Federated Hermes (3KC) Risk Analysis

Federated Hermes has two classes of common stock: Class A, which has voting power; and Class B, which is non-voting except in certain limited circumstances. All the outstanding shares of Class A common stock are held by the Voting Shares Irrevocable Trust for the benefit of certain members of the Donahue family. The three trustees of this trust are Federated Hermes' President and CEO and Chairman of the board of directors, J. Christopher Donahue, his brother, Thomas R. Donahue, Federated Hermes' Vice President, Treasurer and Chief Financial Officer and a director, and Ann C. Donahue, the wife of J. Christopher Donahue. Accordingly, Federated Hermes qualifies as a "controlled company" under Section 303A of the NYSE Listed Company Manual. As a controlled company, Federated Hermes qualifies for and relies upon exemptions from several NYSE corporate governance requirements, including requirements that: (1) a majority of the board of directors consists of independent directors; and (2) the entity maintains a nominating/corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities. As a result, while Federated Hermes' board of directors can from time to time have a majority of independent directors, Federated Hermes' board of directors is not required to have (and, as of December 31, 2025, did not have) a majority of independent directors. It also does not maintain a nominating/corporate governance committee. Federated Hermes is also exempt as a "controlled company" from certain additional independence requirements and responsibilities regarding compensation advisors applicable to Compensation Committee members. The Class A common stock and Class B common stock of Federated Hermes have equal rights to dividends and distributions, when declared, whether in cash or stock, and receive the same amount of consideration per share, notwithstanding any differences in voting rights, in the event of a purchase of Federated Hermes by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation or stock purchase) or a sale of all or substantially all of the assets of Federated Hermes. There can be no assurance that Federated Hermes will generate sufficient earnings and cash flow to pay dividends or distributions at current levels or at all. Any reduction or elimination of dividends can adversely affect the market price of Federated Hermes' Class B common stock. While Federated Hermes believes its dual-class structure is appropriate and benefits its shareholders, and should be a factor taken into account by shareholders when investing in Federated Hermes, as a company with a dual-class structure, Federated Hermes can be excluded from certain financial indexes, which can result in decreased investments in its Class B common stock and adversely affect its stock price. The sale or issuance of substantial amounts of Federated Hermes' Class B common stock in the public market also can adversely affect its price. If existing shareholders sell substantial amounts of Class B common stock, or if there is a perception that such sales will occur, the market price of Federated Hermes Class B common stock can decline as a result.