Prospectus
November
30, 2023
Disclosure
contained herein relates to all classes of the Fund, as listed below, unless
otherwise noted.
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Share
Class | Ticker |
A | FMUUX |
Institutional | FMUSX |
R6 | FMULX |
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Federated Hermes Municipal Ultrashort Fund
A Portfolio of Federated Hermes Fixed Income Securities, Inc.
A mutual
fund seeking to provide current income exempt from federal regular income
tax.
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 |
R6 |
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 |
R6 |
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Management
Fee1 |
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Distribution
(12b-1) Fee |
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Other
Expenses |
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Total
Annual Fund Operating Expenses1 |
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Fee
Waivers and/or Expense Reimbursements1,3 |
( |
( |
( |
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Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements |
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1
2
3
|
Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
|
A |
$ |
$ |
$ |
$ |
|
IS |
$ |
$ |
$ |
$ |
|
R6 |
$ |
$ |
$ |
$ |
1
2
3
The
Fund’s IS class total return for the nine-month period from January 1, 2023 to
September 30, 2023, was 2.18%.
Within
the periods shown in the bar chart, the Fund’s IS class highest quarterly return
was 0.87% (quarter ended December 31, 2022). Its lowest quarterly return was
(0.92)% (quarter ended March 31, 2022).
4
|
Share
Class |
1
Year |
5
Years |
10
Years |
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A: |
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Return
Before Taxes |
( |
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IS: |
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Return
Before Taxes |
( |
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Return
After Taxes on Distributions |
( |
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Return
After Taxes on Distributions and Sale of Fund Shares |
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|
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R6: |
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|
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Return
Before Taxes |
( |
|
|
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Bloomberg
1-Year US Municipal Bond Index1
(reflects
no deduction for fees, expenses or taxes) |
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Blended
Index2
(reflects no deduction for fees, expenses or taxes) |
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Lipper
Short Municipal Debt Funds Average3 |
( |
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1
2
3
FUND
MANAGEMENT
The Fund’s
Investment Adviser is Federated Investment Management Company.
Jeff
A. Kozemchak, CFA, Senior Portfolio Manager, has been the Fund’s portfolio
manager since its inception in October of
2000.
Mary Jo
Ochson, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since November of 2017.
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. 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.
5
R6
Class
There
are no minimum initial or subsequent investment amounts required. The minimum
investment amount for Systematic
Investment Programs is $50.
Tax
Information
It
is anticipated that Fund distributions will be primarily dividends that are
exempt from federal regular income tax, although a
portion of the Fund’s dividends may not be tax-exempt. Dividends may be subject
to state and local taxes. Although the Fund does not seek to realize capital
gains, the Fund may realize and distribute capital gains from time to time as a
result of the Fund’s normal investment activities. Any Fund distributions of
capital gains are taxable at applicable capital gains rates. The Fund is
generally not a suitable investment for retirement accounts.
Income
from the Fund also may be subject to the alternative minimum tax (AMT) for
individuals.
Payments
to Broker-Dealers and Other Financial Intermediaries
A
and IS Classes
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.
R6
Class
Class
R6 Shares do not make any payments to financial intermediaries, either from Fund
assets or from the investment adviser
and its affiliates.
What are
the Fund’s Investment Strategies?
The
Fund’s investment objective is to provide current income exempt from federal
regular income tax. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the strategies and policies described in this Prospectus. The Fund’s
Statement of Additional Information (SAI) provides information about the Fund’s
non-principal strategies.
The
Fund invests its assets so that, normally, distributions of annual interest
income are exempt from federal regular income
tax. Interest from the Fund’s investments may be subject to (or may be a
specific preference item for purposes of) the federal alternative minimum tax
(AMT) for individuals.
The
Fund will invest at least 65% of its assets in securities rated
investment
grade (or unrated securities of comparable quality) without regard to the
maturity of the securities and may purchase securities rated below investment
grade, which are also known as junk bonds (or unrated securities of comparable
quality) without regard to the maturity of the securities up to 35% of its
assets.
The
Adviser, which actively manages the Fund’s portfolio, seeks to maintain a low
degree of Share price fluctuation by generally
limiting the Fund’s dollar-weighted average portfolio duration to one year or
less. The Adviser may lengthen or shorten duration from time to time based on
its interest rate outlook. Duration measures the sensitivity of a security’s
price to changes in interest rates. The greater a portfolio’s average duration,
the greater the change in the portfolio’s value in response to a change in
market interest rates.
The
Adviser may also continue to seek to maintain a low degree of Share price
fluctuation and manage the Fund’s average
duration by investing in variable rate demand notes, municipal notes and
short-term municipal bonds as a core position in the Fund’s
portfolio.
The
Adviser may seek higher returns than may be offered by a tax-exempt money market
fund by generally investing
in:
◾ short-term
securities with maturities greater than one year;
◾ medium-quality
securities; and/or
◾ noninvestment-grade
securities.
Short-term
securities generally include securities with maturities of no more than three
years. The Fund also may invest in
securities with maturities greater than three years, subject to the Fund
generally limiting the Fund’s dollar-weighted average portfolio duration to one
year or less.
Medium-quality
securities generally include investment-grade securities that are rated in the
third and fourth highest rating
category by an NRSRO and unrated securities of comparable quality.
Investment-grade securities are securities that receive investment-grade ratings
(i.e., generally ratings in the first, second, third or fourth highest rating
categories) by an NRSRO or unrated securities of comparable quality. For
example, securities rated AAA, AA, A and BBB (including modifiers,
sub-categories or gradations) by Standard & Poor’s, an NRSRO, would be rated
in the first, second, third or
6
fourth
highest rating category, respectively. Tax-exempt securities rated A and BBB by
Standard & Poor’s are rated in the third (A) and fourth (BBB) highest rating
categories and would be considered medium-quality securities by the Fund. The
presence of a ratings modifier, sub-category, or gradation (for example, a (+)
or (-)) is intended to show relative standing within the major rating categories
and does not affect the security credit rating for purposes of the Fund’s
investment parameters. Although medium-quality securities are still considered
investment-grade securities, lower credit ratings do correspond to higher
perceived credit risk.
Noninvestment-grade
securities generally include securities rated below investment grade and unrated
securities of comparable quality. For example, tax-exempt securities rated BB by
Standard & Poor’s would be noninvestment-grade securities.
The
Fund is not a money market fund and is not subject to the special regulatory
requirements (including, among others, maturity
and credit quality constraints) designed to enable money market funds to
maintain a stable share price.
The
amount of the Fund’s assets invested in short-term, tax-exempt securities or
investment-grade, tax-exempt securities
will be determined at the time when tax-exempt securities are purchased. For
example, a later increase or decrease in percentage resulting from any change in
value or net assets, or from a downgrade in a security’s rating/quality, will
not require the Fund to sell any tax-exempt security held in the Fund’s
portfolio.
The
investment-grade securities in which the Fund invests generally are subject to
tax-exempt securities risk, interest rate,
issuer credit, counterparty credit, liquidity, tax, leverage, call, sector,
prepayment and extension, credit enhancement and economic risks, and the
derivative contracts and hybrid instruments in which the Fund invests generally
are subject to these same risks, as well as the risks of investing in derivative
contracts and hybrid instruments, all as described in this Prospectus.
Medium-quality securities are subject to these same risks, and may be subject to
higher credit risks than higher-quality, investment-grade, tax-exempt
securities. Noninvestment-grade securities are subject to these same risks
(including even higher credit risks), as well as the risks of investing in
noninvestment-grade securities, all as described in this Prospectus.
The
Adviser manages credit risk by performing a fundamental credit analysis on
tax-exempt securities before the Fund purchases
such securities. The Adviser considers various factors, including (among others)
the following: the economic feasibility of revenue bond financings and general
purpose financings; the financial condition of the issuer or guarantor; and
political developments that may affect credit quality. The Adviser monitors the
credit risks of all portfolio securities on an ongoing basis by reviewing, as
the Adviser considers necessary or appropriate in accordance with its
procedures, periodic financial data and ratings of NRSROs. The Fund’s
investments in noninvestment-grade securities will be more dependent on the
Adviser’s credit analysis than would be investment-grade securities, because
noninvestment-grade securities, while generally offering higher yields, also
involve greater risks. Consequently, in addition to the review process described
above, the Adviser may, for example and when appropriate, visit the site that
the issuer is developing with the proceeds of the offering and may engage in
detailed discussions with the issuer regarding the offering.
Within
the Fund’s goal to generally limit the Fund’s dollar-weighted average portfolio
duration to one year or less, the Adviser
may further manage interest rate risk by lengthening or shortening duration from
time to time based on its interest rate outlook. If the Adviser expects interest
rates to decline, it will generally lengthen the Fund’s duration, and if the
Adviser expects interest rates to increase, it will generally shorten the Fund’s
duration. The Adviser uses hedging transactions for purposes of duration
management. The Adviser formulates its interest rate outlook and otherwise
attempts to anticipate changes in economic and market conditions in analyzing a
variety of factors, including (among others) the following:
◾ Current
and expected U.S. growth;
◾ Current
and expected interest rates and inflation;
◾ The
Federal Reserve’s monetary policy; and
◾ Changes in
the supply of or demand for U.S. government securities.
The
Fund may use derivative contracts and/or hybrid instruments to implement
elements of its investment strategy. For example,
the Fund may use derivative contracts or hybrid instruments to increase or
decrease the portfolio’s exposure to the investment(s) underlying the derivative
contracts or hybrid instruments in an attempt to benefit from changes in the
value of the underlying investment(s) or to gain exposure to the municipal bond
sector. Additionally, by way of example, the Fund may use derivative contracts
in an attempt to:
◾ increase
or decrease the effective duration of the Fund portfolio;
◾ obtain
premiums from the sale of derivative contracts;
◾ realize
gains from trading a derivative contract; or
◾ hedge
against potential losses.
7
There
can be no assurance that the Fund’s use of derivative contracts or hybrid
instruments will work as intended. Derivative
investments made by the Fund are included within the Fund’s 80% policy (as
described below) and are calculated at market value.
The
Fund will normally invest so that at least 80% of its net assets are in
tax-exempt securities or at least 80% of its annual
interest income is exempt from federal regular income tax. Only for purposes of
Rule 35d-1 under the 1940 Act, the Fund will invest its assets so that at least
80% of the income it distributes will be exempt from federal regular income tax.
This policy may not be changed without shareholder approval.
Temporary
Investments
The
Fund may temporarily depart from its principal investment strategies by
investing its assets in taxable securities 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 tax-exempt
securities); to maintain liquidity to meet shareholder redemptions; or to
accommodate cash inflows. It is possible that such temporary investments could
affect the Fund’s investment returns. If the Fund invests in taxable securities,
it may receive and distribute taxable income to investors and to that extent
fail to meet its 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.
TAX-EXEMPT
SECURITIES
Tax-exempt
securities are fixed-income securities that, in the opinion of bond counsel to
the issuer or on the basis of another
authority believed by the Adviser to be reliable, pay interest that is not
subject to federal regular income taxes. Fixed-income securities pay interest,
dividends or distributions at a specified rate. The rate may be a fixed
percentage of the principal or adjusted periodically. In addition, the issuer of
a fixed-income security must repay the principal amount of the security,
normally within a specified time. Typically, states, counties, cities and other
political subdivisions and authorities issue tax-exempt securities. The market
categorizes tax-exempt securities by their source of repayment. Certain of these
tax-exempt securities may be subject to credit enhancement.
The
following describes the principal types of tax-exempt securities in which the
Fund may invest:
General
Obligation Bonds (A Type of Tax-Exempt Security)
General
obligation bonds are supported by the issuer’s power to exact property or other
taxes. The issuer must impose and
collect taxes sufficient to pay principal and interest on the bonds. However,
the issuer’s authority to impose additional taxes may be limited by its charter
or state law.
Special
Revenue Bonds (A Type of Tax-Exempt Security)
Special
revenue bonds are payable solely from specific revenues received by the issuer
such as specific taxes, assessments,
tolls or fees. Bondholders may not collect from the municipality’s general taxes
or revenues. For example, a municipality may issue bonds to build a toll road
and pledge the tolls to repay the bonds. Therefore, a shortfall in the tolls
normally would result in a default on the bonds, or in certain cases, may result
in a reduction in payments received in respect of the bonds.
Private
Activity Bonds (A Type of Special Revenue Bond)
Private
activity bonds are special revenue bonds used to finance private projects. A
certain percentage of the proceeds from a
private activity bond is used for a private business use or a certain percentage
of the debt service regarding a private activity bond is paid directly or
indirectly from a private business use. A private business use is a trade or
business carried on by any person or entity other than a governmental unit.
Private activity bonds are secured primarily by revenues derived from loan
repayments or lease payments due from the private entity, which may or may not
be guaranteed by a parent company or otherwise secured. Private activity bonds
generally are not secured by a pledge of the taxing power of the issuer of such
bonds. For example, a municipality may issue bonds to finance a new factory to
improve its local economy. The municipality would lend the proceeds from its
bonds to the company using the factory, and the company would agree to make loan
payments sufficient to cover interest and principal payments on the bonds. The
bonds would be payable from the company’s loan payments, and generally not from
any other revenues of the municipality. Therefore, any default of the loan
normally would result in a default on the bonds.
8
Types
of private activity bonds include, for example: bonds issued to obtain funds to
provide water, sewage and solid waste
facilities, qualified residential rental projects, certain local electric, gas
and other heating and cooling facilities, qualified hazardous waste facilities,
high speed intercity rail facilities, certain airports, docks, wharves and mass
transportation facilities and qualified mortgages; qualified student loan bonds;
qualified redevelopment bonds; and bonds used for certain organizations exempt
from federal income taxation (qualified 501(c)(3) bonds).
The
interest on many types of private activity bonds is subject to the AMT. The Fund
may invest in bonds subject to the
AMT.
Tax
Increment Financing Bonds (A Type of Tax-Exempt Security)
Tax
increment financing (TIF) bonds are payable from increases in taxes or other
revenues attributable to projects within the
TIF district. For example, a municipality may issue TIF bonds to redevelop a
commercial area. The TIF bonds would be payable solely from any increase in
sales taxes collected from the merchants in the area. The bonds could fail to
pay principal or interest if merchants’ sales, and related tax collections,
failed to increase as anticipated.
Municipal
Mortgage-Backed Securities (A Type of Fixed-Income, Tax-Exempt
Security)
Municipal
mortgage-backed securities are special revenue bonds, the proceeds of which may
be used to provide mortgage
loans for single family homes or to finance multifamily housing. Municipal
mortgage-backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable rates. Municipal
mortgage-backed securities generally have fixed interest rates.
Municipal
mortgage-backed securities come in a variety of forms. The simplest forms of
municipal mortgage-backed securities
are unstructured bonds backed by the net interest and principal payments and
prepayments from the underlying mortgages. As a result, the holders assume all
interest rate and prepayment risks of the underlying mortgages. Other municipal
mortgage-backed securities may have more complicated financial
structures.
Variable
Rate Demand Instruments (A Type of Tax-Exempt Security)
Variable
rate demand instruments are tax-exempt securities that require the issuer or a
third party, such as a dealer or bank (the
“Demand Provider”), to repurchase the security for its face value upon demand.
The securities also pay interest at a variable rate intended to cause the
securities to trade at their face value. Some variable rate demand instruments
are “conditional,” so that the occurrence of certain conditions discharges the
Demand Provider’s obligation to repurchase the security. Other variable rate
demand instruments are “unconditional,” so that there are no conditions under
which the Demand Provider’s obligation to repurchase the security can terminate.
The Fund treats variable rate demand instruments as short-term securities even
though their maturity may extend beyond 397 days because, within 397 days, their
variable interest rate adjusts in response to changes in market rates and the
repayment of their principal amount can be demanded. Certain variable rate
demand instruments that may be invested in by the Fund, referred to as
“synthetic” variable rate demand instruments, have certain features, such as
call features, that make it possible that the Fund will realize capital
gains.
Municipal
Notes (A Type of Tax-Exempt Security)
Municipal
notes are short-term, tax-exempt securities. Many municipalities issue such
notes to fund their current operations
before collecting taxes or other municipal revenues. Municipalities may also
issue notes to fund capital projects prior to issuing long-term bonds. The
issuers typically repay the notes at the end of their fiscal year, either with
taxes, other revenues or proceeds from newly issued notes or bonds.
Tax-Exempt
Commercial Paper (A Type of Tax-Exempt Security)
Tax-exempt
commercial paper is a tax-exempt issuer’s obligation with a maturity of
generally less than nine months. Tax-exempt
issuers may issue commercial paper to pay for current expenditures or other
permissible activities. Tax-exempt issuers may constantly reissue their
commercial paper and use the proceeds (or other sources) to repay maturing
paper. If the tax-exempt issuer cannot continue to obtain liquidity in this
fashion, and if there is not another available source of liquidity, its
commercial paper may default or there may be a reduction in payments received in
repayment of the tax-exempt commercial paper.
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
9
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.
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:
10
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).
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, total return swaps, credit default swaps, and caps and
floors.
OTHER
INVESTMENTS, TRANSACTIONS, TECHNIQUES
Investing
in Securities of Other Investment Companies
The
Fund may invest its assets in shares of other investment companies as an
efficient means of implementing its investment
strategies, managing its uninvested cash and/or other investment reasons
consistent with the Fund’s investment objective and investment strategies. These
other investment companies are managed independently of the Fund and incur
additional fees and/or expenses which would, therefore, be borne indirectly by
the Fund in connection with any such investment. In the case of an investment in
an affiliated fund, these investments also can create conflicts of interests for
the Adviser to the Fund and the investment adviser to the acquired fund. For
example, a conflict of interest can arise due to the possibility that the
Adviser to the Fund could make a decision to redeem the Fund’s investment in the
acquired fund. A conflict of interest can also arise if, because of the Fund’s
investment in the acquired fund, the acquired fund is able to garner more
assets, thereby growing the acquired fund and increasing the management fees
received by the investment adviser to the acquired fund, which would either be
the Adviser or an affiliate of the Adviser. However, the Adviser believes that
the benefits and efficiencies of making investments in other investment
companies should outweigh the potential additional fees and/or expenses and
resulting conflicts of interest. The Fund may invest in money market securities
directly.
Credit
Enhancement
The
Fund may invest in securities that have credit enhancement. Credit enhancement
consists of an arrangement in which a
company agrees to pay amounts due on a fixed-income security (including a
tax-exempt security) if the issuer defaults. In some cases the company providing
credit enhancement makes all payments directly to the security holders and
receives reimbursement from the issuer. Normally, the credit enhancer has
greater financial resources and liquidity than the issuer. For this reason, the
Adviser may evaluate the credit risk of a fixed-income security based solely
upon its credit enhancement.
Common
types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement
also includes arrangements where securities or other liquid assets secure
payment of a fixed-income security. If a default occurs, these assets may be
sold and the proceeds paid to the security’s holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for a
fixed-income security.
11
Hybrid
Instruments
Hybrid
instruments combine elements of two different kinds of securities or financial
instruments (such as a derivative contract).
Frequently, the value of a hybrid instrument is determined by reference to
changes in the value of a Reference Instrument (that is a designated security,
commodity, index or other asset or instrument including a derivative contract).
The Fund may use hybrid instruments only in connection with permissible
investment activities. Hybrid instruments can take on many forms including, but
not limited to, the following forms. First, a common form of a hybrid instrument
combines elements of a derivative contract with those of another security
(typically a fixed-income security). In this case all or a portion of the
interest or principal payable on a hybrid security is determined by reference to
changes in the price of a Reference Instrument. Second, hybrid instruments may
include convertible securities with conversion terms related to a Reference
Instrument.
Depending
on the type and terms of the hybrid instrument, its risks may reflect a
combination of the risks of investing in the
Reference Instrument with the risks of investing in other securities and
derivative contracts. Thus, an investment in a hybrid instrument may entail
significant risks in addition to those associated with traditional investments
or the Reference Instrument. Hybrid instruments are also potentially more
volatile than traditional securities or the Reference Instrument. Moreover,
depending on the structure of the particular hybrid, it may expose the Fund to
leverage risks or carry liquidity risks.
Delayed
Delivery Transactions
Delayed
delivery transactions, including when-issued transactions, are arrangements in
which the Fund buys securities for a set
price, with payment and delivery of the securities scheduled for a future time.
During the period between purchase and settlement, no payment is made by the
Fund to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value in
determining the price of its Shares. Settlement dates may be a month or more
after entering into these transactions so that the market values of the
securities bought may vary from the purchase prices. Therefore, delayed delivery
transactions create interest rate risks for the Fund. Delayed delivery
transactions also involve credit risks in the event of a counterparty default.
These transactions create leverage risks.
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.
As
the Fund’s derivative exposure, if any, is 10% or less of its net assets,
excluding certain currency and interest rate hedging
transactions, the Fund is classified as a limited derivatives user under the
Derivatives Rule and will not be subject to the full requirements of the
Derivatives Rule as noted above, including VAR testing and stress testing and
certain Board reporting requirements. However, the Fund is still required to
implement written compliance policies and procedures reasonably designed to
manage its derivatives risks and monitor its derivatives exposure
daily.
Investment
Ratings for Investment-Grade Securities
The
Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more nationally
recognized statistical rating organizations (NRSROs). For example, Standard
& Poor’s, an NRSRO, assigns ratings to investment-grade securities (AAA, AA,
A and BBB including modifiers, sub-categories and gradations) based on their
assessment of the likelihood of the issuer’s inability to pay interest or
principal (default) when due on each security. Lower credit ratings correspond
to higher credit risk. If a security has not received a rating, the Fund must
rely entirely upon the Adviser’s credit assessment that the security is
comparable to investment grade. The presence of a ratings modifier,
sub-category, or gradation (for example, a (+) or (-)) is intended to show
relative standing within the major rating categories and does not affect the
security credit rating for purposes of the Fund’s investment parameters. If a
security is downgraded below the minimum quality grade discussed above, the
Adviser will reevaluate the security, but will not be required to sell
it.
Investment
Ratings for Noninvestment-Grade Securities
Noninvestment-grade
securities are rated below BBB- by an NRSRO. These bonds have greater economic,
credit and liquidity
risks than investment-grade securities.
12
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 profiles of many issuers or guarantors in the universe of securities in
which the Fund may invest. The Adviser may also consider information derived
from active engagements conducted by its in-house stewardship team with certain
issuers or guarantors on environmental, social and governance topics. This
qualitative analysis does not automatically result in including or excluding
specific securities but may be used by Federated Hermes as an additional input
in its primary analysis.
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.
TAX-EXEMPT
SECURITIES Risk
The
securities in which the Fund invests may include those issued by state or local
governments, other political subdivisions
or authorities, or directly or indirectly supported by taxes, assessments,
tolls, fees or other revenue collected by or otherwise derived from or through
such issuers. The amount of public information available about tax-exempt
securities is generally less than for corporate equities or bonds. The secondary
market for tax-exempt securities also tends to be less well-developed and less
liquid than many other securities markets, which may limit the Fund’s ability to
sell its tax-exempt securities at attractive prices. Special factors, such as
legislative changes, and state and local economic and business developments, may
adversely affect the yield and/or value of the Fund’s investments in tax-exempt
securities. Other factors include the general conditions of the tax-exempt
securities market, the size of the particular offering, the maturity of the
obligation and the rating of the issue. Like other issuers, there is no
guarantee that the issuers of such securities will have sufficient revenues to
satisfy their obligations (such as, for example, the payment of interest or
principal when due). Legal, economic, political or other developments may raise
impairments (such as, for example, limitations under applicable law on the
issuer’s authority to raise taxes, prolonged budgetary processes, declining real
estate values, increasing pension liabilities or declining tax revenues which
may occur due to shifting demographics or other factors) to such issuer’s
budgetary flexibility, liquidity and ability to satisfy its obligations. Such
impairments may cause a downgrade in the credit ratings of such an issuer, or
the securities issued or supported by it, and may cause such an issuer to defer
payment of certain obligations, reduce or eliminate appropriations and/or
default on its obligations.
Tax-exempt
issuers can and have defaulted on obligations, been downgraded or commenced
insolvency proceedings. Financial
difficulties of such issuers may continue or get worse. Like other issuers and
securities, the likelihood that the credit risk associated with such issuers and
such securities will increase is greater during times of economic stress and
financial instability. As a result, in such situations, there would be
heightened risk that there could be an interruption in payments to holders of
tax-exempt securities in some cases. There also could be a reduction in the
market value of the tax-exempt securities held by the Fund, which could
adversely affect the Fund’s net asset value or the distributions paid by the
Fund.
To
the extent that the Fund invests a larger portion of its assets in the
tax-exempt securities of a particular state or U.S.
territory or possession, there is greater risk that political, regulatory,
economic or other developments within that state or U.S. territory or possession
may impact on the Fund’s investment performance.
INTEREST
RATE RISK
Prices
of fixed-income securities (including tax-exempt securities) rise and fall in
response to changes in interest rates. Generally,
when interest rates rise, prices of fixed-income securities fall. However,
market factors, such as the demand for particular fixed-income securities, may
cause the price of certain fixed-income securities to fall while the prices of
other securities rise or remain unchanged.
The
longer the duration of a fixed-income security, the more susceptible it is to
interest rate risk. The duration of a fixed-income
security may be equal to or shorter than the stated maturity of a fixed-income
security. Recent and potential future changes in monetary policy made by central
banks and/or their governments are likely to affect the level of interest rates.
Duration measures the price sensitivity of a fixed-income security given a
change in interest rates. For example, if a fixed-income security has an
effective duration of three years, a 1% increase in general interest rates would
be expected to cause the security’s value to decline about 3% while a 1%
decrease in general interest rates would be expected to cause the security’s
value to increase about 3%.
13
The
impact of interest rate changes on the value of floating rate investments is
typically reduced by periodic interest rate resets.
Variable and floating rate securities generally are less sensitive to interest
rate changes, but may decline in value if their interest rates do not rise as
much or as quickly as interest rates in general. Conversely, variable and
floating rate securities generally will not increase in value as much as fixed
rate debt instruments if interest rates decline. Certain of the Fund’s
investments may also be valued, in part, by reference to the relative
relationship between interest rates on tax-exempt securities and taxable
securities. With respect to the Fund’s investments described in the preceding
sentence, the value of such Fund investments may be negatively affected (or
positively affected) when the market for tax-exempt securities underperforms (or
outperforms) the market for taxable securities.
ISSUER
Credit Risk
It
is possible that interest or principal on securities will not be paid when due.
Noninvestment-grade securities generally have a
higher default risk than investment-grade securities. Such non-payment or
default may reduce the value of the Fund’s portfolio holdings, its share price
and its performance.
Many
fixed-income securities (including tax-exempt securities) receive credit ratings
from NRSROs such as Fitch Rating
Service, Moody’s Investor Services, Inc. and Standard & Poor’s that assign
ratings to securities by assessing the likelihood of an issuer and/or guarantor
default. Higher credit ratings correspond to lower perceived credit risk and
lower credit ratings correspond to higher perceived credit risk. Credit ratings
may be upgraded or downgraded from time to time as an NRSRO’s assessment of the
financial condition of a party obligated to make payments with respect to such
securities and credit risk changes. The impact of any credit rating downgrade
can be uncertain. Credit rating downgrades may lead to increased interest rates
and volatility in financial markets, which in turn could negatively affect the
value of the Fund’s portfolio holdings, its share price and its investment
performance. Credit ratings are not a guarantee of quality. Credit ratings may
lag behind the current financial conditions of the issuer and/or guarantor and
do not provide assurance against default or other loss of money. Credit ratings
do not protect against a decline in the value of a security. If a security has
not received a rating, the Fund must rely entirely upon the Adviser’s credit
assessment.
Fixed-income
securities generally compensate for greater credit risk by paying interest at a
higher rate. The difference between
the yield of a security and the yield of a U.S. Treasury security or other
appropriate benchmark with a comparable maturity (the “spread”) measures the
additional interest paid for risk. Spreads may increase generally in response to
adverse economic or market conditions. A security’s spread may also increase if
the security’s rating is lowered, or the security is perceived to have an
increased credit risk. An increase in the spread will cause the price of the
security to decline.
COUNTERPARTY
CREDIT RISK
Counterparty
credit risk includes the possibility that a party to a 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.
LIQUIDITY
RISK
Trading
opportunities are more limited for fixed-income securities (including tax-exempt
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.
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.
Tax
Risk
In
order to pay interest that is exempt from federal regular income tax, tax-exempt
securities must meet certain legal requirements.
Failure to meet such requirements may cause the interest received and
distributed by the Fund to shareholders to be taxable.
Changes
or proposed changes in federal or state tax laws may cause the prices of
tax-exempt securities to fall and/or may affect
the tax-exempt status of the securities in which the Fund invests.
14
The
federal income tax treatment of payments in respect of certain derivative
contracts is unclear. Additionally, the Fund may
not be able to close out certain derivative contracts when it wants to.
Consequently, the Fund may receive payments, and make distributions, that are
treated as ordinary income for federal income tax purposes. Income from the Fund
also may be subject to the AMT.
Leverage
Risk
The
tax-exempt securities, derivative contracts and hybrid instruments in which the
Fund may invest can be principal investment
strategies for the Fund and may be subject to 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.
CALL
RISK
The
tax-exempt securities in which the Fund may invest can be principal investment
strategies for the Fund and may be subject to
call risk. Call risk is the possibility that an issuer may redeem a fixed-income
security (including a tax-exempt security) before maturity (a “call”) at a price
below or above its current market price. An increase in the likelihood of a call
may reduce the security’s price. If a fixed-income security is called, the Fund
may have to reinvest the proceeds in other fixed-income securities with lower
interest rates, higher credit risks or other less favorable
characteristics.
SECTOR
RISK
A
substantial part of the Fund’s portfolio may be comprised of securities issued
or credit-enhanced by companies in similar
businesses or with other similar characteristics. As a result, the Fund will be
more susceptible to any economic, business, political or other developments
which generally affect these issuers or entities. Developments affecting
companies with similar characteristics might include changes in interest rates,
changes in economic cycle affecting credit losses and regulatory
changes.
PREPAYMENT
AND EXTENSION RISK
Unlike
traditional fixed-income securities (including tax-exempt securities), which pay
a fixed rate of interest until maturity
(when the entire principal amount is due), payments on municipal mortgage-backed
securities include both interest and a partial payment of principal. Partial
payment of principal may be comprised of scheduled principal payments as well as
unscheduled payments from the voluntary prepayment, refinancing or foreclosure
of the underlying loans. These unscheduled prepayments of principal create risks
that can adversely affect a fund holding municipal mortgage-backed
securities.
For
example, when interest rates decline, the values of municipal mortgage-backed
securities generally rise. However, when
interest rates decline, unscheduled prepayments can be expected to accelerate,
and the Fund would be required to reinvest the proceeds of the prepayments at
the lower interest rates then available. Unscheduled prepayments would also
limit the potential for capital appreciation on municipal mortgage-backed
securities.
Conversely,
when interest rates rise, the values of municipal mortgage-backed securities
generally fall. Since rising
interest rates typically result in decreased prepayments, this could lengthen
the average lives of municipal mortgage-backed securities, and cause their value
to decline more than traditional fixed-income securities.
Generally,
municipal mortgage-backed securities compensate for the increased risk
associated with prepayments by paying a
higher yield. The additional interest paid for risk is measured by the
difference between the yield of a municipal mortgage-backed security and the
yield of a U.S. Treasury security or other appropriate benchmark with a
comparable maturity (the “spread”). An increase in the spread will cause the
price of the municipal mortgage-backed security to decline. Spreads generally
increase in response to adverse economic or market conditions. Spreads may also
increase if the security is perceived to have an increased prepayment risk or is
perceived to have less market demand.
Credit
Enhancement Risk
The
securities in which the Fund invests may be subject to credit enhancement (for
example, guarantees, letters of credit or bond
insurance). Credit enhancement is designed to help assure timely payment of the
security; it does not protect the Fund against losses caused by declines in a
security’s value due to changes in market conditions. Securities subject to
credit enhancement generally would be assigned a lower credit rating if the
rating were based primarily on the credit quality of the issuer without regard
to the credit enhancement. If the credit quality of the credit enhancement
provider (for example, a bank or bond insurer) is downgraded, the rating on a
security credit enhanced by such credit enhancement provider also may be
downgraded.
15
A
single enhancement provider may provide credit enhancement to more than one of
the Fund’s investments. Having multiple
securities credit enhanced by the same enhancement provider will increase the
adverse effects on the Fund that are likely to result from a downgrading of, or
a default by, such an enhancement provider. Adverse developments in the banking
or bond insurance industries also may negatively affect the Fund, as the Fund
may invest in securities credit enhanced by banks or by bond insurers without
limit. Bond insurers that provide credit enhancement for large segments of the
fixed-income markets, including the municipal bond market, may be more
susceptible to being downgraded or defaulting during recessions or similar
periods of economic stress.
Risk
Associated with Noninvestment-Grade Securities
Securities
rated below investment grade or unrated
securities of comparable quality (i.e., noninvestment-grade securities), also
known as junk bonds, generally entail greater economic, credit and liquidity
risks than investment-grade securities. For example, their prices are more
volatile, economic downturns and financial setbacks may affect their prices more
negatively, and their trading market may be more limited. These securities are
considered speculative with respect to the issuer’s ability to pay interest and
repay principal. The Fund will invest at least 65% of its assets in securities
rated investment grade (or unrated securities of comparable quality), and may
purchase securities rated below investment grade (or unrated securities of
comparable quality) up to 35% of its assets.
RISK
RELATED TO THE ECONOMY
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, or industry or
economic trends and developments, may, from time to time, and for varying
periods of time, cause volatility, illiquidity or other potentially adverse
effects in the financial markets, including the fixed-income market. 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,
including the fixed-income markets, may contribute to the development of or
increase in volatility, illiquidity, shareholder redemptions and other adverse
effects which could negatively impact the Fund’s performance. For example, the
value of certain portfolio securities may rise or fall in response to changes in
interest rates, which could result from a change in government policies, and has
the potential to cause investors to move out of certain portfolio securities,
including fixed-income securities. This may increase redemptions from funds that
hold large amounts of certain securities, and may result in decreased liquidity
and increased volatility in the financial markets. Market factors, such as the
demand for particular portfolio securities, may cause the price of certain
portfolio securities to fall while the prices of other securities rise or remain
unchanged. Among other investments, lower-grade bonds may be particularly
sensitive to changes in the economy.
Epidemic
and Pandemic Risk
An outbreak of respiratory
disease caused by a novel coronavirus was first detected in China in late 2019
and subsequently spread globally. This coronavirus has resulted in,
and may
continue to result in, closed borders, enhanced health screenings, disruptions
to healthcare service preparation and delivery, quarantines, cancellations and
disruptions to supply chains, workflow operations and consumer activity, as well
as general concern and uncertainty. The impact of this coronavirus has resulted
in substantial economic volatility. Health crises caused by outbreaks, such as
the coronavirus outbreak, may exacerbate other pre-existing political, social
and economic risks. The impact of this outbreak, and other epidemics and
pandemics that may arise in the future, could continue to negatively affect the
worldwide economy, as well as the economies of individual countries, individual
companies, including certain Fund service providers and issuers of the Fund’s
investments, and the markets in general in significant and unforeseen ways. In
addition, governments, their regulatory agencies, or self-regulatory
organizations may take actions in response to the pandemic, including
significant fiscal and monetary policy changes, that may affect the instruments
in which the Fund invests or the issuers of such instruments. Any such impact
could adversely affect the Fund’s performance.
Risk
of Investing in Derivative Contracts and Hybrid Instruments
The
Fund’s exposure to derivative contracts and hybrid instruments (either directly
or through its investment in another investment
company) involves risks different from, or possibly greater than, the risks
associated with investing directly in securities and other traditional
investments. First, changes in the value of the derivative contracts and hybrid
instruments in which the Fund invests may not be correlated with changes in the
value of the underlying Reference Instruments or, if they are correlated, may
move in the opposite direction than originally anticipated. Second, while some
strategies involving derivatives may reduce the risk of loss, they may also
reduce potential gains or, in some cases, result in losses by offsetting
favorable price movements in portfolio holdings. Third, there is a risk that
derivative contracts and hybrid instruments may be erroneously priced or
improperly valued and, as a result, the Fund may need to make increased cash
16
payments
to the counterparty. Fourth, exposure to derivative contracts and hybrid
instruments may have tax consequences to the Fund and its shareholders. For
example, derivative contracts and hybrid instruments may cause the Fund to
realize increased ordinary income or short-term capital gains (which are treated
as ordinary income for federal income tax purposes) and, as a result, may
increase taxable distributions to shareholders. In addition, under certain
circumstances certain derivative contracts and hybrid instruments may cause the
Fund to: (a) incur an excise tax on a portion of the income related to those
contracts and instruments; and/or (b) reclassify, as a return of capital, some
or all of the distributions previously made to shareholders during the fiscal
year as dividend income. Fifth, a common provision in OTC derivative contracts
permits the counterparty to terminate any such contract between it and the Fund,
if the value of the Fund’s total net assets declines below a specified level
over a given time period. Factors that may contribute to such a decline (which
usually must be substantial) include significant shareholder redemptions and/or
a marked decrease in the market value of the Fund’s investments. Any such
termination of the Fund’s OTC derivative contracts may adversely affect the Fund
(for example, by increasing losses and/or costs, and/or preventing the Fund from
fully implementing its investment strategies). Sixth, the Fund may use a
derivative contract to benefit from a decline in the value of a Reference
Instrument. If the value of the Reference Instrument declines during the term of
the contract, the Fund makes a profit on the difference (less any payments the
Fund is required to pay under the terms of the contract). Any such strategy
involves risk. There is no assurance that the Reference Instrument will decline
in value during the term of the contract and make a profit for the Fund. The
Reference Instrument may instead appreciate in value creating a loss for the
Fund. Seventh, a default or failure by a CCP or an FCM (also sometimes called a
“futures broker”), or the failure of a contract to be transferred from an
Executing Dealer to the FCM for clearing, may expose the Fund to losses,
increase its costs, or prevent the Fund from entering or exiting derivative
positions, accessing margin, or fully implementing its investment strategies.
The central clearing of a derivative and trading of a contract over a SEF could
reduce the liquidity in, or increase costs of entering into or holding, any
contracts. Finally, derivative contracts and hybrid instruments may also involve
other risks described in this Prospectus, such as interest rate, credit,
liquidity and leverage.
technology
Risk
The
Adviser uses various technologies in managing the Fund, consistent with its
investment objective(s) and strategy described
in this Prospectus. For example, proprietary and third-party data and systems
are utilized to support decision-making for the Fund. Data imprecision, software
or other technology malfunctions, programming inaccuracies and similar
circumstances may impair the performance of these systems, which may negatively
affect Fund performance.
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 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 fixed-income securities that trade on days the NYSE is closed,
the value of the Fund’s assets may change on
days you cannot purchase or redeem Shares.
In
calculating its NAV, the Fund generally values investments as
follows:
◾ Fixed-income
securities are fair valued using price evaluations provided by a pricing service
approved by the Adviser.
◾ 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.
17
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
Pursuant
to Rule 2a-5 under the Investment Company Act of 1940, 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.
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 or R6
Shares. However, if you purchase IS or R6 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 or R6 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.
How is the
Fund Sold?
The
Fund offers the following Share classes: Class A Shares (A), Institutional
Shares (IS) and Class R6 Shares (R6), each
representing interests in a single portfolio of securities. All Share classes
have different sales charge 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.). The Fund may not be a
suitable investment for retirement plans.
A
Class
The
Fund’s Distributor markets the A class shares described in this Prospectus to
institutions or to individuals, directly or through
financial intermediaries.
18
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;
◾ An
employer-sponsored retirement plan;
◾ A trust
institution investing on behalf of its trust customers;
◾ Additional
sales to an investor (including a natural person) who owned the IS class of the
Fund as of December 31, 2008;
◾ 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 sub-advised 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.
R6
Class
The
Fund’s Distributor markets the R6 class to Eligible Investors, as described
below. The Class R6 Shares are sold
at net asset value and are not subject to any minimum initial or subsequent
investment amounts. In connection with a request to purchase the R6 class, you
should provide documentation sufficient to verify your status as an Eligible
Investor.
Class R6 Shares do not
carry sales commissions or pay Rule 12b-1 fees, or make similar payments to
financial intermediaries. As a general matter, the R6 class is not available for
direct investment by natural persons. Individual shareholders who purchase Class
R6 Shares through retirement platforms or other intermediaries will not be
eligible to hold Class R6 Shares outside of their respective plan or
intermediary platform.
Following
are categories of Eligible Investors:
◾ 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;
◾ An
employer-sponsored retirement plan;
◾ A trust
institution investing on behalf of its trust customers;
◾ An
investor, other than a natural person, purchasing Shares directly from the
Fund;
◾ A
Federated Hermes Fund;
◾ An
investor (including a natural person) who acquired the R6 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
19
◾ 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 sub-advised 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.
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.
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.
The
Fund’s Class R6 Shares do not make any payments to financial intermediaries,
either from Fund assets or from the investment
adviser and its affiliates.
service
fees
A
Class
The
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.
The
A class of the Fund has no present intention of paying, accruing or incurring
more than 0.15% of any such Service
Fees until such time as approved by the Fund’s Board of Directors.
ACCOUNT
ADMINISTRATION FEES
A
Class
The
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.
The
A class of the Fund has no present intention of paying, accruing or incurring
more than 0.15% of any such Account Administration
Fees until such time as approved by the Fund’s Board of Directors.
RECORDKEEPING
FEES
A
and IS Classes
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
A
and IS Classes
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.
20
ADDITIONAL
PAYMENTS TO FINANCIAL INTERMEDIARIES
A
and IS Classes
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 or R6 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, with the
exception of R6 class 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.
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.
The
required minimum initial investment for the A class is generally $1,500. The
minimum subsequent investment amount is
$100. 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 for employer-sponsored
retirement plans. Certain types of accounts are eligible for lower minimum
investments.
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 IS class is generally
$1,000,000. There is no minimum subsequent
investment amount.
R6
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?”
There is
no minimum initial or subsequent investment amount required.
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).
21
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.
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.
22
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
and R6 Classes
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.
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.”
23
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;
◾ 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.
24
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.
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.
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.
25
A
Class
You may
exchange Shares into shares of the same class of another Federated Hermes
fund.
Possible
Sales Charge on A Share Exchanges
You may
incur a sales charge if you exchange A Shares of the Fund for A Shares of
another Federated Hermes fund.
If
you acquired your A Shares of the Fund prior to December 1, 2019, you will not
be charged a sales charge when exchanging
those shares for A shares of another Federated Hermes fund. However, if your A
Shares of the Fund were acquired on or after December 1, 2019, you may have to
pay the sales charge when exchanging to A Shares of another Federated Hermes
fund.
In
determining whether you will incur a sales charge on an exchange to another
Federated Hermes fund, Shares that are not
subject to a sales charge will be deemed to have been exchanged first. You will
also not incur a sales charge on an exchange to another Federated Hermes fund if
your exchange would not have been subject to a sales charge if treated as a
purchase of shares of the other Federated Hermes fund. For information on the
sales charges applicable to purchases of A Shares of another Federated Hermes
fund, please refer to that fund’s Prospectus.
IS
and R6 Classes
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.
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.
26
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 any dividends daily and pays them monthly to shareholders. If you
purchase Shares by wire, you begin
earning dividends on the day your wire is received. If you purchase Shares by
check, you begin earning dividends on the business day after the Fund receives
your check. In either case, you earn dividends through the day your redemption
request is received.
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. 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.
If
you purchase Shares just before the record date for a 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 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.
27
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; 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. It is
anticipated that Fund distributions will be primarily dividends that are exempt
from federal regular income tax, although a portion of the Fund’s dividends may
not be exempt. Dividends may be subject to state and local taxes. In addition,
the Fund may realize and distribute capital gains from time to time as a result
of the Fund’s normal investment activities. 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. Capital gains and non-exempt dividends
are taxable whether paid in cash or reinvested in the Fund. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state and local tax liability.
FREQUENT
TRADING POLICIES
The
Fund is intended as a liquid, short-term investment and generally permits
frequent or short-term trading into and out of the
Fund. Given the short-term nature of a majority of the Fund’s investments, under
normal market conditions the Fund does not expect that such trading will have
material adverse consequences for the Fund or its shareholders. For these
reasons, the Fund’s Board has not adopted policies or procedures to monitor or
discourage frequent or short-term trading of the Fund’s Shares. It is possible,
however, that under certain market conditions, such frequent or short-term
trading or certain sized trades or other trading practices could have material
adverse consequences for the Fund or its shareholders, particularly long-term
shareholders. The Fund at all times reserves the right to refuse any purchase or
exchange request for any reason.
Other
funds in the Federated Hermes family of funds may impose monitoring policies.
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 month
is posted on the website seven days (or the next business day) after the end of
the month 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, weighted average effective maturity, weighted average effective
duration and other portfolio characteristics and percentage breakdowns of the
portfolio by sector and credit quality.
28
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.
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
Investment Management Company.
The Adviser manages the Fund’s assets, including buying and selling portfolio
securities. Federated Advisory Services Company (FASC), an affiliate of the
Adviser, provides certain 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
and FASC is 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The
Adviser and other advisory subsidiaries of Federated Hermes combined, advise
approximately 102 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 $668.9 billion
as of December 31, 2022. Federated Hermes was established in 1955 as Federated
Investors, Inc. and is one of the largest investment managers in the United
States with nearly 2,000 employees. Federated Hermes provides investment
products to more than 11,000 investment professionals and
institutions.
The
Adviser advises approximately 73 registered investment
companies and also manages sub-advised funds. The Adviser’s assets under
management totaled approximately $399.6 billion as of December 31,
2022.
PORTFOLIO
MANAGEMENT INFORMATION
Jeff
A. Kozemchak
Jeff
A. Kozemchak, CFA, Senior Portfolio Manager, has been the Fund’s portfolio
manager since its inception in October of
2000.
Mr.
Kozemchak is responsible for day to day management of the Fund focusing on asset
allocation, interest rate strategy and
security selection. He has been with the Adviser or an affiliate since 1987; has
worked in investment management since 1987; has managed investment portfolios
since 1990. Education: B.S., University of Pittsburgh; M.S.I.A., Carnegie Mellon
University.
Mary
Jo Ochson
Mary Jo
Ochson, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since November of 2017.
Ms.
Ochson is Head of the Tax-Free Liquidity Investment Area and Short-Term
Municipal Bonds. She is responsible for
overseeing the macro risk elements in the portfolio. She has been with the
Adviser or an affiliate since 1982; has worked in investment management since
1982; has managed investment portfolios since 1982. Education: B.S.,
Pennsylvania State University; B.S., St. Francis College; M.B.A., University of
Pittsburgh.
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 0.29% 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. The Adviser and its
affiliates have also agreed to certain “Fee Limits” as described in the footnote
to the “Risk/Return Summary: Fees and Expenses” table found in the “Fund
Summary” section of this Prospectus.
29
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 September 30 and March 31,
respectively.
Financial
Information
FINANCIAL
HIGHLIGHTS
The
Financial Highlights will help you understand the Fund’s financial performance
for its past five fiscal years, or since
inception, if the life of the Fund Share class is shorter. 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.
This
information has been 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.
30
Financial
Highlights–Class
A Shares
(For a Share Outstanding Throughout
Each Period)
|
|
Year
Ended September 30, | ||||
|
|
2023 |
2022 |
2021 |
2020 |
2019 |
|
Net
Asset Value, Beginning of Period |
$9.84 |
$10.04 |
$10.03 |
$10.01 |
$9.98 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income |
0.25 |
0.05 |
0.02 |
0.09 |
0.13 |
|
Net
realized and unrealized gain (loss) |
0.04 |
(0.20) |
0.01 |
0.02 |
0.03 |
|
TOTAL
FROM INVESTMENT OPERATIONS |
0.29 |
(0.15) |
0.03 |
0.11 |
0.16 |
|
Less
Distributions: |
|
|
|
|
|
|
Distributions
from net investment income |
(0.25) |
(0.05) |
(0.02) |
(0.09) |
(0.13) |
|
Net
Asset Value, End of Period |
$9.88 |
$9.84 |
$10.04 |
$10.03 |
$10.01 |
|
Total
Return1 |
3.02% |
(1.49)% |
0.33% |
1.14% |
1.59% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses2 |
0.51%3 |
0.51% |
0.51% |
0.57%3 |
0.81%3 |
|
Net
investment income |
2.53% |
0.45% |
0.23% |
0.94% |
1.28% |
|
Expense
waiver/reimbursement4 |
0.08% |
0.09% |
0.08% |
0.09% |
0.13% |
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$270,423 |
$407,000 |
$692,467 |
$584,371 |
$626,570 |
|
Portfolio
turnover5 |
44% |
30% |
61% |
100% |
83% |
|
1 |
Based
on net asset value, which does not reflect the sales charge, redemption
fee or contingent deferred sales charge, if
applicable. |
|
2 |
Amount
does not reflect net expenses incurred by investment companies in which
the Fund may invest. |
|
3 |
The
net expense ratios are calculated without reduction for expense offset
arrangements. The net expense ratios are 0.51%, 0.57% and 0.81% for the
years
ended
September 30, 2023, 2020 and 2019, respectively, after taking into account
these expense reductions. |
|
4 |
This
expense decrease is reflected in both the net expense and net investment
income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may
invest. |
|
5 |
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
September 30, 2023, which can be obtained free of charge.
31
Financial
Highlights–Institutional
Shares
(For a Share Outstanding Throughout
Each Period)
|
|
Year
Ended September 30, | ||||
|
|
2023 |
2022 |
2021 |
2020 |
2019 |
|
Net
Asset Value, Beginning of Period |
$9.85 |
$10.04 |
$10.03 |
$10.01 |
$9.98 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income |
0.27 |
0.07 |
0.04 |
0.11 |
0.17 |
|
Net
realized and unrealized gain (loss) |
0.03 |
(0.19) |
0.01 |
0.02 |
0.03 |
|
TOTAL
FROM INVESTMENT OPERATIONS |
0.30 |
(0.12) |
0.05 |
0.13 |
0.20 |
|
Less
Distributions: |
|
|
|
|
|
|
Distributions
from net investment income |
(0.27) |
(0.07) |
(0.04) |
(0.11) |
(0.17) |
|
Net
Asset Value, End of Period |
$9.88 |
$9.85 |
$10.04 |
$10.03 |
$10.01 |
|
Total
Return1 |
3.07% |
(1.24)% |
0.48% |
1.35% |
2.04% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses2 |
0.36%3 |
0.36% |
0.36% |
0.36%3 |
0.36%3 |
|
Net
investment income |
2.67% |
0.60% |
0.39% |
1.14% |
1.72% |
|
Expense
waiver/reimbursement4 |
0.09% |
0.09% |
0.08% |
0.08% |
0.08% |
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$791,126 |
$1,332,830 |
$2,133,831 |
$2,162,027 |
$2,158,811 |
|
Portfolio
turnover5 |
44% |
30% |
61% |
100% |
83% |
|
1 |
Based
on net asset value. |
|
2 |
Amount
does not reflect net expenses incurred by investment companies in which
the Fund may invest. |
|
3 |
The
net expense ratios are calculated without reduction for expense offset
arrangements. The net expense ratios are 0.36%, 0.36% and 0.36% for the
years
ended
September 30, 2023, 2020 and 2019, respectively, after taking into account
these expense reductions. |
|
4 |
This
expense decrease is reflected in both the net expense and net investment
income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may
invest. |
|
5 |
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
September 30, 2023, which can be obtained free of charge.
32
Financial
Highlights–Class
R6 Shares
(For a Share Outstanding Throughout
Each Period)
|
|
Year
Ended September 30, |
Period
Ended
9/30/20191 | |||
|
|
2023 |
2022 |
2021 |
2020 | |
|
Net
Asset Value, Beginning of Period |
$9.84 |
$10.04 |
$10.03 |
$10.01 |
$10.00 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income |
0.27 |
0.07 |
0.04 |
0.12 |
0.05 |
|
Net
realized and unrealized gain |
0.04 |
(0.20) |
0.01 |
0.02 |
0.01 |
|
TOTAL
FROM INVESTMENT OPERATIONS |
0.31 |
(0.13) |
0.05 |
0.14 |
0.06 |
|
Less
Distributions: |
|
|
|
|
|
|
Distributions
from net investment income |
(0.27) |
(0.07) |
(0.04) |
(0.12) |
(0.05) |
|
Net
Asset Value, End of Period |
$9.88 |
$9.84 |
$10.04 |
$10.03 |
$10.01 |
|
Total
Return2 |
3.20% |
(1.32)% |
0.50% |
1.37% |
0.66% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3 |
0.34%4 |
0.34% |
0.34% |
0.34%4 |
0.34%4,5 |
|
Net
investment income |
2.69% |
0.65% |
0.38% |
0.99% |
1.52%5 |
|
Expense
waiver/reimbursement6 |
0.07% |
0.06% |
0.06% |
0.06% |
0.07%5 |
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$100,886 |
$148,888 |
$208,627 |
$60,784 |
$12,263 |
|
Portfolio
turnover7 |
44% |
30% |
61% |
100% |
83%8 |
|
1 |
Reflects
operations for the period from May 29, 2019 (commencement of operations)
to September 30, 2019. |
|
2 |
Based
on net asset value. Total returns for periods of less than one year are
not annualized. |
|
3 |
Amount
does not reflect net expenses incurred by investment companies in which
the Fund may invest. |
|
4 |
The
net expense ratio is calculated without reduction for expense offset
arrangements. The net expense ratios are 0.34% and 0.34% for the years
ended
September
30, 2023 and 2020, respectively, and 0.34% for the period ended September
30, 2019, after taking into account these expense
reductions. |
|
5 |
Computed
on an annualized basis. |
|
6 |
This
expense decrease is reflected in both the net expense and net investment
income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may
invest. |
|
7 |
Securities
that mature are considered sales for purposes of this
calculation. |
|
8 |
Portfolio
turnover is calculated at the Fund level. Percentage indicated was
calculated for the fiscal year ended September 30,
2019. |
Further information
about the Fund’s performance is contained in the Fund’s Annual Report, dated
September 30, 2023, which can be obtained free of charge.
33
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 MUNICIPAL ULTRASHORT FUND - A CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.59% | |||||
|
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 |
$60.30 |
$10,441.00 |
|
2 |
$10,441.00 |
$522.05 |
$10,963.05 |
$62.96 |
$10,901.45 |
|
3 |
$10,901.45 |
$545.07 |
$11,446.52 |
$65.74 |
$11,382.20 |
|
4 |
$11,382.20 |
$569.11 |
$11,951.31 |
$68.64 |
$11,884.16 |
|
5 |
$11,884.16 |
$594.21 |
$12,478.37 |
$71.66 |
$12,408.25 |
|
6 |
$12,408.25 |
$620.41 |
$13,028.66 |
$74.82 |
$12,955.45 |
|
7 |
$12,955.45 |
$647.77 |
$13,603.22 |
$78.12 |
$13,526.79 |
|
8 |
$13,526.79 |
$676.34 |
$14,203.13 |
$81.57 |
$14,123.32 |
|
9 |
$14,123.32 |
$706.17 |
$14,829.49 |
$85.16 |
$14,746.16 |
|
10 |
$14,746.16 |
$737.31 |
$15,483.47 |
$88.92 |
$15,396.47 |
|
Cumulative |
|
$6,118.44 |
|
$737.89 |
|
|
FEDERATED
HERMES MUNICIPAL ULTRASHORT FUND - IS CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.44% | |||||
|
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 |
$45.00 |
$10,456.00 |
|
2 |
$10,456.00 |
$522.80 |
$10,978.80 |
$47.06 |
$10,932.79 |
|
3 |
$10,932.79 |
$546.64 |
$11,479.43 |
$49.20 |
$11,431.33 |
|
4 |
$11,431.33 |
$571.57 |
$12,002.90 |
$51.44 |
$11,952.60 |
|
5 |
$11,952.60 |
$597.63 |
$12,550.23 |
$53.79 |
$12,497.64 |
|
6 |
$12,497.64 |
$624.88 |
$13,122.52 |
$56.24 |
$13,067.53 |
|
7 |
$13,067.53 |
$653.38 |
$13,720.91 |
$58.81 |
$13,663.41 |
|
8 |
$13,663.41 |
$683.17 |
$14,346.58 |
$61.49 |
$14,286.46 |
|
9 |
$14,286.46 |
$714.32 |
$15,000.78 |
$64.29 |
$14,937.92 |
|
10 |
$14,937.92 |
$746.90 |
$15,684.82 |
$67.23 |
$15,619.09 |
|
Cumulative |
|
$6,161.29 |
|
$554.55 |
|
34
|
FEDERATED
HERMES MUNICIPAL ULTRASHORT FUND - R6 CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.41% | |||||
|
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 |
$41.94 |
$10,459.00 |
|
2 |
$10,459.00 |
$522.95 |
$10,981.95 |
$43.87 |
$10,939.07 |
|
3 |
$10,939.07 |
$546.95 |
$11,486.02 |
$45.88 |
$11,441.17 |
|
4 |
$11,441.17 |
$572.06 |
$12,013.23 |
$47.99 |
$11,966.32 |
|
5 |
$11,966.32 |
$598.32 |
$12,564.64 |
$50.19 |
$12,515.57 |
|
6 |
$12,515.57 |
$625.78 |
$13,141.35 |
$52.49 |
$13,090.03 |
|
7 |
$13,090.03 |
$654.50 |
$13,744.53 |
$54.90 |
$13,690.86 |
|
8 |
$13,690.86 |
$684.54 |
$14,375.40 |
$57.42 |
$14,319.27 |
|
9 |
$14,319.27 |
$715.96 |
$15,035.23 |
$60.06 |
$14,976.52 |
|
10 |
$14,976.52 |
$748.83 |
$15,725.35 |
$62.81 |
$15,663.94 |
|
Cumulative |
|
$6,169.89 |
|
$517.55 |
|
35
An SAI dated November 30,
2023, 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
Municipal Ultrashort Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities
Corp., Distributor
Investment
Company Act File No. 811-6447
CUSIP
31417P866
CUSIP 31417P858
CUSIP 31417P817
CUSIP 31417P858
CUSIP 31417P817
25681
(11/23)
© 2023 Federated Hermes,
Inc.