FHI

of Financial Condition and Results of Operations (unaudited) Business Developments Business Combination On April 9, 2026, Federated Hermes completed the acquisition of an 80% interest in FCP. See Note (4) to the Consolidated Financial Statements for additional information. Current Regulatory Developments The business and regulatory environment in which Federated Hermes operates globally remains complex, uncertain and subject to 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 offerings are subject to various: (1) federal securities laws, such as the Securities Act of 1933 (1933 Act), the Securities Exchange Act of 1934 (Exchange Act), the Investment Company Act of 1940 (1940 Act), and the Investment Advisers Act of 1940 (Advisers Act); (2) state laws regarding fraud and registration; and (3) regulations or other rules promulgated by various regulatory authorities, or other authorities. These regulatory requirements, and 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). Please see Federated Hermes’ prior public filings, including the discussions under Part I, Item 2 – Management’s Discussion and Analysis – Business Developments – Current Regulatory Developments, in Federated Hermes’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026 (First Quarter 2026 Form 10-Q), and Part I, Item 1 – Business – Regulatory Matters, in Federated Hermes’ Annual Report on Form 10-K for the year ended December 31, 2025 (2025 Annual Report), for an overview of Federated Hermes’ regulatory environment and related regulatory developments and requirements for periods prior to March 31, 2026 and December 31, 2025, respectively. Regulatory Developments – Domestic The primary regulator in the U.S. for Federated Hermes and its offerings is the SEC. U.S. regulatory matters addressed in Federated Hermes’ 2025 Annual Report and First Quarter 2026 Form 10-Q included, among others: (1) the regulatory impact resulting from the current Presidential administration, which has fundamentally redirected the SEC away from expansive regulation and aggressive enforcement to emphasizing deregulation, capital formation and “back-to-basics” investor protection; (2) SEC enforcement trends and examination priorities; (3) the Financial Stability Oversight Council’s (FSOC) priorities for 2026, which are primarily focused on deregulation and promoting economic growth; (4) the Financial Industry Regulatory Authority’s (FINRA) regulatory operations programs, including FINRA’s key areas of focus for 2026; (5) SEC proposed amendments to Form N-PORT and the Names Rule compliance dates; (6) scrutiny of governance, environmental and social initiatives, including state laws governing proxy advisory services; (7) the FSOC’s proposed interpretive guidance on systemically important financial institution (SIFI) designations; (8) the Department of Labor’s (DOL) proposed rules establishing a safe harbor framework that would allow for the inclusion of alternative assets, such as private market investments, in 401(k) plans; (9) the SEC’s enforcement results for its 2025 fiscal year; and (10) certain other specific regulatory developments involving the SEC, the DOL, and other regulators. Key regulatory developments and requirements in the U.S. since March 31, 2026, that can significantly impact or relate to Federated Hermes’ business and offerings include, among others, the following. Unless otherwise noted, Federated Hermes is evaluating the impact of the matters described on its business and offerings. Electronic Delivery Rule Proposal. On July 16, 2026, the SEC proposed Regulation E-Delivery, a new rule that would: (1) expand the ability of issuers, market intermediaries, and others to use electronic delivery to satisfy requirements to deliver required regulatory information under the federal securities laws; (2) provide requirements and conditions for delivering regulatory information electronically to investors and others without first obtaining their affirmative consent; and (3) generally supersede the SEC’s decades-old, guidance-based e-delivery approach, which the SEC traces to a 1995 interpretive release. Under the proposal, investors would retain the ability to request paper delivery, and, if a recipient requests a paper copy of information during a specified period, it is required to be retained under the federal securities laws and an issuer would generally have to send a paper copy, free of charge, within three business days of the request. To facilitate this new e-delivery approach, the SEC also proposed to: (1) rescind 1940 Act Rule 30e-3, (which provides alternative means for registered investment companies to satisfy shareholder report transmission requirements); and (2) amend current rules addressing the dissemination of proxy materials and tender offer materials. The proposal is intended to modernize the delivery-method 26 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) rulebook applicable across the SEC’s regulated entities, without altering the content or format requirements for existing disclosures. The public comment period for this proposal will end on September 21, 2026. SEC Publishes Agency Rule List – 2026 (2026 Reg. Flex Agenda). On July 3, 2026, the SEC released its 2026 Reg. Flex Agenda, which was originally produced on May 14, 2026, and included two pre-rule items, 36 proposed rule items, and no final rule items. In a July 7, 2026 statement regarding the 2026 Reg. Flex Agenda, the SEC Chairperson stressed that the SEC recognizes: (1) the importance of advancing the regulatory framework to reflect today’s operating environment by embracing innovation and technology; (2) the importance of reversing the decline of public companies and revitalizing public markets; and (3) the need to ensure a regulatory framework for private markets that is transparent and accessible while remaining safeguarded. Each item from the SEC’s Division of Investment Management is designated as “deregulatory,” reflecting the SEC Chairperson’s strategy for advancing regulatory frameworks into the modern era, clarifying jurisdictional lines, and transforming SEC rules by returning them to first principles. In addition to the electronic delivery rule proposal discussed above, the 2026 Reg. Flex Agenda includes a number of items relating to registered investment advisors and funds, including, among others: (1) proposed amendments to Advisers Act Rule 206(4)-5 (the Pay to Play Rule); (2) Advisers Act recordkeeping modernization; (3) Advisers Act and 1940 Act custody rule amendments, including proposals for crypto-assets; (4) proposed rules to facilitate retail and registered fund access to private markets; (5) 1940 Act Rule 17a-7 amendments to restore fixed income cross-trading; (6) a proposed exemptive rule to permit funds to use an affiliated securities lending agent that can be compensated via a share of securities lending revenue, subject to certain conditions; and (7) various proxy rule amendments. The 2026 Reg. Flex Agenda no longer includes a proposal for a registered investment advisor and exempt reporting advisor customer identification program. SEC Chairperson Announces Comprehensive Review of SEC Enforcement Processes. On July 1, 2026, the SEC Chairperson announced that the SEC will conduct a sweeping review of its enforcement processes, describing the review as only the second such comprehensive evaluation in the SEC’s history. Speaking at the Economic Club of New York, the SEC Chairperson stated that the SEC has “ended the regulation by enforcement approach of the past and recentered [its] enforcement program on the SEC’s core mission by prioritizing cases that provide meaningful investor protection and strengthen market integrity.” The announcement follows a period of significant change at the SEC’s Division of Enforcement, including the appointment of David Woodcock as Enforcement Director on May 4, 2026, who has emphasized a shift away from case volume in favor of prioritizing quality and “back-to-basics” principles. Effective May 21, 2026, the SEC also rescinded a long-standing (since 1972) policy codified in its rules of informal procedure that provided that, when the SEC chose to settle an enforcement action in which a sanction was imposed, the SEC would not settle unless the defendant or respondent also agreed not to publicly deny the allegations in the complaint or administrative order. The SEC Chairperson also previously articulated a four-year strategic blueprint highlighting his intentions to shift regulatory practices and enforcement and improve operational efficiency, with the SEC’s Division of Enforcement focusing on fraud and manipulation. These developments are consistent with the broader deregulatory direction of the current Presidential administration discussed in Federated Hermes’ prior public filings. DOL Submits Proposed Rule on Prudence and Loyalty in Plan Investments and Shareholder Rights. On June 30, 2026, the DOL submitted a proposed rule titled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” to the Office of Management and Budget (OMB) for review under the regulatory review process. While the title of the proposed rule does not use the term “ESG,” the rulemaking is expected to address the permissible factors that Employee Retirement Income Security Act (ERISA) plan fiduciaries may consider when making investment decisions or exercising proxy voting and other shareholder rights on behalf of retirement plans. The proposed rule follows the current administration’s broader efforts to revisit the prior administration’s 2022 rule, which facilitated the consideration of governance, environmental and social factors in ERISA-governed investment decisions, and is consistent with recent DOL enforcement signals and guidance - including Technical Release 2026-01 (discussed below) and Employee Benefits Security Administration (EBSA) head Daniel Aronowitz’s May 8, 2026 remarks (discussed below) - emphasizing that ERISA fiduciaries must act solely in the economic interest of plan participants and beneficiaries. Supreme Court Rules That Section 47(b) of the Investment Company Act of 1940 Provides No Private Right of Action. On June 11, 2026, the U.S. Supreme Court held 6-3 in FS Credit Opportunities Corp. v. Saba Capital Master Fund, Ltd. that 1940 Act Section 47(b) does not create a private right of action for rescission of contracts that violate the 1940 Act. The Court held that Section 47(b)’s phrase “rescission at the instance of any party” does not imply that private parties may sue. The Court concluded that Section 47(b)’s provision is a “mandate directed to … courts” and does not confer a right to individuals. The Court’s decision reaffirms the SEC’s central role in enforcing - or exempting investment companies from - the 1940 Act and reduces the risk that private suits will undermine the SEC’s enforcement priorities. The decision is a setback for activist investors that are now foreclosed from suing for contract rescission under the 1940 Act to prevent exchange-listed closed-end funds and other issuers from adopting safeguards, like control share provisions, designed to protect the interests of long-term 27 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) shareholders. The Court’s decision reduces the exposure of registered investment companies and their advisors to private litigation alleging violations of the 1940 Act, though the full implications will depend on how lower courts apply the decision. SEC Division of Examinations (DOE) Issues Risk Alert on Investment Adviser Conflicts of Interest. On June 9, 2026, the SEC’s DOE issued a Risk Alert describing observations related to SEC-registered investment advisors’ economic conflicts of interest. The Risk Alert, which echoes topics in the DOE’s 2026 Examination Priorities, emphasizes the fiduciary obligations of investment advisors to identify, disclose and manage economic conflicts of interest. The Risk Alert addresses five key areas of concern: (1) conflicts of interest associated with investment advisors’ cash management recommendations, including automatic sweeps of uninvested cash into interest-bearing accounts without enabling informed client consent and undisclosed revenue-sharing arrangements; (2) conflicts of interest associated with other revenue opportunities, including the selection of higher-cost mutual fund share classes when lower-cost share classes were available; (3) compensation-related misstatements or omissions in Form ADV brochures, including failures to disclose industry activities, affiliations and revenue-sharing arrangements; (4) advisory fee calculations that were inconsistent with agreements and disclosures, including charging for services not provided and failing to issue refunds upon early termination; and (5) compliance programs that did not fully address fee-related economic conflicts, including the lack of controls to ensure accurate billing. The SECs DOE noted that examination findings often resulted in investment advisors returning money owed to clients due to fee billing and calculation errors and encouraged investment advisors to routinely review and refine their billing policies, procedures, practices and conflict disclosures. SEC Proposes to Rescind Climate-Related Disclosure Rules. On May 29, 2026, the SEC proposed to rescind, in their entirety, the climate-related disclosure rules that the SEC had adopted in March 2024 but stayed pending litigation in the U.S. Court of Appeals for the Eighth Circuit. The SEC stated that the 2024 rules exceeded the SEC’s statutory authority and, independently, reflected unsound policy because they were inconsistent with a registrant-specific, materiality-based approach to disclosure. If adopted, the proposed rescission would eliminate the 2024 rules’ specific line-item climate disclosure requirements, (covering climate-related risks, governance, targets and certain greenhouse gas emissions) rather than replace them with an alternative climate-specific framework, reverting public companies to existing principles-based and materiality-based disclosure obligations regarding climate matters. The proposal does not affect separate, non-SEC climate-related disclosure obligations that may apply to public (and private) companies under California law (including SB 253 and SB 261, discussed below) or other state, federal or non-U.S. regimes. The public comment period on the proposed rescission ends on August 3, 2026 and, because a subsequent vote of the SEC’s Commissioners would be required, a final rule is not expected before late 2026 or early 2027. SEC Proposes Sweeping Changes to Filer Status Framework and Executive Compensation Disclosure. On May 19, 2026, the SEC proposed a simplified two-classification system for public reporting companies, replacing the existing five filer categories with two: (1) non-accelerated filer (NAF); and (2) large-accelerated filer (LAF). Under this proposal, a public company will be categorized as an NAF unless it satisfies specified public float and time requirements (at least $2 billion and 60 consecutive months of Exchange Act reporting). The public float threshold would need to be satisfied for two consecutive fiscal years before transition to LAF status. Every company conducting an initial public offering, regardless of public float, will benefit from a minimum five-year on-ramp as an NAF. While Federated Hermes would not benefit from the proposal because it would continue to qualify as a LAF, if final rules are adopted as proposed, NAFs’ compensation disclosure obligations will be significantly reduced. NAFs would be required to provide compensation disclosure for only three (rather than five) executive officers, a summary compensation table for up to two (rather than three) fiscal years, an outstanding equity awards table and a director compensation table. The proposal would eliminate for NAFs the Compensation Discussion and Analysis (CD&A), the grants of plan-based awards table, the option exercises and stock vested table, pension benefits and non-qualified deferred compensation tables, pay ratio and pay versus performance disclosures, say-on-pay advisory votes, golden parachute tables, the compensation committee report and compensation committee interlock disclosures. The proposal follows the SEC Chairperson’s January 2026 statement instructing the SEC’s Division of Corporation Finance to undertake a comprehensive review of Regulation S-K, as discussed in Federated Hermes’ First Quarter 2026 Form 10-Q. The public comment period for this proposal ended on July 20, 2026. SEC Proposes Sweeping Reforms to the Registered Offering Process, Including for Closed-End Funds (CEFs) and Business Development Companies (BDCs). On May 19, 2026, the SEC proposed a broad package of rule and form amendments under the 1933 Act intended to modernize and expand issuer eligibility for shelf registration, well-known seasoned issuer (WKSI) benefits, and related communications safe harbors. As proposed, the amendments would extend enhanced registration and communication benefits - including short-form Form N-2 eligibility (without regard to the current $75 million public float requirement), automatic shelf registration for certain qualifying issuers, and an expanded Rule 139b research-report safe harbor without a minimum public float requirement - to BDCs and registered closed-end funds, including exchange-listed CEFs, that register securities on Form N-2. The public comment period for this proposal ended on July 27, 2026. 28 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) DOL Signals Targeted Enforcement on ESG/DEI in 401(k)s. The DOL’s EBSA has signaled a more pointed enforcement approach toward retirement plan fiduciaries engaging in governance, environmental and social or diversity, equity and inclusion (DEI)-related investing. Speaking on May 8, 2026, EBSA head Daniel Aronowitz emphasized that the agency will prioritize action against “bad faith” actors who misappropriate plan assets or pursue “disloyal” objectives collateral to participant benefits, explicitly identifying governance, environmental and social and DEI motivations as potential red flags. The remarks build on recent agency guidance pivoting away from broad fiduciary-prudence inquiries and coincide with efforts to revisit prior administration rules that facilitated governance, environmental and social investment options in 401(k)s. SEC Proposes Optional Semiannual Reporting for Public Companies. On May 5, 2026, the SEC proposed rule and form amendments that would give public companies the option of filing semiannual reports on a new Form 10-S in lieu of quarterly reports on Form 10-Q. Companies that elect semiannual reporting would file one semiannual report and one annual report each fiscal year instead of three quarterly reports and one annual report. The election would be made annually on the cover page of Form 10-K; companies that do not affirmatively elect would continue to file quarterly. Form 10-S would require the same disclosures as Form 10-Q - including reviewed financial statements, management’s discussion and analysis (MD&A), legal proceedings, risk factor updates and executive officer certifications - but for a six-month period. Companies electing semiannual reporting could continue to issue quarterly earnings releases and hold quarterly earnings calls, though such information would not be subject to independent accountant review. The SEC Chairperson described the proposal as part of his agenda to incentivize companies to go and stay public. On July 6, 2026, Federated Hermes submitted a comment letter recommending that the SEC maintain mandatory quarterly reporting requirements and, instead, streamline Forms 10-K and 10-Q to focus on the most decision-useful, material disclosures - including financial statements and MD&A - by eliminating or reducing prescriptive and immaterial disclosure requirements that do not meaningfully inform investors. The public comment period for this proposal ended on July 6, 2026. SEC and Commodity Futures Trade Commission (CFTC) Propose Amendments to Form PF. On April 20, 2026, the SEC and CFTC proposed amendments to Form PF to: (1) eliminate filing requirements for smaller advisors by raising the Form PF filing threshold for all filers from $150 million in private fund AUM to $1 billion in private fund AUM and raising the reporting threshold for large hedge fund advisors from $1.5 billion in hedge fund AUM to $10 billion in hedge fund AUM; (2) eliminate certain reporting requirements for smaller hedge fund advisors; and (3) eliminate, streamline and simplify certain other reporting requirements by, among other proposed changes, eliminating certain “look through” requirements, eliminating certain performance volatility reporting requirements, simplifying certain large hedge fund counterparty exposure reporting, eliminating certain current reporting for large hedge fund advisors, and eliminating quarterly event reporting for all private equity fund advisors. SEC-registered investment advisors that satisfy Form PF’s filing thresholds must file Form PF, which is intended to provide the SEC, CFTC and FSOC with confidential information about the operations and strategies of private funds and their investment advisors. The proposed amendments would repeal certain enhanced reporting requirements promulgated by the SEC in 2024. The public comment period for this proposal ended on June 23, 2026. SEC Publishes Concept Release on Consolidated Audit Trail and Other Audit Trails and Data Sources. On April 16, 2026, the SEC published a concept release soliciting comments in support of a comprehensive review of the Consolidated Audit Trail and other audit trails and related data sources currently used in the regulation of U.S. securities markets, including comments regarding the funding mechanisms for these audit trails and/or related data sources. The Consolidated Audit Trail is a centralized, SEC-mandated system that collects and links detailed data on all orders, quotes and trades across U.S. equity and options markets that purports to enable regulators to efficiently surveil, reconstruct and investigate market activity. The public comment period for this concept release ended on June 22, 2026. FINRA Proposes Amendments to Rules 5130 and 5131 to Exempt Collective Trust Funds (CTFs). On April 7, 2026, FINRA filed a proposed rule change to amend FINRA Rule 5130, (Restrictions on the Purchase and Sale of Initial Equity Public Offerings) and paragraph (b) (Spinning) of FINRA Rule 5131, (New Issue Allocations and Distributions) to exempt specified CTFs. The proposed amendments would modernize the new issue rules, which generally prohibit FINRA member firms from selling new issues to accounts in which certain “restricted persons” (such as broker-dealers, their employees, finders, and certain others) have a beneficial interest, unless an exemption applies, by extending an exemption to specified CTFs, consistent with the treatment of registered investment companies. As proposed, a CTF would be eligible for the exemption if: (1) it has investments from 1,000 or more plan participants and beneficiaries; and (2) it was not formed or maintained for the specific purpose of permitting restricted persons to invest in new issues. The public comment period for this proposal ended on May 1, 2026. Texas Stock Exchange (TXSE) Proposes to Exempt CEFs from Requirement to Hold Annual Shareholder Meetings. On April 6, 2026, the TXSE filed a proposed rule change with the SEC, SR TXSE 2026-005, establishing listing and continued listing standards for CEFs and interval funds on its new exchange. As part of this proposal, the TXSE proposed to eliminate the 29 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) exchange-level requirement that listed CEFs hold annual shareholder meetings. The TXSE proposal follows the Cboe Global Markets Inc. (Cboe) withdrawal on December 12, 2025 of its May 20, 2025 proposal that would have exempted newly-listed CEFs from the requirement to hold annual shareholder meetings and, subject to shareholder approval, also would have exempted previously listed CEFs from the annual shareholder meeting requirement, and the New York Stock Exchange withdrawal on January 5, 2026 of a similar June 6, 2025 proposal. Federated Hermes submitted a comment letter on July 2, 2026, supporting efforts to eliminate annual shareholder meetings for exchange listed CEFs. In Federated Hermes’ view, CEFs are more akin to registered mutual funds, which are not required to have annual meetings, than listed operating companies and the annual shareholder meeting requirement subjects them to attack by activist shareholders who buy discounted shares and then take action to force the CEFs to incur liquidity events, (such as tender offers, reorganizations or open-ending of the CEFs) to realize or arbitrage the difference between the discounted purchase price and the CEFs’ NAV, all to the detriment of the CEFs and their long-term investors. DOL Clarifies Fiduciary Status of Proxy Advisory Firms and Reinforces ERISA Standards on Proxy Voting. On April 1, 2026, the DOL published Technical Release 2026-01, providing guidance to plan administrators and other fiduciaries of plans subject to ERISA that rely on proxy advisory services, as well as to state legislators regulating proxy advisory services. The Release addresses two key issues. First, the Release clarifies that proxy advisory firms that either exercise authority or control over shareholder rights attributable to shares that are ERISA plan assets, including the voting of proxies, or provide advice for a fee to ERISA plans about how such plans should exercise proxy voting rights, must meet ERISA’s functional fiduciary requirements. This appears to be the first time the DOL has explicitly stated that the exercise of discretionary authority over the management of proxy voting rights could, standing alone, render a person or entity a fiduciary under ERISA. Prior DOL guidance had long recognized that proxy voting itself is a fiduciary act because proxy rights are plan assets, which implied that a party exercising discretion over those rights could become a functional fiduciary, but the DOL had not previously issued guidance on the fiduciary status of proxy advisory firms. Indeed, in announcing the Release, the DOL described the guidance as “first-of-its-kind guidance” addressing circumstances in which proxy advisory firms may satisfy the test for fiduciary status under ERISA. Second, the Release addresses ERISA preemption, opining that where a state law mandates disclosure to investors by proxy advisory firms only when they make recommendations other than for the purpose of maximizing risk-adjusted return for the advisee, such laws are generally not preempted by ERISA. The DOL stated that “[a] proxy advisory firm covered by such a law is not permitted to come within its ambit when providing services to an ERISA plan because ERISA imposes even stronger consumer protections in the form of fiduciary protections, including a bar on taking into account anything other than the exclusive purpose of providing benefits to participants and beneficiaries by maximizing risk-adjusted returns - since such a law creates an obligation to provide disclosure only when offering nonfinancial advice (that is, advice based on considerations other than maximizing risk-adjusted returns).” State Actions Relating to Governance, Environmental and Social Factors and Proxy Advisory Firms. State Proxy Advisor Disclosure Laws. Several states have enacted laws modeled on Texas S.B. 2337 (2025) that regulate proxy advisor firms that provide certain recommendations involving governance, environmental and social factors or diversity, equity and inclusion factors. For instance, Indiana (H.B. 1273), Kentucky (S.B. 183), Kansas (S.B. 375), and Oklahoma (H.B. 4429), each enacted proxy advisor disclosure laws similar to Texas S.B. 2337. The two largest proxy advisory firms have filed federal lawsuits challenging the Indiana, Kansas, and Kentucky laws on First Amendment grounds, alleging the disclosure requirements constitute viewpoint discrimination because they impose burdens only when the proxy advisor’s recommendation disagrees with management’s position. On June 24, 2026 and June 26, 2026, two federal courts issued preliminary injunctions preventing the Kansas and Indiana laws, respectively, from going into effect on July 1, 2026. These injunctions follow a similar preliminary injunction issued in Texas in 2025. In July 2026, the Kentucky Attorney General agreed with one of the two largest proxy advisory firms not to enforce its proxy advisor disclosure law against it pending the outcome of an injunction hearing. Separately, on May 20, 2026, four Republican state Attorneys General - Texas, Nebraska, Iowa, and West Virginia -filed state court consumer protection lawsuits against one of the two largest proxy advisory firms alleging the firm failed to disclose that its voting recommendations prioritize governance, environmental and social policies over clients’ financial interests. These lawsuits follow a similar suit filed by Florida in November 2025. On May 26, 2026, the state Attorneys General also announced the formation of a 16-state “Multistate Proxy Advisor Coalition” to coordinate enforcement efforts against the proxy advisory firm. California Climate Corporate Data Accountability Act Update. On June 24, 2026, the California Air Resources Board (CARB) announced that the first reporting deadline under the Climate Corporate Data Accountability Act (SB 253) would be extended from August 10, 2026 to November 10, 2026, providing covered entities, including certain investment advisors and fund complexes doing business in California (such as Federated Hermes), additional time to prepare Scope 1 and Scope 2 greenhouse gas emissions disclosures. Enforcement of the related Climate-Related Financial Risk Act (SB 261) remains stayed 30 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) pending the United States Court of Appeals for the Ninth Circuit’s ongoing review of a preliminary injunction against that statute. State Attorneys General Probe Governance, Environmental and Social Factor Influence in Credit Rating Practices. On April 22, 2026, a coalition of 23 Republican state Attorneys General, co-led by Alaska, Florida, Nebraska, and Texas, sent letters to Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings alleging that the agencies’ downgrades of fossil fuel companies were based on speculative governance, environmental and social predictions that “materially contravened” their stated methodologies and reflect undisclosed conflicts of interest tied to their commitments to United Nations-backed initiatives. The coalition demanded that the agencies explain or reverse the downgrades, withdraw from or disclose their governance, environmental and social commitments, revise methodologies to remove transition-risk factors, and cease offering governance, environmental and social advisory services to entities they also rate. The coalition warned that failure to act could result in enforcement under state unfair and deceptive acts or practices laws, antitrust investigations, or referral to the SEC and Department of Justice. On May 20, 2026, a group of eight Democratic state and local finance officials - including the state treasurers of Connecticut, Massachusetts, Rhode Island, and Colorado - sent a counter-letter urging the agencies to maintain “independent, forward-looking” risk frameworks, arguing that the Republican demands would “narrow risk analysis in ways inconsistent with sound credit practice and the needs of investors and issuers.” Oklahoma Fossil Fuel Boycott Law Found Unconstitutional. On April 7, 2026, the Oklahoma Supreme Court ruled 5-3 in Keenan v. Russ that the Oklahoma Energy Discrimination Elimination Act of 2022 is “unconstitutional in its entirety when applied to the Oklahoma Public Employees Retirement System” (OPERS), upholding a 2024 district court injunction. The law required the Oklahoma Treasurer’s Office to maintain a list of financial companies that boycott energy companies and directed state entities to divest from them. The court held that the law violated Article 23, Section 12 of the Oklahoma Constitution by creating an impermissible “dual purpose” for investment decisions that interfered with OPERS’s constitutional duty to act solely in the interest of participants and beneficiaries, noting that companies on the restricted list controlled approximately 64% of the system’s assets. The Chief Justice of the Oklahoma Supreme Court dissented on the merits, arguing the Constitution expressly delegates to the Legislature the authority to prescribe investment conditions. The ruling is part of a broader pattern of judicial resistance to state anti-governance, environmental and social boycott laws, following a February 2026 federal court decision striking down a similar Texas law on First and Fourteenth Amendment grounds, with potential implications for comparable statutes in other states. Regulatory Developments – International Outside the U.S., the primary regulators of Federated Hermes and its offerings include the United Kingdom (U.K.) Financial Conduct Authority (FCA), the Central Bank of Ireland (CBI), the Luxembourg Commission de Surveillance du Secteur Financier, the Cayman Islands Monetary Authority, the Monetary Authority of Singapore and the Australian Securities and Investments Commission. Federated Hermes and its offerings are subject to various non-U.S. regulatory requirements, and may be impacted by regulatory developments by or involving those primary regulators, as well as, among others, the European Commission, European Securities and Markets Authority (ESMA), Bank of England (BoE), His Majesty’s Treasury (HM Treasury), Financial Stability Board (FSB), and the International Organization of Securities Commission (IOSCO). Non-U.S. regulatory matters addressed in Federated Hermes’ 2025 Annual Report and First Quarter 2026 Form 10-Q included, among others: (1) key regulatory priorities identified by regulators in the U.K. and European Union (EU); (2) money market fund reform in the U.K. and EU; (3) U.K. and EU changes to liquidity risk management requirements; (4) U.K. and EU sustainability requirements for asset managers and investment offerings; (5) U.K. and EU sustainability reporting requirements for corporations; (6) U.K. and EU anti-money laundering requirements; (7) EU reforms to enhance the European Market Infrastructure Regulation (EMIR); (8) U.K. and EU regulation of governance, environmental and social ratings; (9) the transition to the T+1 settlement in the U.K. and EU; and (10) the retail investment strategy (RIS) in the EU. Key regulatory developments outside the U.S. since March 31, 2026 that can significantly impact or relate to Federated Hermes’ business and offerings include, among others, the following. Unless otherwise noted, Federated Hermes is evaluating the impact of the matters described on its business and offerings. U.K. Reform of Alternative Investment Fund Manager Directive (AIFMD) regime, and reform of reporting and remuneration requirements for U.K. asset managers (including Alternative Investment Fund Managers (AIFMs)). On July 14, 2026, HM Treasury published a draft Statutory Instrument and Policy note setting out a new, simplified legislative framework for governing AIFMs, repealing existing legislation governing AIFMs, and providing for the detailed regulation of AIFMs to be addressed in FCA rules. On July 14, 2026, the FCA also published a consultation paper on the new regime for AIFMs (CP26/28 - The U.K. AIFM Regime), as well as consultation papers impacting asset managers generally on reporting requirements (CP26/26 - Fund Reporting for Asset Management Entities (FRAME)) and remuneration requirements (CP26/27 - 31 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) Remuneration: Solo-regulated Firms’ Rules Reform). In these consultation papers, among other things: (1) the FCA proposes replacing the current U.K. AIFMD-derived framework with a new, standalone rulebook - the Alternative Investment Funds (AIFs) sourcebook (ALTS) - and introduces a three-tier system that classifies AIFMs as small (under £750m NAV), medium (£750m–£5bn NAV), or large (over £5bn NAV), with obligations scaling proportionately by size; (2) the FCA sets out a proposed new reporting framework covering the thresholds, frequency, time to report, and scope of the regime, along with its approach to leverage, master and feeder funds, and calculation methodologies that AIFMs would need to follow; and (3) the FCA proposes changes to the remuneration code applicable to solo-regulated asset managers, aiming to simplify and modernize pay-related rules that currently derive largely from the AIFMD, tailor applicable remuneration requirements more proportionately by firm size, and reduce compliance burdens for smaller managers while preserving standards for larger, more systemically significant firms. The public consultation periods for these papers end on October 14, 2026, September 22, 2026, and September 16, 2026, respectively. CBI Undertakings for Collective Investment in Transferable Securities (UCITS) Regulations. On July 10, 2026, the CBI published its final package of updates to the Irish UCITS domestic Irish framework following its consultation paper (CP161) on revised Central Bank UCITS Regulations, which was intended to align domestic Irish UCITS requirements with AIFMD II/UCITS VI, incorporate existing guidance, and revise rules on performance fees and redemption gates for UCITS and certain retail investor AIFs. The final package repeals and replaces the 2019 Central Bank UCITS Regulations and includes substantive changes, including, for example: (1) the CBI removed the proposed standalone swing pricing provision as duplicative; (2) the CBI removed the previously proposed 10% threshold before a redemption gate could be imposed; and (3) the CBI did not proceed with a proposed 10-basis-point deviation limit for non-money market fund UCITS. The publication of the CBI’s final package followed its publication of a revised AIF Rulebook on May 5, 2026. EU Sustainability Requirements for Corporations. On July 3, 2026, the EU’s European Commission adopted the final European Sustainability Reporting Standards (ESRS) as part of the simplification of the Corporate Sustainability Reporting Directive (CSRD). The ESRS are designed to reduce administrative burdens for EU businesses while maintaining high-quality disclosures by: (1) introducing additional flexibility measures and new exemptions; (2) reducing the mandatory datapoints; (3) enhancing the connectivity with international standards and other EU legislation; and (4) introducing a more proportionate approach with principle-based guidance and the possibility to include clearly identified non-material information without obscuring material disclosures. Under the ESRS, asset managers who manage investments subject to a fiduciary duty on behalf of clients are not expected to make certain assessments/disclosures relating to those investments. The European Commission also adopted the voluntary sustainability reporting standards for certain small companies not subject to the CSRD. EU Savings and Investments Union (SIU) and the Market Integration and Supervision Package (MISP). On June 12, 2026 the European Parliament published three draft reports on the MISP, which is a key component of the EU’s SIU initiative. The MISP consists of, among other things, a Master Regulation amending fourteen underlying acts governing various supervisory aspects of financial markets and a Master Directive amending three acts related to asset management and trading (including the UCITS Directive, AIFMD, and Markets in Financial Instruments Directive II (MiFID II)). The MISP is intended to integrate the EU’s capital markets by expanding the role and direct supervisory powers of ESMA, increasing supervisory coordination, and simplifying and harmonizing the requirements for market participants. EU and U.K. Anti-Money Laundering (AML) Requirements. In the U.K., on June 9, 2026, HM Treasury published the Money Laundering and Terrorist Financing (Amendment) Regulations 2026, which had been laid before U.K. Parliament on March 25, 2026, amending the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. This statutory instrument implements targeted updates to the U.K.’s AML and counter-terrorist financing framework. The revisions include amendments regarding customer due diligence and enhanced due diligence requirements for crypto asset businesses and unusually complex or large transactions, high-risk jurisdictions, and pooled client accounts. Most provisions came into force on June 30, 2026, though certain crypto-related change-in-control provisions take full effect from October 25, 2027, aligned with the U.K.’s incoming crypto-asset regulatory regime. In the EU, on April 16, 2026, the Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA) published two consultation papers concerning: (1) draft guidelines on the business-wide risk assessment under Article 10(4) of the Anti-Money Laundering Regulation (AMLR), for which the consultation period closed on July 15, 2026; and (2) draft regulatory technical standards (RTS) on group-wide requirements and additional measures for branches and subsidiaries in third countries under Articles 16(4) and 17(3) of the AMLR, for which the consultation period closed on June 15, 2026. EU RIS and the Retail Investment Directive (RID) and Retail Investment Regulation (RIR). In relation to the RIS, on June 9, 2026, the EU Council published its compromised text of the proposed RID and RIR. These set out the EU Council’s negotiation position with other EU legislators. The RID is designed as an omnibus measure amending, among other directives, the Markets in Financial Instruments Directive, the UCITS Directive, and the AIFMD, with the goal of ensuring that the EU's retail 32 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) investment framework adequately empowers and protects consumers while growing retail investor participation in capital markets. The companion RIR amends the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation to adapt its Key Information Documents to the digital environment and the evolving needs of retail investors. The European Parliament has indicated that it is due to consider the proposed RID during its plenary session on November 11, 2026. Global Investment Fund Valuation. On June 1, 2026, IOSCO published a final report (FR/03/2026) setting out its Recommendations on Valuing Collective Investment Schemes (CIS). The final report supersedes the 2013 IOSCO CIS Valuation Principles and 2007 Hedge Fund Valuation Principles. It merges those principles and sets out a unified list of 13 recommendations that are intended to ensure that IOSCO’s CIS valuation standards remain consistent with market practice and account for recent market developments, including the increased retail investment in CISs, and the particular challenges posed by illiquid assets and private assets. The recommendations emphasize, among other things: (1) the importance of governance and oversight of valuation processes; (2) the need to identify and manage conflicts of interest; and (3) the need for the responsible entity to ensure assets are valued at fair value in line with applicable regulations, accounting standards and the fund documentation. National and supra-national regulators of financial services regulators are expected to take into consideration the IOSCO recommendations in their regulation of asset managers’ valuation policies and procedures. “EU T+1” Settlement. On May 26, 2026, ESMA published a consultation paper on amending its guidelines regarding standardized procedures and messaging protocols under Article 6(2) of the EU Central Securities Depositories Regulation (CSDR). These amendments are intended to enhance settlement efficiency and support a smooth transition to T+1 settlement, which is scheduled to take effect across the EU on October 11, 2027. Among other things, the proposed amendments would mandate electronic, standardized, machine-readable communication of allocations and confirmations using international messaging standards, removing existing references to non-electronic and non-machine-readable communication methods (such as oral allocations and confirmations) except in cases of temporary technical disruption. The consultation period for this paper closed on July 7, 2026, and ESMA expects to publish its final report, including the updated guidelines, by October 2026. EU Regulation of Governance. Environmental and Social Ratings. The European Commission published regulations during the second quarter 2026 regarding the implementation of governance, environmental and social ratings in the EU. These regulatory provisions included: (1) RTS published on May 26, 2026 on the information to be included in applications for the authorization or recognition as a rating provider; (2) RTS regarding the separation of governance, environmental and social rating providers’ business lines and an RTS on disclosure, both published on April 21, 2026; and (3) regulations published on April 24, 2026 regarding ESMA supervisory fees and ESMA fines and penalties for breaches. In addition, on April 29, 2026, ESMA published guidelines regarding the Rating Regulation, which seek to ensure rating providers understand the regulatory expectations (and authorization requirements) involved in endorsing third-country ratings. U.K. Financial Services and Markets Bill 2026-27. On May 19, 2026, the Financial Services and Markets Bill 2026-27 was introduced to the House of Lords, completing its first reading. The Financial Services and Markets Bill 2026-27 sets out significant changes to the overall U.K. financial services regulatory framework, including, among others: (1) reforming the U.K. Senior Managers and Certification Regime (SMCR), including removing the certification regime from primary legislation; (2) reforming the Financial Ombudsman Service framework to resolve disputes more quickly; (3) creating a new provisional authorization regime; (4) empowering HM Treasury to consolidate the AML supervision for various professional services; (5) empowering HM Treasury to establish broader overseas recognition regimes which may extend beyond the current “equivalence” regimes, an ability HM Treasury does not currently have outside areas of financial services activity already covered by assimilated EU law; and (6) changing various requirements relating to how the FCA and Prudential Regulatory Authority (PRA) should exercise their supervisory functions, including shorter statutory deadlines for certain authorization determinations and the removal of certain consultation obligations on guidance and minor rule changes. The Financial Services and Markets Bill 2026-27 also separately provides for the abolition of the Payment Systems Regulator and the transfer of its functions to the FCA. The Financial Services and Markets Bill 2026-27 received its second reading in the House of Lords on June 8, 2026, and is currently going through the legislative process. U.K. and EU Money Market Fund Reform. In the U.K., on May 14, 2026, as an update to a 2023 consultation paper, HM Treasury and the FCA published a joint statement expressing their commitment to reforming the U.K. money market fund regulatory regime (MMFR). The FCA subsequently published a statement on June 8, 2026, stating certain updated proposals that differ from those in the 2023 consultation paper. The updated proposals include: (i) retaining the current minimum daily liquid asset and weekly liquid asset (WLA) requirements (these were initially proposed to be increased in the 2023 consultation); (ii) setting out in guidance a “strong supervisory expectation” that stable NAV money market funds should hold 40% (rather than the required 30%) WLA and variable NAV money market funds hold 20% (rather than the required 15%) WLA; and (iii) requiring all U.K. money market funds to hold sufficient liquidity for adequate resilience. The new U.K. MMFR is expected to be in place by the end of 2026, subject to the legislative process to replace the regulations. In the EU, on May 11, 33 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) 2026, the European Commission published a report on the adequacy of the EU MMFR, along with Frequently Asked Questions (FAQs). The report found that, among other things, in stressed market conditions, WLA of 40% for stable NAV money market funds and 20% for variable NAV money market funds is generally sufficient and functions as an “early warning indicator” for EU member state regulators. The report also found that it would not be proportionate to increase the binding regulatory minimum to these levels. As such, the report concludes that these higher WLA levels should be regarded as “market resilience levels” that money market fund managers should monitor to identify situations warranting closer monitoring and increased supervisory engagement. CBI Publishes Revised AIF Rulebook. On May 5, 2026, the CBI published a comprehensively updated AIF Rulebook, together with its Feedback Statement on Consultation Paper 162, consolidating the requirements applicable to Irish-authorized AIFs, AIFMs and depositaries. Key changes include, among others: (1) removing the legacy loan origination chapter for qualifying investor AIFs (QIAIFs), aligning with the new EU loan-origination framework under AIFMD II; (2) removing the restriction on QIAIFs providing third-party guarantees, simplifying subscription-line and other fund-financing arrangements for private funds and private equity, real estate and direct lending fund structures; (3) for Retail Investor AIFs, removing the restriction on granting loans (enabling loan-originating Retail Investor AIFs), introducing harmonized liquidity management tools, revising performance-fee verification expectations, and imposing new stress-testing requirements for money market funds; and (4) corresponding updates to the European Long-Term Investment Fund (ELTIF) chapter addressing liquidity, performance fees, share classes and disclosure. The CBI declined to adopt a proposed increase in AIFM financial reporting frequency following industry feedback. EU EMIR III and EU Transaction Reporting Simplification. On July 2, 2026, ESMA published its Final Report on the Call for Evidence on a comprehensive approach for the simplification of financial transaction reporting, following a call for evidence launched on June 23, 2025 and a May 4, 2026 interim report. ESMA determined that a transition toward a “report once” framework represents the most effective and future-proof approach to simplifying transaction reporting across Markets in Financial Instruments Regulation, EMIR, and Securities Financing Transactions Regulation (SFTR), under which transaction data would be reported once through a common modular structure and then reused across national competent authorities and supervisory mandates, reducing duplication while preserving the information needed for effective supervision. Consistent with feedback received during the call for evidence process, ESMA confirmed the need to reduce the burden associated with dual-sided reporting under both EMIR and SFTR and the associated reconciliation processes. ESMA has indicated that it will engage with EU institutions on the recommendations set out in the Final Report as next steps toward implementation, which reportedly can take up to five to seven years. EU and U.K. Sustainability Requirements for Asset Managers and Investment Offerings. In the EU, amendments to the Sustainable Finance Disclosure Regulation (SFDR), commonly known as “SFDR 2.0”, are still ongoing following the European Commission’s adoption of the proposed SFDR 2.0. On May 4, 2026, the European Parliament published a draft report setting out its amendments to SFDR 2.0. The European Parliament agreed in principle with the proposed labelling regime but proposed changes to certain detailed requirements. Among these changes, the report proposes mandatory Principal Adverse Impact indicator disclosures for products using one of the new sustainability categories, a requirement that products under the “ESG Basics” category exclude at least 20% of the lowest sustainability-rated securities, and a retail investor disclaimer for products that reference sustainability factors without qualifying for one of the new labelled categories. In the U.K., the FCA published a consultation paper on June 5, 2026 proposing to remove the Task Force on Climate-related Financial Disclosures (TCFD) product reporting requirements. The FCA intends to reduce the disclosure burden and complexity, recognizing the overlap with the product disclosure required under the FCA’s Sustainability Disclosure Requirements (SDR). The consultation period for this paper closed on July 13, 2026. Ireland Transposes AIFMD II and UCITS VI. On May 1, 2026, two statutory instruments - S.I. No. 181/2026 (the AIFMD II Regulations) and S.I. No. 182/2026 (the UCITS VI Regulations) - came into operation, giving effect in Irish law to Directive (EU) 2024/927 (AIFMD II/UCITS VI). The new regulations embed the Directive’s core reforms at the national level, including harmonized liquidity management tools for both EU UCITS and open-ended AIFs (such as suspensions, redemption gates, swing pricing and side pockets) and a harmonized EU framework for AIFs engaged in loan origination, including QIAIFs and, for the first time, retail investor AIFs. Ireland’s implementation closely tracks the EU directive, exercising limited national discretion, including preservation of Ireland’s existing depositary model. U.K. and EU Fund Dealing Models and Tokenization. In the U.K., on April 30, 2026, the FCA published Policy Statement PS26/7, setting out final rules and guidance for fund tokenization, which became effective the same date with immediate effect and no transitional period. These include: (1) new FCA Handbook guidance on the use of distributed ledger technology for unitholder registers, including clarifying that authorized fund managers must retain authority over the register to correct errors, assist investors, and process court decisions; and (2) the introduction of a new optional “direct to fund” (D2F) dealing model 34 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) applicable to both conventional funds and tokenized funds, under which investors deal directly with the fund rather than through the fund manager acting as principal. Adoption of either the tokenization framework or the D2F model is optional for firms. In the EU, on June 12, 2026, ESMA published a speech that indicated that ESMA is engaging with EU member state regulators to build supervisory knowledge on fund tokenization, focusing in particular on real-life use cases, and to understand whether any regulatory barriers to fund tokenization exist, including in relation to the UCITS and AIFMD regimes. U.K. SMCR. On April 22, 2026, the FCA published Policy Statement PS26/6 setting out final rules implementing the first phase of reforms to the SMCR, with the PRA publishing a parallel policy statement (PS12/26) for dual-regulated firms. The final rules for the first phase of SMCR reforms mostly took effect on April 24, 2026 or July 10, 2026, with conduct-related reforms taking effect on September 1, 2026. The phase one reforms introduced targeted measures intended to simplify the SMCR, such as: (1) extending the criminal record check validity from three to six months and making such checks no longer required for certain internal or intragroup moves; (2) giving firms up to six months to notify them of changes related to their statement of responsibilities and management responsibilities maps; and (3) removing certain certification functions. Phase two changes, including the removal from legislation of the certification regime and requirements relating to the statement of responsibility and conduct rules, are being progressed as part of the Financial Services and Markets Bill 2026-27, which was introduced in U.K. Parliament on May 19, 2026 (as discussed above). U.K. Short Selling Regime. On April 16, 2026, the FCA published Policy Statement PS26/5, setting out final rules governing the U.K. short selling regime, which replaces the prior regime based on assimilated EU law with bespoke rules in a new FCA Handbook sourcebook. Among other things, the final rules: (1) created a new anonymized model for aggregated net short position disclosures, publishing figures by company based on individual notifications reported at or above the 0.2% reporting threshold, without identifying individual position holders; (2) removed U.K. sovereign debt from the short position reporting and covering requirements; and (3) removed sovereign credit default swaps (CDS) from the ban on uncovered (naked) short selling. The FCA retains emergency intervention powers over all financial instruments, including U.K. sovereign debt and associated CDS, notwithstanding these changes. The new rules became effective on July 13, 2026, as part of a first implementation phase; a second phase introducing a bulk position-reporting submission facility is scheduled to take effect on November 30, 2026. Unlike the reformed U.K. regime, the EU Short Selling Regulation, which applies within the EU (but no longer in the U.K.), continues to regulate short positions in sovereign debt and uncovered sovereign CDS within its ordinary scope, creating a divergence between the U.K. and EU short selling frameworks with respect to sovereign instruments. Liquidity Risk Management for Open-ended Funds. On April 16, 2026, the EU RTS specifying the characteristics of liquidity management tools (LMTs) for EU UCITS and open-ended AIFs, and the ESMA guidelines on the selection and calibration of LMTs by EU UCITS and open-ended AIFs, took effect, requiring every open-ended AIF and UCITS fund to select and incorporate at least two LMTs from a harmonized list (with certain exceptions, such as money market funds, for which one LMT suffices). Existing funds (i.e., those constituted before April 16, 2026) have until April 16, 2027 to comply with the detailed RTS characteristics and revised guidelines, which require LMTs to be calibrated to the fund's strategy, investor base, liquidity profile, and distribution channels. New funds constituted on or after April 16, 2026 must comply immediately. Among other refinements, open-ended AIFs may now use investor-level redemption gates, alone or in combination with fund-level gates, to help mitigate first-mover redemption risk. FCA’s New Consumer Composite Investments (CCI) Regime Commences. On April 6, 2026, legislation implementing the FCA’s new CCI regime became effective, beginning an 18-month optional transition period before the regime becomes fully mandatory on June 8, 2027. The CCI regime replaces the U.K. PRIIPs and UCITS key investor information disclosure requirements with a single, more flexible U.K.-specific disclosure framework applicable to open-ended funds, closed-ended investment funds (including U.K.-listed investment trusts), U.K. and recognized overseas funds (including funds marketed under the Overseas Funds Regime), structured products and other packaged retail investments. Under the final rules, manufacturers have significant flexibility in designing a consumer-facing “product summary” in place of the prescriptive PRIIPs key information document, and the FCA confirmed that the ongoing costs figure for a consumer composite investment that itself invests in a closed-ended fund will not need to incorporate the underlying closed-ended fund’s costs - a change from the FCA’s originally proposed approach, reflecting industry concern that aggregation would unfairly make CCIs holding closed-ended funds appear less cost-competitive - though those costs must still be separately and clearly disclosed as a distinct, prominent line item. The regime applies broadly, encompassing not only funds but also insurance-based investment products, structured deposits, and CFDs. From April 6, 2026, manufacturers may elect to adopt the new product summary format or continue with existing PRIIPs/UCITS disclosures during the transition period. FCA Broadens Retail and Individual Savings Accounts (ISAs) Access to Long-Term Asset Funds (LTAFs). Beginning in April 2026, U.K. LTAFs - open-ended authorized funds investing mainly in long-term illiquid assets such as private credit, private equity and infrastructure - became eligible investments for U.K. stocks and shares ISAs, extending prior FCA reforms 35 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) that reclassified LTAF units as Restricted Mass Market Investments available to retail investors, self-select defined contribution pension schemes and self-invested personal pensions. Industry data indicate LTAF AUM grew to approximately £7.3 billion as of the first quarter of 2026, up from approximately £5 billion in June 2025, with an additional approximately £3.1 billion of committed but not-yet-called capital, and approximately 25 LTAF strategies currently available in the U.K., focused primarily on private multi-asset and private debt strategies. With several managers now offering direct retail LTAF access through wealth platforms, the FCA and industry observers, including Morningstar, expect ISA eligibility to serve as a further catalyst for growth in retail and wrap account access to private-market strategies, with separate Investment Association research indicating that nearly three in five U.K. investors would consider an LTAF investment following the ISA rule change. Current Regulatory Developments– Potential Impacts Federated Hermes has monitored, reviewed, assessed and implemented changes in response to, and will continue to monitor, review, assess and implement changes in response to, regulatory developments and requirements, as applicable, and their impact on its business, offerings and Financial Condition. Federated Hermes actively participates, either individually or with industry trade groups (such as the Investment Company Institute), in the public comment process regarding regulatory developments that can significantly impact Federated Hermes’ business, offerings and Financial Condition. Regulatory developments and regulatory requirements also are subject to legal challenges in court, and Federated Hermes considers initiating, participating in or supporting such legal challenges when management deems it necessary or appropriate. Federated Hermes also continues to monitor and assess the impact of the 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. The difficulty in, and cost of, complying with applicable regulatory developments and regulatory requirements increases with the number, complexity and differing (and potentially conflicting) requirements of new or amended regulatory requirements, among other factors. In addition to the impact on Federated Hermes’ AUM, revenues, operating income and other aspects of Federated Hermes’ business, Federated Hermes’ regulatory, offering development and restructuring, and other efforts in response to 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 Condition. As of June 30, 2026, given the regulatory environment and the possibility of future additional regulatory developments, requirements and oversight, Federated Hermes is unable to fully assess either: (1) 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; or (2) the degree of impact that such regulatory developments and requirements, and Federated Hermes' efforts related thereto, may have on its Financial Condition. 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. 36 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) Asset Highlights Managed Assets at Period End June 30, Percent Change (in millions) 2026 2025 By Asset Class Equity1 $ 109,590 $ 88,994 23 % Fixed-Income 100,487 98,687 2 Alternative / Private Markets 21,647 20,738 4 Multi-Asset1 2,939 2,856 3 Total Long-Term Assets 234,663 211,275 11 Money Market 676,897 634,400 7 Total Managed Assets $ 911,560 $ 845,675 8 % By Offering Type Funds: Equity $ 64,069 $ 49,359 30 % Fixed-Income 46,189 45,415 2 Alternative / Private Markets 14,918 12,905 16 Multi-Asset 2,935 2,730 8 Total Long-Term Assets 128,111 110,409 16 Money Market 499,927 468,044 7 Total Fund Assets 628,038 578,453 9 Separate Accounts: Equity1 45,521 39,635 15 Fixed-Income 54,298 53,272 2 Alternative / Private Markets 6,729 7,833 (14) Multi-Asset1 4 126 (97) Total Long-Term Assets 106,552 100,866 6 Money Market 176,970 166,356 6 Total Separate Account Assets 283,522 267,222 6 Total Managed Assets $ 911,560 $ 845,675 8 % 1) A Separate Account was reclassified from Multi-Asset to Equity effective October 1, 2025. 37 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) Average Managed Assets Three Months Ended Six Months Ended June 30, Percent Change June 30, Percent Change (in millions) 2026 2025 2026 2025 By Asset Class Equity1 $ 107,031 $ 83,564 28 % $ 104,534 $ 82,834 26 % Fixed-Income 100,041 98,365 2 100,519 98,862 2 Alternative / Private Markets 22,359 20,053 11 20,796 19,533 6 Multi-Asset1 2,898 2,779 4 2,878 2,840 1 Total Long-Term Assets 232,329 204,761 13 228,727 204,069 12 Money Market 677,685 632,543 7 684,067 636,185 8 Total Average Managed Assets $ 910,014 $ 837,304 9 % $ 912,794 $ 840,254 9 % By Offering Type Funds: Equity $ 60,933 $ 45,965 33 % $ 58,960 $ 45,612 29 % Fixed-Income 45,827 44,972 2 45,962 45,344 1 Alternative / Private Markets 15,253 12,370 23 13,754 11,990 15 Multi-Asset 2,893 2,654 9 2,873 2,714 6 Total Long-Term Assets 124,906 105,961 18 121,549 105,660 15 Money Market 498,338 462,683 8 503,045 463,205 9 Total Average Fund Assets 623,244 568,644 10 624,594 568,865 10 Separate Accounts: Equity1 46,098 37,599 23 45,574 37,222 22 Fixed-Income 54,214 53,393 2 54,557 53,518 2 Alternative / Private Markets 7,106 7,683 (8) 7,042 7,543 (7) Multi-Asset1 5 125 (96) 5 126 (96) Total Long-Term Assets 107,423 98,800 9 107,178 98,409 9 Money Market 179,347 169,860 6 181,022 172,980 5 Total Average Separate Account Assets 286,770 268,660 7 288,200 271,389 6 Total Average Managed Assets $ 910,014 $ 837,304 9 % $ 912,794 $ 840,254 9 % 1) A Separate Account was reclassified from Multi-Asset to Equity effective October 1, 2025. 38 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 Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Equity Funds Beginning Assets $ 55,188 $ 43,910 $ 54,988 $ 43,752 Sales 5,443 4,764 11,298 9,479 Redemptions (4,080) (4,195) (8,641) (7,838) Net Sales (Redemptions) 1,363 569 2,657 1,641 Net Exchanges 144 0 (25) (107) Impact of Foreign Exchange1 (68) 567 (226) 905 Market Gains and (Losses)2 7,442 4,313 6,675 3,168 Ending Assets $ 64,069 $ 49,359 $ 64,069 $ 49,359 Equity Separate Accounts Beginning Assets $ 45,644 $ 37,003 $ 42,910 $ 35,671 Sales3 3,619 3,197 6,855 5,894 Redemptions3 (6,122) (1,985) (8,439) (4,335) Net Sales (Redemptions)3 (2,503) 1,212 (1,584) 1,559 Net Exchanges (10) 0 20 (7) Impact of Foreign Exchange1 31 456 (98) 872 Market Gains and (Losses)2 2,359 964 4,273 1,540 Ending Assets $ 45,521 $ 39,635 $ 45,521 $ 39,635 Total Equity Beginning Assets $ 100,832 $ 80,913 $ 97,898 $ 79,423 Sales3 9,062 7,961 18,153 15,373 Redemptions3 (10,202) (6,180) (17,080) (12,173) Net Sales (Redemptions)3 (1,140) 1,781 1,073 3,200 Net Exchanges 134 0 (5) (114) Impact of Foreign Exchange1 (37) 1,023 (324) 1,777 Market Gains and (Losses)2 9,801 5,277 10,948 4,708 Ending Assets $ 109,590 $ 88,994 $ 109,590 $ 88,994 1 Reflects the impact of translating non-U.S. Dollar (USD) denominated AUM into 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 Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return. 39 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 Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Fixed-Income Funds Beginning Assets $ 45,921 $ 45,800 $ 45,973 $ 45,550 Sales 3,867 3,271 7,852 6,716 Redemptions (3,994) (4,459) (7,987) (8,528) Net Sales (Redemptions) (127) (1,188) (135) (1,812) Net Exchanges (153) 6 (5) 110 Impact of Foreign Exchange1 (3) 125 (29) 171 Market Gains and (Losses)2 551 672 385 1,396 Ending Assets $ 46,189 $ 45,415 $ 46,189 $ 45,415 Fixed-Income Separate Accounts Beginning Assets $ 53,877 $ 53,686 $ 54,154 $ 52,509 Sales3 3,820 1,996 5,762 4,495 Redemptions3 (3,870) (3,193) (6,226) (5,412) Net Sales (Redemptions)3 (50) (1,197) (464) (917) Net Exchanges 0 (1) 0 (4) Impact of Foreign Exchange1 (9) 83 (23) 122 Market Gains and (Losses)2 480 701 631 1,562 Ending Assets $ 54,298 $ 53,272 $ 54,298 $ 53,272 Total Fixed-Income Beginning Assets $ 99,798 $ 99,486 $ 100,127 $ 98,059 Sales3 7,687 5,267 13,614 11,211 Redemptions3 (7,864) (7,652) (14,213) (13,940) Net Sales (Redemptions)3 (177) (2,385) (599) (2,729) Net Exchanges (153) 5 (5) 106 Impact of Foreign Exchange1 (12) 208 (52) 293 Market Gains and (Losses)2 1,031 1,373 1,016 2,958 Ending Assets $ 100,487 $ 98,687 $ 100,487 $ 98,687 1 Reflects the impact of translating non-USD denominated AUM into 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 Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return. 40 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 Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Alternative / Private Markets Funds Beginning Assets $ 12,339 $ 11,879 $ 12,085 $ 11,501 Sales 576 674 1,185 1,730 Redemptions (661) (391) (979) (1,341) Net Sales (Redemptions) (85) 283 206 389 Net Exchanges 8 (1) 8 0 Acquisitions/(Dispositions) 2,788 109 2,788 109 Impact of Foreign Exchange1 12 621 (147) 922 Market Gains and (Losses)2 (144) 14 (22) (16) Ending Assets $ 14,918 $ 12,905 $ 14,918 $ 12,905 Alternative / Private Markets Separate Accounts Beginning Assets $ 6,652 $ 7,547 $ 7,016 $ 7,363 Sales3 74 108 94 137 Redemptions3 (341) (160) (570) (234) Net Sales (Redemptions)3 (267) (52) (476) (97) Acquisitions/(Dispositions) 449 0 449 0 Impact of Foreign Exchange1 14 470 (102) 701 Market Gains and (Losses)2 (119) (132) (158) (134) Ending Assets $ 6,729 $ 7,833 $ 6,729 $ 7,833 Total Alternative / Private Markets Beginning Assets $ 18,991 $ 19,426 $ 19,101 $ 18,864 Sales3 650 782 1,279 1,867 Redemptions3 (1,002) (551) (1,549) (1,575) Net Sales (Redemptions)3 (352) 231 (270) 292 Net Exchanges 8 (1) 8 0 Acquisitions/(Dispositions) 3,237 109 3,237 109 Impact of Foreign Exchange1 26 1,091 (249) 1,623 Market Gains and (Losses)2 (263) (118) (180) (150) Ending Assets $ 21,647 $ 20,738 $ 21,647 $ 20,738 1 Reflects the impact of translating non-USD denominated AUM into 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 Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return. 41 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 Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Multi-Asset Funds Beginning Assets $ 2,774 $ 2,700 $ 2,850 $ 2,764 Sales 41 44 99 107 Redemptions (102) (121) (196) (222) Net Sales (Redemptions) (61) (77) (97) (115) Net Exchanges 0 (2) 1 0 Market Gains and (Losses)1 222 109 181 81 Ending Assets $ 2,935 $ 2,730 $ 2,935 $ 2,730 Multi-Asset Separate Accounts Beginning Assets $ 4 $ 126 $ 4 $ 119 Redemptions2 0 (16) 0 (20) Net Sales (Redemptions)2 0 (16) 0 (20) Market Gains and (Losses)1 0 16 0 27 Ending Assets $ 4 $ 126 $ 4 $ 126 Total Multi-Asset Beginning Assets $ 2,778 $ 2,826 $ 2,854 $ 2,883 Sales 41 44 99 107 Redemptions2 (102) (137) (196) (242) Net Sales (Redemptions)2 (61) (93) (97) (135) Net Exchanges 0 (2) 1 0 Market Gains and (Losses)1 222 125 181 108 Ending Assets $ 2,939 $ 2,856 $ 2,939 $ 2,856 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 Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return. 42 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) Changes in Total Long-Term Fund and Separate Account Assets Three Months Ended Six Months Ended June 30, June 30, (in millions) 2026 2025 2026 2025 Total Long-Term Funds Beginning Assets $ 116,222 $ 104,289 $ 115,896 $ 103,567 Sales 9,927 8,753 20,434 18,032 Redemptions (8,837) (9,166) (17,803) (17,929) Net Sales (Redemptions) 1,090 (413) 2,631 103 Net Exchanges (1) 3 (21) 3 Acquisitions/(Dispositions) 2,788 109 2,788 109 Impact of Foreign Exchange1 (59) 1,313 (402) 1,998 Market Gains and (Losses)2 8,071 5,108 7,219 4,629 Ending Assets $ 128,111 $ 110,409 $ 128,111 $ 110,409 Total Long-Term Separate Accounts Beginning Assets $ 106,177 $ 98,362 $ 104,084 $ 95,662 Sales3 7,513 5,301 12,711 10,526 Redemptions3 (10,333) (5,354) (15,235) (10,001) Net Sales (Redemptions)3 (2,820) (53) (2,524) 525 Net Exchanges (10) (1) 20 (11) Acquisitions/(Dispositions) 449 0 449 0 Impact of Foreign Exchange1 36 1,009 (223) 1,695 Market Gains and (Losses)2 2,720 1,549 4,746 2,995 Ending Assets $ 106,552 $ 100,866 $ 106,552 $ 100,866 Total Long-Term Beginning Assets $ 222,399 $ 202,651 $ 219,980 $ 199,229 Sales3 17,440 14,054 33,145 28,558 Redemptions3 (19,170) (14,520) (33,038) (27,930) Net Sales (Redemptions)3 (1,730) (466) 107 628 Net Exchanges (11) 2 (1) (8) Acquisitions/(Dispositions) 3,237 109 3,237 109 Impact of Foreign Exchange1 (23) 2,322 (625) 3,693 Market Gains and (Losses)2 10,791 6,657 11,965 7,624 Ending Assets $ 234,663 $ 211,275 $ 234,663 $ 211,275 1 Reflects the impact of translating non-USD denominated AUM into 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 Separate Accounts, Sales and Redemptions are calculated as the remaining difference between beginning and ending assets after the calculation of total investment return. 43 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 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 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 offering type for the periods presented: Percent of Total Average Managed Assets Percent of Total Revenue Six Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 By Asset Class Money Market 75 % 76 % 52 % 53 % Equity 12 % 10 % 30 % 28 % Fixed-Income 11 % 12 % 10 % 12 % Alternative / Private Markets 2 % 2 % 6 % 5 % Multi-Asset 0 % 0 % 1 % 1 % Other — — 1 % 1 % By Offering Type Funds: Money Market 55 % 55 % 49 % 49 % Equity 7 % 6 % 23 % 22 % Fixed-Income 5 % 6 % 7 % 9 % Alternative / Private Markets 1 % 1 % 5 % 3 % Multi-Asset 0 % 0 % 1 % 1 % Separate Accounts: Money Market 20 % 21 % 3 % 4 % Equity 5 % 4 % 7 % 6 % Fixed-Income 6 % 6 % 3 % 3 % Alternative / Private Markets 1 % 1 % 1 % 2 % Multi-Asset 0 % 0 % 0 % 0 % Other — — 1 % 1 % Total managed assets represent the total 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 9% for both the three and six months ended June 30, 2026, as compared to the same periods in 2025. As of June 30, 2026, total managed assets increased 8% from June 30, 2025. Average money market assets increased 7% and 8% for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. Period-end money market assets increased 7% at June 30, 2026, as compared to June 30, 2025. The Federal Reserve maintained the federal funds rate at a range of 3.50% to 3.75% for the three months ended June 30, 2026, and U.S. money market fund industry assets were at $7.9 trillion. Money market funds continued to offer a yield advantage, as compared to some securities in the direct market, especially overnight securities and those with floating rates. Average equity assets increased 28% and 26% for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. Period-end equity assets increased 23% at June 30, 2026, as compared to June 30, 2025, primarily due to market appreciation and, to a lesser extent, net sales. The S&P 500 declined 4.6% during the first quarter of 2026 but rose 14.9% in the second quarter of 2026. The index provided a total return of 9.6% for the six months ended June 30, 2026. Average fixed-income assets increased 2% for both the three and six months ended June 30, 2026, as compared to the same periods in 2025. Period-end fixed-income assets increased 2% at June 30, 2026, as compared to June 30, 2025, primarily due to market appreciation, partially offset by net redemptions. After ending the fourth quarter of 2025 at 4.18%, yields on the 10-Year Treasury Note traded in a range between a 44 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) low of 4.26% and a high of 4.67%, ending the second quarter at 4.44%. Average alternative/private markets assets increased 11% and 6% for the three and six months ended June 30, 2026, respectively, as compared to the same periods in 2025. Period-end alternative/private markets assets increased 4% at June 30, 2026, as compared to June 30, 2025, primarily due to the FCP acquisition, partially offset by net redemptions. Results of Operations Revenue. Revenue increased $77.9 million for the three-month period ended June 30, 2026, as compared to the same period in 2025, primarily due to (1) an increase in equity revenue of $33.5 million due to an increase in average equity assets, (2) an increase in money market revenue of $26.2 million due to an increase in average money market assets and (3) a $13.9 million increase due to the acquisition of FCP. Revenue increased $133.3 million for the six-month period ended June 30, 2026, as compared to the same period in 2025, primarily due to (1) an increase in money market revenue of $59.5 million due to an increase in average money market assets, (2) an increase in equity revenue of $58.6 million due to an increase in average equity assets and (3) a $13.9 million increase due to the acquisition of FCP. For the six-month periods ended June 30, 2026 and 2025, Federated Hermes’ ratio of revenue to average managed assets was 0.21% and 0.20%, respectively. The increase in the rate was primarily due to an increase in revenue from higher average equity assets and a change in the mix of asset classes of money market assets during the first six months of 2026 compared to the same period in 2025. Operating Expenses. Total Operating Expenses for the three-month period ended June 30, 2026 increased $62.1 million, as compared to the same period in 2025. Distribution expense increased $22.4 million primarily due to higher average money market fund assets. Compensation and Related expense increased $16.7 million primarily due to FCP-acquisition-related compensation ($6.5 million) and an increase of $5.0 million in regular compensation, including FCP compensation. Other expense increased $9.2 million primarily due to fluctuations in foreign currency exchange rates. Professional Service Fees increased $7.0 million primarily due to fees of $4.7 million incurred as a result of the acquisition of FCP. Intangible Asset Related expense increased $2.9 million primarily due to $3.0 million of amortization of intangible assets associated with the FCP acquisition. Total Operating Expenses for the six-month period ended June 30, 2026 increased $123.0 million, as compared to the same period in 2025. Distribution expense increased $49.0 million primarily due to higher average money market fund assets. Compensation and Related expense increased $27.5 million primarily due to (1) higher incentive compensation ($10.5 million), (2) an increase of $6.8 million in regular compensation, including FCP compensation and (3) FCP-acquisition-related compensation ($6.5 million). Other expense increased $27.4 million primarily due to (1) a value added tax (VAT) refund received in 2025 related to amended VAT filings in the U.K. ($12.9 million) and (2) fluctuations in foreign currency exchange rates ($12.2 million). Professional Service Fees increased $9.8 million primarily due to fees incurred as a result of the acquisition of FCP ($6.2 million) and an increase in costs related to global technology projects ($2.2 million). Intangible Asset Related expense increased $3.1 million primarily due to $3.0 million of amortization of intangible assets associated with the FCP acquisition. Nonoperating Income (Expenses). Nonoperating Income (Expenses), net decreased $2.6 million for the three-month period ended June 30, 2026, as compared to the same period in 2025. The decrease is primarily due to a $2.0 million decrease in Investment Income, net. Nonoperating Income (Expenses), net decreased $3.4 million for the six-month period ended June 30, 2026, as compared to the same period in 2025. The decrease is primarily due to (1) a $2.3 million decrease in Investment Income, net and (2) a $1.2 million decrease in Gain (Loss) on Securities, net from a smaller increase in the market value of investments in the first six months of 2026 compared to the increase in the market value of investments during the same period in 2025. Income Taxes. The income tax provision was $37.2 million for the three-month period ended June 30, 2026, as compared to $34.1 million for the same period in 2025. The increase in the income tax provision was primarily due to increased U.S. pre-tax income in 2026. The effective tax rate was 25.8% for the three-month period ended June 30, 2026, as compared to 26.1% for the same period in 2025. The decrease in the effective tax rate was primarily due to a valuation allowance on foreign deferred tax assets and lower foreign losses in the three-month period ended June 30, 2026 as compared to the same period in 2025. The income tax provision was $71.0 million for the six-month period ended June 30, 2026, as compared to $66.3 million for the same period in 2025. The increase in the income tax provision was primarily due to increased U.S. pre-tax income in 2026. The effective tax rate was 25.9% for the six-month period ended June 30, 2026, as compared to 24.8% for the same period in 2025. 45 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) The increase in the effective tax rate was primarily due to a valuation allowance on foreign deferred tax assets and increased foreign losses in the six months ended June 30, 2026 as compared to the same period in 2025. Pillar Two legislation has been enacted in certain jurisdictions in which Federated Hermes operates. The legislation was effective for the year beginning January 1, 2024. Federated Hermes is in scope of the enacted legislation and has performed an assessment of its potential exposure to Pillar Two income taxes based on the most recent tax filings, country-by-country report and financial statements for the constituent entities of Federated Hermes. Based on the assessment, for fiscal years 2026, 2025 and 2024, Federated Hermes expects to be able to rely on the transitional safe harbor for each of the jurisdictions in which it operates. As a result, Federated Hermes does not expect a material exposure to Pillar Two income taxes in those jurisdictions. This assessment will continue to be monitored and updated as additional guidance and/or legislation is released. Net Income Attributable to Federated Hermes, Inc. Net income increased $13.3 million for the three-month period ended June 30, 2026, as compared to the same period in 2025, 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 June 30, 2026 increased $0.22, as compared to the same period in 2025, due to increased net income ($0.16) and a decrease in the shares outstanding resulting from share repurchases ($0.06). Net income increased $8.6 million for the six-month period ended June 30, 2026, as compared to the same period in 2025, primarily as a result of the changes in revenues, expenses, nonoperating income (expenses) and income taxes noted above. Diluted earnings per share for the six-month period ended June 30, 2026 increased $0.25, as compared to the same period in 2025, due to a decrease in shares outstanding resulting from share repurchases ($0.14) and increased net income ($0.11). Liquidity and Capital Resources Liquid Assets. At June 30, 2026, liquid assets, net of noncontrolling interests, consisting of cash and cash equivalents, investments and receivables, totaled $537.5 million, as compared to $769.4 million at December 31, 2025. The change in liquid assets is discussed below. At June 30, 2026, 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, 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 $266 million in AUM) that meet the requirements of Rule 2a-7 under the 1940 Act (Rule 2a-7) or operate in accordance with requirements similar to those in Rule 2a-7, include holdings with indirect short-term exposures invested primarily in high-quality international bank names that are subject to Federated Hermes’ credit analysis process. Cash Provided by Operating Activities. Net cash provided by operating activities totaled $109.7 million for the six months ended June 30, 2026, as compared to $33.1 million for the same period in 2025. The increase in cash provided was primarily due to (1) an increase in cash received related to the $133.3 million increase in revenue previously discussed and (2) an increase of $51.7 million in cash due to a decrease in net purchases of trading securities for the six months ended June 30, 2026 as compared to the same period in 2025. These were partially offset by (1) an increase in cash paid related to the $49.0 million increase in Distribution expense previously discussed and (2) an increase of $21.9 million in cash paid for incentive compensation for the six months ended June 30, 2026 as compared to the same period in 2025. Cash Used by Investing Activities. During the six-month period ended June 30, 2026, net cash used by investing activities was $215.1 million due primarily to cash paid for the FCP acquisition, net of cash acquired. See Note (4) to the Consolidated Financial Statements for additional information on the FCP acquisition. Cash Used by Financing Activities. During the six-month period ended June 30, 2026, net cash used by financing activities was $174.2 million due primarily to (1) $128.7 million of treasury stock purchases, (2) $54.7 million or $0.72 per share of dividends paid to holders of Federated Hermes common shares and (3) $13.9 million of distributions to noncontrolling interests in subsidiaries. These were partially offset by $22.8 million of contributions from noncontrolling interests in subsidiaries. Borrowings. On March 17, 2022, pursuant to the 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 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 46 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) $350 million Notes and certain subsidiaries of Federated Hermes are guarantors of the obligations owed under the Note Purchase Agreement. As of June 30, 2026, the outstanding balance of the $350 million Notes, net of unamortized issuance costs in the amount of $1.5 million, was $348.5 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 outstanding debt and for other general corporate purposes. See Note (11) to the Consolidated Financial Statements for additional information on the Note Purchase Agreement. As of June 30, 2026, Federated Hermes’ Credit Agreement consists of a $350 million revolving credit facility with an additional $225 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 June 30, 2026, Federated Hermes had $350 million available to borrow under the Credit Agreement and an additional $225 million available via its optional accordion feature. See Note (11) to the Consolidated Financial Statements for additional information on the Credit Agreement. 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 six months ended June 30, 2026. An interest coverage ratio of at least 4 to 1 is required for both the Note Purchase Agreement and the Credit Agreement and, as of June 30, 2026, Federated Hermes’ interest coverage ratio was 52 to 1. A leverage ratio of no more than 3 to 1 is required for the Note Purchase Agreement and no more than 3.25 to 1 is required for the Credit Agreement. As of June 30, 2026, Federated Hermes’ leverage ratio was 0.55 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 offerings, modifying existing offerings and relationships and maintaining regulatory liquidity and capital requirements. In addition, Federated Hermes expects to invest approximately $296 million (including the allocation of approximately $205 million in existing technology-related overhead, primarily the compensation expense of existing employees, and an external spend of approximately $91 million) over the next three years 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 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 can continue to increase. On July 30, 2026, the board of directors declared a $0.38 per share dividend to Federated Hermes’ Class A and Class B common stock shareholders of record as of August 7, 2026 to be paid on August 14, 2026. After evaluating Federated Hermes’ existing liquid assets, 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. See Note (4) to the Consolidated Financial Statements for additional information on the FCP acquisition. Investments—Consolidated Investment Companies at June 30, 2026 increased $33.4 million from December 31, 2025 primarily due to the consolidation of two VREs and a VIE in the first half of 2026 ($29.6 million). 47 Table of Contents Management's Discussion and Analysis (continued) of Financial Condition and Results of Operations (unaudited) Receivables, net at June 30, 2026 increased $25.2 million from December 31, 2025 primarily due to 1) the reclassification of the insurance reimbursement receivable (see Note (17)) from a long-term receivable to a short-term receivable ($15.9 million) and 2) an increase in receivables acquired in connection with the FCP acquisition ($8.8 million). Goodwill at June 30, 2026 increased $229.0 million from December 31, 2025 primarily due to the FCP acquisition. Intangible Assets, net at June 30, 2026 increased $90.3 million from December 31, 2025 primarily due to the FCP acquisition. Other Long-Term Assets at June 30, 2026 decreased $11.5 million from December 31, 2025 primarily due to the aforementioned reclassification of the insurance reimbursement receivable. Accrued Compensation and Benefits at June 30, 2026 decreased $68.3 million from December 31, 2025 primarily due to the 2025 accrued annual incentive compensation being paid in the first quarter of 2026 ($149.2 million), partially offset by 2026 incentive compensation accruals recorded at June 30, 2026 ($79.8 million). Other Long-Term Liabilities at June 30, 2026 increased $32.5 million from December 31, 2025 primarily due to estimated contingent payments in connection with the FCP acquisition. See Note (9) to the Consolidated Financial Statements for additional information.