Prospectus
July
31, 2024
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Share
Class | Ticker |
Institutional | PIGDX |
R6 | REIGX |
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Federated Hermes International Growth Fund
A Portfolio of Federated Hermes Adviser Series
A mutual
fund seeking to provide long-term capital appreciation.
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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IS |
R6 |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
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Maximum
Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) |
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Maximum
Sales Charge (Load) Imposed on Reinvested Dividends (and other
Distributions) (as a percentage of offering price) |
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Redemption
Fee (as a percentage of amount redeemed, if
applicable) |
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Exchange
Fee |
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IS |
R6 |
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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 Reimbursements2 |
( |
( |
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Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements |
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1
2
1
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Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
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IS |
$ |
$ |
$ |
$ |
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R6 |
$ |
$ |
$ |
$ |
2
■ Stock
Market Risk. The value
of equity securities in the Fund’s portfolio will fluctuate and, as a result,
the Fund’s Share price may decline suddenly or over a sustained period of time.
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. Among other factors, equity securities may
decline in value because of an increase in interest rates or changes in the
stock market. Recent and potential future changes in industry and/or economic
trends, as well as changes in monetary policy made by central banks and/or their
governments, also can affect the level of interest rates and 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.
■ Small-Cap
Company Risk. The Fund
may invest in small capitalization (or “small-cap”) companies. Small-cap
companies may have less liquid stock, a more volatile share price, unproven
track records, a limited product or service base, and limited access to capital.
The above factors could make small-cap companies more likely to fail than larger
companies, and increase the volatility of the Fund’s portfolio, performance and
Share price.
■ Mid-Cap
Company Risk. The Fund
may invest in mid-capitalization (or “mid-cap”) companies. Mid-cap companies
often have narrower markets, limited managerial and financial resources, more
volatile performance and greater risk of failure, compared to larger, more
established companies. These factors could increase the volatility of the Fund’s
portfolio, performance and Share price.
■ Focused
Investment Risk. To the
extent that the Fund focuses its investments in the securities of a particular
issuer or companies in a particular country, group of countries, region, market,
industry, group of industries, sector, or asset class, the Fund’s exposure to
various risks may be heightened, including price volatility and adverse
economic, market, political, or regulatory occurrences affecting that issuer,
country, group of countries, region, market, industry, group of industries,
sector, or asset class.
■ Large
Shareholder Risk. A
significant percentage of the Fund’s shares may be owned or controlled by a
large shareholder, such as other funds or accounts, including those of which the
Adviser or an affiliate of the Adviser may have investment discretion.
Accordingly, the Fund can be subject to the potential for large scale inflows
and outflows as a result of purchases and redemptions made by significant
shareholders. These inflows and outflows could be significant and, if frequently
occurring, could negatively affect the Fund’s net asset value and performance
and could cause the Fund to buy or sell securities at inopportune times in order
to meet purchase or redemption requests. Investments in the Fund by other
investment companies also can create conflicts of interests for the Adviser to
the Fund and the investment adviser to the acquiring fund. For example, a
conflict of interest can arise due to the possibility that the investment
adviser to the acquiring fund could make a decision to redeem the acquiring
fund’s investment in the Fund. In the case of an investment by an affiliated
fund, a conflict of interest can arise if, because of the acquiring fund’s
investment in the Fund, the Fund is able to garner more assets from third-party
investors, thereby growing the Fund and increasing the management fees received
by the Adviser, which could also be the investment adviser to the acquiring
fund.
■ 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. Economic,
political and financial conditions, industry or economic trends and developments
or public health risks, such as epidemics or pandemics, may, from time to time,
and for varying periods of time, cause the Fund to experience volatility,
illiquidity, shareholder redemptions, or other potentially adverse
effects.
■ Risk
of Foreign Investing. The
foreign markets in which the Fund invests may be subject to economic or
political conditions which are less favorable than those of the United States
and may lack financial reporting standards or regulatory requirements comparable
to those applicable to U.S. companies.
■ Risk
of Investing in Depositary Receipts and Domestically Traded Securities of
Foreign Issuers. Because
the Fund may invest in American Depositary Receipts 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.
■ Currency
Risk. Exchange
rates for currencies fluctuate daily. Accordingly, the Fund may experience
increased volatility with respect to the value of its Shares and its returns as
a result of its exposure to foreign currencies through direct holdings of such
currencies or holdings of non-U.S. dollar-denominated
securities.
3
■ 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.
■ 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. 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.
■ Risk
Related to Investing for Growth. Due to
their relatively high valuations, growth stocks are typically more volatile than
value stocks. For instance, the price of a growth stock may experience a larger
decline on a forecast of lower earnings, a negative fundamental development, or
an adverse market development. Further, growth stocks may not pay dividends or
may pay lower dividends than value stocks. This means they depend more on price
changes for returns and may be more adversely affected in a down market compared
to value stocks that pay higher dividends.
■ Liquidity
Risk. The
securities in which the Fund invests may be less readily marketable and may be
subject to greater fluctuation in price than other
securities.
■ Interest
Rate Risk. Prices of
fixed-income securities generally fall when interest rates rise. The longer the
duration of a fixed-income security, the more susceptible it is to interest rate
risk. Recent and potential future changes in monetary policy made by central
banks and/or their governments are likely to affect the level of interest
rates.
■ Custodial
Services and Related Investment Costs. Custodial
services and other costs relating to investment in international securities
markets generally are more expensive due to differing settlement and clearance
procedures than those of the United States.
■ Risk
of Investing in Derivative Contracts. Derivative
contracts involve risks different from, or possibly greater than, risks
associated with investing directly in securities and other traditional
investments. Specific risk issues related to the use of such contracts include
valuation and tax issues, increased potential for losses and/or costs to the
Fund and a potential reduction in gains to the Fund. Each of these issues is
described in greater detail in this Prospectus. Derivative contracts may also
involve other risks described in this Prospectus, such as stock market, interest
rate, credit, currency and liquidity risks.
■ Issuer
Credit Risk. It is
possible that interest or principal on securities will not be paid when due.
Such non-payment or default may reduce the value of the Fund’s portfolio
holdings, its share price and its performance.
■ Counterparty
Credit Risk. Credit
risk includes the possibility that a party to a transaction involving the Fund
will fail to meet its obligations. This could cause the Fund to lose money or to
lose the benefit of the transaction or prevent the Fund from selling or buying
other securities to implement its investment
strategy.
■ Quantitative
Modeling Risk. The Fund
employs quantitative models as a management technique. These models examine
multiple economic factors using various proprietary and third-party data. The
results generated by quantitative analysis may perform differently than expected
and may negatively affect Fund performance for various reasons (for example,
human judgment, data imprecision, software or other technology malfunctions, or
programming inaccuracies).
■ Technology
Risk. The
Adviser uses various technologies in managing the Fund consistent with its
investment objective 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.
4
The
Fund’s IS class total return for the six-month period from January 1, 2024 to
June 30, 2024, was 9.15%.
Within
the periods shown in the bar chart, the Fund’s IS class highest quarterly return
was 31.97% (quarter ended June 30, 2020). Its lowest quarterly return was
(18.97)% (quarter ended March 31, 2020).
5
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1
Year |
5
Year |
Since
Inception |
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IS: |
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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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R6: |
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Inception
Date: |
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Return
Before Taxes |
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MSCI
ACWI ex USA Index1 |
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MSCI
ACWI ex USA Growth Index2
(reflects
no deduction for fees, expenses or taxes) |
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Morningstar
Foreign Large Growth Funds Average3 |
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1
2
3
FUND
MANAGEMENT
The Fund’s
Investment Adviser is Federated Global Investment Management Corp.
Martin
C. Schulz, Head of International Equity Group; Senior Portfolio Manager, managed
the predecessor fund to the Fund, the
PNC International Growth Fund, since February 2016, and has continued to manage
the Fund as an employee of the Adviser since November 2019.
Calvin
Y. Zhang, Senior Portfolio Manager, managed the predecessor fund to the Fund,
the PNC International Growth Fund,
since February 2016, and has continued to manage the Fund as an employee of the
Adviser since November 2019.
Michael Czekaj, CFA,
Portfolio Manager, has been the Fund’s portfolio manager since July
2024.
purchase
and sale of fund shares
You
may purchase, redeem or exchange Shares of the Fund on any day the New York
Stock Exchange is open. Shares may be
purchased through a financial intermediary firm that has entered into a Fund
selling and/or servicing agreement with the Distributor or an affiliate
(“Financial Intermediary”) or directly from the Fund, by wire or by check.
Please note that certain purchase restrictions may apply. Redeem or exchange
Shares through a financial intermediary or directly from the Fund by telephone
at 1-800-341-7400 or by mail.
IS
Class
The
minimum initial investment amount for the Fund’s IS class is generally
$1,000,000 and there is no minimum subsequent
investment amount. Certain types of accounts are eligible for lower minimum
investments. The minimum investment amount for Systematic Investment Programs is
$50.
R6
Class
There
are no minimum initial or subsequent investment amounts required. The minimum
investment amount for Systematic
Investment Programs is $50.
Tax
Information
IS
Class
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.
R6
Class
The
Fund’s distributions are taxable as ordinary income or capital gains except when
your investment is through a tax-advantaged
investment plan.
6
Payments
to Broker-Dealers and Other Financial Intermediaries
IS
Class
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and/or its related
companies may pay the intermediary for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund
over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
R6
Class
Class
R6 Shares do not make any payments to financial intermediaries, either from Fund
assets or from the investment adviser
and its affiliates.
What are
the Fund’s Investment Strategies?
The
Fund’s investment objective seeks to provide 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. This objective
may be changed by the Fund’s Board of Trustees (the “Trustees”) without
shareholder approval.
The
Fund pursues its investment objective by investing primarily in a portfolio of
equity securities that are tied economically
to a number of countries throughout the world and typically invests in three or
more countries outside of the United States (U.S.). The Fund has broad
discretion to invest in equity securities of any market capitalization and
issuers located or doing business throughout the world, including in both
developed and developing or emerging markets. However, the Fund principally
invests in companies with a market capitalization in excess of $500 million, and
the Fund does not expect to make additional investments in developing or
emerging markets if it would cause the Fund to have a greater than 10%
overweight position to developing or emerging markets as compared to the
exposure of the MSCI ACWI ex USA Growth Index to such markets. The Fund may make
significant investments (e.g., more than 25% of the Fund’s portfolio) in issuers
located or doing business in a single country.
The
Fund’s investments in equity securities may include, for example, common stocks,
American Depositary Receipts or other
U.S. listings of foreign common stocks. The Fund may use closed-end funds and
derivative instruments to gain broad exposure to markets and/or a particular
index. Derivative instruments include, but are not limited to, financial
futures, as well as currency futures and currency forward contracts. For
example, the Fund may use derivative contracts to increase or decrease the
portfolio’s exposure to the investment(s) underlying the derivative in an
attempt to benefit from changes in the value of the underlying investment(s).
Additionally, by way of example, the Fund may use derivative contracts in an
attempt to:
■ obtain
premiums from the sale of derivative contracts;
■ realize
gains from trading a derivative contract; or
■ hedge
against potential losses.
There can
be no assurance that the Fund’s use of derivatives contracts will work as
intended.
Federated
Global Investment Management Corp.’s (the “Adviser”) investment process seeks to
identify companies with robust and
sustainable growth rates, high-quality balance sheets, and management teams with
clearly defined growth strategies. In allocating the Fund’s assets, the Adviser
also incorporates information on the economic and financial market conditions
within each country. The Adviser’s proprietary quantitative model drives country
allocation, while individual stocks are selected through a qualitative process
that incorporates a multi-factor approach to find companies with sustainable
growth characteristics. The Adviser seeks to control risk by seeking
diversification across sectors and using both fundamental and statistical models
to evaluate potential volatility. The Adviser’s portfolio construction process
seeks to combine the best investment candidates within the Adviser’s recommended
framework of country allocations.
The
Fund utilizes an active trading approach. The Adviser may choose to sell a
holding when, for example, in the Adviser’s
view, it no longer represents an attractive investment or to take advantage of
what it considers to be a better investment opportunity.
PORTFOLIO
TURNOVER
The
Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the
Fund to have an increased portfolio turnover rate and increase the Fund’s
trading costs, which may have an adverse impact on the Fund’s performance. An
active trading strategy will likely result in the Fund generating more
short-term capital gains or losses. Short-term gains are generally taxed at a
higher rate than long-term gains. Any short-term losses are used first to offset
short-term gains.
7
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 when the Fund
takes temporary defensive positions, these positions could affect the Fund’s
investment returns and/or the Fund may not achieve its investment
objectives.
What are
the Fund’s Principal Investments?
The
following provides general information on the Fund’s principal investments. The
Fund’s Statement of Additional Information
(SAI) provides information about the Fund’s non-principal investments and may
provide additional information about the Fund’s principal
investments.
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.
Preferred
Stocks
Preferred
stocks have the right to receive specified dividends or distributions before the
issuer makes payments on its common
stock. Some preferred stocks also participate in dividends and distributions
paid on common stock. Preferred stocks may also permit the issuer to redeem the
stock. The Fund may also treat such redeemable preferred stock as a fixed-income
security.
Warrants
Warrants
give the Fund the option to buy the issuer’s equity securities at a specified
price (the “exercise price”) at a specified
future date (the “expiration date”). The Fund may buy the designated securities
by paying the exercise price before the expiration date. Warrants may become
worthless if the price of the stock does not rise above the exercise price by
the expiration date. This increases the market risks of warrants as compared to
the underlying security. Rights are the same as warrants, except companies
typically issue rights to existing stockholders.
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 are primarily denominated in foreign currencies. 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.
8
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 and Domestically Traded Securities of Foreign Issuers (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. American Depositary Receipts (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, Global Depositary Receipts and
International Depositary Receipts 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.
The Fund may also invest in securities issued directly by foreign companies and
traded in U.S. dollars in U.S. markets.
DERIVATIVE
CONTRACTS
Derivative
contracts are financial instruments that derive their value from underlying
securities, commodities, currencies,
indices, or other assets or instruments, including other derivative contracts
(each a “Reference Instrument” and collectively, “Reference Instruments”). The
most common types of derivative contracts are swaps, futures and options, and
major asset classes include interest rates, equities, commodities and foreign
exchange. Each party to a derivative contract may sometimes be referred to as a
“counterparty.” Some derivative contracts require payments relating to an
actual, future trade involving the Reference Instrument. These types of
derivatives are frequently referred to as “physically settled” derivatives.
Other derivative contracts require payments relating to the income or returns
from, or changes in the market value of, a Reference Instrument. These types of
derivatives are known as “cash-settled” derivatives since they require cash
payments in lieu of delivery of the Reference Instrument.
Many
derivative contracts are traded on exchanges. In these circumstances, the
relevant exchange sets all the terms of the
contract except for the price. Parties to an exchange-traded derivative contract
make payments through the exchange. Most exchanges require traders to maintain
margin accounts through their brokers to cover their potential obligations to
the exchange. Parties to the contract make (or collect) daily payments to the
margin accounts to reflect losses (or gains) in the value of their contracts.
This protects traders against a potential default by their counterparty. Trading
contracts on an exchange also allows traders to hedge or mitigate certain risks
or carry out more complex trading strategies by entering into offsetting
contracts.
The
Fund may also trade derivative contracts over-the-counter (OTC), meaning
off-exchange, in transactions negotiated directly
between the Fund and an eligible counterparty, which may be a financial
institution. OTC contracts do not necessarily have standard terms, so they may
be less liquid and more difficult to close out than exchange-traded derivative
contracts. In addition, OTC contracts with more specialized terms may be more
difficult to value than exchange-traded contracts, especially in times of
financial stress.
The
market for swaps and other OTC derivatives was largely unregulated prior to the
enactment of federal legislation known as
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”). Regulations enacted by the Commodity Futures Trading Commission (the
“CFTC”) under the Dodd-Frank Act require the Fund to clear certain types of swap
contracts (including certain interest rate and credit default swaps) through a
central clearinghouse known as a derivatives clearing organization
(DCO).
To
clear a swap through a DCO, the Fund will submit the contract to, and post
margin with, a futures commission merchant
(FCM) that is a clearinghouse member. The Fund may enter into the swap with a
counterparty other than the FCM and arrange for the contract to be transferred
to the FCM for clearing or enter into the contract with the FCM itself. If the
Fund must centrally clear a transaction, the CFTC’s regulations also generally
require that the swap be executed on a registered exchange (either a designated
contract market (DCM) or swap execution facility (SEF)). Central clearing is
presently required only for certain swaps; the CFTC is expected to impose a
mandatory central clearing requirement for additional derivative instruments
over time.
9
DCOs,
DCMs, SEFs and FCMs are all subject to regulatory oversight by the CFTC. In
addition, certain derivative market
participants that act as market makers and engage in a significant amount of
“dealing” activity are also required to register as swap dealers with the CFTC.
Among other things, swap dealers are subject to minimum capital requirements and
business conduct standards and must also post and collect initial and variation
margin on uncleared swaps with certain of their counterparties. Because of this,
if the Fund enters into uncleared swaps with any swap dealers, it may be subject
to initial and variation margin requirements that could impact the Fund’s
ability to enter into swaps in the OTC market, including making transacting in
uncleared swaps significantly more expensive.
At
this point in time, most of the Dodd-Frank Act has been fully implemented,
though a small number of remaining rulemakings
are unfinished or are subject to phase-in periods. Any future regulatory or
legislative activity would not necessarily have a direct, immediate effect upon
the Fund, though it is within the realm of possibility that, upon implementation
of these measures or any future measures, they could potentially limit or
completely restrict the ability of the Fund to use these instruments as a part
of its investment strategy, increase the costs of using these instruments or
make them less effective.
Depending
on how the Fund uses derivative contracts and the relationships between the
market value of a derivative contract
and the Reference Instrument, derivative contracts may increase or decrease the
Fund’s exposure to the risks of the Reference Instrument and may also expose the
Fund to liquidity and leverage risks. OTC contracts also expose the Fund to
credit risks in the event that a counterparty defaults on the contract, although
this risk may be mitigated by submitting the contract for clearing through a
DCO, or certain other factors, such as collecting margin from the
counterparty.
As
discussed above, a counterparty’s exposure under a derivative contract may in
some cases be required to be secured with
initial and/or variation margin (a form of “collateral”).
The
Fund may invest in a derivative contract if it is permitted to own, invest in,
or otherwise have economic exposure to the
Reference Instrument. The Fund is not required to own a Reference Instrument in
order to buy or sell a derivative contract relating to that Reference
Instrument. The Fund may trade in the following specific types and/or
combinations of derivative contracts:
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 index futures and security futures),
as well as currency futures and currency forward contracts.
Currency
Futures and Currency Forward Contracts (Types of Futures Contracts)
A
currency futures contract is an exchange-traded contract to buy or sell a
particular currency at a specific price at some time in
the future (commonly three months or more). A currency forward contract is not
an exchange-traded contract and represents an obligation to purchase or sell a
specific currency at a future date, at a price set at the time of the contract
and for a period agreed upon by the parties which may be either a window of time
or a fixed number of days from the date of the contract. Currency futures and
forward contracts are highly volatile, with a relatively small price movement
potentially resulting in substantial gains or losses to the Fund. Additionally,
the Fund may lose money on currency futures and forward contracts if changes in
currency rates do not occur as anticipated or if the Fund’s counterparty to the
contract were to default.
Option
Contracts (A Type of Derivative)
Option
contracts (also called “options”) are rights to buy or sell a Reference
Instrument for a specified price (the “exercise
price”) during, or at the end of, a specified period. The seller (or “writer”)
of the option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option. A call
option gives the holder (buyer) the right to buy the Reference Instrument from
the seller (writer) of the option. A put option gives the holder the right to
sell the Reference Instrument to the writer of the option. Options may be bought
or sold on a wide variety of Reference Instruments. Options that are written on
futures contracts will be subject to margin requirements similar to those
applied to futures contracts.
10
Swap
Contracts (A Type of Derivative)
A
swap contract (also known as a “swap”) is a type of derivative contract in which
two parties agree to pay each other (swap) the
returns derived from Reference Instruments. Swaps do not always involve the
delivery of the Reference Instruments by either party, and the parties might not
own the Reference Instruments underlying the swap. The payments are usually made
on a net basis so that, on any given day, the Fund would receive (or pay) only
the amount by which its payment under the contract is less than (or exceeds) the
amount of the other party’s payment. Swap agreements are sophisticated
instruments that can take many different forms and are known by a variety of
names. Common types of swaps in which the Fund may invest include interest rate
swaps, caps and floors, total return swaps, credit default swaps, currency swaps
and volatility swaps.
OTHER
INVESTMENTS, TRANSACTIONS, TECHNIQUES
Derivatives
Regulation and Asset Coverage
The
regulation of the U.S. and non-U.S. derivatives markets has undergone
substantial change in recent years and such change may
continue. In addition, effective August 19, 2022, Rule 18f-4 (the “Derivatives
Rule”) under the Investment Company Act of 1940, as amended (the “1940 Act”),
replaced the asset segregation framework previously used by funds to comply with
limitations on leverage imposed by the 1940 Act. The Derivatives Rule generally
mandates that a fund either limit derivatives exposure to 10% or less of its net
assets, or in the alternative implement: (i) limits on leverage calculated based
value-at-risk (VAR); (ii) a written derivatives risk management program (DRMP)
administered by a derivatives risk manager appointed by the Fund’s Board,
including a majority of the independent Board members, that is periodically
reviewed by the Board; and (iii) new reporting and recordkeeping
requirements.
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.
Securities
Lending
The
Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash, U.S.
government securities or irrevocable bank standby letters of credit not issued
by a fund’s bank lending agent from the borrower as collateral. The borrower
must furnish additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Fund the equivalent of any dividends
or interest received on the loaned securities.
The
Fund will reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must
pay interest to the borrower for the use of cash collateral. An acceptable
investment into which the Fund may reinvest cash collateral includes, among
other highly liquid securities, securities of affiliated money market funds
(including affiliated institutional prime money market funds with a “floating”
net asset value that can impose redemption fees and liquidity gates, impose
certain operational impediments to investing cash collateral, and, if net asset
value decreases, result in the Fund having to cover the decrease in the value of
the cash collateral).
Loans
are subject to termination at the option of the Fund or the borrower. The Fund
will not have the right to vote on securities
while they are on loan. However, the Fund will attempt to terminate a loan in an
effort to reacquire the securities in time to vote on matters that are deemed to
be material by the Adviser. There can be no assurance that the Fund will have
sufficient notice of such matters to be able to terminate the loan in time to
vote thereon. The Fund may pay administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker. Securities lending
activities are subject to interest rate risks and credit risks.
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.
11
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 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. The Fund is prohibited from
investing in other registered investment companies in excess of the limitations
imposed on acquired funds by Rule 12d1-4 under the Investment Company Act of
1940, as amended.
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.
Small-Cap
Company Risk
The
Fund may invest in small capitalization (or “small-cap”) companies. Market
capitalization is determined by multiplying
the number of a company’s outstanding shares by the current market price per
share. Generally, the smaller the market capitalization of a company, the fewer
the number of shares traded daily, the less liquid its stock and the more
volatile its price. Companies with smaller market capitalizations also tend to
have unproven track records, a limited product or service base and limited
access to capital. Newer companies with unproven business strategies also tend
to be smaller companies. The above factors increase risks and make these
companies more likely to fail than companies with larger market capitalizations,
and could increase the volatility of the Fund’s portfolio and performance.
Shareholders should expect that the value of the Fund’s Shares will be more
volatile than a fund that invests exclusively in mid-cap or large-cap
companies.
12
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.
focused
investment risk
To
the extent that the Fund focuses its investments in the securities of a
particular issuer or companies in a particular country,
group of countries, region, market, industry, group of industries, sector, or
asset class, the Fund’s exposure to various risks may be heightened, including
price volatility and adverse economic, market, political, or regulatory
occurrences affecting that issuer, country, group of countries, region, market,
industry, group of industries, sector, or asset class.
Large
Shareholder Risk
A
significant percentage of the Fund’s shares may be owned or controlled by a
large shareholder, such as other funds or accounts,
including those of which the Adviser or an affiliate of the Adviser may have
investment discretion. Accordingly, the Fund can be subject to the potential for
large scale inflows and outflows as a result of purchases and redemptions made
by significant shareholders. These inflows and outflows could be significant
and, if frequently occurring, could negatively affect the Fund’s net asset value
and performance and could cause the Fund to buy or sell securities at
inopportune times in order to meet purchase or redemption requests. Investments
in the Fund by other investment companies also can create conflicts of interests
for the Adviser to the Fund and the investment adviser to the acquiring fund.
For example, a conflict of interest can arise due to the possibility that the
investment adviser to the acquiring fund could make a decision to redeem the
acquiring fund’s investment in the Fund. In the case of an investment by an
affiliated fund, a conflict of interest can arise if, because of the acquiring
fund’s investment in the Fund, the Fund is able to garner more assets from
third-party investors, thereby growing the Fund and increasing the management
fees received by the Adviser, which could also be the investment adviser to the
acquiring fund.
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, industry or economic trends and
developments or public health risks, such as epidemics or pandemics, may, from
time to time, and for varying periods of time, cause volatility, illiquidity or
other potentially adverse effects in the financial markets, including the
fixed-income market. The commencement, continuation or ending of government
policies and economic stimulus programs, changes in monetary policy, increases
or decreases in interest rates, or other factors or events that affect the
financial markets, including the fixed-income markets, may contribute to the
development of or increase in volatility, illiquidity, shareholder redemptions
and other adverse effects which could negatively impact the Fund’s performance.
For example, the value of certain portfolio securities may rise or fall in
response to changes in interest rates, which could result from a change in
government policies, and has the potential to cause investors to move out of
certain portfolio securities, including fixed-income securities, on a large
scale. This may increase redemptions from funds that hold large amounts of
certain securities and may result in decreased liquidity and increased
volatility in the financial markets. Market factors, such as the demand for
particular portfolio securities, may cause the price of certain portfolio
securities to fall while the prices of other securities rise or remain
unchanged.
Risk
of Foreign Investing
Foreign
securities 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.
Foreign
companies 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 that is as frequent, extensive and
reliable as the information available concerning companies in the United
States.
13
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.
The
laws of some foreign countries may limit the Fund’s ability to invest in
securities of certain issuers organized under the laws
of those 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.
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 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
14
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.
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, the prices of such securities may be significantly more
volatile than prices of securities in developed countries. Emerging market
economies may also experience more severe down-turns (with corresponding
currency devaluations) than developed economies.
Emerging
market countries may have relatively unstable governments and may present the
risks of nationalization of
businesses, expropriation, confiscatory taxation or, in certain instances,
reversion to closed market, centrally planned economies.
risk
related to investing for growth
Due
to their relatively high valuations, growth stocks are typically more volatile
than value stocks. For instance, the price of a
growth stock may experience a larger decline on a forecast of lower earnings, a
negative fundamental development or an adverse market development. Further,
growth stocks may not pay dividends or may pay lower dividends than value
stocks. This means they depend more on price changes for returns and may be more
adversely affected in a down market compared to value stocks that pay higher
dividends.
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.
INTEREST
RATE risk
Prices
of fixed-income securities rise and fall in response to changes in interest
rates. Generally, when interest rates rise, prices of
fixed-income securities fall. However, market factors, such as the demand for
particular fixed-income securities, may cause the price of certain fixed-income
securities to fall while the prices of other securities rise or remain
unchanged.
15
The
longer the duration of a fixed-income security, the more susceptible it is to
interest rate risk. The duration of a fixed-income
security may be equal to or shorter than the stated maturity of a fixed-income
security. Recent and potential future changes in monetary policy made by central
banks and/or their governments are likely to affect the level of interest rates.
Duration measures the price sensitivity of a fixed-income security given a
change in interest rates. For example, if a fixed-income security has an
effective duration of three years, a 1% increase in general interest rates would
be expected to cause the security’s value to decline about 3% while a 1%
decrease in general interest rates would be expected to cause the security’s
value to increase about 3%.
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.
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, interest rate, credit, currency and
liquidity risks.
ISSUER
CREDIT risk
It
is possible that interest or principal on securities will not be paid when due.
Such non-payment or default may reduce the value
of the Fund’s portfolio holdings, its share price and its
performance.
Many
fixed-income securities receive credit ratings from nationally recognized
statistical rating organizations (NRSROs)
such as Fitch Rating Service, Moody’s Investor Services, Inc. and Standard &
Poor’s that assign ratings to securities by assessing the likelihood of an
issuer and/or guarantor default. Higher credit ratings correspond to lower
perceived credit risk and lower credit ratings correspond to higher perceived
credit risk. Credit ratings may be upgraded or downgraded from time to time as
an NRSRO’s assessment of the financial condition of a party obligated to make
16
payments
with respect to such securities and credit risk changes. The impact of any
credit rating downgrade can be uncertain. Credit rating downgrades may lead to
increased interest rates and volatility in financial markets, which in turn
could negatively affect the value of the Fund’s portfolio holdings, its share
price and its investment performance. Credit ratings are not a guarantee of
quality. Credit ratings may lag behind the current financial conditions of the
issuer and/or guarantor and do not provide assurance against default or other
loss of money. Credit ratings do not protect against a decline in the value of a
security. If a security has not received a rating, the Fund must rely entirely
upon the Adviser’s credit assessment.
Fixed-income
securities generally compensate for greater credit risk by paying interest at a
higher rate. The difference between
the yield of a security and the yield of a U.S. Treasury security or other
appropriate benchmark with a comparable maturity (the “spread”) measures the
additional interest paid for risk. Spreads may increase generally in response to
adverse economic or market conditions. A security’s spread may also increase if
the security’s rating is lowered, or the security is perceived to have an
increased credit risk. An increase in the spread will cause the price of the
security to decline if interest rates remain unchanged.
Counterparty
Credit Risk
Credit
risk includes the possibility that a party to a transaction (such as a
derivative transaction) involving the Fund will fail to
meet its obligations. This could cause the Fund to lose money or to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.
Quantitative
MOdeling Risk
The
Fund employs quantitative models as a management technique. These models examine
multiple economic and market
factors using large data sets. The results generated by quantitative analysis
may be different than expected and may negatively affect Fund performance for a
variety of reasons. For example, human judgment plays a role in building,
utilizing, testing and modifying the financial algorithms and formulas used in
these models. Additionally, the data, which is typically supplied by third
parties, can be imprecise or become stale due to new events or changing
circumstances. Market performance can be affected by non-quantitative factors
(for example, investor fear or over-reaction or other emotional considerations)
that are not easily integrated into quantitative analysis. There may also be
technical issues with the construction and implementation of quantitative models
(for example, software or other technology malfunctions, or programming
inaccuracies).
technology
Risk
The
Adviser uses various technologies in managing the Fund, consistent with its
investment objective(s) and strategy described
in this Prospectus. For example, proprietary and third-party data and systems
are utilized to support decision-making for the Fund. Data imprecision, software
or other technology malfunctions, programming inaccuracies and similar
circumstances may impair the performance of these systems, which may negatively
affect Fund performance.
What Do
Shares Cost?
CALCULATION
OF NET ASSET VALUE
When
the Fund receives your transaction request in proper form (as described in this
Prospectus under the sections entitled
“How to Purchase Shares” and “How to Redeem and Exchange Shares”), it is
processed at the next calculated net asset value of a Share (NAV) plus any
applicable front-end sales charge (“public offering price”). A Share’s NAV is
determined as of the end of regular trading on the New York Stock Exchange
(NYSE) (normally 4:00 p.m. Eastern time), each day the NYSE is open. The Fund
calculates the NAV of each class by valuing the assets allocated to the Share’s
class, subtracting the liabilities allocated to each class and dividing the
balance by the number of Shares of the class outstanding. The NAV for each class
of Shares may differ due to the level of expenses allocated to each class as
well as a result of the variance between the amount of accrued investment income
and capital gains or losses allocated to each class and the amount actually
distributed to shareholders of each class. The Fund’s current NAV and/or public
offering price may be found at FederatedHermes.com/us, via online news sources
and in certain newspapers.
You can
purchase, redeem or exchange Shares any day the NYSE is open.
When
the Fund holds securities that trade principally in foreign markets on days the
NYSE is closed, the value of the Fund’s
assets may change on days you cannot purchase or redeem Shares. This may also
occur when the U.S. markets for fixed-income securities are open on a day the
NYSE is closed.
In
calculating its NAV, the Fund generally values investments as
follows:
■ Equity
securities listed on an exchange or traded through a regulated market system are
valued at their last reported sale price or official closing price in their
principal exchange or market.
17
■ Derivative
contracts listed on exchanges are valued at their reported settlement or closing
price, except that options are valued at the mean of closing bid and ask
quotations.
■ Over-the-counter
(OTC) derivative contracts are fair valued using price evaluations provided by a
pricing service approved by the Adviser.
If
any price, quotation, price evaluation or other pricing source is not readily
available when the NAV is calculated, if the Fund
cannot obtain price evaluations from a pricing service or from more than one
dealer for an investment within a reasonable period of time as set forth in the
Adviser’s valuation policies and procedures, or if information furnished by a
pricing service, in the opinion of the Valuation Committee, is deemed not
representative of the fair value of such security, the Fund uses the fair value
of the investment determined in accordance with the procedures generally
described below. There can be no assurance that the Fund could obtain the fair
value assigned to an investment if it sold the investment at approximately the
time at which the Fund determines its NAV per share.
Shares
of other mutual funds are valued based upon their reported NAVs. The
prospectuses for these mutual funds explain
the circumstances under which they will use fair value pricing and the effects
of using fair value pricing.
Fair
Valuation and Significant Events Procedures
Pursuant
to Rule 2a-5 under the Investment Company Act of 1940, as amended, the Board has
designated the Adviser as the Fund’s
valuation designee to perform the fair valuation determination for securities
and other assets held by the Fund. The Adviser, acting through its “Valuation
Committee,” is responsible for determining the fair value of investments for
which market quotations are not readily available. The Valuation Committee is
comprised of officers of the Adviser and certain of the Adviser’s affiliated
companies and determines fair value and oversees the calculation of the NAV. The
Valuation Committee is subject to Board oversight and certain reporting and
other requirements intended to provide the Board the information it needs to
oversee the Adviser’s fair value determinations.
The
Valuation Committee is also authorized to use pricing services to provide fair
price evaluations of the current fair value of
certain investments for purposes of calculating the NAV. In the event that
market quotations and price evaluations are not available for an investment, the
Valuation Committee determines the fair value of the investment in accordance
with procedures adopted by the Adviser as the valuation designee. The Board
periodically reviews the fair valuations made by the Valuation Committee. The
Board has also approved the Adviser’s fair valuation and significant events
procedures as part of the Fund’s compliance program and will review any changes
made to the procedures. The Fund’s SAI discusses the methods used by pricing
services and the Valuation Committee in valuing investments.
Using
fair value to price investments may result in a value that is different from an
investment’s most recent closing price and
from the prices used by other registered funds to calculate their NAVs. The
application of the fair value procedures to an investment represents a good
faith determination of such investment’s fair value. There can be no assurance
that the Fund could obtain the fair value assigned to an investment if it sold
the investment at approximately the time at which the Fund determines its NAV
per share, and the actual value could be materially different.
The
Adviser also has adopted procedures requiring an investment to be priced at its
fair value whenever the Valuation Committee
determines that a significant event affecting the value of the investment has
occurred between the time as of which the price of the investment would
otherwise be determined and the time as of which the NAV is computed. An event
is considered significant if there is both an affirmative expectation that the
investment’s value will change in response to the event and a reasonable basis
for quantifying the resulting change in value.
Examples
of significant events that may occur after the close of the principal market on
which a security is traded, or after
the time of a price evaluation provided by a pricing service or a dealer,
include:
■ With
respect to securities traded principally in foreign markets, significant trends
in U.S. equity markets or in the trading of foreign securities index futures
contracts;
■ Political
or other developments affecting the economy or markets in which an issuer
conducts its operations or its securities are traded; and
■ Announcements
concerning matters such as acquisitions, recapitalizations or litigation
developments or a natural disaster affecting the issuer’s operations or
regulatory changes or market developments affecting the issuer’s
industry.
The
Adviser has adopted procedures whereby the Valuation Committee uses a pricing
service to provide factors to update the
fair value of equity securities traded principally in foreign markets from the
time of the close of their respective foreign stock exchanges to the pricing
time of the Fund. For other significant events, the Fund may seek to obtain more
current quotations or price evaluations from alternative pricing sources. If a
reliable alternative pricing source is not available, the Valuation Committee
will determine the fair value of the investment. The Board periodically reviews
fair valuations made in response to significant events.
18
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.
COMMISSIONS
ON SHARES
The
Fund does not charge any front-end load, deferred sales charge or other
asset-based fee for sales or distribution of Shares.
However, if you purchase Shares through a broker acting solely as an agent on
behalf of its customers, you may be required to pay a commission to the broker
in an amount determined and separately disclosed to you by the
broker.
Because
the Fund is not a party to any such commission arrangement between you and your
broker, any purchases and redemptions
of Shares will be made at the applicable net asset value (before imposition of
the sales commission). Any such commissions charged by a broker are not
reflected in the fees and expenses listed in the “Risk/Return Summary: Fees and
Expenses” section of the Fund’s Prospectus and described above nor are they
reflected in the “Performance: Bar Chart and Table,” because they are not
charged by the Fund.
How is the
Fund Sold?
The
Fund has established the following Share classes: Class A Shares (A), Class C
Shares (C), Institutional Shares (IS) and Class
R6 Shares (R6), each representing interests in a single portfolio of securities.
This Prospectus relates to the IS and R6 classes. All Share classes have
different sales charges and/or other expenses which affect their performance.
Please note that certain purchase restrictions may apply. Contact your financial
intermediary or call 1-800-341-7400 for more information concerning the other
classes.
Under
the Distributor’s Contract with the Fund, the Distributor, Federated Securities
Corp. offers Shares on a continuous,
best-efforts basis. The Distributor is a subsidiary of Federated Hermes, Inc.
(“Federated Hermes,” formerly, Federated Investors, Inc.).
IS
Class
The
Fund’s Distributor markets the IS class to Eligible Investors, as described
below. In connection with a request to purchase
the IS class, you should provide documentation sufficient to verify your status
as an Eligible Investor. As a general matter, the IS class is not available for
direct investment by natural persons.
The
following categories of Eligible Investors are not subject to any minimum
initial investment amount for the purchase
of the IS class (however, such accounts remain subject to the Fund’s policy on
“Accounts with Low Balances” as discussed later in this Prospectus):
■ An
investor participating in a no-load platform, network or other fee-based program
offered by a financial intermediary, for example, a wrap-account or retirement
platform, where Federated Hermes has entered into an agreement with the
intermediary;
■ A
trustee/director, employee or former employee of the Fund, the Adviser, the
Distributor and their affiliates; an immediate family member of these
individuals or a trust, pension or profit-sharing plan for these
individuals;
■ An
employer-sponsored retirement plan;
■ A trust
institution investing on behalf of its trust customers;
■ A
Federated Hermes Fund;
■ An
investor (including a natural person) who acquired the IS class of a Federated
Hermes fund pursuant to the terms of an agreement and plan of reorganization
which permits the investor to acquire such shares; and
■ In
connection with an acquisition of an investment management or advisory business,
or related investment services, products or assets, by Federated Hermes or its
investment advisory subsidiaries, an investor (including a natural person) who:
(1) becomes a client of an investment advisory subsidiary of Federated Hermes;
or (2) is a shareholder or interest holder of a pooled investment vehicle or
product that becomes advised or sub-advised by a Federated Hermes investment
advisory subsidiary as a result of such an acquisition other than as a result of
a fund reorganization transaction pursuant to an agreement and plan of
reorganization.
The
following categories of Eligible Investors are subject to applicable minimum
initial investment amounts for the purchase
of the IS class (see “How to Purchase Shares” below):
■ An
investor, other than a natural person, purchasing the IS class directly from the
Fund; and
■ In
connection with an initial purchase of the IS class through an exchange, an
investor (including a natural person) who owned the IS class of another
Federated Hermes fund as of December 31, 2008.
19
R6
Class
The
Fund’s Distributor markets the R6 class to Eligible Investors, as described
below. The Class R6 Shares are sold at net asset
value and are not subject to any minimum initial or subsequent investment
amounts. In connection with a request to purchase the R6 class, you should
provide documentation sufficient to verify your status as an Eligible
Investor.
Class
R6 Shares do not carry sales commissions or pay Rule 12b-1 fees, or make similar
payments to financial intermediaries.
As a general matter, the R6 class is not available for direct investment by
natural persons. Individual shareholders who purchase Class R6 Shares through
retirement platforms or other intermediaries will not be eligible to hold Class
R6 Shares outside of their respective plan or intermediary platform.
Following
are categories of Eligible Investors:
■ An
investor participating in a no-load platform, network or other fee-based program
offered by a financial intermediary, for example, a wrap-account or retirement
platform where Federated Hermes has entered into an agreement with the
intermediary;
■ A
trustee/director, employee or former employee of the Fund, the Adviser, the
Distributor and their affiliates; an immediate family member of these
individuals or a trust, pension or profit-sharing plan for these
individuals;
■ An
employer-sponsored retirement plan;
■ A trust
institution investing on behalf of its trust customers;
■ An
investor, other than a natural person, purchasing Shares directly from the
Fund;
■ A
Federated Hermes Fund;
■ An
investor (including a natural person) who acquired the R6 class of a Federated
Hermes fund pursuant to the terms of an agreement and plan of reorganization
which permits the investor to acquire such shares; and
■ In
connection with an acquisition of an investment management or advisory business,
or related investment services, products or assets, by Federated Hermes or its
investment advisory subsidiaries, an investor (including a natural person) who:
(1) becomes a client of an investment advisory subsidiary of Federated Hermes;
or (2) is a shareholder or interest holder of a pooled investment vehicle or
product that becomes advised or sub-advised by a Federated Hermes investment
advisory subsidiary as a result of such an acquisition other than as a result of
a fund reorganization transaction pursuant to an agreement and plan of
reorganization.
Intra-Fund
Share Conversion Program
A
shareholder in the Fund’s Shares may convert their Shares at net asset value to
any other share class of the Fund if the shareholder
meets the investment minimum and eligibility requirements for the share class
into which the conversion is sought, as applicable. The share conversion program
is not applicable to the Fund’s Class A Shares and Class C Shares subject to a
contingent deferred sales charge, if applicable. For Class C Shares purchased
through a financial intermediary after June 30, 2017, such shares may only be
converted to another share class of the same Fund if: (i) the shares are no
longer subject to a CDSC or the financial intermediary agrees to reimburse the
Fund’s distributor the CDSC otherwise payable upon the sale of such shares; (ii)
the shareholder meets the investment minimum and eligibility requirements for
the share class into which the conversion is sought, as applicable; and (iii)
(a) the conversion is made to facilitate the shareholder’s participation in a
self-directed brokerage (non-advice) account or a fee-based advisory program
offered by the intermediary; or (b) the conversion is part of a multiple-client
transaction through a particular financial intermediary as pre-approved by the
Fund’s Administrator. Such conversion of classes should not result in a
realization event for tax purposes. Contact your financial intermediary or call
1-800-341-7400 to convert your Shares.
As
of the date of this Prospectus, Class A Shares and Class C Shares of the Fund
are not being offered.
Payments
to Financial Intermediaries
The
Fund and its affiliated service providers may pay fees as described below to
financial intermediaries (such as broker-dealers,
banks, investment advisers or third-party administrators) whose customers are
shareholders of the Fund.
The
Fund’s Class R6 Shares do not make any payments to financial intermediaries,
either from Fund assets or from the
investment adviser and its affiliates.
service
fees
IS
Class
The
Fund may pay Service Fees of up to 0.25% of average net assets to financial
intermediaries or to Federated Shareholder
Services Company (FSSC), a subsidiary of Federated Hermes, for providing
services to shareholders and maintaining shareholder accounts. Intermediaries
that receive Service Fees may include a company affiliated with management of
Federated Hermes. If a financial intermediary receives Service Fees on an
account, it is not eligible to also receive Account Administration Fees on that
same account.
20
The
Fund has no present intention of paying, accruing or incurring any such Service
Fees on the IS class until such time as
approved by the Fund’s Board of Trustees.
ACCOUNT
ADMINISTRATION FEES
IS
Class
The
Fund may pay Account Administration Fees of up to 0.25% of average net assets to
banks that are not registered as broker-dealers
or investment advisers for providing administrative services to the Fund and its
shareholders. If a financial intermediary receives Account Administration Fees
on an account, it is not eligible to also receive Service Fees or Recordkeeping
Fees on that same account.
The
Fund has no present intention of paying, accruing or incurring any such Account
Administration Fees on the IS class
until such time as approved by the Fund’s Board of Trustees.
RECORDKEEPING
FEES
IS
Class
The
Fund may pay Recordkeeping Fees on an average-net-assets basis or on a
per-account-per-year basis to financial intermediaries
for providing recordkeeping services to the Fund and its shareholders. If a
financial intermediary receives Recordkeeping Fees on an account, it is not
eligible to also receive Account Administration Fees or Networking Fees on that
same account.
networking
fees
IS
Class
The
Fund may reimburse Networking Fees on a per-account-per-year basis to financial
intermediaries for providing administrative
services to the Fund and its shareholders on certain non-omnibus accounts. If a
financial intermediary receives Networking Fees on an account, it is not
eligible to also receive Recordkeeping Fees on that same
account.
ADDITIONAL
PAYMENTS TO FINANCIAL INTERMEDIARIES
IS
Class
The
Distributor may pay out of its own resources amounts to certain financial
intermediaries, including broker-dealers, banks,
registered investment advisers, independent financial planners and retirement
plan administrators, that support the sale of Shares or provide services to Fund
shareholders. The amounts of these payments could be significant, and may create
an incentive for the financial intermediary or its employees or associated
persons to recommend or sell Shares of the Fund to you. Not all financial
intermediaries receive such payments, and the amount of compensation may vary by
intermediary. In some cases, such payments may be made by or funded from the
resources of companies affiliated with the Distributor (including the Adviser).
These payments are not reflected in the fees and expenses listed in the fee
table section of the Fund’s Prospectus and described above because they are not
paid by the Fund.
These
payments are negotiated and may be based on such factors as: the number or value
of Shares that the financial intermediary
sells or may sell; the value of client assets invested; the level and types of
services or support furnished by the financial intermediary; or the Fund’s
and/or other Federated Hermes funds’ relationship with the financial
intermediary. These payments may be in addition to payments, as described above,
made by the Fund to the financial intermediary. In connection with these
payments, the financial intermediary may elevate the prominence or profile of
the Fund and/or other Federated Hermes funds, within the financial
intermediary’s organization by, for example, placement on a list of preferred or
recommended funds and/or granting the Distributor preferential or enhanced
opportunities to promote the funds in various ways within the financial
intermediary’s organization. In addition, as discussed above in “Commissions on
Shares,” if you purchase IS or R6 Shares through a broker acting solely as an
agent on behalf of its customers, you may be required to pay a commission to the
broker in an amount determined and separately disclosed to you by the broker.
You can ask your financial intermediary for information about any payments it
receives from the Distributor or the Fund and any services provided, as well as
about fees and/or commissions it charges.
How to
Purchase Shares
You
may purchase Shares of the Fund any day the NYSE is open. Shares will be
purchased at the NAV next calculated after your
investment is received by the Fund, or its agent, in proper form. The Fund
reserves the right to reject any request to purchase or exchange Shares. New
investors must submit a completed New Account Form. All accounts, with the
exception of R6 class accounts, including those for which there is no minimum
initial investment amount required, are subject to the Fund’s policy on
“Accounts with Low Balances” as discussed later in this
Prospectus.
For
important account information, see the section “Security and Privacy
Protection.”
21
IS
Class
Eligible
investors may purchase Shares through a financial intermediary, directly from
the Fund or through an exchange from
another Federated Hermes fund in the manner described above under “How is the
Fund Sold?”
Where
applicable, the required minimum initial investment for IS class is generally
$1,000,000. There is no minimum subsequent
investment amount.
R6
Class
Eligible
Investors may purchase Shares through a financial intermediary, directly from
the Fund or through an exchange from
another Federated Hermes fund in the manner described above under “How is the
Fund Sold?”
There is
no minimum initial or subsequent investment amount required.
THROUGH
A FINANCIAL INTERMEDIARY
■ Establish an account with
the financial intermediary; and
■ Submit your purchase order
to the financial intermediary before the end of regular trading on the NYSE
(normally 4:00 p.m. Eastern time).
The Fund has authorized
certain intermediaries to accept Share purchase orders on its behalf. When
authorized intermediaries receive an order in proper form, the order is
considered as being placed with the Fund and Shares will be bought at the NAV
next calculated after such an order is received by the authorized intermediary.
If your financial intermediary is not an authorized intermediary, the Fund or
its agent must receive the purchase order in proper form from your financial
intermediary by the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) in order for your transaction to be priced at that day’s NAV. In
addition, your financial intermediary must forward your payment by the
prescribed trade settlement date (typically within one to three business days)
to the Fund’s transfer agent, SS&C GIDS, Inc. (“Transfer Agent”). You will
become the owner of Shares and receive dividends when your payment is received
in accordance with these time frames (provided that, if payment is received in
the form of a check, the check clears). If your payment is not received in
accordance with these time frames, or a check does not clear, your purchase will
be canceled and you could be liable for any losses, fees or expenses incurred by
the Fund or the Fund’s Transfer Agent.
Financial
intermediaries should send payments according to the instructions in the
sections “By Wire” or “By Check.”
Financial
intermediaries may impose higher or lower minimum investment requirements on
their customers than those imposed by
the Fund. Keep in mind that financial intermediaries may charge you fees for
their services in connection with your Share transactions.
Shareholders
are encouraged to ask their financial intermediary if they are an authorized
agent for the Fund and about any fees
that may be charged by the financial intermediary.
DIRECTLY
FROM THE FUND
■ Establish
your account with the Fund by submitting a completed New Account Form;
and
■ Send your
payment to the Fund by Federal Reserve wire or check.
You
will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire
or your check. If your check does not clear, your purchase will be canceled and
you could be liable for any losses or fees incurred by the Fund or the Fund’s
Transfer Agent.
By
Wire
To
facilitate processing your order, please call the Fund before sending the wire.
Send your wire to:
State
Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
BNF: 23026552
Attention: Federated Hermes EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
BNF: 23026552
Attention: Federated Hermes EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot
purchase Shares by wire on holidays when wire transfers are
restricted.
22
By
Check
Make your
check payable to The
Federated Hermes Funds, note
your account number on the check, and send it to:
The
Federated Hermes Funds
P.O. Box 219318
Kansas City, MO 64121-9318
P.O. Box 219318
Kansas City, MO 64121-9318
If you
send your check by a private
courier or overnight delivery service that
requires a street address, send it to:
The
Federated Hermes Funds
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
Payment
should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the
right to reject any purchase
request. For example, to protect against check fraud the Fund may reject any
purchase request involving a check that is not made payable to The
Federated Hermes Funds
(including, but not limited to, requests to purchase Shares using third-party
checks) or involving temporary checks or credit card checks.
By
Direct Deposit
You
may establish Payroll Deduction/Direct Deposit arrangements for investments into
the Fund by either calling a Client
Service Representative at 1-800-341-7400; or by completing the Payroll
Deduction/Direct Deposit Form, which is available on FederatedHermes.com/us
under “Resources” and then “Literature and Forms,” then “Forms.” You will
receive a confirmation when this service is available.
THROUGH
AN EXCHANGE
You may
purchase Fund Shares through an exchange from another Federated Hermes fund. To
do this you must:
■ meet any
applicable shareholder eligibility requirements;
■ ensure
that the account registrations are identical;
■ meet any
applicable minimum initial investment requirements; and
■ receive a
prospectus for the fund into which you wish to exchange.
An
exchange is treated as a redemption and a subsequent purchase, and is a taxable
transaction. The Fund reserves the right to
reject any request to purchase or exchange Shares. The Fund may modify or
terminate the exchange privilege at any time.
You may
purchase Shares through an exchange from any Federated Hermes fund or share
class that does not have a stated sales charge or
contingent deferred sales charge, except Shares of Federated Hermes
Institutional Tax-Free Cash Trust, Federated Hermes Institutional Prime
Obligations Fund, no-load Class A Shares and Class R Shares of any
Fund.
By
Online Account Services
You
may access your accounts online to purchase Shares through FederatedHermes.com/us’s
Shareholder Account Access system once you have registered for access. Online
transactions may be subject to certain limitations including limitations as to
the amount of the transaction. For more information about the services available
through Shareholder Account Access, please visit FederatedHermes.com/us and
select “Sign In” and “Access and Manage Investments,” or call 1-800-341-7400,
Option #4 to speak with a Client Service Representative.
BY
SYSTEMATIC INVESTMENT PROGRAM (SIP)
Once
you have opened an account, you may automatically purchase additional Shares on
a regular basis by completing the SIP
section of the New Account Form or by contacting the Fund or your financial
intermediary. The minimum investment amount for SIPs is $50.
BY
AUTOMATED CLEARING HOUSE (ACH)
Once
you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH
member. This purchase option can be established by completing the appropriate
sections of the New Account Form.
retirement
investments
R6
Class
You
may purchase Shares as retirement investments (such as qualified plans or
transfer of assets). Call your financial intermediary
or the Fund for information on retirement investments. We suggest that you
discuss retirement investments with your tax adviser. You may be subject to an
account fee charged by your financial intermediary.
23
How to
Redeem and Exchange Shares
You should
redeem or exchange Shares:
■ through a
financial intermediary if you purchased Shares through a financial intermediary;
or
■ directly
from the Fund if you purchased Shares directly from the Fund.
Shares
of the Fund may be redeemed for cash, or exchanged for shares of other Federated
Hermes funds as described herein, on
days on which the Fund computes its NAV. Redemption requests may be made by
telephone or in writing.
Redemption
proceeds normally are wired or mailed within one business day for each method of
payment after receiving a timely
request in proper form. Depending upon the method of payment, when shareholders
receive redemption proceeds can differ. Payment may be delayed for up to seven
days under certain circumstances (see “Limitations on Redemption
Proceeds”).
For
important account information, see the section “Security and Privacy
Protection.”
THROUGH
A FINANCIAL INTERMEDIARY
Submit
your redemption or exchange request to your financial intermediary by the end of
regular trading on the NYSE (normally
4:00 p.m. Eastern time). The redemption amount you will receive is based upon
the next calculated NAV after the Fund receives the order from your financial
intermediary.
DIRECTLY
FROM THE FUND
By
Telephone
You may
redeem or exchange Shares by simply calling the Fund at
1-800-341-7400.
If
you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time), you will receive a redemption
amount based on that day’s NAV.
By
Mail
You may
redeem or exchange Shares by sending a written request to the Fund.
You
will receive a redemption amount based on the next calculated NAV after the Fund
receives your written request in proper
form.
Send
requests by mail to:
The
Federated Hermes Funds
P.O. Box 219318
Kansas City, MO 64121-9318
P.O. Box 219318
Kansas City, MO 64121-9318
Send
requests by private
courier or overnight delivery service
to:
The
Federated Hermes Funds
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
All
requests must include:
■ Fund name
and Share class, account number and account registration;
■ amount to
be redeemed or exchanged;
■ signatures
of all shareholders exactly as registered; and
■ if
exchanging, the Fund
name and Share class, account number and account registration into which you are
exchanging.
Call your
financial intermediary or the Fund if you need special instructions.
Signature
Guarantees
Signatures
must be guaranteed by a financial institution which is a participant in a
Medallion signature guarantee program
if:
■ your
redemption will be sent to an address other than the address of
record;
■ your
redemption will be sent to an address of record that was changed within the last
30 days;
■ a
redemption is payable to someone other than the shareholder(s) of record;
or
■ transferring
into another fund with a different shareholder registration.
A
Medallion signature guarantee is designed to protect your account from fraud.
Obtain a Medallion signature guarantee from a
bank or trust company, savings association, credit union or broker, dealer or
securities exchange member. A
notary
public
cannot provide a signature guarantee.
24
By
Online Account Services
You
may access your accounts online to redeem or exchange Shares through
FederatedHermes.com/us’s
Shareholder Account Access system once you have registered for access. Online
transactions may be subject to certain limitations including limitations as to
the amount of the transaction. For more information about the services available
through Shareholder Account Access, please visit FederatedHermes.com/us and
select “Sign In” and “Access and Manage Investments,” or call 1-800-341-7400,
Option #4 to speak with a Client Service Representative.
PAYMENT
METHODS FOR REDEMPTIONS
Your
redemption proceeds will be mailed by check to your address of record. The
following payment options are available
if you complete the appropriate section of the New Account Form or an Account
Service Options Form. These payment options require a signature guarantee if
they were not established when the account was opened:
■ An
electronic transfer to your account at a financial institution that is an ACH
member; or
■ Wire
payment to your account at a domestic commercial bank that is a Federal Reserve
System member.
Methods
the Fund May Use to Meet Redemption Requests
The
Fund intends to pay Share redemptions in cash. To ensure that the Fund has cash
to meet Share redemptions on any day,
the Fund typically expects to hold a cash or cash equivalent reserve or sell
portfolio securities.
In unusual
or stressed circumstances, the Fund may generate cash in the following
ways:
■ Inter-fund
Borrowing and Lending. The SEC
has granted an exemption that permits the Fund and all other funds advised by
subsidiaries of Federated Hermes (“Federated Hermes funds”) to lend and borrow
money for certain temporary purposes directly to and from other Federated Hermes
funds. Inter-fund borrowing and lending is permitted only: (a) to meet
shareholder redemption requests; (b) to meet commitments arising from “failed”
trades; and (c) for other temporary purposes. All inter-fund loans must be
repaid in seven days or less.
■ Committed
Line of Credit. The Fund
participates with certain other Federated Hermes funds, on a several basis, in
an up to $500,000,000 unsecured, 364-day, committed, revolving line of credit
(LOC) agreement. The LOC was made available to temporarily finance the
repurchase or redemption of shares of the funds, failed trades, payment of
dividends, settlement of trades and for other short-term, temporary or emergency
general business purposes. The Fund cannot borrow under the LOC if an inter-fund
loan is outstanding.
■ Redemption
in Kind. Although
the Fund intends to pay Share redemptions in cash, it reserves the right to pay
the redemption price in whole or in part by an “in-kind” distribution of the
Fund’s portfolio securities. Because the Fund has elected to be governed by Rule
18f-1 under the 1940 Act, the Fund is obligated to pay Share redemptions to any
one shareholder in cash only up to the lesser of $250,000 or 1% of the net
assets represented by such Share class during any 90-day period. Redemptions in
kind are made consistent with the procedures adopted by the Fund’s Board, which
generally include distributions of a pro rata share of the Fund’s portfolio
assets. Redemption in kind is not as liquid as a cash redemption. If redemption
is made in kind, securities received may be subject to market risk and the
shareholder could incur taxable gains and brokerage or other charges in
converting the securities to cash.
LIMITATIONS
ON REDEMPTION PROCEEDS
Redemption
proceeds normally are wired or mailed within one business day after receiving a
request in proper form. Payment
may be delayed for up to seven days:
■ to allow
your purchase to clear (as discussed below);
■ during
periods of market volatility;
■ when a
shareholder’s trade activity or amount adversely impacts the Fund’s ability to
manage its assets; or
■ during any
period when the Federal Reserve wire or applicable Federal Reserve banks are
closed, other than customary weekend and holiday closings.
If
you request a redemption of Shares recently purchased by check (including a
cashier’s check or certified check), money
order, bank draft or ACH, your redemption proceeds may not be made available for
up to seven calendar days to allow the Fund to collect payment on the instrument
used to purchase such Shares. If the purchase instrument does not clear, your
purchase order will be canceled and you will be responsible for any losses
incurred by the Fund as a result of your canceled order.
In
addition, the right of redemption may be suspended, or the payment of proceeds
may be delayed (including beyond seven
days), during any period:
■ when the
NYSE is closed, other than customary weekend and holiday closings;
■ when
trading on the NYSE is restricted, as determined by the SEC;
■ in which
an emergency exists, as determined by the SEC, so that disposal of the Fund’s
investments or determination of its NAV is not reasonably practicable;
or
25
■ as the SEC
may by order permit for the protection of Fund shareholders.
You
will not accrue interest or dividends on uncashed redemption checks from the
Fund when checks are undeliverable and
returned to the Fund.
redemptions
from retirement accounts
R6
Class
In
the absence of your specific instructions, 10% of the value of your redemption
from a retirement account in the Fund may be
withheld for taxes. This withholding only applies to certain types of retirement
accounts.
EXCHANGE
PRIVILEGE
You may
exchange Shares of the Fund. To do this, you must:
■ meet any
applicable shareholder eligibility requirements;
■ ensure
that the account registrations are identical;
■ meet any
applicable minimum initial investment requirements; and
■ receive a
prospectus for the fund into which you wish to exchange.
An
exchange is treated as a redemption and a subsequent purchase, and is a taxable
transaction. The Fund reserves the right to
reject any request to purchase or exchange Shares. The Fund may modify or
terminate the exchange privilege at any time.
In
addition, the Fund may terminate your exchange privilege if your exchange
activity is found to be excessive under the Fund’s
frequent trading policies. See “Account and Share Information–Frequent
Trading Policies.”
You may
exchange Shares of the Fund for shares of any Federated Hermes fund or share
class that does not have a stated sales charge or
contingent deferred sales charge, except Shares of Federated Hermes
Institutional Tax-Free Cash Trust, Federated Hermes Institutional Prime
Obligations Fund, no-load Class A Shares and Class R Shares of any
Fund.
Systematic
Withdrawal/Exchange Program
You
may automatically redeem or exchange Shares. The minimum amount for all new or
revised systematic redemptions
or exchanges of Shares is $50 per transaction per fund. Complete the appropriate
section of the New Account Form or an Account Service Options Form or contact
your financial intermediary or the Fund. Your account value must meet the
minimum initial investment amount at the time the program is established. This
program may reduce, and eventually deplete, your account. Payments should not be
considered yield or income.
ADDITIONAL
CONDITIONS
Telephone
Transactions
The
Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.
Share
Certificates
The Fund
does not issue share certificates.
Security
and Privacy Protection
ONLINE
ACCOUNT and TELEPHONE ACCESS SECURITY
Federated
Hermes will not be responsible for losses that result from unauthorized
transactions, unless Federated Hermes does not
follow procedures designed to verify your identity. When initiating a
transaction by telephone or online, shareholders should be aware that any person
with access to your account and other personal information including PINs
(Personal Identification Numbers) may be able to submit instructions by
telephone or online. Shareholders are responsible for protecting their identity
by using strong usernames and complex passwords which utilize combinations of
mixed case letters, numbers and symbols, and change passwords and PINs
frequently.
Using
FederatedHermes.com/us’s
Account Access website means you are consenting to sending and receiving
personal financial information over the Internet, so you should be sure you are
comfortable with the risks. You will be required to accept the terms of an
online agreement and to establish and utilize a password in order to access
online account services. The Transfer Agent has adopted security procedures to
confirm that Internet instructions are genuine. The Transfer Agent will also
send you written confirmation of share transactions. The Transfer Agent, the
Fund and any of its affiliates will not be liable for losses or expenses that
occur from fraudulent Internet instructions reasonably believed to be
genuine.
26
The
Transfer Agent or the Fund will employ reasonable procedures to confirm that
telephone transaction requests are genuine,
which may include recording calls, asking the caller to provide certain personal
identification information, sending you written confirmation, or requiring other
confirmation security procedures. The Transfer Agent, the Fund and any of its
affiliates will not be liable for relying on instructions submitted by telephone
that the Fund reasonably believes to be genuine.
ANTI-MONEY
LAUNDERING COMPLIANCE
To
help the government fight the funding of terrorism and money laundering
activities, federal law requires financial institutions
to obtain, verify and record information that identifies each new customer who
opens a Fund account and to determine whether such person’s name appears on
governmental lists of known or suspected terrorists or terrorist organizations.
Pursuant to the requirements under the USA PATRIOT Act, the information obtained
will be used for compliance with the USA PATRIOT Act or other applicable laws,
regulations and rules in connection with money laundering, terrorism or other
illicit activities.
Information
required includes your name, residential or business address, date of birth (for
an individual), and other information
that identifies you, including your social security number, tax identification
number or other identifying number. The Fund cannot waive these requirements.
The Fund is required by law to reject your Account Application if the required
information is not provided. If, after reasonable effort, the Fund is unable to
verify your identity or that of any other person(s) authorized to act on your
behalf, or believes it has identified potentially suspicious, fraudulent or
criminal activity, the Fund reserves the right to close your account and redeem
your shares at the next calculated NAV without your permission. Any applicable
contingent deferred sales charge (CDSC) will be assessed upon redemption of your
shares.
The
Fund has a strict policy designed to protect the privacy of your personal
information. A copy of Federated Hermes’ privacy
policy notice was given to you at the time you opened your account. The Fund
sends a copy of the privacy notice to you annually. You may also obtain the
privacy notice by calling the Fund, or through
FederatedHermes.com/us.
Account
and Share Information
CONFIRMATIONS
AND ACCOUNT STATEMENTS
You
will receive confirmation of purchases, redemptions and exchanges (except for
systematic transactions). In addition,
you will receive periodic statements reporting all account activity, including
systematic transactions, dividends and capital gains paid.
DIVIDENDS
AND CAPITAL GAINS
The
Fund declares and pays any dividends annually to shareholders. Dividends are
paid to all shareholders invested in the Fund
on the record date. The record date is the date on which a shareholder must
officially own Shares in order to earn a dividend.
In
addition, the Fund pays any capital gains at least annually and may make such
special distributions of dividends and
capital gains as may be necessary to meet applicable regulatory requirements.
Your dividends and capital gains distributions will be automatically reinvested
in additional Shares without a sales charge unless you elect cash payments.
Dividends may also be reinvested without sales charges in shares of any class of
any other Federated Hermes fund of which you are already a
shareholder.
If
you purchase Shares just before the record date for a dividend or capital gain
distribution, you will pay the full price for the
Shares and then receive a portion of the price back in the form of a taxable
distribution, whether or not you reinvest the distribution in Shares. Therefore,
you should consider the tax implications of purchasing Shares shortly before the
record date for a dividend or capital gain. Contact your financial intermediary
or the Fund for information concerning when dividends and capital gains will be
paid.
Under
the federal securities laws, the Fund is required to provide a notice to
shareholders regarding the source of distributions
made by the Fund if such distributions are from sources other than ordinary
investment income. In addition, important information regarding the Fund’s
distributions, if applicable, is available via the link to the Fund and share
class name at FederatedHermes.com/us/FundInformation.
Small
Distributions and Uncashed Checks
Generally,
dividend and/or capital gain distributions payable by check in an amount of less
than $25 will be automatically
reinvested in additional shares. This policy does not apply if you have elected
to receive cash distributions that are directly deposited into your bank account
via wire or ACH.
27
Additionally,
if one or more dividend or capital gain distribution checks are returned as
“undeliverable,” or remain uncashed
for 180 days, all subsequent dividend and capital gain distributions will be
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution checks. For questions on whether reinvestment applies
to your distributions, please contact a Client Service Representative at
1-800-341-7400.
Certain
states, including the State of Texas, have laws that allow shareholders to
designate a representative to receive abandoned or unclaimed
property (“escheatment”) notifications by completing and submitting a
designation form that generally can be found on the official state website. If a
shareholder resides in an applicable state and elects to designate a
representative to receive escheatment notifications, escheatment notices
generally will be delivered as required by such state laws, including, as
applicable, to both the shareholder and the designated representative. A
completed designation form may be mailed to the Fund (if Shares are held
directly with the Fund) or to the shareholder’s financial intermediary (if
Shares are not held directly with the Fund). Shareholders should refer to
relevant state law for the shareholder’s specific rights and responsibilities
under his or her state’s escheatment law(s), which can generally be found on a
state’s official website.
ACCOUNTS
WITH LOW BALANCES
IS
Class
Federated
Hermes reserves the right to close accounts if redemptions or exchanges cause
the account balance to fall
below:
■ $25,000
for the IS class.
Before
an account is closed, you will be notified and allowed at least 30 days to
purchase additional Shares to meet the
minimum.
TAX
INFORMATION
The
Fund and/or your financial intermediary provides year-end tax information and an
annual statement of your account activity
to assist you in completing your federal, state and local tax returns. Fund
distributions of dividends and capital gains are taxable to you whether paid in
cash or reinvested in the Fund. Dividends are taxable at different rates
depending on the source of dividend income. Distributions of net short-term
capital gains are taxable to you as ordinary income. Distributions of net
long-term capital gains are taxable to you as long-term capital gains regardless
of how long you have owned your Shares.
Fund
distributions are expected to be both dividends and capital gains. Redemptions
and exchanges are taxable sales. Please
consult your tax adviser regarding your federal, state and local tax
liability.
FREQUENT
TRADING POLICIES
Frequent
or short-term trading into and out of the Fund can have adverse consequences for
the Fund and shareholders who use
the Fund as a long-term investment vehicle. Such trading in significant amounts
can disrupt the Fund’s investment strategies (e.g., by requiring it to sell
investments at inopportune times or maintain excessive short-term or cash
positions to support redemptions), increase brokerage and administrative costs
and affect the timing and amount of taxable gains distributed by the Fund.
Investors engaged in such trading may also seek to profit by anticipating
changes in the Fund’s NAV in advance of the time as of which NAV is
calculated.
The
Fund’s Board has approved policies and procedures intended to discourage
excessive frequent or short-term trading of the
Fund’s Shares. The Fund’s fair valuation procedures are intended in part to
discourage short-term trading strategies by reducing the potential for these
strategies to succeed. See “What Do Shares Cost?” The Fund also monitors trading
in Fund Shares in an effort to identify disruptive trading activity. The Fund
monitors trades into and out of the Fund within a period of 30 days or less. The
Fund may also monitor trades into and out of the Fund for potentially disruptive
trading activity over periods longer than 30 days. The size of Share
transactions subject to monitoring varies. Where it is determined that a
shareholder has exceeded the detection amounts twice within a period of 12
months, the Fund will temporarily prohibit the shareholder from making further
purchases or exchanges of Fund Shares. If the shareholder continues to exceed
the detection amounts for specified periods, the Fund will impose lengthier
trading restrictions on the shareholder, up to and including permanently
prohibiting the shareholder from making any further purchases or exchanges of
Fund Shares. Whether or not the specific monitoring limits are exceeded, the
Fund’s management or the Adviser may determine from the amount, frequency or
pattern of purchases and redemptions or exchanges that a shareholder is engaged
in excessive trading that is or could be detrimental to the Fund and other
shareholders and may prohibit the shareholder from making further purchases or
exchanges of Fund Shares. No matter how the Fund defines its limits on frequent
trading of Fund Shares, other purchases and sales of Fund Shares may have
adverse effects on the management of the Fund’s portfolio and its
performance.
28
The
Fund’s frequent trading restrictions do not apply to purchases and sales of Fund
Shares by other Federated Hermes funds.
These funds impose the same frequent trading restrictions as the Fund at their
shareholder level. In addition, allocation changes of the investing Federated
Hermes fund are monitored, and the managers of the recipient fund must determine
that there is no disruption to their management activity. The intent of this
exception is to allow investing fund managers to accommodate cash flows and
other activity that result from non-abusive trading in the investing fund,
without being stopped from such trading because the aggregate of such trades
exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares,
purchases and redemptions of Fund Shares by other Federated Hermes funds could
adversely affect the management of the Fund’s portfolio and its
performance.
The
Fund will not restrict transactions made on a non-discretionary basis by certain
asset allocation programs, wrap programs,
fund of funds, collective funds or other similar accounts that have been
pre-approved by Federated Hermes (“Approved Accounts”). The Fund will continue
to monitor transactions by the Approved Accounts and will seek to limit or
restrict even non-discretionary transactions by Approved Accounts that are
determined to be disruptive or harmful to the Fund.
The
Fund’s objective is that its restrictions on short-term trading should apply to
all shareholders that are subject to the restrictions,
regardless of the number or type of accounts in which Shares are held. However,
the Fund anticipates that limitations on its ability to identify trading
activity to specific shareholders, including where Shares are held through
intermediaries in multiple or omnibus accounts, will mean that these
restrictions may not be able to be applied uniformly in all cases.
Other
funds in the Federated Hermes family of funds may impose different monitoring
policies or in some cases, may not
monitor for frequent or short-term trading. Under normal market conditions such
monitoring policies are designed to protect the funds being monitored and their
shareholders and the operation of such policies and shareholder investments
under such monitoring are not expected to have materially adverse impact on the
Federated Hermes funds or their shareholders. If you plan to exchange your fund
shares for shares of another Federated Hermes fund, please read the prospectus
of that other Federated Hermes fund for more information.
PORTFOLIO
HOLDINGS INFORMATION
Information
concerning the Fund’s portfolio holdings is available via the link to the Fund
and share class name at FederatedHermes.com/us/FundInformation.
A complete listing of the Fund’s portfolio holdings as of the end of each
calendar quarter is posted on the website 30 days (or the next business day)
after the end of the quarter and remains posted for six months thereafter.
Summary portfolio composition information as of the close of each month is
posted on the website 15 days (or the next business day) after month-end and
remains posted until replaced by the information for the succeeding month. The
summary portfolio composition information may include identification of the
Fund’s top 10 holdings and a percentage breakdown of the portfolio by
sector.
You may
also access portfolio information as of the end of the Fund’s fiscal quarters
via the link to the Fund and share class name at
FederatedHermes.com/us. The Fund’s Form N-CSR
contains
complete listings of the Fund’s portfolio holdings as of the end of the Fund’s
second and fourth fiscal quarters. Fiscal quarter information is made available
on the website within 70 days after the end of the fiscal quarter. This
information is also available in reports filed with the SEC at the SEC’s website
at sec.gov.
Each
fiscal quarter, the Fund will file with the SEC a complete schedule of its
monthly portfolio holdings on “Form
N-PORT.” The Fund’s holdings as of the end of the third month of every fiscal
quarter, as reported on Form N-PORT, will be publicly available on the SEC’s
website at sec.gov within 60 days of the end of the fiscal quarter upon filing.
You may also access this information via the link to the Fund and share class
name at FederatedHermes.com/us.
In
addition, from time to time (for example, during periods of unusual market
conditions), additional information regarding
the Fund’s portfolio holdings and/or composition may be posted to
FederatedHermes.com/us. If and when such information is posted, its availability
will be noted on, and the information will be accessible from, the home page of
the website.
Who
Manages the Fund?
The
Board governs the Fund. The Board selects and oversees the Adviser, Federated
Global Investment Management Corp. 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 is 101 Park Avenue, 41st Floor,
New York, NY 10178. The address of FASC is 1001 Liberty Avenue, Pittsburgh, PA
15222-3779.
29
The
Fund has received and can rely upon an order from the Securities and Exchange
Commission (SEC) that permits the
Adviser, subject to approval by the Board of Trustees, to appoint a sub-adviser
or change the terms of a sub-advisory agreement without obtaining shareholder
approval. The Fund is permitted to rely upon the SEC order to change
sub-advisers, or the fees paid to a sub-adviser, without the expense and delays
associated with obtaining shareholder approval of the change. This order does
not, however, permit the Adviser to increase the aggregate advisory fee rate of
the Fund without the approval of the shareholders.
The
Adviser and other advisory subsidiaries of Federated Hermes combined, advise
approximately 101 registered investment
companies spanning equity, fixed-income and money market mutual funds and also
manage a variety of other pooled investment vehicles, private investment
companies and customized separately managed accounts (including
non-U.S./offshore funds). Federated Hermes’ assets under management totaled
approximately $757.6 billion as of December 31, 2023. Federated Hermes was
established in 1955 as Federated Investors, Inc. and is one of the largest
investment managers in the United States with more than 2,000 employees.
Federated Hermes provides investment products to more than 10,000 investment
professionals and institutions.
The
Adviser advises approximately 14 registered investment
companies and also manages a variety of sub-advised, institutional and
separately managed accounts (including non-U.S./offshore funds). The Adviser’s
assets under management totaled approximately $13.6 billion as of December 31,
2023.
The
Fund is the successor to the PNC International Growth Fund (inception February
29, 2016) pursuant to a reorganization
that was completed in November 2019 in connection with the acquisition of PNC
Capital Advisers by Federated Hermes.
PORTFOLIO
MANAGEMENT INFORMATION
Martin
C. Schulz
Martin
C. Schulz, Head of International Equity Group; Senior Portfolio Manager, managed
the predecessor fund to the Fund, the
PNC International Growth Fund, since February 2016, and has continued to manage
the Fund as an employee of the Adviser since November 2019.
Mr.
Schulz leads the Adviser’s international equity team responsible for
international core/value, international growth, and
emerging market strategies. He has specific research coverage responsibility for
Europe, formulates all investment strategy, and maintains final authority over
all investment decisions. He has been with the Adviser or an affiliate since
2019; and has managed investment portfolios since 1995. Education: B.A., Cornell
University; M.B.A. and J.D., George Washington University; Master of Strategic
Studies from the U.S. Army War College.
Calvin
Y. Zhang
Calvin
Y. Zhang, Senior Portfolio Manager, managed the predecessor fund to the Fund,
the PNC International Growth Fund,
since February 2016, and has continued to manage the Fund as an employee of the
Adviser since November 2019.
Mr.
Zhang is primarily responsible for research and analysis on all Asian
securities. He has been with the Adviser or an affiliate
since 2019; and has managed investment portfolios since 2005. Education: B.A.,
South China University of Technology; M.B.A., University of
Rochester.
Michael
Czekaj
Michael
Czekaj, CFA, Portfolio Manager, is responsible for research and the day-to-day
management of the Fund. He has been with the Adviser
or an affiliate since 2019; has worked in investment management since 2011; and
has managed investment portfolios since 2024. Education: B.S., Miami University,
Ohio; CFA, 2016.
The
Fund’s SAI provides additional information about the Portfolio Managers’
compensation, management of other accounts
and ownership of securities in the Fund.
ADVISORY
FEES
The
Fund’s investment advisory contract provides for payment to the Adviser of an
annual investment advisory fee of 0.75% of
the Fund’s average daily net assets. The Adviser may voluntarily waive a portion
of its fee or reimburse the Fund for certain operating expenses. The Adviser and
its affiliates have also agreed to certain “Fee Limits” as described in the
footnote to the “Risk/Return Summary: Fees and Expenses” table found in the
“Fund Summary” section of the Prospectus.
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 May 31 and November 30,
respectively.
30
Financial
Information
FINANCIAL
HIGHLIGHTS
The
Financial Highlights will help you understand the Fund’s financial performance
for its past five fiscal years, or since
inception if the life of the Fund’s share class is shorter. Some of the
information is presented on a per Share basis. Total returns represent the rate
an investor would have earned (or lost) on an investment in the Fund, assuming
reinvestment of any dividends and capital gains.
This
information has been audited by KPMG
LLP, an independent registered public accounting firm, whose report, along with
the Fund’s audited financial statements, is included in the Fund’s
filing
on
Form
N-CSR.
Pursuant
to a tax-free reorganization, the Fund is the legal entity successor to PNC
International Growth Fund (“Predecessor
Fund”). The Predecessor Fund is the accounting and tax survivor as a result of
the reorganization. The financial information presented for periods prior to the
reorganization is that of the Predecessor Fund. As a result of the
reorganization, this information has become the Fund’s historical operations.
Prior to the reorganization, the Fund had no investment
operations.
31
Financial
Highlights–Institutional
Shares
(formerly, Class I Shares)
(formerly, Class I Shares)
(For a Share Outstanding Throughout
Each Period)1
|
|
Year
Ended May 31, | ||||
|
|
2024 |
2023 |
2022 |
2021 |
2020 |
|
Net
Asset Value, Beginning of Period |
$13.19 |
$14.26 |
$18.70 |
$13.02 |
$11.87 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income2 |
0.07 |
0.13 |
0.08 |
0.09 |
0.03 |
|
Net
realized and unrealized gain (loss) |
1.70 |
(0.94) |
(3.80) |
6.39 |
1.73 |
|
TOTAL
FROM INVESTMENT OPERATIONS |
1.77 |
(0.81) |
(3.72) |
6.48 |
1.76 |
|
Less
Distributions: |
|
|
|
|
|
|
Distributions
from net investment income |
(0.17) |
(0.15) |
(0.05) |
(0.01) |
(0.08) |
|
Distributions
from net realized gain |
— |
(0.11) |
(0.67) |
(0.79) |
(0.53) |
|
TOTAL
DISTRIBUTIONS |
(0.17) |
(0.26) |
(0.72) |
(0.80) |
(0.61) |
|
Net
Asset Value, End of Period |
$14.79 |
$13.19 |
$14.26 |
$18.70 |
$13.02 |
|
Total
Return3 |
13.56% |
(5.64)% |
(20.70)% |
50.28% |
14.78% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses4 |
0.84%5 |
0.84% |
0.84% |
0.84% |
0.85% |
|
Net
investment income |
0.53% |
1.00% |
0.47% |
0.51% |
0.21% |
|
Expense
waiver/reimbursement6 |
0.08% |
0.07% |
0.09% |
0.36% |
5.10% |
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$699,137 |
$714,886 |
$749,120 |
$835,694 |
$5,094 |
|
Portfolio
turnover7 |
37% |
46% |
47% |
89% |
70% |
|
1 |
PNC
International Growth Fund (the “Predecessor Fund”) was reorganized into
the Fund as of the close of business on November 15, 2019. The Fund is the
successor
to the Predecessor Fund. The performance information and financial
information presented incorporates the operations of the Predecessor Fund,
which,
as a result of the reorganization, are the Fund’s
operations. |
|
2 |
Per
share numbers have been calculated using the average shares
method. |
|
3 |
Based
on net asset value. |
|
4 |
Amount
does not reflect net expenses incurred by investment companies in which
the Fund may invest. |
|
5 |
The
net expense ratios are calculated without reduction for expense offset
arrangements. The net expense is 0.84% for the year ended May 31, 2024,
after taking
into
account this expense reduction. |
|
6 |
This
expense decrease is reflected in both the net expense and the net
investment income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may
invest. |
|
7 |
Securities
that mature are considered sales for purposes of this
calculation. |
Further information
about the Fund’s performance is contained in the Fund’s Annual Report, dated May
31, 2024, which can be obtained free of charge.
32
Financial
Highlights–Class
R6 Shares
(For a Share Outstanding Throughout
Each Period)
|
|
Year
Ended May 31, |
Period
Ended
5/31/20221 | |
|
|
2024 |
2023 | |
|
Net
Asset Value, Beginning of Period |
$13.20 |
$14.26 |
$20.05 |
|
Income
From Investment Operations: |
|
|
|
|
Net
investment income2 |
0.07 |
0.12 |
0.12 |
|
Net
realized and unrealized gain (loss) |
1.70 |
(0.92) |
(5.19) |
|
TOTAL
FROM INVESTMENT OPERATIONS |
1.77 |
(0.80) |
(5.07) |
|
Less
Distributions: |
|
|
|
|
Distributions
from net investment income |
(0.17) |
(0.15) |
(0.05) |
|
Distributions
from net realized gain |
— |
(0.11) |
(0.67) |
|
TOTAL
DISTRIBUTIONS |
(0.17) |
(0.26) |
(0.72) |
|
Net
Asset Value, End of Period |
$14.80 |
$13.20 |
$14.26 |
|
Total
Return3 |
13.55% |
(5.57)% |
(26.04)% |
|
Ratios
to Average Net Assets: |
|
|
|
|
Net
expenses4 |
0.83%5 |
0.83% |
0.83%6 |
|
Net
investment income |
0.53% |
0.95% |
0.92%6 |
|
Expense
waiver/reimbursement7 |
0.08% |
0.06% |
0.12%6 |
|
Supplemental
Data: |
|
|
|
|
Net
assets, end of period (000 omitted) |
$619 |
$619 |
$279 |
|
Portfolio
turnover8 |
37% |
46% |
47%9 |
|
1 |
Reflects
operations for the period from August 26, 2021 (commencement of
operations) to May 31, 2022. |
|
2 |
Per
share numbers have been calculated using the average shares
method. |
|
3 |
Based
on net asset value. Total returns for periods of less than one year are
not annualized. |
|
4 |
Amount
does not reflect net expenses incurred by investment companies in which
the Fund may invest. |
|
5 |
The
net expense ratios are calculated without reduction for expense offset
arrangements. The net expense is 0.83% for the year ended May 31, 2024,
after taking
into
account this expense reduction. |
|
6 |
Computed
on an annualized basis. |
|
7 |
This
expense decrease is reflected in both the net expense and the net
investment income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may
invest. |
|
8 |
Securities
that mature are considered sales for purposes of this
calculation. |
|
9 |
Portfolio
turnover is calculated at the Fund level. Percentage indicated was
calculated for the fiscal year ended May 31,
2022. |
Further information
about the Fund’s performance is contained in the Fund’s Annual Report, dated May
31, 2024, which can be obtained free of charge.
33
Appendix
A: Hypothetical Investment and Expense Information
The
following charts provide additional hypothetical information about the effect of
the Fund’s expenses, including investment
advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year
period. The charts show the estimated expenses that would be incurred in respect
of a hypothetical investment of $10,000, assuming a 5% return each year, and no
redemption of Shares. Each chart also assumes that the Fund’s annual expense
ratio stays the same throughout the 10-year period and that all dividends and
distributions are reinvested. The annual expense ratio used in each chart is the
same as stated in the “Fees and Expenses” table of this Prospectus (and thus
does not reflect any fee waiver or expense reimbursement currently in effect).
The maximum amount of any sales charge that might be imposed on the purchase of Shares
(and deducted from the hypothetical initial investment of $10,000; the
“Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column.
The hypothetical investment information does not reflect the effect of charges
(if any) normally applicable to redemptions of Shares
(e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as
fees and expenses, may fluctuate over time, and your actual investment returns
and total expenses may be higher or lower than those shown below.
|
FEDERATED
HERMES INTERNATIONAL GROWTH FUND - IS CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.93% | |||||
|
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 |
$94.89 |
$10,407.00 |
|
2 |
$10,407.00 |
$520.35 |
$10,927.35 |
$98.75 |
$10,830.56 |
|
3 |
$10,830.56 |
$541.53 |
$11,372.09 |
$102.77 |
$11,271.36 |
|
4 |
$11,271.36 |
$563.57 |
$11,834.93 |
$106.96 |
$11,730.10 |
|
5 |
$11,730.10 |
$586.51 |
$12,316.61 |
$111.31 |
$12,207.52 |
|
6 |
$12,207.52 |
$610.38 |
$12,817.90 |
$115.84 |
$12,704.37 |
|
7 |
$12,704.37 |
$635.22 |
$13,339.59 |
$120.56 |
$13,221.44 |
|
8 |
$13,221.44 |
$661.07 |
$13,882.51 |
$125.46 |
$13,759.55 |
|
9 |
$13,759.55 |
$687.98 |
$14,447.53 |
$130.57 |
$14,319.56 |
|
10 |
$14,319.56 |
$715.98 |
$15,035.54 |
$135.88 |
$14,902.37 |
|
Cumulative |
|
$6,022.59 |
|
$1,142.99 |
|
|
FEDERATED
HERMES INTERNATIONAL GROWTH FUND - R6 CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.92% | |||||
|
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 |
$93.88 |
$10,408.00 |
|
2 |
$10,408.00 |
$520.40 |
$10,928.40 |
$97.71 |
$10,832.65 |
|
3 |
$10,832.65 |
$541.63 |
$11,374.28 |
$101.69 |
$11,274.62 |
|
4 |
$11,274.62 |
$563.73 |
$11,838.35 |
$105.84 |
$11,734.62 |
|
5 |
$11,734.62 |
$586.73 |
$12,321.35 |
$110.16 |
$12,213.39 |
|
6 |
$12,213.39 |
$610.67 |
$12,824.06 |
$114.66 |
$12,711.70 |
|
7 |
$12,711.70 |
$635.59 |
$13,347.29 |
$119.33 |
$13,230.34 |
|
8 |
$13,230.34 |
$661.52 |
$13,891.86 |
$124.20 |
$13,770.14 |
|
9 |
$13,770.14 |
$688.51 |
$14,458.65 |
$129.27 |
$14,331.96 |
|
10 |
$14,331.96 |
$716.60 |
$15,048.56 |
$134.54 |
$14,916.70 |
|
Cumulative |
|
$6,025.38 |
|
$1,131.28 |
|
34
An SAI dated July 31,
2024, is incorporated by reference into this Prospectus. Additional information
about the Fund and its investments is contained in the Fund’s SAI and Annual and
Semi-Annual Reports to shareholders and in Form N-CSR
as they
become available. In Form N-CSR, you will find, among other information, the
Fund’s annual and semi-annual financial statements. 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,
such as
financial statements, without charge, to make inquiries and request e-delivery,
call your financial intermediary or the Fund at 1-800-341-7400. You may also
access the Fund’s Prospectus, SAI, Annual Report, Semi-Annual Report, financial
statements and other information on the Fund’s website at
FederatedHermes.com/us/Fund Information.
These
documents, as well as additional information about the Fund (including portfolio
holdings, performance and distributions), are also available on
FederatedHermes.com/us.
You can
obtain information about the Fund (including the SAI) by accessing Fund
information from the EDGAR Database on the SEC’s website at sec.gov. You can
purchase copies of this information by contacting the SEC by email at
[email protected].
Federated Hermes
International Growth Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us
at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities
Corp., Distributor
Investment
Company Act File No. 811-23259
CUSIP
31423A648
CUSIP 31423A630
CUSIP 31423A630
Q454842
(7/24)
© 2024 Federated Hermes,
Inc.