Prospectus
December
31, 2022
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Ticker
FIDPX |
Federated Hermes International Dividend Strategy Portfolio
A Portfolio of Federated Hermes Managed Pool Series
A mutual
fund seeking to provide income and long-term capital appreciation by investing
primarily in equity securities of companies based in countries outside the
United States, consisting principally of high dividend-paying stocks with
dividend growth potential. The Fund is used to implement high dividend-paying
international stock investment strategies for eligible investors in wrap fee,
separately managed and other discretionary investment accounts that are advised
or sub-advised by Federated Investment Counseling (FIC), a subsidiary of
Federated Hermes, Inc. (“Federated Hermes”), or its affiliates, or certain other
discretionary managers. Shares of the Fund held for an eligible investor may be
purchased only at the direction of FIC or other discretionary managers to such
wrap fee, separately managed or other discretionary investment
accounts.
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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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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Management
Fee |
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Distribution
(12b-1) Fee |
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Other
Expenses |
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Total
Annual Fund Operating Expenses |
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Fee
Waivers and/or Expense Reimbursements1 |
( |
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Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements |
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1
Year |
$ |
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3
Years |
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5
Years |
$ |
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10
Years |
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3
4
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1
Year |
5
Years |
Since
Inception |
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Fund: |
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Inception
Date: |
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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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MSCI
World ex-US High Dividend Yield Index1 |
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MSCI
World ex-US Index2 |
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1
2
FUND
MANAGEMENT
The
Fund’s Investment Adviser is Federated Equity Management Company of
Pennsylvania.
Daniel
Peris, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since February 2015.
Deborah
D. Bickerstaff, Portfolio Manager, has been the Fund’s portfolio manager since
February 2015.
Jared
S. Hoff, Portfolio Manager, has been the Fund’s portfolio manager since January
2017. He has
been a member of the investment management team since January 2012.
Michael
R. Tucker, Portfolio Manager, has been the Fund’s portfolio manager since
January 2017.
Purchase
and Sale of Fund Shares
There
is no required minimum initial or subsequent investment amount to invest in Fund
Shares.
Shares
of the Fund held for an Eligible Investor (see “How to Invest in the Fund”) may
be purchased only at the direction of Federated
Investment Counseling (FIC), a subsidiary of Federated Hermes, Inc. (“Federated
Hermes”) or another Discretionary Manager of the Eligible Account (see “How to
Invest in the Fund”). Shares of the Fund may be purchased any day the NYSE is
open. An account may be established and Shares purchased by submitting an
Account Application and purchase request in good order to the Fund’s Transfer
Agent, DST Asset Manager Solutions,
Inc. Shares
of the Fund may be redeemed any day the NYSE is open. Redemption requests should
be made in accordance with procedures established by the Transfer
Agent.
Tax
Information
The
Fund’s distributions are taxable as ordinary income or capital gains except when
your investment is through a 401(k)
plan, an Individual Retirement Account or other tax-advantaged investment
plan.
Payments
to DISCRETIONARY MANAGERS AND OTHER FINANCIAL INTERMEDIARIES
Shares
of the Fund held for an Eligible Investor may be purchased only at the direction
of FIC or another Discretionary Manager of
the Eligible Account. Discretionary Managers receive no fee from the Fund for
their services. If you purchase the Fund through a Discretionary Manager, the
Fund and/or its related companies do not pay the Discretionary Manager for the
sale of Fund Shares and related services. Ask your salesperson or visit your
Discretionary Manager’s website for more information.
5
What are
the Fund’s Investment Strategies?
The
Fund is a non-diversified portfolio of Federated Hermes Managed Pool Series. The
Fund’s investment objective is to provide
income and long-term capital appreciation. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the principal strategies and policies described in this Prospectus.
The
Fund pursues its investment objective by investing primarily in equity
securities of companies based in countries outside the United States,
consisting principally of high dividend-paying stocks with dividend growth
potential. The Fund is designed to purchase securities required for high
dividend-paying international stock investment strategies (“International
Dividend Strategies”) that cannot be efficiently held individually in Eligible
Accounts, but can be effectively held in a pooled vehicle, such as a mutual
fund. The strategy seeks to deliver dividend yield that is higher than the MSCI
World ex-US Index’s averages while targeting long-term dividend growth and lower
volatility than the index,
as measured
by standard deviation. The Fund generally invests in large-cap or mid-cap stocks
(which are generally defined as of the date of this prospectus as stocks of
companies with market capitalization above $7 billion and $2 billion,
respectively) and may also hold depositary receipts and real estate investment
trusts. The Fund’s investment adviser (the “Adviser”) anticipates that normally
the Fund will invest primarily in companies based in developed countries
although to a lesser extent the Fund may also invest in foreign companies based
in emerging markets.
The
Adviser believes a strategic emphasis on high dividend-paying stocks
with the
potential for future dividend growth can enhance performance over time. The
Adviser defines high-dividend paying stocks as those with a higher dividend
yield than the MSCI
World ex-US
Index’s average
dividend
yield.
The
Fund focuses on high dividend-paying companies that exhibit solid performance in
periods of market weakness in an attempt
to reduce risk. Risk is also managed through exposure to multiple countries,
sectors and industries. At the individual stock level, the Fund generally
adheres to position size limits which may be adjusted over time and are designed
to further control portfolio risk.
As
a fundamental policy, the Fund will concentrate its investments by investing
more than 25% of the value of its total assets, in
the aggregate, in one or more of the following groups of industries: banks;
telecommunication services; insurance; utilities; and energy.
Companies
highly ranked in the prioritization process are scrutinized to determine whether
the company is an attractive investment
proposition. This process is driven primarily by bottom-up fundamental
proprietary research. Broad macroeconomic trends that can influence the outlook
of sectors and industries are also taken into account.
The
Adviser’s sell discipline is a critical component of the investment process.
Generally, a stock is reviewed for sale or reduction
when one or more of the following occur:
◾ the combination of
dividend yield and dividend growth becomes notably lower than the portfolio’s
average dividend yield or dividend growth outlook;
◾ the investment thesis
deteriorates; and
◾ diminished management
commitment to the dividend.
The
Fund may use derivative contracts,
in particular
forward contracts, to manage or hedge the Fund’s currency exposure.
There
can be no assurance that the Fund’s use of derivative contracts 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 its assets so that at least 80% of its net assets
(plus any borrowings for investment purposes)
are invested in dividend-paying securities. The Fund will notify shareholders at
least 60 days in advance of any change in its investment policies that would
enable the Fund to normally invest less than 80% of its net assets (plus any
borrowings for investment purposes) in dividend-paying securities.
TEMPORARY
INVESTMENTS
The
Fund may temporarily depart from its principal investment strategies by
investing its assets in shorter-term debt securities
and similar obligations or holding cash. It may do this in response to unusual
circumstances, such as: adverse market, economic or other conditions (for
example, to help avoid potential losses, or during periods when there is a
shortage of appropriate securities); to maintain liquidity to meet shareholder
redemptions; or to accommodate cash inflows. It is possible that such
investments could affect the Fund’s investment returns and/or the ability to
achieve the Fund’s investment objectives.
What are
the Fund’s Principal Investments?
The
following provides general information on the Fund’s principal investments. The
Fund’s Statement of Additional Information
(SAI) provides information about the Fund’s non-principal investments and may
provide additional information about the Fund’s principal
investments.
6
Equity
Securities
Equity
securities represent a share of an issuer’s earnings and assets, after the
issuer pays its liabilities. The Fund cannot predict
the income it will receive from equity securities because issuers generally have
discretion as to the payment of any dividends or distributions. However, equity
securities offer greater potential for appreciation than many other types of
securities, because their value increases directly with the value of the
issuer’s business.
The
following describes the equity securities in which the Fund principally
invests.
Common
Stocks
Common
stocks are the most prevalent type of equity security. Common stocks receive the
issuer’s earnings after the issuer
pays its creditors and any preferred stockholders. As a result, changes in an
issuer’s earnings directly influence the value of its common stock.
Real
Estate Investment Trusts (REITs)
REITs
are real estate investment trusts (including foreign REITs and REIT-like
entities) that lease, operate and finance commercial
real estate. REITs in the United States are exempt from federal corporate income
tax if they limit their operations and distribute most of their income. Such tax
requirements limit a U.S. REIT’s ability to respond to changes in the commercial
real estate market.
FOREIGN
SECURITIES
Foreign
securities are securities of issuers based outside the United States. To the
extent a Fund invests in securities included
in its applicable broad-based securities market index, the Fund may consider an
issuer to be based outside the United States if the applicable index classifies
the issuer as based outside the United States. Accordingly, the Fund may
consider an issuer to be based outside the United States if the issuer satisfies
at least one, but not necessarily all, of the following:
◾ it is
organized under the laws of, or has its principal office located in, another
country;
◾ the
principal trading market for its securities is in another country;
◾ it
(directly or through its consolidated subsidiaries) derived in its most current
fiscal year at least 50% of its total assets, capitalization, gross revenue or
profit from goods produced, services performed or sales made in another country;
or
◾ it is
classified by an applicable index as based outside the United
States.
Foreign
securities may be denominated in foreign currencies or in U.S. dollars. Along
with the risks normally associated with
domestic securities of the same type, foreign securities are subject to currency
risks and risks of foreign investing. Trading in certain foreign markets is also
subject to liquidity risks.
Foreign
Exchange Contracts
In
order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received
from the sale of a foreign security into U.S. dollars, the Fund may enter into
spot currency trades. In a spot trade, the Fund agrees to exchange one currency
for another at the current exchange rate. The Fund may also enter into
derivative contracts in which a foreign currency is an underlying asset. The
exchange rate for currency derivative contracts may be higher or lower than the
spot exchange rate. Use of these derivative contracts may increase or decrease
the Fund’s exposure to currency risks.
Depositary
Receipts (A Type of Foreign Equity Security)
Depositary
receipts represent interests in underlying securities issued by a foreign
company. Depositary receipts are not traded
in the same market as the underlying security. The foreign securities underlying
American Depositary Receipts (ADRs) are traded outside the United States. ADRs
provide a way to buy shares of foreign-based companies in the United States
rather than in overseas markets. ADRs are also traded in U.S. dollars,
eliminating the need for foreign exchange transactions. The foreign securities
underlying European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs) and International Depositary Receipts (IDRs) are traded globally or
outside the United States. Depositary receipts involve many of the same risks of
investing directly in foreign securities, including currency risks and risks of
foreign investing.
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
7
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”).
8
The
Fund may invest in a derivative contract if it is permitted to own, invest in,
or otherwise have economic exposure to the
Reference Instrument. The Fund is not required to own a Reference Instrument in
order to buy or sell a derivative contract relating to that Reference
Instrument. The Fund may trade in the following specific types and/or
combinations of derivative contracts:
Futures
Contracts (A Type of Derivative)
Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a Reference Instrument at a
specified price, date and time. Entering into a contract to buy a Reference
Instrument is commonly referred to as buying a contract or holding a long
position in the asset. Entering into a contract to sell a Reference Instrument
is commonly referred to as selling a contract or holding a short position in the
Reference Instrument. Futures contracts are considered to be commodity
contracts. The Adviser has claimed an exclusion from the definition of the term
“commodity pool operator” under the Commodity Exchange Act with respect to the
Fund, and therefore is not subject to registration or regulation as a commodity
pool operator under the Act with respect to the Fund. Futures contracts traded
OTC are frequently referred to as forward contracts. The Fund can buy or sell
financial futures (such as interest rate futures, index futures and security
futures), as well as currency futures and currency forward
contracts.
Investing
in Securities of Other Investment Companies
The
Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market
funds, 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. 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. In the case of an investment in an affiliated fund, a conflict of
interest can 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.
OTHER
INVESTMENTS, TRANSACTIONS, TECHNIQUES
Hedging
Hedging
transactions are intended to reduce specific risks. For example, to protect the
Fund against circumstances that would
normally cause the Fund’s portfolio securities to decline in value, the Fund may
buy or sell a derivative contract that would normally increase in value under
the same circumstances. The Fund may also attempt to hedge by using combinations
of different derivative contracts, or derivative contracts and securities. The
Fund’s ability to hedge may be limited by the costs of the derivative contracts.
The Fund may attempt to lower the cost of hedging by entering into transactions
that provide only limited protection, including transactions that: (1) hedge
only a portion of its portfolio; (2) use derivative contracts that cover a
narrow range of circumstances; or (3) involve the sale of derivative contracts
with different terms. Consequently, hedging transactions will not eliminate risk
even if they work as intended. In addition, hedging strategies are not always
successful, and could result in increased expenses and losses to the
Fund.
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 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.
9
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 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 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.
Stock
Market Risk
The
value of equity securities in the Fund’s portfolio will rise and fall over time.
These fluctuations could be a sustained trend or a
drastic movement. Historically, the equity market has moved in cycles, and the
value of the Fund’s securities may fluctuate from day to day. The Fund’s
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund’s Share price may
decline. The Adviser attempts to manage market risk by limiting the amount the
Fund invests in each company’s equity securities. However, diversification will
not protect the Fund against widespread or prolonged declines in the stock
market.
Information
publicly available about a company, whether from the company’s financial
statements or other disclosures or from
third parties, or information available to some but not all market participants,
can affect the price of a company’s shares in the market. The price of a
company’s shares depends significantly on the information publicly available
about the company. The reporting of poor results by a company, the restatement
of a company’s financial statements or corrections to other information
regarding a company or its business may adversely affect the price of its
shares, as would allegations of fraud or other misconduct by the company’s
management. The Fund may also be disadvantaged if some market participants have
access to material information not readily available to other market
participants, including the Fund.
Mid-Cap
Company Risk
The
Fund may invest in mid-capitalization (or “mid-cap”) companies. Market
capitalization is determined by multiplying
the number of a company’s outstanding shares by the current market price per
share. Mid-cap companies often have narrower markets and limited managerial and
financial resources compared to larger, more established companies. The
performance of mid-cap companies can be more volatile and they face greater risk
of business failure, compared to larger, more established companies, which could
increase the volatility of the Fund’s portfolio and performance. Shareholders
should expect that the value of the Fund’s Shares will be more volatile than a
fund that invests exclusively in large-cap companies.
Large-Cap
Company Risk
The
Fund may invest in large-capitalization (or “large-cap”) companies. Market
capitalization is determined by multiplying
the number of a company’s outstanding shares by the current market price per
share. Larger, more established, companies may have fewer opportunities to
expand the market for their products or services, may focus their competitive
efforts on maintaining or expanding their market share, and may be unable to
respond quickly to new competitive challenges, like price competition, changes
in consumer tastes or innovative products. These factors could result in the
share price of larger companies not keeping pace with the overall stock market
or growth in the general economy, and could have a negative effect on the Fund’s
portfolio, performance and Share price.
Risk
Related to Investing for dividend income
There
is no guarantee that the issuers of the stocks held by the Fund will declare
dividends in the future or that, if dividends
are declared, they will remain at their current levels or increase over time.
Because a dividend is always a positive contributor to total return,
dividend-paying stocks are typically less volatile than non-dividend-paying
stocks. Accordingly, the Fund’s performance may lag behind the general market
when dividend-paying stocks are out of favor.
RISK
OF FOREIGN INVESTING
Foreign
securities and national governments, including ADRs and domestically traded
securities of foreign issuers, pose additional
risks because foreign economic or political conditions may be less favorable
than those of the United States. Securities in foreign markets may also be
subject to taxation policies that reduce returns for U.S. investors.
10
Foreign
companies and national governments may not provide information (including
financial statements) as frequently
or to as great an extent as companies in the United States. Foreign companies
may also receive less coverage than U.S. companies by market analysts and the
financial press. In addition, foreign countries may lack uniform accounting,
auditing and financial reporting standards or regulatory requirements comparable
to those applicable to U.S. companies. These factors may prevent the Fund and
its Adviser from obtaining information concerning foreign companies and national
governments that is as frequent, extensive and reliable as the information
available concerning companies in the United States.
Foreign
countries may have restrictions on foreign ownership of securities or may impose
exchange controls, capital flow
restrictions or repatriation restrictions which could adversely affect the
liquidity of the Fund’s investments.
Legal
remedies available to investors in certain foreign countries may be more limited
than those available with respect to
investments in the United States or in other foreign countries.
Risk
of Investing IN DepoSitary Receipts and Domestically Traded Securities of
Foreign Issuers
Because
the Fund may invest in ADRs and other domestically traded securities of foreign
companies, whether in the United
States or in foreign local markets, the Fund’s Share price may be more affected
by foreign economic and political conditions, taxation policies and accounting
and auditing standards than would otherwise be the case. Foreign companies may
not provide information as frequently or to as great an extent as companies in
the United States. Foreign companies may also receive less coverage than U.S.
companies by market analysts and the financial press. In addition, foreign
companies may lack uniform accounting, auditing and financial reporting
standards or regulatory requirements comparable to those applicable to U.S.
companies. These factors may prevent the Fund and its Adviser from obtaining
information concerning foreign companies that is as frequent, extensive and
reliable as the information concerning companies in the United
States.
Currency
Risk
Exchange
rates for currencies fluctuate daily. The combination of currency risk and
market risks tends to make securities
traded in foreign markets more volatile than securities traded exclusively in
the United States. The Adviser attempts to manage currency risk by limiting the
amount the Fund invests in securities denominated in a particular currency.
However, diversification will not protect the Fund against a general increase in
the value of the U.S. dollar relative to other currencies.
Investing
in currencies or securities denominated in a foreign currency entails risk of
being exposed to a currency that may not
fully reflect the strengths and weaknesses of the economy of the country or
region utilizing the currency. Currency risk includes both the risk that
currencies in which the Fund’s investments are traded, or currencies in which
the Fund has taken an active investment position, will decline in value relative
to the U.S. dollar and, in the case of hedging positions, that the U.S. dollar
will decline in value relative to the currency being hedged. In addition, it is
possible that a currency (such as, for example, the euro) could be abandoned in
the future by countries that have already adopted its use, and the effects of
such an abandonment on the applicable country and the rest of the countries
utilizing the currency are uncertain but could negatively affect the Fund’s
investments denominated in the currency. If a currency used by a country or
countries is replaced by another currency, the Fund’s Adviser would evaluate
whether to continue to hold any investments denominated in such currency, or
whether to purchase investments denominated in the currency that replaces such
currency, at the time. Such investments may continue to be held, or purchased,
to the extent consistent with the Fund’s investment objective(s) and permitted
under applicable law.
Many
countries rely heavily upon export-dependent businesses and any strength in the
exchange rate between a currency
and the U.S. dollar or other currencies can have either a positive or a negative
effect upon corporate profits and the performance of investments in the country
or region utilizing the currency. Adverse economic events within such country or
region may increase the volatility of exchange rates against other currencies,
subjecting the Fund’s investments denominated in such country’s or region’s
currency to additional risks. In addition, certain countries, particularly
emerging market countries, may impose foreign currency exchange controls or
other restrictions on the transferability, repatriation or convertibility of
currency.
European
Union and eurozone Related risk
A
number of countries in the European Union (EU), including certain countries
within the EU that have adopted the euro
(Eurozone), have experienced, and may continue to experience, severe economic
and financial difficulties. Additional countries within the EU may also fall
subject to such difficulties. These events could negatively affect the value and
liquidity of the Fund’s investments in euro-denominated securities and
derivatives contracts, securities of issuers located in the EU or with
significant exposure to EU issuers or countries. If the euro is dissolved
entirely, the legal and contractual
11
consequences
for holders of euro-denominated obligations and derivative contracts would be
determined by laws in effect at such time. Such investments may continue to be
held, or purchased, to the extent consistent with the Fund’s investment
objective(s) and permitted under applicable law. These potential developments,
or market perceptions concerning these and related issues, could adversely
affect the value of the Shares.
Certain
countries in the EU have had to accept assistance from supra-governmental
agencies such as the International Monetary
Fund, the European Stability Mechanism (the “ESM”) or other supra-governmental
agencies. The European Central Bank has also been intervening to purchase
Eurozone debt in an attempt to stabilize markets and reduce borrowing costs.
There can be no assurance that these agencies will continue to intervene or
provide further assistance and markets may react adversely to any expected
reduction in the financial support provided by these agencies. Responses to the
financial problems by European governments, central banks and others including
austerity measures and reforms, may not work, may result in social unrest and
may limit future growth and economic recovery or have other unintended
consequences.
In
addition, one or more countries may withdraw from the EU, and one or more
countries within the Eurozone may abandon the euro. The
impact of these actions, especially if they occur in a disorderly fashion, could
be significant and far-reaching. On January 31, 2020, the United Kingdom (UK)
left the EU, commonly referred to as “Brexit,” and there commenced a transition
period during which the EU and UK negotiated and agreed on the nature of their
future relationship, with such agreements becoming effective on December 31,
2020. There is significant market uncertainty regarding Brexit’s ramifications,
and the range and potential implications of possible political, regulatory,
economic and market outcomes are difficult to predict. This long-term
uncertainty may affect other countries in the EU and elsewhere and may cause
volatility within the EU, triggering prolonged economic downturns in certain
countries within the EU. In addition, Brexit may create additional and
substantial economic stresses for the UK, including a contraction of the UK
economy and price volatility in UK stocks, decreased trade, capital outflows,
devaluation of the British pound, wider corporate bond spreads due to
uncertainty and declines in business and consumer spending as well as foreign
direct investment. Brexit may also adversely affect UK-based financial firms,
including certain sub-advisers to the Federated Hermes Funds, that have
counterparties in the EU or participate in market infrastructure (trading
venues, clearinghouses, settlement facilities) based in the EU. These events and
the resulting market volatility may have an adverse effect on the performance of
the Fund.
CUSTODIAL
SERVICES AND RELATED INVESTMENT COSTS
Custodial
services and other costs relating to investment in international securities
markets generally are more expensive
than in the United States. Such markets have settlement and clearance procedures
that differ from those in the United States. In certain markets, there have been
times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions. The
inability of the Fund to make intended securities purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities.
Inability to dispose of a portfolio security caused by settlement problems could
result in losses to the Fund due to a subsequent decline in value of the
portfolio security. In addition, security settlement and clearance procedures in
some emerging market countries may not fully protect the Fund against loss of
its assets.
Sector
Risk
Companies
with similar characteristics may be grouped together in broad categories called
sectors. Sector risk is the possibility
that a certain sector may underperform other sectors or the market as a whole.
As the Adviser allocates more of the Fund’s portfolio holdings to a particular
sector, the Fund’s performance will be more susceptible to any economic,
business or other developments which generally affect that sector.
Risk
of Investing in Emerging Market Countries
Securities
issued or traded in emerging markets generally entail greater risks than
securities issued or traded in developed
markets. For example, their prices may be significantly more volatile than
prices in developed countries. Emerging markets economies may also experience
more severe downturns (with corresponding currency devaluations) than developed
economies.
Emerging
market countries may have relatively unstable governments and may present the
risk of nationalization of businesses,
expropriation, confiscatory taxation or, in certain instances, reversion to
closed market, centrally planned economies.
12
Liquidity
Risk
Trading
opportunities are more limited for equity securities that are not widely held.
This 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.
Liquidity
risk also refers to the possibility that the Fund may not be able to sell a
security or close out a derivative contract
when it wants to. If this happens, the Fund will be required to continue to hold
the security or keep the position open, and the Fund could incur
losses.
OTC
derivative contracts generally carry greater liquidity risk than exchange-traded
contracts. This risk may be increased
in times of financial stress, if the trading market for OTC derivative contracts
becomes restricted.
Risk
of Investing in Derivative Contracts
The
Fund’s exposure to derivative contracts (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 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 may be erroneously priced or
improperly valued and, as a result, the Fund may need to make increased cash
payments to the counterparty. Fourth, exposure to derivative contracts may have
tax consequences to the Fund and its shareholders. For example, derivative
contracts 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 may cause
the Fund to: (a) incur an excise tax on a portion of the income related to those
contracts; 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 may also involve other risks described
in this Prospectus, such as stock market, currency, and liquidity
risks.
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.
RISK
OF NON-DIVERSIFIED FUND
The
Fund is non-diversified. Compared to diversified mutual funds, it may invest a
higher percentage of its assets among
fewer issuers of portfolio securities. In certain situations, being
non-diversified may reduce the Fund’s credit risk by enabling it to avoid
investing in certain countries, regions or sectors that exhibit above average
credit risk. However, being non-diversified may also increase the Fund’s risk by
magnifying the impact (positively or negatively) that only one issuer has on the
Fund’s share price and performance.
13
CONCENTRATION
RISK
The
Fund will concentrate its investments by investing more than 25% of the value of
its total assets, in the aggregate, in the
following groups of industries: banks; telecommunication services; insurance;
energy; and utilities. Because the Fund will be concentrated in such groups of
industries, it may be subject to more risks than if it were broadly diversified
across additional industries and groups of industries of the economy. General
changes in market sentiment towards a group of industries may adversely affect
the Fund, and the performance of such industry groups may lag behind the broader
market as a whole. Risks associated with such groups of industries include, but
are not limited to, the following:
Banking
Concentration Risk: Banks are
very sensitive to changes in interest rates and general economic conditions. The
profitability of the banking industry group is dependent upon banks being able
to obtain funds at reasonable costs and upon liquidity in the capital and credit
markets to finance their lending operations. Adverse general economic conditions
can cause financial difficulties for a bank’s borrowers and the borrowers’
failure to repay their loans can adversely affect the bank’s financial
situation. Companies in the banking industry group are subject to extensive
regulation at the federal and/or state level and, to the extent that they
operate internationally, in other countries. Banks, savings and loan
associations and their holding companies are especially subject to adverse
effects of changes in interest rates, increases in loan losses, increases in
deposit costs, concentrations of loans in particular industries (such as real
estate or energy) and significant competition. The profitability of these
businesses is to a significant degree dependent upon the availability and cost
of capital funds. Banks are also subject to extensive regulation and decisions
by regulators may impose stricter capital standards and may limit the loans
banks make and the interest rates and fees they charge, which could reduce bank
profitability.
Telecommunications
Concentration Risk: The
telecommunications industry group includes wireline telephone, wireless
telephone, cable television, internet and other communications media. Companies
that distribute wireline telephone services and provide access to the telephone
networks still comprise a large portion of the telecommunications industry, but
other, less-regulated firms providing services such as wireless telephone
services, data transmission and processing, equipment retailing, computer
software and hardware and internet services are becoming increasingly
significant components as well. The telecommunications industry can be
significantly affected by failure or delays in obtaining financing or regulatory
approval, intense competition, product incompatibility, changing consumer
preferences, rapid obsolescence, significant capital expenditures, and heavy
debt burdens. In addition, potential statutory or regulatory changes could
either help or harm particular segments of the telecommunications
industry.
Insurance
Concentration Risk: Many
factors can affect significantly the profits of companies involved in the
insurance industry group, including changes in interest rates, general economic
conditions, the imposition of premium rate caps, misapprehension of the risks
involved in given underwritings, competition and pressure to compete globally,
including price and marketing competition, and other changes in government
regulation or tax law. In addition, other factors such as mortality and
morbidity rates, actuarial miscalculations, environmental clean-up costs and
catastrophic events, including natural disasters and terrorist acts, and
availability and cost of reinsurance, may affect significantly different
segments of the insurance industry.
Energy
Concentration Risk: The
profitability of companies in the energy industry group may be affected
adversely by factors such as changes in worldwide energy prices, and exploration
and production spending. Changes in government regulation, economic conditions,
government regulation and events in the regions that the companies operate
(e.g., expropriation, nationalization, confiscation of assets and property or
the imposition of restrictions on foreign investments and repatriation of
capital, military coups, social unrest, violence or labor unrest, and terrorism
and natural disasters) also affect companies in this industry. In addition,
certain companies could be at risk for significant environmental damage claims.
Furthermore, certain companies in this industry group could be adversely
affected by commodity price volatility, changes in exchange rates, interest
rates, imposition of import controls, increased competition, depletion of
resources, development of alternative energy sources, energy conservation
efforts, technological developments and labor relations.
Utilities
Concentration Risk: Issuers
in the utilities industry group are subject to many risks, including the
following: increases in fuel and other operating costs; restrictions on
operations, increased costs, and delays as a result of environmental and safety
regulations; coping with the impact of energy conservation and other factors
reducing the demand for services; technological innovations that may render
existing plants, equipment or products obsolete; the potential impact of natural
or man-made disasters; difficulty in obtaining adequate returns on invested
capital; difficulty in obtaining approval of rate increases; the high cost of
obtaining financing, particularly during periods of inflation; increased
competition resulting from deregulation, overcapacity, and pricing pressures;
and the negative impact of regulation as well as labor unrest. Although utility
companies generate relatively predictable streams of revenue and income and are
likely to pay dividends to shareholders, these risks may have an adverse effect
on a utility company’s ability to pay dividends, which could make such utility
company’s shares unattractive to investors, resulting in a lower share price and
increased volatility.
14
REAL
ESTATE INVESTMENT TRUST RISK
Real
estate investment trusts (REITs), including foreign REITs and REIT-like
entities, are subject to risks associated with the
ownership of real estate. Some REITs experience market risk due to investment in
a limited number of properties, in a narrow geographic area, or in a single
property type, which increases the risk that such REIT could be unfavorably
affected by the poor performance of a single investment or investment type.
These companies are also sensitive to factors such as changes in real estate
values and property taxes, interest rates, cash flow of underlying real estate
assets, supply and demand and the management skill and creditworthiness of the
issuer. Borrowers could default on or sell investments that a REIT holds, which
could reduce the cash flow needed to make distributions to investors. In
addition, REITs may also be affected by tax and regulatory requirements
impacting the REITs’ ability to qualify for preferential tax treatments or
exemptions. REITs require specialized management and pay management expenses.
REITs also are subject to physical risks to real property, including weather,
natural disasters, terrorist attacks, war, or other events that destroy real
property. Foreign REITs and REIT-like entities can also be subject to currency
risk, emerging market risk, limited public information, illiquid trading and the
impact of local laws.
REITs
include equity REITs and mortgage REITs. Equity REITs may be affected by changes
in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by the
quality of any credit extended. Further, equity and mortgage REITs are dependent
upon management skills and generally may not be diversified. Equity and mortgage
REITs are also subject to heavy cash flow dependency, defaults by borrowers and
self-liquidations. In addition, equity and mortgage REITs could possibly fail to
qualify for tax-free pass-through of income under applicable tax laws or to
maintain their exemptions from registration under the Investment Company Act of
1940, as amended. The above factors may also adversely affect a borrower’s or a
lessee’s ability to meet its obligations to the REIT. In the event of a default
by a borrower or lessee, the REIT may experience delays in enforcing its rights
as a mortgagee or lessor and may incur substantial costs associated with
protecting its investments. In addition, even many of the larger REITs in the
industry tend to be small- to medium-sized companies in relation to the equity
markets as a whole.
Effective
for taxable years beginning after December 31, 2017, the Tax Cuts and Jobs Act
generally allows individuals and
certain non-corporate entities, such as partnerships, a deduction for 20% of
qualified REIT dividends. Related regulations allow a regulated investment
company to pass the character of its qualified REIT dividends through to its
shareholders, provided certain holding period requirements are met.
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. The commencement, continuation or ending of
government policies and economic stimulus programs, changes in monetary policy,
increases or decreases in interest rates, or other factors or events that affect
the financial markets may contribute to the development of or increase in
volatility, illiquidity, shareholder redemptions and other adverse effects (such
as a decline in a company’s stock price), which could negatively impact the
Fund’s performance. For example, the value of equity securities may rise and
fall in response to changes in interest rates. Market factors, such as the
demand for particular equity securities, may cause the price of certain equity
securities to fall while the prices of other securities rise or remain
unchanged.
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.
15
How to
Invest in the Fund
The
Fund is used to implement high dividend-paying international stock investment
strategies for investors in wrap fee, separately
managed, and other discretionary investment accounts that are advised or
sub-advised by Federated Investment Counseling (FIC), a subsidiary of Federated
Hermes, Inc. (“Federated Hermes”), or its affiliates, or certain other
third-party discretionary managers that have a business relationship with FIC as
described below. The Fund is advised by Federated Equity Management Company of
Pennsylvania (“Adviser”), another subsidiary of Federated Hermes, and an
affiliate of FIC.
For
purposes of this Prospectus: (1) the high dividend-paying international stock
investment strategies implemented through
investments in the Fund are referred to as the “International Dividend
Strategies”; (2) the investors in the wrap fee, separately managed and other
discretionary investment accounts that may be permitted to invest in the Fund
are referred to as “Eligible Investors”; (3) the wrap fee, separately managed
and other discretionary investment accounts in which Eligible Investors may
invest are referred to as “Eligible Accounts”; and (4) FIC, its affiliates and
any other third-party discretionary managers that may invest Eligible Investors’
assets in the Fund are referred to as “Discretionary Managers.”
Eligible
Investors in the Fund do not include investment companies under the Investment
Company Act of 1940 (“1940 Act”), or private funds
exempt from registration under the 1940 Act pursuant to Sections 3(c)(1) or
3(c)(7) of the 1940 Act, unless appropriate exemptive relief is obtained under
the 1940 Act and the Fund determines to accept the purchase order for such an
investment. In addition, unless the Fund determines to accept a purchase order
for an investment, an Eligible Investor in the Fund does not
include:
(i) a
non-resident alien within the meaning of I.R.C. § 7701(b)(1)(B) who is a natural
person; (ii) a covered expatriate (i.e., a U.S. citizen temporarily residing
abroad) within the meaning of I.R.C. § 877A(g)(1)(A); (iii) a foreign
institutional investor; or (iv) a fund or investor in the European Union. At any
time that an investor in the Fund ceases to be an Eligible Investor and FIC (or
its affiliate) is acting in a discretionary capacity, the Fund will redeem the
Fund’s Shares held by such investor. At any time that an investor in the Fund
(through a relationship with a third-party discretionary manager that has a
business relationship with FIC (or its affiliate)) ceases to be an Eligible
Investor, the third-party discretionary manager will redeem the Fund’s Shares
held by such investor. In all circumstances, Federated Securities Corp. reserves
the right to authorize the liquidation of shares for ineligible
investors.
The
International Dividend Strategies may include investments in individual
securities, as well as shares of the Fund (“Shares”),
depending upon the type of Eligible Account, the applicable investment
objectives, restrictions and investment mandate of an Eligible Investor,
instructions provided by an Eligible Investor or Discretionary Manager or other
relevant factors. The Fund is designed to purchase securities required for the
International Dividend Strategies that cannot be efficiently held individually
in Eligible Accounts, but can be effectively held in a pooled vehicle, such as a
mutual fund.
When
the Fund is used to implement International Dividend Strategies for wrap fee and
separately managed accounts, the wrap
fee program sponsors or separately managed account managers typically will have
contracts with Eligible Investors to provide investment management, custody
and/or other services to Eligible Investors in connection with investments in
Eligible Accounts. Eligible Investors typically will pay negotiated asset-based
fees, which may vary, for the services. In wrap fee programs, the fees generally
will be aggregated or “bundled.” FIC, or an affiliate, will be engaged as an
adviser or sub-adviser to manage, on a discretionary basis, assets of the
Eligible Investors invested in the Eligible Accounts in accordance with one or
more International Dividend Strategies developed by FIC or an affiliate. FIC, or
an affiliate, typically will receive negotiated asset-based investment advisory
fees for managing the Eligible Investors’ assets and performing other
administrative services. These fees received by FIC or an affiliate, may vary
between wrap fee program sponsors and/or separately managed account managers,
and typically will be paid out of the aggregated fees charged to Eligible
Investors by the wrap fee program sponsors and/or separately managed account
managers. The fees received by FIC, or an affiliate, will be paid for separate
account advisory services which are separate from the Adviser’s management of
the Fund.
Where
FIC, or an affiliate, will be the Discretionary Manager for Eligible Accounts of
Eligible Investors, FIC, or an affiliate,
will implement the applicable International Dividend Strategies through, among
other possible investments, purchasing and redeeming Shares of the Fund on
behalf of the Eligible Investors. In such cases, the Fund will be used to
implement certain investment strategies offered by FIC, including an investment
strategy for Eligible Accounts. The investment adviser to the Fund does not
charge a fee for its advisory services to the Fund and has contractually agreed
to reimburse all operating expenses, excluding extraordinary expenses, incurred
by the Fund. However, as discussed above in “Investing in Securities of Other
Investment Companies,” the Fund may invest its assets in securities of other
investment companies, including the securities of affiliated money market funds,
as an efficient means of implementing its investment
16
strategies,
managing its uninvested cash and/or other investment reasons consistent with the
Fund’s investment objective and investment strategies. For example, the Fund may
decide to have any excess cash swept on a daily basis into an affiliated money
market fund. 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.
If
the Fund is used to implement International Dividend Strategies for other
separately managed or discretionary investment
accounts, FIC, or an affiliate, will not manage, on a discretionary basis, the
accounts of the Eligible Investors invested in these types of Eligible Accounts.
The Discretionary Managers of the Eligible Investors’ accounts will be
third-party discretionary managers. These Discretionary Managers typically will
have contracts with Eligible Investors to provide investment management, custody
and/or other services to Eligible Investors in connection with investments in
these Eligible Accounts. Eligible Investors typically will pay negotiated
asset-based fees, which may vary, for the services. These Discretionary Managers
will be engaged as advisers or sub-advisers to manage, on a discretionary basis,
assets of the Eligible Investors invested in these Eligible Accounts in
accordance with one or more International Dividend Strategies developed by these
Discretionary Managers. These Discretionary Managers will have separate
contracts with FIC, or an affiliate, to provide these Discretionary Managers
with one or more model portfolios for International Dividend Strategies
developed by FIC or an affiliate, as well as recommendations for updates to the
model portfolios. These Discretionary Managers will use the model portfolios,
and recommended updates, at their discretion to develop the Discretionary
Managers’ International Dividend Strategies. FIC, or an affiliate, will not have
discretionary authority over Eligible Investors’ accounts. As compensation for
providing the model portfolios and recommended updates, FIC, or an affiliate,
typically will receive negotiated asset-based fees, which will be determined
based on the amount of assets under management these Discretionary Managers
manage in accordance with their International Dividend Strategies that they
develop using the model portfolios, and recommended updates, provided by FIC or
an affiliate. These fees received by FIC or an affiliate may vary between
Discretionary Managers, and will be paid to FIC, or an affiliate, by these
Discretionary Managers. The fees received by FIC, or an affiliate, will be paid
for services separate from the Adviser’s management of the Fund. These
Discretionary Managers will have the option to implement their International
Dividend Strategies through, among other possible investments, purchasing and
redeeming Shares of the Fund on behalf of the Eligible Investors.
Shareholders
of the Fund, as Eligible Investors, are strongly encouraged to read carefully
the wrap fee brochure or other disclosure
documents provided to them in connection with their investments in wrap fee,
separately managed or other discretionary investment accounts (i.e., the
Eligible Accounts). To the extent that an Eligible Investor has imposed
investment restrictions on its Eligible Accounts, the Fund may hold investments
that are inconsistent with the Eligible Investor’s investment restrictions.
These brochures and disclosure documents will contain information about the fees
charged to Eligible Investors in connection with their investments in the
Eligible Accounts. These brochures and other disclosure documents will contain
information about the fees paid or received by the wrap fee program sponsors, or
Discretionary Managers or other third-parties, to or from FIC, or its
affiliates, in connection with the Eligible Investors’ investments in the
Eligible Accounts. These brochures and disclosure documents also will contain
other important information regarding the Discretionary Managers and Eligible
Accounts, such as minimum Eligible Account sizes. Shareholders of the Fund, as
Eligible Investors, pay no additional fees or expenses to purchase Shares of the
Fund.
To
the extent permitted under applicable law, the Fund may also be used as an
investment option for other investment companies
managed by the Adviser or an affiliate. These other investment companies are
referred to in this Prospectus as “Affiliated Funds.” As a result, at any time,
shareholders of the Fund may include Eligible Investors and, to the extent
permitted under applicable law, Affiliated Funds.
Shares
of the Fund held by an Eligible Investor may be purchased or redeemed only at
the direction of FIC or another Discretionary
Manager of the Eligible Account. To the extent the Fund is permitted as an
investment option for an Affiliated Fund, Shares also may be purchased and
redeemed at the discretion of an Affiliated Fund’s adviser. Shares can be
purchased or redeemed on any day the New York Stock Exchange (NYSE) is
open.
What Do
Shares Cost?
CALCULATION
OF NET ASSET VALUE
When
the Fund receives a transaction request in proper form (as described in this
Prospectus under the sections entitled “How to
Purchase Shares” and “How to Redeem Shares”), it is processed at the next
calculated net asset value of a Share (NAV). 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 by
valuing its assets, subtracting its liabilities, and dividing the balance by the
number of Shares outstanding. The Fund’s current NAV and/or public offering
price may be found at FederatedInvestors.com, via
online news sources and in certain newspapers.
17
Eligible
Investors can purchase, redeem or exchange Shares any day the NYSE is
open.
When
the Fund holds securities that trade principally in foreign markets on days the
NYSE is closed, the value of the Fund’s
assets may change on days you cannot purchase or redeem Shares. This may also
occur when the U.S. markets for fixed-income securities are open on a day the
NYSE is closed.
Valuation
of Portfolio Securities by the Fund
The
Fund generally values portfolio securities in calculating NAV as
follows:
◾ Equity
securities listed on an exchange or traded through a regulated market system are
valued at their last reported sale price or official closing price in their
principal exchange or market.
◾ Derivative contracts
listed on exchanges are valued at their reported settlement or closing price,
except that options are valued at the mean of closing bid and ask
quotations.
◾ OTC derivative contracts
are fair valued using price evaluations provided by a pricing service approved
by the Adviser.
If any
price, quotation, price evaluation or other pricing source is not readily
available when the NAV is calculated, if the Fund cannot obtain
price evaluations from a pricing service or from more than one dealer for an
investment within a reasonable period of time as set forth in the Adviser’s
valuation policies and procedures, or if information furnished by a pricing
service, in the opinion of the valuation committee, is deemed not representative
of the fair value of such security, the Fund uses the fair value of the
investment determined in accordance with the procedures generally described
below. There can be no assurance that the Fund could obtain the fair value
assigned to an investment if it sold the investment at approximately the time at
which the Fund determines its NAV per share.
Shares
of other mutual funds are valued based upon their reported NAVs. The
prospectuses for these mutual funds explain
the circumstances under which they will use fair value pricing and the effects
of using fair value pricing.
Fair
Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Investment Company Act of 1940, the Board of Trustees 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 Statement of Additional Information (SAI) discusses the
methods used by pricing services and the Valuation Committee in valuing
investments.
Using
fair value to price investments may result in a value that is different from an
investment’s most recent closing price and from the prices
used by other registered funds to calculate their NAVs. The application of the
fair value procedures to an investment represents a good faith determination of
such investment’s fair value. There can be no assurance that the Fund could
obtain the fair value assigned to an investment if it sold the investment at
approximately the time at which the Fund determines its NAV per share, and the
actual value could be materially different.
The
Adviser also
has adopted procedures requiring an investment to be priced at its fair value
whenever the Valuation Committee determines that a significant event affecting
the value of the investment has occurred between the time as of which the price
of the investment would otherwise be determined and the time as of which the NAV
is computed. An event is considered significant if there is both an affirmative
expectation that the investment’s value will change in response to the event and
a reasonable basis for quantifying the resulting change in value.
Examples
of significant events that may occur after the close of the principal market on
which a security is traded, or after the time of a price
evaluation provided by a pricing service or a dealer, include:
◾ With
respect to securities traded principally in foreign markets, significant trends
in U.S. equity markets or in the trading of foreign securities index futures
contracts;
◾ Political
or other developments affecting the economy or markets in which an issuer
conducts its operations or its securities are traded; and
◾ Announcements
concerning matters such as acquisitions, recapitalizations, or litigation
developments, or a natural disaster affecting the issuer’s operations or
regulatory changes or market developments affecting the issuer’s
industry.
18
The
Adviser has
adopted procedures whereby the Valuation Committee uses a pricing service to
provide factors to update the fair value of equity securities traded principally
in foreign markets from the time of the close of their respective foreign stock
exchanges to the pricing time of the Fund. For other significant events, the
Fund may seek to obtain more current quotations or price evaluations from
alternative pricing sources. If a reliable alternative pricing source is not
available, the Valuation Committee will determine the fair value of the
investment. The Board periodically reviews fair valuations made in response to
significant events.
The
fair valuation of securities following a significant event can serve to reduce
arbitrage opportunities for short-term traders to profit at the
expense of long-term investors in the Fund. For example, such arbitrage
opportunities may exist when the market on which portfolio securities are traded
closes before the Fund calculates its NAV, which is typically the case with
Asian and European markets. However, there is no assurance that these
significant event procedures will prevent dilution of the NAV by short-term
traders. See “Account and Share Information–Frequent
Trading Policies” for other procedures the Fund
employs to deter such short-term trading.
How to
Purchase Shares
Shares
of the Fund held for an Eligible Investor may be purchased only at the direction
of FIC or another Discretionary Manager of
the Eligible Account. To the extent the Fund is permitted as an investment
option for an Affiliated Fund, Shares also may be purchased at the discretion of
the Affiliated Funds adviser. Shares of the Fund may be purchased any day the
NYSE is open. An account may be established and Shares purchased by submitting
an Account Application and purchase request in good order to the Fund’s Transfer
Agent State Street Bank and Trust Company.
Payment
by federal funds must be received by the Fund’s custodian by 3:00 p.m. (Eastern
time) the third business day following
the receipt of the purchase order. The Fund reserves the right to reject any
request to purchase Shares.
How to
Redeem Shares
Shares
of the Fund held by an Eligible Investor may be redeemed only at the direction
of FIC or another Discretionary Manager of
the Eligible Investor’s Eligible Account.
Shares
held by or on behalf of a shareholder who ceases to be an Eligible Investor (as
defined above) must be redeemed and each
shareholder on whose behalf FIC or another Discretionary Manager has purchased
Shares agrees to any such redemption. If FIC (or its affiliate) is acting in a
discretionary capacity, the Fund will redeem the Fund’s Shares held by such
investor. If the Fund Shares were purchased through a relationship with a
third-party Discretionary Manager that has a business relationship with FIC (or
its affiliate), the third-party Discretionary Manager will redeem the Fund’s
Shares held by such investor. In all circumstances, Federated Securities Corp.
reserves the right to authorize the liquidation of shares for ineligible
investors. The Fund will attempt to provide the applicable Discretionary Manager
and/or wrap program sponsor with advance notice of any such redemption on behalf
of the shareholder.
Shares
of the Fund may be redeemed any day the NYSE is open by submitting a redemption
request in good order to the Fund’s
Transfer Agent, State Street Bank and Trust Company. Redemption requests
received before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) will receive a redemption amount based on that day’s
NAV.
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”).
PAYMENT
METHODS FOR REDEMPTIONS
Redemption
proceeds will be paid by one of the following methods established by the
Discretionary Manager or affiliated
Adviser:
◾ an
electronic transfer to the shareholder’s wrap fee, separately managed or
discretionary investment account (i.e., Eligible Account) custodied at a
financial institution that is an ACH member;
◾ wire
payment to the shareholder’s wrap fee, separately managed or discretionary
investment account (i.e., Eligible Account) custodied at a domestic commercial
bank that is a Federal Reserve System member; or
◾ check
mailed to the qualified custodian of the shareholder’s wrap fee, separately
managed or discretionary investment accounts (i.e., Eligible
Account).
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.
19
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 up to seven days:
◾ to allow a
purchase to clear;
◾ 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
a redemption of Shares recently purchased by check (including a cashier’s check
or certified check), money order, bank draft
or ACH is requested, redemption proceeds may not be made available 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, any purchase
order will be canceled and the party submitting such payment will be responsible
for any losses incurred by the Fund as a result of the canceled
order.
In
addition, redemptions may be suspended, or the payment of proceeds may be
delayed, 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.
Share
Certificates
The
Fund does not issue share certificates.
20
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
FederatedInvestors.com’s Account Access website
means you are consenting to sending and receiving personal financial information
over the Internet, so you should be sure you are comfortable with the risks. You
will be required to accept the terms of an online agreement and to establish and
utilize a password in order to access online account services. The Transfer
Agent has adopted security procedures to confirm that Internet instructions are
genuine. The Transfer Agent will also send you written confirmation of share
transactions. The Transfer Agent, the Fund and any of its affiliates will not be
liable for losses or expenses that occur from fraudulent Internet instructions
reasonably believed to be genuine.
The
Transfer Agent or the Fund will employ reasonable procedures to confirm that
telephone transaction requests are genuine,
which may include recording calls, asking the caller to provide certain personal
identification information, sending you written confirmation, or requiring other
confirmation security procedures. The Transfer Agent, the Fund and any of its
affiliates will not be liable for relying on instructions submitted by telephone
that the Fund reasonably believes to be genuine.
ANTI-MONEY
LAUNDERING COMPLIANCE
To
help the government fight the funding of terrorism and money laundering
activities, federal law requires financial institutions
to obtain, verify and record information that identifies each new customer who
opens a Fund account and to determine whether such person’s name appears on
governmental lists of known or suspected terrorists or terrorist organizations.
Pursuant to the requirements under the USA PATRIOT Act, the information obtained
will be used for compliance with the USA PATRIOT Act or other applicable laws,
regulations and rules in connection with money laundering, terrorism or other
illicit activities.
Information
required includes your name, residential or business address, date of birth (for
an individual), and other information
that identifies you, including your social security number, tax identification
number or other identifying number. The Fund cannot waive these requirements.
The Fund is required by law to reject your Account Application if the required
information is not provided. If, after reasonable effort, the Fund is unable to
verify your identity or that of any other person(s) authorized to act on your
behalf, or believes it has identified potentially suspicious, fraudulent or
criminal activity, the Fund reserves the right to close your account and redeem
your shares at the next calculated NAV without your permission. Any applicable
contingent deferred sales charge (CDSC) will be assessed upon redemption of your
shares.
The
Fund has a strict policy designed to protect the privacy of your personal
information. A copy of Federated Hermes’ privacy
policy notice was given to you at the time you opened your account. The Fund
sends a copy of the privacy notice to you annually. You may also obtain the
privacy notice by calling the Fund, or through FederatedInvestors.com.
Account
and Share Information
CONFIRMATIONS
AND ACCOUNT STATEMENTS
Shareholders
will receive confirmation of purchases and redemptions and periodic statements
reporting all account activity,
including dividends and capital gains paid.
DIVIDENDS
AND CAPITAL GAINS
The
Fund declares and pays any dividends 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. Dividends on investments in the Fund are generally paid in cash and
dividend reinvestment is generally not available.
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.
Shares
purchased just before the record date for a capital gain distribution will pay
the full price for the shares and then receive a
portion of the price back in the form of a taxable distribution. Investors
should consider the tax implications of purchasing Shares shortly before the
record date for a capital gain.
21
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 at FederatedInvestors.com under the
“Managed Accounts” section of the “Products” tab. Click on the appropriate asset
class or category under “Find Managed Accounts,” where you will be directed to
create a password and login to access this information. After you have logged
in, select a product name, then click on the “MAPs” link under “Managed Account
Pools,” and select the Fund under “Managed Account Pools
Available.”
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.
TAX
INFORMATION
The
Fund sends an IRS Form 1099 and an annual statement of each shareholder’s
account activity to assist shareholders in
completing their federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to shareholders whether paid in cash or
reinvested in the Fund. Dividends are taxable at different rates depending on
the source of dividend income. Distributions of net short-term capital gains are
taxable to shareholders as ordinary income. Distributions of net long-term
capital gains are taxable to shareholders as long-term capital gains regardless
of how long a shareholder has owned the Shares.
Fund
distributions are expected to be both dividends and capital gains. Redemptions
and exchanges are taxable sales. Please
consult your tax adviser regarding your federal, state and local tax
liability.
FREQUENT
TRADING POLICIES
Frequent
or short-term trading into and out of the Fund can have adverse consequences for
the Fund and its shareholders who use
the Fund as a long-term investment vehicle. Such trading in significant amounts
can disrupt the Fund’s investment strategies (e.g., by requiring it to sell
investments at inopportune times or maintain excessive short-term cash positions
to support redemptions), increase brokerage and administrative costs and affect
the timing and amount of taxable gains distributed by the Fund. Investors
engaged in such trading may also seek to profit by anticipating changes in the
Fund’s NAV in advance of the time as of which NAV is calculated. Given that: (a)
the Fund is used exclusively to implement certain International Dividend
Strategies for Eligible Investors in Eligible Accounts and, to the extent
permitted by applicable law, as an investment option for Affiliated Funds as
described in this Prospectus; (b) FIC has the ability to limit Eligible
Investors’ investments in the Fund and Fund Share purchases, and redemptions for
Eligible Accounts will be at the direction of FIC or another Discretionary
Managers; (c) with respect to Eligible Accounts, Fund Share purchases and
redemptions will be made on a frequent basis, generally only for account
initialization, rebalancing and liquidation purposes, or in order to invest new
monies or accommodate reductions in Eligible Account size; and (d) that
individual Eligible Investors will not be in a position to effect purchase or
redemption orders directly, the Fund does not anticipate that, in the normal
case, frequent or short-term trading into and out of the Fund will have
significant unanticipated or adverse consequences for the Fund and its
shareholders. For these reasons, the Fund’s Board has not adopted policies or
procedures to discourage frequent or short-term trading of the Fund’s
Shares.
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 purchase shares of
another Federated Hermes fund, please read the prospectus of that other
Federated Hermes fund for more information.
The
Fund may invest in affiliated investment companies whose boards have determined
not to adopt frequent trading policies.
The Fund therefore may be exposed to any adverse consequences of any frequent or
short-term trading in such funds, to the extent of the Fund’s investment
therein.
22
PORTFOLIO
HOLDINGS INFORMATION
Information
concerning the Fund’s portfolio holdings is available at FederatedInvestors.com under the
“Managed Accounts” section of the “Products” tab. Click on the appropriate asset
class or category under “Find Managed Accounts,” where you will be directed to
create a password and login to access this information. After you have logged
in, select a product name, then click on the “MAPs” link under “Managed Account
Pools,” and select the Fund under “Managed Account Pools Available” to access
the “Portfolio Characteristics” tab. A complete listing of the Fund’s portfolio
holdings as of the end of each month is posted on the website five business days
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 and percentage breakdowns of the
portfolio by sector, type of investment and credit quality.
You
may also access portfolio information as of the end of the Fund’s fiscal
quarters under the “Managed Accounts” section of
the “Products” tab by following the directions listed above. The Fund’s Annual
Shareholder Report and Semi-Annual Shareholder Report 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 FederatedInvestors.com.
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 Federated
Hermes’ website. 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
Equity Management Company of Pennsylvania.
The Adviser manages the Fund’s assets, including buying and selling portfolio
securities. Federated Advisory Services Company (FASC), an affiliate of the
Adviser, provides research, quantitative analysis, equity trading and
transaction settlement and certain other support services to the Adviser. The
fee for these services is paid by the Adviser and not by the Fund.
The
address of the Adviser 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 in assets
as of December 31, 2021. 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 15 registered
investment
companies
and
also manages
sub-advised funds.
The Adviser’s
assets under management totaled approximately $16.3 billion as of December 31,
2021.
PORTFOLIO
MANAGEMENT INFORMATION
Daniel
Peris
Daniel
Peris, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since February 2015.
Mr.
Peris is jointly responsible for the day-to-day management of the Fund and
develops the investment strategy for the Fund. He
has been with the Adviser or an affiliate since 2002; has worked in investment
management since 1999; and has managed investment portfolios since 2006.
Education: B.A., Williams College; M.Phil., Oxford University; and Ph.D.,
University of Illinois.
23
Deborah
D. Bickerstaff
Deborah
D. Bickerstaff, Portfolio Manager, has been the Fund’s portfolio manager since
February 2015.
Ms.
Bickerstaff is jointly responsible for the day-to-day management of the Fund,
with emphasis on portfolio analytics and implementation. She
has been with the Adviser or an affiliate since 1996; has worked in investment
management since 2000; and has managed investment portfolios since 2005.
Education: B.S., La Roche College.
Jared
S. Hoff
Jared
S. Hoff, Portfolio Manager, has been the Fund’s portfolio manager since January
2017.
Mr.
Hoff is jointly responsible for the day-to-day management of the Fund. He has
been with the Adviser or an affiliate since
2000; has worked in investment management since 2000; and has managed investment
portfolios since 2017. Education: B.S., Duquesne University; M.B.A., Carnegie
Mellon University.
Michael
R. Tucker
Michael
R. Tucker, Portfolio Manager, has been the Fund’s portfolio manager since
January 2017.
Mr.
Tucker is jointly responsible for the day-to-day management of the Fund. He has
been with the Adviser or an affiliate
since 1993; has worked in investment management since 1993; and has managed
investment portfolios since 2017. Education: B.S. and M.S., Carnegie Mellon
University.
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
Adviser will not charge an advisory fee for its services to the
Fund.
The
Adviser’s affiliate, FIC, may benefit from the Fund being used to implement
International Dividend Strategies for Eligible
Investors’ Eligible Accounts.
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 October 31 and April 30,
respectively.
Financial
Information
FINANCIAL
HIGHLIGHTS
The
Financial Highlights will help you understand the Fund’s financial performance
for its past five fiscal years. Some of the
information is presented on a per Share basis. Total returns represent the rate
an investor would have earned (or lost) on an investment in the Fund, assuming
reinvestment of any dividends and capital gains.
This
information has been audited by Ernst & Young LLP, an independent registered
public accounting firm, whose report,
along with the Fund’s audited financial statements, is included in the Annual
Report.
24
Financial
Highlights
(For a Share
Outstanding Throughout Each Period)
|
Year
Ended October 31 |
2022 |
2021 |
2020 |
2019 |
2018 |
|
Net
Asset Value, Beginning of Period |
$9.01 |
$7.92 |
$8.40 |
$7.48 |
$8.66 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income |
0.36 |
0.42 |
0.34 |
0.39 |
0.411 |
|
Net
realized and unrealized gain (loss) |
(1.30) |
1.09 |
(0.48) |
0.92 |
(1.18) |
|
TOTAL
FROM INVESTMENT OPERATIONS |
(0.94) |
1.51 |
(0.14) |
1.31 |
(0.77) |
|
Less
Distributions: |
|
|
|
|
|
|
Distributions
from net investment income |
(0.36) |
(0.42) |
(0.34) |
(0.39) |
(0.41) |
|
Net
Asset Value, End of Period |
$7.71 |
$9.01 |
$7.92 |
$8.40 |
$7.48 |
|
Total
Return2 |
(10.78)% |
19.04% |
(1.60)% |
17.96% |
(9.21)% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses3,4
|
0.00% |
0.00% |
0.00% |
0.00% |
0.00% |
|
Net
investment income |
4.37% |
4.53% |
4.10% |
4.87% |
5.02% |
|
Expense
waiver/reimbursement5 |
0.49% |
0.48% |
0.43% |
0.40% |
0.34% |
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$71,292 |
$67,935 |
$65,758 |
$88,508 |
$84,351 |
|
Portfolio
turnover6 |
43% |
33% |
51% |
57% |
38% |
1
Per
share number has been calculated using the average shares method.
2
Based
on net asset value.
3
Amount
does not reflect net expenses incurred by investment companies in which the Fund
may invest.
4
The
Adviser has contractually agreed to reimburse all operating expenses, excluding
extraordinary expenses, incurred by the Fund.
5
This
expense decrease is reflected in both the net expense and net investment income
ratios shown above. Amount does not reflect net expenses incurred by investment
companies in which the Fund may invest.
6
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 October 31, 2022,
which can be obtained free of charge.
25
Appendix
A: Hypothetical Investment and Expense Information
The
following chart provides 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 chart shows 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. The chart also assumes that the Fund’s annual expense
ratio stays the same throughout the 10-year period (except for the impact of
changes in contractual expense limitations) and that all dividends and
distributions are reinvested. The annual expense ratio used in the chart is the
same as stated in the “Fees and Expenses” table of this Prospectus (and thus may
not reflect any other 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 INTERNATIONAL DIVIDEND STRATEGY PORTFOLIO | |||||
|
ANNUAL
EXPENSE RATIO: 0.00% | |||||
|
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 |
$0.00 |
$10,500.00 |
|
2 |
$10,500.00 |
$525.00 |
$11,025.00 |
$0.00 |
$11,025.00 |
|
3 |
$11,025.00 |
$551.25 |
$11,576.25 |
$0.00 |
$11,576.25 |
|
4 |
$11,576.25 |
$578.81 |
$12,155.06 |
$0.00 |
$12,155.06 |
|
5 |
$12,155.06 |
$607.75 |
$12,762.81 |
$0.00 |
$12,762.81 |
|
6 |
$12,762.81 |
$638.14 |
$13,400.95 |
$0.00 |
$13,400.95 |
|
7 |
$13,400.95 |
$670.05 |
$14,071.00 |
$0.00 |
$14,071.00 |
|
8 |
$14,071.00 |
$703.55 |
$14,774.55 |
$0.00 |
$14,774.55 |
|
9 |
$14,774.55 |
$738.73 |
$15,513.28 |
$0.00 |
$15,513.28 |
|
10 |
$15,513.28 |
$775.66 |
$16,288.94 |
$0.00 |
$16,288.94 |
|
Cumulative |
|
$6,288.94 |
|
$0.00 |
|
26
An SAI dated December 31,
2022, 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, Discretionary Manager or the Fund at 1-800-341-7400.
The
Fund’s
shareholder reports will be made available on FederatedInvestors.com/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 at FederatedInvestors.com/product-landing/managed-account-pools.do.
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
International Dividend Strategy Portfolio
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us
at
FederatedInvestors.com
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities
Corp., Distributor
Investment
Company Act File No. 811-4017
CUSIP
31421P605
Q452400
(12/22)
© 2022 Federated Hermes,
Inc.
