HFMIL Remuneration Policy

Introduction

Our remuneration policy is designed to attract, motivate, retain, and reward staff, regardless of each individual’s protected characteristics (as per the Equality Act 2010), including gender, ethnicity, age, disability, socio-economic status, gender reassignment, race, marital or civil partnership status, pregnancy or maternity, religion or belief, or sexual orientation.

Our philosophy is to reward individual contribution, as demonstrated by the delivery of results that are aligned with our business strategy, values and, behaviours and which serve the best interests of our clients, their investors and our shareholders while enabling the business to profitably grow to its potential.

Through focusing on long-term awards (including co-investment of deferred bonuses in funds managed by FHL Group), our remuneration strategies are designed to: encourage all staff to act like long term stakeholders; create enduring, responsible wealth for our clients and their investors; support our responsible performance culture to create a sustainable business; discourage excessive or concentrated risk taking; and avoid conflicts of interest.

Individual and organisational performance is transparently and rigorously assessed against a combination of financial (multi-year) and non-financial targets and criteria to determine appropriate total compensation that will attract and retain our talent.

Reward Strategy Principles

Our policies, procedures and practices are guided by our principles, which form the basis of our approach to performance and behaviour-linked total compensation. Our reward principles are:

• to encourage staff to deliver on the business purpose of enduring, responsible wealth creation that enriches investors, society, and the environment;
• to be aligned with the business strategy, objectives, values and long-term interests of FHL Group as reflected in the Federated Hermes Pledge (which include, amongst others, acting in the best interests of the clients and (as relevant) investors);
• to provide competitive total remuneration potential, designed to attract, retain, motivate, and reward staff that deliver outstanding long-term performance and corporate behaviours;
• to promote sound and effective risk management (including investment risk, sustainability risk (including climate and nature risk) and other risk factors), and (where applicable) to design remuneration practices in a way that is consistent with ensuring good outcomes for retail customers ;
• to ensure remuneration is linked to investment, business, personal performance, and corporate behaviours for all staff, and where appropriate measured over the short, medium, and long-term;
• to differentiate and reward strong performance and demonstration of compliant behaviours and to proactively manage poor performance and behaviours not aligned to our values;
• to deliver reward programs which are transparent, competitive and affordable; and
• to deliver compensation and benefit strategies consistent with the ethos and strategy set by FHL Group’s ultimate parent undertaking, Federated Hermes, Inc.

Enduring Wealth Creation

Building on the principles above, the FHL Group seeks outperformance and positive outcomes whilst aiming to deliver enduring wealth creation that enriches all our stakeholders – investors, society and the environment – by investing responsibly. The principle of responsible wealth creation includes consideration of sustainability and ESG factors as appropriate.

To achieve this, the Performance Management Framework that underpins the Performance Assessment process described at section 7 incorporates consideration of stewardship and the integration of responsible performance and risk management in both the investment activities and wider operations of the FHL Group. In particular:

• Senior management are incentivised to drive FHL Group’s strategy and initiatives in line with the FHL Group’s business purpose of achieving enduring, responsible wealth creation. This is intended to ensure that purpose is at the heart of all FHL Group’s key business and operational decisions and processes.
• Performance is assessed with a view to promoting best practices including the integration of investor stewardship, appropriate risk-return metrics, and (where relevant) material ESG considerations, in the investment process and decision-making.
• Staff have performance objectives that relate to responsible wealth creation as appropriate for their role. This ranges from staff working in investment management, client relationship management and product design/development, to those in Human Resources, IT, Compliance and Risk.
• The mechanisms for risk-related adjustments – to the overall bonus pool, the bonus pool for individual teams/business units/functions, and individual outcome determinations – takes into consideration sustainability risk, including climate and nature-related risk.
• Staff are assessed against responsibility-related objectives and behaviours in their annual performance assessment (where relevant), which informs annual bonus outcomes. This is supported by the co-investment of deferred bonuses in funds managed by FHL Group to align staff to longer-term investment performance after the bonus has been awarded.

Categories of Staff (Material Risk Takers, Code Staff and Identified Staff)

The Remuneration Requirements under the UCITS regime (i.e. UCITS Remuneration Code in the UK, and the UCITS Remuneration Regime (Ire)), and the AIFMD regime (i.e. the AIFM Remuneration Code and the AIFM Remuneration Regime (Ire)) apply to those categories of staff whose professional activities have a material impact on the risk profiles of the relevant entity and/or the products it manages. Such staff are termed “Code Staff” under the UK Remuneration Requirements, and “Identified Staff” under the Irish Remuneration Requirements.

Governance

The AIFMD Regulations and the UCITS Regulations require AIFMs or UCITS Management Companies that are significant in terms of their size or the size of the Funds they manage, their internal organisation and the nature, scope and complexity of their activities to establish a remuneration committee.

Whilst the Company considers that it is not required to establish a remuneration committee based on these criteria, the Company has determined to establish a remuneration committee (the “Remuneration Committee”). Membership of the Remuneration Committee is comprised of non-Executive Director(s) and/or FHL Group representatives who are appointed from time to time. The Remuneration Committee and the Board agree the broad policy and framework for the remuneration of Code Staff.

Delegation

Within the FHL Group, certain functions are delegated from one entity (“Principal“) to other firms (“Delegate“), who may potentially sub-contract to another firm (“Sub-Delegate”). Delegation enables the broader FHI Group to leverage expertise, resources, or operational expertise. The Principal retains overall responsibility for the performance of the functions by the Delegate (and any Sub-Delegate), and compliance with applicable regulatory requirements. At the date of this Policy, the following delegations are in place:

Under the Remuneration Requirements, each firm is prohibited from paying variable remuneration through vehicles or methods that facilitate the avoidance of the Remuneration Requirements. This is understood to mean that where there is a delegation, the Principal must ensure the delegation does not circumvent the applicable Remuneration Requirements.

In relation to the UCITS Remuneration Regime (Ire) and AIFM Remuneration Regime (Ire), the possible approaches to ensuring a delegation does not circumvent the Remuneration Requirements are set out in the ESMA UCITS Remuneration Guidelines and ESMA AIFMD Remuneration Guidelines (respectively). These outline the following possible approaches:

• The Principal should ensure that the Delegate (and/or any Sub-Delegate) is subject to regulatory requirements on remuneration that are equally as effective as those applicable to the Principal.
• The Principal should put in place appropriate contractual arrangements with the Delegate in order to ensure that there is no circumvention of the applicable remuneration rules. These contractual arrangements should cover any payments made to the relevant personnel of the Delegate as compensation for the performance of portfolio/risk management activities on behalf of the delegating Principal.

HFMIL Approach to Ensuring No Circumvention

HIML and HGPE as Delegates and FedHUK as Sub-Delegate

HIML, HGPE and FedHUK are part of the FHL Group, and are subject to different remuneration requirements. Each entity is subject to the MIFIDPRU Remuneration Code; HGPE is also subject to AIFM Remuneration Code; and FedHUK is also subject to the UCITS Remuneration Code.

HFMIL is satisfied that HIML, HGPE and FedHUK are each subject to remuneration requirements that are equally as effective as the UCITS Remuneration Regime (Ire) and/or the AIFM Remuneration Regime (Ire) to which HFMIL is subject in connection with the delegations.

FIC, FGIM and MDT as Delegates

FIC, FGIM and MDT are within the wider FHI group and are located in the US. FIC, FGIM and MDT are not directly subject to the Remuneration Requirements. As such, the investment management agreements entered into by HFMIL and FIC/FGIM/MDT, respectively, includes a contractual obligation that FIC/FGIM/MDT shall ensure its remuneration arrangements for personnel involved in the provision of services to HFMIL pursuant to that agreement who are identified as Identified Staff shall not circumvent the principles and rules relating to remuneration under the UCITS Remuneration Regime (Ire). FIC/FGIM/MDT shall also ensure that appropriate contractual provisions regarding remuneration are put in place with any sub-delegate performing investment management functions in relation to the relevant HFMIL-managed fund in accordance with the delegation requirement as described in section 10.2.

Each of FIC, FGIM and MDT is required to provide a confirmation on an annual basis (or as otherwise reasonably required by HFMIL) that the statement above was accurate during the relevant period.

Annual Review

The HFMIL RemCo will review this Policy annually, or on an ad hoc basis where the need to do so arises, to ensure that it remains fit for the future business and compliant with the latest regulatory requirements. The HFMIL RemCo shall update the Board of Directors of HFMIL following its review and shall identify any proposed changes. The Board of Directors of HFMIL shall take into consideration the recommendations of the HFMIL RemCo when adopting the policy that will apply for a performance period or considering material revisions to the policy.

In addition, the development and review of this Policy is supported by relevant control functions including Human Resources, Risk, Compliance, Internal Audit and the relevant business units. These control functions and business units provide input to ensure the Policy is aligned with sound risk management and regulatory requirements.

Effective Date

The effective date of this Policy is 2025.