Prospectus
Disclosure
contained herein relates to all classes of the Fund, as listed below, unless
otherwise noted.
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Share
Class | Ticker |
A | QAMNX |
Institutional | QQMNX |
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Federated Hermes MDT Market Neutral Fund
A Portfolio of Federated Hermes Adviser Series
The Fund
seeks to provide long-term capital appreciation while limiting exposure to
general stock market risk.
As with
all mutual funds, the Securities and Exchange Commission (SEC) has not approved
or disapproved these securities or passed upon the adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
Not
FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee
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A |
IS |
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Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
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Maximum
Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) |
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Maximum
Sales Charge (Load) Imposed on Reinvested Dividends (and other
Distributions) (as a percentage of offering price) |
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Redemption
Fee (as a percentage of amount redeemed, if
applicable) |
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Exchange
Fee |
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A |
IS |
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Management
Fee |
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Distribution
(12b-1) Fee |
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Other
Expenses |
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Dividends
and Other Operating Expenses Related to Short Sales |
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Other
Operating Expenses |
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Acquired
Fund Fees and Expenses |
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Total
Annual Fund Operating Expenses |
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Fee
Waivers and/or Expense Reimbursements2 |
( |
( |
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Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements |
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1
2
1
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Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
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A |
$ |
$ |
$ |
$ |
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IS |
$ |
$ |
$ |
$ |
2
3
4
Within
the periods shown in the bar chart, the Fund’s IS class highest quarterly return
was 12.84% (quarter ended December 31, 2021). Its lowest quarterly return was
(17.78)% (quarter ended March 31, 2020).
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1
Year |
5
Years |
10
Years |
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IS: |
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Returns
Before Taxes |
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Returns
After Taxes on Distributions |
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Returns
After Taxes on Distributions and Sale of Fund Shares |
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A: |
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Returns
Before Taxes |
( |
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ICE
BofA US 3-Month Treasury Bill Index1
(reflects
no deduction for fees, expenses or taxes) |
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Morningstar
Equity Market Neutral Funds Average2 |
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1
2
FUND
MANAGEMENT
The Fund’s
Investment Adviser is Federated MDTA LLC.
Daniel J. Mahr, CFA, Head
of MDT, has been the Fund’s portfolio manager since September 2021.
Damien Zhang, CFA, Head of
MDT Research, has been the Fund’s portfolio manager since September
2021.
Frederick L.
Konopka,
CFA,
Portfolio and
Trading Manager, has been the Fund’s portfolio manager since September
2021.
John Paul Lewicke,
Research Manager, has been the Fund’s portfolio manager since September
2021.
5
purchase
and sale of fund shares
You
may purchase, redeem or exchange Shares of the Fund on any day the New York
Stock Exchange is open. Shares may be
purchased through a financial intermediary firm that has entered into a Fund
selling and/or servicing agreement with the Distributor or an affiliate
(“Financial Intermediary”) or directly from the Fund, by wire or by check.
Please note that certain purchase restrictions may apply. Redeem or exchange
Shares through a financial intermediary or directly from the Fund by telephone
at 1-800-341-7400 or by mail.
A
Class
The
minimum investment amount for the Fund’s A class is generally $1,500 for initial
investments and $100 for subsequent
investments. The minimum initial and subsequent investment amounts for
Individual Retirement Accounts are generally $250 and $100, respectively. There
is no minimum initial or subsequent investment amount required for
employer-sponsored retirement plans. Certain types of accounts are eligible for
lower minimum investments. The minimum investment amount for Systematic
Investment Programs is $50.
IS
Class
The
minimum initial investment amount for the Fund’s IS class is generally
$1,000,000 and there is no minimum subsequent
investment amount. Certain types of accounts are eligible for lower minimum
investments. The minimum investment amount for Systematic Investment Programs is
$50.
Tax
Information
The
Fund’s distributions are taxable as ordinary income or capital gains except when
your investment is through a 401(k)
plan, an Individual Retirement Account or other tax-advantaged investment
plan.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and/or its related
companies may pay the intermediary for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund
over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
What are
the Fund’s Investment Strategies?
The
Fund’s investment objective is to seek to provide long-term capital appreciation
while limiting exposure to general stock market risk. The
objective may be changed by the Fund’s Board of Trustees (the “Trustees”)
without shareholder approval. The Fund seeks to achieve its objective by
selecting long positions in publicly traded common stocks which the Fund’s
quantitative model predicts will achieve above-market returns, and short
positions in publicly traded common stocks which the Fund’s quantitative model
predicts will achieve below-market returns. The portfolio maintains long and
short exposures in an attempt to neutralize market volatility. The Fund’s
investments primarily include, but are not limited to, equity securities of
issuers listed in the Russell 3000 Index. The Russell 3000 Index measures the
performance of the 3,000 largestU.S. companies by market capitalization
representing approximately 98% of the investable domestic equity market. As of
December 31, 2023, companies in the Russell 3000 Index ranged in market
capitalization from $19.5 million to $3.0 trillion.
The
Adviser implements its strategy using a quantitative model driven by fundamental
and technical stock selection variables, including
relative value, profit trends, capital structure and price history. This process
seeks to impose strict discipline over stock selection, unimpeded by market or
manager psychology. It seeks to maximize compound annual return while
controlling risk. The process also takes into account trading costs in an effort
to ensure that trades are generated only to the extent they are expected to be
profitable on an after-trading-cost basis. Additionally, risk is controlled
through diversification constraints which limit exposure to individual companies
as well as groups of correlated companies. The Adviser’s stock selection process
is expected to result in long and short investments in companies with both
growth and value characteristics.
The
Fund will attempt to realize investment gains on both the long and short sides
of its investment strategies through stock selection. The style
is termed market neutral in that it is not dependent upon the direction of the
equity markets and the Fund’s overall price movements are not expected to
correlate with the general stock market’s price movements. The market neutral
approach is balanced roughly across sectors, but is not balanced across
industries or businesses. The Fund’s net positions will not be concentrated in
any industry or group of industries. Thus, the Fund is not completely isolated
from market movements. The overall performance of the Fund depends on the net
performance of its long and short positions, and it is possible for the Fund to
experience a net loss across both its long and short positions. If the Fund’s
investment strategy is successful, however, the net performance of its long and
short positions will produce long-term capital appreciation that reflects the
quality of the Adviser’s security selections, with limited exposure to general
stock market risk.
6
Because
of the Fund’s market neutral strategy, the Fund’s overall price movements are
not expected to correlate with the
general stock market’s price movements. In other words, the Fund is expected to
have returns that are independent of the returns and direction of the general
stock market (i.e., zero beta).
The
Fund may, but is not required to, use derivatives, such as futures, options,
forward contracts, and swap agreements, as an
alternative to selling a security short, to increase returns, or as part of a
hedging strategy.
PORTFOLIO
TURNOVER
The
Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the
Fund to have an increased portfolio turnover rate and increase the Fund’s
trading costs, which may have an adverse impact on the Fund’s performance. The
Fund’s use of short sales is likely to increase the rate of active trading. An
active trading strategy will likely result in the Fund’s generating more
short-term capital gains or losses. Short-term gains are generally taxed at a
higher rate than long-term gains. Any short-term losses are used first to offset
short-term gains.
TEMPORARY
INVESTMENTS
The
Fund may temporarily depart from its principal investment strategies by
investing its assets in shorter-term debt securities
and similar obligations or holding cash. It may do this in response to unusual
circumstances, such as: adverse market, economic or other conditions (for
example, to help avoid potential losses, or during periods when there is a
shortage of appropriate securities); to maintain liquidity to meet shareholder
redemptions; or to accommodate cash inflows. It is possible that such
investments could affect the Fund’s investment returns and/or the ability to
achieve the Fund’s investment objectives.
What are
the Fund’s Principal Investments?
The
following provides general information on the Fund’s principal investments. The
Fund’s Statement of Additional Information
(SAI) provides information about the Fund’s non-principal investments and may
provide additional information about the Fund’s principal
investments.
EQUITY
SECURITIES
Equity
securities represent a share of an issuer’s earnings and assets, after the
issuer pays its liabilities. The Fund cannot predict
the income it will receive from equity securities because issuers generally have
discretion as to the payment of any dividends or distributions. However, equity
securities offer greater potential for appreciation than many other types of
securities, because their value is expected to increase directly with the value
of the issuer’s business. The following describes the equity securities in which
the Fund principally invests.
SHORT
SALES
The
Fund may sell a security short in an effort to take advantage of an anticipated
decline in the price of the security. In a short
sale, the Fund sells a security it does not own, and must borrow the security in
order to deliver it at completion of the sale. The Fund then has an obligation
to replace the borrowed security (e.g., to purchase the security at a future
date and deliver it to the lender of the security). In order to cover its
obligation to purchase such securities in the future, the Fund holds short-term
liquid securities such as money market funds, U.S. Treasury securities,
government agency securities or equity securities. If the value of the security
sold short declines between the time that the Fund borrows the security and the
time it repurchases and returns the security to the lender, the Fund makes a
profit on the difference (less any interest, fees and/or dividend payments the
Fund is required to pay the lender). If it has to buy the security back at a
higher price, a loss results. The Fund may incur expenses in selling securities
short and such expenses are investment expenses of the Fund.
HEDGING
Hedging
transactions are intended to reduce specific risks. The Fund anticipates using
short selling and derivatives to reduce its
equity market exposure. For example, to protect the Fund against circumstances
that would normally cause the Fund’s portfolio securities to decline in value,
the Fund may buy or sell a derivative contract that would normally increase in
value under the same circumstances. The Fund may also attempt to hedge by using
combinations of different derivative contracts, or derivative contracts and
securities. The Fund’s ability to hedge may be limited by the costs of the
derivative contracts. The Fund may attempt to lower the cost of hedging by
entering into transactions that provide only limited protection, including
transactions that: (1) hedge only a portion of its portfolio; (2) use derivative
contracts that cover a narrow range of circumstances; or (3) involve the sale of
derivative contracts with different terms. Consequently, hedging transactions
will not eliminate risk even if they work as intended. In addition, hedging
strategies are not always successful, and could result in increased expenses and
losses to the Fund.
7
Common
Stocks
Common
stocks are the most prevalent type of equity security. Common stocks receive the
issuer’s earnings after the issuer
pays its creditors and any preferred stockholders. As a result, changes in an
issuer’s earnings directly influence the value of its common stock.
Real
Estate Investment Trusts (REITs)
REITs
are real estate investment trusts (including foreign REITs and REIT-like
entities) that lease, operate and finance commercial
real estate. REITs in the United States are exempt from federal corporate income
tax if they limit their operations and distribute most of their income. Such tax
requirements limit a U.S. REIT’s ability to respond to changes in the commercial
real estate market.
DERIVATIVE
CONTRACTS
Derivative
contracts are financial instruments that derive their value from underlying
securities, commodities, currencies,
indices, or other assets or instruments, including other derivative contracts
(each a “Reference Instrument” and collectively, “Reference Instruments”). The
most common types of derivative contracts are swaps, futures and options, and
major asset classes include interest rates, equities, commodities and foreign
exchange. Each party to a derivative contract may sometimes be referred to as a
“counterparty.” Some derivative contracts require payments relating to an
actual, future trade involving the Reference Instrument. These types of
derivatives are frequently referred to as “physically settled” derivatives.
Other derivative contracts require payments relating to the income or returns
from, or changes in the market value of, a Reference Instrument. These types of
derivatives are known as “cash-settled” derivatives since they require cash
payments in lieu of delivery of the Reference Instrument.
Many
derivative contracts are traded on exchanges. In these circumstances, the
relevant exchange sets all the terms of the
contract except for the price. Parties to an exchange-traded derivative contract
make payments through the exchange. Most exchanges require traders to maintain
margin accounts through their brokers to cover their potential obligations to
the exchange. Parties to the contract make (or collect) daily payments to the
margin accounts to reflect losses (or gains) in the value of their contracts.
This protects traders against a potential default by their counterparty. Trading
contracts on an exchange also allows traders to hedge or mitigate certain risks
or carry out more complex trading strategies by entering into offsetting
contracts.
The
Fund may also trade derivative contracts over-the-counter (OTC), meaning
off-exchange, in transactions negotiated directly
between the Fund and an eligible counterparty, which may be a financial
institution. OTC contracts do not necessarily have standard terms, so they may
be less liquid and more difficult to close out than exchange-traded derivative
contracts. In addition, OTC contracts with more specialized terms may be more
difficult to value than exchange-traded contracts, especially in times of
financial stress.
The
market for swaps and other OTC derivatives was largely unregulated prior to the
enactment of federal legislation known as
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”). Regulations enacted by the Commodity Futures Trading Commission (the
“CFTC”) under the Dodd-Frank Act require the Fund to clear certain types of swap
contracts (including certain interest rate and credit default swaps) through a
central clearinghouse known as a derivatives clearing organization
(DCO).
To
clear a swap through a DCO, the Fund will submit the contract to, and post
margin with, a futures commission merchant
(FCM) that is a clearinghouse member. The Fund may enter into the swap with a
counterparty other than the FCM and arrange for the contract to be transferred
to the FCM for clearing or enter into the contract with the FCM itself. If the
Fund must centrally clear a transaction, the CFTC’s regulations also generally
require that the swap be executed on a registered exchange (either a designated
contract market (DCM) or swap execution facility (SEF)). Central clearing is
presently required only for certain swaps; the CFTC is expected to impose a
mandatory central clearing requirement for additional derivative instruments
over time.
DCOs,
DCMs, SEFs and FCMs are all subject to regulatory oversight by the CFTC. In
addition, certain derivative market
participants that act as market makers and engage in a significant amount of
“dealing” activity are also required to register as swap dealers with the CFTC.
Among other things, swap dealers are subject to minimum capital requirements and
business conduct standards and must also post and collect initial and variation
margin on uncleared swaps with certain of their counterparties. Because of this,
if the Fund enters into uncleared swaps with any swap dealers, it may be subject
to initial and variation margin requirements that could impact the Fund’s
ability to enter into swaps in the OTC market, including making transacting in
uncleared swaps significantly more expensive.
8
At
this point in time, most of the Dodd-Frank Act has been fully implemented,
though a small number of remaining rulemakings
are unfinished or are subject to phase-in periods. Any future regulatory or
legislative activity would not necessarily have a direct, immediate effect upon
the Fund, though it is within the realm of possibility that, upon implementation
of these measures or any future measures, they could potentially limit or
completely restrict the ability of the Fund to use these instruments as a part
of its investment strategy, increase the costs of using these instruments or
make them less effective.
Depending
on how the Fund uses derivative contracts and the relationships between the
market value of a derivative contract
and the Reference Instrument, derivative contracts may increase or decrease the
Fund’s exposure to the risks of the Reference Instrument and may also expose the
Fund to liquidity and leverage risks. OTC contracts also expose the Fund to
credit risks in the event that a counterparty defaults on the contract, although
this risk may be mitigated by submitting the contract for clearing through a
DCO, or certain other factors, such as collecting margin from the
counterparty.
As
discussed above, a counterparty’s exposure under a derivative contract may in
some cases be required to be secured with
initial and/or variation margin (a form of “collateral”).
The
Fund may invest in a derivative contract if it is permitted to own, invest in,
or otherwise have economic exposure to the
Reference Instrument. The Fund is not required to own a Reference Instrument in
order to buy or sell a derivative contract relating to that Reference
Instrument. The Fund may trade in the following specific types and/or
combinations of derivative contracts:
Futures
Contracts (A Type of Derivative)
Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a Reference
Instrument at a specified price, date and time. Entering into a contract to buy
a Reference Instrument is commonly referred to as buying a contract or holding a
long position in the asset. Entering into a contract to sell a Reference
Instrument is commonly referred to as selling a contract or holding a short
position in the Reference Instrument. Futures contracts are considered to be
commodity contracts. The Adviser has claimed an exclusion from the definition of
the term “commodity pool operator” under the Commodity Exchange Act with respect
to the Fund and, therefore, is not subject to registration or regulation as a
commodity pool operator under the Act with respect to the Fund. Futures
contracts traded OTC are frequently referred to as forward contracts. The Fund
can buy or sell financial futures (such as interest rate futures, index futures
and security futures), as well as currency futures and currency forward
contracts.
Index
Futures
An
index futures contract is an exchange-traded contract to make or receive a
payment based upon changes in the value of an
index. An index is a statistical composite that measures changes in the value of
designated Reference Instruments within the index.
Option
Contracts (A Type of Derivative)
Option
contracts (also called “options”) are rights to buy or sell a Reference
Instrument for a specified price (the “exercise
price”) during, or at the end of, a specified period. The seller (or “writer”)
of the option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option. A call
option gives the holder (buyer) the right to buy the Reference Instrument from
the seller (writer) of the option. A put option gives the holder the right to
sell the Reference Instrument to the writer of the option. Options may be bought
or sold on a wide variety of Reference Instruments. Options that are written on
futures contracts will be subject to margin requirements similar to those
applied to futures contracts.
Swap
Contracts (A Type of Derivative)
A
swap contract (also known as a “swap”) is a type of derivative contract in which
two parties agree to pay each other (swap) the
returns derived from Reference Instruments. Swaps do not always involve the
delivery of the Reference Instruments by either party, and the parties might not
own the Reference Instruments underlying the swap. The payments are usually made
on a net basis so that, on any given day, the Fund would receive (or pay) only
the amount by which its payment under the contract is less than (or exceeds) the
amount of the other party’s payment. Swap agreements are sophisticated
instruments that can take many different forms and are known by a variety of
names. Common types of swaps in which the Fund may invest include interest rate
swaps, caps and floors, total return swaps, credit default swaps, currency swaps
and volatility swaps.
9
OTHER
INVESTMENTS, TRANSACTIONS, TECHNIQUES
Derivatives
Regulation and Asset Coverage
The
regulation of the U.S. and non-U.S. derivatives markets has undergone
substantial change in recent years and such change may
continue. In addition, effective August 19, 2022, Rule 18f-4 (the “Derivatives
Rule”) under the Investment Company Act of 1940, as amended (the “1940 Act”),
replaced the asset segregation framework previously used by funds to comply with
limitations on leverage imposed by the 1940 Act. The Derivatives Rule generally
mandates that a fund either limit derivatives exposure to 10% or less of its net
assets, or in the alternative implement: (i) limits on leverage calculated based
value-at-risk (VAR); (ii) a written derivatives risk management program (DRMP)
administered by a derivatives risk manager appointed by the Fund’s Board,
including a majority of the independent Board members, that is periodically
reviewed by the Board; and (iii) new reporting and recordkeeping
requirements.
Additional
Information Regarding the Security Selection Process
As
part of analysis in its security selection process, among other factors, the
Adviser also evaluates whether environmental,
social and governance factors could have a positive or negative impact on the
risk/return profiles of many issuers in the universe of securities in which the
Fund may invest. This analysis does not automatically result in including or
excluding specific securities but may be used by Federated Hermes as an
additional input to improve portfolio risk/return
characteristics.
What are
the Specific Risks of Investing in the Fund?
The
following provides general information on the risks associated with the Fund’s
principal investments. Any additional
risks associated with the Fund’s non-principal investments are described in the
Fund’s SAI. The Fund’s SAI also may provide additional information about the
risks associated with the Fund’s principal investments.
QUANTITATIVE
MODELING RISK
The
Fund employs quantitative models as a management technique. These models examine
multiple economic and market
factors using large data sets. The results generated by quantitative analysis
may be different than expected and may negatively affect Fund performance for a
variety of reasons. For example, human judgment plays a role in building,
utilizing, testing and modifying the financial algorithms and formulas used in
these models. Additionally, the data, which is typically supplied by third
parties, can be imprecise or become stale due to new events or changing
circumstances. Market performance can be affected by non-quantitative factors
(for example, investor fear or over-reaction or other emotional considerations)
that are not easily integrated into quantitative analysis. There may also be
technical issues with the construction and implementation of quantitative models
(for example, software or other technology malfunctions, or programming
inaccuracies). The Adviser’s security selection process may not eliminate all
stock market risk factors associated with the long and short positions it
establishes for the Fund. It is possible that the stocks the Fund holds long
will decline in value at the same time that the stocks it holds short increase
in value, thereby increasing potential losses to the Fund. Any gain from a short
position may be partially or totally offset by a decline in a long position, or
vice versa.
STRATEGY
RISK
There
is no guarantee that the use of long and short positions will succeed in
limiting the Fund’s exposure to domestic stock
market movements, capitalization, sector-swings or other risk.
SHORT
SELLING RISK
The
Fund can sell securities short to the maximum extent permitted under the 1940
Act. A short sale by the Fund involves
borrowing a security from a lender which is then sold in the open market. At a
future date, the security is repurchased by the Fund and returned to the lender.
While the security is borrowed, the proceeds from the sale are deposited with
the lender and the Fund may be required to pay interest, fees and/or the
equivalent of any dividend payments paid by the security to the lender. If the
value of the security declines between the time the Fund borrows the security
and the time it repurchases and returns the security to the lender, the Fund
makes a profit on the difference (less any expenses the Fund is required to pay
the lender). There is no assurance that a security will decline in value during
the period of the short sale and make a profit for the Fund. If the value of the
security sold short increases between the time that the Fund borrows the
security and the time it repurchases and returns the security to the lender, the
Fund will realize a loss on the difference plus any expenses the Fund is
required to pay to the lender. This loss is theoretically unlimited as there is
no limit as to how high the security sold short can appreciate in value, thus
increasing the cost of buying that security to cover a short position. In
addition, there is no guarantee that the security needed to cover the short
position will be available for purchase. Short selling carries a risk that a
third party to the short sale may fail to honor its contract terms, causing a
loss to the Fund.
10
The
Fund may incur two types of expenses from short sales: borrowing expenses and
dividend expenses. Borrowing expenses
may occur because the Fund may pay income or be charged a fee on borrowed
securities. This income or fee is based upon the market value of the borrowed
security and is dependent upon the availability of the security. Dividend
expenses may occur because the Fund has to pay the lender of the security the
value of any dividends earned on the borrowed security. These dividends and
borrowing expenses are investment expenses of the Fund.
STOCK
MARKET RISK
The
value of equity securities in the Fund’s portfolio will rise and fall over time.
These fluctuations could be a sustained trend or a
drastic movement. Historically, the equity market has moved in cycles, and the
value of the Fund’s securities may fluctuate from day to day. The Fund’s
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund’s Share price may
decline. The Adviser attempts to manage market risk by limiting the amount the
Fund invests in each company’s equity securities. However, diversification will
not protect the Fund against widespread or prolonged declines in the stock
market.
Information
publicly available about a company, whether from the company’s financial
statements or other disclosures or from
third parties, or information available to some but not all market participants,
can affect the price of a company’s shares in the market. The price of a
company’s shares depends significantly on the information publicly available
about the company. The reporting of poor results by a company, the restatement
of a company’s financial statements or corrections to other information
regarding a company or its business may adversely affect the price of its
shares, as would allegations of fraud or other misconduct by the company’s
management. The Fund may also be disadvantaged if some market participants have
access to material information not readily available to other market
participants, including the Fund.
RISK
RELATED TO THE ECONOMY
Notwithstanding
the Fund’s investment objective, the value of the Fund’s portfolio may decline
in tandem with a drop in the overall value of
the markets in which the Fund invests and/or other markets based on negative
developments in the U.S. and global economies. Economic, political and financial
conditions, industry or economic trends and developments or public health risks,
such as epidemics or pandemics, may, from time to time, and for varying periods
of time, cause volatility, illiquidity and/or other potentially adverse effects
in the financial markets. The commencement, continuation or ending of government
policies and economic stimulus programs, changes in monetary policy, increases
or decreases in interest rates, or other factors or events that affect the
financial markets, may contribute to the development of or increase in
volatility, illiquidity, shareholder redemptions and other adverse effects (such
as a decline in a company’s stock price), which could negatively impact the
Fund’s performance. For example, the value of equity securities may rise and
fall in response to changes in interest rates. Market factors, such as the
demand for particular equity securities, may cause the price of certain equity
securities to fall while the prices of other securities rise or remain
unchanged.
RISK
RELATED TO COMPANY CAPITALIZATION
The
Fund may invest in companies with market capitalizations of any size, including
small-capitalization and mid-capitalization (or
“small-cap” and “mid-cap”) companies. Market capitalization is determined by
multiplying the number of a company’s outstanding shares by the current market
price per share. Larger, more established, companies may be unable to respond
quickly to new competitive challenges, like price competition, changes in
consumer tastes or innovative smaller competitors or innovative products.
Small-cap companies may have unproven business strategies and track records,
less liquid stock, a more volatile share price and limited access to capital,
which make them more likely to fail than larger companies. Mid-cap companies
also often have narrower markets, and limited managerial and financial
resources, more volatile performance and greater risk of failure, compared to
larger, more established, companies. The performance of small-cap and mid-cap
companies can be more volatile and they face greater risk of business failure.
These factors could increase the volatility of the Fund’s portfolio and
performance. Shareholders should expect that the value of the Fund’s Shares will
be more volatile than a fund that invests exclusively in large-cap
companies.
Small-Cap
Company Risk
The
Fund may invest in small capitalization (or “small-cap”) companies. Market
capitalization is determined by multiplying
the number of a company’s outstanding shares by the current market price per
share. Generally, the smaller the market capitalization of a company, the fewer
the number of shares traded daily, the less liquid its stock and the more
volatile its price. Companies with smaller market capitalizations also tend to
have unproven track records, a limited product or service base and limited
access to capital. Newer companies with unproven business strategies also tend
to be smaller companies. The above factors increase risks and make these
companies more likely to fail than companies with larger market capitalizations
and could increase the volatility of the Fund’s portfolio and performance.
Shareholders should expect that the value of the Fund’s Shares will be more
volatile than a fund that invests exclusively in mid-cap or large-cap
companies.
11
Mid-Cap
Company Risk
The
Fund may invest in mid-capitalization (or “mid cap”) companies. Market
capitalization is determined by multiplying
the number of a company’s outstanding shares by the current market price per
share. Mid cap companies often have narrower markets and limited managerial and
financial resources compared to larger, more established companies. The
performance of mid cap companies can be more volatile and they face greater risk
of business failure, compared to larger, more established companies, which could
increase the volatility of the Fund’s portfolio and performance. Shareholders
should expect that the value of the Fund’s Shares will be more volatile than a
fund that invests exclusively in large cap companies.
LIQUIDITY
RISK
Trading
opportunities are more limited for fixed-income securities that have not
received any credit ratings, have received
any credit ratings below investment grade or are not widely held. These features
may make it more difficult to sell or buy a security at a favorable price or
time. Consequently, the Fund may have to accept a lower price to sell a
security, sell other securities to raise cash or give up an investment
opportunity, any of which could have a negative effect on the Fund’s
performance. Infrequent trading of securities may also lead to an increase in
their price volatility. Noninvestment-grade securities generally have less
liquidity than investment-grade securities.
Loan
instruments may not be readily marketable and may be subject to restrictions on
resale. In some cases, negotiations
involved in disposing of loans may require weeks to complete. Thus, transactions
in loan instruments may take longer than seven days to settle. This could pose a
liquidity risk to the Fund and, if the Fund’s exposure to such investments is
substantial, could impair the Fund’s ability to meet shareholder redemptions in
a timely manner. Additionally, collateral on loan instruments may consist of
assets that may not be readily liquidated, and there is no assurance that the
liquidation of such assets will satisfy a borrower’s obligations under the
instrument.
Liquidity
risk also refers to the possibility that the Fund may not be able to sell a
security or close out a derivative contract
when it wants to. If this happens, the Fund will be required to continue to hold
the security or keep the position open, and the Fund could incur losses. OTC
derivative contracts generally carry greater liquidity risk than exchange-traded
contracts. This risk may be increased in times of financial stress, if the
trading market for OTC derivative contracts becomes restricted.
RISK
RELATED TO INVESTING FOR GROWTH
Due
to their relatively high valuations, growth stocks are typically more volatile
than value stocks. For instance, the price of a
growth stock may experience a larger decline on a forecast of lower earnings, a
negative fundamental development or an adverse market development. Further,
growth stocks may not pay dividends or may pay lower dividends than value
stocks. This means they depend more on price changes for returns and may be more
adversely affected in a down market compared to value stocks that pay higher
dividends.
RISK
RELATED TO INVESTING FOR VALUE
Due
to their relatively low valuations, value stocks are typically less volatile
than growth stocks. For instance, the price of a value
stock may experience a smaller increase on a forecast of higher earnings, a
positive fundamental development or positive market development. Further, value
stocks tend to have higher dividends than growth stocks. This means they depend
less on price changes for returns and may lag behind growth stocks in an up
market. The value approach to stock selection also carries the risk that the
market will not recognize a security’s intrinsic value for a long time (if
ever), or that a stock judged to be undervalued may actually be appropriately
priced.
REAL
ESTATE INVESTMENT TRUST (REIT) RISK
Real
estate investment trusts (REITs), including foreign REITs and REIT-like
entities, are subject to risks associated with the
ownership of real estate. Some REITs experience market risk due to investment in
a limited number of properties, in a narrow geographic area, or in a single
property type, which increases the risk that such REIT could be unfavorably
affected by the poor performance of a single investment or investment type.
These companies are also sensitive to factors such as changes in real estate
values and property taxes, interest rates, cash flow of underlying real estate
assets, supply and demand, and the management skill and creditworthiness of the
issuer. Borrowers could default on or sell investments that a REIT holds, which
could reduce the cash flow needed to make distributions to investors. In
addition, REITs may also be affected by tax and regulatory requirements
impacting the REITs’ ability to qualify for preferential tax treatments or
exemptions. REITs require specialized management and pay management expenses.
REITs also are subject to physical risks to real property, including weather,
natural disasters, terrorist attacks, war or other events that destroy real
property. Foreign REITs and REIT-like entities can also be subject to currency
risk, emerging market risk, limited public information, illiquid trading and the
impact of local laws.
12
REITs
include equity REITs and mortgage REITs. Equity REITs may be affected by changes
in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by the
quality of any credit extended. Further, equity and mortgage REITs are dependent
upon management skills and generally may not be diversified. Equity and mortgage
REITs are also subject to heavy cash flow dependency, defaults by borrowers and
self-liquidations. In addition, equity and mortgage REITs could possibly fail to
qualify for tax-free pass-through of income under applicable tax laws or to
maintain their exemptions from registration under the Investment Company Act of
1940, as amended. The above factors may also adversely affect a borrower’s or a
lessee’s ability to meet its obligations to the REIT. In the event of a default
by a borrower or lessee, the REIT may experience delays in enforcing its rights
as a mortgagee or lessor and may incur substantial costs associated with
protecting its investments. In addition, even many of the larger REITs in the
industry tend to be small to medium-sized companies in relation to the equity
markets as a whole.
Effective
for taxable years beginning after December 31, 2017, the Tax Cuts and Jobs Act
generally allows individuals and
certain non-corporate entities, such as partnerships, a deduction for 20% of
qualified REIT dividends. Related regulations allow a regulated investment
company to pass the character of its qualified REIT dividends through to its
shareholders provided certain holding period requirements are met.
FOCUSED
INVESTMENT
RISK
To the extent that the
Fund focuses its investments in the securities of a particular issuer or
companies in a particular country, group of countries, region, market, industry,
group of industries, sector, or asset class, the Fund’s exposure to various
risks may be heightened,
including
price volatility and adverse economic, market,
political, or
regulatory occurrences affecting that issuer, country, group of countries,
region, market, industry,
group of
industries, sector, or asset class.
COUNTERPARTY
CREDIT RISK
Credit
risk includes the possibility that a party to a transaction (such as a
derivative transaction) involving the Fund will fail to
meet its obligations. This could cause the Fund to lose money or to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
PORTFOLIO
TURNOVER RISK
The
Fund expects that the Adviser will need to frequently rebalance its long and
short positions as it attempts to neutralize
volatility because of continuous changes in the prices of securities. The Fund’s
use of short sales is likely to increase the rate of active trading. The Fund’s
holdings will also need to reflect changes in the universe of securities the
Adviser considers undervalued or overvalued. As a result, the Fund is expected
to experience a high portfolio turnover rate, possibly in excess of
100%.
RISK
OF INVESTING IN DERIVATIVE CONTRACTS
Derivative
contracts involve risks different from, or possibly greater than, risks
associated with investing directly in securities
and other traditional investments. Specific risk issues related to the use of
such contracts include valuation and tax issues, increased potential for losses
and/or costs to the Fund and a potential reduction in gains to the Fund. Each of
these issues is described in greater detail in this Prospectus. Derivative
contracts may also involve other risks described in this Prospectus, such as
stock market, credit, currency, liquidity and leverage risks.
LEVERAGE
RISK
Leverage
risk is created when an investment, which includes, for example, an investment
in a derivative contract, exposes
the Fund to a level of risk that exceeds the amount invested. Changes in the
value of such an investment magnify the Fund’s risk of loss and potential for
gain. Investments can have these same results if their returns are based on a
multiple of a specified index, security or other benchmark.
What Do
Shares Cost?
CALCULATION
OF NET ASSET VALUE
When
the Fund receives your transaction request in proper form (as described in this
Prospectus under the sections entitled
“How to Purchase Shares” and “How to Redeem and Exchange Shares”), it is
processed at the next calculated net asset value of a Share (NAV) plus any
applicable front-end sales charge (“public offering price”). A Share’s NAV is
determined as of the end of regular trading on the New York Stock Exchange
(NYSE) (normally 4:00 p.m. Eastern time), each day the NYSE is open. The Fund
calculates the NAV of each class by valuing the assets allocated to the Share’s
class, subtracting the liabilities allocated to each class and dividing the
balance by the number of Shares of the class
13
outstanding. The NAV for
each class of Shares may differ due to the level of expenses allocated to each
class as well as a result of the variance between the amount of accrued
investment income and capital gains or losses allocated to each class and the
amount actually distributed to shareholders of each class. The Fund’s current
NAV and/or public offering price may be found at FederatedHermes.com/us, via
online news sources and in certain newspapers.
You can
purchase, redeem or exchange Shares any day the NYSE is open.
When
the Fund holds securities that trade principally in foreign markets on days the
NYSE is closed, the value of the Fund’s
assets may change on days you cannot purchase or redeem Shares. This may also
occur when the U.S. markets for fixed-income securities are open on a day the
NYSE is closed.
In
calculating its NAV, the Fund generally values investments as
follows:
■ Equity
securities listed on an exchange or traded through a regulated market system are
valued at their last reported sale price or official closing price in their
principal exchange or market.
■ Derivative
contracts listed on exchanges are valued at their reported settlement or closing
price, except that options are valued at the mean of closing bid and ask
quotations.
■ Over-the-counter
(OTC) derivative contracts are fair valued using price evaluations provided by a
pricing service approved by the Adviser.
If
any price, quotation, price evaluation or other pricing source is not readily
available when the NAV is calculated, if the Fund
cannot obtain price evaluations from a pricing service or from more than one
dealer for an investment within a reasonable period of time as set forth in the
Adviser’s valuation policies and procedures, or if information furnished by a
pricing service, in the opinion of the Valuation Committee, is deemed not
representative of the fair value of such security, the Fund uses the fair value
of the investment determined in accordance with the procedures generally
described below. There can be no assurance that the Fund could obtain the fair
value assigned to an investment if it sold the investment at approximately the
time at which the Fund determines its NAV per share.
Shares
of other mutual funds are valued based upon their reported NAVs. The
prospectuses for these mutual funds explain
the circumstances under which they will use fair value pricing and the effects
of using fair value pricing.
Fair
Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Investment Company Act of 1940, as amended, the Board has
designated the Adviser as the Fund’s
valuation designee to perform the fair valuation determination for securities
and other assets held by the Fund. The Adviser, acting through its “Valuation
Committee,” is responsible for determining the fair value of investments for
which market quotations are not readily available. The Valuation Committee is
comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The
Valuation Committee is subject to Board oversight and certain reporting and
other requirements intended to provide the Board the information it needs to
oversee the Adviser’s fair value determinations.
The
Valuation Committee is also authorized to use pricing services to provide
fair price
evaluations of the current fair value of certain investments for purposes of
calculating the NAV. In the event that market quotations and price evaluations
are not available for an investment, the Valuation Committee determines the fair
value of the investment in accordance with procedures adopted by the Adviser as
the valuation designee. The Board periodically reviews the fair valuations made
by the Valuation Committee. The Board has also approved the Adviser’s fair
valuation and significant events procedures as part of the Fund’s compliance
program and will review any changes made to the procedures. The Fund’s SAI
discusses the methods used by pricing services and the Valuation Committee in
valuing investments.
Using
fair value to price investments may result in a value that is different from an
investment’s most recent closing price and
from the prices used by other registered funds to calculate their NAVs. The
application of the fair value procedures to an investment represents a good
faith determination of such investment’s fair value. There can be no assurance
that the Fund could obtain the fair value assigned to an investment if it sold
the investment at approximately the time at which the Fund determines its NAV
per share, and the actual value could be materially different.
The
Adviser also has adopted procedures requiring an investment to be priced at its
fair value whenever the Valuation Committee
determines that a significant event affecting the value of the investment has
occurred between the time as of which the price of the investment would
otherwise be determined and the time as of which the NAV is computed. An event
is considered significant if there is both an affirmative expectation that the
investment’s value will change in response to the event and a reasonable basis
for quantifying the resulting change in value.
Examples
of significant events that may occur after the close of the principal market on
which a security is traded, or after
the time of a price evaluation provided by a pricing service or a dealer,
include:
■ With
respect to securities traded principally in foreign markets, significant trends
in U.S. equity markets or in the trading of foreign securities index futures
contracts;
■ Political
or other developments affecting the economy or markets in which an issuer
conducts its operations or its securities are traded; and
14
■ Announcements
concerning matters such as acquisitions, recapitalizations or litigation
developments or a natural disaster affecting the issuer’s operations or
regulatory changes or market developments affecting the issuer’s
industry.
The
Adviser has adopted procedures whereby the Valuation Committee uses a pricing
service to provide factors to update the
fair value of equity securities traded principally in foreign markets from the
time of the close of their respective foreign stock exchanges to the pricing
time of the Fund. For other significant events, the Fund may seek to obtain more
current quotations or price evaluations from alternative pricing sources. If a
reliable alternative pricing source is not available, the Valuation Committee
will determine the fair value of the investment. The Board periodically reviews
fair valuations made in response to significant events.
The
fair valuation of securities following a significant event can serve to reduce
arbitrage opportunities for short-term traders to
profit at the expense of long-term investors in the Fund. For example, such
arbitrage opportunities may exist when the market on which portfolio securities
are traded closes before the Fund calculates its NAV, which is typically the
case with Asian and European markets. However, there is no assurance that these
significant event procedures will prevent dilution of the NAV by short-term
traders. See “Account and Share Information–Frequent
Trading Policies” for other procedures
the Fund employs to deter such short-term trading.
SALES
CHARGE INFORMATION
The
following table summarizes the minimum investment amount and the maximum sales
charge, if any, that you will pay on an
investment in the Fund. Keep in mind that financial intermediaries may charge
you fees for their services in connection with your Share
transactions.
|
|
Minimum
Initial/Subsequent
Investment
Amounts1
|
Maximum
Sales Charges | |
|
Shares
Offered |
Front-End
Sales
Charge2
|
Contingent
Deferred
Sales
Charge3
| |
|
A |
$1,500/$100 |
5.50% |
0.00% |
1
The
minimum initial and subsequent investment amounts for Individual Retirement
Accounts (IRAs) are generally $250 and $100, respectively. There is no minimum
initial or subsequent investment amount required for employer-sponsored
retirement plans; however, such accounts remain subject to the Fund’s policy on
“Accounts with Low Balances” as discussed later in this Prospectus. Please see
“By Systematic Investment Program” for applicable minimum investment. Financial
intermediaries may impose higher or lower minimum investment requirements on
their customers than those imposed by the Fund.
2
Front-End
Sales Charge is expressed as a percentage of public offering price. See “Sales
Charge When You Purchase.”
3
See
“Sales Charge When You Redeem.”
Among
the important factors to consider are the amount you plan to invest and the
length of time you expect to hold your
investment (for example, whether the investment is in connection with a
long-term retirement program). You should also consider, for example, that it
may be possible to reduce, or eliminate, the front-end sales charges imposed on
purchases of the A class. Among other ways, the A class has a series of
“breakpoints,” which means that the front-end sales charges decrease (and can be
eliminated entirely) as the amount invested increases. (The breakpoint schedule
is set out below, along with detailed information on ways to reduce, or
eliminate, front-end sales charges.)
SALES
CHARGE WHEN YOU PURCHASE
The
following table lists the sales charges which will be applied to your Share
purchase, subject to the breakpoint discounts
indicated in the table and described below.
|
A: |
|
|
|
Purchase
Amount |
Sales
Charge
as a
Percentage
of
Public
Offering
Price |
Sales
Charge
as a
Percentage
of
NAV |
|
Less
than $50,000 |
5.50% |
5.82% |
|
$50,000
but less than $100,000 |
4.50% |
4.71% |
|
$100,000
but less than $250,000 |
3.75% |
3.90% |
|
$250,000
but less than $500,000 |
2.50% |
2.56% |
|
$500,000
but less than $1 million |
2.00% |
2.04% |
|
$1
million or greater1
|
0.00% |
0.00% |
15
1
A
contingent deferred sales charge (CDSC) of 0.75% of the redemption amount
applies to Shares originally purchased in an amount of $1 million or more and
redeemed up to 24 months after purchase under certain investment programs where
a financial intermediary received an advance payment on the transaction. CDSC
exceptions may apply. See “Sales Charge When You Redeem.”
REDUCING
THE SALES CHARGE WITH BREAKPOINT DISCOUNTS
Your
investment may qualify for a reduction or elimination of the sales charge, also
known as a breakpoint discount. The
breakpoint discounts offered by the Fund are indicated in the table
above.
You
or your financial intermediary must notify the Fund’s Transfer Agent of
eligibility for any applicable breakpoint discount
at the time of purchase.
In
order to receive the applicable breakpoint discount, it may be necessary at the
time of purchase for you to inform your
financial intermediary or the Transfer Agent of the existence of other accounts
in which there are holdings eligible to be aggregated to meet a sales charge
breakpoint (“Qualifying Accounts”). Qualifying Accounts mean those share
accounts in the Federated Hermes funds held directly or through a financial
intermediary or through a single-participant retirement account by you, your
spouse, your parents (if you are under age 21) and/or your children under age
21, which can be linked using tax identification numbers (TINs), social security
numbers (SSNs) or broker identification numbers (BINs). Accounts held through
401(k) plans and similar multi-participant retirement plans, or through “Section
529” college savings plans or those accounts which cannot be linked using TINs,
SSNs or BINs, are not Qualifying Accounts.
In
order to verify your eligibility for a breakpoint discount, you will be required
to provide to your financial intermediary or the
Transfer Agent certain information on your New Account Form and may be required
to provide account statements regarding Qualifying Accounts. If you purchase
through a financial intermediary, you may be asked to provide additional
information and records as required by the financial intermediary. Failure to
provide proper notification or verification of eligibility for a breakpoint
discount may result in your not receiving a breakpoint discount to which you are
otherwise entitled. Breakpoint discounts apply only to your current purchase and
do not apply retroactively to previous purchases. The sales charges applicable
to the Shares offered in this Prospectus, and the breakpoint discounts offered
with respect to such Shares, are described in full in this Prospectus. Because
the Prospectus is available on FederatedHermes.com/us free of charge, Federated
Hermes does not disclose this information separately on the
website.
Contingent
upon notification to the Transfer Agent, the sales charge at purchase of the A
class only, may be reduced
or eliminated by:
Larger
Purchases
■ Purchasing
the A class in greater quantities to reduce the applicable sales
charge;
Concurrent
and Accumulated Purchases
■ Excluding any Federated
Hermes fund A class without a sales charge (“no-load A class”), combining
concurrent purchases of and/or current investments in the A class, C class, F
class and R class of any Federated Hermes fund made or held by Qualifying
Accounts; the purchase amount used in determining the sales charge on your
additional Share purchase will be calculated by multiplying the respective
maximum public offering price times the number of the A class,C class, F class
and R class Shares of any Federated Hermes fund currently held in Qualifying
Accounts and adding the dollar amount of your current purchase;
or
Letter
of Intent
■ Signing a
letter of intent to purchase a qualifying amount of the A class within 13
months. (Call your financial intermediary or the Fund for more information.) The
Fund’s custodian will hold Shares in escrow equal to the maximum applicable
sales charge. If you complete the Letter of Intent, the Custodian will release
the Shares in escrow to your account. If you do not fulfill the Letter of
Intent, the Custodian will redeem the appropriate amount from the Shares held in
escrow to pay the sales charges that were not applied to your
purchases.
ELIMINATING
The SALES CHARGE
Your
investment may qualify for a sales charge waiver. Sales charge waivers offered
by the Fund are listed below. In order to
receive a sales charge waiver, you must inform your financial intermediary or
the Transfer Agent at the time of each purchase that your investment is eligible
for a waiver. It is possible that your financial intermediary may not, in
accordance with its policies, procedures and system limitations, be able to
ensure your receipt of one or more of these waiver categories. In this
situation, you would need to invest directly through the Fund’s Transfer Agent.
If you do not let your financial intermediary or the Transfer Agent know that
your investment is eligible for a sales charge waiver at the time of purchase,
you may not receive the waiver to which you may otherwise be
entitled.
Contingent
upon notification to the Transfer Agent, the sales charge will be eliminated
when you purchase
or acquire Shares:
16
■ within 120
days of redeeming Shares of an equal or greater amount (see “120 Day
Reinstatement Program” below);
■ through an
eligible program offered by a Financial Intermediary that provides for the
purchase of Shares without imposition of a sales charge (for example, a wrap
account, self-directed brokerage account, retirement or other fee-based program
offered by the Financial Intermediary);
■ with
reinvested dividends or capital gains;
■ issued in
connection with the merger, consolidation or acquisition of the assets of
another fund. Further, the sales charge will be eliminated on purchases of
Shares made by a shareholder that originally became a shareholder of a Federated
Hermes Fund pursuant to the terms of an agreement and plan of reorganization
which permits shareholders to acquire Shares at NAV, provided that such
purchased Shares are held directly with the Fund’s transfer agent. If the Shares
are held through a financial intermediary, the sales charge waiver will not
apply (A class only);
■ as a
Federated Life Member (Federated Hermes shareholders who originally were issued
shares through the “Liberty Account,” which was an account for the Liberty
Family of Funds on February 28, 1987, or who invested through an affinity group
prior to August 1, 1987, into the Liberty Account) (A class only);
■ as a
Trustee, employee or former employee of the Fund, the Adviser, the Distributor
and their affiliates, an employee of any financial intermediary that sells
Shares according to a sales agreement with the Distributor, an immediate family
member of these individuals or a trust, pension or profit-sharing plan for these
individuals; or
■ pursuant
to the exchange privilege.
The
sales charge will not be eliminated if you purchase Shares of the Fund through
an exchange of shares of any no-load A
class unless your no-load A class shares were acquired through an exchange of
shares on which the sales charge had previously been paid.
120
Day reinstatement program
Within
120 days of redeeming Class A Shares of the Fund, upon proper notification to
the Fund’s Transfer Agent, you may
reinvest all or a portion of the redemption proceeds in Class A Shares of the
Fund at net asset value, without the imposition of a sales charge or CDSC.
Please note:
■ The
ownership of the account receiving the purchase is not required to be identical
to that of the account in which the redemption was placed; however, the
registration of the account receiving the purchase must include at least one
registered shareholder of the account from which the redemption
occurred.
■ You will
not be reimbursed for any fees originally incurred on the redemption (e.g., CDSC
or redemption fees) by subsequently participating in the 120 DayReinstatement
Program.
■ The 120
Day Reinstatement Program does not supersede or override any restrictions placed
on an account due to frequent trading and/or client contractual
issues.
Additional
operational restrictions may apply, please contact a Client Service
Representative at 1-800-341-7400 for more
information.
sales
charge when you redeem
Your
redemption proceeds may be reduced by a sales charge, commonly referred to as a
contingent deferred sales charge
(CDSC). Shares otherwise subject to a CDSC will not be charged a CDSC at the
time of an exchange; however, the CDSC will continue to be measured from the
date of your original purchase. The CDSC schedule applicable to your original
purchase will continue to apply to the shares you receive in an
exchange.
To
keep the sales charge as low as possible, the Fund redeems your Shares in this
order:
■ Shares
that are not subject to a CDSC; and
■ Shares
held the longest. (To determine the number of years your Shares have been held,
include the time you held shares of other Federated Hermes funds that have been
exchanged for Shares of this Fund.)
The
CDSC is then calculated using the Share price at the time of purchase or
redemption, whichever is lower.
|
A: |
|
|
|
If
you make a purchase of the A class in the amount of $1 million or more and
your financial intermediary received an advance commission on the sale,
you will
pay
a 0.75% CDSC on any such Shares redeemed within 24 months of the
purchase. | ||
17
Your
redemption may qualify for a waiver of the CDSC. The CDSC waivers offered by the
Fund are listed below. In order to
receive a waiver of the CDSC, you must inform your financial intermediary or the
Transfer Agent at the time of each redemption that your investment is eligible
for a waiver. It is possible that your financial intermediary may not, in
accordance with its policies, procedures and system limitations, be able to
ensure your receipt of one or more of these waiver categories. In this
situation, you would need to invest directly through the Fund’s Transfer Agent
in order to take advantage of the waiver. If you do not let your financial
intermediary or the Transfer Agent know that your redemption is eligible for a
CDSC waiver at the time of redemption, you may not receive the waiver to which
you may otherwise be entitled.
Contingent
upon notification to the Transfer Agent, you will not be charged a CDSC when
redeeming Shares:
■ following
the death of the last surviving shareholder on the account or the post-purchase
disability of all registered shareholders, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986 (the beneficiary on an account with a Transfer on
Death registration is deemed the last surviving shareholder on the
account);
■ due to the
termination of a trust following the death of the trustor/grantor or
beneficiary, provided that the trust document specifically states that the trust
is terminated upon the death;
■ representing
minimum required distributions from an IRA or other retirement plan as required
under the Internal Revenue Code;
■ purchased
by Trustees, employees of the Fund, the Adviser, the Distributor and their
affiliates, by employees of a financial intermediary that sells Shares according
to a sales agreement with the Distributor, by the immediate family members of
the above persons and by trusts, pension or profit-sharing plans for the above
persons;
■ purchased
through an eligible program offered by a Financial Intermediary that provides
for the purchase of Shares without imposition of a sales charge (for example, a
wrap account, self-directed brokerage account, retirement or other fee-based
program offered by the Financial Intermediary);
■ purchased
with reinvested dividends or capital gains;
■ redeemed
by the Fund when it closes an account for not meeting the minimum balance
requirements.
■ purchased
pursuant to the exchange privilege, if the Shares were held for the applicable
CDSC holding period (the holding period on the Shares purchased in the exchange
will include the holding period of the Shares sold in the exchange);
or
A
Class Only
■ purchased
in the amount of $1 million or more and redeemed within 24 months of purchase if
the Shares were originally purchased through an eligible program offered by a
Financial Intermediary that provides for the purchase of Shares without
imposition of a sales charge (for example, a wrap account, self-directed
brokerage account, retirement or other fee-based program offered by the
Financial Intermediary).
ADDITIONAL
INFORMATION ON THE AVAILABILITY OF CERTAIN WAIVERS AND DISCOUNTS
The
availability of certain sales charge waivers and discounts will depend on
whether you purchase your shares directly from the
Fund or through a financial intermediary. Certain
financial intermediaries may have different policies and procedures regarding
the availability of front-end sales load waivers or CDSC waivers which are
discussed in Appendix B to this Prospectus.The information contained in Appendix
B is provided by these financial intermediaries. Please contact your financial
intermediary to ensure that you have the information regarding the sales charge
waivers and discounts available to you and that you understand the steps you
must take to qualify for available waivers and discounts. In all
instances, it is the shareholder’s responsibility to notify the Fund or the
shareholder’s Financial Intermediary at the time of purchase of any relationship
or other facts qualifying the investor for sales charge waivers or discounts.
For
waivers and discounts not available through a particular financial intermediary,
shareholders will have to purchase Fund shares directly from the Fund or through
another financial intermediary to receive these waivers or
discounts.
COMMISSIONS
ON CERTAIN SHARES
The
Fund does not charge any front-end load, deferred sales charge or other
asset-based fee for sales or distribution of IS Shares.
However, if you purchase IS Shares through a broker acting solely as an agent on
behalf of its customers, you may be required to pay a commission to the broker
in an amount determined and separately disclosed to you by the
broker.
Because
the Fund is not a party to any such commission arrangement between you and your
broker, any purchases and
redemptions of IS Shares will be made at the applicable net asset value (before
imposition of the sales commission). Any such commissions charged by a broker
are not reflected in the fees and expenses listed in the “Risk/Return Summary:
Fees and Expenses” section of the Fund’s Prospectus and described above nor are
they reflected in the “Performance: Bar Chart and Table,” because they are not
charged by the Fund.
Shares of
the Fund are available in other share classes that have different fees and
expenses.
18
How is the
Fund Sold?
The
Fund offers the following Share classes: Class A Shares (A) and Institutional
Shares (IS), each representing interests
in a single portfolio of securities. All Share classes have different sales
charges and/or other expenses which affect their performance. Please note that
certain purchase restrictions may apply.
Under
the Distributor’s Contract with the Fund, the Distributor, Federated Securities
Corp., offers Shares on a continuous,
best-efforts basis. The Distributor is a subsidiary of Federated Hermes, Inc.
(“Federated Hermes,” formerly, Federated Investors, Inc.).
A
Class
The
Fund’s Distributor markets the A class to institutions on behalf of their
customers or to individuals, directly or through
financial intermediaries.
IS
Class
The
Fund’s Distributor markets the IS class to Eligible Investors, as described
below. In connection with a request to purchase
the IS class, you should provide documentation sufficient to verify your status
as an Eligible Investor. As a general matter, the IS class is not available for
direct investment by natural persons.
The
following categories of Eligible Investors are not subject to any minimum
initial investment amount for the purchase
of the IS class (however, such accounts remain subject to the Fund’s policy on
“Accounts with Low Balances” as discussed later in this Prospectus):
■ An
investor participating in a no-load platform, network or other fee-based program
offered by a financial intermediary, for example, a wrap-account or retirement
platform, where Federated Hermes has entered into an agreement with the
intermediary;
■ A
trustee/director, employee or former employee of the Fund, the Adviser, the
Distributor and their affiliates; an immediate family member of these
individuals or a trust, pension or profit-sharing plan for these
individuals;
■ Trustees
and Officers of the former MDT Funds, shareholders of an MDT Fund as of August
26, 2005, and former members of the Memorial Drive Trust;
■ An
employer-sponsored retirement plan;
■ A trust
institution investing on behalf of its trust customers;
■ A
Federated Hermes Fund;
■ An
investor (including a natural person) who acquired the IS class of a Federated
Hermes fund pursuant to the terms of an agreement and plan of reorganization
which permits the investor to acquire such shares; and
■ In
connection with an acquisition of an investment management or advisory business,
or related investment services, products or assets, by Federated Hermes or its
investment advisory subsidiaries, an investor (including a natural person) who:
(1) becomes a client of an investment advisory subsidiary of Federated Hermes;
or (2) is a shareholder or interest holder of a pooled investment vehicle or
product that becomes advised or subadvised by a Federated Hermes investment
advisory subsidiary as a result of such an acquisition other than as a result of
a fund reorganization transaction pursuant to an agreement and plan of
reorganization.
The
following categories of Eligible Investors are subject to applicable minimum
initial investment amounts for the purchase
of the IS class (see “How to Purchase Shares” below):
■ An
investor, other than a natural person, purchasing the IS class directly from the
Fund; and
■ In
connection with an initial purchase of the IS class through an exchange, an
investor (including a natural person) who owned the IS class of another
Federated Hermes fund as of December 31, 2008.
Intra-Fund
Share Conversion Program
A
shareholder in the Fund’s Shares may convert their Shares at net asset value to
any other share class of the Fund if the shareholder
meets the investment minimum and eligibility requirements for the share class
into which the conversion is sought, as applicable. The share conversion program
is not applicable to the Fund’s Class A Shares subject to a contingent deferred
sales charge, if applicable. Such conversion of classes should not result in a
realization event for tax purposes. Contact your financial intermediary or call
1-800-341-7400 to convert your Shares.
19
Payments
to Financial Intermediaries
The
Fund and its affiliated service providers may pay fees as described below to
financial intermediaries (such as broker-dealers,
banks, investment advisers or third-party administrators) whose customers are
shareholders of the Fund.
FRONT-END
SALES CHARGE REALLOWANCES
The
Distributor receives a front-end sales charge on certain Share sales. The
Distributor pays a portion of this charge to financial
intermediaries that are eligible to receive it (the “Dealer Reallowance”) and
retains any remaining portion of the front-end sales charge.
When
a financial intermediary’s customer purchases Shares, the financial intermediary
may receive a Dealer Reallowance
as follows:
|
A: |
|
|
Purchase
Amount |
Dealer
Reallowance
as a
Percentage of
Public
Offering Price |
|
Less
than $50,000 |
5.00% |
|
$50,000
but less than $100,000 |
4.00% |
|
$100,000
but less than $250,000 |
3.25% |
|
$250,000
but less than $500,000 |
2.25% |
|
$500,000
but less than $1 million |
1.80% |
|
$1
million or greater |
0.00% |
ADVANCE
COMMISSIONS
When
a financial intermediary’s customer purchases Shares, the financial intermediary
may receive an advance commission
as follows:
|
A
(for purchases over $1 million): |
|
|
Purchase
Amount |
Advance
Commission
as a
Percentage of
Public
Offering Price |
|
First
$1 million - $5 million |
0.75% |
|
Next
$5 million - $20 million |
0.50% |
|
Over
$20 million |
0.25% |
Advance
commissions are calculated on a year-by-year basis based on amounts invested
during that year. Accordingly, with
respect to additional purchase amounts, the advance commission breakpoint resets
annually to the first breakpoint on the anniversary of the first
purchase.
The
A class purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above
advance commission will be paid only on those purchases that were not previously
subject to a front-end sales charge or dealer advance commission. Certain
retirement accounts may not be eligible for this program.
rule
12b-1 fees
A
Class
The
Board has adopted a Rule 12b-1 Plan, which allows payment of marketing fees of
up to 0.05% for A class of average
net assets to the Distributor for the sale, distribution, administration and
customer servicing of the Fund’s A class. When the Distributor receives Rule
12b-1 fees, it may pay some or all of them to financial intermediaries whose
customers purchase Shares. The Fund’s A class has no present intention of
paying, accruing or incurring any Rule 12b-1 Fees until such time as approved by
the Fund’s Board of Trustees. Federated Hermes and its subsidiaries may benefit
or sustain losses from such arrangements. Because these Shares pay marketing
fees on an ongoing basis, your investment cost may be higher over time than
other shares with different sales charges and marketing fees.
20
service
fees
A
Class
A Class
may pay Service Fees of up to 0.25% of average net assets to financial
intermediaries or to Federated Shareholder Services
Company (FSSC), a subsidiary of Federated Hermes, for providing services to
shareholders and maintaining shareholder accounts. Intermediaries that receive
Service Fees may include a company affiliated with management of Federated
Hermes. If a financial intermediary receives Service Fees on an account, it is
not eligible
to also
receive Account Administration Fees on that same account.
ACCOUNT
ADMINISTRATION FEES
A
Class
A
class may pay Account Administration Fees of up to 0.25% of average net assets
to banks that are not registered as broker-dealers
or investment advisers for providing administrative services to the Fund and its
shareholders. If a financial intermediary receives Account Administration Fees
on an account, it is not eligible to also receive Service Fees or Recordkeeping
Fees on that same account.
RECORDKEEPING
FEES
The
Fund may pay Recordkeeping Fees on an average-net-assets basis or on a
per-account-per-year basis to financial intermediaries
for providing recordkeeping services to the Fund and its shareholders. If a
financial intermediary receives Recordkeeping Fees on an account, it is not
eligible to also receive Account Administration Fees or Networking Fees on that
same account.
networking
fees
The
Fund may reimburse Networking Fees on a per-account-per-year basis to financial
intermediaries for providing administrative
services to the Fund and its shareholders on certain non-omnibus accounts. If a
financial intermediary receives Networking Fees on an account, it is not
eligible to also receive Recordkeeping Fees on that same
account.
ADDITIONAL
PAYMENTS TO FINANCIAL INTERMEDIARIES
The
Distributor may pay out of its own resources amounts to certain financial
intermediaries, including broker-dealers, banks,
registered investment advisers, independent financial planners and retirement
plan administrators, that support the sale of Shares or provide services to Fund
shareholders. The amounts of these payments could be significant, and may create
an incentive for the financial intermediary or its employees or associated
persons to recommend or sell Shares of the Fund to you. Not all financial
intermediaries receive such payments, and the amount of compensation may vary by
intermediary. In some cases, such payments may be made by or funded from the
resources of companies affiliated with the Distributor (including the Adviser).
These payments are not reflected in the fees and expenses listed in the fee
table section of the Fund’s Prospectus and described above because they are not
paid by the Fund.
These
payments are negotiated and may be based on such factors as: the number or value
of Shares that the financial intermediary
sells or may sell; the value of client assets invested; the level and types of
services or support furnished by the financial intermediary; or the Fund’s
and/or other Federated Hermes funds’ relationship with the financial
intermediary. These payments may be in addition to payments, as described above,
made by the Fund to the financial intermediary. In connection with these
payments, the financial intermediary may elevate the prominence or profile of
the Fund and/or other Federated Hermes funds, within the financial
intermediary’s organization by, for example, placement on a list of preferred or
recommended funds and/or granting the Distributor preferential or enhanced
opportunities to promote the funds in various ways within the financial
intermediary’s organization. In addition, as discussed above in “Commissions on
Certain Shares,” if you purchase IS Shares through a broker acting solely as an
agent on behalf of its customers, you may be required to pay a commission to the
broker in an amount determined and separately disclosed to you by the broker.
You can ask your financial intermediary for information about any payments it
receives from the Distributor or the Fund and any services provided, as well as
about fees and/or commissions it charges.
How to
Purchase Shares
You
may purchase Shares of the Fund any day the NYSE is open. Shares will be
purchased at the NAV next calculated after your
investment is received by the Fund, or its agent, in proper form. The Fund
reserves the right to reject any request to purchase or exchange Shares. New
investors must submit a completed New Account Form. All accounts, including
those for which there is no minimum initial investment amount required, are
subject to the Fund’s policy on “Accounts with Low Balances” as discussed later
in this Prospectus.
Where
the Fund offers more than one Share class and you do not specify the class
choice on your New Account Form or form
of payment
(e.g., Federal Reserve wire or check), you automatically will receive the A
class.
21
For
important account information, see the section “Security and Privacy
Protection.”
A
Class
You
may purchase Shares through a financial intermediary, directly from the Fund or
through an exchange from another Federated
Hermes fund.
IS
Class
Eligible
investors may purchase Shares through a financial intermediary, directly from
the Fund or through an exchange from
another Federated Hermes fund in the manner described above under “How is the
Fund Sold?”
Where
applicable, the required minimum initial investment for the IS class is
generally $1,000,000. There is no minimum
subsequent investment amount.
THROUGH
A FINANCIAL INTERMEDIARY
■ Establish an account with
the financial intermediary; and
■ Submit your purchase order
to the financial intermediary before the end of regular trading on the NYSE
(normally 4:00 p.m. Eastern time).
The Fund has authorized
certain intermediaries to accept Share purchase orders on its behalf. When
authorized intermediaries receive an order in proper form, the order is
considered as being placed with the Fund and Shares will be bought at the NAV
next calculated after such an order is received by the authorized intermediary.
If your financial intermediary is not an authorized intermediary, the Fund or
its agent must receive the purchase order in proper form from your financial
intermediary by the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) in order for your transaction to be priced at that day’s NAV. In
addition, your financial intermediary must forward your payment by the
prescribed trade settlement date (typically within one to three business days)
to the Fund’s transfer agent, SS&C GIDS, Inc. (“Transfer Agent”). You will
become the owner of Shares and receive dividends when your payment is received
in accordance with these time frames (provided that, if payment is received in
the form of a check, the check clears). If your payment is not received in
accordance with these time frames, or a check does not clear, your purchase will
be canceled and you could be liable for any losses, fees or expenses incurred by
the Fund or the Fund’s Transfer Agent.
Financial
intermediaries should send payments according to the instructions in the
sections “By Wire” or “By Check.”
Financial
intermediaries may impose higher or lower minimum investment requirements on
their customers than those imposed by
the Fund. Keep in mind that financial intermediaries may charge you fees for
their services in connection with your Share transactions.
Shareholders
are encouraged to ask their financial intermediary if they are an authorized
agent for the Fund and about any fees
that may be charged by the financial intermediary.
DIRECTLY
FROM THE FUND
■ Establish
your account with the Fund by submitting a completed New Account Form;
and
■ Send your
payment to the Fund by Federal Reserve wire or check.
You
will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire
or your check. If your check does not clear, your purchase will be canceled and
you could be liable for any losses or fees incurred by the Fund or the Fund’s
Transfer Agent.
By
Wire
To
facilitate processing your order, please call the Fund before sending the wire.
Send your wire to:
State
Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
BNF: 23026552
Attention: Federated Hermes EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
BNF: 23026552
Attention: Federated Hermes EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot
purchase Shares by wire on holidays when wire transfers are
restricted.
22
By
Check
Make your
check payable to The
Federated Hermes Funds, note
your account number on the check, and send it to:
The
Federated Hermes Funds
P.O. Box 219318
Kansas City, MO 64121-9318
P.O. Box 219318
Kansas City, MO 64121-9318
If you
send your check by a private
courier or overnight delivery service that
requires a street address, send it to:
The
Federated Hermes Funds
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
Payment
should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the
right to reject any purchase
request. For example, to protect against check fraud the Fund may reject any
purchase request involving a check that is not made payable to The
Federated Hermes Funds
(including, but not limited to, requests to purchase Shares using third-party
checks) or involving temporary checks or credit card checks.
By
Direct Deposit
You may
establish Payroll Deduction/Direct Deposit arrangements for investments into the
Fund by either calling a Client Service
Representative at 1-800-341-7400; or by completing the Payroll Deduction/Direct
Deposit Form, which is available on FederatedHermes.com/us under “Resources” and
then “Literature and Forms,” then “Forms.” You will receive a confirmation when
this service is available.
THROUGH
AN EXCHANGE
You may
purchase Fund Shares through an exchange from another Federated Hermes fund. To
do this you must:
■ meet any
applicable shareholder eligibility requirements;
■ ensure
that the account registrations are identical;
■ meet any
applicable minimum initial investment requirements; and
■ receive a
prospectus for the fund into which you wish to exchange.
An
exchange is treated as a redemption and a subsequent purchase, and is a taxable
transaction. The Fund reserves the right to
reject any request to purchase or exchange Shares. The Fund may modify or
terminate the exchange privilege at any time.
A
Class
You may
purchase Shares through an exchange from the same share class of another
Federated Hermes fund.
IS
Class
You
may purchase Shares through an exchange from any Federated Hermes fund or share
class that does not have a stated
sales charge or contingent deferred sales charge, except Shares of Federated
Hermes Institutional Money Market Management, Federated Hermes Institutional
Tax-Free Cash Trust, Federated Hermes Institutional Prime Obligations Fund,
Federated Hermes Institutional Prime Value Obligations Fund, no-load Class A
Shares and Class R Shares of any Fund.
By
Online Account Services
You may
access your accounts online to purchase Shares through FederatedHermes.com/us’s
Shareholder Account Access system once you have registered for access. Online
transactions may be subject to certain limitations including limitations as to
the amount of the transaction. For more information about the services available
through Shareholder Account Access, please visit FederatedHermes.com/us and
select “Sign In” and “Access and Manage Investments,” or call 1-800-341-7400,
Option #4 to speak with a Client Service Representative.
BY
SYSTEMATIC INVESTMENT PROGRAM (SIP)
Once
you have opened an account, you may automatically purchase additional Shares on
a regular basis by completing the SIP
section of the New Account Form or by contacting the Fund or your financial
intermediary. The minimum investment amount for SIPs is $50.
BY
AUTOMATED CLEARING HOUSE (ACH)
Once
you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH
member. This purchase option can be established by completing the appropriate
sections of the New Account Form.
23
RETIREMENT
INVESTMENTS
A
Class
You
may purchase Shares as retirement investments (such as qualified plans and IRAs
or transfer or rollover of assets).
Call your financial intermediary or the Fund for information on retirement
investments. We suggest that you discuss retirement investments with your tax
adviser. You may be subject to an account fee charged by your financial
intermediary.
How to
Redeem and Exchange Shares
You should
redeem or exchange Shares:
■ through a
financial intermediary if you purchased Shares through a financial intermediary;
or
■ directly
from the Fund if you purchased Shares directly from the Fund.
Shares
of the Fund may be redeemed for cash, or exchanged for shares of other Federated
Hermes funds as described herein, on
days on which the Fund computes its NAV. Redemption requests may be made by
telephone or in writing.
Redemption
proceeds normally are wired or mailed within one business day for each method of
payment after receiving a timely
request in proper form. Depending upon the method of payment, when shareholders
receive redemption proceeds can differ. Payment may be delayed for up to seven
days under certain circumstances (see “Limitations on Redemption
Proceeds”).
For
important account information, see the section “Security and Privacy
Protection.”
THROUGH
A FINANCIAL INTERMEDIARY
Submit
your redemption or exchange request to your financial intermediary by the end of
regular trading on the NYSE (normally
4:00 p.m. Eastern time). The redemption amount you will receive is based upon
the next calculated NAV after the Fund receives the order from your financial
intermediary.
DIRECTLY
FROM THE FUND
By
Telephone
You may
redeem or exchange Shares by simply calling the Fund at
1-800-341-7400.
If
you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time), you will receive a redemption
amount based on that day’s NAV.
By
Mail
You may
redeem or exchange Shares by sending a written request to the Fund.
You
will receive a redemption amount based on the next calculated NAV after the Fund
receives your written request in proper
form.
Send
requests by mail to:
The
Federated Hermes Funds
P.O. Box 219318
Kansas City, MO 64121-9318
P.O. Box 219318
Kansas City, MO 64121-9318
Send
requests by private
courier or overnight delivery service
to:
The
Federated Hermes Funds
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
All
requests must include:
■ Fund name
and Share class, account number and account registration;
■ amount to
be redeemed or exchanged;
■ signatures
of all shareholders exactly as registered; and
■ if
exchanging, the Fund
name and Share class, account number and account registration into which you are
exchanging.
Call your
financial intermediary or the Fund if you need special instructions.
Signature
Guarantees
Signatures
must be guaranteed by a financial institution which is a participant in a
Medallion signature guarantee program
if:
■ your
redemption will be sent to an address other than the address of
record;
24
■ your
redemption will be sent to an address of record that was changed within the last
30 days;
■ a
redemption is payable to someone other than the shareholder(s) of record;
or
■ transferring
into another fund with a different shareholder registration.
A
Medallion signature guarantee is designed to protect your account from fraud.
Obtain a Medallion signature guarantee from a
bank or trust company, savings association, credit union or broker, dealer or
securities exchange member. A
notary
public
cannot provide a signature guarantee.
By
Online Account Services
You may
access your accounts online to redeem or exchange Shares through FederatedHermes.com/us’s
Shareholder Account Access system once you have registered for access. Online
transactions may be subject to certain limitations including limitations as to
the amount of the transaction. For more information about the services available
through Shareholder Account Access, please visit FederatedHermes.com/us and
select “Sign In” and “Access and Manage Investments,” or call 1-800-341-7400,
Option #4 to speak with a Client Service Representative.
PAYMENT
METHODS FOR REDEMPTIONS
Your
redemption proceeds will be mailed by check to your address of record. The
following payment options are available
if you complete the appropriate section of the New Account Form or an Account
Service Options Form. These payment options require a signature guarantee if
they were not established when the account was opened:
■ An
electronic transfer to your account at a financial institution that is an ACH
member; or
■ Wire
payment to your account at a domestic commercial bank that is a Federal Reserve
System member.
Methods
the Fund May Use to Meet Redemption Requests
The
Fund intends to pay Share redemptions in cash. To ensure that the Fund has cash
to meet Share redemptions on any day, the
Fund typically expects to hold a cash or cash equivalent reserve or sell
portfolio securities.
In unusual
or stressed circumstances, the Fund may generate cash in the following
ways:
■ Inter-fund
Borrowing and Lending. The SEC
has granted an exemption that permits the Fund and all other funds advised by
subsidiaries of Federated Hermes (“Federated Hermes funds”) to lend and borrow
money for certain temporary purposes directly to and from other Federated Hermes
funds. Inter-fund borrowing and lending is permitted only: (a) to meet
shareholder redemption requests; (b) to meet commitments arising from “failed”
trades; and (c) for other temporary purposes. All inter-fund loans must be
repaid in seven days or less.
■ Committed
Line of Credit. The Fund
participates with certain other Federated Hermes funds, on a several basis, in
an up to $500,000,000 unsecured, 364-day, committed, revolving line of credit
(LOC) agreement. The LOC was made available to temporarily finance the
repurchase or redemption of shares of the funds, failed trades, payment of
dividends, settlement of trades and for other short-term, temporary or emergency
general business purposes. The Fund cannot borrow under the LOC if an inter-fund
loan is outstanding.
■ Redemption
in Kind. Although
the Fund intends to pay Share redemptions in cash, it reserves the right to pay
the redemption price in whole or in part by an “in-kind” distribution of the
Fund’s portfolio securities. Because the Fund has elected to be governed by Rule
18f-1 under the 1940 Act, the Fund is obligated to pay Share redemptions to any
one shareholder in cash only up to the lesser of $250,000 or 1% of the net
assets represented by such Share class during any 90-day period. Redemptions in
kind are made consistent with the procedures adopted by the Fund’s Board, which
generally include distributions of a pro rata share of the Fund’s portfolio
assets. Redemption in kind is not as liquid as a cash redemption. If redemption
is made in kind, securities received may be subject to market risk and the
shareholder could incur taxable gains and brokerage or other charges in
converting the securities to cash.
LIMITATIONS
ON REDEMPTION PROCEEDS
Redemption
proceeds normally are wired or mailed within one business day after receiving a
request in proper form. Payment
may be delayed for up to seven days:
■ to allow
your purchase to clear (as discussed below);
■ during
periods of market volatility;
■ when a
shareholder’s trade activity or amount adversely impacts the Fund’s ability to
manage its assets; or
■ during any
period when the Federal Reserve wire or applicable Federal Reserve banks are
closed, other than customary weekend and holiday closings.
If
you request a redemption of Shares recently purchased by check (including a
cashier’s check or certified check), money
order, bank draft or ACH, your redemption proceeds may not be made available for
up to seven calendar days to allow the Fund to collect payment on the instrument
used to purchase such Shares. If the purchase instrument does not clear, your
purchase order will be canceled and you will be responsible for any losses
incurred by the Fund as a result of your canceled order.
25
In
addition, the right of redemption may be suspended, or the payment of proceeds
may be delayed (including beyond seven
days), during any period:
■ when the
NYSE is closed, other than customary weekend and holiday closings;
■ when
trading on the NYSE is restricted, as determined by the SEC;
■ in which
an emergency exists, as determined by the SEC, so that disposal of the Fund’s
investments or determination of its NAV is not reasonably practicable;
or
■ as the SEC
may by order permit for the protection of Fund shareholders.
You
will not accrue interest or dividends on uncashed redemption checks from the
Fund when checks are undeliverable and
returned to the Fund.
redemptions
from retirement accounts
A
Class
In
the absence of your specific instructions, 10% of the value of your redemption
from a retirement account in the Fund may be
withheld for taxes. This withholding only applies to certain types of retirement
accounts.
EXCHANGE
PRIVILEGE
You may
exchange Shares of the Fund. To do this, you must:
■ meet any
applicable shareholder eligibility requirements;
■ ensure
that the account registrations are identical;
■ meet any
applicable minimum initial investment requirements; and
■ receive a
prospectus for the fund into which you wish to exchange.
An
exchange is treated as a redemption and a subsequent purchase, and is a taxable
transaction. The Fund reserves the right to
reject any request to purchase or exchange Shares. The Fund may modify or
terminate the exchange privilege at any time.
In
addition, the Fund may terminate your exchange privilege if your exchange
activity is found to be excessive under the Fund’s
frequent trading policies. See “Account and Share Information–Frequent
Trading Policies.”
Financial
intermediaries may have different policies and procedures regarding the
availability of intra-fund exchanges (“automatic
exchanges”). These exchanges which are directed by the financial intermediary
and not the Fund are discussed in Appendix B to this
Prospectus.
A
Class
You may
exchange Shares into shares of the same class of another Federated Hermes
fund.
IS
Class
You
may exchange Shares of the Fund for shares of any Federated Hermes fund or share
class that does not have a stated
sales charge or contingent deferred sales charge, except Shares of Federated
Hermes Institutional Money Market Management, Federated Hermes Institutional
Tax-Free Cash Trust, Federated Hermes Institutional Prime Obligations Fund,
Federated Hermes Institutional Prime Value Obligations Fund, no-load Class A
Shares and Class R Shares of any Fund.
Systematic
Withdrawal/Exchange Program
You
may automatically redeem or exchange Shares. The minimum amount for all new or
revised systematic redemptions
or exchanges of Shares is $50 per transaction per fund. Complete the appropriate
section of the New Account Form or an Account Service Options Form or contact
your financial intermediary or the Fund. Your account value must meet the
minimum initial investment amount at the time the program is established. This
program may reduce, and eventually deplete, your account. Payments should not be
considered yield or income.
Generally,
it is not advisable to continue to purchase Shares subject to a sales charge
while redeeming Shares using this
program.
ADDITIONAL
CONDITIONS
Telephone
Transactions
The
Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Share
Certificates
The Fund
does not issue share certificates.
26
Security
and Privacy Protection
ONLINE
ACCOUNT and TELEPHONE ACCESS SECURITY
Federated
Hermes will not be responsible for losses that result from unauthorized
transactions, unless Federated Hermes does not
follow procedures designed to verify your identity. When initiating a
transaction by telephone or online, shareholders should be aware that any person
with access to your account and other personal information including PINs
(Personal Identification Numbers) may be able to submit instructions by
telephone or online. Shareholders are responsible for protecting their identity
by using strong usernames and complex passwords which utilize combinations of
mixed case letters, numbers and symbols, and change passwords and PINs
frequently.
Using
FederatedHermes.com/us’s
Account Access website means you are consenting to sending and receiving
personal financial information over the Internet, so you should be sure you are
comfortable with the risks. You will be required to accept the terms of an
online agreement and to establish and utilize a password in order to access
online account services. The Transfer Agent has adopted security procedures to
confirm that Internet instructions are genuine. The Transfer Agent will also
send you written confirmation of share transactions. The Transfer Agent, the
Fund and any of its affiliates will not be liable for losses or expenses that
occur from fraudulent Internet instructions reasonably believed to be
genuine.
The
Transfer Agent or the Fund will employ reasonable procedures to confirm that
telephone transaction requests are genuine,
which may include recording calls, asking the caller to provide certain personal
identification information, sending you written confirmation, or requiring other
confirmation security procedures. The Transfer Agent, the Fund and any of its
affiliates will not be liable for relying on instructions submitted by telephone
that the Fund reasonably believes to be genuine.
ANTI-MONEY
LAUNDERING COMPLIANCE
To
help the government fight the funding of terrorism and money laundering
activities, federal law requires financial institutions
to obtain, verify and record information that identifies each new customer who
opens a Fund account and to determine whether such person’s name appears on
governmental lists of known or suspected terrorists or terrorist organizations.
Pursuant to the requirements under the USA PATRIOT Act, the information obtained
will be used for compliance with the USA PATRIOT Act or other applicable laws,
regulations and rules in connection with money laundering, terrorism or other
illicit activities.
Information
required includes your name, residential or business address, date of birth (for
an individual), and other information
that identifies you, including your social security number, tax identification
number or other identifying number. The Fund cannot waive these requirements.
The Fund is required by law to reject your Account Application if the required
information is not provided. If, after reasonable effort, the Fund is unable to
verify your identity or that of any other person(s) authorized to act on your
behalf, or believes it has identified potentially suspicious, fraudulent or
criminal activity, the Fund reserves the right to close your account and redeem
your shares at the next calculated NAV without your permission. Any applicable
contingent deferred sales charge (CDSC) will be assessed upon redemption of your
shares.
The
Fund has a strict policy designed to protect the privacy of your personal
information. A copy of Federated Hermes’ privacy policy notice was
given to you at the time you opened your account. The Fund sends a copy of the
privacy notice to you annually. You may also obtain the privacy notice by
calling the Fund, or through FederatedHermes.com/us.
Account
and Share Information
CONFIRMATIONS
AND ACCOUNT STATEMENTS
You
will receive confirmation of purchases, redemptions and exchanges (except for
systematic transactions). In addition,
you will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS
AND CAPITAL GAINS
The
Fund declares and pays any dividends annually to shareholders. Dividends are
paid to all shareholders invested in the Fund
on the record date. The record date is the date on which a shareholder must
officially own Shares in order to earn a dividend.
In
addition, the Fund pays any capital gains at least annually and may make such
special distributions of dividends and capital gains as may
be necessary to meet applicable regulatory requirements. If the Fund declares
more than one distribution of capital gains and/or ordinary income during the
course of a calendar year, the Fund will attempt to pay all distributions at one
time at the end of the year. Your dividends and capital gains distributions will
be automatically reinvested in additional Shares without a sales charge, unless
you elect cash payments. Dividends may also be reinvested without sales charges
in shares of any class of any other Federated Hermes fund of which you are
already a shareholder.
27
If
you purchase Shares just before the record date for a dividend or capital gain
distribution, you will pay the full price for the
Shares and then receive a portion of the price back in the form of a taxable
distribution, whether or not you reinvest the distribution in Shares. Therefore,
you should consider the tax implications of purchasing Shares shortly before the
record date for a dividend or capital gain. Contact your financial intermediary
or the Fund for information concerning when dividends and capital gains will be
paid.
Under
the federal securities laws, the Fund is required to provide a notice to
shareholders regarding the source of distributions made by the
Fund if such distributions are from sources other than ordinary investment
income. In addition, important information regarding the Fund’s distributions,
if applicable, is available via the link to the Fund and share class name at
FederatedHermes.com/us/FundInformation.
Small
Distributions and Uncashed Checks
Generally,
dividend and/or capital gain distributions payable by check in an amount of less
than $25 will be automatically
reinvested in additional shares. This policy does not apply if you have elected
to receive cash distributions that are directly deposited into your bank account
via wire or ACH.
Additionally,
if one or more dividend or capital gain distribution checks are returned as
“undeliverable,” or remain uncashed
for 180 days, all subsequent dividend and capital gain distributions will be
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution checks. For questions on whether reinvestment applies
to your distributions, please contact a Client Service Representative at
1-800-341-7400.
Certain
states, including the State of Texas, have laws that allow shareholders to
designate a representative to receive abandoned or unclaimed
property (“escheatment”) notifications by completing and submitting a
designation form that generally can be found on the official state website. If a
shareholder resides in an applicable state and elects to designate a
representative to receive escheatment notifications, escheatment notices
generally will be delivered as required by such state laws, including, as
applicable, to both the shareholder and the designated representative. A
completed designation form may be mailed to the Fund (if Shares are held
directly with the Fund) or to the shareholder’s financial intermediary (if
Shares are not held directly with the Fund). Shareholders should refer to
relevant state law for the shareholder’s specific rights and responsibilities
under his or her state’s escheatment law(s), which can generally be found on a
state’s official website.
ACCOUNTS
WITH LOW BALANCES
Federated
Hermes reserves the right to close accounts if redemptions or exchanges cause
the account balance to fall
below:
■ $1,500 for
the A class (or in the case of IRAs, $250); and
■ $25,000
for the IS class.
Before
an account is closed, you will be notified and allowed at least 30 days to
purchase additional Shares to meet the
minimum.
TAX
INFORMATION
The
Fund and/or your financial intermediary provides year-end tax information and an
annual statement of your account activity
to assist you in completing your federal, state and local tax returns. Fund
distributions of dividends and capital gains are taxable to you whether paid in
cash or reinvested in the Fund. Dividends are taxable at different rates
depending on the source of dividend income. Distributions of net short-term
capital gains are taxable to you as ordinary income. Distributions of net
long-term capital gains are taxable to you as long-term capital gains regardless
of how long you have owned your Shares.
Fund
distributions are expected to be both dividends and capital gains. Redemptions
and exchanges are taxable sales. Please
consult your tax adviser regarding your federal, state and local tax
liability.
FREQUENT
TRADING POLICIES
Frequent
or short-term trading into and out of the Fund can have adverse consequences for
the Fund and shareholders who use
the Fund as a long-term investment vehicle. Such trading in significant amounts
can disrupt the Fund’s investment strategies (e.g., by requiring it to sell
investments at inopportune times or maintain excessive short-term or cash
positions to support redemptions), increase brokerage and administrative costs
and affect the timing and amount of taxable gains distributed by the Fund.
Investors engaged in such trading may also seek to profit by anticipating
changes in the Fund’s NAV in advance of the time as of which NAV is
calculated.
The
Fund’s Board has approved policies and procedures intended to discourage
excessive frequent or short-term trading of the
Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify
disruptive trading activity. The Fund monitors trades into and out of the Fund
within a period of 30 days or less. The Fund may also monitor trades into and
out of the Fund for potentially disruptive trading activity over periods longer
than 30 days. The size of Share
28
transactions
subject to monitoring varies. Where it is determined that a shareholder has
exceeded the detection amounts twice within a period of 12 months, the Fund will
temporarily prohibit the shareholder from making further purchases or exchanges
of Fund Shares. If the shareholder continues to exceed the detection amounts for
specified periods, the Fund will impose lengthier trading restrictions on the
shareholder, up to and including permanently prohibiting the shareholder from
making any further purchases or exchanges of Fund Shares. Whether or not the
specific monitoring limits are exceeded, the Fund’s management or the Adviser
may determine from the amount, frequency or pattern of purchases and redemptions
or exchanges that a shareholder is engaged in excessive trading that is or could
be detrimental to the Fund and other shareholders and may prohibit the
shareholder from making further purchases or exchanges of Fund Shares. No matter
how the Fund defines its limits on frequent trading of Fund Shares, other
purchases and sales of Fund Shares may have adverse effects on the management of
the Fund’s portfolio and its performance.
The
Fund’s frequent trading restrictions do not apply to purchases and sales of Fund
Shares by other Federated Hermes funds.
These funds impose the same frequent trading restrictions as the Fund at their
shareholder level. In addition, allocation changes of the investing Federated
Hermes fund are monitored, and the managers of the recipient fund must determine
that there is no disruption to their management activity. The intent of this
exception is to allow investing fund managers to accommodate cash flows and
other activity that result from non-abusive trading in the investing fund,
without being stopped from such trading because the aggregate of such trades
exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares,
purchases and redemptions of Fund Shares by other Federated Hermes funds could
adversely affect the management of the Fund’s portfolio and its
performance.
The
Fund will not restrict transactions made on a non-discretionary basis by certain
asset allocation programs, wrap programs,
fund of funds, collective funds or other similar accounts that have been
pre-approved by Federated Hermes (“Approved Accounts”). The Fund will continue
to monitor transactions by the Approved Accounts and will seek to limit or
restrict even non-discretionary transactions by Approved Accounts that are
determined to be disruptive or harmful to the Fund.
The
Fund’s objective is that its restrictions on short-term trading should apply to
all shareholders that are subject to the restrictions,
regardless of the number or type of accounts in which Shares are held. However,
the Fund anticipates that limitations on its ability to identify trading
activity to specific shareholders, including where Shares are held through
intermediaries in multiple or omnibus accounts, will mean that these
restrictions may not be able to be applied uniformly in all cases.
Other
funds in the Federated Hermes family of funds may impose different monitoring
policies or in some cases, may not
monitor for frequent or short-term trading. Under normal market conditions such
monitoring policies are designed to protect the funds being monitored and their
shareholders and the operation of such policies and shareholder investments
under such monitoring are not expected to have materially adverse impact on the
Federated Hermes funds or their shareholders. If you plan to exchange your Fund
Shares for shares of another Federated Hermes fund, please read the prospectus
of that other Federated Hermes fund for more information.
PORTFOLIO
HOLDINGS INFORMATION
Information
concerning the Fund’s portfolio holdings is available via the link to the Fund
and share class name at FederatedHermes.com/us/FundInformation.
A complete listing of the Fund’s portfolio holdings as of the end of each
calendar quarter is posted on the website on or about 15 days (or the next
business day) after the end of the quarter and remains posted for six months
thereafter. Summary portfolio composition information as of the close of each
month is posted on the website 15 days (or the next business day) after
month-end and remains posted until replaced by the information for the
succeeding month. The summary portfolio composition information may include
identification of the Fund’s top 10 holdings, and a percentage breakdown of the
portfolio by positioning and sector.
You may
also access portfolio information as of the end of the Fund’s fiscal quarters
via the link to the Fund and share class name at
FederatedHermes.com/us. The Fund’s Annual and Semi-Annual Shareholder Reports
contain complete listings of the Fund’s portfolio holdings as of the end of the
Fund’s second and fourth fiscal quarters. Fiscal quarter information is made
available on the website within 70 days after the end of the fiscal quarter.
This information is also available in reports filed with the SEC at the SEC’s
website at sec.gov.
Each
fiscal quarter, the Fund will file with the SEC a complete schedule of its
monthly portfolio holdings on “Form N-PORT.” The Fund’s
holdings as of the end of the third month of every fiscal quarter, as reported
on Form N-PORT, will be publicly available on the SEC’s website at sec.gov
within 60 days of the end of the fiscal quarter upon filing. You may also access
this information via the link to the Fund and share class name at
FederatedHermes.com/us.
29
In
addition, from time to time (for example, during periods of unusual market
conditions), additional information regarding the Fund’s
portfolio holdings and/or composition may be posted to FederatedHermes.com/us.
If and when such information is posted, its availability will be noted on, and
the information will be accessible from, the home page of the
website.
Who
Manages the Fund?
The
Board governs the Fund. The Board selects and oversees the Adviser, Federated
MDTA LLC (“MDT Advisers”) which is
registered as an investment adviser with the SEC. Federated Hermes acquired MDT
Advisers in July 2006. MDT Advisers is responsible for the day-to-day management
of the Fund in accordance with the Fund’s investment objectives and policies
(subject to the general supervision of the Fund’s Board). This includes
designing, developing, periodically enhancing and implementing the quantitative
model that drives investment decisions. Federated Advisory Services Company
(FASC), an affiliate of the Adviser, provides security and market data and
certain other support services to the Adviser. The fee for these services is
paid by the Adviser and not by the Fund.
The
address of the Adviser is 125 High Street, Oliver Tower, 21st Floor, Boston, MA
02110-2704. The address of FASC is
1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The
Fund has received and can rely upon an order from the Securities and Exchange
Commission (SEC) that permits the
Adviser, subject to approval by the Board of Trustees, to appoint a sub-adviser
or change the terms of a sub-advisory agreement without obtaining shareholder
approval. The Fund is permitted to rely upon the SEC order to change
sub-advisers, or the fees paid to a sub-adviser, without the expense and delays
associated with obtaining shareholder approval of the change. This order does
not, however, permit the Adviser to increase the aggregate advisory fee rate of
the Fund without the approval of the shareholders.
The
Adviser and other advisory subsidiaries of Federated Hermes combined, advise
approximately 101 registered investment
companies spanning equity, fixed-income and money market mutual funds and also
manage a variety of other pooled investment vehicles, private investment
companies and customized separately managed accounts (including
non-U.S./offshore funds). Federated Hermes’ assets under management totaled
approximately $757.6 billion as of December 31, 2023. Federated Hermes was
established in 1955 as Federated Investors, Inc. and is one of the largest
investment managers in the United States with more than 2,000 employees.
Federated Hermes provides investment products to more than 10,000 investment
professionals and institutions.
The
Adviser advises approximately eight registered investment companies and also
manages a variety of institutional,
separately
managed and sub-advised accounts. The Adviser’s assets under management totaled
approximately $8.2 billion as of December 31, 2023.
PORTFOLIO
MANAGEMENT INFORMATION
The
Fund is managed by a proprietary, quantitative model that drives investment
selection, which is supported and implemented
by the MDT Advisers Investment Team (“Investment Team”) since October
2002.
Daniel
J. Mahr, CFA, joined
the Investment Team in 2002, and has been the Fund’s portfolio manager since
September 2021.
As
Head of MDT,
he is responsible for overseeing the Investment Team as it relates to the
ongoing design, development and implementation of the investment model. He
received his A.B., Computer Science from Harvard College and his S.M., Computer
Science from Harvard University.
Damien
Zhang, CFA,
joined the Investment Team in 2009, and has been the Fund’s portfolio manager
since September 2021.
As Head
of MDT Research, he is responsible for day-to-day management of the Investment
Team as it relates to the ongoing design,
development and implementation of the investment model. Mr. Zhang received his
A.B., Economics from Princeton University.
Frederick
L. Konopka, CFA, joined the Investment
Team in 1997, and has been the Fund’s portfolio manager since September
2021.
As the Portfolio and
Trading Manager, he is responsible for the ongoing implementation of the
investment model including trading impact evaluation and implementation. He
received his A.B., Mathematics from Dartmouth College and his M.S.,
Concentration in Information Technology and Finance from MIT Sloan School of
Management.
John
Paul Lewicke joined
the Investment Team in 2007, and has been the Fund’s portfolio manager since
September 2021.
As Research Manager, he is
responsible for ongoing evaluation and enhancement of the investment model,
including software code design and development. Mr. Lewicke received his A.B.,
Mathematics and Computer Science from Dartmouth College.
30
The
Fund’s SAI provides additional information about the Portfolio Managers’
compensation, management of other accounts
and ownership of securities in the Fund.
ADVISORY
FEES
The
Fund’s investment advisory contract provides for payment to the Adviser of an
annual investment advisory fee of 0.80% of
the Fund’s average daily net assets. The Adviser may voluntarily waive a portion
of its fee or reimburse the Fund for certain operating
expenses.
A
discussion of the Board’s review of the Fund’s investment advisory contract is
available in the Fund’s Annual and Semi-Annual
Shareholder Reports for the periods ended December 31 and June 30,
respectively.
PRIOR
PERFORMANCE OF COMPOSITE OF ACCOUNTS SIMILARLY MANAGED BY ADVISER
The
following performance information relates to the Federated MDT Market Neutral
Institutional Composite (“Composite”),
which is a performance composite consisting of all private accounts and funds
with substantially similar investment objectives, strategies, policies and risks
to those of the Fund that also are managed by the Fund’s investment adviser
Federated MDTA LLC (the “Adviser”). The
following performance information is not
the Fund’s performance (or any predecessor fund’s performance), should
not
be considered indicative of the past or future performance of the Fund, and
should not
be considered a substitute for the Fund’s performance.
Information regarding the Fund’s performance is shown under the section of the
Fund’s prospectus entitled “Performance: Bar Chart and Table.” The performance
information of the Composite is not that of the Fund’s performance predecessor,
the Hancock Horizon Quantitative Long/Short Fund.
The
following performance information relating to the Composite is being provided
because the investment adviser to all
private accounts and funds included in the Composite is the Fund’s Adviser and
the Fund’s investment objective, strategies, policies and risks are
substantially similar to those of all private accounts and funds included in the
Composite.
As of
December 31, 2023, the Composite
consisted of only the Fund, with assets totaling approximately $332 million. The
inception date of the Composite was September 1, 1994. Between the Composite’s
inception date and December 31, 2023, all private accounts and funds with
substantially similar investment objectives, strategies, policies and risks to
those of the Fund have been included in the Composite. The following performance
information is therefore intended to illustrate past performance for all private
accounts and funds with substantially similar investment objectives, strategies,
policies and risks to those of the Fund managed by the Adviser.
The
following performance information for the Composite was prepared in accordance
with industry best practices in accordance
with the Global Investment Performance Standards (“GIPS”). Individual portfolio
returns are calculated using the daily compounding method and the composite has
been prepared in accordance with GIPS. The method for computing historical
performance information for the Composite differs from the SEC’s method for
computing the historical performance of the Fund.
The
private accounts and funds included in the Composite have different fees,
expenses and cash flows than the Fund, which
could negatively impact the performance of the Fund in relation to the
Composite. Since the actual fees and expenses of the private accounts and funds
in the Composite are lower than the Fund’s fees and expenses, use of the Fund’s
expense structure would have lowered the performance result of the
Composite.
The
private accounts and funds included in the Composite also are not registered
under the 1940 Act and therefore are not
subject to certain investment restrictions, diversification requirements and
other limitations imposed on the Fund by the 1940 Act and Subchapter M of the
Internal Revenue Code. If the private accounts and funds had been registered
under the 1940 Act and been subject to the 1940 Act and Subchapter M of the
Internal Revenue Code requirements and limitations, the performance may have
been adversely affected. The net returns shown are net of all actual fees and
expenses, including sales loads. The highest fee charged to any account in the
Composite, during the performance period, is reflected in the performance
tables.
31
(For the Periods Ended December 31,
2023)
|
|
Federated
Hermes
MDT
Market Neutral
Institutional
Composite
Gross
Returns |
Federated
Hermes MDT Market Neutral
Institutional
Composite Net Returns
(after
fees/expenses) |
ICE
BofA US 3-Month
Treasury
Bill Index1
(reflects
no deduction
for
fees, expenses or taxes) |
|
1-Year |
6.13% |
5.07% |
5.01% |
|
5-Year |
7.98% |
6.91% |
1.88% |
|
10-Year |
6.93% |
5.87% |
1.25% |
|
|
|
|
|
|
Calendar
Year Ended |
Federated
Hermes
MDT
Market Neutral
Institutional
Composite
Gross
Returns |
Federated
Hermes MDT Market Neutral
Institutional
Composite Net Returns
(after
fees/expenses) |
ICE
BofA US 3-Month
Treasury
Bill Index1
(reflects
no deduction
for
fees, expenses or taxes) |
|
2023 |
6.13% |
5.07% |
5.01% |
|
2022 |
10.83% |
9.72% |
1.46% |
|
2021 |
34.69% |
33.38% |
0.05% |
|
2020 |
(1.53%) |
(2.51%) |
0.67% |
|
2019 |
(5.90%) |
(6.84%) |
2.28% |
|
2018 |
0.83% |
(0.18%) |
1.87% |
|
2017 |
7.97% |
6.90% |
0.86% |
|
2016 |
11.02% |
9.92% |
0.33% |
|
2015 |
4.13% |
3.10% |
0.05% |
|
2014 |
5.82% |
4.77% |
0.04% |
1
ICE
BofA US 3-Month Treasury Bill Index measures returns of three-month Treasury
Bills. The index is unmanaged and, unlike the Fund, is not affected by cash
flows.
Financial
Information
FINANCIAL
HIGHLIGHTS
The
Financial Highlights will help you understand the Fund’s financial performance
for its past five fiscal years. Some of the
information is presented on a per Share basis. Total returns represent the rate
an investor would have earned (or lost) on an investment in the Fund, assuming
reinvestment of any dividends and capital gains.
Pursuant
to a tax-free reorganization, the Fund is the legal entity successor to the
Hancock Horizon Quantitative Long/Short Fund
(“Predecessor Fund”). The Predecessor Fund is the accounting and tax survivor as
a result of the reorganization.
The
financial information presented incorporates the operations of the Predecessor
Fund which, as a result of the reorganization,
is the Fund’s historical operations. Prior to the reorganization, the Fund had
no investment operations.
The
information presented for the fiscal years ended December 31, 2023, 2022 and 2021 has
been derived from financial statements audited by KPMG LLP, an independent
registered public accounting firm, whose report, along with the Fund’s audited
financial statements is included in the Annual Report. The financial information
presented for the period ended December 31, 2020, has been derived from
financial statements audited by PricewaterhouseCoopers LLP, another independent
registered public accounting firm, which issued an unqualified opinion. The
information provided below for the periods ended on or before January 31, 2020,
was audited by a different independent registered public accounting firm, whose
reports reflected unqualified audit opinions.
32
Financial
Highlights–Class
A Shares
(formerly, Investor Class Shares)
(formerly, Investor Class Shares)
(For a Share
Outstanding Throughout Each Period)1
|
|
Year
Ended December 31, |
Period
Ended
12/31/20203 |
Year
Ended January 31, | |||
|
|
2023 |
2022 |
20212 |
2020 |
2019 | |
|
Net
Asset Value, Beginning of Period |
$17.28 |
$17.75 |
$17.47 |
$17.94 |
$17.06 |
$19.54 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)4 |
0.50 |
0.08 |
(0.07) |
(0.07) |
(0.05) |
0.105 |
|
Net
realized and unrealized gain (loss) |
0.28 |
1.48 |
4.04 |
(0.40) |
1.02 |
(1.24) |
|
Total
From Investment Operations |
0.78 |
1.56 |
3.97 |
(0.47) |
0.97 |
(1.14) |
|
Less
Distributions: |
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.51) |
— |
— |
— |
(0.09) |
(0.07) |
|
Distributions
from net realized gain |
(0.50) |
(2.03) |
(3.69) |
— |
— |
(1.27) |
|
Total
Distributions |
(1.01) |
(2.03) |
(3.69) |
— |
(0.09) |
(1.34) |
|
Net
Asset Value, End of Period |
$17.05 |
$17.28 |
$17.75 |
$17.47 |
$17.94 |
$17.06 |
|
Total
Return6 |
4.71% |
9.24% |
23.16% |
(2.62)% |
5.69% |
(5.42)%5 |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses7 |
2.14% |
1.85% |
1.26% |
1.61% |
1.50% |
1.35% |
|
Net
expenses excluding dividends and other expenses related to short
sales |
1.31% |
1.33% |
0.93% |
1.43% |
1.34% |
1.22% |
|
Net
investment income (loss) |
2.88% |
0.43% |
(0.36)% |
(0.47)% |
(0.28)% |
0.51%5 |
|
Expense
waiver/reimbursement8 |
0.07% |
0.15% |
0.13% |
—% |
—% |
—% |
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$13,857 |
$10,276 |
$2,554 |
$2,765 |
$12,667 |
$14,875 |
|
Portfolio
turnover9 |
150% |
270% |
204% |
74% |
83% |
84% |
|
1 |
Hancock
Horizon Quantitative Long/Short Fund (the “Predecessor Fund”) was
reorganized into Federated Hermes MDT Market Neutral Fund (the “Fund”), a
portfolio
of the Federated Hermes Adviser Series as of the close of business on
September 24, 2021. The Fund is the successor to the Predecessor Fund. The
performance
information and financial information presented incorporates the
operations of the Predecessor Fund, which, as a result of the
reorganization, are
the
Fund’s operations. |
|
2 |
Beginning
with the year ended December 31, 2021, the Fund was audited by KPMG LLP.
The previous years were audited by other independent registered public
accounting
firms. |
|
3 |
For
the period February 1, 2020 to December 31, 2020. Effective July 31, 2020,
the Predecessor Fund changed its fiscal year end to December
31. |
|
4 |
Per
share numbers have been calculated using the average shares
method. |
|
5 |
For
the year ended January 31, 2019 amounts included reimbursement for
payments of prior years’ Shareholder Servicing fees as follows: Net
Investment Income
Per
Share of $0.00, Net Investment Income Ratio of 0.02%, and Total Returns of
0.02%. |
|
6 |
Based
on net asset value, which does not reflect the sales charge, redemption
fee or contingent deferred sales charge, if applicable. Total returns for
periods of
less
than one year are not annualized. |
|
7 |
Amount
does not reflect net expenses incurred by investment companies in which
the Fund may invest. |
|
8 |
This
expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above. Amount does not reflect
expense waiver/
reimbursement
recorded by investment companies in which the Fund may
invest. |
|
9 |
Securities
that mature are considered sales for purposes of this
calculation. |
Further information
about the Fund’s performance is contained in the Fund’s Annual Report, dated
December 31, 2023, which can be obtained free of charge.
33
Financial
Highlights–Institutional
Shares
(For a Share
Outstanding Throughout Each Period)1
|
|
Year
Ended December 31, |
Period
Ended
12/31/20203 |
Year
Ended January 31, | |||
|
|
2023 |
2022 |
20212 |
2020 |
2019 | |
|
Net
Asset Value, Beginning of Period |
$17.76 |
$18.16 |
$17.84 |
$18.36 |
$17.48 |
$19.97 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
|
Net
investment income (loss)4 |
0.55 |
0.10 |
(0.11) |
(0.04) |
0.11 |
0.12 |
|
Net
realized and unrealized gain (loss) |
0.30 |
1.55 |
4.12 |
(0.40) |
0.91 |
(1.24) |
|
Total
From Investment Operations |
0.85 |
1.65 |
4.01 |
(0.44) |
1.02 |
(1.12) |
|
Less
Distributions: |
|
|
|
|
|
|
|
Distributions
from net investment income |
(0.55) |
(0.02) |
— |
(0.08) |
(0.14) |
(0.10) |
|
Distributions
from net realized gain |
(0.50) |
(2.03) |
(3.69) |
— |
— |
(1.27) |
|
Total
Distributions |
(1.05) |
(2.05) |
(3.69) |
(0.08) |
(0.14) |
(1.37) |
|
Net
Asset Value, End of Period |
$17.56 |
$17.76 |
$18.16 |
$17.84 |
$18.36 |
$17.48 |
|
Total
Return5 |
4.96% |
9.52% |
22.90% |
(2.37)% |
5.83% |
(5.21)% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
|
Net
expenses6 |
1.93% |
1.60% |
1.44% |
1.37% |
1.25% |
1.20% |
|
Net
expenses excluding dividends and other expenses related to short
sales |
1.08% |
1.08% |
1.12% |
1.19% |
1.08% |
1.07% |
|
Net
investment income (loss) |
3.10% |
0.55% |
(0.55)% |
(0.29)% |
0.63% |
0.64% |
|
Expense
waiver/reimbursement7 |
0.07% |
0.16% |
0.14% |
—% |
—% |
—% |
|
Supplemental
Data: |
|
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$318,862 |
$232,152 |
$85,310 |
$79,415 |
$120,650 |
$114,494 |
|
Portfolio
turnover8 |
150% |
270% |
204% |
74% |
83% |
84% |
|
1 |
The
Predecessor Fund was reorganized into the Fund, a portfolio of the
Federated Hermes Adviser Series as of the close of business on September
24, 2021. The
Fund
is the successor to the Predecessor Fund. The performance information and
financial information presented incorporates the operations of the
Predecessor
Fund,
which, as a result of the reorganization, are the Fund’s
operations. |
|
2 |
Beginning
with the year ended December 31, 2021, the Fund was audited by KPMG LLP.
The previous years were audited by other independent registered public
accounting
firms. |
|
3 |
For
the period February 1, 2020 to December 31, 2020. Effective July 31, 2020,
the Predecessor Fund changed its fiscal year end to December
31. |
|
4 |
Per
share numbers have been calculated using the average shares
method. |
|
5 |
Based
on net asset value, which does not reflect the sales charge, redemption
fee or contingent deferred sales charge, if applicable. Total returns for
periods of
less
than one year are not annualized. |
|
6 |
Amount
does not reflect net expenses incurred by investment companies in which
the Fund may invest. |
|
7 |
This
expense decrease is reflected in both the net expense and the net
investment income (loss) ratios shown above. Amount does not reflect
expense waiver/
reimbursement
recorded by investment companies in which the Fund may
invest. |
|
8 |
Securities
that mature are considered sales for purposes of this
calculation. |
Further information
about the Fund’s performance is contained in the Fund’s Annual Report, dated
December 31, 2023, which can be obtained free of
charge.
34
Appendix
A: Hypothetical Investment and Expense Information
The
following charts provide additional hypothetical information about the effect of
the Fund’s expenses, including investment advisory fees
and other Fund costs, on the Fund’s assumed returns over a 10-year period. The
charts show the estimated expenses that would be incurred in respect of a
hypothetical investment of $10,000, assuming a 5% return each year, and no
redemption of Shares. Each chart also assumes that the Fund’s annual expense
ratio stays the same throughout the 10-year period and that all dividends and
distributions are reinvested. The annual expense ratio used in each chart is the
same as stated in the “Fees and Expenses” table of this Prospectus (and thus
does not reflect any fee waiver or expense reimbursement currently in effect).
The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted
from the hypothetical initial investment of $10,000; the “Front-End Sales
Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical
investment information does not reflect the effect of charges (if any) normally
applicable to redemptions of Shares (e.g., deferred
sales charges, redemption fees). Mutual fund returns, as well as fees and
expenses, may fluctuate over time, and your actual investment returns and total
expenses may be higher or lower than those shown below.
|
FEDERATED
HERMES MDT MARKET NEUTRAL FUND - A CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 2.26% | |||||
|
MAXIMUM
FRONT-END SALES CHARGE: 5.50% | |||||
|
Year |
Hypothetical
Beginning
Investment |
Hypothetical
Performance
Earnings |
Investment
After
Returns |
Hypothetical
Expenses |
Hypothetical
Ending
Investment |
|
1 |
$10,000.00 |
$472.50 |
$9,922.50 |
$766.50 |
$9,708.93 |
|
2 |
$9,708.93 |
$485.45 |
$10,194.38 |
$222.43 |
$9,974.95 |
|
3 |
$9,974.95 |
$498.75 |
$10,473.70 |
$228.52 |
$10,248.26 |
|
4 |
$10,248.26 |
$512.41 |
$10,760.67 |
$234.78 |
$10,529.06 |
|
5 |
$10,529.06 |
$526.45 |
$11,055.51 |
$241.22 |
$10,817.56 |
|
6 |
$10,817.56 |
$540.88 |
$11,358.44 |
$247.83 |
$11,113.96 |
|
7 |
$11,113.96 |
$555.70 |
$11,669.66 |
$254.62 |
$11,418.48 |
|
8 |
$11,418.48 |
$570.92 |
$11,989.40 |
$261.59 |
$11,731.35 |
|
9 |
$11,731.35 |
$586.57 |
$12,317.92 |
$268.76 |
$12,052.79 |
|
10 |
$12,052.79 |
$602.64 |
$12,655.43 |
$276.12 |
$12,383.04 |
|
Cumulative |
|
$5,352.27 |
|
$3,002.37 |
|
|
FEDERATED
HERMES MDT MARKET NEUTRAL FUND - IS CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 2.02% | |||||
|
MAXIMUM
FRONT-END SALES CHARGE: NONE | |||||
|
Year |
Hypothetical
Beginning
Investment |
Hypothetical
Performance
Earnings |
Investment
After
Returns |
Hypothetical
Expenses |
Hypothetical
Ending
Investment |
|
1 |
$10,000.00 |
$500.00 |
$10,500.00 |
$205.01 |
$10,298.00 |
|
2 |
$10,298.00 |
$514.90 |
$10,812.90 |
$211.12 |
$10,604.88 |
|
3 |
$10,604.88 |
$530.24 |
$11,135.12 |
$217.41 |
$10,920.91 |
|
4 |
$10,920.91 |
$546.05 |
$11,466.96 |
$223.89 |
$11,246.35 |
|
5 |
$11,246.35 |
$562.32 |
$11,808.67 |
$230.56 |
$11,581.49 |
|
6 |
$11,581.49 |
$579.07 |
$12,160.56 |
$237.43 |
$11,926.62 |
|
7 |
$11,926.62 |
$596.33 |
$12,522.95 |
$244.51 |
$12,282.03 |
|
8 |
$12,282.03 |
$614.10 |
$12,896.13 |
$251.79 |
$12,648.03 |
|
9 |
$12,648.03 |
$632.40 |
$13,280.43 |
$259.30 |
$13,024.94 |
|
10 |
$13,024.94 |
$651.25 |
$13,676.19 |
$267.02 |
$13,413.08 |
|
Cumulative |
|
$5,726.66 |
|
$2,348.04 |
|
35
Appendix
B: Sales Charge Waivers and Exchange Features for Shareholders Purchasing
Through Certain Financial Intermediaries
The
term “fund family,” used herein, shall refer to the Federated Hermes mutual
funds.
The
following Appendix applies to certain share classes offered by the
Fund.
Ameriprise
Financial
CLASS
A SHARES FRONT-END SALES CHARGE WAIVERS AVAILABLE AT AMERIPRISE
FINANCIAL:
The
following information applies to Class A shares purchases if you have an account
with or otherwise purchase Fund shares through Ameriprise Financial:
Effective
January 15, 2021, shareholders purchasing Fund shares through an Ameriprise
Financial retail brokerage account
are eligible for the following front-end sales charge waivers, which may differ
from those disclosed elsewhere in this Fund’s prospectus or SAI:
■ Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs or SAR-SEPs.
■ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same Fund (but not any other fund
within the same fund family).
■ Shares
exchanged from Class C shares of the same fund in the month of or following the
7-year anniversary of the purchase date. To the extent that this prospectus
elsewhere provides for a waiver with respect to exchanges of Class C shares or
conversion of Class C shares following a shorter holding period, that waiver
will apply.
■ Employees
and registered representatives of Ameriprise Financial or its affiliates and
their immediate family members.
■ Shares
purchased by or through qualified accounts (including IRAs, Coverdell Education
Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit
plans) that are held by a covered family member, defined as an Ameriprise
financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant
(mother, father, grandmother, grandfather, great grandmother, great
grandfather), advisor’s lineal descendant (son, step-son, daughter,
step-daughter, grandson, granddaughter, great grandson, great granddaughter) or
any spouse of a covered family member who is a lineal descendant.
■ Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (i.e., Rights of
Reinstatement).
Robert
W. Baird & Co., Inc.
Effective
June 15, 2020, shareholders purchasing Fund shares through a Baird platform or
account will only be eligible for the
following sales charge waivers (front-end sales charge waivers and CDSC waivers)
and discounts, which may differ from those disclosed elsewhere in this
prospectus or the SAI.
Front-End
Sales Charge Waivers on Investors A-shares Available at Baird
■ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing share of the same fund;
■ Share
purchase by employees and registered representatives of Baird or its affiliate
and their family members as designated by Baird;
■ Shares
purchase from the proceeds of redemptions within the same fund family, provided:
(1) the repurchase occurs within 90 days following the redemption; (2) the
redemption and purchase occur in the same accounts; and (3) redeemed shares were
subject to a front-end or deferred sales charge (known as rights of
reinstatement);
■ Class C
(i.e., level-load) shares that are no longer subject to a CDSC and are exchanged
to Class A shares (or the appropriate share class) of the same fund pursuant to
Baird’s intra-fund share class policies and procedures;
■ Employer-sponsored
retirement plans or charitable accounts in a transactional brokerage account at
Baird, including 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit sharing and money purchase pension plans and defined benefit plans. For
purposes of this provision, employer-sponsored retirement plans do not include
SEP IRAs, Simple IRAs or SAR-SEPs.
36
CDSC
Waivers on Investor A and C Shares Available at Baird
■ Shares
sold upon the death or disability of the shareholder;
■ Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
Prospectus;
■ Shares
bought due to returns of excess contributions from an IRA Account;
■ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
pursuant to the Internal Revenue Code;
■ Shares
sold to pay Baird fees but only if the transaction is initiated by
Baird;
■ Shares
acquired through a right of reinstatement.
Front-End
Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of
Accumulations
■ Breakpoints
as described in this prospectus;
■ Rights of
accumulations which entitles shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at Baird. Eligible fund family
assets not held at Baird may be included in the rights of accumulations
calculation only if the shareholder notifies his or her financial advisor about
such assets;
■ Letters of
Intent (LOI) allow for breakpoint discounts based on anticipated purchases
within a fund family through Baird, over a 13-month period of time.
Edward
D. Jones & Co., L.P. (EDWARD JONES)
Policies
Regarding Transactions Through Edward Jones
Effective on or
after January 1st, 2024, the following information supersedes prior information
with respect to transactions and positions held in fund shares through an Edward
Jones system. Clients of Edward Jones
(also referred
to as “shareholders”) purchasing fund shares on the Edward Jones commission and
fee-based platforms are eligible only for the following sales charge discounts
(also referred to as
“breakpoints”)
and
waivers, which can differ from discounts and waivers described elsewhere in the
mutual fund prospectus or statement of additional information (“SAI”) or through
another broker-dealer. In all instances, it is the shareholder’s responsibility
to inform Edward Jones at the time of purchase of any relationship, holdings of
fund family, or other facts qualifying the purchaser for discounts or waivers.
Edward Jones can ask for documentation of such circumstance. Shareholders should
contact Edward Jones if they have questions regarding their eligibility for
these discounts and waivers.
Breakpoints
■ Breakpoint pricing,
otherwise known as volume pricing, at dollar thresholds as described in the
prospectus.
Rights of
Accumulation (“ROA”)
■ The applicable sales
charge on a purchase of Class A shares is determined by taking into account all
share classes (except certain money market funds and any assets held in group
retirement plans) of the fund family held by the shareholder or in an account
grouped by Edward Jones with other accounts for the purpose of providing certain
pricing considerations (“pricing groups”). If grouping assets as a shareholder,
this includes all share classes held on the Edward Jones platform and/or held on
another platform.
The inclusion
of eligible fund family assets in the ROA calculation is dependent on the
shareholder notifying Edward Jones of such assets at the time of calculation.
Money market funds are included only if such shares were sold with a sales
charge at the time of purchase or acquired in exchange for shares purchased with
a sales charge.
■ The employer maintaining a
SEP IRA plan and/or SIMPLE IRA plan may elect to establish or change ROA for the
IRA accounts associated with the plan to a plan-level grouping as opposed to
including all share classes at a shareholder or pricing group level.
■ ROA is determined by
calculating the higher of cost minus redemptions or market value (current shares
x NAV).
Letter of Intent
(“LOI”)
■ Through a LOI,
shareholders can receive the sales charge and breakpoint discounts for purchases
shareholders intend to make over a 13-month period from the date Edward Jones
receives the LOI. The LOI is determined by calculating the higher of cost or
market value of qualifying holdings at LOI initiation in combination with the
value that the shareholder intends to buy over a 13-month period to calculate
the front-end sales charge and any breakpoint discounts. Each purchase the
shareholder makes during that 13-month period will receive the sales charge and
breakpoint discount
37
that
applies to the total amount. The inclusion of eligible fund family assets in the
LOI calculation is dependent on the shareholder notifying
Edward Jones of such assets at the time of calculation. Purchases made before
the LOI is received by Edward Jones are not adjusted under the LOI and will not
reduce the sales charge previously paid. Sales charges will be adjusted if LOI
is not met.
■ If the employer
maintaining a SEP IRA plan and/or SIMPLE IRA plan has elected to establish or
change ROA for the IRA accounts associated with the plan to a plan-level
grouping, LOIs will also be at the plan-level and may only be established by the
employer.
Sales Charge
Waivers
Sales
charges are waived for the following shareholders and in the following
situations:
■ Associates of Edward Jones
and its affiliates and other accounts in the same pricing group (as determined
by Edward Jones under its policies and procedures) as the associate. This waiver
will continue for the remainder of the associate’s life if the associate retires
from Edward Jones in good-standing and remains in good standing pursuant to
Edward Jones’ policies and procedures.
■ Shares
purchased in an Edward Jones fee-based program.
■ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment.
■ Shares purchased from the
proceeds of redeemed shares of the same fund family so long as the following
conditions are met: the proceeds are from the sale of shares within 60 days of
the purchase, the sale and purchase are made from a share class that charges a
front load and one of
the
following:
– The redemption and
repurchase occur in the same account.
– The redemption proceeds
are used to process an: IRA contribution, excess contributions, conversion,
recharacterizing of contributions, or distribution, and the repurchase is done
in an account within the same Edward Jones grouping for ROA.
■ Shares exchanged into
Class A shares from another share class so long as the exchange is into the same
fund and was initiated at the discretion of Edward Jones. Edward Jones is
responsible for any remaining CDSC due to the fund company, if applicable. Any
future purchases are subject to the applicable sales charge as disclosed in the
prospectus.
■ Exchanges from Class C
shares to Class A shares of the same fund, generally, in the 84th month
following the anniversary of the purchase date or earlier at the discretion of
Edward Jones.
■ Purchases of Class 529-A
shares through a rollover from either another education savings plan or a
security used for qualified distributions.
■ Purchases of Class
529-A
shares
made for
recontribution of
refunded
amounts.
Contingent
Deferred Sales Charge (“CDSC”) Waivers
If the shareholder
purchases shares that are subject to a CDSC and those shares are redeemed before
the CDSC is expired, the shareholder is responsible to pay the CDSC except in
the following conditions:
■ The death or disability of
the shareholder.
■ Systematic withdrawals
with
up to 10% per
year of the account value.
■ Return of
excess contributions from an Individual Retirement Account (IRA).
■ Shares redeemed as part of
a required minimum distribution for IRA and retirement accounts if the
redemption is taken in or after the year the shareholder reaches qualified age
based on applicable IRS regulations.
■ Shares redeemed to pay
Edward Jones fees or costs in such cases where the transaction is initiated by
Edward Jones.
■ Shares
exchanged in an Edward Jones fee-based program. Edward Jones is responsible for
any remaining CDSC due to the fund company, if applicable.
■ Shares
acquired through a right of reinstatement.
■ Shares
redeemed at the discretion of Edward Jones for Minimum Balances, as described
below.
Other
Important Information Regarding Transactions Through
Edward
Jones
Minimum
Purchase Amounts
■ Initial
purchase minimum: $250
■ Subsequent
purchase minimum: none
Minimum
Balances
■ Edward
Jones has the right to redeem at its discretion fund holdings with a balance of
$250 or less. The following are examples of accounts that are not included in
this policy:
– A
fee-based account held on an Edward Jones platform
– A 529
account held on an Edward Jones platform
38
– An
account with an active systematic investment plan or LOI
Exchanging
Share Classes
■ At any
time it deems necessary, Edward Jones has the authority to exchange at NAV a
shareholder’s holdings in a fund to Class A shares of the same fund.
Janney
Montgomery Scott LLC
Effective
May 1, 2020, if you purchase or redeem Fund shares through a Janney Montgomery
Scott LLC (“Janney”) brokerage
account, you will be eligible for the following load waivers (front-end sales
charge waivers and contingent deferred sales charge (CDSC), or back-end sales
charge, waivers) and discounts, which may differ from those disclosed elsewhere
in this Fund’s Prospectus or SAI.
Front-end
sales charge waivers on Class A Shares available at Janney
■ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family).
■ Shares
purchased by employees and registered representatives of Janney or its
affiliates and their family members as designated by Janney.
■ Shares
purchased from the proceeds of redemptions within the same fund family,
provided: (1) the repurchase occurs within ninety (90) days following the
redemption; (2) the redemption and purchase occur in the same account; and (3)
redeemed shares were subject to a front-end or deferred sales load (i.e., right
of reinstatement).
■ Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans.
■ Shares
acquired through a right of reinstatement.
■ Class C
shares that are no longer subject to a contingent deferred sales charge and are
exchanged to Class A shares (or the appropriate share class) of the same fund
pursuant to Janney’s intra-fund share class policies and procedures.
CDSC
Waivers on Class A and C Shares available at Janney
■ Shares
sold upon the death or disability of the shareholder.
■ Shares
sold as part of a systematic withdrawal plan as described in the fund’s
Prospectus.
■ Shares
purchased in connection with a return of excess contributions from an IRA
account.
■ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
if the redemption is taken in or after the year the shareholder reaches
qualified age based on applicable IRS regulations.
■ Shares
sold to pay Janney fees but only if the transaction is initiated by
Janney.
■ Shares
acquired through a right of reinstatement.
■ Shares
exchanged into the same share class of a different Federated Hermes fund, if the
shares were held for the applicable CDSC holding period (the holding period on
the shares purchased in the exchange will include the holding period of the
shares sold in the exchange).
Front-end
sales charge discounts available at Janney: Breakpoints, Rights of Accumulation,
and/or Letters of Intent
■ Breakpoints
as described in the fund’s Prospectus.
■ Rights of accumulation
(ROA), which entitle shareholders to breakpoint discounts, will be automatically
calculated based on the aggregated holding of fund family assets held by
accounts within the purchaser’s household at Janney. Eligible fund family assets
not held at Janney may be included in the ROA calculation only if the
shareholder notifies his or her financial advisor about such assets.
■ Letters of
intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over a 13-month time period. Eligible fund family assets
not held at Janney may be included in the calculation of letters of intent only
if the shareholder notifies his or her financial advisor about such
assets.
J.P.
Morgan Securities LLC
Effective September 29,
2023, if you purchase or hold Fund shares through an applicable J.P. Morgan
Securities LLC brokerage account, you will be eligible for the following sales
charge waivers (front-end sales charge waivers and contingent deferred sales
charge (CDSC), or back-end sales charge, waivers), share class conversion policy
and discounts, which may differ from those disclosed elsewhere in this Fund’s
prospectus or SAI.
39
Front-end sales
charge waivers on Class A shares available at J.P. Morgan Securities
LLC
■ Shares exchanged from
Class C (i.e., level-load) shares that are no longer subject to a CDSC and are
exchanged into Class A shares of the same fund pursuant to J.P. Morgan
Securities LLC’s share class exchange policy.
■ Qualified
employer-sponsored defined contribution and defined benefit retirement plans,
nonqualified deferred compensation plans, other employee benefit plans and
trusts used to fund those plans. For purposes of this provision, such plans do
not include SEP IRAs, SIMPLE IRAs, SAR-SEPs or 501(c)(3) accounts.
■ Shares of funds purchased
through J.P. Morgan Securities LLC Self-Directed Investing accounts.
■ Shares purchased through
rights of reinstatement.
■ Shares purchased through
reinvestment of capital gains distributions and dividend reinvestment when
purchasing shares of the same fund (but not any other fund within the fund
family).
■ Shares purchased by
employees and registered representatives of J.P. Morgan Securities LLC or its
affiliates and their spouse or financial dependent as defined by J.P. Morgan
Securities LLC.
Class C to Class
A share conversion
■ A shareholder in the
Fund’s Class C shares will have their shares converted by J.P. Morgan Securities
LLC to Class A shares (or the appropriate share class) of the same fund if the
shares are no longer subject to a CDSC and the conversion is consistent with
J.P. Morgan Securities LLC’s policies and procedures.
CDSC waivers on
Class A and C shares available at J.P. Morgan Securities LLC
■ Shares sold upon the death
or disability of the shareholder.
■ Shares sold as part of a
systematic withdrawal plan as described in the Fund’s prospectus.
■ Shares purchased in
connection with a return of excess contributions from an IRA
account.
■ Shares sold as part of a
required minimum distribution for IRA and retirement accounts pursuant to the
Internal Revenue Code.
■ Shares acquired through a
right of reinstatement.
Front-end load
discounts available at J.P. Morgan Securities LLC: breakpoints, rights of
accumulation & letters of intent
■ Breakpoints as described
in the prospectus.
■ Rights of Accumulation
(ROA) which entitle shareholders to breakpoint discounts as described in the
Fund’s prospectus will be automatically calculated based on the aggregated
holding of fund family assets held by accounts within the purchaser’s household
at J.P. Morgan Securities LLC. Eligible fund family assets not held at J.P.
Morgan Securities LLC (including 529 program holdings, where applicable) may be
included in the ROA calculation only if the shareholder notifies their financial
advisor about such assets.
■ Letters of Intent (LOI)
which allow for breakpoint discounts based on anticipated purchases within a
fund family, through J.P. Morgan Securities LLC, over a 13-month period of time
(if applicable).
Merrill
Lynch
Shareholders
purchasing Fund shares through a Merrill Lynch platform or account will be
eligible only for the following
load waivers (front-end sales charge waivers and contingent deferred, or
back-end, sales charge waivers) and discounts, which may differ from those
disclosed elsewhere in this Fund’s prospectus or SAI.
Front-end
Sales Load Waivers on Class A Shares available at Merrill Lynch
■ Employer-sponsored
retirement, deferred compensation and employee benefit plans (including health
savings accounts) and trusts used to fund those plans, provided that the shares
are not held in a commission-based brokerage account and shares are held for the
benefit of the plan;
■ Shares
purchased by a 529 Plan (does not include 529 Plan units or 529-specific share
classes or equivalents);
■ Shares
purchased through a Merrill Lynch affiliated investment advisory program or
exchanged due to the holdings moving from the program;
■ Shares
exchanged due to the holdings moving from a Merrill Lynch affiliated investment
advisory program to a Merrill Lynch brokerage (non-advisory) account pursuant to
Merrill Lynch’s policies relating to sales load discounts and
waivers;
■ Shares
purchased by third party investment advisors on behalf of their advisory clients
through Merrill Lynch’s platform;
■ Shares of
funds purchased through the Merrill Edge Self-Directed platform (if
applicable);
40
■ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family);
■ Shares
exchanged from Class C (i.e., level-load) shares of the same fund pursuant to
Merrill Lynch’s policies relating to sales load discounts and
waivers;
■ Employees
and registered representatives of Merrill Lynch or its affiliates and their
family members;
■ Directors
or Trustees of the Fund, and employees of the Fund’s investment adviser or any
of its affiliates, as described in the prospectus;
■ Eligible
shares purchased from the proceeds of redemptions within the same fund family,
provided: (1) the repurchase occurs within 90 days following the redemption; (2)
the redemption and purchase occur in the same account; and (3) redeemed shares
were subject to a front-end or deferred sales load (known as Rights of
Reinstatement). Automated transactions (i.e., systematic purchases and
withdrawals) and purchases made after shares are automatically sold to pay
Merrill Lynch’s account maintenance fees are not eligible for
reinstatement.
CDSC Waivers on
A
and
C Shares available at Merrill Lynch
■ Death or
disability of the shareholder;
■ Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus;
■ Return of
excess contributions from an IRA Account;
■ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
pursuant to the Internal Revenue Code;
■ Shares
sold to pay Merrill Lynch fees but only if the transaction is initiated by
Merrill Lynch;
■ Shares
acquired through a right of reinstatement;
■ Shares
held in retirement brokerage accounts, that are exchanged for a lower cost share
class due to transfer to certain fee based accounts or platforms (applicable to
A and C shares only);
■ Class A
Shares received through an exchange due to the holdings moving from a Merrill
Lynch affiliated investment advisory program to a Merrill Lynch brokerage
(non-advisory) account pursuant to Merrill Lynch’s policies relating to sales
load discounts and waivers.
Front-end
load Discounts Available at Merrill Lynch:
Breakpoints, Rights of Accumulation & Letters of Intent
Breakpoints, Rights of Accumulation & Letters of Intent
■ Breakpoints
as described in this prospectus;
■ Rights of
Accumulation (ROA) which entitle shareholders to breakpoint discounts as
described in the Fund’s prospectus will be automatically calculated based on the
aggregated holding of fund family assets held by accounts (including 529 program
holdings, where applicable) within the purchaser’s household at Merrill Lynch.
Eligible fund family assets not held at Merrill Lynch may be included in the ROA
calculation only if the shareholder notifies his or her financial advisor about
such assets;
■ Letters of
Intent (LOI) which allow for breakpoint discounts based on anticipated purchases
within a fund family, through Merrill Lynch, over a 13-month period of time (if
applicable).
Morgan
Stanley Smith Barney
Shareholders
purchasing Fund shares through a Morgan Stanley Wealth Management transactional
brokerage account will be
eligible only for the following front-end sales charge waivers with respect to
Class A shares, which may differ from and may be more limited than those
disclosed elsewhere in this Fund’s Prospectus or SAI.
Front-End
Sales Charge Waivers on Class A Shares Available at Morgan Stanley Wealth
Management
■ Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans;
■ Morgan
Stanley employee and employee-related accounts according to Morgan Stanley’s
account linking rules;
■ Shares
purchased through reinvestment of dividends and capital gains distributions when
purchasing shares of the same fund;
■ Shares
purchased through a Morgan Stanley self-directed brokerage account;
■ Class C
(i.e., level-load) shares that are no longer subject to a contingent deferred
sales charge and are exchanged to Class A shares of the same fund pursuant to
Morgan Stanley Wealth Management’s intra-fund share class exchange
program;
41
■ Shares
purchased from the proceeds of redemptions within the same fund family, provided
(i) the repurchase occurs within 90 days following the redemption, (ii) the
redemption and purchase occur in the same account, and (iii) redeemed shares
were subject to a front-end or deferred sales charge.
OPPENHEIMER
& CO., INC.
Effective
May 1, 2020, shareholders purchasing Fund shares through an Oppenheimer &
Co., Inc. (OPCO) platform or account
are eligible only for the following load waivers (front-end sales charge waivers
and contingent deferred, or back-end, sales charge waivers) and discounts, which
may differ from those disclosed elsewhere in this Fund’s prospectus or
SAI.
Front-end
Sales Load Waivers on Class A Shares available at OPCO
■ Employer-sponsored
retirement, deferred compensation and employee benefit plans (including health
savings accounts) and trusts used to fund those plans, provided that the shares
are not held in a commission-based brokerage account and shares are held for the
benefit of the plan
■ Shares
purchased by or through a 529 Plan
■ Shares
purchased through an OPCO affiliated investment advisory program
■ Shares
purchased through reinvestment of dividends and capital gains distributions when
purchasing shares of the same fund (but not any other fund within the fund
family)
■ Shares
purchased from the proceeds of redemptions within the same fund family,
provided: (1) the repurchase occurs within 90 days following the redemption; (2)
the redemption and purchase occur in the same account; and (3) redeemed shares
were subject to a front-end or deferred sales load (known as Rights of
Reinstatement).
■ A
shareholder in the Fund’s Class C shares will have their shares automatically
exchanged at net asset value to Class A shares (or the appropriate share class)
of the Fund if the shares are no longer subject to a CDSC and the automatic
exchange is in line with the policies and procedures of OPCO
■ Employees
and registered representatives of OPCO or its affiliates and their family
members
■ Directors
or Trustees of the Fund, and employees of the Fund’s investment adviser or any
of its affiliates, as described in this prospectus
CDSC Waivers on
A
and
C Shares available at OPCO
■ Death or
disability of the shareholder
■ Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus
■ Return of
excess contributions from an IRA Account
■ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
pursuant to the Internal Revenue Code
■ Shares
sold to pay OPCO fees but only if the transaction is initiated by
OPCO
■ Shares
acquired through a right of reinstatement
Front-end
load Discounts Available at OPCO: Breakpoints, Rights of Accumulation &
Letters of Intent
■ Breakpoints
as described in this prospectus.
■ Rights of
Accumulation (ROA), which entitle shareholders to breakpoint discounts, will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at OPCO. Eligible fund family
assets not held at OPCO may be included in the ROA calculation only if the
shareholder notifies his or her financial advisor about such assets
Raymond
James & Associates, Inc., Raymond James Financial Services, Inc. and each
entity’s affiliates (“Raymond James”)
Effective
March 1, 2019, shareholders purchasing and redeeming Fund shares through a
Raymond James platform or account,
or through an introducing broker-dealer or independent registered investment
adviser for which Raymond James provides trade execution, clearance, and/or
custody services, will be eligible only for the following load waivers
(front-end sales charge waivers and contingent deferred, or back-end, sales
charge waivers) and discounts, which may differ from those disclosed elsewhere
in this Fund’s prospectus or SAI.
Front-End
Sales Load Waivers on Class A Shares Available at Raymond James
■ Shares
purchased in an investment advisory program.
■ Shares
purchased within the same fund family through a systematic reinvestment of
capital gains and dividend distributions.
42
■ Employees
and registered representatives of Raymond James or its affiliates and their
family members as designated by Raymond James.
■ Shares
purchased from the proceeds of redemptions within the same fund family,
provided: (1) the repurchase occurs within 90 days following the redemption; (2)
the redemption and purchase occur in the same account; and (3) redeemed shares
were subject to a front-end or deferred sales load (known as Rights of
Reinstatement).
■ A
shareholder in the Fund’s Class C shares will have their shares automatically
exchanged at net asset value to Class A shares (or the appropriate share class)
of the Fund if the shares are no longer subject to a CDSC and the automatic
exchange is in line with the policies and procedures of Raymond
James.
CDSC Waivers on
A
and
C Shares Available at Raymond James
■ Death or
disability of the shareholder.
■ Shares
sold as part of a systematic withdrawal plan as described in the fund’s
prospectus.
■ Return of
excess contributions from an IRA Account.
■ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching the qualified age based on applicable IRS
regulations as described in the fund’s prospectus.
■ Shares
sold to pay Raymond James fees but only if the transaction is initiated by
Raymond James.
■ Shares
acquired through a right of reinstatement.
Front-End
Load Discounts Available at Raymond James: Breakpoints, Rights of Accumulation,
and/or Letters of Intent
■ Breakpoints
as described in this prospectus;
■ Rights of
accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at Raymond James. Eligible
fund family assets not held at Raymond James may be included in the calculation
of rights of accumulation only if the shareholder notifies his or her financial
advisor about such assets.
■ Letters of
Intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over a 13-month time period. Eligible fund family assets
not held at Raymond James may be included in the calculation of letters of
intent only if the shareholder notifies his or her financial advisor about such
assets.
Stifel,
Nicolaus & Company, Incorporated
Effective
July 1, 2020, shareholders purchasing Fund shares through a Stifel, Nicolaus
& Company, Incorporated (“Stifel”)
platform or account or who own shares for which Stifel or an affiliate is the
broker-dealer of record are eligible for the following additional sales charge
waiver.
Front-End
Sales Load Waiver on Class A Shares
■ Class C
shares that have been held for more than seven (7) years will be converted to
Class A shares of the same Fund pursuant to Stifel’s policies and
procedures
All other
sales charge waivers and reductions described elsewhere in the Fund’s Prospectus
or SAI still apply.
U.S.
Bancorp Investments, Inc.
Effective
November 1, 2021, shareholders purchasing Fund shares through a U.S. Bancorp
Investments, Inc. (USBI) platform or who own
shares for which USBI is the broker-dealer, where the shares are held in an
omnibus account, will be eligible for the following front-end sales charge
waivers and discounts, which may differ from those disclosed elsewhere in the
Funds’ Prospectus or SAI. All other sales charge waivers and reductions
described elsewhere in the Fund’s Prospectus or SAI still apply.
USBI
Conversion of Class C Shares
Class
C (i.e., level-load) shares that are no longer subject to a contingent deferred
sales charge are systematically converted
to the Class A shares of the same fund pursuant to USBI’s intra-fund share class
policy. No front-end sales charge will apply to such
conversions.
43
An SAI dated February 29,
2024, is incorporated by reference into this Prospectus. Additional information
about the Fund and its investments is contained in the Fund’s SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual
Report’s Management’s Discussion of Fund Performance discusses market conditions
and investment strategies that significantly affected the Fund’s performance
during its last fiscal year. The SAI contains a description of the Fund’s
policies and procedures with respect to the disclosure of its portfolio
securities. To obtain the SAI, Annual Report, Semi-Annual Report and other
information without charge, and to make inquiries, call your financial
intermediary or the Fund at 1-800-341-7400.
The Fund’s shareholder
reports will be made available on FederatedHermes.com/us/FundInformation, and
you will be notified and provided with a link each time a report is posted to
the website. You may request to receive paper reports from the Fund or from your
financial intermediary, free of charge, at any time. You may also request to
receive documents through e-delivery.
These documents, as well
as additional information about the Fund (including portfolio holdings,
performance and distributions), are also available on
FederatedHermes.com/us.
You can
obtain information about the Fund (including the SAI) by accessing Fund
information from the EDGAR Database on the SEC’s website at sec.gov. You can
purchase copies of this information by contacting the SEC by email at
[email protected].
Federated Hermes MDT
Market Neutral Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us atFederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities
Corp., Distributor
Investment
Company Act File No. 811-23259
CUSIP
31423A440
CUSIP 31423A432
CUSIP 31423A432
Q455293
(2/24)
© 2024 Federated Hermes,
Inc.