund Strategy

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


	Three Months Ended
	March 31,
	2024		2023
Federated Hermes Government Obligations Fund	15	%	14	%
Federated Hermes Strategic Value Dividend strategy1	8	%	10	%

1Strategy includes Federated Hermes ~~Government Obligations Fund, was 14% for both the three-~~Funds and ~~nine-month periods ended September 30, 2023, and 14% and 11% for the three- and nine-month periods ended September 30, 2022, respectively.~~ Separate Accounts

A significant and prolonged decline in the AUM in this fund or strategy could 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 ~~these funds.~~this fund or strategy.

Approximately 11% of Federated Hermes’ total revenue for ~~both~~ the ~~three-~~three-month period ended March 31, 2024, and ~~nine-month periods ended September 30, 2023, and 14% and 11%~~13% for the ~~three- and nine-month periods~~three-month period ended ~~September 30, 2022, respectively,~~March 31, 2023, was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary. Significant negative changes in Federated Hermes’ relationship with this intermediary could 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, carried interest vehicles 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,~~offerings, in order to provide investable cash to establish a performance history. Federated 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

Table of Contents



Notes to the Consolidated Financial Statements (continued)
(unaudited)

Hermes Fund. Generally, neither creditors of, nor equity investors in, the Federated Hermes Funds have any recourse to Federated 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 could implement fee waivers, rebates or expense reimbursements for various Federated Hermes Funds for competitive reasons (such as ~~Voluntary~~waivers to maintain the yields of certain money market funds at or above zero (Voluntary Yield-related Fee ~~Waivers~~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, 2023,~~March 31, 2024, Fee Waivers totaled ~~$142.4~~$108.2 million, ~~and $398.8 million, respectively,~~ of which ~~$114.0~~$81.1 million ~~and $313.5 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, 2022,~~March 31, 2023, Fee Waivers totaled ~~$118.2~~$125.2 million, ~~and $444.7 million, respectively,~~ of which ~~$89.1~~$96.1 million ~~and $351.0 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 could 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 money market Federated Hermes Funds. In these instances, such capital contributions typically are intended to either offset realized losses or other permanent impairments to a fund’s net asset value (NAV), increase the market-based NAV per share of the 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

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

(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 ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

In accordance with Federated 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, 2023~~March 31, 2024 and December 31, ~~2022.~~2023.

(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’ Consolidated Balance Sheets primarily in Investments—Consolidated Investment Companies and Redeemable Noncontrolling Interests in Subsidiaries.

(b) Consolidated Variable Interest Entities

As of the periods ended ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, 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’ net interest in the consolidated VIEs for each period presented:


(in millions)	(in millions)	September 30, 2023		December 31, 2022		(in millions)	March 31, 2024	December 31, 2023
Cash and Cash Equivalents	Cash and Cash Equivalents	$	10.8	$	8.0
Investments—Consolidated Investment Companies	Investments—Consolidated Investment Companies	61.2		50.1
Receivables-Affiliates	Receivables-Affiliates	11.6		0.3
Other Current Assets	Other Current Assets	0.4		0.4
Other Long-Term Assets	Other Long-Term Assets	12.4		13.4
Less: Liabilities	Less: Liabilities	19.7		5.7
Less: Accumulated Other Comprehensive Income (Loss), net of tax	Less: Accumulated Other Comprehensive Income (Loss), net of tax	0.4		1.2
Less: Redeemable Noncontrolling Interests in Subsidiaries	Less: Redeemable Noncontrolling Interests in Subsidiaries	56.3		49.5
Federated Hermes’ Net Interest in VIEs	Federated Hermes’ Net Interest in VIEs	$	20.0	$	15.8

Federated Hermes’ net interest in the consolidated VIEs represents the value of Federated Hermes’ economic ownership interest in those VIEs. During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, Federated Hermes consolidated ~~an existing~~one VIE due primarily to ~~Federated Hermes increasing its ownership in this fund. One VIE was deconsolidated in the first quarter 2023 due to an increase in~~redemptions from outside investments which briefly reduced Federated Hermes’ ownership below controlling interest level. This VIE was reconsolidated in the third quarter 2023 when Federated Hermes increased its ownership in the VIE. In the second quarter 2023, Federated Hermes consolidated a new fund, which was deconsolidated in the third quarter 2023 due to an increase in outside investments, as well as Federated Hermes redeeming a portion of its investment in the fund, resulting in a decrease in its ownership below controlling interest level.investors. There was no material impact to the Consolidated Statements of Income as a result of ~~these consolidations and deconsolidations~~this consolidation on a net basis.

Table of September 30, 2023, the consolidation of a certain VIE included a receivable of $9.8 million recorded in Receivables—Affiliates and a corresponding liability of $10.0 million recorded in Other Current Liabilities related to carried interest earned in September 2023. After it was received by the consolidated VIE, the carried interest was dispersed by that VIE to settle the $10.0 million liability in October 2023.Contents



Notes to the Consolidated Financial Statements (continued)
(unaudited)

Federated 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’ 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, 2023 and December 31, 2022,~~ Federated Hermes’ maximum risk of loss related to investments in variable interests in non-consolidated VIEs was ~~$112.0~~$3.4 million (primarily recorded in Other Long-Term Assets on the Consolidated Balance Sheets) at March 31, 2024 and ~~$101.7~~was $133.9 million ~~respectively,~~ (primarily recorded in Cash and Cash Equivalents on the Consolidated Balance Sheets) at December 31, 2023, and was entirely related to Federated Hermes Funds. AUM for these non-consolidated Federated Hermes Funds totaled ~~$8.6~~$0.2 billion and ~~$5.4~~$9.3 billion at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

2023, respectively. Of the Receivables—Affiliates at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022, $0.8~~2023, $0.3 million and ~~$0.7~~$1.1 million, respectively, was related to non-consolidated VIEs and represented Federated Hermes’ maximum risk of loss from non-consolidated VIE receivables.

(7) Investments

At ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, Federated Hermes held investments in non-consolidated fluctuating-value Federated Hermes Funds of ~~$52.4~~$67.3 million and ~~$67.0~~$99.5 million, respectively, primarily in mutual funds which represent equity investments for Federated Hermes, and held investments in non-affiliate Separate Accounts of ~~$6.9~~$7.5 million ~~and $9.5 million at September 30, 2023~~for both periods ended March 31, 2024 and December 31, ~~2022, respectively,~~2023, that were included in Investments—Affiliates and Other on the Consolidated Balance Sheets. Federated Hermes’ investments held in Separate Accounts as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 were primarily composed of stocks of large domestic and foreign companies ($~~3.2~~3.7 million and $3.4 million, respectively) and domestic debt securities ($~~2.3~~2.4 million ~~and $4.6 million, respectively)~~for both periods).

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’ Consolidated Balance Sheets.

The investments held by consolidated Federated Hermes Funds as of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023 were primarily composed of domestic and foreign debt securities ($~~58.2~~59.1 million ~~and $57.8 million, respectively)~~for both periods), stocks of large ~~domestic~~foreign and ~~foreign~~domestic companies ($~~54.2~~59.0 million and ~~$45.3~~$4.9 million, respectively), and stocks of small and mid-sized domestic and foreign companies ($~~3.6~~4.6 million and ~~$3.3 million, respectively) and mutual funds ($2.2 million and $2.1~~$4.2 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’ investments:


		Three Months Ended				Nine Months Ended
		September 30,				September 30,

		March 31,
		March 31,
		March 31,
(in thousands)
(in thousands)
(in thousands)	(in thousands)	2023		2022		2023		2022
Investments—Consolidated Investment Companies	Investments—Consolidated Investment Companies
Investments—Consolidated Investment Companies
Investments—Consolidated Investment Companies
Net Unrealized Gains (Losses)
Net Unrealized Gains (Losses)
Net Unrealized Gains (Losses)	Net Unrealized Gains (Losses)	$	(1,680)	$	1,137	$	2,582	$	(16,446)
Net Realized Gains (Losses)1	Net Realized Gains (Losses)1	(125)		(4,568)		(1,101)		(6,047)
Net Realized Gains (Losses)1
Net Realized Gains (Losses)1
Net Gains (Losses) on Investments—Consolidated Investment Companies
Net Gains (Losses) on Investments—Consolidated Investment Companies
Net Gains (Losses) on Investments—Consolidated Investment Companies	Net Gains (Losses) on Investments—Consolidated Investment Companies	(1,805)		(3,431)		1,481		(22,493)
Investments—Affiliates and Other	Investments—Affiliates and Other
Investments—Affiliates and Other
Investments—Affiliates and Other
Net Unrealized Gains (Losses)
Net Unrealized Gains (Losses)
Net Unrealized Gains (Losses)	Net Unrealized Gains (Losses)	(1,518)		(3,248)		(662)		(18,979)
Net Realized Gains (Losses)1	Net Realized Gains (Losses)1	(115)		(146)		1,275		2,066
Net Realized Gains (Losses)1
Net Realized Gains (Losses)1
Net Gains (Losses) on Investments—Affiliates and Other
Net Gains (Losses) on Investments—Affiliates and Other
Net Gains (Losses) on Investments—Affiliates and Other	Net Gains (Losses) on Investments—Affiliates and Other	(1,633)		(3,394)		613		(16,913)
Gain (Loss) on Securities, net	Gain (Loss) on Securities, net	$	(3,438)	$	(6,825)	$	2,094	$	(39,406)
Gain (Loss) on Securities, net
Gain (Loss) on Securities, net

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

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Notes to the Consolidated Financial Statements (continued)
(unaudited)

(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 can 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.

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

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.

(a) Fair Value Measurements on a Recurring Basis

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


(in thousands)	(in thousands)	Level 1		Level 2		Level 3		Total
September 30, 2023

(in thousands)

(in thousands)										Level 1	Level 2	Level 3	Total
March 31, 2024
Financial Assets	Financial Assets
Financial Assets
Financial Assets
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and Cash Equivalents	Cash and Cash Equivalents	$	376,960	$	0	$	0	$	376,960
Investments—Consolidated Investment Companies	Investments—Consolidated Investment Companies	60,037		58,164		0		118,201
Investments—Affiliates and Other	Investments—Affiliates and Other	56,840		2,407		25		59,272
Other1	Other1	6,623		0		0		6,623
Total Financial Assets	Total Financial Assets	$	500,460	$	60,571	$	25	$	561,056

Total Financial Liabilities2	Total Financial Liabilities2	$	48	$	3,467	$	8,180	$	11,695

December 31, 2022

Total Financial Liabilities2

Total Financial Liabilities2

December 31, 2023
December 31, 2023
December 31, 2023
Financial Assets	Financial Assets
Financial Assets
Financial Assets
Cash and Cash Equivalents
Cash and Cash Equivalents
Cash and Cash Equivalents	Cash and Cash Equivalents	$	336,782	$	0	$	0	$	336,782
Investments—Consolidated Investment Companies	Investments—Consolidated Investment Companies	49,119		59,329		0		108,448
Investments—Affiliates and Other	Investments—Affiliates and Other	71,369		5,130		25		76,524
Other1	Other1	6,538		469		0		7,007
Total Financial Assets	Total Financial Assets	$	463,808	$	64,928	$	25	$	528,761

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

Total Financial Liabilities2

Total Financial Liabilities2

1 Amounts primarily consist of restricted cash, ~~and~~ security deposits ~~as of September 30, 2023~~ and ~~December 31, 2022.~~derivative assets.

2 Amounts primarily consist of acquisition-related future contingent consideration liabilities and ~~unrealized~~ derivative ~~losses as of September 30, 2023 and acquisition-related future contingent consideration liabilities as of December 31, 2022.~~liabilities.

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, 2023~~March 31, 2024 or December 31, ~~2022.~~2023.

Cash and Cash Equivalents

Cash and Cash Equivalents include deposits with banks and investments in money market funds. Investments in money market funds totaled ~~$329.5~~$310.9 million and ~~$289.8~~$333.3 million at ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, 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.

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Notes to the Consolidated Financial Statements (continued)
(unaudited)

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 values of certain securities held by consolidated Federated Hermes Funds which are determined by third-party pricing services and utilize observable market inputs of comparable investments are classified within Level 2 of the valuation hierarchy.

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

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

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 values of certain securities which are determined by third-party pricing services and utilize observable market inputs of comparable investments are classified within Level 2 of the valuation hierarchy.

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 could 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, 2023,~~March 31, 2024, acquisition-related future consideration liabilities of ~~$8.2~~$7.7 million were primarily related to ~~the CWH Acquisition and a~~ business ~~combination~~combinations made in 2022 and 2020 and were recorded in Other Current Liabilities ($~~1.2~~4.1 million) and Other Long-Term Liabilities ($~~7.0~~3.6 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’ liability for future consideration payments related to these business combinations:


(in thousands)
Balance at December 31, ~~2022~~2023	$	~~8,439~~7,626

Changes in Fair Value	~~598~~222
Contingent Consideration Payments	~~(857)~~(118)
Balance at ~~September 30, 2023~~March 31, 2024	$	~~8,180~~7,730

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, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, these investments totaled ~~$18.5~~$18.9 million and ~~$18.3~~$19.9 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, 2023.~~March 31, 2024.

The fair value of Federated 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, net of unamortized issuance costs in the amount of ~~$2.2~~$2.1 million.

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Notes to the Consolidated Financial Statements (continued)
(unaudited)

(9) Derivatives

~~Federated Hermes Limited (FHL), a British Pound Sterling-denominated subsidiary of~~ Federated Hermes enters into foreign currency forward transactions in order to hedge against foreign exchange rate ~~fluctuations.~~fluctuations related to Federated Hermes Limited (FHL), a British Pound Sterling-denominated subsidiary. None of these forwards have been designated as hedging instruments for accounting purposes.

As of ~~September 30, 2023, FHL~~March 31, 2024, Federated Hermes held foreign currency forwards expiring from June 2024 through December 2024 with two counterparties. For foreign currency forwards with a combined notional amount of ~~£83.8~~£56.8 million, ~~with expiration dates ranging from December 2023 through June 2024.~~ Federated Hermes recorded ~~$3.5~~$0.9 million in Receivables, net on the Consolidated Balance Sheets, which represented the fair value as of March 31, 2024. For foreign currency forwards with a notional amount of £26.8 million, Federated Hermes recorded $1.3 million in Other Current Liabilities on the Consolidated Balance Sheets, which represented the fair value ~~of these derivative instruments~~ as of ~~September 30, 2023.~~March 31, 2024.

As of December 31, ~~2022, FHL~~2023, Federated Hermes held foreign currency ~~forward derivative instruments~~forwards expiring from March 2024 through September 2024 with two counterparties. For foreign currency forwards with a ~~combined~~ notional amount of ~~£67.3~~£28.8 million, ~~with expiration dates ranging from March 2023 through September 2023.~~ Federated Hermes recorded ~~$0.5~~$1.6 million in ~~Other Current Assets~~Receivables, net on the Consolidated Balance Sheets, which represented the fair value ~~of these derivative instruments~~ as of December 31, ~~2022.~~2023. For foreign currency forwards with a combined notional amount of £55.5 million, Federated Hermes recorded $0.3 million in Other Current Liabilities on the Consolidated Balance Sheets, which represented the fair value as of December 31, 2023.

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

(10) Intangible Assets, including Goodwill

Intangible Assets, net at ~~September 30, 2023~~March 31, 2024 decreased ~~$7.2~~$5.3 million from December 31, ~~2022~~2023 primarily due to amortization ~~expense.~~expense ($3.2 million) and a decrease in the value of intangible assets denominated in a foreign currency as a result of foreign exchange rate fluctuations ($2.3 million).

Goodwill at ~~September 30, 2023 increased $1.1~~March 31, 2024 decreased $1.2 million from December 31, ~~2022 primarily~~2023 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 million ($350 million Notes), at a fixed interest rate of 3.29% per annum, payable semiannually in arrears in 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 $350 million Notes and certain subsidiaries of Federated Hermes are guarantors of the obligations owed under the Note Purchase Agreement. As of ~~September 30, 2023, $347.8~~March 31, 2024, $347.9 million, net of unamortized issuance costs in the amount of ~~$2.2~~$2.1 million, was recorded in Long-Term Debt on the Consolidated Balance Sheets.

The entire principal amount of the $350 million Notes will become due March 17, 2032, subject to certain prepayment requirements under limited conditions. Federated Hermes can elect to prepay the $350 million Notes under certain limited circumstances including with a make-whole amount if ~~mandatorily~~ prepaid without the consent of the holders of the $350 million 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 $350 million Notes.

The Note Purchase Agreement includes representations and warranties, affirmative and negative financial covenants, including an interest coverage ratio covenant and a leverage ratio covenant, reporting requirements, other non-financial covenants and other customary terms and conditions. Federated Hermes was in compliance with all of its covenants at and during the period ended ~~September 30, 2023.~~March 31, 2024. 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 $350 million 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 repayment of the $350 million Notes prior to their stated date of maturity. Any such accelerated amounts would accrue interest at a default rate and could

Table of Contents



Notes to the Consolidated Financial Statements (continued)
(unaudited)

include an additional make-whole amount upon repayment. The $350 million Notes rank without preference or priority in relation to 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 eleven 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 consists of a $350 million revolving credit facility with an additional $200 million available via an optional increase (or accordion) feature. Borrowings under the Credit Agreement may be used for general corporate purposes, including, without limitation, stock repurchases, dividend payments (including any special dividend payments), and acquisitions.

~~As of September 30, 2023, the~~The interest on borrowings from the revolving credit facility is calculated at the term Secured Overnight Financing Rate (SOFR) which includes a benchmark adjustment based on its historical relationship to the London Interbank Offering Rate (LIBOR). The borrowings under the revolving credit facility may include up to $50 million for which interest is calculated at the daily SOFR plus a spread unless a base rate option is elected (Swing Line). Effective July 1, 2023, Federated Hermes began using SOFR as a replacement to LIBOR in order to calculate interest on borrowings, if any, as permitted by the Credit Agreement. This is only a change to the rate index used for future borrowings under the Credit Agreement due to the discontinuance of LIBOR in the market and is not an amendment to the Credit Agreement.

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

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, can elect to make discretionary principal payments. There was no activity on the Credit Agreement during the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024.

As of ~~September 30, 2023~~March 31, 2024 and December 31, ~~2022,~~2023, there were no outstanding borrowings under the revolving credit facility. The commitment fee under the Credit Agreement is 0.10% per annum on the daily unused portion of each Lender’s commitment. As of ~~September 30, 2023,~~March 31, 2024, Federated Hermes has $350 million available for borrowings under the revolving credit facility and an additional $200 million available via its optional accordion feature.

The Credit Agreement includes representations and warranties, affirmative and negative financial covenants, including an interest coverage ratio covenant and a leverage ratio covenant, reporting requirements, other non-financial covenants and other customary terms and conditions. Federated Hermes was in compliance with all covenants at and during the ~~nine~~three months ended ~~September 30, 2023.~~March 31, 2024. 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 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

During the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, Federated Hermes awarded ~~380,796~~391,107 shares of restricted ~~Federated Hermes~~ Class B common stock, the majority 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 the 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 ~~2022,~~2023, Federated Hermes awarded ~~494,043~~375,796 shares of restricted Class B common stock in connection with a bonus program in which certain key employees received a portion of their bonus in the form of restricted stock under the Plan. This bonus restricted stock, which was granted on the bonus payment date and issued out of treasury, generally vests over a three-year period. Federated Hermes also awarded ~~474,500~~414,500 shares of restricted Class B common stock under this same Plan that generally vest over a ten-year period. In addition, Federated Hermes awarded ~~1,345,999~~86,000 shares of restricted Class B common stock under the Federated Hermes UK Sub-Plan that generally vest over a five-year period. ~~Of that amount, 1,183,066 shares were granted pursuant to award agreements to certain FHL employees in exchange for their beneficial interests in awards~~

Table of ~~restricted FHL shares in connection with the acquisition of the remaining FHL noncontrolling interests.~~Contents



Notes to the Consolidated Financial Statements (continued)
(unaudited)

(13) Equity

In ~~June 2022,~~October 2023, the Federated Hermes 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, 2023.~~March 31, 2024. 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~~three months ended ~~September 30, 2023,~~March 31, 2024, Federated Hermes repurchased approximately ~~3.4~~1.1 million shares of its Class B common stock for ~~$117.0~~$37.0 million ($~~6.8~~0.7 million of which was accrued in Other Current Liabilities as of ~~September 30, 2023)~~March 31, 2024), nearly all of which were repurchased in the open market. At ~~September 30, 2023,~~March 31, 2024, approximately ~~1.4~~3.5 million shares remain available to be repurchased under this share repurchase program. ~~See Note (19) to the Consolidated Financial Statements for information regarding a new share repurchase program approved on October 26, 2023.~~

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

The following table presents the activity for the Class B common stock and Treasury stock for the three ~~and nine~~ months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023. Class A shares have been excluded as there was no activity during these same periods.


		Three Months Ended		Nine Months Ended
		September 30,		September 30,
		2023	2022	2023	2022
		March 31,
		March 31,
		March 31,
		2024
		2024
		2024
Class B Shares
Class B Shares
Class B Shares	Class B Shares
Beginning Balance	Beginning Balance	88,290,140	89,197,952	89,275,935	93,410,968
Beginning Balance
Beginning Balance
Stock Award Activity
Stock Award Activity
Stock Award Activity	Stock Award Activity	5,000	0	387,996	1,704,592
Purchase of Treasury Stock	Purchase of Treasury Stock	(2,046,790)	(211,885)	(3,415,581)	(6,129,493)
Purchase of Treasury Stock
Purchase of Treasury Stock
Ending Balance
Ending Balance
Ending Balance	Ending Balance	86,248,350	88,986,067	86,248,350	88,986,067

Treasury Shares	Treasury Shares

Treasury Shares

Treasury Shares
Beginning Balance
Beginning Balance
Beginning Balance	Beginning Balance	11,215,316	20,307,504	10,229,521	16,094,488
Stock Award Activity	Stock Award Activity	(5,000)	0	(387,996)	(1,704,592)
Stock Award Activity
Stock Award Activity
Purchase of Treasury Stock	Purchase of Treasury Stock	2,046,790	211,885	3,415,581	6,129,493
Retirement of Treasury Stock		0	(10,000,000)	0	(10,000,000)
Purchase of Treasury Stock
Purchase of Treasury Stock

Ending Balance	Ending Balance	13,257,106	10,519,389	13,257,106	10,519,389

Ending Balance

Ending Balance

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Notes to the Consolidated Financial Statements (continued)
(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,

		March 31,
		March 31,
		March 31,
(in thousands, except per share data)
(in thousands, except per share data)
(in thousands, except per share data)	(in thousands, except per share data)	2023		2022		2023		2022
Numerator	Numerator
Numerator
Numerator
Net Income Attributable to Federated Hermes, Inc.
Net Income Attributable to Federated Hermes, Inc.
Net Income Attributable to Federated Hermes, Inc.	Net Income Attributable to Federated Hermes, Inc.	$	75,026	$	69,479	$	216,802	$	182,999
Less: Total Net Income Available to Participating Unvested Restricted Shareholders1	Less: Total Net Income Available to Participating Unvested Restricted Shareholders1	(3,310)		(3,565)		(10,309)		(9,072)
Less: Total Net Income Available to Participating Unvested Restricted Shareholders1
Less: Total Net Income Available to Participating Unvested Restricted Shareholders1
Total Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted
Total Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted
Total Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted	Total Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted	$	71,716	$	65,914	$	206,493	$	173,927

Denominator	Denominator

Denominator

Denominator
Basic Weighted-Average Federated Hermes Common Stock2
Basic Weighted-Average Federated Hermes Common Stock2
Basic Weighted-Average Federated Hermes Common Stock2	Basic Weighted-Average Federated Hermes Common Stock2	83,710		84,531		84,499		86,109
Dilutive Impact from Non-forfeitable Restricted Stock	Dilutive Impact from Non-forfeitable Restricted Stock	0		5		3		2
Dilutive Impact from Non-forfeitable Restricted Stock
Dilutive Impact from Non-forfeitable Restricted Stock
Diluted Weighted-Average Federated Hermes Common Stock2
Diluted Weighted-Average Federated Hermes Common Stock2
Diluted Weighted-Average Federated Hermes Common Stock2	Diluted Weighted-Average Federated Hermes Common Stock2	83,710		84,536		84,502		86,111
Earnings Per Share	Earnings Per Share
Earnings Per Share
Earnings Per Share
Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted2
Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted2
Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted2	Net Income Attributable to Federated Hermes Common Stock - Basic and Diluted2	$	0.86	$	0.78	$	2.44	$	2.02

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, except for circumstances where shares vest upon retirement and the employee has reached retirement age.

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

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

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


(in thousands)
Balance at December 31, 2023	$	(19,911)
Other Comprehensive Income (Loss)	(5,235)




Balance at March 31, 2024	$	(25,146)

Balance at December 31, 2022	$	(45,676)
Other Comprehensive Income (Loss)	~~2,283~~9,620




Balance at ~~September 30,~~March 31, 2023	$	~~(43,393)~~(36,056)

Table of Contents

Notes to the Consolidated Financial Statements (continued)

~~Balance at December 31, 2021~~(unaudited)

~~16,362~~

~~Other Comprehensive Income (Loss)~~

~~(103,778)~~

~~Balance at September 30, 2022~~

~~(87,416)~~

(16) Redeemable Noncontrolling Interests in Subsidiaries

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


(in thousands)	(in thousands)	Consolidated Investment Companies		Other Entities		Total
Balance at December 31, 2022		$	50,317	$	11,504	$	61,821
(in thousands)
(in thousands)								Consolidated Investment Companies	Other Entities	Total
Balance at December 31, 2023
Net Income (Loss)	Net Income (Loss)	1,925		(60)		1,865
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax	0		232		232
Subscriptions—Redeemable Noncontrolling Interest Holders	Subscriptions—Redeemable Noncontrolling Interest Holders	12,669		107		12,776
Consolidation/(Deconsolidation)	Consolidation/(Deconsolidation)	(33,962)		0		(33,962)

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

Balance at March 31, 2023		$	28,450	$	11,058	$	39,508
Net Income (Loss)		486		341		827
Other Comprehensive Income (Loss), net of tax		0		328		328
Subscriptions—Redeemable Noncontrolling Interest Holders		19,642		42		19,684
Consolidation/(Deconsolidation)		12,119		0		12,119

Distributions to Noncontrolling Interests in Subsidiaries		(14,017)		(437)		(14,454)
Balance at March 31, 2024

Balance at June 30, 2023		$	46,680	$	11,332	$	58,012
Net Income (Loss)		(804)		44		(760)
Other Comprehensive Income (Loss), net of tax		(8)		(446)		(454)
Subscriptions—Redeemable Noncontrolling Interest Holders		35,323		0		35,323
Consolidation/(Deconsolidation)		(6,601)		0		(6,601)

Distributions to Noncontrolling Interests in Subsidiaries		(14,621)		(268)		(14,889)
Balance at March 31, 2024

Balance at September 30, 2023		$	59,969	$	10,662	$	70,631
Balance at March 31, 2024

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~


(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 December 31, 2022

Balance at December 31, 2022

Balance at June 30, 2022		$	42,024	$	12,707	$	54,731
Balance at December 31, 2022
Net Income (Loss)	Net Income (Loss)	(2,104)		199		(1,905)
Other Comprehensive Income (Loss), net of tax	Other Comprehensive Income (Loss), net of tax	0		(1,713)		(1,713)
Subscriptions—Redeemable Noncontrolling Interest Holders	Subscriptions—Redeemable Noncontrolling Interest Holders	3,591		903		4,494
Consolidation/(Deconsolidation)	Consolidation/(Deconsolidation)	15,599		0		15,599

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

Balance at September 30, 2022		$	43,598	$	10,988	$	54,586
Balance at March 31, 2023

Balance at March 31, 2023

Balance at March 31, 2023

(17) 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) 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 can 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, 2023,~~March 31, 2024, management does not believe that a material loss related to any of these matters is reasonably possible.

~~Table of Contents~~

~~Notes to the Consolidated Financial Statements~~

~~(unaudited)~~

Like other companies, Federated Hermes has claims asserted and threatened against it in the ordinary course of business. As of ~~September 30, 2023,~~March 31, 2024, Federated Hermes does not believe that a material loss related to any of these claims is reasonably possible.

(d)Other

During the first quarter 2023, an administrative error was identified related to a failure to register certain shares of a Federated Hermes closed-end tender fund. Federated Hermes estimated a probable cost of ~~$18.9~~$19.6 million as of ~~September 30, 2023~~March 31, 2024 related to

Table of Contents



Notes to the Consolidated Financial Statements (continued)
(unaudited)

correcting this issue, of which $17.9 million represents a settlement with affected shareholders that was paid during the second quarter 2023. During the first quarter 2023, Federated Hermes recorded $2.5 million to Operating Expenses - Other representing Federated Hermes' retention under the insurance policy. Management believes an insurance reimbursement of ~~$16.4~~$15.9 million is probable based on the contractual terms of the insurance policies. Accordingly, ~~$16.4~~$15.9 million has been recorded to Receivables, net at ~~September 30, 2023.~~March 31, 2024. However, the insurance claim is now the subject of litigation with two of Federated Hermes’ insurance carriers. Changes to these estimates, which are contingent upon resolution of the insurance claim with the applicable insurers, could be materially different from the amount Federated Hermes has ~~accrued.~~

~~(18) Income Taxes~~recorded.

In connection with the restructuring of an infrastructure fund, ~~in the second quarter 2023,~~ Federated Hermes purchased certain limited partners’ rights to receive future carried interest at fair value, which was calculated by a third-party, for $9.8 million and was included in Operating Expenses - Other in the second quarter 2023. Due to the restructuring, an existing clawback risk on previously earned carried interest was removed. The purchase of these carried interest rights and related legal and professional fees and other costs are not deductible for tax purposes. Negotiations for additional consideration continue with a subset of limited ~~partners. An~~partners, with an additional ~~$2.9~~$5.1 million ~~was~~in consideration being recorded in Operating Expenses - Other in the ~~third quarter~~second half of 2023. The final consideration may be different from the amounts recorded and the difference could be ~~significant, potentially~~material.

(18) Income Taxes

The income tax provision was $29.0 million for the three-month period ended March 31, 2024, as compared to $21.0 million for the same period in 2023. The increase in the income tax provision was primarily due to higher income before income taxes. The effective tax rate was 27.9% for the three-month period ended March 31, 2024, as compared to 22.7% for the same period in 2023. The increase in the effective tax rate was primarily due to a ~~material way.~~valuation allowance on foreign deferred tax assets (3.0%), and a larger tax benefit in 2023 associated with vesting of restricted shares related to share-based compensation (1.1%).

(19) Subsequent Events

~~On October 26, 2023,~~2024. The dividend, which will be paid from Federated Hermes’ existing cash balance, is considered an ordinary dividend for tax purposes and consists of a $0.31 quarterly dividend and a $1.00 special dividend. See Management’s Discussion and Analysis under the board of directors authorized an additional share repurchase program with no stated expiration date that allows the repurchase of up to 5.0 million shares of Class B common stock. This program authorizes executive management to determine the timing and the amount of sharescaption Business Developments - Subsequent Event - Special Cash Dividend 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). See Note (13) for additionalmore information on ~~Federated Hermes'~~the estimated diluted earnings per share ~~repurchase programs.~~impact for the quarter ending June 30, 2024.

2221


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 appearing elsewhere in this report. Management has presumed that the readers of this interim financial information have read or have access to Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

General

Federated Hermes is a global leader in active, responsible investing with ~~$715.2~~$778.7 billion in managed assets as of ~~September 30, 2023.~~March 31, 2024. The majority of Federated Hermes’ revenue is derived from advising Federated Hermes Funds and Separate Accounts in 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’ revenue is primarily dependent upon factors that affect the value of managed/serviced assets, including market conditions and the ability to attract and retain assets. Generally, managed assets in Federated Hermes’ public market investment products and strategies (together with other offered services, as applicable, offerings) can be redeemed or withdrawn at any time with no advance notice requirement, while managed assets in Federated Hermes’ private market investment ~~products and strategies~~offerings are subject to restrictions to withdrawals. Fee rates for Federated Hermes’ services generally vary by asset and service type and can vary based on changes in asset levels. Generally, advisory fees charged for services provided to multi-asset and equity ~~products and strategies~~offerings are higher than advisory fees charged to alternative/private markets and fixed-income ~~products and strategies,~~offerings, which in turn are higher than advisory fees charged to money market ~~products and strategies.~~offerings. 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~~offering types. Federated Hermes can implement Fee Waivers for competitive reasons such as ~~Voluntary~~to maintain positive or zero net yields (Voluntary Yield-related Fee ~~Waivers,~~Waivers), to maintain certain fund expense ratios, to meet regulatory requirements or to meet contractual requirements. Since Federated Hermes’ public market ~~products~~offerings are largely distributed and serviced through financial ~~intermediaries,~~intermediary customers, Federated Hermes pays a portion of fees earned from sponsored ~~products~~offerings to the financial ~~intermediaries~~intermediary customers that sell these ~~products and strategies.~~offerings. 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’ 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’ financial condition and results of operations are based on Federated Hermes’ Consolidated Financial Statements. ~~Management evaluates Federated 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’ 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 and, as required by law, fund shareholders. Management believes that meaningful indicators of Federated Hermes’ financial performance include AUM, gross and net product sales, total revenue and net income, both in total and per diluted share.

2322

Table of Contents



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

Business Developments

~~Fund-Related Transactions~~

During the second quarter 2023, a shareholder in a private equity fund sold a portion of their investment to a third-party. As part of the terms of this sale, $25.1 million of carried interest was recorded as revenue and $17.5 million was recorded as related compensation expense.

In an independent transaction during the second quarter 2023, as part of a restructuring of an infrastructure fund, Federated Hermes purchased certain limited partners’ rights to receive future carried interest at fair value, which was calculated by a third-party, for $9.8 million and was included in Operating Expenses - Other in the second quarter 2023. Due to the restructuring, an existing clawback risk on previously earned carried interest was removed, resulting in $14.2 million of carried interest being recorded as revenue and $8.8 million of related compensation expense being recorded. The purchase of these carried interest rights and related legal and professional fees and other costs are not deductible for tax purposes. Negotiations for additional consideration continue with a subset of limited partners. An additional $2.9 million was recorded in Operating Expenses - Other in the third quarter 2023. The final consideration may be different from the amounts recorded and the difference could be significant, potentially in a material way.

~~Pandemic~~

On May 5, 2023, the World Health Organization declared that COVID-19 no longer represents a global health emergency. The President of the U.S. also ended the national public health emergency declaration on May 11, 2023. Federated Hermes will continue to monitor and assess in the ordinary course of business any lingering potential impacts of the Pandemic on Federated Hermes’ employees and business, results of operations, financial condition, cash flows, and stock price (collectively, Financial Condition). As of September 30, 2023, the Pandemic has not materially affected Federated Hermes’ Financial Condition.

~~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 was not sufficient to cover all of the fund’s operating expenses. Beginning in the first quarter 2020, Federated Hermes had implemented Voluntary Yield-related Fee Waivers. These waivers had been partially offset by related reductions in distribution expense as a result of Federated 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 raised the federal funds target rate multiple times in 2022 and 2023. The range is currently at 5.25% - 5.50% as of the September 2023 FOMC meeting. These rate increases eliminated the net negative pre-tax impact of the Voluntary Yield-related Fee Waivers in the second half of 2022.

Current Regulatory ~~Environment~~Developments

The ~~following discussion focuses on various aspects of the current~~business and regulatory ~~environment~~environments in which Federated Hermes operated its business during the third quarter 2023. Please see Federated Hermes’ prior public filings, including, the discussions under Item 1 – Business – Current Regulatory Environment – Domesticoperates globally remain complex, uncertain and Item 1 – Business – Current Regulatory Environment – International, in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2022, and under Part 1, Item 2 – Management’s Discussion and Analysis – Business Developments – Current Regulatory Environment, in Federated Hermes Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2023 and June 30, 2023 for historical information on the regulatory environment, and related regulatory developments, for periods priorsubject to ~~June 30, 2023, which also includes further background information relevant to certain of the matters discussed below.~~

change. Federated Hermes and its investment management business are subject to extensive regulation, both within and outside of the U.S., including various laws, rules and regulations globally that impose restrictions, limitations, registration, reporting and disclosure requirements on its business, and add complexity to its global compliance operations.For example, Federated Hermes and its ~~products, such as the Federated Hermes Funds,~~ ~~and strategies~~offerings are subject ~~to: various~~to various: (1) federal securities laws, such as the Securities Act of 1933 (1933 Act), the Securities Act of 1934 ~~(1934~~(Exchange Act), Investment Company Act of 1940 (1940 Act), and Investment Advisers Act ~~and Advisers Act;~~of 1940 (Advisers Act); (2) state laws regarding securities fraud and registration; and (3) regulations or other rules promulgated by various regulatory authorities, or

~~Table of Contents~~



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

other authorities. ~~Various laws~~These regulatory requirements, 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)other 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 stock price (collectively, Financial ~~Condition.~~

~~Domestic~~

~~The pace of new proposed and final laws, rules and regulations and other regulatory activity continues at a high level~~Condition).Please see Federated Hermes’ prior public filings, including, the discussions under Item 1 – Business – Regulatory Matters, in ~~2023. Despite receiving criticism~~Federated Hermes’ Annual Report on Form 10-K for the ~~expedited pace~~year ended December 31, 2023 (2023 Annual Report), for an overview of Federated Hermes’ regulatory environment and ~~layering of new regulation,~~related regulatory developments for periods prior to December 31, 2023.

Regulatory Developments – Domestic

Federated Hermes’ primary regulator in the U.S. is the Securities and Exchange Commission (SEC). U.S. regulatory matters addressed in Federated Hermes’ 2023 Annual Report included, among others, money market fund reform, voluntary swing pricing and liquidity for open-end funds, ESG and sustainability, amendments to Rule 35d-1 (Names Rule) under the 1940 Act, proposed custody rule amendments under the Advisers Act, and systematically important financial institutions designation by the Financial Stability Oversight Council (FSOC). Key regulatory developments and requirements in the U.S. since December 31, 2023 that could significantly impact or relate to Federated Hermes’ business and offerings include, among others, the following:

Climate-Related Disclosures for Investors. On March 6, 2024, the SEC ~~(among~~adopted much anticipated new rules mandating climate-related disclosures in public companies’ annual reports and registration statements. In most cases, the new climate-related disclosures will only be required if determined to be material to the issuer. The new rules require disclosure of, among other ~~regulatory authorities, self-regulatory organizations,~~things, material climate-related risks, material mitigation activities, oversight and governance of climate-related risks, and whether and how any climate-related targets or ~~exchanges) has continued~~goals have materially affected, or are reasonably likely to ~~advance its robust rulemaking initiatives. Based~~materially affect, the issuer’s business, results of operations or financial condition. For large-accelerated filers or accelerated filers that are not also smaller reporting companies or emerging growth companies, the new rules require disclosure of material Scope 1 and/or Scope 2 greenhouse gas (GHG) emissions, and related methodology, significant inputs and significant assumptions used in calculating the emissions. Subject to lengthy phase-in-periods, large-accelerated filers and accelerated filers are required to obtain limited assurance on their GHG emissions disclosure, and large-accelerated filers would need to eventually obtain reasonable assurance. Finally, the rules require issuers to disclose the financial impacts of certain climate-related expenses in a new note in their audited financial statements, to the extent such expenses exceed certain disclosure thresholds. The new rules provide phase-in periods based on SEC filer status, with extended phase-in periods for required third-party attestation of GHG emissions. On March 15, 2024, the United States Court of Appeals for the Fifth Circuit (Fifth Circuit) issued an administrative stay of the SEC’s ~~Spring 2023 Unified Agenda~~new climate-related disclosure rules. Consolidated challenges of ~~Regulatory and Declaratory Actions (SEC Spring Reg Flex Agenda), which identified 55 rulemaking initiatives on~~ the ~~SEC’s calendar for 2023 and 2024, and the number of final and proposed~~new rules ~~promulgated~~will be heard by the United States Court of Appeals for the Eighth Circuit (Eighth Circuit). On April 4, 2024, the SEC ~~through September 30,~~issued an order in which it announced that it has determined to exercise its discretion to stay its new climate-related disclosure rules pending completion of the judicial review by the Eighth Circuit.

Share Repurchase Disclosure Modernization. In May 2023, the SEC ~~expects~~adopted amendments to ~~promulgate at least 18 additional final~~modernize the disclosure requirements relating to repurchases of an issuer’s equity securities, including requiring issuers to provide daily repurchase activity on a quarterly or semi-annual basis, depending on the type of issuer (Repurchase Rule). On December 19, 2023, the Fifth Circuit vacated the Repurchase Rule, which had the legal effect of reverting to the rules and ~~four additional proposed rules in~~forms that existed prior to the ~~fourth quarter 2023,~~effective date of the Repurchase Rule. On March 19, 2024, the SEC adopted final technical amendments to the Repurchase Rule, which had the effect of revising the regulations to reflect the Fifth Circuit’s vacatur of the Repurchase Rule and ~~at least nine additional final~~reverting to the rules and ~~five additional proposed rules in~~forms that existed prior to the ~~first half~~effective date of ~~2024. These final and proposed rules are expected to impose significant new requirements on~~ the ~~investment management industry, including Federated Hermes.~~Repurchase Rule.

Tailored Shareholder Report Guidance. On October 16, 2023, the SEC Division of Examinations (DOE) issued its 2024 examination priorities for investment advisors, investment companies, broker-dealers and other registrants, including the key risks, examination topics and priorities that the DOE plans to focus on in 2024. The SEC indicated that the DOE will prioritize areas that pose emerging risks to investors or the markets in addition to core and perennial risk areas, including, among other topics: (1) Regulation Best Interest; (2) conflict of interest disclosures; (3) conflict mitigation practices; (4) complex, high cost, illiquid or microcap products, including derivatives, exchange-traded funds, variable annuities, real estate investment trusts, and private placements, and related investment advice, recommendations and disclosures; (5) Form CRS, (6) the SEC’s marketing rule; (7) crypto assets; and (8) emerging financial technologies, such as artificial intelligence, and their usage. The SEC emphasized that its published examination priorities are not an exhaustive list, and are in addition to its normal examinations, risk alerts, and other outreach to registrants and investors.

~~On July 12, 2023,~~26, 2022, the SEC adopted a final rule, ~~imposing additional money market fund reforms, enhancing Form PF reporting requirements~~“Tailored Shareholder Reports for ~~large liquidity fund advisors,~~Mutual Funds and requiring additional disclosures through amendments to Form N-CSR and Form N-1A. These reforms were the first amendments to Rule 2a-7 under the 1940 Act since the amendments to Rule 2a-7, and certain other regulations, adopted by the SEC on July 23, 2014,Exchange Traded Funds; Fee Information in Investment Company Advertisements,” and related guidance (collectively, 2014 Money Fund Rules and Guidance). The final rule purports to improve the resiliency and transparency of money market funds by: (1) de-linking and removing the regulatory tie between the imposition of redemption gates and liquidity fees and the 30% threshold for a money market fund’s weekly liquid assets; (2) removing provisions from Rule 2a-7 under the 1940 Actform amendments, that, permit a money market fund to temporarily suspend redemptions; (3) increasing minimum portfolio liquidity requirements from 10% to 25% for daily liquid assets and from 30% to 50% for weekly liquid assets to provide a more substantial buffer in the event of rapid redemptions from money market funds; (4) requiring institutional prime and institutional tax-exempt money market funds to impose mandatory liquidity fees when such a fund experiences daily net redemptions that exceed 5% of its net assets, unless the fund’s liquidity costs are de minimis; (5) requiring non-government money market funds to impose a discretionary liquidity fee if the fund’s board (or its delegate) determines that a fee is in the best interest of the fund; (6) allowing retail and government money market funds to handle a negative interest rate environment either by converting from a stable NAV or share price to a floating NAV or share price or by using a reverse distribution mechanism (RDM) or share cancellation to reduce the number of shares outstanding to maintain a stable NAV per share, subject to certain board determinations and disclosures to shareholders; and (7) enhancing certain reporting requirements that are intended to improve the SEC’s ability to monitor and assess money market fund data. The amendments adopted in the final rule became effective on October 2, 2023. The compliance date for the discretionary liquidity fee, increased minimum liquidity requirements, changes to the stress testing requirements and amendments specifying the method for calculating weighted average maturity and weighted average life, is April 2, 2024. The reporting amendments will become effective June 11, 2024. There is a six-month transition period for money market funds to comply with certain of the amendments, including the minimum portfolio liquidity requirements and the discretionary liquidity fee requirement. Money market funds have 12 months after the effective date of the amendments to comply with the mandatory liquidity fee requirement.

~~Federated Hermes actively participated in the debate surrounding the SEC’s proposed money market fund reforms through,~~ among other ~~actions, engagement with SEC~~things, require open-end management investment companies to transmit “concise and Staff and by submitting 12 comment letters during the comment process, which were cited 197 times by the SEC in its adopting release for its money market fund reforms. Throughout the comment process, Federated Hermes supported, and now continues to support: (1) de-linking and removing the regulatory tie between the imposition of redemption gates and liquidity fees and the 30% threshold for a money market fund’s weekly liquid assets;visually

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~~(2) providing a money market fund’s board of directors/trustees~~engaging” annual and semi-annual reports directly to shareholders that highlight key information for investors. On January 17, 2024, the ~~discretion to impose a liquidity fee when the board determines that a liquidity fee is~~SEC staff issued guidance in the ~~best interest~~form of frequently asked questions (FAQs) related to the adoption of the ~~money~~final rule and form amendments addressing questions regarding: (1) the definition of an “appropriate broad-based securities market ~~fund;~~index;” (2) delivery of materials for funds underlying variable annuity or insurance contracts; (3) ~~allowing retail~~the ability to bind individual shareholder reports of multiple funds for delivery to an investor; (4) permissible methods of electronic delivery of shareholder reports; and ~~government money market~~(5) the compliance date for the rule and Form N-CSR filings. Compliance with the tailored shareholder report requirements is required beginning with shareholder reports issued in July 2024.

Amendments to Form PF. On February 8, 2024, the SEC and Commodity Futures Trading Commission (CFTC) jointly adopted amendments to Form PF, the confidential reporting form for certain SEC-registered investment advisors to private funds, to: (1) enhance reporting by large hedge fund advisors regarding qualifying hedge funds purportedly to ~~handle a negative interest rate environment by using a RDM or share cancellation~~provide better insight into the operations and strategies of these funds and their advisors and to ~~reduce~~improve data quality and comparability; (2) enhance reporting of hedge funds purportedly to provide greater insight into hedge funds’ operations and strategies, to assist in identifying trends, and to improve data quality and comparability; (3) amend how investment advisors report complex structures purportedly to improve the ~~number~~ability of ~~shares outstanding~~the FSOC to ~~maintain a stable NAV per share;~~monitor and assess systemic risk and to provide greater visibility for the FSOC, SEC and CFTC into the arrangements; and (4) ~~not requiring swing pricing. Federated Hermes also emphasized that swing pricing~~remove aggregate reporting for large hedge fund advisors purportedly to lessen the burden on advisors and ~~mandatory liquidity fees would precipitate runs~~to focus Form PF reporting on ~~money market funds, not prevent them. Federated Hermes~~more valuable information for systemic risk assessment purposes. The effective date and compliance date for the amendments to Form PF is ~~particularly concerned that mandatory liquidity fees will have an effect similar~~March 12, 2025.

New Department of Labor (DOL) Fiduciary Rule. On April 23, 2024, the DOL issued its final “Fiduciary Rule” in which it changes to the ~~effect swing pricing would likely have had on money market funds.~~definition of “investment advice” fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA), as well as amendments to several prohibited transaction class exemptions (DOL New Fiduciary Rule). The SEC’s action of adopting a mandatory liquidity fee requirement, without specifically proposing it in its money market fund reform proposing release and seeking public comment on it, may be challenged in court due to its unworkability and lack of supporting data.

~~Federated Hermes also asserted in certain of its comment letters,~~changes, among other points, that: (1) institutional prime and municipal money market funds are safer than uninsured bank deposits; (2) institutional prime and municipal money market funds have less systemic risk than equivalent bank deposits; (3) the SEC’s money market fund reforms would increase systemic risk by driving institutions into less regulated vehicles (or securities subject to fire sales) or bank deposits (which likely would be uninsured); and (4) the Financial Stability Oversight Council (FSOC) should consider how certain banks would be better served by moving uninsured institutional depositor cash into money market funds. Federated Hermes emphasized that money market funds do not require special attention or vigilance by the Fed through, for example, emergency lending facilities, and should instead be correctly viewed as a resilient cornerstone of the capital markets. In a July 3, 2023 comment letter, Federated Hermes further discussed how the Fed’s discount window can be used as a means of addressing market illiquidity such as witnessed in March 2020 and as an alternative to the use of emergency lending facilities.

On October 2, 2023, the Department of Treasury and Internal Revenue Service (IRS) issued a new revenue procedure (Proc. Rev. 2023-35, 2023-42 IRB), which covers the wash sale rules for money market funds and describesthings, broaden the circumstances in which ~~the IRS~~ERISA fiduciary status will ~~not treat~~apply to investment advisors, broker dealers and other entities with direct or indirect discretionary authority or control, that represent or acknowledge acting as a ~~redemption of shares in~~fiduciary, or that make investment recommendations to investors on a ~~money market fund~~regular basis as part of ~~a wash sale for purposes~~their business, including recommendations relating to ERISA plan rollover transactions, any other securities transaction, or any investment strategy involving securities or other investment property. The final rule amends or eliminates several prohibited transaction exemptions (PTE), including, among others, PTE 77-4 (Purchase of ~~Section 1091~~Shares of Open-End Investment Companies), and require all investment advice fiduciaries to comply with the ~~Internal Revenue Code~~“best interest” standard of ~~1986, as amended (Internal Revenue Code). This new~~care and disclosure requirements under PTE 2020-02 in order to receive compensation that would otherwise be prohibited under ERISA in the absence of an exemption, including commissions, 12b-1 fees, revenue ~~procedure is intended to reduce undue tax compliance burdens resulting~~sharing, and mark-ups and mark-downs in certain principal transactions. The final DOL New Fiduciary Rule differs from the ~~new SEC money market reforms. Under this new revenue procedure,~~proposed DOL New Fiduciary Rule in certain respects, including: (1) the final rule narrows the contexts in which a ~~redemption of shares of any money market fund~~covered recommendation will constitute ERISA fiduciary investment advice and makes clear that the test for fiduciary status is objective; (2) the final rule confirms that sales recommendations that do not satisfy the objective test will not be treated as ~~part~~ERISA fiduciary investment advice, and that the mere provision of investment information or education, without an investment recommendation, is not ERISA investment advice within the meaning of the final rule; and (3) the final rule clarifies that it focuses on communications with persons with authority over plan investment decisions (including selecting investment options for participant-directed plans), rather than communications with financial services providers who do not have such authority, and excludes plan and individual retirement account investment advice fiduciaries from the definition of a ~~wash sale under Section 1091~~retirement investor. As a result, an asset manager does not render ERISA fiduciary investment advice simply by making recommendations to a financial professional or firm that, in turn, will render ERISA fiduciary investment advice to retirement investors in a fiduciary capacity. The final DOL New Fiduciary Rule will become effective 150 days after it is published in the Federal Register.

Federal Trade Commission (FTC) Ban on Non-Compete Agreements. On April 23, 2024, the FTC issued its final rule banning all new post-employment non-compete agreements between an employer and its employee after its effective date, which will be 120 days after publication of the ~~Internal Revenue Code~~final rule in the Federal Register. The final rule applies to for-profit companies, regardless of industry or level of worker (e.g., senior executive versus other levels of employee). Under the final rule, a “non-compete clause” includes a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from: (1) seeking or accepting work in the U.S. with a different person where such ~~that redeeming money market fund shareholders will be allowed to immediately take losses attributable to liquidity fees. Previously,~~work would begin after the ~~IRS had only provided an exemption from the wash sale rules for certain money market funds. The new revenue procedure is effective for any money market fund shares redeemed after October 2, 2023.~~

Management believes money market funds provide, and will continue to provide, a more attractive investment opportunity compared to other competing products, such as insured and uninsured deposit account alternatives. Management also believes that money market funds are investment products that have proven their resiliency. Federated Hermes continues to review the SEC’s adopting release for its money market fund reforms, plan for changes to its money market fund business required by the reforms and assess the impactconclusion of the ~~reforms on Federated Hermes’ Financial Condition. Also, while Federated Hermes agrees with certain~~employment that includes the term or condition; or (2) operating a business in the U.S. after the conclusion of the ~~money market fund reforms adopted by~~employment that includes the ~~SEC, Federated Hermes also supports efforts~~term or condition. The final rule does not: (1) apply to ~~permit~~non-competes applicable during the ~~use~~term of ~~amortized cost valuation by, and~~a person’s employment that prohibit the employee from competing against the employer while still employed; (2) apply to ~~override~~existing post-employment non-compete agreements with “senior executives” (generally defined as employees earning for than $151,164 annually who are in policy making positions); (3) apply to non-compete agreements entered into in connection with 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. Work is being undertaken to re-introduce legislation in both the Senate and the Housesale of ~~Representatives in~~ a ~~continuing effort to get these money market fund reform revisions regarding the use of amortized cost passed and signed into law.~~

On July 27, 2023, Federated Hermes also submitted a comment letter on the FSOC’s April 21, 2023 (1) proposed analytic framework for financial stability risk identification, assessment, and response, and (2) proposed guidance on nonbank financial company designations as systemically important, which included requests for public comment on these proposals. The proposed new framework is purportedly intended to provide greater transparency to the public about how the FSOC identifies, assesses, and addresses potential risks to financial stability,business, regardless of ~~whether~~a person’s ownership percentage; (4) apply to franchisee/franchisor contracts (although the ~~risk stems from activities, individual firms~~final rule does apply to employees working for a franchisee or otherwise. The proposed interpretative guidance on the FSOC’s procedures for designating nonbank financial companies as systemically important for Fed supervision and enhanced prudential standards (such as capital and liquidity requirements) pursuant to Section 113franchisor); or (5) require formal recession of ~~the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and enhanced prudential standards would replace the FSOC’s~~ existing guidance issued in 2019 and describes the procedural steps the FSOC would take in considering whether to designate a nonbank financial company. Importantly, under the FSOC’s proposals, the FSOC would no longer look to federal and state regulators to address risks to financial stability before the FSOC would begin to consider a nonbank financial company for potential designation. The FSOC’s proposal would separate into two documents the FSOC’s procedures and substantive analysis for considering a nonbank financial company for potential designation. The FSOC’s proposals would eliminate language added in the FSOC’s 2019 guidance that would have required the FSOC to conduct a cost-benefit analysis and an assessment of the likelihood of a nonbank financial company’s material financial distressnon-compete

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~~prior~~agreements, but rather requires notice to deciding whether the firm should be subject to Fed supervision. The FSOC also would not necessarily need to consider the financial impact of a designation on the entity being designated or the broader market in which the company participates. In the Fact Sheet issued by the FSOC on April 21, 2023, the FSOC noted that it’s monitoring for potential risks to financial stability may cover a broad range of asset classes, institutions, and activities, such as, among others, financial entities, including banking organizations, broker-dealers, asset managers, investment companies, insurance companies, mortgage originators and servicers, and specialty finance companies. In a September 26, 2023 letteremployees to the ~~Chairman of the Federal Deposit Insurance Corporation (FDIC) in response to a September 23, 2023 speech in which the FDIC Chairman~~ ~~discussed the financial stability risks posed by nonbank financial companies, including the purported structural liquidity vulnerabilities of money market funds and open-end investment companies, Federated Hermes challenged FSOC’s authority to dispense with the requirement to conduct a cost-benefit analysis and to~~effect that post-employment non-compete agreements are no longer ~~defer in any way to the primary regulator of an entity~~enforceable. Companies that is subject to designation as a systemically important financial institution. Federated Hermes also stressed that: (1) money market funds and other mutual funds are not less regulated and are far more transparent than banks; (2) money market funds are not interconnected with the financial system in a way that transmits risk and do not pose a threat to the financial stability of the United States; (3) money market funds and other mutual funds did not cause or amplify the 2008 Financial Crisis, the 2020 Pandemic shutdown crisis or the spring 2023 bank panic; (4) money market funds, other mutual funds and other types of SEC-regulated investment funds, are not “shadow banks”; and (5) money market funds and other mutual funds are not nonbank financial institutions as defined in the Bank Holding Company Act and should not be subject to designation as systemically important financial institutions.

In its July 27, 2023 comment letter, Federated Hermes stressed its concern that the FSOC’s proposal could decimate the money market fund industry if money market funds were to be designated and subjected to Fed supervision and enhanced prudential standards under Section 113 of the Dodd-Frank Act. Federated Hermes argued that the FSOC is engaged in a regulatory frolic and detour inconsistent with its statutory mission and the systemic risk issues confronting it at present. Federated Hermes argued that the FSOC’s proposal is aimed at designating money market funds (among other types of entities) and their asset managers and subjecting them to Fed supervision, which would be inconsistent with the statutory criteria for designation under Title I of the Dodd-Frank Act and the supervisory program established by the Dodd-Frank Act and at odds with the stated intent of Congress in enacting the Dodd-Frank Act in 2010. Federated Hermes also argued that the changes proposed by the FSOC are contrary to the text of the Dodd-Frank Act, violate the Administrative Procedure Act and other norms of administrative law, and are unlawful and unconstitutional on various grounds, including violation of the Constitution’s separation of powers doctrine and due process clause. The FSOC’s proposal alsofinal rule may be subject to ~~challenge under~~civil penalties. The U.S. Chamber of Commerce has announced that it will file a lawsuit challenging the ~~Major Questions Doctrine as interpreted by~~FTC’s final rule. Accordingly, it is possible that the final rule’s implementation will be stayed until there is a resolution of this lawsuit.

Regulatory Developments – International

Federated Hermes’ primary regulators outside the U.S. ~~Supreme Court’s decision~~are the UK Financial Conduct Authority (FCA), the Central Bank of Ireland (CBI), the Luxembourg Commission de Surveillance du Secteur Financier (CSSF) and the Cayman Island Monetary Authority (CIMA). Non-U.S. regulatory matters addressed in ~~West Virginia vs. Environmental Protection Agency, in which~~Federated Hermes’ 2023 Annual Report included, among others, the ~~Supreme Court weakened~~Retained EU Law (Revocation and Reform) Act 2023, the deference given to an administrative agency’s regulatory authority. Under the Major Questions Doctrine, a court is required 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. FSOC’s proposed new framework also has drawn criticism from the Chairman of the House Financial Services ~~Committee, who,~~and Markets Act 2023, and remaining impacts of Brexit, money market fund reform, liquidity risk management in open-end funds, sustainability finance initiatives, and the possibility of a ~~June 15,~~financial transaction tax. Key recent regulatory developments outside the U.S. since December 31, 2023 ~~letter, urged FSOC~~that could significantly impact or relate to ~~revisit its proposal due to concerns,~~Federated Hermes’ business and offerings include, among others, ~~that FSOC’s proposals~~the following:

UK Overseas Fund Regime (OFR) and Other Ongoing Impacts of Brexit. There has been progress in the UK on the OFR, which will apply where non-UK funds are ~~contrary~~to be made available to retail investors in the UK, and also apply to the ~~due process protections afforded by the U.S. Constitution and that FSOC’s designation~~marketing of nonbank financial companies as systemically important, and subjecting them to Fed supervision and enhanced prudential standards, could pose significant consequences on the broader U.S. financial system.

On November 22, 2022, the SEC proposed to amend Rule 22c-1 (the voluntary swing pricing rule) and Rule 22e-4 (the liquidity rule) under the 1940 Act, as well as certain disclosure forms under the 1940 Act for open-end management investment companies, other thannon-UK money market funds ~~and exchange-traded funds (ETFs). The amendments outlined~~ in the ~~proposing release include, among others: (1) mandating swing pricing~~UK. The UK government previously confirmed the completion of its equivalence assessment of the member states of the European Economic Area (EEA) for ~~such~~the purposes of the OFR. Following that announcement, the Financial Services Act 2021 (Overseas Fund Regime and Recognition of Parts of Schemes) (Amendment and Modification) Regulations 2024 became effective on February 26, 2024. This is a further step towards the OFR becoming operational before the current temporary market permissions regime (TMPR) expires on December 31, 2026. It is expected that once the OFR is implemented, funds ~~during times of stressed market conditions; (2) implementing a “hard close” for such funds, whereby purchase and redemption orders must~~currently subject to the TMPR will be received by a fund, its transfer agent or a registered clearing agency by an established cut-off time to receive the applicable day’s price; (3) eliminating the “less liquid” investment categorytransitioned from the ~~existing four category liquidity classification framework under Rule 22e-4~~TMPR to OFR prior to December 31, 2026.

The UK Government previously announced a package of proposed changes, known as the “Edinburgh Reforms,” that are intended to reform the regulation of financial services in the UK. The Edinburgh Reforms are in part a response to Brexit, and have various components. One area of focus is the permissible arrangements for financial services firms to acquire and pay for investment research. The UK Government commissioned the Investment Research Review to evaluate investment research in the UK and its contribution to the international competitiveness of the ~~1940 Act, and thereby broadening~~UK’s capital markets. The Investment Research Review made a number of wide-ranging recommendations. On April 10, 2024, the ~~“illiquid” investment category; (4) requiring such funds to classify all portfolio investments daily instead of monthly; (5) mandating such funds to determine and maintain~~FCA published a ~~highly liquid investment minimum (HLIM) equal to at least 10% of net assets; and (6) imposing expanded Form N-PORT reporting and disclosure obligations~~consultation paper on such funds. In the proposing release the SEC contends that the proposed amendments would “enhance funds’ liquidity risk management to help better prepare them for stressed market conditions and to require the use of swing pricing for certain funds in certain circumstances to limit dilution” and “enhance open-end fund resilience in periods of market stress by promoting funds’ ability to meet redemptions in a ~~timely manner while limiting dilution of remaining shareholders’ interests in the fund.” In its comment letter dated February 14, 2023, Federated Hermessupported the comments and recommendations~~key recommendation of the Investment ~~Company Institute (ICI)~~Research Review, which is the introduction of an option that would allow asset managers to pay for investment research using a joint or bundled payment for trade execution and research services. The FCA intends to issue final rules in June 2024.

UK regulatory priorities and areas of focus for the financial services sector. On March 19, 2024, the FCA set out its business plan for 2024-25. The business plan identifies a number of areas of focus, including: (1) the protection of consumers; (2) ensuring market integrity by monitoring market risk and taking action where appropriate; (3) strengthening the UK’s international competitiveness to facilitate long-term growth, including in the global wholesale markets by welcoming new technology and innovation; (4) reducing and preventing financial crime; and (5) preparing financial services for the future.

Specifically in relation to the asset management sector, on March 1, 2024, the FCA published a portfolio letter on its supervisory strategy for asset managers in the UK. The FCA noted that its supervisory approach will continue to focus on assessing the effectiveness of firms’ governance arrangements in assigning senior accountability for key risks and ensuring appropriate management information about those risks support good decision making. The FCA identified its supervisory priorities as including: (1) setting and testing higher standards; (2) reducing and preventing serious harm to market integrity and avoiding disruption in financial markets; (3) supporting innovation through technological and digital innovation such as fund and asset tokenization; and (4) promoting competition and positive change. The FCA also provided an update on its work to migrate certain European Union (EU) legislation, notably Markets in Financial Instruments, Alternative Investment Funds Manager Directive (AIFMD) and Collective Investment in Transferable Securities ~~Industry~~(UCITS) regulation into the FCA Handbook. Although the timeframe for this is yet to be determined, the FCA noted in its portfolio letter that it expects to make significant progress in 2024.

UK’s Digital Securities Sandbox (DSS) joint Bank of England (BoE) and ~~Financial Markets Association (SIFMA) on~~FCA Consultation Paper. On April 3, 2024, the ~~proposal, including strongly opposing~~BoE and FCA published a consultation paper setting out their proposals to implement and operate the DSS, which is a regime that will allow firms to use developing technology, such as distributed ledger technology, in the issuance, trading and settlement of ~~swing pricing because~~securities. Firms that successfully apply for the ~~implementation~~DSS will be able to operate under a set of ~~swing pricing is unnecessary~~rules and regulations that have been modified to ~~achieve the~~facilitate DSS financial activities. The DSS lasts for five years and will help regulators design a permanent

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technology friendly regime for the securities market. The proposals call for the BoE and FCA to work together to operate the DSS with the goals of: (1) facilitating innovation to promote a safe, sustainable and efficient financial system; (2) protecting financial stability; and (3) protecting market integrity and cleanliness. Examples of financial instruments that could be issued and traded in the DSS include, but are not limited to, the following: (1) equities; (2) corporate and government bonds; (3) money market instruments such as commercial paper and certificates of deposits; (4) units in collective investment undertakings; and (5) emissions allowances. The trading and settlement of derivative contracts and “unbacked cryptocurrencies” such as Bitcoin are not in the scope of the DSS. The consultation period ends on May 29, 2024, and the current plan calls for the DSS application process to begin over the summer of 2024, with the first cohort of DSS applicants becoming sandbox entrants in the fall of 2024.

~~SEC’s desired objective,~~EU Corporate Sustainability Due Diligence Directive (CSDDD). On December 14, 2023, the Council of the EU (Council) and the EU Parliament announced that they had reached a provisional political agreement on the CSDDD. The original version of the CSDDD imposed due diligence obligations requiring companies to identify, and to prevent or at least mitigate, adverse impacts on human rights and the environment, including by their subsidiaries and supply chain partners. Obligations would be ~~extremely costly, would~~enforced through administrative sanctions and civil liability, with a defense of having exercised reasonable due diligence. Following negotiations among certain EU member states, a revised version of the CSDDD was approved by the Council on March 15, 2024, and will be ~~very difficult~~presented to EU Parliament for approval. Contrary to previous announcements, financial services firms will not be excluded from the ~~industry~~scope of the CSDDD. Among other things, the revised version of the CSDDD has a more limited scope than the original version, as it only applies to EU businesses with more than 1,000 employees (compared to 500 employees in the original version) and an annual net worldwide turnover of at least 450 million Euros in the EU (compared to 150 million Euros in the original version). In addition, companies are no longer required to provide incentives to directors to implement ~~would~~climate transition plans.

Corporate Sustainability Reporting Directive (CSRD). In the EU, corporate issuers will be ~~difficult~~required to disclose sustainability reporting by the CSRD, which became effective on January 5, 2023. The CSRD expands the scope of companies that are required to disclose sustainability information. The CSRD also significantly increases the extent and level of detail required to be disclosed regarding sustainability matters by mandating the creation of European Sustainability Reporting Standards (ESRS), which will apply to entities that are required to make non-financial sustainability disclosures under the CSRD. On April 10, 2024, the European Parliament adopted a directive to postpone by two years the deadline for ~~investors~~adopting the ESRS for certain sectors and for certain third-country undertakings.

EU UCITS Directive and AIFMD Review. Two EU directives regulate the EU collective investment funds industry: the directive relating to ~~understand~~UCITS and ~~would represent an unwarranted change~~the AIFMD. The UCITS directive, which covers mutual funds, establishes uniform rules, allowing them to be offered cross-border, while the AIFMD covers alternative funds, including private equity, private credit and hedge funds, and establishes the rules for authorizing, supervising, and overseeing Alternative Investment Fund Managers (AIFMs).On February 26, 2024, the EU Parliament adopted a Directive amending the AIFMD and the directive governing UCITS in the ~~character~~EU, often referred to as AIFMD II. The changes relate to delegation arrangements, liquidity risk management, supervisory reporting, provision of ~~a hugely popular~~depositary and custody services, and loan origination by alternative investment ~~vehicle which provides investors with~~funds. On March 26, 2024, the ~~benefits~~final legislative text of ~~professional management, diversification~~the Directive was published in the EU's official journal, and the implementation phase is expected to conclude by March or April 2026. The changes to the AIFMD and the UCITS Directive aim to: (1) strengthen investor protection; (2) improve firms' access to finance from sources other than banks; and (3) help complete the capital markets union by limiting national approaches when it comes to help them meet their financial goals. Federated Hermes noted that there are less onerous alternatives to mandating swing pricing in those limited circumstances where material dilution is a real concern, such as discretionary liquidity feesmarketing alternative investment funds.

EU cross-border arrangements for UCITS management companies and AIFMs. On March 25, 2024, the official journal of the EU published four EU Commission Delegated and Implementing Regulations regarding the cross-border marketing and management of funds under the UCITS Directive and AIFMD. The regulations: (1) specify the information to be ~~applied at a fund’s board’s discretion~~notified in relation to the ~~exercise~~cross-border activities of ~~its fiduciary duty to a fund~~UCITS management companies, UCITS and ~~its shareholders. Federated Hermes strongly opposes a hard close concept, which was proposed to ensure fund managers have~~AIFMs; (2) set out the ~~appropriate data necessary to determine whether a fund’s NAV should be adjusted via swing pricing, but which would result in unintended consequences to third-party intermediaries~~form and ~~underlying investors~~content of such notifications; and would be particularly detrimental to retirement plan participants in 401(k) plans using open-end mutual funds on their menu. Federated Hermes strongly opposes eliminating the “less liquid” investment category from the existing four category liquidity classification framework under the liquidity rule because funds investing primarily in bank loans will not be able to comply with the 15% limit on illiquid investments under the 1940 Act, subjecting these ~~funds to undeserving harm. The comment period for this proposal ended on February 14, 2023.~~

~~On September 5, 2023, 38 members of Congress sent a letter to SEC Chairman Gary Gensler voicing their concerns~~(3) provide detail on the ~~SEC’s open-end investment management company liquidity proposal,~~exchange of information between competent authorities on cross-border notification letters. These regulations became effective on April 14, 2024.

European Markets Infrastructure Regulation (EMIR) Refit. On December 20, 2022, the European Securities and ~~requesting that~~Markets Authority (ESMA) published a final report on guidelines for reporting under EMIR. The guidelines aim to further harmonize and standardize the ~~SEC withdrawal~~reporting under EMIR. This requires many new data fields and mandatory use of XML format. The reporting is effective starting April 29, 2024.

Money Market Fund Reform. On February 27, 2024, the Financial Stability Board (FSB) published its ~~proposal, given potential harm to retail investors and retirement plan participants due to potential increased costs, reduced returns, and limitations~~Thematic Review on investment choices if the proposal was adopted as proposed. Specifically, the letter indicates that the SEC’s proposal to require swing pricing and “hard closes” for open-end investment companies “would require the majority of individual investors to plan trades several hours earlier than a mandated 4:00 p.m. ET deadline” and that this “fundamental change to mutual fund operations would create a two-tiered market that would disadvantage retail and retirement investors” because it “would limit the investor’s ability to react to shifts in the market on any given day” (particularly for investors living on the west coastMoney Market Fund Reforms. The review takes stock of the ~~U.S.). The letter also indicates that the SEC’s proposal “would redefine a myriad of assets that commonly appear~~measures adopted or planned by FSB member jurisdictions in mutual fund form by classifying them as ‘illiquid’ and subjecting them to a 15 percent cap of fund assets” which “would limit or prohibit open-end funds from using certain investment strategies [such as bank loan strategies], reducing choice, and likely returns for fund shareholders, including many retirement savers.” After noting that market participants have noted that the proposal is based on assumptions about the operation of open-end investment companies that the historical record contradicts, the letter also indicates that “[w]ithout clear evidence to support the rationale behind this proposal, the purported benefits [of the proposal] are speculative.”

The SEC, the FSOC and other federal regulators also continue to focus on climate and environmental, social, and governance (ESG)-related disclosures by corporate issuers, registered investment advisors and registered investment companies. For example, on July 28, 2023, the FSOC’s Climate-related Financial Risk Committee (CFRC) issued a staff progress report on actions underway to support capacity building and disclosure among FSOC member agencies, address data gaps, and assess climate-related financial risks. Among other actions, the progress report indicates that the CFRC is developing a framework to identify and assess climate-related financial risk, as well as a set of risk indicators for banking, insurance, and financial markets. In March 2022, the SEC issued a proposed rule that 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 a proposed disclosure regime that w~~ould mandate, among other things, certain climate risk disclosur~~es by public companies, such as Federated Hermes, including on Form 10-K, about a company’s governance, risk management, and strategy with respect to climate-related risks, as well as Scope 1, Scope 2, and, for certain issuers, Scope 3 emissions data. Consistent with its previously submitted comment letter, Federated Hermes continues to support the ICI’s commentsresponse to the ~~SEC on~~2021 FSB Report, Policy Proposals to Enhance Money Market Fund Resilience. The review does not assess the proposal, including, among others, 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. Federated Hermes also continues to believe 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.

On September 20, 2023, the SEC adopted amendments to rule 35d-1 (Names Rule) under the 1940 Act which: (1) purportedly improve and broaden the scope of funds that must comply with the current requirement to adopt a policy to invest at least 80% of their assets in accordance with the investment focus the fund’s name suggests; (2) provide enhanced disclosure and reporting requirements related to terms used in fund names; and (3) establish certain additional recordkeeping requirements. Specifically, the amendments, among other things: (1) apply the Names Rule’s 80% investment policy requirement to any fund name with terms suggesting that the fund focuses in investments that have, or investments whose issuers have, particular characteristics, such as “growth” or “value” or certain terms that reference a thematic investment focus, including terms indicating that the

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fund’s investment decisions incorporate one or more ESG factors; (2) update funds’ prospectus disclosure requirements to require a fund with an 80% investment policy to define the terms used in its name, including the criteria the fund uses to select the investments that the term describes; (3) amend Form N-PORT to purportedly enhance transparency regarding how funds’ investments reflect their investment focus as required under the amended Names Rule; (4) include new recordkeeping provisions related to a fund’s compliance with the Names Rule’s requirements; (5) retain the Names Rule’s current requirements for a fund to invest in accordance with its 80% investment policy “under normal circumstances,” and for the 80% investment requirement to apply at the time a fund invests its assets, but also add a new requirement that a fund review its portfolio assets’ treatment under its 80% investment policy at least quarterly and specific time frames—generally 90 days—for getting back into compliance if a fund departs from its 80% investment policy; (6) generally require a registered closed-end fund or business development company whose shares are not listed on a national securities exchange to obtain shareholder approval before changing its 80% investment policy unless the fund conducts a tender or repurchase offer in advance of the change, subject to certain conditions; and (7) retain the current Names Rule’s requirement that, unless the 80% investment policy is a fundamental policy of the fund, 60 days’ notice must be provided to fund shareholders of any change in the fund’s 80% investment policy, and update the notice requirement to expressly address electronic delivery of the notice and the content of the notice. Federated Hermes is reviewing the amendments to the Names Rule and their impact on its business.

The Department of Labor’s (DOL) final rule on Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights (Final DOL ESG/Proxy Voting Rule) amended the Investment Duties regulation under Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA) to clarify the application of ERISA’s fiduciary duties of prudence and loyalty to selecting investments and investment courses of action, including considering ESG factors, selecting qualified default investment alternatives, exercising shareholder rights, such as proxy voting, and the use of written proxy voting policies and guidelines. The Final DOL ESG/Proxy Voting Rule also reversed and modified certain amendments to the Investment Duties regulation adopted in 2020. Specifically, among other things, the Final DOL ESG/Proxy Voting Rule clarified that a fiduciary's duty of prudence must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis and that such factors may include the economic effects of climate change and other ESG considerations on the particular investment or investment course of action, such as when exercising shareholder rights, including voting on shareholder resolutions and board nominations. The DOL Final ESG/Proxy Voting Rule became effective on January 30, 2023, except that its proxy voting provisions apply from and after December 1, 2023.

Aggressive rulemaking, particularly regarding climate/ESG disclosure, could be challenged by legislators and in the courts by investment management industry participants and other industry groups. For example, on July 12, 2023, Republican representatives in the U.S. House of Representatives kicked off a series of hearings dissecting ESG investing and examining new legislation that would block the SEC’s proposed regulations that would require publicly traded companies to report how their businesses impact the environment and steps being taken to manage climate risks because ESG-reporting should be voluntary, and such regulations are too broad, costly and difficult to assess, and could have a chilling effect on new investments across the economy. Particularly in the context of climate/ESG disclosures, ~~the likely success of any court challenge could be bolstered considering the U.S. Supreme Court’s interpretation of the Major Questions Doctrine discussed above.~~

In addition to Congress, the SEC, the FSOC, the DOL and other federal regulators focusing on, and, in certain cases, conducting investigations and hearings regarding, ESG activities and regulation, state Attorneys General and legislatures continue to debate the legality of ESG investing under unfair and deceptive practices laws, antitrust laws, securities laws and other grounds. There is an ideological battle unfolding at the state level, pitting Republican, conservative-leaning “Red” state governments that would seek to exclude or limit ESG investing against Democratic, liberal-leaning or “Blue” state governments that support ESG-focused investing. For example, on July 6, 2023, 15 state Attorneys General sent a letter to the directors of a mutual fund complex demanding responses to certain conflict of interest-related questions, including questions based on the funds’ and their sponsor’s ESG-related activities. The Attorneys General premised their demand on their authority under state laws prohibiting deceptive and unfair acts and practices, state securities laws, and state common law to act for the protection of their states’ residents, state entities that hold mutual funds, and the integrity of the marketplace. Among other conflicts of interest, the Attorneys General asserted that the funds’ sponsor’s and investment advisor’s ESG commitments to push political goals of certain ESG organizations raise serious concerns over the sponsor’s and investment advisor’s duty to act exclusively for the financial benefit of its shareholders and may have cost mutual funds’ returns. In addition, on June 30, 2023, 21 state Attorneys General sent letters to 53 asset managers advising them to uphold their fiduciary duty when managing assets, engaging with companies, and voting proxies for their states.

There also have been stepped up efforts by states to ensure ESG investment strategies are not modifying their investment decisions to emphasize ESG factors due to the values of the asset manager versus their impact on investment returns. State ESG legislation takes a variety of forms, including, for example: (1) legislation that targets asset managers who “boycott” industries,

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such as oil and gas companies, as defined by their excluding or otherwise underweighting exposure to these companies due to their desire to direct capital away from the industry, not for financial return purposes, or that prohibits public entities or businesses operating in a state from “discriminating” against individuals or other companies based on ESG scores or other value-based scores. Certain of these states maintain a list of asset managers who have been banned from managing state assets; (2) legislation that requires all investment to be made for maximizing investment return and restrict or prohibit the pursuit of ESG-related goals and/or the use of ESG factors in investment decisions and seek to prohibit asset managers from making investment decisions which are outside of a risk/return objective. Generally, this type of ESG legislation includes provisions that require asset managers to uphold their fiduciary duty to focus on risk/reward and take all material risks into consideration when managing assets; (3) legislation that prohibits investment in, or promotes divestment from, specific industries or sectors; and (4) legislation that promotes or requires an asset manager to consider ESG factors when making risk/return decisions for their portfolios or to pursue ESG-related goals. Generally, this type of ESG legislation models traditional active asset management processes which include qualitative evaluation of risk and opportunity alongside financial indicators. This type of ESG legislation may require a manager to illustrate to a State governing body how it considers those factors and, if required, how the manager withholds from investing in specific companies. Since the beginning of the third quarter 2023, at least three states enacted new or additional ESG-related legislation. For example, in September 2023, the California legislature passed climate reporting laws that generally require large businesses doing business in California that were formed in the United States and that have revenues of more than $1 billion to report on GHG emissions (including Scope 3 disclosures) and climate-related financial risk. As of October 2, 2023, 20 states have enacted anti-ESG regulations, eight states have enacted pro-ESG regulations, and three states have enacted disclosure-related ESG regulations.

Federated Hermes believes that it is appropriate to integrate ESG factors within traditional qualitative analysis of risk/returns for purposes of assessing risks and opportunities within the time horizon of the strategy in an effort to obtain long-term returns for clients and shareholders.

Federated Hermes, like other investment managers, is complying with Rule 2a-5 under the 1940 Act. 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 1940 Act. The rule expressly permits boards, subject to continued board oversight and certain other conditions, to designate certain parties, such as fund investment advisors, to perform 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 would not have a “quoted price (unadjusted) in active markets.” Federated Hermes 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.

Other actions by the DOL also affect investment management industry participants, including Federated Hermes. In addition to the DOL’s July 26, 2022 proposed amendments to the Class Prohibited Transaction Exemption 84-14, also known as the Qualified Professional Asset Manager (QPAM) Exemption, on September 8, 2023, the DOL submitted a new DOL fiduciary rule (New DOL Fiduciary Rule) for review to the Office of Management and Budget (OMB), which review normally takes 90 days. According to the notice of proposed rulemaking at the OMB: (1) the New DOL Fiduciary Rule will amend the regulatory definition of the term “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; (2) the New DOL Fiduciary Rule will take into account practices of investment advisors, and the expectations of plan officials and participants, and IRA owners who receive investment advice, as well as developments in the investment marketplace, including the ways investment advisors are compensated that can be subject to an investment advisor’s harmful conflicts of interest; and (3) 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 plans and IRA investors.

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Since the beginning of the third quarter 2023, other proposed rules, new guidance and other actions have been issued or taken that impact U.S. investment management industry participants, including Federated Hermes. Federated Hermes is reviewing these Regulatory Developments and their impact on its business. For example:

•On October 13, 2023, the SEC adopted new Rule 13f-2 and related Form SHO, along with an amendment to the national market system plan (NMS Plan) governing the consolidated audit trail (CAT), to purportedly provide greater transparency of short sale-related data. Under Rule 13f-2, institutional investment managers that meet or exceed certain prescribed reporting thresholds will report on Form SHO certain short position and short activity data for equity securities. The SEC will thereafter aggregate and publish certain data collected from Form SHO. Under the amendment to the NMS Plan governing CAT (CAT NMS Plan), CAT reporting firms will indicate whether an order is a short sale effected by a market maker in connection with bona fide market making (BFMM) activities for which the BFMM exception in Rule 203(b)(2)(iii) of Regulation SHO is claimed. Rule 13f-2, Form SHO, and the amendment to the CAT NMS Plan will become effective 60 days following the date of publication of the adopting release in the Federal Register. The compliance date for Rule 13f-2 and Form SHO will be 12 months after the effective date of the adopting release – with public aggregated reporting to follow three months later. The compliance date for the amendment to the CAT NMS Plan will be 18 months after the effective date of the adopting release.

•On October 13, 2023, the SEC adopted Rule 10c-1a under the 1934 Act purportedly to increase the transparency and efficiency of the securities lending market by requiring that: (1) certain persons report specified information about securities loans to a registered national securities association (RNSA), in the format and manner required by the RNSA, and within specified time periods; and (2) an RNSA, in turn, make publicly available certain information it receives, within specified time periods, and keep confidential certain information it receives. Rule 10c-1a will become effective 60 days following the date of publication of the adopting release in the Federal Register. The compliance dates for Rule 10c-1a require that: (1) an RNSA propose rules to implement Rule 10c-1a within four months of the effective date of Rule 10c-1a and that such RNSA rules are effective no later than 12 months after the effective date of Rule 10c-1a; (2) covered persons report the information required by Rule 10c-1a to an RNSA starting on the first business day 24 months after the effective date of Rule 10c-1a (“reporting date”); and (3) an RNSA make specified information publicly available within 90 calendar days of the reporting date.

•On October 10, 2023, the SEC adopted amendments to modernize the rules governing beneficial ownership reporting. The amendments: (1) shorten the deadlines for initial and amended beneficial ownership reporting in Schedule 13D and 13G filings; (2) clarify the Schedule 13D disclosure requirements with respect to derivative securities; and (3) require that Schedule 13D and 13G filings be made using a structured, machine readable data language. In addition, the adopting release provides guidance regarding: (1) the application of the current beneficial ownership reporting rules to an investor’s use of certain cash-settled derivative securities; and (2) the application of the current legal standard found in Sections 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934 to certain common types of shareholder engagement activities. The amendments will become effective 90 days after publication in the Federal Register. Compliance with the revised Schedule 13G filing deadlines will be required beginning on September 30, 2024. Compliance with the structured data requirement for Schedules 13D and 13G will be required on December 18, 2024.

•On September 29, 2023, the SEC proposed to amend the offering process and to create a tailored form to register the offerings of index-linked annuities (RILAs), a type of annuity contract that provides investors a return based on the performance of a market index. The proposed amendments would: (1) provide investors with disclosures tailored to RILAs; (2) highlight key information about RILAs as complex products; and (3) enhance the registration, disclosure, and advertising framework for RILAs. The public comment period for the proposed amendments will remain open for the longer of 60 days following publication of the release on the SEC’s website or 30 days following publication in the Federal Register.

•On September 13, 2023, the SEC proposed rule and form amendments concerning access to and management of accounts on the SEC’s Electronic Data Gathering, Analysis, and Retrieval system (EDGAR) related to potential technical changes to EDGAR (collectively referred to as EDGAR Next). The proposal would require: (1) that electronic filers authorize and maintain designated individuals as account administrators and, through their account administrators, take certain actions to manage their accounts on a dashboard on EDGAR; and (2) that electronic filers may only authorize individuals as account administrators or in the other roles described in the proposal if those individuals first obtain individual account credentials in the manner to be specified in the EDGAR Filer Manual. The public comment period for the proposed rule and form amendments will end on November 21, 2023.

•On August 23, 2023, the SEC reopened the comment period for its proposed revisions to the “Safeguarding Advisory Client Assets” (Custody Rule) under the Advisers Act. The SEC previously proposed to exercise its authority under Section 411 of

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the Dodd-Frank Act by amending and redesignating rule 206(4)-2 under the Advisers Act to purportedly enhance investor protections relating to advisory client assets. The proposed amendments would: (1) expand the current Custody Rule to protect and subject a broader array of client assets and advisory activities to the Custody Rule’s protections; (2) purportedly enhance the custodial protections that client assets receive under the Custody Rule; and (3) update related recordkeeping and reporting requirements for investment advisors. The reopened public comment period will end on October 30, 2023.

•On August 23, 2023, the SEC adopted new rules and amendments under the Advisers Act to enhance the regulation of private fund advisors. The new rules require private fund advisors registered with the SEC to: (1) provide investors with quarterly statements detailing information regarding private fund performance, fees, and expenses; (2) obtain an annual audit for each private fund; and (3) obtain a fairness opinion or valuation opinion in connection with an advisor-led secondary transaction. The new rules also require that all private fund advisors, including investment advisors not registered with the SEC: (1) prohibit engaging in certain activities and practices that are contrary to the public interest and the protection of investors unless they provide certain disclosures to investors, and in some cases, receive investor consent; and (2) prohibit providing certain types of preferential treatment that have a material negative effect on other investors and prohibit other types of preferential treatment unless disclosed to current and prospective investors. Additionally, the amendments require all registered investment advisors, including those that do not advise private funds, to document in writing the annual review of their compliance policies and procedures.

•On July 26, 2023, the SEC adopted new final rules to purportedly enhance and standardize disclosures regarding cybersecurity risk management, strategy, governance, and incidents by public companies, such as Federated Hermes, that are subject to 1934 Act reporting requirements. The amendments will require: (1) current disclosure on Form 8-K about cybersecurity incidents determined to be material, including the material aspects of the nature, scope, timing and material impact or reasonably likely material impact of the incident on a public company and its financial condition and results of operations, generally within four business days of the determination that the incident is material; (2) periodic disclosures about a public company’s processes to assess, identify, and manage material cybersecurity risks, management’s role in assessing and managing material cybersecurity risks, and the board of directors’ oversight of cybersecurity risks; and (3) the cybersecurity disclosures to be presented in Inline eXtensible Business Reporting Language (or Inline XBRL). The amendments became effective on September 5, 2023. Smaller reporting public companies must begin to comply with the Form 8-K disclosure requirements on June 15, 2024. Other public companies, such as Federated Hermes, must begin to comply with the Form 8-K disclosure requirements on December 18, 2023. Public companies must comply with the periodic disclosure requirements beginning with annual reports for fiscal years ending on or after December 15, 2023. Public companies must comply with the InLine XBRL requirements beginning one year after initial compliance with the relevant disclosure requirements.

•On July 26, 2023, the SEC proposed rule amendments to purportedly modernize the internet advisor exemption from the prohibition on SEC registration for smaller investment advisors. The proposed amendments would: (1) require an investment advisor relying on the exemption to always have an operational interactive website through which the advisor provides investment advisory services on an ongoing basis to more than one client; and (2) eliminate the current rule’s ~~de minimis~~ exception for non-internet clients, thus requiring that an internet investment advisor must provide advice to all its clients exclusively through an operational interactive website. The public comment period ended on October 2, 2023.

•On July 26, 2023, the SEC proposed new rules and amendments to purportedly address certain conflicts of interest associated with the use of predictive data analytics by broker-dealers and investment advisors in investor interactions. The proposal would require: (1) a broker-dealer or investment advisor to eliminate or neutralize the effect of conflicts of interest associated with such a firm’s use of covered technologies in investor interactions that place the firm’s or its associated person’s interest ahead of investors’ interests; (2) a broker-dealer or investment advisor that has any investor interaction using covered technology to have written policies and procedures reasonably designed to prevent violations of (in the case of investment advisors) or achieve compliance with (in the case of broker-dealers) the proposed rules; and (3) certain recordkeeping related to the proposed conflicts rules. Under the proposed rules, “covered technology” would include a broker-dealers or investment advisor’s use of analytical, technological, or computational functions, algorithms, models, correlation matrices, or similar methods or processes that optimize for, predict, guide, forecast, or direct investment-related behaviors or outcomes of an investor. The proposed new rules and amendments also would generally apply to a broker-dealer’s or investment advisor’s use of a covered technology to the extent it is used in connection with such a firm’s engagement or communication with an investor, including by exercising discretion with respect to an investor’s account, providing information to an investor, or soliciting an investor. The public comment period ended on October 10, 2023.

•On July 12, 2023, the proposed enhancements to Rule 15c3-3 under the 1934 Act, which protects a customer’s cash and securities held at a broker-dealer, require certain broker-dealers to increase the frequency of the computations of the net cash

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they owe to customers and other broker-dealers from weekly to daily. Specifically, the proposed amendments would require, among other things, carrying broker-dealers with average total credits equal to or greater than $250 million to make the relevant computations daily, as of the close of the previous business day, and to make deposits no later than one hour after the opening of banking business on the following business day. The public comment period ended on September 11, 2023.

Federated Hermes continues to monitor developments regarding previously issued regulatory proposals and developments, including, among others: (1) new listing standards for the New York Stock Exchange (NYSE) that adopt and comply with written incentive compensation recovery or claw-back policies meeting the standards specified by Rule 10D-1 under the 1934 Act; (2) recently adopted amendments to Form PF; and (3) recently adopted amendments to modernize the disclosure requirements relating to repurchases of an issuer’s equity securities. Please refer to our prior quarterly reports on Form 10-Q and annual reports on Form 10-K for further information regarding other Regulatory Developments that can affect Federated Hermes’ Financial Condition.

In addition to the above Regulatory Developments, as noted above, the SEC and other regulators also continue in 2023 to conduct risk-based, for cause and sweep examinations, bring enforcement actions, issue risk alerts, and review and comment on issuer and fund filings. In addition to routine and for cause examinations conducted on individual firms, SEC sweep exams have included, or are expected to include, examinations regarding private fund advisors, including their use of artificial intelligence, off-channel communications, the use of hypothetical performance, the investment advisor marketing rule, ETF revenue sharing payments, ESG practices and disclosures, and approval of registered investment company advisory fees, among others. Among other enforcement actions, on September 25, 2023, the SEC announced it had brought and settled for an aggregate $25 million, two enforcement actions against an investment advisor, the first for failing to develop and implement a reasonably designed anti-money laundering program and one for making materially misleading statements about its controls for incorporating ESG factors into research and investment recommendations for ESG integrated products. Among other risk alerts, on September 23, 2023, the SEC issued a risk alert titled “Risk Alert: Investment Advisers: Assessing Risks, Scoping Examinations, and Requesting Documents” in which the SEC provided additional information regarding the SEC Division of Enforcement’s risk-based approach for both selecting registered investment advisors to examine and in determining the scope of risk areas to examine, and also provided the SEC staff’s typical initial request for documents and information. In addition to the SEC’s aggressive “regulation by enforcement” posture, the SEC staff has become more aggressive in commenting on issuer and fund filings, imposing new interpretations of certain requirements, and taking firm positions, resulting in “regulation by the comment process.”

The Financial Industry Regulatory Authority (FINRA) staff also continues to engage in such investigations, enforcement actions, and examinations of registered broker-dealers. For example, in October 2023, FINRA provided an update on its sweep exam related to special purpose acquisition companies (SPACs). This sweep exam reviewed broker-dealer offerings of SPACs and services provided to SPACs and their sponsors, principal stockholders, board members, related parties, and other affiliates, and included a review of, among other things, practices relating to reasonable investigation, best interest analysis, disclosure of outside activities or potential conflicts, net capital, and supervision. The update sets forth several questions for broker-dealers to consider based on examination observations.

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, DOL, FSOC and FINRA, as well as state or federal lawmakers, also continued, and can continue, to affect investment management industry participants, including Federated Hermes. For example, various state legislatures or regulators have adopted or are beginning to adopt state-specific cybersecurity and/or privacy requirements that can apply to varying degrees to investment management industry participants, including Federated Hermes.

On June 14, 2023, the Tax on Wall Street Speculation Act of 2023 was introduced into the U.S. House of Representatives and U.S. Senate. The proposed legislation would enact a financial transaction tax (FTT) of 0.5% on the trading of equities, 0.1% on the trading of bonds and 0.005% on the trading of derivatives and other financial instruments. The proposed legislation has been introduced annually since 2021 and has not yet gained significant support within Congress.

~~International~~

Like the U.S., the pace of regulation in the European Union (EU) and United Kingdom (UK) has remained heightened so far in 2023. In its Business Plan 2023/24, the Financial Conduct Authority (FCA) set forth an ambitious program for 2023, including:

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(1) a focus on putting consumer needs first, particularly with the UK Consumer Duty coming into force in July 2023; (2) preparing financial services for the future, through the Future Regulatory Framework (FRF) and Edinburgh Reforms; (3) strengthening the UK’s position in global wholesale markets; and (4) reducing and preventing financial crime. The FCA’s Business Plan follows the publication of its Strategy: 2022-2025, in which the FCA indicated it would focus on reducing and preventing serious harm, setting, and testing higher standards, and promoting competition and positive change. The Central Bank of Ireland (CBI) has disclosed that its key regulation and supervision priorities for 2023 include, among other areas, (1) assessing and managing risks to the financial and operational resilience of firms; (2) addressing systemic risks generated by non-banks; (3) consulting on regulatory developments under the Consumer Protection Framework and Individual Accountability Framework; (4) ensuring that the EU Anti-Money Laundering Plan results in a consistent and robust EU-wide framework; (5) implementing new EU regulations on digital operational resilience (DORA) and markets in crypto assets; and (6) strengthening the resilience of the financial system to climate risks.

In the third quarter 2023, the FCA, CBI, and European Securities and Markets Authority (ESMA) alone issued over 20 consultation papers, discussion papers, reports, statements, regulatory technical standards (RTS) and other guidance-related documents relevant to the investment management industry. Examples of these papers, reports, statements, RTS and other documents are discussed below. These regulators and supervisory authorities are expected to continue to address these and other topics, and publish additional consultation papers and other regulatory documents, throughout the remainder of 2023.

UK regulators continue to rationalize the EU legislation and regulatory requirements that were quickly “on-shored” upon Brexit taking effect. A paired-back version of the Retained EU Law (Revocation and Reform) Bill received Royal Assent on June 29, 2023 and is now known as the Retained EU Law (Revocation and Reform) Act 2023 (i.e., the Brexit Freedoms Act). The Brexit Freedoms Act implements a renewed regulatory framework in the UK. Among other things, under the Brexit Freedoms Act: (1) a large amount of EU legislation (approximately 600 retained laws) will be automatically revoked and the principle of supremacy and other general principles of EU law will be abolished, which will end the special status of EU law, by December 31, 2023; (2) any remaining retained EU laws will be “assimilated law” after December 31, 2023, at which point it will no longer be necessary to interpret assimilated law in accordance with corresponding EU law; (3) any secondary retained EU law, or the same categories of assimilated law, can be revoked and alternative provisions made, so long as no regulatory burden is increased, up until June 23, 2026; (4) certain retained EU laws can be modified by statutory instrument; (5) certain retained EU law can be more easily restated, replaced or updated; and (6) it is easier for UK domestic courts to depart from retained EU case law.

The Financial Services and Markets Bill also was granted Royal Assent on June 29, 2023, and is now known as the Financial Services and Markets Act 2023 (FSM Act). The FSM Act contains significant reforms to the UK’s regulatory framework for financial services, aims to establish an enhanced regulatory regime better tailored to UK markets, and provides certain updated objectives for financial services regulators aimed at focusing on long-term growth and international competitiveness. Among other things, the FSM Act: (1) provides for a phased revocation of retained EU law relating to financial services; (2) empowers His Majesty’s Treasury (HM Treasury), relevant national authorities (i.e., financial service regulators, such as the FCA and Prudential Regulation Authority (PRA)), and the Bank of England (BoE) to modify or replace existing retained EU laws or to prepare new transitional amendments to bring about a new UK-specific regulatory regime; (3) grants HM Treasury the power to designate certain third parties as “critical” on the basis of the materiality of the services which the third party provides to firms, the number and types of firms which use a third party and other defined criteria, and authorizes the FCA, PRA and BoE to oversee critical services; (4) reforms the UK financial promotions regime; (5) enables the regulation of crypto assets to support their adoption in the UK; (6) facilitates the use of new technologies such as blockchain in financial markets; and (7) implements other outcomes of the Future Regulatory Framework review, which included consultations that concluded on February 9, 2022.

On June 27, 2023, HM Treasury, on behalf of the UK Government, and the European Commission entered into a memorandum of understanding (MOU) establishing a framework for financial services regulatory cooperation between the UK and EU. Premised on an objective of preserving financial stability, market integrity, and the protection of investors and consumers, the MOU provides for: (1) the bilateral exchanges of views and analysis relating to regulatory developments and other issues of common interest; (2) transparency and appropriate dialogue in the process of adoption, suspension and withdrawal of equivalence decisions; (3) bilateral exchanges of views and analysis relating to market developments and financial stability issues; and (4) enhanced cooperation and coordination, including in international bodies as appropriate. The MOU also provides that each participant will endeavor to share information on regulatory developments to allow for a timely identification of potential cross-border implementation issues, to the extent that such information is available and can be shared. The MOU also established a Joint EU-UK Financial Regulatory Forum (EU-UK Forum). The EU-UK Forum will serve as a platform to facilitate structured regulatory cooperation in the area of financial services and is intended to take stock of progress and to undertake forward planning of regulatory cooperation with general operational objectives to: (1) improve transparency;

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(2) reduce uncertainty; (3) identify potential cross-border implementation issues, including concerns linked to potential regulatory arbitrage by firms; (4) consider working towards compatibility of each other’s standards, as appropriate; (5) promote domestic implementation consistent with international standards; (6) share knowledge to facilitate a common understanding of the EU and UK’s regulatory frameworks; and (7) exchange information and views on other issues of common interest within the scope of these regulatory cooperation arrangements.

Federated Hermes continues to have permission from the FCA to allow certain Irish-domiciled Undertakings for the Collective Investment in Transferable Securities (UCITS) funds and Luxembourg-based direct lending funds to continue to be marketed in the UK under the temporary marketing permissions regime, which currently is scheduled to end on December 31, 2025. The overseas funds regime (OFR) has also been established. The OFR is targeted at UCITS and is a long-term replacement to the temporary permissions regime which enables Federated Hermes’ Irish UCITS funds to continue to be marketed in the UK post-Brexit.

The post-Brexit regulatory environment (particularly the need to obtain full authorizations on a country-by-country basis) also continues to create 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. The impact of Brexit on Federated Hermes’ UK domiciled funds is difficult to quantify and remains uncertain given the number of Regulatory Developments and recent surge in the number of ESG-related funds in both the EU and UK. As of September 30, 2023, EU-resident shareholders in Federated Hermes’ UK domiciled funds and the UK-resident shareholders in Federated Hermes’ Irish-domiciled funds were permitted to remain in the funds. Subscriptions also can continue.

The regulation of money market funds in the EU and UK is another example of potential divergence between the EU and UK post-Brexit. EU and UK money market fund regulation is considered “equivalent” until December 31, 2025. Accordingly, UK-domiciled money market funds currently remain on par with current EU regulatory requirements. As a result, EU-based funds can still use passports to sell to UK investors. However, following various consultations, reports, and speeches by representatives of International Organization of Securities Commissions (IOSCO) and the Financial Stability Board (FSB) in 2020, 2021, 2022, and 2023 similar to the SEC in the U.S., ESMA, the BoE, the European Systemic Risk Board (ESRB), the European Banking Authority (EBA), and the International Monetary Fund (IMF), among other regulators, have been re-examining existing money market fund regulation, soliciting public comment on proposed money market fund reforms, and issuing reports and recommendations. While money market fund reform continues to be discussed in the UK and the EU, new proposals for reform have not been promulgated. It has been reported that, in late January 2023, Andrew Bailey, a governor of the BoE and Chairman of the FSB, expressed concerns regarding money market funds given their perceived impact during the recent financial crisis and the “mini budget” crisis in the UK in 2022, and indicated that the BoE and FCA will come out with their own money market fund reform proposals in 2023. On July 20, 2023, the European Commission adopted a report to European Parliament and the Council of the EU (Council) regarding its assessment of the functioning of Regulation (EU) 2017/1131 on money market funds (MMF Regulation). In the report, the European Commission, drawing on a number of studies carried out by European and international bodies, including ESMA, ESRB and FSB, and the results of a targeted consultation published in 2022, concluded that, among other things: (1) the EU MMF Regulation, as it existed in March 2020, enhanced financial stability and overall successfully passed the test of recent market developments, including the market stress of March 2020, more recent interest rate increases, and related financial asset re-pricing; (2) recent market developments show that there could be benefits to further increasing the resilience of EU money market funds, notably by decoupling the potential activation of liquidity management tools (such as redemption gates and liquidity fees) from regulatory liquidity thresholds; (3) proposals to increase minimum liquid asset requirements are difficult to implement and may have unintended consequences; (4) proposals to increase the loss-absorption capacity of money market funds by imposing constraints on the shares that can be redeemed immediately (known as “minimum balance at risk”) or by requiring money market funds to maintain capital buffers are either untested and contingent on significant operational adjustments or they would make it more expensive to operate money market funds and likely lead to closures of some money market funds and lower returns for investors; and (5) the European Commission will not propose a revision of the EU MMF Regulation at this time, but will continue to monitor the money market funds sector and related vulnerabilities based on the work of ESMA and relevant national competent authorities. Given the above, it is possible that the EU or UK could either deviate from one another regarding, or simply not adopt, any new or amended money market fund reforms in the future. Management believes that the final SEC rule on money market fund reforms could influence the UK and EU regulators.

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In a September 4, 2023 ESMA Working Paper No. 2, 2023 titled, “Bang for (breaking) the buck: Regulatory constraints and money market funds reforms” (ESMA Working Paper), the authors: (1) set out a framework to assess money market fund resilience; (2) demonstrate that the maximum redemptions a money market fund can face depends on regulatory constraints and asset liquidity; and (3) utilize the framework to assess the impact of regulatory reforms, such as an increase in liquidity requirements, changes to the allowed price deviation for money market funds using amortized cost or requirements to invest in more liquid assets, to, among other things, conclude that removing the use of amortized cost has the largest positive effect in terms of resilience, while higher liquidity requirements have more limited effects. In a September 6, 2023 progress report, “Enhancing the Resilience of Non-Bank Financial Intermediation” (FSB Progress Report), the FSB reviewed its 2021 money market reform recommendations, discussed perceived vulnerabilities of money market funds, and recognized that individual jurisdictions need flexibility to tailor measures to their specific circumstances. In its FSB Progress Report, the FSB also indicated that: (1) through its “Thematic Peer Review of Money Market Fund Reforms” announced on August 14, 2023, it will take stock of the money market fund policy measures adopted by FSB member jurisdictions by the end of 2023; (2) it will be working with IOSCO to assess the functioning and resilience of commercial paper and negotiable certificates of deposits markets by the end of 2023; and (3) it will be working with IOSCO to complete an assessment of the effectiveness of ~~money market fund reforms~~those policy measures in addressing risks to financial stability, as this will be the focus of separate follow-up work by the ~~end~~FSB in 2026.

The main purported money market fund vulnerability cited by jurisdictions is the mismatch between the liquidity of ~~2026.~~

~~As discussed above, Federated Hermes believes that~~fund asset holdings and the redemption terms offered to investors, which may make money market funds ~~are investment products~~susceptible to runs from sudden and disruptive redemptions. To address the cited vulnerabilities, the 2021 FSB Report provided a menu of policy options including: (1) imposing on redeeming investors the cost of their redemptions; (2) enhancing the ability to absorb credit losses; (3) addressing regulatory thresholds that ~~have proven their resiliency. Federated Hermes intends~~may give rise to ~~continue to engage with UK~~cliff effects; and ~~EU regulators~~(4) reducing liquidity transformation.

The review found that progress in ~~2023 and beyond, both individually and through industry groups, to shape any further~~implementing the 2021 FSB policy proposals has been uneven across FSB member jurisdictions. Authorities in all jurisdictions reported that they had implemented policies aimed at addressing cited money market fund vulnerabilities prior to the 2021 FSB Report. Since then, some jurisdictions have introduced new policy tools or recalibrated existing ones (e.g., China, India, Indonesia, Japan, Korea, Switzerland, and the U.S.), while others are still in the process of developing or finalizing their reforms (e.g., EU, South Africa, and the UK). The review concludes that, given the cited vulnerabilities reported in individual jurisdictions, further progress on implementing the FSB policy toolkit would be needed to ~~avoid overly burdensome~~enhance money market fund resilience and limit the need for extraordinary central bank interventions during times of stress.

The review calls on FSB member jurisdictions that have not yet done so to review their policy frameworks and adopt tools to address cited money market fund vulnerabilities, taking into consideration the 2021 FSB policy proposals. Where relevant tools, such as minimum liquidity requirements, orare already available, the ~~erosion~~review recommends that FSB jurisdictions consider whether these need to be re-calibrated to ensure their effective use and to maintain a sufficient level of ~~benefits~~money market fund resilience. It also recommends that the International Organization of Securities Commissions, consider the findings of this review when it revisits its 2012 Policy Recommendations for money market funds ~~provide.~~

~~On July 5, 2023,~~in light of the 2021 FSB ~~issued a consultation report on addressing structural~~Report. The FSB will take these findings into account in its monitoring of cited vulnerabilities ~~from the liquidity mismatch in open-end funds. The report proposes revisions to the FSB’s 2017~~and policy recommendations to address structural vulnerabilities from asset management activities. The revisions include, among others: (1) providing greater clarity on the redemption terms that open-end funds can offer to investors based on the liquidity of their asset holdings; (2) ensuring a broad set of anti-dilution and quantity-based liquidity management tools for ~~use by open-end fund managers in normal and stressed~~money market conditions; (3) greater inclusion of anti-dilution liquidity management tools in open-end fund constitutional documents and greater use, and consistency in use, of such liquidity management tools in both normal and stressed market conditions; and (4) providing clearer public disclosures from open-end fund managers on the availability and use of liquidity management tools in normal and stressed market conditions. In a September 4, 2023 comment letter, funds.

Current Regulatory Developments– Potential Impacts

Federated Hermes ~~supported comments submitted by the ICI~~has monitored, reviewed, assessed, and among other points, stressed that any further guidance regarding the use of liquidity management tools should maintain a balance between providing clear expectations and allowing for the flexibility necessary to adapt to the unique dynamics of individual markets and funds. The FSB published responses to this consultation report on September 14, 2023. The IOSCO also proposed on July 5, 2023 detailed guidance for open-end funds’ use of anti-dilution liquidity management tools. The IOSCO report provides detailed guidance to support greater and more consistent use of anti-dilution liquidity management tools by open-ended funds in both normal and stressed market conditions. In a September 4, 2023 comment letter, Federated Hermes emphasized, among other points, that: (1) the consideration, use and calibration of anti-dilution liquidity management tools should be to the discretion of the managers and boards of the responsible entities; (2) all open-end funds should be able, if deemed appropriate by their boards, to implement an anti-dilution liquidity management tool; and (3) guidance should allow for flexibility in implementing anti-dilution liquidity management tools. In a September 6, 2023 press release issued along with an FSB Report “The Financial Stability Implications of Leverage in Non-Bank Financial Intermediation,” the FSB warned that the financial system remains vulnerable to further liquidity strains, and that a key area of policy focus in 2023 will be addressing financial stability risks from non-bank financial intermediation leverage. In its FSB Progress Report, the FSB indicated that: (1) it, in consultation with IOSCO, will be issuing a final report revising its 2017 recommendations on liquidity mismatch in open-end funds in late 2023; (2) IOSCO will be operationalizing the revised FSB recommendations through amendments to IOSCO’s 2018 recommendations after the FSB issues its revised recommendations; (3) IOSCO, in consultation with the FSB, will be developing guidance on liquidity management tools to complement the revised FSB recommendations by late 2023; (4) it, in consultation with IOSCO, will be initiating a pilot program intended to close identified data gaps for monitoring financial stability risks relating to open-end funds’ liquidity mismatch and the use of liquidity management tools in 2023, with follow-up work being conducted in 2024; (5) it and IOSCO will be organizing a workshop on experiences among authorities on design/use of stress tests for open-end funds in early 2024; and (6) it and IOSCO will thereafter be monitoring implementation of, and assessing the effectiveness of, their revised recommendations.

~~The sweeping~~implemented changes implemented by the Brexit Freedoms Act and FSM Act heighten the risk of regulatory divergence between the UK and the EU post-Brexit. Such divergence has already begun in certain areas of financial services regulation. For example, EU investment firms in EU Member States are required to comply with the Investment Firms Directive (IFD) and Investment Firms Regulation (IFR); however, the IFD and IFR do not bind the UK, and a new UK prudential regime for

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Markets in Financial Instruments (MiFID) firms titled Investment Firms Prudential Regime (IFPR) has been established. The IFPR, which became effective on January 1, 2022, introduced a single prudential regime, and represents a significant change for FCA-authorized investment firms in the UK that are authorized under MiFID, including alternative investment fund managers (AIFMs) with MiFID top-up permissions.

As another example of potential divergence, EU regulators have previously issued or proposed directives, rules, and laws regarding sustainable finance, including the Sustainability-Related Disclosures Regulation or SFDR and the Taxonomy Regulation, as well as proposals on the use of ESG- or sustainability-related terms in fund names. 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 sustainable.” On April 12, 2023, the European Supervisory Authorities (ESAs) published a joint consultation, “Joint Consultation Paper on the Review of SFDR Delegated Regulation regarding PAI and financial product disclosures”, in which the ESAs set out proposed RTS on content and presentation of disclosures pursuant to the SFDR. In addition to other adjustments, the purpose of this joint consultation is to broaden the disclosure framework and address certain technical issues that have emerged since the SFDR was originally implemented, which concern sustainability indicators in relation to principal adverse impacts, and to propose amendments to RTS on pre-contractual and periodic documents on website product disclosures for financial products, in order to include GHG emissions reduction targets, including intermediary targets and milestones and actions pursued. The consultation period ended on July 4, 2023. In a July 4, 2023 comment letter, Federated Hermes noted that implementation of the SFDR has resulted in significant challenges for financial market participants and national supervisors and recommended certain fundamental changes to the SFDR legislation to improve its clarity and focus on engagement and transition plans. Among other comments, Federated Hermes expressed its belief that fund managers ought to be able to: (1) design their funds to meet the objectives and interests of investors; (2) describe in detail to investors and the regulator how fund managers intend to deliver on the investment objectives and which indicators should be used to measure the fund’s performance against its stated investment policy; and (3) name their funds in accordance to the demonstrated investment policy. On August 2, 2023, ESMA published an updated implementation timeline with important deadlines for the implementation of key regulations including for, among other regulations, the SFDR, the Taxonomy Regulation, and the related Corporate Sustainability Reporting Directive or CSRD, which together form the basis for the EU Sustainable Finance Framework.

Rather than adopt the SFDR, the UK decided to more closely align with the Taskforce on Climate Related Financial Disclosures (TCFD). The FCA also has proposed its own guidelines regarding the use of ESG- and sustainability-related terms in fund names. On August 2, 2023, the UK Government Department for Business and Trade published guidance on UK sustainability disclosure standards (SDS). The SDS are based on the International Financial Reporting Standards Board (IFRS®) SDS issued by the International Sustainability Standards Board (ISSB). The UK SDS will set out corporate disclosures on the sustainability-related risks and opportunities that companies face. They will form the basis of any future requirements in UK legislation or regulation for companies to report on risks and opportunities relating to sustainability matters, including risks and opportunities arising from climate change. On July 25, 2023, IOSCO issued a report endorsing the ISSB standards concluding that they serve as an effective and proportionate global framework of investor-focused disclosures in relation to climate-related matters. Federated Hermes continues to monitor developments regarding ESG, climate and sustainability disclosure and greenwashing in jurisdictions relevant to its business, including the UK and EU.

In addition to potential divergence between UK and EU law and regulation, the possibility of divergence exists between the laws of the EU, UK, U.S., and other jurisdictions, including, among others, in the areas of climate disclosures, ESG and fund naming requirements and other reforms. For example, following a December 2022 consultation, the Australian Government issued a second consultation paper, “Climate-related financial disclosure,” in which it sought views on proposed positions for the detail, implementation and sequencing of standardized, internationally-aligned requirements for the disclosure of climate-related financial risks and opportunities in Australia, including views on proposed positions relating to coverage, content, framework and enforcement of the requirements. The consultation period ended on July 21, 2023.

The activities of the FSB and the IOSCO also continue to be monitored by the investment management industry, including Federated Hermes. In the third quarter 2023, in addition to their consultations and guidance referenced above, the FSB and IOSCO published consultations and other papers on, among other topics: (1) IOSCO Thematic Analysis: Emerging Risks in Private Finance; (2) Financial Resources and Tools for Central Counterparty Resolution; (3) IMF-FSB Synthesis Paper: Policies for Crypto-Assets; (4) FSB Global Regulatory Framework for Crypto-Asset Activities; (5) International regulation of crypto-asset activities: a proposed framework: FSB overview of responses to the consultation; (6) FSB High-Level Recommendations for the Regulation, Supervision and Oversight of Global Stablecoin Arrangements; (7) Roadmap for Addressing Financial Risks from Climate Change: 2023 Progress Report; (8) Continuity of access to financial market infrastructure (FMI) services for firms in resolution: FSB statement following survey feedback; and (9) IOSCO Policy

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~~Recommendations for Decentralized Finance (DeFi). In an August 22, 2023 comment letter~~ in response to, ~~the FSB’s June 2023 consultation report titled “Enhancing Third-Party Risk Management~~ and ~~Oversight: a toolkit for financial institutions~~will continue to monitor, review, assess, and ~~financial authorities,” Federated Hermes supported comments submitted by the ICI~~implement changes in response to, regulatory developments and requested that the FSB make abundantly clear in any final report that the toolkit is an optional resource that may be referred to by financial institutions when developing, and financial authorities when supervising, third-party service provider risk management processes, to avoid unintended and burdensome mandates.

Since the beginning of the third quarter 2023, UK and EU regulators and supervisory authorities issued, proposed, or adopted other new consultations, directives, rules, laws, and guidance that impact or could impact UK and EU investment management industry participants, including Federated Hermes. Federated Hermes is reviewing these Regulatory Developmentsrequirements, as applicable, and their impact on its ~~business. For example:~~

•~~On September 25, 2023,~~business, offerings, and Financial Condition. Federated Hermes actively participates, either individually or with industry trade groups (such as the ~~FCA and PRA published a Consultation Paper, “Diversity and inclusion~~Investment Company Institute), in the ~~financial sector – working together to drive change,” in which the FCA~~public comment process regarding regulatory developments that can significantly impact Federated Hermes’ business, offerings, and ~~PRA seek feedback on proposals to introduce a new~~Financial Condition. Regulatory developments and regulatory framework on diversity and inclusion (D&I) in the financial sector. The proposed framework would establish minimum standards and provide a better understanding of regulatory expectations for D&I in the financial sector, with the aim of endeavoring to ensure greater consistency and transparency across the financial sector on firms’ approaches to D&I. The consultation period closes on December 18, 2023.

•On September 12, 2023, the FCA published a Policy Statement, “Introducing a gateway for firms who approve financial promotions,” in which the FCA sets forth its final policy position and response to feedback received on its prior 2022 consultation paper regarding the introduction of a gateway for firms who approve financial promotions. The Policy Statement supports legislative changes by the UK Government within the FSM Act, and,requirements also are subject to ~~certain exemptions, requires firms who want to approve financial promotions to apply to the FCA for permission. The FCA’s finalized approach, as set forth~~legal challenge in the Policy Statement, includes, among other things: (1) how the FCA will assess applicants at the gateway and the basis for granting or refusing applications; (2) reporting requirements for firms that are granted permission to approve financial promotions; (3) not extending the compulsory jurisdiction of the UK Financial Ombudsman Service to the approval of financial promotions; and (4) provision for a review of the FCA’s approach within 24 months of the rules coming into force on February 7, 2024.

•On September 4, 2023, the ESRB published an issue note on policy options to address perceived risks in corporate debt and real estate investment funds from a financial stability perspective. The ESRB’s recommendations included, among other things, new regulatory proposals as well as amendments to existing regulation, such as the length of notice periods for redemptions and the use of anti-dilution liquidity management tools, such as swing pricing, dual pricing, anti-dilution levies or redemption fees, as part of their day-to-day management.

•On August 31, 2023, the FCA issued an updated Report on its wholesale data market study. The FCA launched its market study on March 2, 2023 following persistent user concerns about how well wholesale data markets are working. It focuses on competition in the provision of benchmarks, credit ratings data and market data vendor (MDV) services. Benchmarks are widely used in financial markets, often as a reference for index-tracking funds and to evaluate an asset manager’s performance. Credit ratings assess the creditworthiness of a wide range of financial obligations. MDVs are key distributors of wholesale data such as benchmarks and Credit Rating Agency data.

•On August 10, 2023, the FCA published its review of the processes that authorized fund managers (AFMs) used to assess fund value in 2023. The Collective Investment Schemes sourcebook (COLL) rules require AFMs to carry out an assessment of value at least annually, report publicly on their conclusions and appoint independent directors to AFM boards. The COLL rules require firms to assess whether the firms’ fees and charges are justified by the value provided to fund investors, measured against the COLL rules’ minimum considerations. Firms must report the details of these assessments to investors, together with an explanation of what action the firm has or will take if they find investors’ fees and charges are not justified. The FCA concluded that, compared with its last review, many firms have a better understanding of the COLL rules and have significantly improved their assessment of value processes.

•On August 7, 2023, the FCA published a Consultation Paper, “Rules relating to Securitization,” in which the FCA discusses the UK Securitization Regulation (UK SR), which is retained EU law (REUL) that specifies how securitization markets are regulated. Supervisory responsibility for the UK SR is currently shared primarily between the FCA and the PRA. As part of the repeal and replacement of REUL (an outcome of HM Treasury’s Future Regulatory Framework Review, now called the Smarter Regulatory Framework), HM Treasury plans that some provisions of the UK SR will be brought into new UK legislation and most firm-facing provisions of the UK SR will be covered by new FCA rules and PRA rules. This

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consultation paper sets out the FCA’s proposed rules for the UK securitization markets and contains the proposed legal instrument which includes firm facing requirements of the UK SR plus all related technical standards and their annexes. The consultation period closes on October 30, 2023.

•On July 27, 2023, ESMA and EBA published a Report, “Implementation of SRD2 provisions on proxy advisors and the investment chain,” which discusses the implementation of Article 3j (regarding proxy advisors) and Chapter Ia with respect to the EBA (concerning the investment chain) of the European Commission’s second Shareholder Rights Directive (SRD2). The Report provides an analysis of the implementation of the SRD2 and presents certain conclusions regarding its implementation.

•On July 18, 2023, the CBI published a Discussion Paper, “An approach to macroprudential policy for investment funds,” in which the CBI seeks to enhance the debate on a potential approach to the development and operationalization of a macroprudential framework for the investment funds sector. The Discussion Paper purports to seek feedback on the “most salient issues related to the development of a comprehensive macroprudential framework for the funds sector” for use by the CBI’s when participating in international or European regulatory discussions on the topic, as well as its policy and analytical work on investment fund issues more broadly. The consultation period ends on November 15, 2023.

•On July 18, 2023, the FCA and PRA published a Consultation Paper, “Margin requirements for non-centrally cleared derivatives: Amendments to BTS 2016/2251,” in which the FCA and PRA solicit feedback on proposed changes to the UK bilateral margining requirements under the European Market Infrastructure Regulation. The proposals aim to: (1) extend the temporary exemption for singe-stock equity options and index options from the UK bilateral margining requirements from January 4, 2024 until January 4, 2026; and (2) set out the PRA’s and FCA’s proposed approach to pre-approving bi-lateral initial margin models. The consultation period ended on October 18, 2023.

•On July 17, 2023, the FCA published a Consultation Paper, “Financial promotions on social media”, in which the FCA provides guidance on how its financial promotion requirements apply to promotions on social media. The guidance reiterate that financial promotions should be fair, clear, and not misleading, and reinforces that the FCA’s financial promotion rules are designed to be technology neutral and apply across all channels used to advertise, including social media. Among other things, the guidance clarifies when a communication might constitute a financial promotion. The consultation period ended on September 9, 2023.

•On July 13, 2023, the FCA published Engagement Paper 6, “Primary multilateral trading facilities,” in which the FCA solicited feedback on future rules for multilateral trading facilities (MTFs) under the FCA’s new public offers and admission to trading regime. The regime will create a new type of MTF admission document, which will be subject to the same liability and compensation scheme as regulated market prospectuses and give the FCA the power to make certain MTFs operating as primary markets require the production of an MTF admission prospectus.

•On July 12, 2023, the FCA published a Feedback Statement, “The potential competition impacts of Big Tech entry and expansion in retail financial services,” with the aim of continuing discussion regarding the areas where “Big Tech” is likely to create the biggest competition benefits for consumers and where there is the greatest risk of significant harm if competition does not develop. The feedback is derived from a prior 2022 consultation paper. Among other things, the Feedback Statement sets out feedback on: (1) the FCA’s analytical entry framework and entry scenarios; (2) potential competition benefits and harms; (3) regulatory concerns; and (4) next steps.

•On July 5, 2023, the FCA published a Consultation Paper, “The Framework for a UK Consolidated Tape,” which sets out the FCA’s proposed framework for a consolidated tape for bonds, the FCA’s criteria for the operation of a consolidated tape provider (CTP), and the tender process for appointing a CTP. A consolidated tape collates market data from trading venues and over-the-counter transactions, such as prices and volumes associated with trades in a financial market, with the aim to provide a comprehensive picture of transactions in a specific asset class, such as fixed income bonds or equity securities. The FCA indicated that it will finalize rules to establish a UK consolidated tape by 2024. The consultation period ended on September 15, 2023.

•On July 5, 2023, the FCA published a Policy Statement, “Guidance on the trading venue perimeter,” in which the FCA issued new guidance on the regulatory perimeter for trading venue intended to provide greater clarity on when firms may be operating a multilateral system and require authorization as a trading venue, as well promote consumer protection, market integrity and competition. The guidance is based on the results of a prior 2022 consultation paper. The guidance came into force on October 9, 2023.

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•On July 3, 2023, ESMA published a Report, “Marketing requirements and marketing communications under the Regulation on cross-border distribution of funds,” which represents the second report submitted by ESMA to the European Parliament, the European Council, and European Commission under such regulation. The Report reviews applicable marketing requirements in all EU Member States and provides ESMA’s analysis of the effects of national laws, regulations and administrative provisions governing marketing communications.

Federated Hermes continues to monitor developments regarding previously issued regulatory proposals and developments, including, among others: (1) ESMA's Questions and Answers document on the Alternative Investment Fund Managers Directive (AIFMD), on the issue of “pre-marketing”; (2) the EU Commission draft Retail Investment Strategy package; (3) ESMA's suggested legislative amendments to the AIFMD and UCITS Directive regarding the definition of “undue costs” for investors; (4) FCA guidance regarding sanctions controls, as well as the Consumer Duty, which went into force on July 31, 2023 and requires firms “to act to deliver good outcomes for retail customers”; and (5) the UK Government's Call for Evidence in relation to financial services investment research. Please refer to our prior quarterly reports on Form 10-Q and annual reports on Form 10-K for further information regarding other Regulatory Developments that can affect Federated Hermes’ Financial Condition.

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. The FCA and CBI, and other international regulatory authorities, also continue to conduct regulatory investigations, enforcement actions, and examinations and inquiries.

An EU FTT also continues to be discussed, although it remains unclear if or when an agreement will be reached regarding its adoption. The last proposal 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 have 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. As attention 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. The Council has recognized that the European Commission has clarified that, if there is no agreement by the end of 2022 (which there was not), 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 planned introduction by January 1, 2026. The Council also has indicated 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. The weakened economy in Europe can increase the risk that additional jurisdictions propose to implement single-country FTTs. The debate regarding the use of a FTT as a funding source for governments continues. For example, on June 23, 2023, a European Commission Working Document regarding own resources of the EU was published in which an EU FTT was considered as a potential resource to assist in funding the EU budget. This Working Paper concluded that “the prospects of reaching an agreement in the future are limited given that the last substantive discussions took place under the Portuguese Council Presidency in 2021” and “[t]here is little expectations that any proposal would be agreed in the short term.” Also, on June 13, 2023, a policy brief was submitted to the G20 proposing that an international FTT be adopted by G20 nations to assist with funding net zero climate actions.

As of June 30, 2023, the publication of the few remaining tenors of U.S. dollar (USD) London Interbank Offered Rate (LIBOR) ceased. On April 3, 2023, the FCA authorized the publication of 1-, 3- and 6-month synthetic USD LIBOR for a limited time after June 30, 2023 to facilitate a smoother transition to an alternative reference rate. Specifically, overnight, and 12-month US dollar LIBOR permanently ceased on June 30, 2023, while the 1-, 3- and 6-month US dollar LIBOR tenors will continue until September 30, 2024, using an unrepresentative ‘synthetic’ methodology. The synthetic LIBOR rates are available for all legacy contracts except cleared derivatives and may not be used in new issues. Additionally, the 3-month synthetic sterling LIBOR is expected to cease on March 28, 2024. The FCA made clear that its primary purpose in requiring the publication of synthetic USD LIBOR is to facilitate an orderly transition of legacy contracts that are governed by UK or other non‑U.S. law and that had no realistic prospect of being amended by June 30, 2023. On May 15, 2023, the SEC Staff issued a LIBOR transition risk alert for investment advisors and investment companies to remind firms about the transition, convey findings from SEC examinations to assess firms’ preparedness for the LIBOR transition, and discuss certain practices in the areas of risk management, operations, portfolio management, fiduciary responsibility, and investor communications that firms have implemented to address the transition. At its July 28, 2023 meeting, the FSOC received a LIBOR update from representatives of the Fed, SEC, and Commodity Futures Trading Commission (CFTC), among others, in which it was reported, among other

~~Table of Contents~~



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

things, that: (1) the transition from LIBOR to alternative reference rates on June 30, 2023, passed without incident, with most borrowers transitioning to an alternative reference rate or agreeing with lenders to extend a LIBOR interest period to allow for further negotiation with lenders; and (2) the most common alternative reference rate in the United States was the Secured Overnight Financing Rate (SOFR). In a July 3, 2023 “Statement on Alternatives to USD Libor”, IOSCO, among other things: (1) confirmed regulatory authorities’ concern that certain credit sensitive rates exhibit some of the same inherent “invested pyramid” weaknesses as LIBOR; and (2) made recommendations to administrators of alternative reference rates regarding disclosures, licensing restrictions, transparency considerations, and not representing that credit sensitive rates are “IOSCO compliant.”

The phase-out of LIBOR caused 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, altered the accounting treatment of certain instruments or transactions, or had other consequences, which, among other effects, required additional internal and external resources and operating expense. Federated Hermes 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 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 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 sought to negotiate modifications to benchmark fallback language for such securities and other instruments to contemplate the permanent cessation of LIBOR. To the extent necessary, Federated Hermes continues 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 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. While management believes that Federated Hermes’ LIBOR transition efforts are substantially completed, Federated Hermes continues to monitor the impact that the transition from LIBOR will have on Federated Hermescourt, and Federated Hermes’ ~~products and strategies, customers, and service providers.~~

considers initiating, participating in or supporting such legal challenges when management deems it necessary or appropriate. 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' Financial Condition can vary, including in a material way, and is uncertain.

~~Management~~also continues to monitor and assess the impact of the ~~increasing~~ interest rate environment (whether increasing or decreasing), and any instability in the banking sector and financial markets, on asset values and money market fund and other fund asset flows, and related asset mixes, as well as the degree to which these factors impact Federated Hermes' institutional prime and municipal (or tax-exempt) money market business and Federated Hermes' Financial Condition. Management also continues to monitor, and expend internal and external resources in connection with, new money market fund reforms and the potential for additional regulatory scrutiny of money market funds, including institutional prime and institutional municipal (or tax-exempt) money market funds, as well as the impact of Regulatory Developments on Federated Hermes’ business generally.

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 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. The difficulty in, and cost of, complying with applicable ~~Regulatory~~

~~Table of Contents~~



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

~~Developments~~regulatory developments and regulatory requirements increases with the number, complexity, and differing (and potentially conflicting) requirements of new or amended ~~laws, rules, regulations, directives, and other Regulatory Developments,~~regulatory requirements, among other factors.

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,~~regulatory developments and regulatory requirements, 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.~~Financial Condition.

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 and regulatory requirements ultimately will be successful. The degree of impact of regulatory developments and regulatory requirements on Federated Hermes' Financial Condition can vary, including in a material way, and is uncertain.

As of ~~September 30, 2023,~~March 31, 2024, given the regulatory environment, and the possibility of future additional ~~Regulatory Developments~~regulatory developments, requirements and oversight, Federated Hermes is unable to fully assess the impact of ~~modified or new future Regulatory Developments,~~regulatory developments and requirements, and Federated Hermes' efforts related thereto, on its Financial Condition. ~~Modified or new~~ Regulatory ~~Developments~~developments and requirements in the current regulatory environment, and Federated Hermes' efforts in responding to them, could have further material and adverse effects on Federated Hermes' Financial Condition.

4227

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

~~Asset Highlights~~Subsequent Event – Special Cash Dividend

~~Managed Assets at Period End~~

September 30, Percent
Change
(in millions) 2023 2022
By Asset Class
Equity $ 77,315 $ 74,684 4 %
Fixed-Income 89,765 85,365 5
Alternative / Private Markets 20,337 20,182 1
Multi-Asset 2,728 2,902 (6)
Total Long-Term Assets 190,145 183,133 4
Money Market 525,085 441,294 19
Total Managed Assets $ 715,230 $ 624,427 15 %
By Product Type
Funds:
Equity $ 40,801 $ 40,633 0 %
Fixed-Income 42,569 44,896 (5)
Alternative / Private Markets 12,409 12,680 (2)
Multi-Asset 2,599 2,784 (7)
Total Long-Term Assets 98,378 100,993 (3)
Money Market 384,896 309,859 24
Total Fund Assets 483,274 410,852 18
Separate Accounts:
Equity 36,514 34,051 7
Fixed-Income 47,196 40,469 17
Alternative / Private Markets 7,928 7,502 6
Multi-Asset 129 118 9
Total Long-Term Assets 91,767 82,140 12
Money Market 140,189 131,435 7
Total Separate Account Assets 231,956 213,575 9
Total Managed Assets $ 715,230 $ 624,427 15 %

On April 25, 2024, the board of directors declared a $1.31 per share dividend to Federated Hermes’ Class A and Class B common stock shareholders of record as of May 8, 2024 to be paid on May 15, 2024. The dividend, which will be paid from Federated Hermes’ existing cash balance, is considered an ordinary dividend for tax purposes and consists of a $0.31 quarterly dividend and a $1.00 special dividend. The special dividend is expected to decrease diluted earnings per share for the quarter ending June 30, 2024 by approximately $0.01 to $0.02 due to the application of the two-class method of calculating earnings per share.

4328

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

~~Average~~ Asset Highlights

Managed Assets at Period End

Three Months Ended Nine Months Ended
September 30, Percent Change September 30, Percent Change
(in millions) 2023 2022 2023 2022
By Asset Class
Equity $ 82,203 $ 81,809 0 % $ 83,128 $ 86,543 (4) %
Fixed-Income 88,677 87,042 2 88,130 90,419 (3)
Alternative / Private Markets 21,413 21,193 1 21,254 22,090 (4)
Multi-Asset 2,861 3,144 (9) 2,934 3,368 (13)
Total Long-Term Assets 195,154 193,188 1 195,446 202,420 (3)
Money Market 516,046 438,601 18 503,182 429,878 17
Total Average Managed Assets $ 711,200 $ 631,789 13 % $ 698,628 $ 632,298 10 %
By Product Type
Funds:
Equity $ 43,687 $ 45,135 (3) % $ 44,320 $ 48,353 (8) %
Fixed-Income 43,437 47,489 (9) 43,741 52,025 (16)
Alternative / Private Markets 13,184 13,432 (2) 13,143 14,158 (7)
Multi-Asset 2,724 3,012 (10) 2,794 3,222 (13)
Total Long-Term Assets 103,032 109,068 (6) 103,998 117,758 (12)
Money Market 373,088 301,940 24 356,351 289,577 23
Total Average Fund Assets 476,120 411,008 16 460,349 407,335 13
Separate Accounts:
Equity 38,516 36,674 5 38,808 38,190 2
Fixed-Income 45,240 39,553 14 44,389 38,394 16
Alternative / Private Markets 8,229 7,761 6 8,111 7,932 2
Multi-Asset 137 132 4 140 146 (4)
Total Long-Term Assets 92,122 84,120 10 91,448 84,662 8
Money Market 142,958 136,661 5 146,831 140,301 5
Total Average Separate Account Assets 235,080 220,781 6 238,279 224,963 6
Total Average Managed Assets $ 711,200 $ 631,789 13 % $ 698,628 $ 632,298 10 %


	March 31,				Percent Change
(in millions)	2024		2023
By Asset Class
Equity	$	80,157	$	83,629	(4)	%
Fixed-Income	96,325		87,461		10
Alternative / Private Markets	20,465		21,174		(3)
Multi-Asset	2,928		2,973		(2)
Total Long-Term Assets	199,875		195,237		2
Money Market	578,811		505,800		14
Total Managed Assets	$	778,686	$	701,037	11	%

By Product/Strategy Type
Funds:
Equity	$	43,415	$	44,732	(3)	%
Fixed-Income	44,481		43,616		2
Alternative / Private Markets	12,458		13,040		(4)
Multi-Asset	2,789		2,832		(2)
Total Long-Term Assets	103,143		104,220		(1)
Money Market	417,102		357,346		17
Total Fund Assets	520,245		461,566		13
Separate Accounts:
Equity	36,742		38,897		(6)
Fixed-Income	51,844		43,845		18
Alternative / Private Markets	8,007		8,134		(2)
Multi-Asset	139		141		(1)
Total Long-Term Assets	96,732		91,017		6
Money Market	161,709		148,454		9
Total Separate Account Assets	258,441		239,471		8
Total Managed Assets	$	778,686	$	701,037	11	%

4429

Table of Contents



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

Average Managed Assets


	Three Months Ended
	March 31,				Percent Change
(in millions)	2024		2023
By Asset Class
Equity	$	78,969	$	84,155	(6)	%
Fixed-Income	95,791		88,209		9
Alternative / Private Markets	20,485		20,938		(2)
Multi-Asset	2,874		3,012		(5)
Total Long-Term Assets	198,119		196,314		1
Money Market	578,383		483,083		20
Total Average Managed Assets	$	776,502	$	679,397	14	%

By Product/Strategy Type
Funds:
Equity	$	42,355	$	45,055	(6)	%
Fixed-Income	43,857		43,961		0
Alternative / Private Markets	12,377		13,062		(5)
Multi-Asset	2,739		2,869		(5)
Total Long-Term Assets	101,328		104,947		(3)
Money Market	414,902		333,358		24
Total Average Fund Assets	516,230		438,305		18
Separate Accounts:
Equity	36,614		39,100		(6)
Fixed-Income	51,934		44,248		17
Alternative / Private Markets	8,108		7,876		3
Multi-Asset	135		143		(6)
Total Long-Term Assets	96,791		91,367		6
Money Market	163,481		149,725		9
Total Average Separate Account Assets	260,272		241,092		8
Total Average Managed Assets	$	776,502	$	679,397	14	%

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
		September 30,				September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in millions)
(in millions)
(in millions)	(in millions)	2023		2022		2023		2022
Equity Funds	Equity Funds
Equity Funds
Equity Funds
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	44,383	$	44,207	$	43,342	$	57,036
Sales	Sales	1,733		2,581		7,059		10,210
Sales
Sales
Redemptions
Redemptions
Redemptions	Redemptions	(3,254)		(3,033)		(9,798)		(11,122)
Net Sales (Redemptions)	Net Sales (Redemptions)	(1,521)		(452)		(2,739)		(912)
Net Sales (Redemptions)
Net Sales (Redemptions)
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	3		9		85		(145)

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(285)		(667)		(69)		(1,635)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2	Market Gains and (Losses)2	(1,779)		(2,464)		182		(13,711)
Market Gains and (Losses)2
Market Gains and (Losses)2
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	40,801	$	40,633	$	40,801	$	40,633

Equity Separate Accounts	Equity Separate Accounts

Equity Separate Accounts

Equity Separate Accounts
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	38,609	$	36,781	$	38,181	$	39,680
Sales3	Sales3	2,164		2,552		7,338		8,510
Sales3
Sales3
Redemptions3
Redemptions3
Redemptions3	Redemptions3	(3,050)		(1,918)		(6,939)		(8,463)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	(886)		634		399		47
Net Sales (Redemptions)3
Net Sales (Redemptions)3
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	15		0		41		0

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(247)		(520)		(284)		(1,205)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2	Market Gains and (Losses)2	(977)		(2,844)		(1,823)		(4,471)
Market Gains and (Losses)2
Market Gains and (Losses)2
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	36,514	$	34,051	$	36,514	$	34,051

Total Equity	Total Equity

Total Equity

Total Equity
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	82,992	$	80,988	$	81,523	$	96,716
Sales3	Sales3	3,897		5,133		14,397		18,720
Sales3
Sales3
Redemptions3
Redemptions3
Redemptions3	Redemptions3	(6,304)		(4,951)		(16,737)		(19,585)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	(2,407)		182		(2,340)		(865)
Net Sales (Redemptions)3
Net Sales (Redemptions)3
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	18		9		126		(145)

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(532)		(1,187)		(353)		(2,840)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2
Market Gains and (Losses)2
Market Gains and (Losses)2	Market Gains and (Losses)2	(2,756)		(5,308)		(1,641)		(18,182)
Ending Assets	Ending Assets	$	77,315	$	74,684	$	77,315	$	74,684
Ending Assets
Ending Assets

1 Reflects the impact of translating ~~non-U.S. dollar~~non-USD denominated AUM into ~~U.S. dollars~~USD 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,~~Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

4531

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,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in millions)
(in millions)
(in millions)	(in millions)	2023		2022		2023		2022
Fixed-Income Funds	Fixed-Income Funds
Fixed-Income Funds
Fixed-Income Funds
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	43,884	$	48,215	$	43,180	$	59,862
Sales	Sales	3,110		3,956		11,201		13,711
Sales
Sales
Redemptions
Redemptions
Redemptions	Redemptions	(3,794)		(6,058)		(12,082)		(22,614)
Net Sales (Redemptions)	Net Sales (Redemptions)	(684)		(2,102)		(881)		(8,903)
Net Sales (Redemptions)
Net Sales (Redemptions)
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	0		(17)		(95)		79

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(63)		(161)		(4)		(409)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2	Market Gains and (Losses)2	(568)		(1,039)		369		(5,733)
Market Gains and (Losses)2
Market Gains and (Losses)2
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	42,569	$	44,896	$	42,569	$	44,896

Fixed-Income Separate Accounts	Fixed-Income Separate Accounts

Fixed-Income Separate Accounts

Fixed-Income Separate Accounts
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	43,541	$	38,038	$	43,563	$	37,688
Sales3	Sales3	5,167		3,725		8,014		8,385
Sales3
Sales3
Redemptions3
Redemptions3
Redemptions3	Redemptions3	(1,339)		(526)		(5,141)		(2,357)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	3,828		3,199		2,873		6,028
Net Sales (Redemptions)3
Net Sales (Redemptions)3
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	(25)		0		(25)		(1)

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(33)		(70)		(11)		(151)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2	Market Gains and (Losses)2	(115)		(698)		796		(3,095)
Market Gains and (Losses)2
Market Gains and (Losses)2
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	47,196	$	40,469	$	47,196	$	40,469

Total Fixed-Income	Total Fixed-Income

Total Fixed-Income

Total Fixed-Income
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	87,425	$	86,253	$	86,743	$	97,550
Sales3	Sales3	8,277		7,681		19,215		22,096
Sales3
Sales3
Redemptions3
Redemptions3
Redemptions3	Redemptions3	(5,133)		(6,584)		(17,223)		(24,971)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	3,144		1,097		1,992		(2,875)
Net Sales (Redemptions)3
Net Sales (Redemptions)3
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	(25)		(17)		(120)		78

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(96)		(231)		(15)		(560)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2
Market Gains and (Losses)2
Market Gains and (Losses)2	Market Gains and (Losses)2	(683)		(1,737)		1,165		(8,828)
Ending Assets	Ending Assets	$	89,765	$	85,365	$	89,765	$	85,365
Ending Assets
Ending Assets

1 Reflects the impact of translating ~~non-U.S. dollar~~non-USD denominated AUM into ~~U.S. dollars~~USD 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,~~Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

4632

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,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in millions)
(in millions)
(in millions)	(in millions)	2023		2022		2023		2022
Alternative / Private Markets Funds	Alternative / Private Markets Funds
Alternative / Private Markets Funds
Alternative / Private Markets Funds
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	13,338	$	13,911	$	13,050	$	14,788
Sales	Sales	541		537		1,824		1,637
Sales
Sales
Redemptions
Redemptions
Redemptions	Redemptions	(856)		(835)		(2,154)		(2,020)
Net Sales (Redemptions)	Net Sales (Redemptions)	(315)		(298)		(330)		(383)
Net Sales (Redemptions)
Net Sales (Redemptions)
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	(3)		3		17		7

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(450)		(1,013)		96		(2,390)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2	Market Gains and (Losses)2	(161)		77		(424)		658
Market Gains and (Losses)2
Market Gains and (Losses)2
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	12,409	$	12,680	$	12,409	$	12,680

Alternative / Private Markets Separate Accounts	Alternative / Private Markets Separate Accounts

Alternative / Private Markets Separate Accounts

Alternative / Private Markets Separate Accounts
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	8,264	$	7,874	$	7,752	$	8,132
Sales3	Sales3	119		409		744		1,069
Sales3
Sales3
Redemptions3
Redemptions3
Redemptions3	Redemptions3	(10)		(94)		(249)		(505)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	109		315		495		564
Net Sales (Redemptions)3
Net Sales (Redemptions)3
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	0		0		(23)		0

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(312)		(625)		49		(1,440)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2	Market Gains and (Losses)2	(133)		(62)		(345)		246
Market Gains and (Losses)2
Market Gains and (Losses)2
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	7,928	$	7,502	$	7,928	$	7,502

Total Alternative / Private Markets	Total Alternative / Private Markets

Total Alternative / Private Markets

Total Alternative / Private Markets
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	21,602	$	21,785	$	20,802	$	22,920
Sales3	Sales3	660		946		2,568		2,706
Sales3
Sales3
Redemptions3
Redemptions3
Redemptions3	Redemptions3	(866)		(929)		(2,403)		(2,525)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	(206)		17		165		181
Net Sales (Redemptions)3
Net Sales (Redemptions)3
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	(3)		3		(6)		7

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(762)		(1,638)		145		(3,830)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2
Market Gains and (Losses)2
Market Gains and (Losses)2	Market Gains and (Losses)2	(294)		15		(769)		904
Ending Assets	Ending Assets	$	20,337	$	20,182	$	20,337	$	20,182
Ending Assets
Ending Assets

1 Reflects the impact of translating ~~non-U.S. dollar~~non-USD denominated AUM into ~~U.S. dollars~~USD 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,~~Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

4733

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
		September 30,				September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in millions)
(in millions)
(in millions)	(in millions)	2023		2022		2023		2022
Multi-Asset Funds	Multi-Asset Funds
Multi-Asset Funds
Multi-Asset Funds
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	2,782	$	3,001	$	2,851	$	3,608
Sales	Sales	29		54		108		170
Sales
Sales
Redemptions
Redemptions
Redemptions	Redemptions	(114)		(130)		(391)		(397)
Net Sales (Redemptions)	Net Sales (Redemptions)	(85)		(76)		(283)		(227)
Net Sales (Redemptions)
Net Sales (Redemptions)
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	0		0		3		6

Market Gains and (Losses)1	Market Gains and (Losses)1	(98)		(141)		28		(603)

Market Gains and (Losses)1

Market Gains and (Losses)1
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	2,599	$	2,784	$	2,599	$	2,784

Multi-Asset Separate Accounts	Multi-Asset Separate Accounts

Multi-Asset Separate Accounts

Multi-Asset Separate Accounts
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	140	$	134	$	138	$	172
Sales2	Sales2	1		0		2		1
Sales2
Sales2
Redemptions2	Redemptions2	(5)		(2)		(15)		(10)
Redemptions2
Redemptions2
Net Sales (Redemptions)2
Net Sales (Redemptions)2
Net Sales (Redemptions)2	Net Sales (Redemptions)2	(4)		(2)		(13)		(9)

Market Gains and (Losses)1	Market Gains and (Losses)1	(7)		(14)		4		(45)

Market Gains and (Losses)1

Market Gains and (Losses)1
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	129	$	118	$	129	$	118

Total Multi-Asset	Total Multi-Asset

Total Multi-Asset

Total Multi-Asset
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	2,922	$	3,135	$	2,989	$	3,780
Sales2	Sales2	30		54		110		171
Sales2
Sales2
Redemptions2
Redemptions2
Redemptions2	Redemptions2	(119)		(132)		(406)		(407)
Net Sales (Redemptions)2	Net Sales (Redemptions)2	(89)		(78)		(296)		(236)
Net Sales (Redemptions)2
Net Sales (Redemptions)2
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	0		0		3		6

Market Gains and (Losses)1	Market Gains and (Losses)1	(105)		(155)		32		(648)

Market Gains and (Losses)1

Market Gains and (Losses)1
Ending Assets	Ending Assets	$	2,728	$	2,902	$	2,728	$	2,902
Ending Assets
Ending Assets

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,~~Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

4834

Table of Contents



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

Changes in Total Long-Term Assets


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
		Three Months Ended
		Three Months Ended
		Three Months Ended
		March 31,
		March 31,
		March 31,
(in millions)
(in millions)
(in millions)	(in millions)	2023		2022		2023		2022
Total Long-Term Fund Assets	Total Long-Term Fund Assets
Total Long-Term Fund Assets
Total Long-Term Fund Assets
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	104,387	$	109,334	$	102,423	$	135,294
Sales	Sales	5,413		7,128		20,192		25,728
Sales
Sales
Redemptions
Redemptions
Redemptions	Redemptions	(8,018)		(10,056)		(24,425)		(36,153)
Net Sales (Redemptions)	Net Sales (Redemptions)	(2,605)		(2,928)		(4,233)		(10,425)
Net Sales (Redemptions)
Net Sales (Redemptions)
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	0		(5)		10		(53)

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(798)		(1,841)		23		(4,434)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2	Market Gains and (Losses)2	(2,606)		(3,567)		155		(19,389)
Market Gains and (Losses)2
Market Gains and (Losses)2
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	98,378	$	100,993	$	98,378	$	100,993

Total Long-Term Separate Accounts Assets	Total Long-Term Separate Accounts Assets

Total Long-Term Separate Accounts Assets

Total Long-Term Separate Accounts Assets
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	90,554	$	82,827	$	89,634	$	85,672
Sales3	Sales3	7,451		6,686		16,098		17,965
Sales3
Sales3
Redemptions3
Redemptions3
Redemptions3	Redemptions3	(4,404)		(2,540)		(12,344)		(11,335)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	3,047		4,146		3,754		6,630
Net Sales (Redemptions)3
Net Sales (Redemptions)3
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	(10)		0		(7)		(1)

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(592)		(1,215)		(246)		(2,796)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2	Market Gains and (Losses)2	(1,232)		(3,618)		(1,368)		(7,365)
Market Gains and (Losses)2
Market Gains and (Losses)2
Ending Assets
Ending Assets
Ending Assets	Ending Assets	$	91,767	$	82,140	$	91,767	$	82,140

Total Long-Term Assets	Total Long-Term Assets

Total Long-Term Assets

Total Long-Term Assets
Beginning Assets
Beginning Assets
Beginning Assets	Beginning Assets	$	194,941	$	192,161	$	192,057	$	220,966
Sales3	Sales3	12,864		13,814		36,290		43,693
Sales3
Sales3
Redemptions3
Redemptions3
Redemptions3	Redemptions3	(12,422)		(12,596)		(36,769)		(47,488)
Net Sales (Redemptions)3	Net Sales (Redemptions)3	442		1,218		(479)		(3,795)
Net Sales (Redemptions)3
Net Sales (Redemptions)3
Net Exchanges
Net Exchanges
Net Exchanges	Net Exchanges	(10)		(5)		3		(54)

Impact of Foreign Exchange1	Impact of Foreign Exchange1	(1,390)		(3,056)		(223)		(7,230)

Impact of Foreign Exchange1

Impact of Foreign Exchange1
Market Gains and (Losses)2
Market Gains and (Losses)2
Market Gains and (Losses)2	Market Gains and (Losses)2	(3,838)		(7,185)		(1,213)		(26,754)
Ending Assets	Ending Assets	$	190,145	$	183,133	$	190,145	$	183,133
Ending Assets
Ending Assets

1 Reflects the impact of translating ~~non-U.S. dollar~~non-USD denominated AUM into ~~U.S. dollars~~USD 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,~~Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return.

4935

Table of Contents



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

Changes in Federated Hermes’ average asset mix period-over-period across both asset classes and ~~product~~offering types have a direct impact on Federated Hermes’ operating income. Asset mix impacts Federated Hermes’ total revenue due to the difference in the fee rates earned on each asset class and ~~product~~offering 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~~offering 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
		Three Months Ended																Three Months Ended							Three Months Ended
			September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022				March 31, 2024			March 31, 2023					March 31, 2024			March 31, 2023
By Asset Class	By Asset Class
Money Market
Money Market
Money Market	Money Market		72	%	68	%	46	%	37	%		75	%		71	%				51	%		47	%
Equity	Equity		12	%	14	%	30	%	38	%	Equity		10	%		12	%				30	%		33		%
Fixed-Income	Fixed-Income		12	%	14	%	12	%	15	%	Fixed-Income		12	%		13	%				12	%		13		%
Alternative / Private Markets	Alternative / Private Markets		3	%	3	%	10	%	7	%	Alternative / Private Markets		3	%		3	%				5	%		5		%
Multi-Asset	Multi-Asset		1	%	1	%	1	%	2	%	Multi-Asset		0	%		1	%				1	%		1		%
Other	Other		—	%	—	%	1	%	1	%	Other		—	%		—	%				1	%		1		%
By Product Type
By Product/Strategy Type
Funds:	Funds:
Funds:
Funds:
Money Market
Money Market
Money Market	Money Market		51	%	46	%	43	%	34	%		54	%		49	%				48	%		44	%
Equity	Equity		6	%	8	%	23	%	29	%	Equity		5	%		6	%				23	%		25		%
Fixed-Income	Fixed-Income		6	%	8	%	9	%	12	%	Fixed-Income		6	%		6	%				9	%		10		%
Alternative / Private Markets	Alternative / Private Markets		2	%	2	%	8	%	5	%	Alternative / Private Markets		2	%		2	%				3	%		3		%
Multi-Asset	Multi-Asset		1	%	1	%	1	%	2	%	Multi-Asset		0	%		1	%				1	%		1		%

Separate Accounts:	Separate Accounts:
Separate Accounts:
Separate Accounts:
Money Market
Money Market
Money Market	Money Market		21	%	22	%	3	%	3	%		21	%		22	%				3	%		3	%
Equity	Equity		6	%	6	%	7	%	9	%	Equity		5	%		6	%				7	%		8		%
Fixed-Income	Fixed-Income		6	%	6	%	3	%	3	%	Fixed-Income		6	%		7	%				3	%		3		%
Alternative / Private Markets	Alternative / Private Markets		1	%	1	%	2	%	2	%	Alternative / Private Markets		1	%		1	%				2	%		2		%

Other	Other		—	%	—	%	1	%	1	%
Other
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.

Total average managed assets increased ~~13% and 10%~~14% for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, as compared to the same ~~periods~~period in ~~2022.~~2023. As of ~~September 30, 2023,~~March 31, 2024, total managed assets increased ~~15%~~11% from ~~September 30, 2022.~~March 31, 2023. Average money market assets increased ~~18% and 17%~~20% for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, as compared to the same ~~periods~~period in ~~2022.~~2023. Period-end money market assets increased ~~19%~~14% at ~~September 30, 2023,~~March 31, 2024, as compared to ~~September 30, 2022.~~March 31, 2023. Money market strategies continued to benefit from favorable market conditions for cash as an asset class, elevated liquidity levels in the financial system, and attractive yields compared to cash management alternatives such as bank deposits and direct investments in money market instruments such as treasury bills and commercial paper. Average equity assets ~~remained flat and~~ decreased 4%6% for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, as compared to the same ~~periods~~period in ~~2022.~~2023. Period-end equity assets ~~increased~~decreased 4% at ~~September 30, 2023,~~March 31, 2024, as compared to ~~September 30, 2022,~~March 31, 2023, primarily due to ~~market appreciation and foreign exchange rate fluctuations,~~net redemptions, partially offset by ~~net redemptions.~~market appreciation. Stocks trended higher in the first quarter of 2024 as optimism over the U.S. economy, a “soft landing” and potential interest-rate cuts combined with enthusiasm for generative artificial intelligence sent the S&P 500 up more than 10%. Average fixed-income assets increased ~~2% and decreased 3%~~9% for the three ~~and nine~~ months ended ~~September 30, 2023, respectively,~~March 31, 2024, as compared to the same ~~periods~~period in ~~2022.~~2023. Period-end fixed-income assets increased 5%10% at ~~September 30, 2023,~~March 31, 2024, as compared to ~~September 30, 2022,~~March 31, 2023, primarily due to ~~assets acquired in an acquisition~~net sales and market ~~appreciation, partially offset by net redemptions.~~appreciation. As yields increased across the Treasury curve, including for the benchmark U.S. 10-year Treasury that ended the quarter at 4.21% up from 3.88% at the end of 2023, bond prices fell. Average alternative/private markets assets ~~increased 1% and~~ decreased 4%2% for the three ~~and nine~~ months ended September 30, 2023, respectively, as compared to the same periods in 2022. Period-end alternative/private markets assets increased 1% at September 30, 2023, as compared to September 30, 2022, primarily due to foreign exchange rate fluctuations, partially offset by market depreciation.

The first-half equity rally broadened early in the third quarter on surprising economic growth, moderating inflation and rising expectations that the U.S. may be able to skirt a recession. The enthusiasm waned as the quarter wore on, however, as longer-March 31,

5036

Table of Contents



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

~~dated yields persistently climbed higher, with~~2024, as compared to the ~~10-year Treasury yield reaching a 16-year high~~same period in ~~September. The move reflected~~2023. Period-end alternative/private markets assets decreased 3% at March 31, 2024, as compared to March 31, 2023, primarily due to market ~~worries over record public debt,~~depreciation and speculation that market rates may be resetting to levels that prevailed before the unprecedented monetary easing that kept rates artificially low during the 14-year global financial crisis/Pandemic era. During the quarter, the FOMC raised its federal funds target range in July by a quarter-point to 5.25% - 5.50% and, while holding steady at September’s FOMC meeting, suggested a similar increase is possible before year-end. Policymakers also projected rates to remain at current levels at least through summer 2024. For third quarter 2023, the S&P 500 returned (3.76)% and the broad bond market, as measured by Bloomberg US Aggregate Bond Index, returned (3.23)%.net redemptions.

Results of Operations

Revenue. Revenue increased ~~$21.5~~$14.2 million for the three-month period ended ~~September 30, 2023,~~March 31, 2024, as compared to the same period in ~~2022,~~2023, primarily due to ~~(1)~~ an increase in money market revenue of ~~$16.6~~$22.2 million due to ~~a change in assets and product structures (partially offset in Distribution expense) and (2)~~ an increase in carried interest of $11.0 million (partially offset in Compensation and Related expense). These increases were partially offset by a decrease in equity and fixed-income revenue of $3.8 million and $2.0 million, respectively, related to changes in the mix of average ~~assets.~~

Revenue increased $146.2 million for the nine-month period ended September 30, 2023, as compared to the same period in 2022, primarily due to (1) a decrease of $85.3 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), (2) an increase in money market ~~revenue of $63.6 million due to a change in average assets and product structures (partially offset in Distribution expense) and (3) an~~fund assets. This increase ~~in carried interest of $48.5 million (partially offset in Compensation and Related expense). These increases were~~was partially offset by a decrease of ~~$58.7~~$8.6 million in equity revenue due to lower ~~long-term~~ average assets.

For the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ Federated Hermes’ ratio of revenue to average managed assets was ~~0.23%~~0.20% and ~~0.22%~~0.23%, respectively. The ~~increase~~decrease in the rate was primarily due to ~~the increase in revenue from the elimination of Voluntary Yield-related Fee Waivers and an increase in carried interest, partially offset by~~ a decrease in revenue from lower average equity assets and a change in the mix of fixed-income average assets during the first ~~nine~~three months of ~~2023~~2024 compared to the same period in ~~2022.~~2023.

Operating Expenses. Total Operating Expenses for the three-month period ended ~~September 30, 2023~~March 31, 2024 increased ~~$16.9~~$0.8 million, as compared to the same period in ~~2022. Compensation and Related expense increased $12.5 million~~2023 primarily due to ~~$7.6 million related to the consolidation of carried interest vehicles.~~

~~Total Operating Expenses for the nine-month period ended September 30, 2023 increased $134.2 million, as compared to the same period in 2022.~~ Distribution expense ~~increased $56.4~~increases of $1.6 million ~~primarily~~mainly due to an increase of $66.5 million resulting from the elimination of 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) partially offset by a $6.5 million decrease due to lower long-term averagein money market fund assets. Compensation and Related expense increased $47.2 million, primarily related to the consolidation of carried interest vehicles ($32.8 million) and increased staff and compensation rates ($9.4 million). Professional Service Fees increased $11.2 million primarily due to legal fees ($4.0 million) and increased spending on technology initiatives ($2.8 million).

Nonoperating Income (Expenses). Nonoperating Income (Expenses), net ~~increased $7.1~~decreased $1.9 million for the three-month period ended ~~September 30, 2023,~~March 31, 2024, as compared to the same period in ~~2022.~~2023. The ~~increase~~decrease is primarily due to a ~~$3.6~~$3.7 million decrease in Gain (Loss) on Securities, net due to a smaller increase in the market value of investments in the first quarter 2024 compared to the increase in the market value of investments during the first quarter 2023. This decrease was partially offset by a $1.9 million increase in Investment Income, net primarily due to an increase in investment yields due to ~~rising~~higher interest rates ~~and a $3.4 million increase in Gain (Loss) on Securities, net from a larger decrease~~ in the ~~market value of investments during the third~~first quarter ~~2022,~~2024 as compared to the ~~decrease in market value of investments during the third~~first quarter 2023.

Nonoperating Income (Expenses), net increased $51.0 million for the nine-month period ended September 30, 2023, as compared to the same period in 2022. The increase is primarily due to (1) a $41.5 million increase in Gain (Loss) on Securities, net from an increase in the market value of investments in the first nine months of 2023 as opposed to a decrease in the market value of investments during the same period in 2022 and (2) an $11.0 million increase in Investment Income, net primarily due to an increase in investment yields due to rising interest rates.

Income Taxes. The income tax provision was ~~$26.7~~$29.0 million for the three-month period ended ~~September 30, 2023,~~March 31, 2024, as compared to ~~$21.6~~$21.0 million for the same period in ~~2022.~~2023. The increase in the income tax provision was primarily due to higher income before income taxes. The effective tax rate was ~~26.5%~~27.9% for the three-month period ended ~~September 30, 2023,~~March 31, 2024, as compared to ~~24.3%~~22.7% for the same period in ~~2022.~~2023. The increase in the effective tax rate was primarily due to a ~~revaluation of certain~~valuation allowance on foreign deferred tax ~~amounts during the third quarter 2022 (1.5%~~assets (3.0%), and ~~an increase~~a larger tax benefit in ~~state income tax~~2023 associated with vesting of restricted shares related to ~~a change in tax law effective in the third quarter 2023~~share-based compensation (1.1%).

~~Table of Contents~~



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

Pillar Two legislation has been enacted in certain jurisdictions in which Federated Hermes operates. The ~~income tax provision was $75.3 million~~legislation is effective for the ~~nine-month period ended September 30, 2023, as compared~~financial year beginning January 1, 2024. Federated Hermes is in scope of the enacted legislation and has performed an assessment of its potential exposure to ~~$58.1 million~~Pillar Two income taxes based on the most recent tax filings, country-by-country report and financial statements for the ~~same period~~constituent entities of Federated Hermes. Based on the assessment, for fiscal year 2024 Federated Hermes expects to be able to rely on the transitional safe harbor for each of the jurisdictions in ~~2022. The increase~~which it operates. As a result, Federated Hermes does not expect a material exposure to Pillar Two income taxes in ~~the income tax provision was primarily due~~those jurisdictions. This assessment will continue to ~~higher income before income taxes. The effective tax rate was 25.6% for the nine-month period ended September 30, 2023,~~be monitored and updated as ~~compared to 25.2% for the same period in 2022.~~additional guidance and/or legislation is released.

Net Income Attributable to Federated Hermes, Inc. Net income increased ~~$5.5~~$5.4 million for the three-month period ended ~~September 30, 2023,~~March 31, 2024, as compared to the same period in ~~2022,~~2023, 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, 2023~~March 31, 2024 increased ~~$0.08,~~$0.11, as compared to the same period in ~~2022,~~2023, primarily due to increased net income ($0.07) and a decrease in shares outstanding resulting from share repurchases ($~~0.01)~~0.04).

Net income increased $33.8 million for the nine-month period ended September 30, 2023, as compared to the same period in 2022, 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, 2023 increased $0.42, as compared to the same period in 2022, primarily due to increased net income ($0.38) and a decrease in shares outstanding resulting from share repurchases ($0.04).

Liquidity and Capital Resources

Liquid Assets. At ~~September 30, 2023,~~March 31, 2024, liquid assets, net of noncontrolling interests, consisting of cash and cash equivalents, investments and receivables, totaled ~~$599.3~~$605.7 million, as compared to ~~$559.5~~$656.4 million at December 31, ~~2022.~~2023. The change in liquid assets is discussed below.

At ~~September 30, 2023,~~March 31, 2024, Federated 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’ 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 ~~$321.0~~$302.1 million in AUM) that meet the requirements of Rule 2a-7 under the 1940 Act (Rule 2a-7) or operate in accordance with

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

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’ credit analysis process.

Cash Provided by Operating Activities. Net cash provided by operating activities totaled ~~$182.2~~$14.0 million for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024, as compared to ~~$191.5~~$5.4 million for the same period in ~~2022.~~2023. The ~~decrease~~increase in cash provided was primarily due to (1) an increase in cash ~~paid~~received related to the ~~$56.4~~$14.2 million increase in ~~Distribution expense~~revenue previously discussed and (2) an increase of ~~$19.5~~$9.6 million in cash ~~paid for taxes, (3) a $17.9 million payment representing a settlement with affected shareholders related to an administrative error (see Note (17) to~~received from the ~~Consolidated Financial Statements for additional information), (4) a~~ net ~~increase~~sale of ~~$10.1 million in cash paid for~~ trading securities for the ~~nine~~three months ended ~~September 30, 2023,~~March 31, 2024 as compared to the same period in 2022, (5) an increase of $4.5 million in cash paid for interest primarily related to the $350 million Notes issued in March 2022 and (6) an increase in cash paid of $4.0 million related to a fund restructuring.2023. These ~~decreases~~increases in cash were partially offset by an increase in cash ~~received related~~paid to vendors during the three-month period ended March 31, 2024 as compared to the ~~$146.2 million increase~~same period in ~~revenue previously discussed (excluding $16.7 million related to Receivables—Affiliates discussed in Financial Position below) and a decrease of $5.2 million in cash paid for incentive compensation.~~2023.

Cash Provided by Investing Activities. During the ~~nine-month~~three-month period ended ~~September 30, 2023,~~March 31, 2024, net cash provided by investing activities was ~~$8.6~~$27.6 million, which primarily represented ~~$28.0~~$53.9 million in cash received from redemptions of Investments—Affiliates and Other, partially offset by ~~$13.6~~$25.7 million paid for purchases of Investments—Affiliates and ~~Other and $5.8 million paid for property and equipment.~~Other.

Cash Used by Financing Activities. During the ~~nine-month~~three-month period ended ~~September 30, 2023,~~March 31, 2024, net cash used by financing activities was ~~$151.6~~$63.5 million due primarily to ~~$112.0~~$39.0 million of treasury stock purchases ~~$74.0~~and $23.7 million or ~~$0.83~~$0.28 per share of dividends paid to holders of Federated Hermes common shares and $32.6 million of distributions to noncontrolling interests in subsidiaries. These decreases in cash were partially offset by $67.8 million of contributions from noncontrolling interests in subsidiaries.shares.

Long-term Debt. On March 17, 2022, pursuant to a Note Purchase Agreement, Federated Hermes issued unsecured senior Notes in the aggregate amount of $350 million at a fixed interest rate of 3.29% per annum, payable semiannually in arrears in

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

March and September in each year of the agreement. The entire principal amount of the $350 million 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 $350 million Notes and certain subsidiaries of Federated Hermes are guarantors of the obligations owed under the Note Purchase Agreement. As of ~~September 30, 2023,~~March 31, 2024, the outstanding balance of the $350 million Notes, net of unamortized issuance costs in the amount of ~~$2.2~~$2.1 million, was ~~$347.8~~$347.9 million and was recorded in Long-Term Debt on the Consolidated Balance Sheets. The proceeds were, or will be, used to supplement cash flow from operations, to fund share repurchases and potential acquisitions, to pay down debt outstanding 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, 2023,~~March 31, 2024, Federated Hermes’ Credit Agreement consists of a $350 million revolving credit facility with an additional $200 million available via an optional increase (or accordion) feature. Borrowings under the Credit Agreement may be used for general corporate purposes including cash payments related to acquisitions, dividends, investments and share repurchases. As of ~~September 30, 2023,~~March 31, 2024, Federated Hermes has $350 million available to borrow under the Credit ~~Agreement.~~Agreement and an additional $200 million available via its optional accordion feature. See Note (11) to the Consolidated Financial Statements for additional information.

Both the Note Purchase Agreement and Credit Agreement 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~~three months ended ~~September 30, 2023.~~March 31, 2024. An interest coverage ratio of at least 4 to 1 is required and, as of ~~September 30, 2023,~~March 31, 2024, Federated Hermes’ interest coverage ratio was 3740 to 1. A leverage ratio of no more than 3 to 1 is required and, as of ~~September 30, 2023,~~March 31, 2024, Federated Hermes’ leverage ratio was ~~0.78~~0.72 to 1.

Both the Note Purchase Agreement and the Credit Agreement 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, paying debt obligations, paying taxes, repurchasing company stock, developing and seeding new ~~products and strategies,~~offerings, modifying existing ~~products, strategies~~offerings and relationships, maintaining regulatory liquidity and capital requirements and funding property and equipment expenditures. In addition, Federated Hermes expects to invest approximately $310 million (including ~~technology).~~the allocation of approximately $190 million in existing technology-related overhead, primarily the compensation expense of existing employees, and an external spend of approximately $120 million) through 2026 to support a number of planned technology-driven initiatives. Any number of factors may cause Federated Hermes’ future cash needs to increase. As a result of the highly

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

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~~could continue to increase.

On ~~October 26, 2023, Federated Hermes’~~April 25, 2024, the board of directors declared a ~~$0.28~~$1.31 per share dividend to Federated Hermes’ Class A and Class B common stock shareholders of record as of ~~November~~May 8, ~~2023~~2024 to be paid on ~~November~~May 15, ~~2023.~~2024. The dividend, which will be paid from Federated Hermes’ existing cash balance, is considered an ordinary dividend for tax purposes and consists of a $0.31 quarterly dividend and a $1.00 special dividend. See Business Developments - Subsequent Event - Special Cash Dividend for more information on the estimated diluted earnings per share impact for the quarter ending June 30, 2024.

After evaluating Federated Hermes’ ~~existing~~ liquid assets following the special dividend payment, expected continuing cash flow from operations, its borrowing capacity under the 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 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.

~~Receivables, net~~Investments—Consolidated Investment Companies at ~~September 30, 2023~~March 31, 2024 increased ~~$14.5~~$53.4 million from December 31, ~~2022 primarily due to an insurance receivable excluding Federated Hermes' retention under the policy. See Note (17) to the Consolidated Financial Statements for additional information.~~

~~Receivables—Affiliates at September 30,~~ 2023, ~~increased $16.7 million from December 31, 2022 primarily due to the accrual for carried interest earned in September 2023 and received in October 2023.~~

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

~~Investments—Consolidated Investment Companies at September 30, 2023 increased $9.8 million from December 31, 2022,~~ primarily due to an increase related to the consolidation of ~~$21.6~~a VIE during the three-month period ended March 31, 2024.

Investments—Affiliates and Other at March 31, 2024 decreased $32.1 million from December 31, 2023 primarily due to (1) a decrease of $28.2 million from net redemptions and (2) $5.4 million related to the consolidation of ~~two VIEs~~a VIE during the ~~nine-month period ended September 30, 2023, partially offset by a decrease~~first three months of ~~$13.0 million of net redemptions from investments during the same period.~~

~~Investments—Affiliates and Other at September 30, 2023 decreased $17.3 million from December 31, 2022 due~~2024, which reclassified Federated Hermes’ investment to a decrease of $18.2 million from net redemptions during the nine-month period ended September 30, 2023, partially offset by an increase of approximately $1.0 million from net appreciation on existing investments during the same period.Investments—Consolidated Investment Companies.

Accrued Compensation and Benefits at ~~September 30, 2023~~March 31, 2024 decreased ~~$25.2~~$91.9 million from December 31, ~~2022~~2023 primarily due to the ~~2022~~2023 accrued annual incentive compensation being paid in the first ~~half~~quarter of ~~2023~~2024 ($~~120.3~~129.4 million), partially offset by ~~2023~~2024 incentive compensation accruals recorded at ~~September 30, 2023~~March 31, 2024 ($~~91.4~~38.1 million).

~~Other Current Liabilities~~Income Taxes Payable at ~~September 30, 2023~~March 31, 2024 increased ~~$20.0~~$23.7 million from December 31, ~~2022 and~~2023 primarily ~~represents carried interest payable as of September 30, 2023.~~due to an accrual for the first quarter estimated federal tax payment that was paid in April 2024.

Legal Proceedings

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

Recent Accounting Pronouncements

For a list of new accounting standards applicable to Federated Hermes, see Note (2) to the Consolidated Financial Statements.

Critical Accounting Policies

Federated 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 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~~can differ from those estimates made by management and those differences may be material.

Of the significant accounting policies described in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, management believes that indefinite-lived intangible assets included in its Goodwill and Intangible Assets policy involves a higher degree of judgment and complexity. See Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations under the section Critical Accounting Policies for a complete discussion of this policy.

~~Increases in market interest rates and a~~

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

A decrease in ~~near-term~~ projected cash flows resulted in management determining that an indicator of potential impairment existed as of December 31, ~~2022~~2023 for the FHL right to manage public fund assets which ~~totaled £150.3~~totals £124.4 million at March 31, 2024 and was acquired in connection with the 2018 FHL acquisition. Management used an income-based approach to valuation, the discounted cash flow method, in valuing the asset. AThe discounted cash flow ~~analysis prepared as of December 31, 2022 resulted in a non-cash impairment charge of $31.5 million. This~~ method resulted in no impairment for the ~~first two quarters of~~year ended December 31, 2023 as the estimated fair value of this intangible asset exceeded the carrying value. As a result of ~~continued increases in market interest rates~~revenue for the three-month period ended March 31, 2024 trailing forecast revenue and ~~a decrease in projected cash flows,~~an increased discount rate, a discounted cash flow analysis was prepared as of ~~September 30, 2023~~March 31, 2024 which resulted in the estimated fair value exceeding the carrying value by less than 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, 2023,~~March 31, 2024, 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 7%. 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 2%. Any market volatility and other events related to geopolitical or other unexpected events could further reduce the AUM, revenues and earnings associated with this intangible asset and can result in subsequent impairment tests being based upon updated assumptions and future cash flow projections, which can result in an impairment. For additional information on risks related to geopolitical or other unexpected events, see Item 1A - Risk Factors included in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

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

As of ~~September 30, 2023,~~March 31, 2024, there were no material changes to Federated Hermes’ exposures to market risk that would require an update to the disclosures provided in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

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’ President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of Federated Hermes’ disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of ~~September 30, 2023.~~March 31, 2024. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that Federated Hermes’ disclosure controls and procedures were effective at ~~September 30, 2023.~~March 31, 2024.

(b)There has been no change in Federated Hermes’ internal control over financial reporting that occurred during the quarter ended ~~September 30, 2023~~March 31, 2024 that has materially affected, or is reasonably likely to materially affect, Federated Hermes’ internal control over financial reporting.

Part II, Item 1. Legal Proceedings

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

Part II, Item 1A. Risk Factors

There are no material changes to the risk factors included in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

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’ share repurchase program during the ~~third~~first quarter ~~2023.~~2024.

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
54,024 $ 31.44 50,000 3,372,415
August2
1,077,500 33.49 1,075,000 2,297,415
September2
915,266 34.00 900,000 1,397,415
Total 2,046,790 $ 33.66 2,025,000 1,397,415


	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
January2	64,399	$	28.25	50,000	4,482,415
February2	585,000	35.06		580,000	3,902,415
March2	432,721	33.91		410,000	3,492,415
Total	1,082,120	$	34.20	1,040,000	3,492,415

1 In ~~June 2022,~~October 2023, the Federated Hermes 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, 2023.~~March 31, 2024. See Note (13) to the Consolidated Financial Statements for additional information on this program. ~~See Note (19) to the Consolidated Financial Statements for information regarding a new share repurchase program approved on October 26, 2023.~~

2 In ~~July, August~~January, February and ~~September 2023, 4,024, 2,500,~~March 2024, 14,399, 5,000 and ~~15,266~~22,721 shares, respectively, of Class B common stock with a weighted-average price of ~~$0.00,~~$2.88, $0.00 and ~~$2.42~~$2.07 per share, respectively, were repurchased as employees forfeited restricted stock.

Part II, Item 5. Other Information

~~Insider Trading Arrangements~~SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

At the Annual Meeting of Shareholders of Federated Hermes held on Thursday, April 25, 2024, via teleconference, the holder of Federated Hermes’ Class A common stock, which constituted all of the shares entitled to vote at the meeting, approved the following proposal, which is described in more detail in Federated Hermes’ Information Statement to shareholders dated March 13, 2024.

The holder of Federated Hermes’ Class A common stock elected seven individuals to the Board of Directors of Federated Hermes, Inc. as set forth below:


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

INSIDER TRADING ARRANGEMENTS

While certain officers have elected in advance to satisfy tax obligations arising from the vesting of awards of periodic and bonus restricted Federated Hermes Class B Common Stock through the sale of sufficient shares of such stock necessary to satisfy such tax obligations in the open-market, no director or officer adopted, modified or terminated a Rule 10b5-1(c) or a non-Rule 10b5-1(c) trading arrangement during the fiscal quarter ended ~~September 30, 2023.~~March 31, 2024.

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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 10.1~~ ~~– Federated Hermes, Inc. Annual Incentive Plan, as amended October 26, 2023 (filed herewith)~~

~~Exhibit 10.~~2 ~~– Federated Hermes, Inc. Stock Incentive Plan, as amended October 26, 2023 (filed herewith)~~

~~Exhibit 10.~~3 ~~– Form of 2023 Restricted Stock Award Agreement for Federated Hermes, Inc. Stock Incentive Plan (filed herewith)~~

~~Exhibit 10.~~4 ~~– UK Sub-Plan to the Federated Hermes, Inc. Stock Incentive Plan, as amended as of October 26, 2023 (filed herewith)~~

~~Exhibit 10.~~5 ~~– Form of 2023 Restricted Stock Award Agreement for UK Sub-Plan (filed herewith)~~

~~Exhibit 10.~~6 ~~– Form of Cash Award Agreement for Non-U.S. Employee for Federated Hermes, Inc. Stock Incentive Plan (filed herewith)~~

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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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 27, 2023~~April 26, 2024

By:

/s/ J. Christopher Donahue

J. Christopher Donahue

President and Chief Executive Officer

Date

~~October 27, 2023~~April 26, 2024

By:

/s/ Thomas R. Donahue

Thomas R. Donahue

Chief Financial Officer

5743


Part I. Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets	4
		Consolidated Statements of Income	5
		Consolidated Statements of Comprehensive Income	6
		Consolidated Statements of Changes in Equity	7
		Consolidated Statements of Cash Flows	8
		Notes to the Consolidated Financial Statements	9
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2322
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5540
	Item 4.	Controls and Procedures	5540
Part II. Other Information
	Item 1.	Legal Proceedings	5540
	Item 1A.	Risk Factors	5540
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5541
	Item 5.	Other Information	5541
	Item 6.	Exhibits	5642
Signatures			5743