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Item 8. Financial Statements and Supplementary Data

2025-02-28 compared with 2024-02-23 · 151 added, 179 removed, 993 unchanged (25% of the section changed)

47 unchanged sentences

As described in Note 1(j) to the consolidated financial statements, indefinite-lived intangible assets are tested for impairment at the accounting unit level annually, or when indicators of potential impairment exist, to determine whether it is more likely than not that the accounting unit is impaired.

The Company evaluated the FHL indefinite-lived intangible asset at December 31, 2023 in light of a decrease in management’s projected cash flows and determined that the fair value exceeded the carrying value.

The Company evaluated the FHL indefinite-lived intangible asset for impairment at June 30, 2024 in light of actual results trailing projected results, driven by a combination of lower gross sales and higher redemptions, and recorded an impairment loss as the carrying value exceeded the fair value.

At December 31, 2024, the Company evaluated the FHL indefinite-lived intangible asset for impairment primarily due to higher net redemptions in the quarter ended December 31, 2024, and determined that the fair value exceeded the carrying value.

Auditing the Company’s impairment test of the FHL indefinite-lived intangible asset was complex and judgmental due to the significant estimation uncertainty in determining the fair value of this accounting unit.

123 unchanged sentences

Amounts Attributable to Federated Hermes, Inc.

Earnings Per Common Share—Basic $ 3.40 $ 2.65 $ 2.77

Earnings Per Common Share—Diluted $ 3.40 $ 2.65 $ 2.75

Earnings Per Common Share—Basic and Diluted $ 3.23 $ 3.40 $ 2.65

Cash Dividends Per Share $ 2.21 $ 1.11 $ 1.08

26 unchanged sentences

Distributions to Noncontrolling Interests in Subsidiaries 0 0 0

Acquisition of Additional Equity of FHL 0 0 0

Acquisition of Remaining Equity of FHL 0 0 0

Retirement of Treasury Stock 0 0 ( 10,000,000 )

Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 0 0

8 unchanged sentences

Distributions to Noncontrolling Interests in Subsidiaries 0 0 0

Acquisition of Additional Equity of FHL 0 0 0

Retirement of Treasury Stock 0 0 ( 10,000,000 )

Change in Estimated Redemption Value of Redeemable Noncontrolling Interests 0 0 0

Purchase of Treasury Stock 0 ( 5,318,442 ) 5,318,442

54 unchanged sentences

$ 503,524 $ 0 $ 1,256,603 $ ( 632,838 ) $ ( 32,083 ) $ 1,095,206 $ 55,514

0 0 0 ( 179,296 ) 0 ( 179,296 ) 0

$ 475,003 $ 2 $ 1,194,561 $ ( 521,403 ) $ ( 19,911 ) $ 1,128,252 $ 25,845

CONSOLIDATED STATEMENTS OF CASH FLOWS

4 unchanged sentences

Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities

Depreciation and Other Amortization 26,835 28,085 30,010

Depreciation and Amortization 22,429 26,835 28,085

Share-Based Compensation Expense 28,784 33,947 34,798

1 unchanged sentence

(Gain) Loss on Disposal of Assets ( 1,552 ) 260 4,844

Provision (Benefit) for Deferred Income Taxes 4,252 ( 18,822 ) 18,163

(Benefit) Provision for Deferred Income Taxes ( 14,935 ) 4,252 ( 18,822 )

Impairment of Intangible Asset 66,331 0 31,520

11 unchanged sentences

Cash Paid for Business Acquisitions, net of Cash Acquired 0 0 ( 28,111 )

Cash Paid for Asset Acquisitions 0 0 ( 5,324 )

Proceeds from Redemptions of Investments—Affiliates and Other 119,891 35,304 22,770

Cash Paid for Property and Equipment ( 4,024 ) ( 7,915 ) ( 4,372 )

Other Investing Activities ( 4,100 ) 0 0

Net Cash Provided (Used) by Investing Activities 64,251 ( 30,610 ) ( 32,357 )

4 unchanged sentences

Contributions from Noncontrolling Interests in Subsidiaries 69,144 72,823 55,171

Payments to Acquire Additional Equity in FHL 0 0 ( 165,886 )

Cash paid for Business Acquisitions ( 3,236 ) ( 2,065 ) ( 7,105 )

26 unchanged sentences

Non-U.S.-domiciled Federated Hermes Funds are generally distributed by subsidiaries and third-party distribution firms which are registered under applicable jurisdictional law.

Federated Hermes’ investment products are distributed within the U.S.

Federated Hermes’ investment offerings are distributed within the U.S.

financial intermediary, U.S.

10 unchanged sentences

This amount could be reduced by Fee Waivers.

See Note (6) for information about current period Fee Waivers.

Federated Hermes’ revenue is earned from investment advisory (includes performance fees and carried interest), administrative, distribution and other services.

The majority of the contracts related to these revenue streams contain a single performance obligation as the obligations in the contracts are not separately identifiable from other obligations and therefore are not distinct.

The payment terms for each revenue stream vary dependent on the specific contracts in place.

The majority of investment advisory and administrative services payments are settled daily.

Carried interest and performance fees are settled after uncertainties are resolved and contract-specific approval procedures have been completed.

Distribution fees and the majority of other services are generally settled monthly.

Certain revenue streams are accounted for as variable consideration and are subject to factors outside of Federated Hermes’ control, including investor activity and preferences, market volatility and, in the case of carried interest, contracts which contain a large number and broad range of possible amounts and certain clawback provisions which may require the return of previously received consideration based on future fund performance.

Revenue from variable consideration is recognized as these uncertainties are resolved.

Revenue from providing investment advisory, administrative and the majority of other services is recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers.

2 unchanged sentences

Investment advisory, administrative and certain other service fees are generally calculated as a percentage of average net assets of the investment portfolios managed by Federated Hermes.

Based on the nature of the calculation, the revenue for these services is accounted for as variable consideration, and is subject to factors outside of Federated Hermes’ control, including investor activity and market volatility, and is recognized as these uncertainties are resolved.

Based on the nature of the calculation, the revenue for these services is accounted for as variable consideration.

Certain other service fees are earned on fixed-rate contracts which are recorded over the life of the contract as services are performed.

3 unchanged sentences

Measurement of distribution revenue is based on contractual fee rates and the fair value of AUM over the time period the investor remains in the fund.

The revenue for these services is accounted for as variable consideration, and is subject to factors outside of Federated Hermes’ control, including investor activity and preferences, and market volatility, and is recognized as these uncertainties are resolved.

The revenue for these services is accounted for as variable consideration, and the majority of this revenue relates to performance obligations that have been satisfied in prior periods.

Performance fees, including carried interest, are received from certain Federated Hermes Funds and Separate Accounts and are dependent upon meeting certain performance hurdles which typically arise from investment management services that began in prior periods.

Because each fee arrangement is unique, contracts are evaluated on an individual basis for each reporting period.

Performance fees are forms of variable consideration which are recognized only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, which involves significant judgement.

Potential constraints impacting the amount of variable consideration recognized include factors outside of management’s influence, such as market conditions, and situations where the contract has a large number and broad range of possible amounts and, in the case of carried interest, certain clawback provisions which may require the return of previously-received carried interest based on future fund performance.

Federated Hermes records a contract liability for deferred carried interest to the extent it receives cash prior to meeting the revenue recognition criteria.

Performance fees, including carried interest, are accounted for as variable consideration, and Federated Hermes records a contract liability for deferred carried interest to the extent it receives cash prior to meeting the revenue recognition criteria.

The fair value of AUM managed by Federated Hermes is primarily determined using quoted market prices, independent third-party pricing services and broker/dealer price quotes or the NAV Practical Expedient.

22 unchanged sentences

Federated Hermes’ conclusion to consolidate a Federated Hermes Fund could vary from period to period, most commonly as a result of changes in its percentage of ownership interest in the entity.

All intercompany accounts and transactions have been eliminated.

All intercompany accounts and transactions are eliminated in consolidation.

Consolidation of Variable Interest Entities

Federated Hermes has a controlling financial interest in a VIE and is, therefore, deemed to be the primary beneficiary of a VIE if it has (1) the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

Financial information for certain entities, whose primary purpose is to collect and distribute carried interest paid by foreign private equity and infrastructure funds (carried interest vehicles), is not available timely and is therefore consolidated on a one

quarter lag, adjusted for any known material carried interest revenue and compensation transactions occurring through the balance sheet date.

Financial information for certain entities, whose primary purpose is to collect and distribute carried interest paid by foreign

private equity and infrastructure funds (carried interest vehicles), is not available timely and is therefore consolidated on a one quarter lag, adjusted for any known material carried interest revenue and compensation transactions occurring through the balance sheet date.

Consolidation of Voting Rights Entities

3 unchanged sentences

Cash equivalents are highly liquid investments that are readily convertible to cash with original maturities of 90 days or less at the date of acquisition.

Cash and cash equivalents that are legally restricted for use are considered Restricted Cash and are recorded in Other Current Assets and Other Long-Term Assets on the Consolidated Balance Sheets.

(g) Investments

2 unchanged sentences

Investments—Affiliates and Other represent Federated Hermes’ investments in fluctuating-value Federated Hermes Funds and investments held in Separate Accounts for which Federated Hermes owns the underlying debt and equity securities.

All investments are carried at fair value with unrealized gains or losses on these securities recognized in Gain (Loss) on Securities, net on the Consolidated Statements of Income.

All investments are carried at fair value in line with the investment company accounting standards applied at the fund level with unrealized gains or losses on these securities recognized in Gain (Loss) on Securities, net on the Consolidated Statements of Income.

Realized gains and losses on these securities are computed on a specific-identification basis and recognized in Gain (Loss) on Securities, net on the Consolidated Statements of Income.

4 unchanged sentences

(h) Derivatives and Hedging Instruments

From time to time, Federated Hermes may consolidate an investment product that holds freestanding derivative financial instruments for trading purposes.

From time to time, Federated Hermes may consolidate an investment offering that holds freestanding derivative financial instruments for trading purposes.

Federated Hermes reports such derivative instruments at fair value and records the changes in fair value in Gain (Loss) on Securities, net on the Consolidated Statements of Income.

From time to time, Federated Hermes may also enter into derivative financial instruments to hedge against the risk of movement in foreign exchange rates.

Federated Hermes may also enter into derivative financial instruments to hedge against the risk of movement in foreign exchange rates.

Federated Hermes records all derivative financial instruments as either assets or liabilities on its Consolidated Balance Sheets and measures these instruments at fair value.

3 unchanged sentences

Federated Hermes performs an analysis to determine whether a transaction should be accounted for as an asset acquisition or a business combination.

A transaction that does not meet the definition of a business under U.S.

A transaction that does not meet the definition of a business combination under U.S.

GAAP is accounted for as an asset acquisition.

2 unchanged sentences

The primary asset acquired in previous asset acquisitions has been the rights to manage fund assets.

The rights to manage fund assets is an intangible asset valued using the excess earnings method, under the income approach, which estimates fair value by quantifying the amount of discounted cash flows generated by the asset.

The rights to manage fund assets is an intangible asset valued using the excess earnings method, under the income approach, which estimates

fair value by quantifying the amount of discounted cash flows generated by the asset.

No goodwill is recognized in an asset acquisition.

A transaction that meets the definition of a business is accounted for as a business combination under the acquisition method of accounting.

The consideration transferred to the seller in a business combination is measured at fair value and calculated as the

sum of the acquisition date fair values of the assets transferred by Federated Hermes, the liabilities incurred by Federated Hermes from the seller and any equity interests issued by Federated Hermes.

A transaction that meets the definition of a business combination is accounted for under the acquisition method of accounting.

The consideration transferred to the seller in a business combination is measured at fair value and calculated as the sum of the acquisition date fair values of the assets transferred by Federated Hermes, the liabilities incurred by Federated Hermes from the seller and any equity interests issued by Federated Hermes.

Direct transaction costs are expensed as incurred in a business combination.

27 unchanged sentences

The fair value of the rights to manage fund assets is determined using the excess earnings method, under the income approach.

The fair value of the trade name is determined using the relief from royalty method, under the income approach.

The fair value of trade names is determined using the relief from royalty method, under the income approach.

Federated Hermes has identified three units of accounting for purposes of indefinite-lived intangible impairment testing.

The determination to group indefinite-lived intangible assets into three units of accounting is not a one-time evaluation.

Rather, it is subject to reconsideration and can change depending on the facts and circumstances.

The determination to group indefinite-lived intangible assets into three units of accounting is subject to reconsideration and can change depending on the facts and circumstances.

On a quarterly basis, indefinite-lived intangible assets are reviewed for potential changes in useful life.

5 unchanged sentences

Management periodically evaluates the remaining useful lives and carrying values of the intangible assets to determine whether events and circumstances indicate that a change in the useful life or impairment in value may have occurred.

Indicators of a potential impairment monitored by management include a significant decline in the level of managed assets, changes to contractual provisions underlying certain intangible assets and significant reductions in underlying operating cash flows.

Should there be an indication of a change in the useful life or impairment in value of the finite-lived intangible assets, Federated Hermes compares the carrying value of the asset to the projected undiscounted cash flows expected to be generated from the

underlying asset over its remaining useful life to determine whether impairment has occurred.

Indicators of a

potential impairment monitored by management include a significant decline in the level of managed assets, changes to contractual provisions underlying certain intangible assets and significant reductions in underlying operating cash flows.

If the carrying value of the asset exceeds the undiscounted cash flows, the asset is written down to its fair value determined using discounted cash flows.

1 unchanged sentence

(k) Property and Equipment

Property and equipment are initially recorded at cost and are depreciated using the straight-line method over their estimated useful lives ranging from 1 to 15 years.

Property and equipment are initially recorded at cost and are depreciated using the straight-line method over their estimated useful lives ranging from one to 15 years.

Leasehold improvements are amortized using the straight-line method over the shorter of their estimated useful lives or their respective lease terms.

5 unchanged sentences

Should there be an indication of a change in the useful life or an impairment in value, Federated Hermes compares the carrying value of the asset to the probability-weighted undiscounted cash flows expected to be generated from the underlying asset over its remaining useful life to determine whether an impairment has occurred.

If the carrying value of the asset exceeds the undiscounted cash flows, the asset is written down to fair value which is determined based on prices of similar assets if available or discounted cash flows.

If the carrying value of the asset or asset group exceeds the undiscounted cash flows, management will estimate the fair value of the asset or asset group based on prices of similar assets if available or a discounted cash flow analysis;

after which, an impairment adjustment will be recorded for the amount that the carrying value exceeds the estimated fair value for each asset or asset group on a pro rata basis, but not below the estimated fair value of each respective asset.

Impairment adjustments are recognized in Operating Expenses – Other on the Consolidated Statements of Income.

13 unchanged sentences

(1) not to separate lease components from non-lease components for all asset classes and (2) to apply the short-term lease exception, which does not require the capitalization of leases with terms of 12 months or less.

Rent expense is recorded on a straight-line basis over the lease term, beginning on the earlier of the effective date of the lease or the date Federated Hermes obtains control of the asset.

Rent expense is recorded on a straight-line basis over the lease term, beginning on the earlier of the effective date of the lease or

the date Federated Hermes obtains control of the asset.

The lease term may include options to extend the lease when they are reasonably certain of being exercised.

2 unchanged sentences

In order to calculate the IBR, management began with readily observable unsecured rates, and adjusted for the following assumptions:

(1) collateralization, (2) remaining lease term and (3) the type of ROU asset.

(1) collateralization;

(2) remaining lease term;

and (3) the type of ROU asset.

(n) Loss Contingencies

6 unchanged sentences

To the extent Federated Hermes’ interest in a consolidated entity represents less than 100% of the entity’s equity, Federated Hermes recognizes noncontrolling interests in subsidiaries.

These noncontrolling interests are deemed to represent temporary equity and are classified as Redeemable Noncontrolling Interests in Subsidiaries in the mezzanine section of the Consolidated Balance Sheets.

These noncontrolling interests are classified as Redeemable Noncontrolling Interests in Subsidiaries in the Temporary Equity section of the Consolidated Balance Sheets.

In the case of consolidated investment companies, the noncontrolling interests represent equity which is redeemable or convertible for cash at the option of the equity holder.

16 unchanged sentences

Shareholders’ Equity on the Consolidated Balance Sheets.

At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on a specific-identification basis.

Additional Paid-in Capital from Treasury Stock Transactions is increased as Federated Hermes reissues treasury stock for more than the cost of the shares.

Conversely, if Federated Hermes issues treasury stock for less than its cost, first Additional Paid-in Capital from Treasury Stock Transactions is reduced to zero with any further required reductions recorded to Retained Earnings on the Consolidated Balance Sheets.

No gain or loss is recognized within the Consolidated Statements of Comprehensive Income on the purchase, reissue, or retirement of treasury stock.

(q) Accumulated Other Comprehensive Income (Loss)

1 unchanged sentence

(r) Foreign Currency Translation

The balance sheets of certain foreign subsidiaries of Federated Hermes, certain consolidated foreign-denominated investment products and all other foreign-denominated cash or investment balances are translated at the current exchange rate as of the end of the reporting period and the related income or loss is translated at the average exchange rate in effect during the period.

The balance sheets of certain foreign subsidiaries of Federated Hermes, certain consolidated foreign-denominated investment offerings and all other foreign-denominated cash or investment balances are translated at the current exchange rate as of the end of the reporting period and the related income or loss is translated at the average exchange rate in effect during the period.

Net exchange gains and losses resulting from these translations are excluded from income and are recorded in Accumulated Other

9 unchanged sentences

Compensation and Related expense also includes dividends paid on forfeited awards.

Excess tax benefits and deficiencies (including tax benefits from dividends paid on unvested restricted stock awards) are recognized in the Income Tax Provision in the Consolidated Statements of Income.

Excess tax benefits and/or additional tax expense (including tax benefits from dividends paid on unvested restricted stock awards) are recognized in the Income Tax Provision in the Consolidated Statements of Income.

Effective July 2, 2018, Federated Hermes established a non-public subsidiary share-based compensation plan for certain employees of FHL.

19 unchanged sentences

Pursuant to the two-class method, unvested restricted shares of Federated Hermes’ Class B common stock with nonforfeitable rights to dividends are considered participating securities and are required to be considered in the computation of earnings per share.

These unvested restricted shares, as well as the related dividends paid and their proportionate share of undistributed earnings, if any, are excluded from the computation of basic earnings per share, except for circumstances where shares vest upon retirement and the employee has reached retirement age.

In addition to the amounts excluded from the basic earnings per share calculation, prior to Federated Hermes acquiring the remaining shares of FHL in 2022, net income available to unvested shareholders of a nonpublic consolidated subsidiary was excluded from the computation of diluted earnings per share.

These unvested restricted shares, as well as the related dividends paid and their proportionate share of undistributed earnings, if any, are excluded from the computation of basic and diluted earnings per share, except for circumstances where shares vest upon retirement and the employee has reached retirement age.

(w) Business Segments

Business or operating segments are defined as a component of an enterprise that engages in activities from which it could earn revenue and incur expenses for which discrete financial information is available and is regularly evaluated by Federated Hermes’ CEO, who is the chief operating decision maker, in deciding how to allocate resources and assess performance.

Business or operating segments are defined as a component of an enterprise that engages in activities from which it could earn revenue and incur expenses for which discrete financial information is available and is regularly evaluated by Federated Hermes’ CEO, who is the chief operating decision maker (CODM), in deciding how to allocate resources and assess performance.

Federated Hermes operates in one operating segment, the investment management business, which is primarily conducted within the U.S.

Federated Hermes’ CEO utilizes a consolidated approach to assess performance and allocate resources.

Federated Hermes’ CEO utilizes a consolidated approach to allocate resources and assess performance.

(2) Recent Accounting Pronouncements

Recently Issued Accounting Guidance Not Yet Adopted

(a) Segment Reporting

Recently Adopted Accounting Guidance

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No.

2 unchanged sentences

This ASU updates reportable segment disclosures by expanding the frequency and extent of segment disclosures.

The update is effective for Federated Hermes for the December 31, 2024 Form 10-K, and for interim periods starting in fiscal year 2025.

Early adoption is permitted and requires the retrospective adoption method.

Management is currently evaluating this ASU to determine its impact on Federated Hermes’ disclosures.

(b) Income Taxes

The update was adopted for Federated Hermes’ December 31, 2024 Form 10-K.

The adoption did not have a material impact on Federated Hermes’ disclosures.

Recently Issued Accounting Guidance Not Yet Adopted

In December 2023, the FASB issued ASU No.

4 unchanged sentences

Management is currently evaluating this ASU to determine its impact on Federated Hermes’ disclosures.

(3) Business Combination

CWH Acquisition

Effective October 1, 2022, Federated Hermes completed the acquisition of substantially all of the assets of C.W.

Henderson and Associates, Inc.

(CWH), a Chicago-based registered investment advisor specializing in the management of tax-exempt municipal securities (CWH Acquisition).

This acquisition enhanced Federated Hermes’ existing separately managed accounts business.

The CWH Acquisition included an upfront cash payment of $ 28.1 million.

The purchase agreement also provides for a series of contingent purchase price payments, which can total as much as $ 17.6 million in the aggregate and is payable annually over the first five years if certain levels of net revenue growth are achieved.

Federated Hermes performed a valuation of the fair value of the CWH Acquisition.

The accounting for this acquisition was finalized in the third quarter 2023.

There were no changes to the provisional amounts for the acquired assets and assumed liabilities.

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

(in millions)

Right-of-Use Asset $ 0.8

Intangible Assets 1

Lease Liability Assumed 0.8

Fair Value of Contingent Consideration 3.7

Total Upfront Purchase Price Consideration $ 28.1

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

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

Management does not plan to early adopt this update and will elect the retrospective transition method.

In November 2024, the FASB issued ASU No.

2024-03 Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of income statement expenses.

This ASU updates expense disclosures by requiring additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods.

The update is effective for Federated Hermes for the December 31, 2027 Form 10-K, with early adoption permitted, and allows for either the prospective or retrospective adoption method.

Management is currently evaluating this ASU to determine its impact on Federated Hermes’ disclosures.

(3) Revenue from Contracts with Customers

4 unchanged sentences

Fixed-income 195,798 189,280 206,794

182,570 136,802 145,510

Other 125,282 182,570 136,802

Total Revenue $ 1,632,093 $ 1,609,574 $ 1,445,814

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

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

(in thousands) 2024 2023 2022

Asset Management 1

$ 1,115,783 $ 1,011,631 $ 915,984

Investment Advisory $ 1,097,866 $ 1,115,783 $ 1,011,631

Administrative Services 387,531 343,332 294,557

Distribution 120,276 126,350 112,356

126,350 112,356 49,600

24,109 27,270 28,224

Other 26,420 24,109 27,270

Total Revenue $ 1,632,093 $ 1,609,574 $ 1,445,814

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

2 The performance obligation is satisfied at a point in time.

A portion of this revenue relates to a performance obligation that has been satisfied in a prior period.

3 Primarily includes shareholder service fees and stewardship services revenue.

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

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

(in thousands) 2024 2023 2022

1 unchanged sentence

Separate Accounts 240,422 244,952 238,638

16,031 18,243 16,499

Other 17,971 16,031 18,243

Total Revenue $ 1,632,093 $ 1,609,574 $ 1,445,814

1 Primarily includes stewardship services revenue.

For nearly all revenue, Federated Hermes is not required to disclose certain estimates of revenue expected to be recorded in future periods as a result of applying the following exemptions:

1 unchanged sentence

Federated Hermes expects to recognize revenue in the future related to the unsatisfied portion of the stewardship services and real estate development performance obligations at December 31, 2024.

Generally, contracts are billed in arrears on a quarterly basis and have a three-year duration, after which the customer can terminate the agreement with notice, generally from three to twelve months .

Generally, contracts are billed in arrears on a quarterly basis and have a three-year duration, after which the customer can terminate the agreement with notice, generally from three to 12 months.

Based on existing contracts and the applicable foreign exchange rates as of December 31, 2024, Federated Hermes may recognize future fixed revenue from these services as presented in the following table:

(in thousands)

2024 $ 10,891

2028 and Thereafter 83

9 unchanged sentences

Fixed-Income Assets 12 % 12 % 14 %

The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets in 2023, as compared to the same period in 2022, was primarily the result of an increase in money market revenue due to the elimination of Voluntary Yield-related Fee Waivers and higher average money market assets.

See section below entitled Low Short-Term Interest Rates.

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

The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets in 2022, as compared to the same period in 2021, was primarily the result of increased money market revenue primarily due to a decrease in Voluntary Yield-related Fee Waivers and lower average equity and fixed-income assets in 2022.

Low Short-Term Interest Rates

In March 2020, in response to disrupted economic activity as a result of the Pandemic, the FOMC of the Fed decreased the federal funds target rate range to 0% - 0.25%.

The federal funds target rate drives short-term interest rates.

As a result of the near-zero interest-rate environment, the gross yield earned by certain money market funds was not sufficient to cover all of the fund’s operating expenses.

Beginning in the first quarter 2020, Federated Hermes had implemented Voluntary Yield-related Fee Waivers.

These waivers had been partially offset by related reductions in distribution expense as a result of Federated Hermes’ mutual understanding and agreement with third-party intermediaries to share the impact of the Voluntary Yield-related Fee Waivers.

In response to global economic activity and elevated inflation levels, the FOMC raised the federal funds target rate multiple times in 2022 and 2023.

The range is currently 5.25% - 5.50% as of the January 31, 2024 FOMC meeting.

These rate increases eliminated the net negative pre-tax impact of the Voluntary Yield-related Fee Waivers in the second half of 2022.

For the year ended December 31, 2023, there were no Voluntary Yield-related Fee Waivers.

For the year ended December 31, 2022, Voluntary Yield-related Fee Waivers totaled $ 85.3 million.

These fee waivers were partially offset by related reductions in distribution expenses of $ 66.5 million, such that the net negative pre-tax impact to Federated Hermes was $ 18.8 million.

The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets in 2024, as compared to the same period in 2023, was primarily the result of an increase in money market revenue due to higher average money market assets.

The change in the relative proportion of Federated Hermes’ revenue attributable to money market assets in 2023, as compared to the same period in 2022, was primarily the result of increased money market revenue primarily due to the elimination of Voluntary Yield-related Fee Waivers and higher average money market assets in 2023.

(b) Revenue Concentration by Investment Fund Strategy

3 unchanged sentences

Federated Strategic Value Dividend strategy 1

Federated Hermes Kaufmann Fund and Federated Hermes Kaufmann Fund II 5 % 7 % 11 %

1 Strategy includes Federated Hermes Funds and Separate Accounts.

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

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

Approximately 11 % of Federated Hermes’ total revenue for both 2023 and 2022, and 3 % for 2021, was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary.

The increase in 2022 was primarily due to a decrease in Voluntary Yield-related Fee Waivers.

Approximately 10 % of Federated Hermes’ total revenue for 2024, and 11 % for both 2023 and 2022, was derived from services provided to one intermediary, The Bank of New York Mellon Corporation, including its Pershing subsidiary.

Significant negative changes in Federated Hermes’ relationship with this intermediary could have a material adverse effect on Federated Hermes’ future revenues and, to a lesser extent, net income due to a related reduction in distribution expenses associated with this intermediary.

2 unchanged sentences

Federated Hermes is involved with various entities in the normal course of business that may be deemed to be VREs or VIEs.

From time to time, Federated Hermes invests in Federated Hermes Funds for general corporate investment purposes or, in the case of newly launched products, in order to provide investable cash to establish a performance history.

From time to time, Federated Hermes invests in Federated Hermes Funds for general corporate investment purposes or, in the case of newly launched offerings, in order to provide investable cash to establish a performance history.

Federated Hermes’ investment in, and/or receivables from, these Federated Hermes Funds represents its maximum exposure to loss.

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money market mutual funds to the SEC as financial support to the investment company that is being reorganized or liquidated.

There were no contributions for the years ended December 31, 2023 or 2022 and no material contributions for the year ended December 31, 2021.

There were no contributions for the years ended December 31, 2024, 2023 or 2022.

In accordance with Federated Hermes’ consolidation accounting policy, Federated Hermes first determines whether the entity being evaluated is a VRE or a VIE.

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Federated Hermes’ net interest in the consolidated VIEs represents the value of Federated Hermes’ economic ownership interest in those VIEs.

At December 31, 2024, a Federated Hermes consolidated VIE held foreign currency forwards, which are subject to a master netting agreement, entered into as part of the consolidated VIE’s strategy.

These foreign currency forwards had a $ 35.7 million asset balance and an offsetting $ 35.6 million liability balance which is recorded as a net amount of $ 0.1 million in Other Current Assets on the Consolidated Balance Sheets.

As of December 31, 2023, this VIE was not consolidated;

therefore, comparative information is not applicable.

During the year ended December 31, 2024, Federated Hermes consolidated and/or deconsolidated various VIEs due to changes in its ownership in these VIEs.

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At December 31, 2024 and 2023, Federated Hermes held investments in non-consolidated fluctuating-value Federated Hermes Funds of $ 48.0 million and $ 99.5 million, respectively, primarily in mutual funds which represent equity investments for Federated Hermes, and held investments in Separate Accounts of $ 6.2 million and $ 7.5 million at December 31, 2024 and 2023, respectively, that were included in Investments—Affiliates and Other on the Consolidated Balance Sheets.

Federated Hermes’ investments held in Separate Accounts as of December 31, 2023 and 2022, were primarily composed of stocks of large domestic and foreign companies ($ 3.4 million for both periods) and domestic debt securities ($ 2.4 million and $ 4.6 million, respectively).

Federated Hermes’ investments held in Separate Accounts as of December 31, 2024 and 2023, were primarily composed of stocks of large

domestic and foreign companies ($ 2.8 million and $ 3.4 million, respectively) and domestic debt securities ($ 1.8 million and $ 2.4 million, respectively).

Federated Hermes consolidates certain Federated Hermes Funds into its Consolidated Financial Statements as a result of its controlling financial interest in these Federated Hermes Funds (see Note (5)).

All investments held by these consolidated Federated Hermes Funds were included in Investments—Consolidated Investment Companies on Federated Hermes’ Consolidated Balance Sheets.

The investments held by consolidated Federated Hermes Funds as of December 31, 2023 and 2022, were primarily composed of domestic and foreign debt securities ($ 59.1 million and $ 57.8 million, respectively), stocks of large foreign and domestic companies ($ 4.9 million and $ 45.3 million, respectively) and stocks of small and mid-sized domestic and foreign companies ($ 4.2 million and $ 3.3 million, respectively).

The investments held by consolidated Federated Hermes Funds as of December 31, 2024 and 2023, were primarily composed of foreign and domestic debt securities ($ 70.4 million and $ 59.1 million, respectively), stocks of large foreign and domestic companies ($ 7.4 million and $ 4.9 million, respectively) and stocks of small and mid-sized domestic and foreign companies ($ 4.7 million and $ 4.2 million, respectively).

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

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Level 2 assets and liabilities may include debt and equity securities, purchased loans and over-the-counter derivative contracts whose fair value is determined using a pricing model without significant unobservable market data inputs.

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

Level 3 – Valuation techniques in which one or more significant inputs or significant value drivers are unobservable in active markets.

NAV Practical Expedient – Investments that calculate NAV per share (or its equivalent) as a practical expedient.

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$ 0 $ 335 $ 7,626 $ 7,961

1 Amounts primarily consist of restricted cash, security deposits and derivative assets.

2 Amounts primarily consist of acquisition-related future contingent consideration liabilities.

1 Amounts primarily consist of security and other deposits and restricted cash for 2024 and 2023 and derivative assets for 2023.

2 Amounts primarily consist of derivative liabilities for 2024 and acquisition-related future contingent consideration liabilities for 2023.

The following is a description of the valuation methodologies used for financial assets and liabilities measured at fair value on a recurring basis.

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Cash and Cash Equivalents

Cash and Cash Equivalents include deposits with banks and investments in money market funds.

Cash and Cash Equivalents include investments in money market funds and deposits with banks.

Investments in money market funds totaled $ 465.9 million and $ 333.3 million at December 31, 2024 and 2023, respectively.

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The liability is subsequently re-measured at fair value on a recurring basis with changes in fair value recorded in earnings.

As of December 31, 2023, acquisition-related future consideration liabilities of $ 7.6 million were primarily related to the CWH Acquisition and a business combination made in 2020 and were recorded in Other Current Liabilities ($ 4.0 million) and Other Long-Term Liabilities ($ 3.6 million) on the Consolidated Balance Sheets.

As of December 31, 2024, acquisition-related future consideration liabilities of $ 0.4 million were primarily related to a business combination made in 2022 and were recorded in Other Long-Term Liabilities on the Consolidated Balance Sheets.

Management estimated the fair value of future consideration payments based primarily upon expected future cash flows using an income approach valuation methodology with unobservable market data inputs (Level 3).

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For investments in mutual funds that are not publicly available but for which the NAV is calculated monthly and for which there are redemption restrictions, the investments are valued using NAV as a practical expedient and are excluded from the fair value hierarchy.

As of December 31, 2023 and December 31, 2022, these investments totaled $ 19.9 million and $ 18.3 million, respectively, and were recorded in Other Long-Term Assets.

As of December 31, 2024 and 2023, these investments totaled $ 19.4 million and $ 19.9 million, respectively, and were recorded in Other Long-Term Assets.

(b) Fair Value Measurements on a Nonrecurring Basis

Federated Hermes did not hold any assets or liabilities measured at fair value on a nonrecurring basis at December 31, 2023.

Due to an indication of potential impairment as of June 30, 2024, management measured the fair value of an indefinite-lived intangible asset related to the FHL right to manage public fund assets acquired in connection with the 2018 FHL acquisition.

The fair value of this asset was determined using an income-based approach, which resulted in a fair value of $ 91.3 million as of June 30, 2024 (Level 3).

The key assumptions used in the fair value measurement were projected revenue growth rates, projected pre-tax profit margins and the discount rate applied to projected cash flows.

The projected revenue growth rates used in the measurement were between 0 % and 13 % (with an average of 9 %) over the 2024 through 2033 forecast period, and a normalized revenue terminal growth rate of 2.5 %.

Projected pre-tax profit margins were between - 20 % and 28 % (with an average of 12 %) over the same forecast period, and a normalized terminal pre-tax profit margin of 28 %.

The discount rate used in the fair value measurement was 17.6 %.

See Note (9) for additional information related to the impairment of indefinite-lived intangible assets.

Federated Hermes did not hold any assets or liabilities measured at fair value on a nonrecurring basis at December 31, 2024 and 2023.

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As of December 31, 2024, Federated Hermes held foreign currency forwards with a combined notional amount of £ 92.6 million with expiration dates ranging from March 2025 through September 2025.

Federated Hermes recorded $ 1.3 million in Other Current Assets on the Consolidated Balance Sheets, which represented the fair value of these derivative instruments as of December 31, 2023.

As of December 31, 2022, Federated Hermes held foreign currency forward derivative instruments with a combined notional amount of £ 67.3 million with expiration dates ranging from March 2023 through September 2023.

Federated Hermes recorded $ 0.5 million in Other Current Assets on the Consolidated Balance Sheets, which represented the fair value of these derivative instruments as of December 31, 2022.

For the years ended December 31, 2023 and 2022 Federated Hermes recorded a $ 3.4 million realized gain and $ 15.4 million realized loss, respectively, to Operating Expenses - Other on the Consolidated Statements of Income for foreign currency forward transactions.

Federated Hermes recorded $ 2.8 million in Accounts Payable and Accrued Expenses on the Consolidated Balance Sheets, which represented the fair value of these derivative instruments as of December 31, 2024.

As of December 31, 2023, Federated Hermes held foreign currency forwards expiring from March 2024 through September 2024 with two counterparties.

For foreign currency forwards with a notional amount of £ 28.8 million, Federated Hermes recorded $ 1.6 million in Receivables, net on the Consolidated Balance Sheets, which represented the fair value as of December 31, 2023.

For foreign currency forwards with a combined notional amount of £ 55.5 million, Federated Hermes recorded $ 0.3 million in Other Current Liabilities on the Consolidated Balance Sheets, which represented the fair value as of December 31, 2023.

For the years ended December 31, 2024 and 2023 Federated Hermes recorded a $ 2.5 million and $ 3.4 million realized gain, respectively, to Operating Expenses – Other on the Consolidated Statements of Income for foreign currency forward transactions.

(9) Intangible Assets

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Indefinite-lived intangible assets are recorded in Intangible Assets, net on the Consolidated Balance Sheets and include rights to manage fund assets ($ 237.4 million and $ 304.6 million at December 31, 2024 and 2023, respectively) and trade names ($ 49.2 million and $ 50.1 million at December 31, 2024 and 2023, respectively).

The increase in indefinite-lived intangible assets at December 31, 2023 as compared to December 31, 2022 is primarily a result of foreign exchange rate fluctuations on intangible assets denominated in a foreign currency.

The uncertainty caused by the Pandemic resulted in management determining that an indicator of potential impairment existed beginning in the first quarter 2020 for the FHL right to manage public fund assets acquired in connection with the 2018 FHL acquisition.

Management used an income-based approach to valuation, the discounted cash flow method, in valuing the asset.

The decrease in indefinite-lived intangible assets at December 31, 2024 as compared to December 31, 2023 is primarily a result of a $ 66.3 million non-cash impairment of an indefinite-lived intangible asset recognized at June 30, 2024.

Due to actual results trailing projected results, driven by a combination of lower gross sales and higher redemptions for the quarter ended June 30, 2024 management concluded that an indicator of potential impairment existed for the indefinite-lived intangible asset related to the FHL right to manage public fund assets acquired in connection with the 2018 FHL acquisition.

Management used an income-based approach, the discounted cash flow method, to value the asset as of June 30, 2024, which resulted in a non-cash impairment charge of $ 66.3 million.

The non-cash impairment was recorded in Operating Expenses – Intangible Asset Related on the Consolidated Statements of Income.

There were no other impairments during the year ended December 31, 2024.

The uncertainty caused by the coronavirus pandemic resulted in management determining that an indicator of potential impairment existed beginning in the first quarter 2020 for the FHL right to manage public fund assets acquired in connection with the 2018 FHL acquisition.

Management used an income-based approach to valuation, the discounted cash flow method, to value the asset.

As a result of continued increases in market interest rates and a decrease in near-term projected cash flows, a discounted cash flow analysis was prepared as of December 31, 2022 and resulted in a non-cash impairment charge of $ 31.5 million recorded in Operating Expenses – Intangible Asset Related on the Consolidated Statements of Income.

A discounted cash flow analysis prepared as of December 31, 2023 did no t result in an impairment.

The FHL right to manage public fund assets totaled $ 158.6 million as of December 31, 2023.

There were no other impairments during the year ended December 31, 2023.

(b) Finite-lived intangible assets

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Carrying Value $ 41,267 $ 54,793

The decrease in finite-lived intangible assets at December 31, 2023 as compared to December 31, 2022 primarily relates to amortization expense ($ 13.9 million), which was partially offset by foreign exchange translation ($ 2.5 million).

Amortization expense for finite-lived intangible assets was $ 13.9 million, $ 12.5 million and $ 13.8 million in 2023, 2022 and 2021, respectively, and was recorded in Operating Expenses - Other on the Consolidated Statements of Income.

The decrease in finite-lived intangible assets at December 31, 2024 as compared to December 31, 2023 primarily relates to amortization expense ($ 13.0 million).

Amortization expense for finite-lived intangible assets was $ 13.0 million, $ 13.9 million and $ 12.5 million in 2024, 2023 and 2022, respectively, and was recorded in Operating Expenses – Intangible Asset Related on the Consolidated Statements of Income.

Expected aggregate annual amortization expense for finite-lived intangible assets in each of the five succeeding years assuming no new acquisitions or impairments is shown in the table below:

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2025 $ 12,716

Goodwill at December 31, 2023 increased $ 6.7 million from December 31, 2022 primarily as a result of foreign exchange rate fluctuations on goodwill denominated in a foreign currency.

Goodwill at December 31, 2024 decreased $ 2.3 million from December 31, 2023 primarily as a result of foreign exchange rate fluctuations on goodwill denominated in a foreign currency.

(10) Property and Equipment

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Leasehold Improvements Up to term of lease 41,764 41,945

Transportation Equipment 14 years 17,851 17,851

Transportation Equipment 3 to 12 years 17,851 17,851

Office Furniture and Equipment 4 to 15 years 5,283 5,713

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T he entire principal amount of the $ 350 million Notes will become due March 17, 2032, subject to certain prepayment requirements under limited conditions.

Federated Hermes can elect to prepay the $ 350 million Notes under certain limited circumstances including with a make-whole amount if mandatorily prepaid without the consent of the holders of the $ 350 million Notes.

Federated Hermes can elect to prepay the $ 350 million Notes under certain limited circumstances including with a make-whole amount if prepaid without the consent of the holders of the $ 350 million Notes.

The Note Purchase Agreement does not feature a facility for the further i ssuance of additional notes or borrowing of any other amounts and there is no commitment fee payable in connection with the $ 350 million Notes.

The Note Purchase Agreement includes representations and warranties, affirmative and negative financial covenants, including an interest coverage ratio covenant and a leverage ratio covenant reporting requirements, other non-financial covenants and other customary terms and conditions.

The Note Purchase Agreement includes representations and warranties, affirmative and negative financial covenants, including interest coverage ratio covenant and leverage ratio covenant reporting requirements, other non-financial covenants and other customary terms and conditions.

Federated Hermes was in compliance with all of its covenants at and during the period ended December 31, 2024.

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The Note Purchase Agreement includes certain stated events of default and cross default provisions which would permit the lenders/counterparties to accelerate the repayment of the $ 350 million Notes if not cured within the applicable grace periods.

The events of default generally include breaches of contract, failure to make required payments, insolvency, certain material misrepresentations and other proceedings, whether voluntary or involuntary, that would require repayment of the $ 350 million Notes prior to their stated date of maturity.

The events of default generally include breaches of contract, failure to make required payments, insolvency, certain material

misrepresentations and other proceedings, whether voluntary or involuntary, that would require repayment of the $ 350 million Notes prior to their stated date of maturity.

Any such accelerated amounts would accrue interest at a default rate and could include an additional make-whole amount upon repayment.

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Borrowings under the Credit Agreement may be used for general corporate purposes, including, without limitation, stock repurchases, dividend payments (including any special dividend payments), and acquisitions.

As of December 31, 2023, the interest on borrowings from the revolving credit facility is calculated at the term SOFR which includes a benchmark adjustment based on its historical relationship to LIBOR.

The borrowings under the revolving credit facility may include up to $ 50 million for which interest is calculated at the daily SOFR plus a spread unless a base rate option

is elected (Swing Line).

As of December 31, 2024, the interest on borrowings from the revolving credit facility is calculated at the term Secured Overnight Financing Rate (SOFR) which includes a benchmark adjustment based on its historical relationship to the London Interbank Offering Rate (LIBOR).

The borrowings under the revolving credit facility may include up to $ 50 million for which interest is calculated at the daily SOFR plus a spread unless a base rate option is elected (Swing Line).

Effective July 1, 2023, Federated Hermes began using SOFR as a replacement to LIBOR in order to calculate interest on borrowings, if any, as permitted by the Credit Agreement.

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Federated Hermes awarded 378,107 shares of restricted Class B common stock in connection with a bonus program in which certain key employees received a portion of their bonus in the form of restricted stock under the Plan.

This bonus restricted stock, which was granted on the bonus payment date and issued out of treasury, generally vests over a three-year period.

This bonus restricted stock generally vests over a three-year period.

In addition, Federated Hermes awarded 449,500 shares of restricted Class B common stock under this same Plan that generally vest over a ten-year period.

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The award holders had a right to exercise a put option to sell shares to Federated Hermes at fair value and Federated Hermes had a right to exercise a call option to acquire shares at fair value.

Federated Hermes recognized compensation expense for this plan of $ 0.7 million and $ 9.4 million in Operating Expenses - Compensation and Related on the Consolidated Statements of Income for the years ended December 31, 2022 and 2021, respectively.

No compensation expense for this plan was recognized for the year ended December 31, 2023.

Federated Hermes recognized compensation expense for this plan of $ 0.7 million in Operating Expenses – Compensation and Related on the Consolidated Statements of Income for the year ended December 31, 2022.

No compensation expense for this plan was recognized for the years ended December 31, 2024 or 2023.

On March 14, 2022, Federated Hermes acquired the remaining shares of FHL.

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resident former FHL employee, in exchange for beneficial interests in the FHL shares held by them on March 14, 2022.

The Federated Hermes shares now held by the employee benefit trust are to be used for future restricted stock awards for FHL management and key employees.

As of December 31, 2023, 79,874 shares remain available in the employee benefit trust.

The Federated Hermes shares held by the employee benefit trust were used for restricted stock awards for FHL management and key employees.

As of December 31, 2024, no shares remain in the employee benefit trust.

(14) Common Stock

The Class A Shareholder has the entire voting rights of Federated Hermes;

however, without the consent of the majority of the holders of Class B common stock, the Class A Shareholder cannot alter Federated Hermes’ structure, dispose of all or substantially all of its assets, amend its Articles of Incorporation or Bylaws to adversely affect the Class B common stockholders, or liquidate or dissolve Federated Hermes.

however, without the consent of the majority of the holders of Class B common stock, the Class A Shareholder cannot alter Federated Hermes’ structure, dispose of all or substantially all of its assets, amend its Articles of Incorporation or Bylaws to adversely affect the Class B common shareholders, or liquidate or dissolve Federated Hermes.

With respect to dividends, distributions and liquidation rights, the Class A common stock and Class B common stock have equal preferences and rights.

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Cash dividends of $ 184.8 million, $ 98.1 million and $ 97.9 million were paid in 2024, 2023 and 2022, respectively, to holders of Federated Hermes common stock.

Of the amount paid in 2024, $ 84.2 million represented a $ 1.00 per share special dividend.

All dividends were considered ordinary dividends for tax purposes.

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In October 2023, the board of directors authorized a share repurchase program with no stated expiration date that allows the repurchase of up to 5.0 million shares of Class B common stock.

No other program existed as of December 31, 2023.

The program authorizes executive management to determine the timing and the amount of shares for each purchase.

In October 2024, the board of directors authorized an additional share repurchase program with no stated expiration date that allows the repurchase of up to 5.0 million shares of Class B common stock.

No other programs existed as of December 31, 2024.

The programs authorize executive management to determine the timing and the amount of shares for each purchase.

The repurchased stock is to be held in treasury for employee share-based compensation plans, potential acquisitions and other corporate activities, unless Federated Hermes’ board of directors subsequently determines to retire the repurchased stock and restore the shares to authorized but unissued status (rather than holding the shares in treasury).

During the year ended December 31, 2023, Federated Hermes repurchased 5.3 million shares of its Class B common stock for $ 178.0 million ($ 2.7 million of which was accrued in Other Current Liabilities as of December 31, 2023), nearly all of which were repurchased in the open market.

At December 31, 2023, 4.5 million shares remained available to be repurchased under this share repurchase program.

During the year ended December 31, 2024, Federated Hermes repurchased 4.0 million shares of its Class B common stock for $ 133.6 million, nearly all of which were repurchased in the open market.

At December 31, 2024, 5.7 million shares remained available to be repurchased under these share repurchase programs.

In July 2022, Federated Hermes’ board of directors authorized the retirement of 10.0 million treasury shares which restored these shares to authorized but unissued status.

Federated Hermes recorded a $ 313.8 million reduction to Treasury Stock, at cost using the specific-identification method and a $ 42.7 million reduction to Class B common stock, at cost using the average cost method.

Federated Hermes recorded a $ 313.8 million reduction to Treasury Stock and a $ 42.7 million reduction to Class B common stock.

The difference was recorded as a reduction to Retained Earnings and Additional Paid-In Capital from Treasury Stock Transactions.

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Effective Tax Rate 29.7 % 25.9 % 23.4 %

The effective tax rate for 2023 increased to 25.9 % as compared to the effective tax rate for 2022 of 23.4 % prim arily due to a valuation allowance on foreign deferred tax assets ( 1.0 %), nondeductible expenses associated with the restructuring of an infrastructure fund ( 0.9 %) and establishing a deferred tax asset in 2022 related to a write-off of a foreign subsidiary ( 0.8 %).

The effective tax rate for 2024 increased to 29.7 % as compared to the effective tax rate for 2023 of 25.9 % prim arily due to a valuation allowance on foreign deferred tax assets and the impairment of an indefinite-lived intangible asset ( 2.3 %), and a state tax law change and a state deferred tax adjustment ( 0.8 %).

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities consisted of the following at December 31:

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( 11,605 ) ( 13,981 ) ( 11,828 )

Total Net Income Attributable to Federated Hermes Common Stock - Basic

$ 284,999 $ 227,668 $ 259,435

Total Net Income Available to Unvested Restricted Shareholders of a Nonpublic Consolidated Subsidiary

0 0 ( 1,580 )

Total Net Income Attributable to Federated Hermes Common Stock - Diluted

Total Net Income Attributable to Federated Hermes Common Stock

$ 256,709 $ 284,999 $ 227,668

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Earnings Per Share

Net Income Attributable to Federated Hermes Common Stock - Basic 2

$ 3.40 $ 2.65 $ 2.77

Net Income Attributable to Federated Hermes Common Stock - Diluted 2

Net Income Attributable to Federated Hermes Common Stock – Basic and Diluted 2

$ 3.23 $ 3.40 $ 2.65

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The value of the ROU assets and lease liabilities recognized do not include the consideration of any renewal options, as they are not yet reasonably certain to be exercised.

Federated Hermes may enter into, modify or terminate certain leases in accordance with the lease agreements.

During the years ended December 31, 2024, 2023 and 2022, these transactions resulted in non-cash increases of $ 20.0 million, $ 20.3 million and $ 3.3 million, respectively, to Right-of-Use Assets, net and Lease Liabilities (both current and long-term) on the Consolidated Balance Sheets.

During the years ended December 31, 2024, 2023 and 2022, Federated Hermes recorded $ 19.2 million, $ 19.5 million and $ 19.0 million, respectively, in operating lease costs to Operating Expenses – Office and Occupancy on the Consolidated Statements of Income.

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Distributions to Noncontrolling Interests in Subsidiaries ( 20,627 ) ( 5,352 ) ( 25,979 )

Acquisition of Additional Equity of FHL 0 ( 167,302 ) ( 167,302 )

Acquisition of Remaining Equity of FHL 0 ( 37,805 ) ( 37,805 )

Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL 0 14,221 14,221

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Consolidation/(Deconsolidation) ( 75,225 ) 0 ( 75,225 )

Stock Award Activity 0 707 707

Distributions to Noncontrolling Interests in Subsidiaries ( 38,517 ) ( 1,443 ) ( 39,960 )

Acquisition of Additional Equity of FHL 0 ( 37,805 ) ( 37,805 )

Change in Estimated Redemption Value of Redeemable Noncontrolling Interests in FHL 0 14,221 14,221

Balance at December 31, 2023 $ 14,341 $ 11,504 $ 25,845

5 unchanged sentences

Balance at December 31, 2024 $ 45,085 $ 10,429 $ 55,514

The activity in 2021 includes $ 892.1 million of contributions from noncontrolling interests in subsidiaries as a result of a purchase-in-kind investment into a previously consolidated VRE.

This was a non-cash transaction and was therefore excluded from the Consolidated Statements of Cash Flows.

During 2022 and 2021, the FHL Redeemable Noncontrolling Interests in Subsidiaries carrying value was adjusted by $ 14.2 million and $ 19.3 million, respectively, to the curre nt redemption value, assuming the FHL noncontrolling interests was redeemable at the balance sheet date.

The noncontrolling interests were adjusted through a corresponding adjustment to retained earnings.

On March 14, 2022, Federated Hermes acquired the remaining shares of FHL.

(20) Commitments and Contingencies

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(b) Guarantees and Indemnifications

On an intercompany basis, various subsidiaries of Federated Hermes guarantee certain financial obligations of Federated

Hermes, Inc., and of other consolidated subsidiaries, and Federated Hermes, Inc.

On an intercompany basis, various subsidiaries of Federated Hermes guarantee certain financial obligations of Federated Hermes, Inc., and of other consolidated subsidiaries, and Federated Hermes, Inc.

guarantees certain financial and performance-related obligations of various wholly-owned subsidiaries.

Federated Hermes or its subsidiaries also can guarantee the obligations of certain offerings, such as direct lending funds, as a condition to making seed or other investments in them.

In addition, in the normal course of business, Federated Hermes has entered into contracts that provide a variety of indemnifications.

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It is not possible to predict the maximum potential amount of future payments under these or similar agreements due to the conditional nature of Federated Hermes’ obligations and the unique facts and circumstances involved in each particular agreement.

As of December 31, 2023, management does not believe that a material loss related to any of these matters is reasonably possible.

As of December 31, 2024, management does not believe that a material loss related to

any of these matters is reasonably possible.

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As of December 31, 2024, Federated Hermes does not believe that a material loss related to any of these claims is reasonably possible.

In addition, during the first quarter 2023, an administrative error was identified related to a failure to register certain shares of a Federated Hermes closed-end tender fund.

Federated Hermes estimated a probable cost of $ 19.6 million as of December 31, 2023 related to correcting this issue, of which $ 17.9 million represents a settlement with affected shareholders that was paid during the second quarter 2023.

During the first quarter 2023, Federated Hermes recorded $ 2.5 million to Operating Expenses - Other representing Federated Hermes' retention under the insurance policy.

During the first quarter 2023, an administrative error was identified related to a failure to register certain shares of a Federated Hermes closed-end tender fund.

Federated Hermes has incurred costs totaling $ 20.0 million as of December 31, 2024 related to correcting this issue, of which $ 17.9 million represents a settlement with affected shareholders that was paid during the second quarter 2023.

Management believes an insurance reimbursement of $ 15.9 million is probable based on the contractual terms of the insurance policies.

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The purchase of these carried interest rights and related legal and professional fees and other costs are not deductible for tax purposes.

Negotiations for additional consideration continue with a subset of limited partners, with an additional $ 5.1 million in consideration being recorded in Operating Expenses - Other in the second half of 2023.

The final consideration may be different from the amounts recorded and the difference could be material.

An additional $ 5.1 million and $ 3.1 million in consideration was recorded in Operating Expenses – Other in the second half of 2023 and in 2024, respectively.

An agreement with the last limited partner was finalized in January 2025.

(21) Segment and Geographic Information

Federated Hermes operates in one operating segment, the investment management business.

Federated Hermes’ CEO is the CODM.

The CODM utilizes a consolidated approach to allocate resources and assess performance.

The CODM assesses performance and decides how to allocate resources based on revenue and net income as reported on the Consolidated Statements of Income.

The measure of segment assets is reported on the Consolidated Balance Sheets as Total Assets.

The CODM uses revenue and net income in making key operating decisions, including approvals for business acquisitions, high-level compensation decisions, determination of shareholder dividends, including special dividends, repurchasing company stock, developing and seeding new offerings, modifying existing offerings and determination of funding of significant technology projects.

Federated Hermes’ revenues from U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data