Prospectus
August
31, 2022
Disclosure
contained herein relates to all classes of the Fund, as listed below, unless
otherwise noted.
|
Share
Class | Ticker |
A | FMTAX |
A2 | FMTHX |
Institutional | FSHIX |
Service | FSHSX |
Federated Hermes Short-Intermediate Municipal Fund
A Portfolio of Federated Hermes Short-Intermediate Duration Municipal Trust
A mutual
fund seeking to provide dividend income which is exempt from federal regular
income tax by investing its assets so that, normally, distributions of annual
interest income are exempt from federal regular income tax.
As with
all mutual funds, the Securities and Exchange Commission (SEC) has not approved
or disapproved these securities or passed upon the adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
Not
FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee
|
|
A |
A2 |
IS |
SS |
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
|
|||
|
Maximum
Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) |
|
|
|
|
Maximum
Sales Charge (Load) Imposed on Reinvested Dividends (and other
Distributions) (as a percentage of
offering
price) |
|
|||
|
Redemption
Fee (as a percentage of amount redeemed, if
applicable) |
|
|
|
|
Exchange
Fee |
|
|
|
A |
A2 |
IS |
SS |
|
Management
Fee |
||||
|
Distribution
(12b-1) Fee |
|
|
|
|
|
Other
Expenses |
||||
|
Total
Annual Fund Operating Expenses |
|
|
|
|
|
Fee
Waivers and/or Expense Reimbursements3 |
( |
( |
( |
( |
|
Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements
|
|
|
|
|
1
2
3
1
|
Share
Class |
1
Year |
3
Years |
5
Years |
10
Years |
|
A |
$ |
$ |
$ |
$ |
|
A2 |
$ |
$ |
$ |
$ |
|
IS |
$ |
$ |
$ |
$ |
|
SS |
$ |
$ |
$ |
$ |
2
3
4
5
|
|
1
Year |
5
Year |
10
Year |
|
A: |
|
|
|
|
Return
Before Taxes |
( |
|
|
|
A2: |
|
|
|
|
Return
Before Taxes |
( |
|
|
|
IS: |
|
|
|
|
Return
Before Taxes |
|
|
|
|
Return
After Taxes on Distributions |
|
|
|
|
Return
After Taxes on Distributions and Sale of Fund Shares |
|
|
|
|
SS: |
|
|
|
|
Return
Before Taxes |
( |
|
|
|
S&P
Municipal Bond Short Index1
(reflects
no deduction for fees, expenses or taxes) |
|
|
|
|
S&P
Municipal Bond 1-5 Years Investment
Grade
5% Pre-Refunded Index2
(reflects
no deduction for fees, expenses or taxes) |
|
|
|
|
Morningstar
US Fund Muni National Short Funds Average3 |
|
|
|
1
2
3
FUND
MANAGEMENT
The
Fund’s Investment Adviser is Federated Investment Management
Company.
Jeff
A. Kozemchak, CFA, Senior Portfolio Manager, has been the Fund’s portfolio
manager since June of 1996.
Mary
Jo Ochson, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since August of 2017.
Kyle
Stewart, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since August of 2022.
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.
The
A2 class offered through this Prospectus is available for purchase to
shareholders investing through certain financial
intermediaries that have entered into an agreement with the Fund’s Distributor.
The A2 class may also be purchased directly from the Fund in certain
circumstances.
A & A2
Classes
The
minimum investment amount for the Fund’s A class and A2 class is generally
$1,500 for initial investments and $100 for subsequent investments. There is no
minimum initial or subsequent investment amount required for employer-sponsored
retirement plans. Certain types of accounts are eligible for lower minimum
investments. The minimum investment amount for Systematic Investment Programs is
$50.
IS
& SS Classes
The
minimum initial investment amount for the Fund’s IS and SS classes 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.
6
Tax
Information
It
is anticipated that Fund distributions will be primarily dividends that are
exempt from federal regular income tax, although a
portion of the Fund’s dividends may not be tax-exempt. Dividends may be subject
to state and local taxes. Although the Fund does not seek to realize capital
gains, the Fund may realize and distribute capital gains from time to time as a
result of the Fund’s normal investment activities. Any Fund distributions of
capital gains are taxable at applicable capital gains rates. The Fund is
generally not a suitable investment for retirement accounts.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and/or its related
companies may pay the intermediary for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund
over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
What are
the Fund’s Investment Strategies?
The
Fund’s investment objective is to provide dividend income which is exempt from
federal regular income tax. While there is
no assurance that the Fund will achieve its investment objective, it endeavors
to do so by following the principal strategies and policies described in this
Prospectus. The Fund’s Statement of Additional Information (SAI) provides
information about the Fund’s non-principal strategies.
The
Fund pursues its objective by investing its assets so that normally
distributions of annual interest income are exempt
from federal regular income tax. The Adviser may invest the Fund’s assets
without limitation in securities whose interest may be subject to (or may be a
specific preference item for purposes of) the AMT. With respect to such
investments, interest from the Fund’s investments may be subject to (or may be a
specific preference item for purposes of) the AMT.
The
Fund does not limit itself to securities of a particular maturity range. The
Fund’s dollar-weighted average portfolio duration
will be less than five years.
The
Fund will invest at least a majority of its assets in securities rated
investment-grade (or unrated securities of comparable quality), and
may purchase securities rated below investment-grade (or unrated securities of
comparable quality), which are also known as junk bonds, up to 49% of its
assets. The amount of the Fund’s assets invested in investment-grade, tax-exempt
securities will be determined at the time when tax-exempt securities are
purchased. For example, a later increase or decrease in percentage resulting
from any change in value or net assets, or from a downgrade in a security’s
rating/quality, will not require the Fund to sell any tax-exempt security held
in the Fund’s portfolio. Investment-grade securities are securities that receive
investment-grade ratings (i.e., generally ratings in the first, second, third or
fourth highest rating category, including modifiers, sub-categories or
gradations) by a nationally recognized statistical rating organization (NRSRO)
or unrated securities of comparable quality. For example, securities rated AAA,
AA, A or BBB (including modifiers, sub-categories or gradations) by Standard
& Poor’s
would be
rated in the first, second, third or fourth ratings category, respectively.
Securities rated below investment-grade (or noninvestment-grade securities) are
securities that do not receive investment-grade ratings (i.e., generally ratings
below one of the four highest rating categories) by an NRSRO or unrated
securities of comparable quality. For example, securities rated B or BB
(including modifiers, sub-categories or gradations) by Standard & Poor’s, an
NRSRO, would be noninvestment-grade securities. The presence of a ratings
modifier, sub-category, or gradation (for example, a (+) or (-)) is intended to
show relative standing within the major rating categories and does not affect
the security credit rating for purposes of the Fund’s investment parameters. The
Fund does not have a specific minimum quality rating.
The
investment-grade, tax-exempt securities in which the Fund invests generally are
subject to tax-exempt securities, interest
rate, issuer credit, counterparty credit, liquidity, tax, leverage, call,
sector, prepayment and extension, credit enhancement and economic risks, and the
derivative contracts and hybrid instruments in which the Fund invests are
subject to these risks, as well as the risks of investing in derivatives
contracts and hybrid instruments, all as described in this Prospectus. The
noninvestment-grade, tax-exempt securities in which the Fund invests, which are
also known as junk bonds, also are subject to tax-exempt securities, interest
rate, issuer credit, counterparty credit, liquidity, tax, leverage, call,
sector, prepayment and extension, credit enhancement and economic risks, as well
as the risks of investing in noninvestment-grade securities, all as described in
this Prospectus.
The
Fund’s Adviser actively manages the Fund’s portfolio, seeking to manage the
interest rate risk and credit risk assumed by
the Fund and to provide enhanced levels of income.
7
Subject
to the Fund’s dollar-weighted average portfolio duration constraint, the Adviser
of the Fund manages the Fund’s interest
rate risk by adjusting the duration of its portfolio. The Adviser may lengthen
or shorten duration from time to time based on its interest rate outlook.
“Duration” measures the price sensitivity of a fixed income security to changes
in interest rates. The greater a portfolio’s duration, the greater the potential
change in the portfolio’s value in response to a change in market interest
rates.
The
Adviser will increase or reduce the Fund’s portfolio duration based on its
interest rate outlook. When the Adviser expects
interest rates to fall, it will maintain a longer portfolio duration. When the
Adviser expects interest rates to increase, it will shorten the portfolio
duration. The Adviser uses hedging transactions for purposes of duration
management. The Adviser considers a variety of factors in formulating its
interest rate outlook, including (among others) the following:
◾ Current
and expected U.S. economic growth;
◾ Current
and expected interest rates and inflation;
◾ The
Federal Reserve’s monetary policy; and
◾ Supply and
demand factors related to the municipal market and the effect they may have on
the returns offered for various bond maturities.
The
Adviser manages credit risk by performing a fundamental credit analysis on
tax-exempt securities before the Fund purchases
such securities. The Adviser considers various factors, including (among others)
the following:
◾ The
economic feasibility of revenue bond financings and general purpose
financings;
◾ The
financial condition of the issuer or guarantor; and
◾ Political
developments that may affect credit quality.
The
Adviser monitors the credit risks of all portfolio securities on an ongoing
basis by reviewing, as the Adviser considers
necessary or appropriate in accordance with its procedures, periodic financial
data and ratings of NRSROs. The Fund’s investments in noninvestment-grade
securities will be more dependent on the Adviser’s credit analysis than would be
investment-grade securities, because noninvestment-grade securities, while
generally offering higher yields, also involve greater risks. Consequently, in
addition to the review process described above, the Adviser may, for example and
when appropriate, visit the site that the issuer is developing with the proceeds
of the offering; and may engage in detailed discussions with the issuer
regarding the offering.
The
Adviser attempts to provide enhanced levels of income, subject to the Fund’s
quality and duration constraint, through the following
management techniques. The Adviser will engage in a relative value analysis;
that is, the Adviser will assess the cost of a tax-exempt security compared with
other tax-exempt securities and taxable securities such as U.S. Treasury
obligations. The Adviser may also allocate investments in sectors of the
tax-exempt market that offer the highest return. In seeking to provide enhanced
levels of income, the Fund may invest in certain securities or other
investments
(such
as
market
discount bonds, credit default swaps and other derivative transactions) and
engage in other permissible activities that will likely cause the Fund to
realize a limited amount of ordinary income or short-term capital gains (which
are treated as ordinary income for federal income tax purposes) and, as a
result, may result in taxable distributions to shareholders.
The
Fund may use derivative contracts,
in
particular, futures contracts, options contracts and swap contracts, and/or
hybrid instruments to implement elements of its investment strategy. For
example, the Fund may use derivative contracts or hybrid instruments to increase
or decrease the portfolio’s exposure to the investment(s) underlying the
derivative or hybrid instrument in an attempt to benefit from changes in the
value of the underlying instrument(s) or to gain exposure to the municipal bond
sector. Additionally, by way of example, the Fund may use derivative contracts
in an attempt to:
◾ increase
or decrease the effective duration of the Fund portfolio;
◾ obtain
premiums from the sale of derivative contracts;
◾ realize
gains from trading a derivative contract; or
◾ hedge
against potential losses.
There
can be no assurance that the Fund’s use of derivative contracts or hybrid
instruments will work as intended. Derivative
investments made by the Fund are included within the Fund’s 80% policy (as
described below) and are calculated at market value.
Under
normal circumstances, the Fund will invest its assets so that at least 80% of
the income that it distributes will be exempt
from federal regular income tax. This policy may not be changed without
shareholder approval.
8
TEMPORARY
INVESTMENTS
The
Fund may temporarily depart from its principal investment strategies by
investing its assets in taxable securities or holding
cash. It may do this in response to unusual circumstances, such as: adverse
market, economic or other conditions (for example, to help avoid potential
losses, or during periods when there is a shortage of appropriate tax-exempt
securities); to maintain liquidity to meet shareholder redemptions; or to
accommodate cash inflows. It is possible that such temporary investments could
affect the Fund’s investment returns. If the Fund invests in taxable securities,
it may receive and distribute taxable income to investors and to that extent
fail to meet its investment objectives.
What are
the Fund’s Principal Investments?
The
following provides general information on the Fund’s principal investments. The
Fund’s Statement of Additional Information
(SAI) provides information about the Fund’s non-principal investments and may
provide additional information about the Fund’s principal
investments.
TAX-EXEMPT
SECURITIES
Tax-exempt
securities are fixed-income securities that, in the opinion of bond counsel to
the issuer or on the basis of another
authority believed by the Adviser to be reliable, pay interest that is not
subject to federal regular income taxes. Fixed-income securities pay interest,
dividends or distributions at a specified rate. The rate may be a fixed
percentage of the principal or adjusted periodically. In addition, the issuer of
a fixed-income security must repay the principal amount of the security,
normally within a specified time. Typically, states, counties, cities and other
political subdivisions and authorities issue tax-exempt securities. The market
categorizes tax-exempt securities by their source of repayment. Certain of these
tax-exempt securities may be subject to credit enhancement.
The
following describes the principal types of tax-exempt securities in which the
Fund may invest:
General
Obligation Bonds (A Type of Tax-Exempt Security)
General
obligation bonds are supported by the issuer’s power to exact property or other
taxes. The issuer must impose and
collect taxes sufficient to pay principal and interest on the bonds. However,
the issuer’s authority to impose additional taxes may be limited by its charter
or state law.
Special
Revenue Bonds (A Type of Tax-Exempt Security)
Special
revenue bonds are payable solely from specific revenues received by the issuer
such as specific taxes, assessments,
tolls or fees. Bondholders may not collect from the municipality’s general taxes
or revenues. For example, a municipality may issue bonds to build a toll road
and pledge the tolls to repay the bonds. Therefore, a shortfall in the tolls
normally would result in a default on the bonds, or in certain cases, may result
in a reduction in payments received in respect of the bonds.
Private
Activity Bonds (A Type of Special Revenue Bond)
Private
activity bonds are special revenue bonds used to finance private projects. A
certain percentage of the proceeds from a
private activity bond is used for a private business use or a certain percentage
of the debt service regarding a private activity bond is paid directly or
indirectly from a private business use. A private business use is a trade or
business carried on by any person or entity other than a governmental unit.
Private activity bonds are secured primarily by revenues derived from loan
repayments or lease payments due from the private entity, which may or may not
be guaranteed by a parent company or otherwise secured. Private activity bonds
generally are not secured by a pledge of the taxing power of the issuer of such
bonds. For example, a municipality may issue bonds to finance a new factory to
improve its local economy. The municipality would lend the proceeds from its
bonds to the company using the factory, and the company would agree to make loan
payments sufficient to cover interest and principal payments on the bonds. The
bonds would be payable from the company’s loan payments, and generally not from
any other revenues of the municipality. Therefore, any default of the loan
normally would result in a default on the bonds.
Types
of private activity bonds include, for example: bonds issued to obtain funds to
provide water, sewage and solid waste
facilities, qualified residential rental projects, certain local electric, gas
and other heating and cooling facilities, qualified hazardous waste facilities,
high speed intercity rail facilities, certain airports, docks, wharves and mass
transportation facilities and qualified mortgages; qualified student loan bonds;
qualified redevelopment bonds; and bonds used for certain organizations exempt
from federal income taxation (qualified 501(c)(3) bonds).
The
interest on many types of private activity bonds is subject to AMT. However,
issues are available in the marketplace
that are not subject to AMT due to qualifying tax rules.
9
Inverse
Floaters (A Type of Fixed-Income, Tax-Exempt Security)
An
inverse floater has a floating or variable interest rate that moves in the
opposite direction of market interest rates. Inverse
floaters are used to enhance the income from a bond investment by employing
leverage. When short-term market interest rates go up, the interest rate paid on
the inverse floater goes down; when short-term market interest rates go down,
the interest rate paid on the inverse floater goes up. Inverse floaters
generally respond more rapidly to market interest rate changes than fixed-rate,
tax-exempt securities. Inverse floaters are subject to interest rate risks and
leverage risks.
Municipal
Mortgage-Backed Securities (A Type of Fixed-Income, Tax-Exempt
Security)
Municipal
mortgage-backed securities are special revenue bonds, the proceeds of which may
be used to provide mortgage
loans for single family homes or to finance multifamily housing. Municipal
mortgage-backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable rates. Municipal
mortgage-backed securities generally have fixed interest rates.
Municipal
mortgage-backed securities come in a variety of forms. The simplest forms of
municipal mortgage-backed securities
are unstructured bonds backed by the net interest and principal payments and
prepayments from the underlying mortgages. As a result, the holders assume all
interest rate and prepayment risks of the underlying mortgages. Other municipal
mortgage-backed securities may have more complicated financial
structures.
Variable
Rate Demand Instruments (A Type of Tax-Exempt Security)
Variable
rate demand instruments are tax-exempt securities that require the issuer or a
third party, such as a dealer or bank (the
“Demand Provider”), to repurchase the security for its face value upon demand.
The securities also pay interest at a variable rate intended to cause the
securities to trade at their face value. Some variable rate demand instruments
are “conditional,” so that the occurrence of certain conditions discharges the
Demand Provider’s obligation to repurchase the security. Other variable rate
demand instruments are “unconditional,” so that there are no conditions under
which the Demand Provider’s obligation to repurchase the security can terminate.
The Fund treats variable rate demand instruments as short-term securities even
though their maturity may extend beyond 397 days because, within 397 days, their
variable interest rate adjusts in response to changes in market rates and the
repayment of their principal amount can be demanded. Certain variable rate
demand instruments that may be invested in by the Fund, referred to as
“synthetic” variable rate demand instruments, have certain features, such as
call features, that make it possible that the Fund will realize capital
gains.
Municipal
Notes (A Type of Tax-Exempt Security)
Municipal
notes are short-term, tax-exempt securities. Many municipalities issue such
notes to fund their current operations
before collecting taxes or other municipal revenues. Municipalities may also
issue notes to fund capital projects prior to issuing long-term bonds. The
issuers typically repay the notes at the end of their fiscal year, either with
taxes, other revenues or proceeds from newly issued notes or bonds.
Derivative
Contracts
Derivative
contracts are financial instruments that require payments based upon changes in
the values of designated securities,
commodities, indices or other assets or instruments including other derivative
contracts (each a “Reference Instrument” and collectively, “Reference
Instruments”). 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 securities or commodities exchanges. In this
case, the exchange sets all the terms of
the contract except for the price. Investors make payments due under their
contracts through the exchange. Most exchanges require investors 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 investors against potential defaults by the other party to the
contract. Trading contracts on an exchange also allows investors to close out
their contracts by entering into offsetting contracts.
The
Fund may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between the Fund and 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
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.
10
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 swap contracts
through a clearing house or central counterparty (a “CCP”).
To
clear a swap through the CCP, the Fund will submit the contract to, and post
margin with, a futures commission merchant
(FCM) that is a clearing house member. The Fund may enter into the swap with a
financial institution 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 or
through a market facility that is known as a swap execution facility or SEF.
Central clearing is presently required only for certain swaps and the CFTC is
expected to impose a mandatory central clearing requirement for additional
derivative instruments over time.
The
CCP, SEF and FCM are all subject to regulatory oversight by the CFTC. In
addition, most derivative market participants
are now regulated as swap dealers or major swap participants and are subject to
certain minimum capital and margin requirements and business conduct standards.
Similar regulatory requirements are expected to apply to derivative contracts
that are subject to the jurisdiction of the SEC, although the SEC has not yet
finalized its regulations. In addition, uncleared OTC swaps will be subject to
regulatory collateral requirements that could adversely affect the Fund’s
ability to enter into swaps in the OTC market. These developments could cause
the Fund to terminate new or existing swap agreements or to realize amounts to
be received under such instruments at an inopportune time.
Until
the mandated rulemaking and regulations are implemented completely, it will not
be possible to determine the complete
impact of the Dodd-Frank Act and related regulations on the Fund.
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
CCP.
Payment
obligations arising in connection with derivative contracts are frequently
required to be secured with margin (which is
commonly called “collateral”). To the extent necessary to meet such
requirements, the Fund may purchase U.S. Treasury and/or government agency
securities.
The
Fund may invest in a derivative contract if it is permitted to own, invest in or
otherwise have economic exposure to the Reference
Instrument. The Fund is not required to own a Reference Instrument in order to
buy or sell a derivative contract relating to that Reference Instrument. The
Fund may trade in the following specific types and/or combinations of derivative
contracts:
Futures
Contracts (A Type of Derivative)
Futures
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a Reference Instrument at a
specified price, date and time. Entering into a contract to buy a Reference
Instrument is commonly referred to as buying a contract or holding a long
position in the asset. Entering into a contract to sell a Reference Instrument
is commonly referred to as selling a contract or holding a short position in the
Reference Instrument. Futures contracts are considered to be commodity
contracts. The Adviser has claimed an exclusion from the definition of the term
“commodity pool operator” under the Commodity Exchange Act with respect to the
Fund, and therefore is not subject to registration or regulation as a commodity
pool operator under the Act with respect to the Fund. Futures contracts traded
OTC are frequently referred to as forward contracts. The Fund can buy or sell
financial futures (such as interest rate futures, index futures and security
futures).
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.
11
Swap
Contracts (A Type of Derivative)
A
swap contract (also known as a “swap”) is a type of derivative contract in which
two parties agree to pay each other (swap) the
returns derived from Reference Instruments. Swaps do not always involve the
delivery of the Reference Instruments by either party, and the parties might not
own the Reference Instruments underlying the swap. The payments are usually made
on a net basis so that, on any given day, the Fund would receive (or pay) only
the amount by which its payment under the contract is less than (or exceeds) the
amount of the other party’s payment. Swap agreements are sophisticated
instruments that can take many different forms and are known by a variety of
names. Common types of swaps in which the Fund may invest include interest rate
swaps, total return swaps, credit default swaps and caps and
floors.
OTHER
INVESTMENTS, TRANSACTIONS, TECHNIQUES
Investing in
Securities of Other Investment Companies
The
Fund may invest its assets in shares of other investment companies as an
efficient means of implementing its investment strategies,
managing its uninvested cash and/or other investment reasons consistent with the
Fund’s investment objective and investment strategies. These other investment
companies are managed independently of the Fund and incur additional fees and/or
expenses which would, therefore, be borne indirectly by the Fund in connection
with any such investment. In the case of an investment in an affiliated fund,
these investments also can create conflicts of interests for the Adviser to the
Fund and the investment adviser to the acquired fund. For example, a conflict of
interest can arise due to the possibility that the Adviser to the Fund could
make a decision to redeem the Fund’s investment in the acquired fund. A conflict
of interest can also arise if, because of the Fund’s investment in the acquired
fund, the acquired fund is able to garner more assets, thereby growing the
acquired fund and increasing the management fees received by the investment
adviser to the acquired fund, which would either be the Adviser or an affiliate
of the Adviser. However, the Adviser believes that the benefits and efficiencies
of making investments in other investment companies should outweigh the
potential additional fees and/or expenses and resulting conflicts of interest.
The Fund may invest in money market securities directly.
Credit
Enhancement
The
Fund may invest in securities that have credit enhancement. Credit enhancement
consists of an arrangement in which a
company agrees to pay amounts due on a fixed-income security (including a
tax-exempt security) if the issuer defaults. In some cases the company providing
credit enhancement makes all payments directly to the security holders and
receives reimbursement from the issuer. Normally, the credit enhancer has
greater financial resources and liquidity than the issuer. For this reason, the
Adviser may evaluate the credit risk of a fixed-income security based solely
upon its credit enhancement.
Common
types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement
also includes arrangements where securities or other liquid assets secure
payment of a fixed-income security. If a default occurs, these assets may be
sold and the proceeds paid to the security’s holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for a
fixed-income security.
Hybrid
Instruments
Hybrid
instruments combine elements of two different kinds of securities or financial
instruments (such as a derivative contract).
Frequently, the value of a hybrid instrument is determined by reference to
changes in the value of a Reference Instrument (that is a designated security,
commodity, index or other asset or instrument including a derivative contract).
The Fund may use hybrid instruments only in connection with permissible
investment activities. Hybrid instruments can take on many forms including, but
not limited to, the following forms. First, a common form of a hybrid instrument
combines elements of a derivative contract with those of another security
(typically a fixed-income security). In this case all or a portion of the
interest or principal payable on a hybrid security is determined by reference to
changes in the price of a Reference Instrument. Second, hybrid instruments may
include convertible securities with conversion terms related to a Reference
Instrument.
Depending
on the type and terms of the hybrid instrument, its risks may reflect a
combination of the risks of investing in the
Reference Instrument with the risks of investing in other securities and
derivative contracts. Thus, an investment in a hybrid instrument may entail
significant risks in addition to those associated with traditional investments
or the Reference Instrument. Hybrid instruments are also potentially more
volatile than traditional securities or the Reference Instrument. Moreover,
depending on the structure of the particular hybrid, it may expose the Fund to
leverage risks or carry liquidity risks.
12
Delayed
Delivery Transactions
Delayed
delivery transactions, including when-issued transactions, are arrangements in
which the Fund buys securities for a set
price, with payment and delivery of the securities scheduled for a future time.
During the period between purchase and settlement, no payment is made by the
Fund to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value in
determining the price of its Shares. Settlement dates may be a month or more
after entering into these transactions so that the market values of the
securities bought may vary from the purchase prices. Therefore, delayed delivery
transactions create interest rate risks for the Fund. Delayed delivery
transactions also involve credit risks in the event of a counterparty default.
These transactions create leverage risks.
Asset
Segregation
In
order to secure its obligations in connection with derivative contracts or
special transactions, the Fund will either own the
underlying assets, enter into offsetting transactions or set aside cash or
readily marketable securities in each case, as provided by the SEC or SEC staff
guidance. This requirement may cause the Fund to miss favorable trading
opportunities due to a lack of sufficient cash or readily marketable securities.
This requirement may also cause the Fund to realize losses on offsetting or
terminated derivative contracts or special transactions.
Investment
Ratings for Investment-Grade Securities
The
Adviser will determine whether a security is investment grade based upon the
credit ratings given by one or more NRSROs.
For example, Standard & Poor’s, an NRSRO, assigns ratings to
investment-grade securities (AAA, AA, A and BBB including modifiers,
sub-categories and gradations) based on their assessment of the likelihood of
the issuer’s inability to pay interest or principal (default) when due on each
security. Lower credit ratings correspond to higher credit risk. If a security
has not received a rating, the Fund must rely entirely upon the Adviser’s credit
assessment that the security is comparable to investment grade. The presence of
a ratings modifier, sub-category, or gradation (for example, a (+) or (-)) is
intended to show relative standing within the major rating categories and does
not affect the security credit rating for purposes of the Fund’s investment
parameters. If a security is downgraded below the minimum quality grade
discussed above, the Adviser will reevaluate the security, but will not be
required to sell it.
As
disclosed in this Prospectus, the Fund may invest up to 49% of its assets in
securities rated below investment-grade (or
unrated securities of comparable quality). The Fund does not have a specific
minimum quality rating requirement.
If
a security is downgraded below any minimum quality grade discussed above, the
Adviser will reevaluate the security, but will
not be required to sell it.
Investment
Ratings for Noninvestment-Grade Securities
Noninvestment-grade
securities are rated below BBB- by an NRSRO. These bonds have greater economic,
credit and liquidity
risks than investment-grade securities.
Additional
Information Regarding the Security Selection Process
As part
of analysis in its security selection
process, among other factors, the Adviser also evaluates whether environmental,
social and governance factors could have a positive or negative impact on the
risk profiles of many issuers or guarantors in the universe of securities in
which the Fund may invest. The Adviser may also consider information derived
from active engagements conducted by its in-house stewardship team with certain
issuers or guarantors on environmental, social and governance topics. This
qualitative analysis does not automatically result in including or excluding
specific securities but may be used by Federated Hermes as an additional input
in its
primary
analysis.
What are
the Specific Risks of Investing in the Fund?
The
following provides general information on the risks associated with the Fund’s
principal investments. Any additional
risks associated with the Fund’s non-principal investments are described in the
Fund’s SAI. The Fund’s SAI also may provide additional information about the
risks associated with the Fund’s principal investments.
TAX-EXEMPT
SECURITIES Risk
The
securities in which the Fund invests may include those issued by state or local
governments, other political subdivisions
or authorities, or directly or indirectly supported by taxes, assessments,
tolls, fees or other revenue collected by or otherwise derived from or through
such issuers. The amount of public information available about tax-exempt
securities is generally less than for corporate equities or bonds. The secondary
market for tax-exempt securities also tends to be less well-developed and less
liquid than many other securities markets, which may limit the Fund’s ability to
sell its tax-exempt securities at attractive prices. Special factors, such as
legislative changes, and state and local economic and business developments, may
adversely affect the yield and/or value of the Fund’s investments in tax-exempt
securities. Other factors include the general conditions of the tax-exempt
securities market, the size of the particular offering, the
13
maturity
of the obligation and the rating of the issue. Like other issuers, there is no
guarantee that the issuers of such securities will have sufficient revenues to
satisfy their obligations (such as, for example, the payment of interest or
principal when due). Legal, economic, political or other developments may raise
impairments (such as, for example, limitations under applicable law on the
issuer’s authority to raise taxes, prolonged budgetary processes, declining real
estate values, increasing pension liabilities or declining tax revenues which
may occur due to shifting demographics or other factors) to such issuer’s
budgetary flexibility, liquidity and ability to satisfy its obligations. Such
impairments may cause a downgrade in the credit ratings of such an issuer, or
the securities issued or supported by it, and may cause such an issuer to defer
payment of certain obligations, reduce or eliminate appropriations and/or
default on its obligations.
Tax-exempt
issuers can and have defaulted on obligations, been downgraded or commenced
insolvency proceedings. Financial difficulties of
such issuers may continue or get worse. Like other issuers and securities, the
likelihood that the credit risk associated with such issuers and such securities
will increase is greater during times of economic stress and financial
instability. As a result, in such situations, there would be heightened risk
that there could be an interruption in payments to holders of tax-exempt
securities in some cases. There also could be a reduction in the market value of
the tax-exempt securities held by the Fund, which could adversely affect the
Fund’s net asset value or the distributions paid by the Fund.
To
the extent that the Fund invests a larger portion of its assets in the
tax-exempt securities of a particular state or U.S.
territory or possession, there is greater risk that political, regulatory,
economic or other developments within that state or U.S. territory or possession
may impact on the Fund’s investment performance.
INTEREST
RATE RISK
Prices
of fixed-income securities (including tax-exempt securities) rise and fall in
response to changes in interest rates. Generally,
when interest rates rise, prices of fixed-income securities fall. However,
market factors, such as the demand for particular fixed-income securities, may
cause the price of certain fixed-income securities to fall while the prices of
other securities rise or remain unchanged.
The
longer the duration of a fixed-income security, the more susceptible it is to
interest rate risk. The duration of a fixed-income
security may be equal to or shorter than the stated maturity of a fixed-income
security. Recent and potential future changes in monetary policy made by central
banks and/or their governments are likely to affect the level of interest rates.
Duration measures the price sensitivity of a fixed-income security given a
change in interest rates. For example, if a fixed-income security has an
effective duration of three years, a 1% increase in general interest rates would
be expected to cause the security’s value to decline about 3% while a 1%
decrease in general interest rates would be expected to cause the security’s
value to increase about 3%.
The
impact of interest rate changes on the value of floating rate investments is
typically reduced by periodic interest rate resets.
Variable and floating rate securities generally are less sensitive to interest
rate changes, but may decline in value if their interest rates do not rise as
much or as quickly as interest rates in general. Conversely, variable and
floating rate securities generally will not increase in value as much as fixed
rate debt instruments if interest rates decline. Certain of the Fund’s
investments may also be valued, in part, by reference to the relative
relationship between interest rates on tax-exempt securities and taxable
securities. With respect to the Fund’s investments described in the preceding
sentence, the value of such Fund investments may be negatively affected (or
positively affected) when the market for tax-exempt securities underperforms (or
outperforms) the market for taxable securities.
ISSUER
Credit Risk
It
is possible that interest or principal on securities will not be paid when due.
Noninvestment-grade securities generally have a
higher default risk than investment-grade securities. Such non-payment or
default may reduce the value of the Fund’s portfolio holdings, its share price
and its performance.
Many
fixed-income securities (including tax-exempt securities) receive credit ratings
from NRSROs such as Fitch Rating
Service, Moody’s Investor Services, Inc. and Standard & Poor’s that assign
ratings to securities by assessing the likelihood of an issuer and/or guarantor
default. Higher credit ratings correspond to lower perceived credit risk and
lower credit ratings correspond to higher perceived credit risk. Credit ratings
may be upgraded or downgraded from time to time as an NRSRO’s assessment of the
financial condition of a party obligated to make payments with respect to such
securities and credit risk changes. The impact of any credit rating downgrade
can be uncertain. Credit rating downgrades may lead to increased interest rates
and volatility in financial markets, which in turn could negatively affect the
value of the Fund’s portfolio holdings, its share price and its investment
performance. Credit ratings are not a guarantee of quality. Credit ratings may
lag behind the current financial conditions of the issuer and/or guarantor and
do not provide assurance against default or other loss of money. Credit ratings
do not protect against a decline in the value of a security. If a security has
not received a rating, the Fund must rely entirely upon the Adviser’s credit
assessment.
14
Fixed-income
securities generally compensate for greater credit risk by paying interest at a
higher rate. The difference between
the yield of a security and the yield of a U.S. Treasury security or other
appropriate benchmark with a comparable maturity (the “spread”) measures the
additional interest paid for risk. Spreads may increase generally in response to
adverse economic or market conditions. A security’s spread may also increase if
the security’s rating is lowered, or the security is perceived to have an
increased credit risk. An increase in the spread will cause the price of the
security to decline.
COUNTERPARTY
CREDIT RISK
Counterparty
credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations.
This could cause the Fund to lose money or to lose the benefit of the
transaction or prevent the Fund from selling or buying other securities to
implement its investment strategy.
LIQUIDITY
RISK
Trading
opportunities are more limited for fixed-income securities (including tax-exempt
securities) that have not received
any credit ratings, have received any credit ratings below investment grade or
are not widely held. Trading opportunities also are more limited for inverse
floaters that have complex terms or that are not widely held. These features may
make it more difficult to sell or buy a security at a favorable price or time.
Consequently, the Fund may have to accept a lower price to sell a security, sell
other securities to raise cash or give up an investment opportunity, any of
which could have a negative effect on the Fund’s performance. Infrequent trading
of securities may also lead to an increase in their price volatility.
Noninvestment-grade securities generally have less liquidity than
investment-grade securities.
Liquidity
risk also refers to the possibility that the Fund may not be able to sell a
security or close out a derivative contract
when it wants to. If this happens, the Fund will be required to continue to hold
the security or keep the position open, and the Fund could incur
losses.
OTC
derivative contracts generally carry greater liquidity risk than exchange-traded
contracts. This risk may be increased
in times of financial stress, if the trading market for OTC derivative contracts
becomes restricted.
Tax
Risk
In
order to pay interest that is exempt from federal regular income tax, tax-exempt
securities must meet certain legal requirements.
Failure to meet such requirements may cause the interest received and
distributed by the Fund to shareholders to be taxable.
Changes
or proposed changes in federal, state or local tax laws may cause the prices of
tax-exempt securities to fall and/or may
affect the tax-exempt status of the securities in which the Fund
invests.
The
federal income tax treatment of payments in respect of certain derivative
contracts is unclear. Additionally, the Fund may
not be able to close out certain derivative contracts when it wants to. The Fund
also may invest in market discount bonds, enter into credit default swap
arrangements and other derivative transactions, and engage in other permissible
activities that will likely cause the Fund to realize a limited amount of
ordinary income or short-term capital gains (which are treated as ordinary
income for federal income tax purposes). Consequently, for each of these
reasons, the Fund may receive payments, and make distributions, that are treated
as ordinary income for federal income tax purposes. Income from the Fund may
also be subject to AMT.
Leverage
Risk
The
tax-exempt securities, derivative contracts and hybrid instruments in which the
Fund may invest can be principal investment
strategies for the Fund and may be subject to leverage risk. Leverage risk is
created when an investment, which includes, for example, an investment in a
derivative contract, exposes the Fund to a level of risk that exceeds the amount
invested. Changes in the value of such an investment magnify the Fund’s risk of
loss and potential for gain. Investments can have these same results if their
returns are based on a multiple of a specified index, security or other
benchmark.
CALL
RISK
The
tax-exempt securities in which the Fund may invest can be principal investment
strategies for the Fund and may be subject to
call risk. Call risk is the possibility that an issuer may redeem a fixed-income
security (including a tax-exempt security) before maturity (a “call”) at a price
below or above its current market price. An increase in the likelihood of a call
may reduce the security’s price. If a fixed-income security is called, the Fund
may have to reinvest the proceeds in other fixed-income securities with lower
interest rates, higher credit risks or other less favorable
characteristics.
15
SECTOR
RISK
A
substantial part of the Fund’s portfolio may be comprised of securities issued
or credit-enhanced by companies in similar
businesses or with other similar characteristics. As a result, the Fund will be
more susceptible to any economic, business, political or other developments
which generally affect these issuers or entities. Developments affecting
companies with similar characteristics might include changes in interest rates,
changes in economic cycle affecting credit losses and regulatory
changes.
PREPAYMENT
AND EXTENSION RISK
Unlike
traditional fixed-income securities (including tax-exempt securities), which pay
a fixed rate of interest until maturity
(when the entire principal amount is due), payments on municipal mortgage-backed
securities include both interest and a partial payment of principal. Partial
payment of principal may be comprised of scheduled principal payments as well as
unscheduled payments from the voluntary prepayment, refinancing or foreclosure
of the underlying loans. These unscheduled prepayments of principal create risks
that can adversely affect a fund holding municipal mortgage-backed
securities.
For
example, when interest rates decline, the values of municipal mortgage-backed
securities generally rise. However, when
interest rates decline, unscheduled prepayments can be expected to accelerate,
and the Fund would be required to reinvest the proceeds of the prepayments at
the lower interest rates then available. Unscheduled prepayments would also
limit the potential for capital appreciation on municipal mortgage-backed
securities.
Conversely,
when interest rates rise, the values of municipal mortgage-backed securities
generally fall. Since rising
interest rates typically result in decreased prepayments, this could lengthen
the average lives of municipal mortgage-backed securities, and cause their value
to decline more than traditional fixed-income securities.
Generally,
municipal mortgage-backed securities compensate for the increased risk
associated with prepayments by paying a
higher yield. The additional interest paid for risk is measured by the
difference between the yield of a municipal mortgage-backed security and the
yield of a U.S. Treasury security or other appropriate benchmark with a
comparable maturity (the “spread”). An increase in the spread will cause the
price of the municipal mortgage-backed security to decline. Spreads generally
increase in response to adverse economic or market conditions. Spreads may also
increase if the security is perceived to have an increased prepayment risk or is
perceived to have less market demand.
Credit
Enhancement Risk
The
securities in which the Fund invests may be subject to credit enhancement (for
example, guarantees, letters of credit or bond
insurance). Credit enhancement is designed to help assure timely payment of the
security; it does not protect the Fund against losses caused by declines in a
security’s value due to changes in market conditions. Securities subject to
credit enhancement generally would be assigned a lower credit rating if the
rating were based primarily on the credit quality of the issuer without regard
to the credit enhancement. If the credit quality of the credit enhancement
provider (for example, a bank or bond insurer) is downgraded, the rating on a
security credit enhanced by such credit enhancement provider also may be
downgraded.
A
single enhancement provider may provide credit enhancement to more than one of
the Fund’s investments. Having multiple
securities credit enhanced by the same enhancement provider will increase the
adverse effects on the Fund that are likely to result from a downgrading of, or
a default by, such an enhancement provider. Adverse developments in the banking
or bond insurance industries also may negatively affect the Fund, as the Fund
may invest in securities credit enhanced by banks or by bond insurers without
limit. Bond insurers that provide credit enhancement for large segments of the
fixed-income markets, including the municipal bond market, may be more
susceptible to being downgraded or defaulting during recessions or similar
periods of economic stress.
Risk
Associated with Noninvestment-Grade Securities
Securities
that are rated below investment grade or unrated securities of comparable
quality (i.e., noninvestment-grade securities),
also known as junk bonds, generally entail greater economic, credit and
liquidity risks than investment-grade securities. For example, their prices are
more volatile, economic downturns and financial setbacks may affect their prices
more negatively, and their trading market may be more limited. These securities
are considered speculative with respect to the issuer’s ability to pay interest
and repay principal. The Fund will invest at least a majority of its assets in
securities rated investment grade (or unrated securities of comparable quality),
and may purchase securities rated below investment grade (or unrated securities
of comparable quality) up to 49% of its assets.
16
RISK
RELATED TO THE ECONOMY
The
value of the Fund’s portfolio may decline in tandem with a drop in the overall
value of the markets in which the Fund
invests and/or other markets based on negative developments in the U.S. and
global economies. Economic, political and financial conditions, or industry or
economic trends and developments, may, from time to time, and for varying
periods of time, cause volatility, illiquidity or other potentially adverse
effects in the financial markets, including the fixed-income market. The
commencement, continuation or ending of government policies and economic
stimulus programs, changes in monetary policy, increases or decreases in
interest rates, or other factors or events that affect the financial markets,
including the fixed-income markets, may contribute to the development of or
increase in volatility, illiquidity, shareholder redemptions and other adverse
effects which could negatively impact the Fund’s performance. For example, the
value of certain portfolio securities may rise or fall in response to changes in
interest rates, which could result from a change in government policies, and has
the potential to cause investors to move out of certain portfolio securities,
including fixed-income securities. This may increase redemptions from funds that
hold large amounts of certain securities, and may result in decreased liquidity
and increased volatility in the financial markets. Market factors, such as the
demand for particular portfolio securities, may cause the price of certain
portfolio securities to fall while the prices of other securities rise or remain
unchanged. Among other investments, lower-grade bonds may be particularly
sensitive to changes in the economy.
Epidemic
and Pandemic Risk
An outbreak of respiratory
disease caused by a novel coronavirus was first detected in China in late 2019
and subsequently spread globally (“COVID-19”). This coronavirus has resulted in
closing borders, enhanced health screenings, disruptions to healthcare service
preparation and delivery, quarantines, cancellations, and disruptions to supply
chains, workflow operations and consumer activity, as well as general concern
and uncertainty. The impact of this coronavirus may continue for an extended
period of time and has resulted in substantial economic volatility. Health
crises caused by outbreaks, such as the coronavirus outbreak, may exacerbate
other pre-existing political, social and economic risks. The impact of this
outbreak, and other epidemics and pandemics that may arise in the future, could
continue to negatively affect the worldwide economy, as well as the economies of
individual countries, individual companies, including certain Fund service
providers and issuers of the Fund’s investments, and the markets in general in
significant and unforeseen ways. Any such impact could adversely affect the
Fund’s performance.
The United
States has responded to the COVID-19 pandemic and resulting economic distress
with fiscal and monetary stimulus packages. In late March 2020, the government
passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”),
a stimulus package providing for over $2.2 trillion in resources to small
businesses, state and local governments, and individuals that have been
adversely impacted by the COVID-19 pandemic. In addition, in mid-March 2020 the
U.S. Federal Reserve (“Fed”) cut interest rates to historically low levels and
announced a new round of quantitative easing, including purchases of corporate
and municipal government bonds. The Fed also enacted various programs to support
liquidity operations and funding in the financial markets, including expanding
its reverse repurchase agreement operations, adding $1.5 trillion of liquidity
to the banking system; establishing swap lines with other major central banks to
provide dollar funding; establishing a program to support money market funds;
easing various bank capital buffers; providing funding backstops for businesses
to provide bridging loans for up to four years; and providing funding to help
credit flow in asset-backed securities markets. The Fed also plans to extend
credit to small- and medium-sized businesses.
Risk
of Investing in Derivative Contracts and Hybrid Instruments
The
Fund’s exposure to derivative contracts and hybrid instruments (either directly
or through its investment in another investment
company) involves risks different from, or possibly greater than, the risks
associated with investing directly in securities and other traditional
investments. First, changes in the value of the derivative contracts and hybrid
instruments in which the Fund invests may not be correlated with changes in the
value of the underlying Reference Instruments or, if they are correlated, may
move in the opposite direction than originally anticipated. Second, while some
strategies involving derivatives may reduce the risk of loss, they may also
reduce potential gains or, in some cases, result in losses by offsetting
favorable price movements in portfolio holdings. Third, there is a risk that
derivative contracts and hybrid instruments may be erroneously priced or
improperly valued and, as a result, the Fund may need to make increased cash
payments to the counterparty. Fourth, exposure to derivative contracts and
hybrid instruments may have tax consequences to the Fund and its shareholders.
For example, derivative contracts and hybrid instruments may cause the Fund to
realize increased ordinary income or short-term capital gains (which are treated
as ordinary income for federal income tax purposes) and, as a result, may
increase taxable distributions to shareholders. In addition, under certain
circumstances certain derivative contracts and hybrid instruments may cause the
Fund to: (a) incur an excise tax on a portion of the income related to those
contracts and instruments; and/or (b) reclassify, as a return of capital, some
or all of the distributions previously made to shareholders during the fiscal
year as dividend income. Fifth, a common provision in
17
OTC
derivative contracts permits the counterparty to terminate any such contract
between it and the Fund, if the value of the Fund’s total net assets declines
below a specified level over a given time period. Factors that may contribute to
such a decline (which usually must be substantial) include significant
shareholder redemptions and/or a marked decrease in the market value of the
Fund’s investments. Any such termination of the Fund’s OTC derivative contracts
may adversely affect the Fund (for example, by increasing losses and/or costs,
and/or preventing the Fund from fully implementing its investment strategies).
Sixth, the Fund may use a derivative contract to benefit from a decline in the
value of a Reference Instrument. If the value of the Reference Instrument
declines during the term of the contract, the Fund makes a profit on the
difference (less any payments the Fund is required to pay under the terms of the
contract). Any such strategy involves risk. There is no assurance that the
Reference Instrument will decline in value during the term of the contract and
make a profit for the Fund. The Reference Instrument may instead appreciate in
value creating a loss for the Fund. Seventh, a default or failure by a CCP or an
FCM (also sometimes called a “futures broker”), or the failure of a contract to
be transferred from an Executing Dealer to the FCM for clearing, may expose the
Fund to losses, increase its costs, or prevent the Fund from entering or exiting
derivative positions, accessing margin, or fully implementing its investment
strategies. The central clearing of a derivative and trading of a contract over
a SEF could reduce the liquidity in, or increase costs of entering into or
holding, any contracts. Finally, derivative contracts and hybrid instruments may
also involve other risks described in this Prospectus, such as interest rate,
credit, liquidity and leverage risks.
technology
Risk
The
Adviser uses various technologies in managing the Fund, consistent with its
investment objective(s) and strategy
described in this Prospectus. For example, proprietary and third-party data and
systems are utilized to support decision-making for the Fund. Data imprecision,
software or other technology malfunctions, programming inaccuracies and similar
circumstances may impair the performance of these systems, which may negatively
affect Fund performance.
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 FederatedInvestors.com, via
online news sources and in certain newspapers.
You
can purchase, redeem or exchange Shares any day the NYSE is open.
When
the Fund holds fixed-income securities that trade on days the NYSE is closed,
the value of the Fund’s assets may change on
days you cannot purchase or redeem Shares.
In
calculating its NAV, the Fund generally values investments as
follows:
◾ Fixed-income
securities are fair valued using price evaluations provided by a pricing service
approved by the Board of Trustees (“Board”).
◾ 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 asked
quotations.
◾ Over-the-counter
(OTC) derivative contracts are fair valued using price evaluations provided by a
pricing service approved by the Board.
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
Fund’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.
18
Fair
Valuation
The
Board has ultimate responsibility for determining the fair value of investments
for which market quotations are not readily
available. The Board has appointed a Valuation Committee comprised of officers
of the Fund, the Adviser and certain of the Adviser’s affiliated companies to
assist in determining fair value and in overseeing the calculation of the NAV.
The Board has also authorized the use of pricing services recommended by the
Valuation Committee to provide fair value evaluations of the current 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 Board. The Board periodically reviews and
approves the fair valuations made by the Valuation Committee and any changes
made to the procedures. The Fund’s SAI discusses the methods used by pricing
services and the Valuation Committee to assist the Board 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 mutual funds to calculate their NAVs. The
application of the fair value procedures to an investment represent 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
following sections until “How is the Fund Sold?” relate to sales charge
information in connection with the purchase of the A & A2
classes. | ||
SALES
CHARGE INFORMATION
The
following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will
pay on an investment in the Fund. Keep in mind that financial intermediaries may
charge you fees for their services in connection with your Share
transactions.
|
|
Minimum
Initial/Subsequent
Investment
Amounts1
|
Maximum
Sales Charges |
| |
|
Shares
Offered |
Front-End
Sales
Charge2
|
|
Contingent
Deferred
Sales
Charge3
| |
|
A |
$1,500/$100 |
1.00% |
None | |
|
A2 |
$1,500/$100 |
1.50% |
|
0.00% |
1
Please
see “By Systematic Investment Program” for applicable minimum investment.
Financial intermediaries may impose higher or lower minimum
investment
requirements on their customers than those imposed by the
Fund.
2
Front-End
Sales Charge is expressed as a percentage of public offering price. See “Sales
Charge When You Purchase.”
3
See
“Sales Charge When You Redeem.”
SALES
CHARGE WHEN YOU PURCHASE
A Class and A2
Class
The
following sections relate to sales charge information in connection with the
purchase of the share classes listed above.
The
following table lists the sales charges which will be applied to your Share
purchase, subject to the breakpoint discounts
indicated in the table and described below.
|
A
Class: | ||
|
Purchase
Amount |
Sales
Charge
as a
Percentage
of
Public
Offering
Price |
Sales
Charge
as a
Percentage
of
NAV |
|
Less
than $100,000 |
1.00% |
1.01% |
|
$100,000
or greater |
0.00% |
0.00% |
19
|
A2
Class: |
|
|
|
Purchase
Amount |
Sales Charge
as a
Percentage
of Public
Offering
Price |
Sales Charge
as a
Percentage
of
NAV |
|
Less
than $100,000 |
1.50% |
1.52% |
|
$100,000
but less than $250,000 |
1.25% |
1.27% |
|
$250,000
but less than $500,000 |
1.00% |
1.01% |
|
$500,000
and Over1 |
0.00% |
0.00% |
1
A
contingent deferred sales charge (CDSC) of 0.50% of the redemption amount
applies to Shares originally purchased in an amount of $500,000 or more and
redeemed up to 18 months after purchase under certain investment programs where
a financial intermediary received an advance payment on the transaction. CDSC
exceptions may apply. See “Sales Charge When You Redeem.”
REDUCING
THE SALES CHARGE WITH BREAKPOINT DISCOUNTS
Your
investment may qualify for a reduction or an
elimination of the sales charge, also known as a breakpoint discount. The
breakpoint discounts offered by the Fund are indicated in the table
above.
You
or your financial intermediary must notify the Fund’s Transfer Agent of
eligibility for any applicable breakpoint discount
at the time of purchase.
In
order to receive the applicable breakpoint discount, it may be necessary at the
time of purchase for you to inform your financial
intermediary or the Transfer Agent of the existence of other accounts in which
there are holdings eligible to be aggregated to meet a sales charge breakpoint
(“Qualifying Accounts”). Qualifying Accounts mean those share accounts in the
Federated Hermes funds held directly or through a financial intermediary or
through a single-participant retirement account by you, your spouse, your
parents (if you are under age 21) and/or your children under age 21, which can
be linked using tax identification numbers (TINs), social security numbers
(SSNs) or broker identification numbers (BINs). Accounts held through 401(k)
plans and similar multi-participant retirement plans, or through “Section 529”
college savings plans or those accounts which cannot be linked using TINs, SSNs
or BINs, are not Qualifying Accounts.
In
order to verify your eligibility for a breakpoint discount, you will be required
to provide to your financial intermediary or the
Transfer Agent certain information on your New Account Form and may be required
to provide account statements regarding Qualifying Accounts. If you purchase
through a financial intermediary, you may be asked to provide additional
information and records as required by the financial intermediary. Failure to
provide proper notification or verification of eligibility for a breakpoint
discount may result in your not receiving a breakpoint discount to which you are
otherwise entitled. Breakpoint discounts apply only to your current purchase and
do not apply retroactively to previous purchases. The sales charges applicable
to the Shares offered in this Prospectus, and the breakpoint discounts offered
with respect to such Shares, are described in full in this Prospectus. Because
the Prospectus is available on FederatedInvestors.com free of charge, Federated
Hermes does not disclose this information separately on the
website.
Contingent
upon notification to the Transfer Agent, the sales charge at purchase of the A
class and A2
class only, may be eliminated by:
Larger
Purchases
◾ Purchasing the A class or
A2 class in greater quantities to reduce the applicable sales
charge;
Concurrent
and Accumulated Purchases
◾ Excluding any Federated
Hermes fund A class without a sales charge (“no-load A class”), combining
concurrent purchases of and/or current investments in the A class, A2 class, B
class, C class, F class and R class shares of any Federated Hermes fund made or
held by Qualifying Accounts; the purchase amount used in determining the sales
charge on your additional Share purchase will be calculated by multiplying the
respective maximum public offering price times the number of the A class, A2
class B class, C class, F class and R class shares of any Federated Hermes fund
currently held in Qualifying Accounts and adding the dollar amount of your
current purchase; or
Letter
of Intent
◾ Signing a letter of intent
to purchase a qualifying amount of the A class or A2 class within 13 months.
(Call your financial intermediary or the Fund for more information.) The Fund’s
custodian will hold Shares in escrow equal to the maximum applicable sales
charge. If you complete the Letter of Intent, the Custodian will release the
Shares in escrow to your account. If you do not fulfill the Letter of Intent,
the Custodian will redeem the appropriate amount from the Shares held in escrow
to pay the sales charges that were not applied to your purchases.
20
ELIMINATING
The SALES CHARGE
Your
investment may qualify for a sales charge waiver. Sales charge waivers offered
by the Fund are listed below. In order to
receive a sales charge waiver, you must inform your financial intermediary or
the Transfer Agent at the time of each purchase that your investment is eligible
for a waiver. It is possible that your financial intermediary may not, in
accordance with its policies, procedures and system limitations, be able to
ensure your receipt of one or more of these waiver categories. In this
situation, you would need to invest directly through the Fund’s Transfer Agent.
If you do not let your financial intermediary or the Transfer Agent know that
your investment is eligible for a sales charge waiver at the time of purchase,
you may not receive the waiver to which you may otherwise be
entitled.
Contingent
upon notification to the Transfer Agent, the sales charge will be eliminated
when you purchase
or acquire Shares:
◾ within 120
days of redeeming Shares of an equal or greater amount (see “120 Day
Reinstatement Program” below);
◾ through an
eligible program offered by a Financial Intermediary that provides for the
purchase of Shares without imposition of a sales charge (for example, a wrap
account, self-directed brokerage account, retirement, or other fee-based program
offered by the Financial Intermediary);
◾ with
reinvested dividends or capital gains;
◾ issued in connection with
the merger, consolidation, or acquisition of the assets of another fund.
Further, the sales charge will be eliminated on purchases of Shares made by a
shareholder that originally became a shareholder of a Federated Hermes fund
pursuant to the terms of an agreement and plan of reorganization which permits
shareholders to acquire Shares at NAV, provided that such purchased Shares are
held directly with the Fund’s transfer agent. If the Shares are held through a
financial intermediary the sales charge waiver will not apply (A class and A2
class only);
◾ as a Federated Hermes Life
Member (Federated Hermes shareholders who originally were issued shares through
the “Liberty Account,” which was an account for the Liberty Family of Funds on
February 28, 1987, or who invested through an affinity group prior to August 1,
1987, into the Liberty Account) (A class and A2 class only);
◾ as a
Trustee, employee or former employee of the Fund, the Adviser, the Distributor
and their affiliates, an employee of any financial intermediary that sells
Shares according to a sales agreement with the Distributor, an immediate family
member of these individuals or a trust, pension or profit-sharing plan for these
individuals; or
◾ pursuant
to the exchange privilege.
The
sales charge will not be eliminated if you purchase Shares of the Fund through
an exchange of shares of any no-load A class
unless your no-load A class shares were acquired through an exchange of shares
on which the sales charge had previously been paid.
sales
charge when you redeem
Class A2
Shares
Your
redemption proceeds may be reduced by a sales charge, commonly referred to as a
contingent deferred sales charge (CDSC). Shares
otherwise subject to a CDSC will not be charged a CDSC at the time of an
exchange; however, the CDSC will continue to be measured from the date of your
original purchase. The CDSC schedule applicable to your original purchase will
continue to apply to the shares you receive in an exchange.
To
keep the sales charge as low as possible, the Fund redeems your Shares in this
order:
◾ Shares that are not
subject to a CDSC; and
◾ Shares held the longest.
(To determine the number of years your Shares have been held, include the time
you held shares of other Federated Hermes funds that have been exchanged for
Shares of this Fund.)
The
CDSC is then calculated using the Share price at the time of purchase or
redemption, whichever is lower.
|
A2: |
|
|
|
If you
make a purchase of the A2 class in the amount of $500,000 or more and your
financial intermediary received an advance commission on the sale, you
will
pay a
0.50% CDSC on any such Shares redeemed within 18 months of the
purchase. | ||
Your
redemption may qualify for a waiver of the CDSC. The CDSC waivers offered by the
Fund are listed below. In order to receive a waiver
of the CDSC, you must inform your financial intermediary or the Transfer Agent
at the time of each redemption that your investment is eligible for a waiver. It
is possible that your financial intermediary may not, in accordance with its
policies, procedures and system limitations, be able to ensure your receipt of
one or more of these waiver categories. In this situation, you would need to
invest directly through the Fund’s Transfer Agent in order to take advantage of
the waiver. If you do not let your financial intermediary or the Transfer Agent
know that your redemption is eligible for a CDSC waiver at the time of
redemption, you may not receive the waiver to which you may otherwise be
entitled.
21
Contingent
upon notification to the Transfer Agent, you will not be charged a CDSC when
redeeming Shares:
◾ following the death of the
last surviving shareholder on the account or the post-purchase disability of all
registered shareholders, as defined in Section 72(m)(7) of the Internal Revenue
Code of 1986 (the beneficiary on an account with a Transfer on Death
registration is deemed the last surviving shareholder on the
account);
◾ due to the termination of
a trust following the death of the trustor/grantor or beneficiary, provided that
the trust document specifically states that the trust is terminated upon the
death;
◾ representing minimum
required distributions from an IRA or other retirement plan as required under
the Internal Revenue Code;
◾ purchased by Trustees,
employees of the Fund, the Adviser, the Distributor and their affiliates, by
employees of a financial intermediary that sells Shares according to a sales
agreement with the Distributor, by the immediate family members of the above
persons and by trusts, pension or profit-sharing plans for the above
persons;
◾ purchased with reinvested
dividends or capital gains;
◾ redeemed by the Fund when
it closes an account for not meeting the minimum balance
requirements.
◾ purchased in the amount of
$500,000 or more and redeemed within 18 months of purchase if the Shares were
originally purchased through an eligible program offered by a Financial
Intermediary that provides for the purchase of Shares without imposition of a
sales charge (for example, a wrap account, self-directed brokerage account,
retirement or other fee-based program offered by the Financial Intermediary) and
where the Financial Intermediary has agreed with the principal underwriter not
to receive an advanced commission on purchases under such program.
120
Day reinstatement program
Within
120 days of redeeming Class A Shares or Class A2 Shares of the
Fund, upon proper notification to the Fund’s Transfer Agent, you may reinvest
all or a portion of the redemption proceeds in Class A Shares or Class A2 Shares
of the Fund at net asset value, without the imposition of a sales charge or
CDSC. Please note:
◾ The
ownership of the account receiving the purchase is not required to be identical
to that of the account in which the redemption was placed; however, the
registration of the account receiving the purchase must include at least one
registered shareholder of the account from which the redemption
occurred.
◾ You will
not be reimbursed for any fees originally incurred on the redemption (e.g., CDSC
or redemption fees) by subsequently participating in the 120 Day Reinstatement
Program.
◾ The 120
Day Reinstatement Program does not supersede or override any restrictions placed
on an account due to frequent trading and/or client contractual
issues.
Additional
operational restrictions may apply, please contact a Client Service
Representative at 1-800-341-7400 for more
information.
ADDITIONAL
INFORMATION ON THE AVAILABILITY OF CERTAIN WAIVERS AND DISCOUNTS
The
availability of certain sales charge waivers and discounts will depend on
whether you purchase your shares directly from the
Fund or through a financial intermediary. Certain
financial intermediaries may have different policies and procedures regarding
the availability of front-end sales load waivers or CDSC waivers which are
discussed in Appendix B to this Prospectus. The information contained in
Appendix B is provided by these financial intermediaries. Please contact your
financial intermediary to ensure that you have the most current information
regarding the sales charge waivers and discounts available to you and that you
understand the steps you must take to qualify for available waivers and
discounts. In all
instances, it is the shareholder’s responsibility to notify the Fund or the
shareholder’s Financial Intermediary at the time of purchase of any relationship
or other facts qualifying the investor for sales charge waivers or discounts.
For
waivers and discounts not available through a particular financial intermediary,
shareholders will have to purchase Fund shares directly from the Fund or through
another financial intermediary to receive these waivers or
discounts.
COMMISSIONS
ON CERTAIN SHARES
The
Fund does not charge any front-end load, deferred sales charge or other
asset-based fee for sales or distribution of IS or SS
Shares. However, if you purchase IS or SS Shares through a broker acting solely
as an agent on behalf of its customers, you may be required to pay a commission
to the broker in an amount determined and separately disclosed to you by the
broker.
Because
the Fund is not a party to any such commission arrangement between you and your
broker, any purchases and
redemptions of IS or SS 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.
22
Shares
of the Fund are available in other share classes that have different fees and
expenses.
How is the
Fund Sold?
The
Fund offers the following Share classes: Class A Shares (A), Class A2 Shares (A2),
Institutional Shares (IS) and Service Shares (SS), each representing interests
in a single portfolio of securities. All Share classes have different sales
charges and/or other expenses which affect their performance. Please note that
certain purchase restrictions may apply.
Under
the Distributor’s Contract with the Fund, the Distributor, Federated Securities
Corp., offers Shares on a continuous,
best-efforts basis. The Distributor is a subsidiary of Federated Hermes, Inc.
(“Federated Hermes,” formerly, Federated Investors, Inc.). The Fund may not be a
suitable investment for retirement plans.
A
Class
The
Fund’s Distributor markets the A class to accounts for which financial
institutions act in a fiduciary or agency
capacity.
A2
Class
The A2
class offered through this Prospectus is available for purchase to shareholders
investing through certain financial intermediaries
that have entered into an agreement with the Fund’s Distributor, Federated
Securities Corp. The A2 class may also be purchased directly from the Fund in
certain circumstances.
IS
& SS Classes
The
Fund’s Distributor markets the IS and SS classes to Eligible Investors, as
described below. In connection with a request to
purchase an IS or SS class, you should provide documentation sufficient to
verify your status as an Eligible Investor. As a general matter, IS and SS
classes are 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 IS or SS classes (however, such accounts remain subject to the Fund’s policy
on “Accounts with Low Balances” as discussed later in this
Prospectus):
◾ An
investor participating in a no-load platform, network or other fee-based program
offered by a financial intermediary, for example, a wrap-account or retirement
platform where Federated Hermes has entered into an agreement with the
intermediary;
◾ A
trustee/director, employee or former employee of the Fund, the Adviser, the
Distributor and their affiliates; an immediate family member of these
individuals or a trust, pension or profit-sharing plan for these
individuals;
◾ An
employer-sponsored retirement plan;
◾ A trust
institution investing on behalf of its trust customers;
◾ Additional sales to an
investor (including a natural person) who owned IS and/or SS classes of the Fund
as of December 31, 2008;
◾ A
Federated Hermes Fund;
◾ An investor (including a
natural person) who acquired IS and/or SS classes of a Federated Hermes fund
pursuant to the terms of an agreement and plan of reorganization which permits
the investor to acquire such shares; and
◾ In
connection with an acquisition of an investment management or advisory business,
or related investment services, products or assets, by Federated Hermes or its
investment advisory subsidiaries, an investor (including a natural person) who:
(1) becomes a client of an investment advisory subsidiary of Federated Hermes;
or (2) is a shareholder or interest holder of a pooled investment vehicle or
product that becomes advised or subadvised by a Federated Hermes investment
advisory subsidiary as a result of such an acquisition other than as a result of
a fund reorganization transaction pursuant to an agreement and plan of
reorganization.
The
following categories of Eligible Investors are subject to applicable minimum
initial investment amounts for the purchase
of IS or SS classes (see “How to Purchase Shares” below):
◾ An investor, other than a
natural person, purchasing IS and/or SS classes directly from the Fund;
and
◾ In connection with an
initial purchase of IS and/or SS classes through an exchange, an investor
(including a natural person) who owned IS and/or SS classes of another Federated
Hermes fund as of December 31, 2008.
Intra-Fund
Share Conversion Program
A
shareholder in the Fund’s Shares may convert their Shares at net asset value to
any other share class of the Fund if the shareholder meets the
investment minimum and eligibility requirements for the share class into which
the conversion is sought, as applicable. The share conversion program is not
applicable to the Fund’s Class A Shares or Class A2 Shares subject to a
contingent deferred sales charge, if applicable. Such conversion of classes
should not result in a realization event for tax purposes. Contact your
financial intermediary or call 1-800-341-7400 to convert your
Shares.
23
Payments
to Financial Intermediaries
The
Fund and its affiliated service providers may pay fees as described below to
financial intermediaries (such as broker-dealers,
banks, investment advisers or third-party administrators) whose customers are
shareholders of the Fund.
FRONT-END
SALES CHARGE REALLOWANCES
A2
Class
The
Distributor receives a front-end sales charge on Class A2 Share sales. The
Distributor pays 100% of this charge as a dealer reallowance to
financial intermediaries that are eligible to receive it. The Distributor does
not retain any portion of the front-end sales charge applicable to shares
purchased by customers of these eligible financial intermediaries.
A
Class
The
Distributor receives a front-end sales charge on certain Class A Share sales. The
Distributor pays a portion of this charge to financial intermediaries that are
eligible to receive it (the “Dealer Reallowance”) and retains any remaining
portion of the front-end sales charge.
When
a financial intermediary’s customer purchases Shares, the financial intermediary
may receive a Dealer Reallowance
as follows:
|
A
Class: |
|
|
Purchase
Amount |
Dealer
Reallowance
as a
Percentage of
Public
Offering Price |
|
Less
than $100,000 |
1.00% |
|
$100,000
or greater |
0.00% |
ADVANCE
COMMISSIONS
A2
Class
When a
financial intermediary’s customer purchases Class A2 Shares, the financial
intermediary may receive an advance commission as
follows:
|
A2
(for purchases over $500,000): |
|
|
Purchase
Amount |
Advance
Commission
as a Percentage
of
Public Offering
Price |
|
First
$500,000 - $20 million |
0.50% |
|
Over
$20 million |
0.25% |
Advance
commissions are calculated on a year-by-year basis based on amounts invested
during that year. Accordingly, with respect to additional
purchase amounts, the advance commission breakpoint resets annually to the first
breakpoint on the anniversary of the first purchase.
The A2
class purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance
commission will be paid only on those purchases that were not previously subject
to a front-end sales charge or dealer advance commission. Certain retirement
accounts may not be eligible for this program.
RULE
12
b-1 FEES
A & A2
Classes
The
Board has adopted a Rule 12b-1 Plan, which allows payment of marketing fees of
up to 0.05% of the A class and 0.25% of
the A2 class of average net assets to the Distributor for the sale,
distribution, administration and customer servicing of the Fund’s A class. When
the Distributor receives Rule 12b-1 Fees, it may pay some or all of them to
financial intermediaries whose customers purchase Shares. The A class of the
Fund has no present intention of paying, accruing or incurring any Rule 12b-1
Fees until such time as approved by the Fund’s Board of Trustees. Federated
Hermes and its subsidiaries may benefit or sustain losses from such
arrangements. Because these Shares pay marketing fees on an ongoing basis, your
investment cost may be higher over time than other shares with different sales
charges and marketing fees.
24
service
fees
A,
A2, IS and SS
classes may pay Service Fees of up to 0.25% of average net assets to financial
intermediaries or to Federated Shareholder Services Company (FSSC), a subsidiary
of Federated Hermes, for providing services to shareholders and maintaining
shareholder accounts. Intermediaries that receive Service Fees may include a
company affiliated with management of Federated Hermes. If a financial
intermediary receives Service Fees on an account, it is not eligible to also
receive Account Administration Fees on that same account.
The
Fund has no present intention of paying, accruing or incurring any such Service
Fees on the A2 class until such time as approved by the
Fund’s Board of Trustees.
ACCOUNT
ADMINISTRATION FEES
A,
A2, IS and SS
classes 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 A2 class until such time
as approved by the Fund’s Board of Trustees.
RECORDKEEPING
FEES
The
Fund may pay Recordkeeping Fees on an average-net-assets basis or on a
per-account-per-year basis to financial intermediaries
for providing recordkeeping services to the Fund and its shareholders. If a
financial intermediary receives Recordkeeping Fees on an account, it is not
eligible to also receive Account Administration Fees or Networking Fees on that
same account.
networking
fees
The
Fund may reimburse Networking Fees on a per-account-per-year basis to financial
intermediaries for providing administrative
services to the Fund and its shareholders on certain non-omnibus accounts. If a
financial intermediary receives Networking Fees on an account, it is not
eligible to also receive Recordkeeping Fees on that same account.
ADDITIONAL
PAYMENTS TO FINANCIAL INTERMEDIARIES
The
Distributor may pay out of its own resources amounts to certain financial
intermediaries, including broker-dealers, banks,
registered investment advisers, independent financial planners and retirement
plan administrators, that support the sale of Shares or provide services to Fund
shareholders. The amounts of these payments could be significant, and may create
an incentive for the financial intermediary or its employees or associated
persons to recommend or sell Shares of the Fund to you. Not all financial
intermediaries receive such payments, and the amount of compensation may vary by
intermediary. In some cases, such payments may be made by or funded from the
resources of companies affiliated with the Distributor (including the Adviser).
These payments are not reflected in the fees and expenses listed in the fee
table section of the Fund’s Prospectus and described above because they are not
paid by the Fund.
These
payments are negotiated and may be based on such factors as: the number or value
of Shares that the financial intermediary
sells or may sell; the value of client assets invested; the level and types of
services or support furnished by the financial intermediary; or the Fund’s
and/or other Federated Hermes funds’ relationship with the financial
intermediary. These payments may be in addition to payments, as described above,
made by the Fund to the financial intermediary. In connection with these
payments, the financial intermediary may elevate the prominence or profile of
the Fund and/or other Federated Hermes funds, within the financial
intermediary’s organization by, for example, placement on a list of preferred or
recommended funds and/or granting the Distributor preferential or enhanced
opportunities to promote the funds in various ways within the financial
intermediary’s organization. In addition, as discussed above in “Commissions on
Certain Shares,” if you purchase IS or SS Shares through a broker acting solely
as an agent on behalf of its customers, you may be required to pay a commission
to the broker in an amount determined and separately disclosed to you by the
broker. You can ask your financial intermediary for information about any
payments it receives from the Distributor or the Fund and any services provided,
as well as about fees and/or commissions it charges.
How to
Purchase Shares
You
may purchase Shares of the Fund any day the NYSE is open. Shares will be
purchased at the NAV next calculated after your
investment is received by the Fund, or its agent, in proper form. The Fund
reserves the right to reject any request to purchase or exchange Shares. New
investors must submit a completed New Account Form. All accounts, including
those for which there is no minimum initial investment amount required, are
subject to the Fund’s policy on “Accounts with Low Balances” as discussed later
in this Prospectus.
25
A2
Class
The A2 class offered
through this Prospectus is available for purchase to shareholders investing
through certain financial intermediaries
that have
entered into an agreement with the Fund’s Distributor. The A2 class may also be
purchased directly from the Fund in
certain
circumstances.
Where
the Fund offers more than one Share class and you do not specify the class
choice on your New Account Form or form of
payment (e.g., Federal
Reserve wire or check), you automatically will receive the A class.
For
important account information, see the section “Security and Privacy
Protection.”
A & A2
Classes
You may
purchase Shares through a financial intermediary, directly from the Fund or
through an exchange from another Federated Hermes
fund.
IS
& SS Classes
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 and SS classes is
generally $1,000,000. There is no minimum
subsequent investment amount.
THROUGH
A FINANCIAL INTERMEDIARY
◾ Establish
an account with the financial intermediary; and
◾ Submit
your purchase order to the financial intermediary before the end of regular
trading on the NYSE (normally 4:00 p.m. Eastern time).
The
Fund has authorized certain intermediaries to accept Share purchase orders on
its behalf. When authorized intermediaries receive an
order in proper form, the order is considered as being placed with the Fund, and
Shares will be bought at the NAV next calculated after such an order is received
by the authorized intermediary. If your financial intermediary is not an
authorized intermediary, the Fund or its agent must receive the purchase order
in proper form from your financial intermediary by the end of regular trading on
the NYSE (normally 4:00 p.m. Eastern time) in order for your transaction to be
priced at that day’s NAV. In addition, your financial intermediary must forward
your payment by the prescribed trade settlement date (typically within one to
three business days) to the Fund’s transfer agent, DST Asset Manager
Solutions,
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.
26
By
Wire
To
facilitate processing your order, please call the Fund before sending the wire.
Send your wire to:
State
Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
BNF: 23026552
Attention: Federated Hermes EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
BNF: 23026552
Attention: Federated Hermes EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You
cannot purchase Shares by wire on holidays when wire transfers are
restricted.
By
Check
Make
your check payable to The
Federated Hermes Funds, note
your account number on the check, and send it to:
The
Federated Hermes Funds
P.O. Box 219318
Kansas City, MO 64121-9318
P.O. Box 219318
Kansas City, MO 64121-9318
If
you send your check by a private
courier or overnight delivery service that
requires a street address, send it to:
The
Federated Hermes Funds
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
430 W 7th Street
Suite 219318
Kansas City, MO 64105-1407
Payment
should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the
right to reject any purchase
request. For example, to protect against check fraud the Fund may reject any
purchase request involving a check that is not made payable to The
Federated Hermes Funds
(including, but not limited to, requests to purchase Shares using third-party
checks) or involving temporary checks or credit card checks.
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 FederatedInvestors.com under
“Resources” and then “Literature and Forms,” then “Forms.” You will receive a
confirmation when this service is available.
THROUGH
AN EXCHANGE
You
may purchase Fund Shares through an exchange from another Federated Hermes fund.
To do this you must:
◾ meet any
applicable shareholder eligibility requirements;
◾ ensure
that the account registrations are identical;
◾ meet any
applicable minimum initial investment requirements; and
◾ receive a
prospectus for the fund into which you wish to exchange.
An
exchange is treated as a redemption and a subsequent purchase, and is a taxable
transaction. The Fund reserves the right to
reject any request to purchase or exchange Shares. The Fund may modify or
terminate the exchange privilege at any time.
A
Class
You
may purchase Shares through an exchange from the same share class of another
Federated Hermes fund.
A2
Class
You may
purchase Shares through an exchange from Class A Shares or Class A2 Shares of
another Federated Hermes fund.
IS
& SS Classes
You
may purchase Shares through an exchange from any Federated Hermes fund or share
class that does not have a stated
sales charge or contingent deferred sales charge, except Shares of Federated
Hermes Institutional Money Market Management, Federated Hermes Institutional
Tax-Free Cash Trust, Federated Hermes Institutional Prime Obligations Fund,
Federated Hermes Institutional Prime Value Obligations Fund, no-load Class A
Shares and Class R Shares of any Fund.
27
By
Online Account Services
You may
access your accounts online to purchase Shares through FederatedInvestors.com’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 FederatedInvestors.com and select “Sign In” and
“Access and Manage Investments,” or call 1-800-341-7400, Option #4 to speak with
a Client Service Representative.
BY
SYSTEMATIC INVESTMENT PROGRAM (SIP)
Once
you have opened an account, you may automatically purchase additional Shares on
a regular basis by completing the SIP
section of the New Account Form or by contacting the Fund or your financial
intermediary. The minimum investment amount for SIPs is $50.
BY
AUTOMATED CLEARING HOUSE (ACH)
Once
you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH
member. This purchase option can be established by completing the appropriate
sections of the New Account Form.
How to
Redeem and Exchange Shares
You
should redeem or exchange Shares:
◾ through a
financial intermediary if you purchased Shares through a financial intermediary;
or
◾ directly
from the Fund if you purchased Shares directly from the Fund.
Shares
of the Fund may be redeemed for cash, or exchanged for shares of other Federated
Hermes funds as described herein, on
days on which the Fund computes its NAV. Redemption requests may be made by
telephone or in writing.
Redemption
proceeds normally are wired or mailed within one business day for each method of
payment after receiving a timely
request in proper form. Depending upon the method of payment, when shareholders
receive redemption proceeds can differ. Payment may be delayed for up to seven
days under certain circumstances (see “Limitations on Redemption
Proceeds”).
For
important account information, see the section “Security and Privacy
Protection.”
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;
28
◾ signatures
of all shareholders exactly as registered; and
◾ if
exchanging, the Fund
name and Share class, account number and account registration into which you are
exchanging.
Call
your financial intermediary or the Fund if you need special
instructions.
Signature
Guarantees
Signatures
must be guaranteed by a financial institution which is a participant in a
Medallion signature guarantee program
if:
◾ your
redemption will be sent to an address other than the address of
record;
◾ your
redemption will be sent to an address of record that was changed within the last
30 days;
◾ a
redemption is payable to someone other than the shareholder(s) of record;
or
◾ transferring
into another fund with a different shareholder registration.
A
Medallion signature guarantee is designed to protect your account from fraud.
Obtain a Medallion signature guarantee from a
bank or trust company, savings association, credit union or broker, dealer or
securities exchange member. A
notary
public
cannot provide a signature guarantee.
By
Online Account Services
You may
access your accounts online to redeem or exchange Shares through FederatedInvestors.com’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 FederatedInvestors.com 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);
29
◾ during
periods of market volatility;
◾ when a
shareholder’s trade activity or amount adversely impacts the Fund’s ability to
manage its assets; or
◾ during any
period when the Federal Reserve wire or applicable Federal Reserve banks are
closed, other than customary weekend and holiday closings.
If
you request a redemption of Shares recently purchased by check (including a
cashier’s check or certified check), money
order, bank draft or ACH, your redemption proceeds may not be made available for
up to seven calendar days to allow the Fund to collect payment on the instrument
used to purchase such Shares. If the purchase instrument does not clear, your
purchase order will be canceled and you will be responsible for any losses
incurred by the Fund as a result of your canceled order.
In
addition, the right of redemption may be suspended, or the payment of proceeds
may be delayed (including beyond seven
days), during any period:
◾ when the
NYSE is closed, other than customary weekend and holiday closings;
◾ when
trading on the NYSE is restricted, as determined by the SEC;
◾ in which
an emergency exists, as determined by the SEC, so that disposal of the Fund’s
investments or determination of its NAV is not reasonably practicable;
or
◾ as the SEC
may by order permit for the protection of Fund shareholders.
You
will not accrue interest or dividends on uncashed redemption checks from the
Fund when checks are undeliverable and
returned to the Fund.
EXCHANGE
PRIVILEGE
You
may exchange Shares of the Fund. To do this, you must:
◾ meet any
applicable shareholder eligibility requirements;
◾ ensure
that the account registrations are identical;
◾ meet any
applicable minimum initial investment requirements; and
◾ receive a
prospectus for the fund into which you wish to exchange.
An
exchange is treated as a redemption and a subsequent purchase, and is a taxable
transaction. The Fund reserves the right to
reject any request to purchase or exchange Shares. The Fund may modify or
terminate the exchange privilege at any time.
In
addition, the Fund may terminate your exchange privilege if your exchange
activity is found to be excessive under the Fund’s
frequent trading policies. See “Account and Share Information–Frequent
Trading Policies.”
Financial
intermediaries may have different policies and procedures regarding the
availability of intra-fund exchanges (“automatic
exchanges”). These exchanges which are directed by the financial intermediary
and not the Fund are discussed in Appendix B to this Prospectus.
A
Class
You
may exchange Shares into shares of the same class of another Federated Hermes
fund.
A2
Class
You may
exchange Shares into Class A Shares or Class A2 Shares of another Federated
Hermes fund.
IS
& SS Classes
You
may exchange Shares of the Fund for shares of any Federated Hermes fund or share
class that does not have a stated
sales charge or contingent deferred sales charge, except Shares of Federated
Hermes Institutional Money Market Management, Federated Hermes Institutional
Tax-Free Cash Trust, Federated Hermes Institutional Prime Obligations Fund,
Federated Hermes Institutional Prime Value Obligations Fund, no-load Class A
Shares and Class R Shares of any Fund.
Systematic
Withdrawal/Exchange Program
You
may automatically redeem or exchange Shares. The minimum amount for all new or
revised systematic redemptions
or exchanges of Shares is $50 per transaction per fund. Complete the appropriate
section of the New Account Form or an Account Service Options Form or contact
your financial intermediary or the Fund. Your account value must meet the
minimum initial investment amount at the time the program is established. This
program may reduce, and eventually deplete, your account. Payments should not be
considered yield or income.
Generally,
it is not advisable to continue to purchase Shares subject to a sales charge
while redeeming Shares using this
program.
30
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 no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously
issued by the Fund, you must return the certificates with your written
redemption or exchange request. For your protection, send your certificates by
registered or certified mail, but do not endorse them.
Security
and Privacy Protection
ONLINE
ACCOUNT and TELEPHONE ACCESS SECURITY
Federated
Hermes will not be responsible for losses that result from unauthorized
transactions, unless Federated Hermes does not
follow procedures designed to verify your identity. When initiating a
transaction by telephone or online, shareholders should be aware that any person
with access to your account and other personal information including PINs
(Personal Identification Numbers) may be able to submit instructions by
telephone or online. Shareholders are responsible for protecting their identity
by using strong usernames and complex passwords which utilize combinations of
mixed case letters, numbers and symbols, and change passwords and PINs
frequently.
Using
FederatedInvestors.com’s Account Access website
means you are consenting to sending and receiving personal financial information
over the Internet, so you should be sure you are comfortable with the risks. You
will be required to accept the terms of an online agreement and to establish and
utilize a password in order to access online account services. The Transfer
Agent has adopted security procedures to confirm that Internet instructions are
genuine. The Transfer Agent will also send you written confirmation of share
transactions. The Transfer Agent, the Fund and any of its affiliates will not be
liable for losses or expenses that occur from fraudulent Internet instructions
reasonably believed to be genuine.
The
Transfer Agent or the Fund will employ reasonable procedures to confirm that
telephone transaction requests are genuine,
which may include recording calls, asking the caller to provide certain personal
identification information, sending you written confirmation, or requiring other
confirmation security procedures. The Transfer Agent, the Fund and any of its
affiliates will not be liable for relying on instructions submitted by telephone
that the Fund reasonably believes to be genuine.
ANTI-MONEY
LAUNDERING COMPLIANCE
To
help the government fight the funding of terrorism and money laundering
activities, federal law requires financial institutions
to obtain, verify and record information that identifies each new customer who
opens a Fund account and to determine whether such person’s name appears on
governmental lists of known or suspected terrorists or terrorist organizations.
Pursuant to the requirements under the USA PATRIOT Act, the information obtained
will be used for compliance with the USA PATRIOT Act or other applicable laws,
regulations and rules in connection with money laundering, terrorism or other
illicit activities.
Information
required includes your name, residential or business address, date of birth (for
an individual), and other information
that identifies you, including your social security number, tax identification
number or other identifying number. The Fund cannot waive these requirements.
The Fund is required by law to reject your Account Application if the required
information is not provided. If, after reasonable effort, the Fund is unable to
verify your identity or that of any other person(s) authorized to act on your
behalf, or believes it has identified potentially suspicious, fraudulent or
criminal activity, the Fund reserves the right to close your account and redeem
your shares at the next calculated NAV without your permission. Any applicable
contingent deferred sales charge (CDSC) will be assessed upon redemption of your
shares.
The
Fund has a strict policy designed to protect the privacy of your personal
information. A copy of Federated Hermes’ privacy
policy notice was given to you at the time you opened your account. The Fund
sends a copy of the privacy notice to you annually. You may also obtain the
privacy notice by calling the Fund, or through FederatedInvestors.com.
Account
and Share Information
CONFIRMATIONS
AND ACCOUNT STATEMENTS
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.
31
DIVIDENDS
AND CAPITAL GAINS
The
Fund declares any dividends daily and pays them monthly to shareholders. If you
purchase Shares by wire, you begin
earning dividends on the day your wire is received. If you purchase Shares by
check, you begin earning dividends on the business day after the Fund receives
your check. In either case, you earn dividends through the day your redemption
request is received.
In
addition, the Fund pays any capital gains at least annually, and may make such
special distributions of dividends and capital
gains as may be necessary to meet applicable regulatory requirements. Your
dividends and capital gains distributions will be automatically reinvested in
additional Shares without a sales charge, unless you elect cash payments.
Dividends may also be reinvested without sales charges in shares of any class of
any other Federated Hermes fund of which you are already a
shareholder.
If
you purchase Shares just before the record date for a capital gain distribution,
you will pay the full price for the Shares and
then receive a portion of the price back in the form of a taxable distribution,
whether or not you reinvest the distribution in Shares. Therefore, you should
consider the tax implications of purchasing Shares shortly before the record
date for a capital gain. Contact your financial intermediary or the Fund for
information concerning when dividends and capital gains will be
paid.
Under
the federal securities laws, the Fund is required to provide a notice to
shareholders regarding the source of distributions
made by the Fund if such distributions are from sources other than ordinary
investment income. In addition, important information regarding the Fund’s
distributions, if applicable, is available via the link to the Fund and share
class name at FederatedInvestors.com/FundInformation.
Small
Distributions and Uncashed Checks
Generally,
dividend and/or capital gain distributions payable by check in an amount of less
than $25 will be automatically
reinvested in additional shares. This policy does not apply if you have elected
to receive cash distributions that are directly deposited into your bank account
via wire or ACH.
Additionally,
if one or more dividend or capital gain distribution checks are returned as
“undeliverable,” or remain uncashed
for 180 days, all subsequent dividend and capital gain distributions will be
reinvested in additional shares. No interest will accrue on amounts represented
by uncashed distribution checks. For questions on whether reinvestment applies
to your distributions, please contact a Client Service Representative at
1-800-341-7400.
Certain
states, including the State of Texas, have laws that allow shareholders to
designate a representative to receive abandoned
or unclaimed property (“escheatment”) notifications by completing and submitting
a designation form that generally can be found on the official state website. If
a shareholder resides in an applicable state, and elects to designate a
representative to receive escheatment notifications, escheatment notices
generally will be delivered as required by such state laws, including, as
applicable, to both the shareholder and the designated representative. A
completed designation form may be mailed to the Fund (if Shares are held
directly with the Fund) or to the shareholder’s financial intermediary (if
Shares are not held directly with the Fund). Shareholders should refer to
relevant state law for the shareholder’s specific rights and responsibilities
under his or her state’s escheatment law(s), which can generally be found on a
state’s official website.
ACCOUNTS
WITH LOW BALANCES
Federated
Hermes reserves the right to close accounts if redemptions or exchanges cause
the account balance to fall
below:
◾ $1,500 for the A and A2
classes (or in the case of IRAs, $250);
◾ $25,000
for the IS and SS classes.
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 sends an IRS Form 1099 and an annual statement of your account activity to
assist you in completing your federal,
state and local tax returns. It is anticipated that Fund distributions will be
primarily dividends that are exempt from federal regular income tax, although a
portion of the Fund’s dividends may not be exempt. Dividends may be subject to
state and local taxes. In addition, the Fund may realize and distribute capital
gains from time to time as a result of the Fund’s normal investment activities.
Distributions of net short-term capital gains are taxable to you as ordinary
income. Distributions of net long-term capital gains are taxable to you as
long-term capital gains regardless of how long you have owned your Shares. The
Fund may invest a portion of its assets in securities that generate income that
is not exempt from federal or state income tax. Capital gains and non-exempt
dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.
32
FREQUENT
TRADING POLICIES
Frequent
or short-term trading into and out of the Fund can have adverse consequences for
the Fund and shareholders who use
the Fund as a long-term investment vehicle. Such trading in significant amounts
can disrupt the Fund’s investment strategies (e.g., by requiring it to sell
investments at inopportune times or maintain excessive short-term or cash
positions to support redemptions), increase brokerage and administrative costs
and affect the timing and amount of taxable gains distributed by the Fund.
Investors engaged in such trading may also seek to profit by anticipating
changes in the Fund’s NAV in advance of the time as of which NAV is
calculated.
The
Fund’s Board has approved policies and procedures intended to discourage
excessive frequent or short-term trading of the
Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify
disruptive trading activity. The Fund monitors trades into and out of the Fund
within a period of 30 days or less. The Fund may also monitor trades into and
out of the Fund for potentially disruptive trading activity over periods longer
than 30 days. The size of Share transactions subject to monitoring varies. Where
it is determined that a shareholder has exceeded the detection amounts twice
within a period of 12 months, the Fund will temporarily prohibit the shareholder
from making further purchases or exchanges of Fund Shares. If the shareholder
continues to exceed the detection amounts for specified periods, the Fund will
impose lengthier trading restrictions on the shareholder, up to and including
permanently prohibiting the shareholder from making any further purchases or
exchanges of Fund Shares. Whether or not the specific monitoring limits are
exceeded, the Fund’s management or the Adviser may determine from the amount,
frequency or pattern of purchases and redemptions or exchanges that a
shareholder is engaged in excessive trading that is or could be detrimental to
the Fund and other shareholders and may prohibit the shareholder from making
further purchases or exchanges of Fund Shares. No matter how the Fund defines
its limits on frequent trading of Fund Shares, other purchases and sales of Fund
Shares may have adverse effects on the management of the Fund’s portfolio and
its performance.
The
Fund’s frequent trading restrictions do not apply to purchases and sales of Fund
Shares by other Federated Hermes funds.
These funds impose the same frequent trading restrictions as the Fund at their
shareholder level. In addition, allocation changes of the investing Federated
Hermes fund are monitored, and the managers of the recipient fund must determine
that there is no disruption to their management activity. The intent of this
exception is to allow investing fund managers to accommodate cash flows and
other activity that result from non-abusive trading in the investing fund,
without being stopped from such trading because the aggregate of such trades
exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares,
purchases and redemptions of Fund Shares by other Federated Hermes funds could
adversely affect the management of the Fund’s portfolio and its
performance.
The
Fund will not restrict transactions made on a non-discretionary basis by certain
asset allocation programs, wrap programs,
fund of funds, collective funds or other similar accounts that have been
pre-approved by Federated Hermes (“Approved Accounts”). The Fund will continue
to monitor transactions by the Approved Accounts and will seek to limit or
restrict even non-discretionary transactions by Approved Accounts that are
determined to be disruptive or harmful to the Fund.
The
Fund’s objective is that its restrictions on short-term trading should apply to
all shareholders that are subject to the restrictions,
regardless of the number or type of accounts in which Shares are held. However,
the Fund anticipates that limitations on its ability to identify trading
activity to specific shareholders, including where Shares are held through
intermediaries in multiple or omnibus accounts, will mean that these
restrictions may not be able to be applied uniformly in all cases.
Other
funds in the Federated Hermes family of funds may impose different monitoring
policies or in some cases, may not
monitor for frequent or short-term trading. Under normal market conditions such
monitoring policies are designed to protect the funds being monitored and their
shareholders and the operation of such policies and shareholder investments
under such monitoring are not expected to have materially adverse impact on the
Federated Hermes funds or their shareholders. If you plan to exchange your Fund
Shares for shares of another Federated Hermes fund, please read the prospectus
of that other Federated Hermes fund for more information.
PORTFOLIO
HOLDINGS INFORMATION
Information
concerning the Fund’s portfolio holdings is available via the link to the Fund
and share class name at FederatedInvestors.com/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, weighted average effective maturity, weighted average effective
duration and other portfolio characteristics, recent purchase and sale
transactions and percentage breakdowns of the portfolio by sector and credit
quality.
33
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 FederatedInvestors.com. The
Fund’s Annual and Semi-Annual Shareholder Reports contain complete listings of
the Fund’s portfolio holdings as of the end of the Fund’s second and fourth
fiscal quarters. Fiscal quarter information is made available on the website
within 70 days after the end of the fiscal quarter. This information is also
available in reports filed with the SEC at the SEC’s website at sec.gov.
Each
fiscal quarter, the Fund will file with the SEC a complete schedule of its
monthly portfolio holdings on “Form
N-PORT.” The Fund’s holdings as of the end of the third month of every fiscal
quarter, as reported on Form N-PORT, will be publicly available on the SEC’s
website at sec.gov within 60
days of the end of the fiscal quarter upon filing. You may also access this
information via the link to the Fund and share class name at FederatedInvestors.com.
In
addition, from time to time (for example, during periods of unusual market
conditions), additional information regarding
the Fund’s portfolio holdings and/or composition may be posted to FederatedInvestors.com. If and
when such information is posted, its availability will be noted on, and the
information will be accessible from, the home page of the website.
Who
Manages the Fund?
The
Board governs the Fund. The Board selects and oversees the Adviser, Federated
Investment Management Company.
The Adviser manages the Fund’s assets, including buying and selling portfolio
securities. Federated Advisory Services Company (FASC), an affiliate of the
Adviser, provides certain support services to the Adviser. The fee for these
services is paid by the Adviser and not by the Fund. The address of the Adviser
and FASC is 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
The
Adviser and other advisory subsidiaries of
Federated Hermes combined, advise approximately 102 registered
investment
companies spanning equity, fixed-income and money market mutual funds and also
manage a variety of other pooled investment vehicles, private investment
companies and customized separately managed accounts (including
non-U.S./offshore funds).
Federated
Hermes’ assets under management totaled approximately $668.9 billion in assets
as of December 31, 2021. Federated Hermes was established in 1955 as Federated
Investors, Inc. and is one of the largest investment managers in the United
States with nearly 2,000 employees. Federated Hermes provides investment
products to more than 11,000 investment professionals and
institutions.
The
Adviser advises approximately 74 registered
investment
companies and also manages
sub-advised
funds.
The Adviser’s
assets under
management
totaled approximately $399.6 billion in assets as of December 31,
2021.
PORTFOLIO
MANAGEMENT INFORMATION
Jeff
A. Kozemchak
Jeff
A. Kozemchak, CFA, Senior Portfolio Manager, has been the Fund’s portfolio
manager since June of 1996.
Mr.
Kozemchak is a Senior Portfolio Manager responsible for day to day management of
the Fund focusing on asset allocation,
interest rate strategy and security selection. He has been with the Adviser or
an affiliate since 1987; has worked in investment management since 1987; has
managed investment portfolios since 1990. Education: B.S., University of
Pittsburgh; M.S.I.A., Carnegie Mellon University.
Mary
Jo Ochson
Mary
Jo Ochson, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since August of 2017.
Ms.
Ochson is a Senior Portfolio Manager and Head of the Tax-Free Liquidity
Investment Area and Short-Term Municipal
Bonds.
She is responsible for
overseeing the macro risk elements in the portfolio. She has been with the
Adviser or an affiliate since 1982; has worked in investment management since
1982; has managed investment portfolios since 1982. Education: B.S.,
Pennsylvania State University; B.S., St. Francis College; M.B.A., University of
Pittsburgh.
Kyle
Stewart
Kyle
Stewart, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since August of 2022.
Mr.
Stewart is a Senior Portfolio Manager responsible for day to day management of
the Fund focusing on asset allocation, interest rate
strategy and security selection. He has been with the Adviser or an affiliate
since 1993; has worked in investment management since 1996; has managed
investment portfolios since 2011. Education : B.S., Edinboro University of
Pennsylvania; M.B.A., Robert Morris University.
The
Fund’s SAI provides additional information about the Portfolio Manager’s
compensation, management of other accounts
and ownership of securities in the Fund.
34
ADVISORY
FEES
The
Fund’s investment advisory contract provides for payment to the Adviser of an
annual investment advisory fee of 0.40% of the Fund’s
average daily net assets. Under the investment advisory contract, which is
subject to annual renewal by the Fund’s Board of Trustees, the Adviser will
reimburse the amount, limited to the amount of the advisory fee, by which the
Fund’s Institutional Shares aggregate annual operating expenses, including the
investment advisory fee, but excluding interest, taxes, brokerage commissions,
expenses of registering and qualifying the Fund and its Shares under federal and
state laws and regulations, expenses of withholding taxes and extraordinary
expenses, exceed .45 of 1% of the Fund’s Institutional Shares average daily net
assets. The Adviser and its affiliates have also agreed to certain “Fee Limits”
as described in the footnote to the “Risk/Return Summary: Fees and Expenses”
table found in the “Fund Summary” section of this Prospectus.
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 June 30 and December 31,
respectively.
Financial
Information
FINANCIAL
HIGHLIGHTS
The
Financial Highlights will help you understand the Fund’s financial performance
for its past five fiscal years, or since inception, if
the life of the Fund’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 Ernst &Young LLP, an independent registered
public accounting firm, whose report,
along with the Fund’s audited financial statements, is included in the Annual
Report.
35
Financial
Highlights–Class
A Shares
(For a Share
Outstanding Throughout Each Period)
|
Year
Ended June 30 |
2022 |
2021 |
2020 |
2019 |
2018 |
|
Net
Asset Value, Beginning of Period |
$10.37 |
$10.25 |
$10.30 |
$10.22 |
$10.27 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income |
0.07 |
0.08 |
0.13 |
0.14 |
0.11 |
|
Net
realized and unrealized gain (loss) |
(0.55) |
0.12 |
(0.05) |
0.08 |
(0.05) |
|
TOTAL
FROM INVESTMENT OPERATIONS |
(0.48) |
0.20 |
0.08 |
0.22 |
0.06 |
|
Less
Distributions: |
|
|
|
|
|
|
Distributions
from net investment income |
(0.07) |
(0.08) |
(0.13) |
(0.14) |
(0.11) |
|
Net
Asset Value, End of Period |
$9.82 |
$10.37 |
$10.25 |
$10.30 |
$10.22 |
|
Total
Return1 |
(4.67)% |
1.98% |
0.81% |
2.20% |
0.60% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses2 |
0.71% |
0.71% |
0.81%3 |
0.96%3 |
0.96%3 |
|
Net
investment income |
0.64% |
0.78% |
1.30% |
1.41% |
1.07% |
|
Expense
waiver/reimbursement4 |
0.10% |
0.10% |
0.11% |
0.10% |
0.09% |
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$294,033 |
$509,643 |
$250,177 |
$178,706 |
$178,414 |
|
Portfolio
turnover5 |
23% |
11% |
49% |
39% |
18% |
1
Based on net asset value, which does not reflect the sales charge, redemption
fee or contingent deferred sales charge, if applicable.
2
Amount
does not reflect net expenses incurred by investment companies in which the Fund
may invest.
3
The
net expense ratio is calculated without reduction for expense offset
arrangements. The net expense ratio is 0.81% for the year ended June 30, 2020
and 0.96% for the years ended June 30, 2019 and 2018, after taking into account
these expense reductions.
4
This
expense decrease is reflected in both the net expense and net investment income
ratios shown above. Amount does not reflect expense waiver/reimbursement
recorded by investment companies in which the Fund may
invest.
5
Securities
that mature are considered sales for purposes of this
calculation.
Further information about the Fund’s
performance is contained in the Fund’s Annual Report, dated June 30, 2022, which
can be obtained free of charge.
36
Financial
Highlights–Class
A2 Shares
(For a Share Outstanding Throughout
the Period)
|
|
Period
Ended
6/30/20221
|
|
Net
Asset Value, Beginning of Period |
$10.31 |
|
Income
From Investment Operations: |
|
|
Net
investment income |
0.04 |
|
Net
realized and unrealized gain (loss) |
(0.49) |
|
TOTAL
FROM INVESTMENT OPERATIONS |
(0.45) |
|
Less
Distributions: |
|
|
Distributions
from net investment income |
(0.04) |
|
Net
Asset Value, End of Period |
$9.82 |
|
Total
Return2 |
(4.33)% |
|
Ratios
to Average Net Assets: |
|
|
Net
expenses3 |
0.71%4 |
|
Net
investment income |
0.22%4 |
|
Expense
waiver/reimbursement5 |
—%4 |
|
Supplemental
Data: |
|
|
Net
assets, end of period (000 omitted) |
$06 |
|
Portfolio
turnover7 |
23%8 |
1
Reflects
operations for the period from November 17, 2021 (commencement of operations) to
June 30, 2022. Certain ratios included in Ratios to Average Net Assets and per
share amounts may be inflated or deflated as compared to the fee structure for
each respective share class as a result of daily systematic allocations being
rounded to the nearest penny for fund level income, expense and realized
gain/loss amounts. Such differences are immaterial.
2
Based
on net asset value. Total returns for periods of less than one year are not
annualized.
3
Amount
does not reflect net expenses incurred by investment companies in which the Fund
may invest.
4
Computed
on an annualized basis.
5
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.
6
Represents
less than $1,000.
7
Securities
that mature are considered sales for purposes of this
calculation.
8
Portfolio
turnover is calculated at the Fund level. Percentage indicated was calculated
for the period ended June 30, 2022.
Further information about the Fund’s
performance is contained in the Fund’s Annual Report, dated June 30, 2022, which
can be obtained free of charge.
37
Financial
Highlights–Institutional
Shares
(For a Share
Outstanding Throughout Each Period)
|
Year
Ended June 30 |
2022 |
2021 |
2020 |
2019 |
2018 |
|
Net
Asset Value, Beginning of Period |
$10.37 |
$10.24 |
$10.30 |
$10.21 |
$10.26 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income |
0.09 |
0.11 |
0.17 |
0.19 |
0.16 |
|
Net
realized and unrealized gain (loss) |
(0.54) |
0.13 |
(0.06) |
0.09 |
(0.05) |
|
TOTAL
FROM INVESTMENT OPERATIONS |
(0.45) |
0.24 |
0.11 |
0.28 |
0.11 |
|
Less
Distributions: |
|
|
|
|
|
|
Distributions
from net investment income |
(0.09) |
(0.11) |
(0.17) |
(0.19) |
(0.16) |
|
Net
Asset Value, End of Period |
$9.83 |
$10.37 |
$10.24 |
$10.30 |
$10.21 |
|
Total
Return1 |
(4.33)% |
2.34% |
1.07% |
2.81% |
1.10% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses2 |
0.46% |
0.46% |
0.46%3 |
0.46%3 |
0.46%3 |
|
Net
investment income |
0.91% |
1.05% |
1.66% |
1.91% |
1.58% |
|
Expense
waiver/reimbursement4 |
0.17% |
0.17% |
0.18% |
0.21% |
0.24% |
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$461,550 |
$624,552 |
$561,612 |
$575,676 |
$689,739 |
|
Portfolio
turnover5 |
23% |
11% |
49% |
39% |
18% |
1
Based
on net asset value.
2
Amount
does not reflect net expenses incurred by investment companies in which the Fund
may invest.
3
The
net expense ratio is calculated without reduction for expense offset
arrangements. The net expense ratio is 0.46% for the years ended June 30, 2020,
2019 and 2018 after taking into account these expense
reductions.
4
This
expense decrease is reflected in both the net expense and net investment income
ratios shown above. Amount does not reflect expense waiver/reimbursement
recorded by investment companies in which the Fund may
invest.
5
Securities
that mature are considered sales for purposes of this
calculation.
Further information about the Fund’s
performance is contained in the Fund’s Annual Report, dated June 30, 2022, which
can be obtained free of charge.
38
Financial
Highlights–Service
Shares
(For a Share
Outstanding Throughout Each Period)
|
Year
Ended June 30 |
2022 |
2021 |
2020 |
2019 |
2018 |
|
Net
Asset Value, Beginning of Period |
$10.37 |
$10.25 |
$10.30 |
$10.22 |
$10.26 |
|
Income
From Investment Operations: |
|
|
|
|
|
|
Net
investment income |
0.07 |
0.08 |
0.14 |
0.17 |
0.14 |
|
Net
realized and unrealized gain (loss) |
(0.54) |
0.12 |
(0.05) |
0.08 |
(0.04) |
|
TOTAL
FROM INVESTMENT OPERATIONS |
(0.47) |
0.20 |
0.09 |
0.25 |
0.10 |
|
Less
Distributions: |
|
|
|
|
|
|
Distributions
from net investment income |
(0.07) |
(0.08) |
(0.14) |
(0.17) |
(0.14) |
|
Net
Asset Value, End of Period |
$9.83 |
$10.37 |
$10.25 |
$10.30 |
$10.22 |
|
Total
Return1 |
(4.56)% |
2.00% |
0.93% |
2.46% |
0.95% |
|
Ratios
to Average Net Assets: |
|
|
|
|
|
|
Net
expenses2 |
0.70% |
0.70% |
0.70%3 |
0.70%3 |
0.71%3 |
|
Net
investment income |
0.67% |
0.82% |
1.42% |
1.67% |
1.30% |
|
Expense
waiver/reimbursement4 |
0.10% |
0.10% |
0.21% |
0.35% |
0.34% |
|
Supplemental
Data: |
|
|
|
|
|
|
Net
assets, end of period (000 omitted) |
$7,697 |
$10,101 |
$11,431 |
$11,663 |
$14,429 |
|
Portfolio
turnover5 |
23% |
11% |
49% |
39% |
18% |
1
Based
on net asset value.
2
Amount
does not reflect net expenses incurred by investment companies in which the Fund
may invest.
3
The
net expense ratio is calculated without reduction for expense offset
arrangements. The net expense ratio is 0.70% for the years ended June 30, 2020
and 2019 and 0.71% for the year ended June 30, 2018, after taking into account
these expense reductions.
4
This
expense decrease is reflected in both the net expense and net investment income
ratios shown above. Amount does not reflect expense waiver/reimbursement
recorded by investment companies in which the Fund may
invest.
5
Securities
that mature are considered sales for purposes of this
calculation.
Further information about the Fund’s
performance is contained in the Fund’s Annual Report, dated June 30, 2022, which
can be obtained free of charge.
39
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 may
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 SHORT-INTERMEDIATE MUNICIPAL FUND–A
CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.81% | |||||
|
MAXIMUM
FRONT-END SALES CHARGE: 1.00% | |||||
|
Year |
Hypothetical
Beginning
Investment |
Hypothetical
Performance
Earnings |
Investment
After
Returns |
Hypothetical
Expenses |
Hypothetical
Ending
Investment |
|
1 |
$10,000.00 |
$495.00 |
$10,395.00 |
$181.87 |
$10,314.81 |
|
2 |
$10,314.81 |
$515.74 |
$10,830.55 |
$85.30 |
$10,747.00 |
|
3 |
$10,747.00 |
$537.35 |
$11,284.35 |
$88.87 |
$11,197.30 |
|
4 |
$11,197.30 |
$559.87 |
$11,757.17 |
$92.60 |
$11,666.47 |
|
5 |
$11,666.47 |
$583.32 |
$12,249.79 |
$96.48 |
$12,155.30 |
|
6 |
$12,155.30 |
$607.77 |
$12,763.07 |
$100.52 |
$12,664.61 |
|
7 |
$12,664.61 |
$633.23 |
$13,297.84 |
$104.73 |
$13,195.26 |
|
8 |
$13,195.26 |
$659.76 |
$13,855.02 |
$109.12 |
$13,748.14 |
|
9 |
$13,748.14 |
$687.41 |
$14,435.55 |
$113.69 |
$14,324.19 |
|
10 |
$14,324.19 |
$716.21 |
$15,040.40 |
$118.46 |
$14,924.37 |
|
Cumulative |
|
$5,995.66 |
|
$1,091.64 |
|
|
FEDERATED
HERMES SHORT-INTERMEDIATE MUNICIPAL FUND–A2
CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.81% | |||||
|
MAXIMUM
FRONT-END SALES CHARGE: 1.50% | |||||
|
Year |
Hypothetical
Beginning
Investment |
Hypothetical
Performance
Earnings |
Investment
After
Returns |
Hypothetical
Expenses |
Hypothetical
Ending
Investment |
|
1 |
$10,000.00 |
$492.50 |
$10,342.50 |
$231.46 |
$10,262.72 |
|
2 |
$10,262.72 |
$513.14 |
$10,775.86 |
$84.87 |
$10,692.73 |
|
3 |
$10,692.73 |
$534.64 |
$11,227.37 |
$88.43 |
$11,140.76 |
|
4 |
$11,140.76 |
$557.04 |
$11,697.80 |
$92.13 |
$11,607.56 |
|
5 |
$11,607.56 |
$580.38 |
$12,187.94 |
$95.99 |
$12,093.92 |
|
6 |
$12,093.92 |
$604.70 |
$12,698.62 |
$100.01 |
$12,600.66 |
|
7 |
$12,600.66 |
$630.03 |
$13,230.69 |
$104.20 |
$13,128.63 |
|
8 |
$13,128.63 |
$656.43 |
$13,785.06 |
$108.57 |
$13,678.72 |
|
9 |
$13,678.72 |
$683.94 |
$14,362.66 |
$113.12 |
$14,251.86 |
|
10 |
$14,251.86 |
$712.59 |
$14,964.45 |
$117.86 |
$14,849.01 |
|
Cumulative |
|
$5,965.39 |
|
$1,136.64 |
|
40
|
FEDERATED
HERMES SHORT-INTERMEDIATE MUNICIPAL FUND–IS
CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.81% | |||||
|
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 |
$82.70 |
$10,419.00 |
|
2 |
$10,419.00 |
$520.95 |
$10,939.95 |
$86.16 |
$10,855.56 |
|
3 |
$10,855.56 |
$542.78 |
$11,398.34 |
$89.77 |
$11,310.41 |
|
4 |
$11,310.41 |
$565.52 |
$11,875.93 |
$93.53 |
$11,784.32 |
|
5 |
$11,784.32 |
$589.22 |
$12,373.54 |
$97.45 |
$12,278.08 |
|
6 |
$12,278.08 |
$613.90 |
$12,891.98 |
$101.54 |
$12,792.53 |
|
7 |
$12,792.53 |
$639.63 |
$13,432.16 |
$105.79 |
$13,328.54 |
|
8 |
$13,328.54 |
$666.43 |
$13,994.97 |
$110.22 |
$13,887.01 |
|
9 |
$13,887.01 |
$694.35 |
$14,581.36 |
$114.84 |
$14,468.88 |
|
10 |
$14,468.88 |
$723.44 |
$15,192.32 |
$119.65 |
$15,075.13 |
|
Cumulative |
|
$6,056.22 |
|
$1,001.65 |
|
|
FEDERATED
HERMES SHORT-INTERMEDIATE MUNICIPAL FUND–SS
CLASS | |||||
|
ANNUAL
EXPENSE RATIO: 0.81% | |||||
|
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 |
$82.70 |
$10,419.00 |
|
2 |
$10,419.00 |
$520.95 |
$10,939.95 |
$86.16 |
$10,855.56 |
|
3 |
$10,855.56 |
$542.78 |
$11,398.34 |
$89.77 |
$11,310.41 |
|
4 |
$11,310.41 |
$565.52 |
$11,875.93 |
$93.53 |
$11,784.32 |
|
5 |
$11,784.32 |
$589.22 |
$12,373.54 |
$97.45 |
$12,278.08 |
|
6 |
$12,278.08 |
$613.90 |
$12,891.98 |
$101.54 |
$12,792.53 |
|
7 |
$12,792.53 |
$639.63 |
$13,432.16 |
$105.79 |
$13,328.54 |
|
8 |
$13,328.54 |
$666.43 |
$13,994.97 |
$110.22 |
$13,887.01 |
|
9 |
$13,887.01 |
$694.35 |
$14,581.36 |
$114.84 |
$14,468.88 |
|
10 |
$14,468.88 |
$723.44 |
$15,192.32 |
$119.65 |
$15,075.13 |
|
Cumulative |
|
$6,056.22 |
|
$1,001.65 |
|
41
Appendix
B: Sales Charge Waivers and Exchange Features for Shareholders Purchasing
Through Certain Financial Intermediaries
The
term “fund family,” used herein, shall refer to the Federated Hermes mutual
funds.
The following
Appendix applies to certain share classes offered by the Fund.
Ameriprise
Financial
CLASS
A SHARES FRONT-END SALES CHARGE WAIVERS AVAILABLE AT AMERIPRISE
FINANCIAL:
The
following information applies to Class A shares purchases if you have an account
with or otherwise purchase Fund shares through Ameriprise
Financial:
Effective
January 15, 2021, shareholders purchasing Fund shares through an Ameriprise
Financial retail brokerage account
are eligible for the following front-end sales charge waivers, which may differ
from those disclosed elsewhere in this Fund’s prospectus or SAI:
◾ Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs or SAR-SEPs.
◾ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same Fund (but not any other fund
within the same fund family).
◾ Shares
exchanged from Class C shares of the same fund in the month of or following the
7-year anniversary of the purchase date. To the extent that this prospectus
elsewhere provides for a waiver with respect to exchanges of Class C shares or
conversion of Class C shares following a shorter holding period, that waiver
will apply.
◾ Employees
and registered representatives of Ameriprise Financial or its affiliates and
their immediate family members.
◾ Shares
purchased by or through qualified accounts (including IRAs, Coverdell Education
Savings Accounts, 401(k)s, 403(b) TSCAs subject to ERISA and defined benefit
plans) that are held by a covered family member, defined as an Ameriprise
financial advisor and/or the advisor’s spouse, advisor’s lineal ascendant
(mother, father, grandmother, grandfather, great grandmother, great
grandfather), advisor’s lineal descendant (son, step-son, daughter,
step-daughter, grandson, granddaughter, great grandson, great granddaughter) or
any spouse of a covered family member who is a lineal descendant.
◾ Shares
purchased from the proceeds of redemptions within the same fund family, provided
(1) the repurchase occurs within 90 days following the redemption, (2) the
redemption and purchase occur in the same account, and (3) redeemed shares were
subject to a front-end or deferred sales load (i.e., Rights of
Reinstatement).
Robert
W. Baird & Co., Inc.
Effective
June 15, 2020, shareholders purchasing Fund shares through a Baird platform or
account will only be eligible for the
following sales charge waivers (front-end sales charge waivers and CDSC waivers)
and discounts, which may differ from those disclosed elsewhere in this
prospectus or the SAI.
Front-End
Sales Charge Waivers on Investors A-shares Available at Baird
◾ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing share of the same fund;
◾ Share
purchase by employees and registered representatives of Baird or its affiliate
and their family members as designated by Baird;
◾ Shares
purchase from the proceeds of redemptions within the same fund family, provided:
(1) the repurchase occurs within 90 days following the redemption; (2) the
redemption and purchase occur in the same accounts; and (3) redeemed shares were
subject to a front-end or deferred sales charge (known as rights of
reinstatement);
◾ Class C
(i.e., level-load) shares that are no longer subject to a CDSC and are exchanged
to Class A shares (or the appropriate share class) of the same fund pursuant to
Baird’s intra-fund share class policies and procedures;
◾ Employer-sponsored
retirement plans or charitable accounts in a transactional brokerage account at
Baird, including 401(k) plans, 457 plans, employer-sponsored 403(b) plans,
profit sharing and money purchase pension plans and defined benefit plans. For
purposes of this provision, employer-sponsored retirement plans do not include
SEP IRAs, Simple IRAs or SAR-SEPs.
42
CDSC
Waivers on Investor A and C Shares Available at Baird
◾ Shares
sold upon the death or disability of the shareholder;
◾ Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
Prospectus;
◾ Shares
bought due to returns of excess contributions from an IRA Account;
◾ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
pursuant to the Internal Revenue Code;
◾ Shares
sold to pay Baird fees but only if the transaction is initiated by
Baird;
◾ Shares
acquired through a right of reinstatement.
Front-End
Sales Charge Discounts Available at Baird: Breakpoints and/or Rights of
Accumulations
◾ Breakpoints
as described in this prospectus;
◾ Rights of
accumulations which entitles shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at Baird. Eligible fund family
assets not held at Baird may be included in the rights of accumulations
calculation only if the shareholder notifies his or her financial advisor about
such assets;
◾ Letters of
Intent (LOI) allow for breakpoint discounts based on anticipated purchases
within a fund family through Baird, over a 13-month period of time.
Edward
D. Jones & Co., L.P. (EDWARD JONES)
Policies
Regarding Transactions Through Edward Jones
The
following information has been provided by Edward Jones
Effective
on or after March 1, 2021, the following information supersedes prior
information with respect to transactions and
positions held in fund shares through an Edward Jones system. Shareholders
purchasing Fund shares on the Edward Jones commission and fee-based platforms
are eligible only for the following sales charge waivers (front-end sales charge
waivers and contingent deferred sales charge (CDSC), or back-end sales charge,
waivers) and discounts, which may differ from those disclosed elsewhere in this
Fund’s prospectus or statement of additional information (SAI). In all
instances, it is the shareholder’s responsibility to inform Edward Jones at the
time of purchase of any relationship, holdings of fund family, or other facts
qualifying the purchaser for waivers or discounts. Edward Jones can ask for
documentation of such circumstance. Shareholders should contact Edward Jones if
they have questions regarding their eligibility for these discounts and
waivers.
Front-End
Sales Load Waivers on Class A and F Shares Available at Edward
Jones
Sales
charges are waived for the following shareholders and in the following
situations:
◾ Associates
of Edward Jones and its affiliates and their family members who are in the same
pricing group (as determined by Edward Jones under its policies and procedures)
as the associate. This waiver will continue for the remainder of the associate’s
life if the associate retires from Edward Jones in good-standing and remains in
good standing pursuant to Edward Jones’ policies and procedures.
◾ Shares
purchased in an Edward Jones fee-based program.
◾ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment.
◾ Shares
purchased from the proceeds of redeemed shares of the same fund family so long
as the following conditions are met: 1) the proceeds are from the sale of shares
within 60 days of the purchase, and 2) the sale and purchase are made in the
same share class and the same account or the purchase is made in an individual
retirement account with proceeds from liquidations in a non-retirement
account.
◾ Shares
exchanged into Class A shares from another share Class so long as the exchange
is into the same fund and was initiated at the discretion of Edward Jones.
Edward Jones is responsible for any remaining CDSC due to the fund company, if
applicable. Any future purchases are subject to the applicable sales charge as
disclosed in the prospectus.
◾ Exchanges
from Class C shares to Class A shares of the same fund, generally, in the 84th
month following the anniversary of the purchase date or earlier at the
discretion of Edward Jones. Edward Jones will be responsible for any remaining
CDSC due to the fund company, if applicable.
CDSC
Waivers on A, B, C and F Shares Available at Edward Jones
If
the shareholder purchases shares that are subject to a CDSC and those shares are
redeemed before the CDSC is expired,
the shareholder will be responsible to pay the CDSC except in the following
conditions:
◾ Shares
sold upon the death or disability of the shareholder.
◾ Shares
sold as part of a systematic withdrawal plan (limited to up to 10% per year of
the account value).
43
◾ Return of
excess contributions from an Individual Retirement Account (IRA).
◾ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
if the redemption is taken in or after the year the shareholder reaches
qualified age based on applicable IRS regulations.
◾ Shares
sold to pay Edward Jones fees or costs in such cases where the transaction is
initiated by Edward Jones.
◾ Shares
exchanged in an Edward Jones fee-based program. Edward Jones is responsible for
any remaining CDSC due to the fund company, if applicable.
◾ Shares
acquired through a right of reinstatement.
◾ Shares
redeemed at the discretion of Edward Jones for Minimum Balances, as described
below.
Front-End
Load Discounts Available at Edward Jones:
Rights
of Accumulation (ROA)
◾ The
applicable sales charge on a purchase of Class A shares is determined by taking
into account all share classes (except certain money market funds and any assets
held in group retirement plans) of the fund family held by the shareholder or in
an account grouped by Edward Jones with other accounts for the purpose of
providing certain pricing considerations (“pricing groups”). If grouping assets
as a shareholder, this includes all share classes held on the Edward Jones
platform and/or held on another platform. The inclusion of eligible fund family
assets in the ROA calculation is dependent on the shareholder notifying Edward
Jones of such assets at the time of calculation. Money market funds are included
only if such shares were sold with a sales charge at the time of purchase or
acquired in exchange for shares purchased with a sales charge.
◾ The
employer maintaining a SEP IRA plan and/or SIMPLE IRA plan may elect to
establish or change ROA for the IRA accounts associated with the plan to a
plan-level grouping as opposed to including all share classes at a shareholder
or pricing group level.
◾ ROA is
determined by calculating the higher of cost minus redemptions or market value
(current shares x NAV).
Letter
of Intent (LOI)
◾ Through a
LOI, shareholders can receive the sales charge and breakpoint discounts for
purchases shareholders intend to make over a 13-month period from the date
Edward Jones receives the LOI. The LOI is determined by calculating the higher
of cost or market value of qualifying holdings at LOI initiation in combination
with the value that the shareholder intends to buy over a 13-month period to
calculate the front-end sales charge and any breakpoint discounts. Each purchase
the shareholder makes during that 13-month period will receive the sales charge
and breakpoint discount that applies to the total amount. The inclusion of
eligible fund family assets in the LOI calculation is dependent on the
shareholder notifying Edward Jones of such assets at the time of calculation.
Purchases made before the LOI is received by Edward Jones are not adjusted under
the LOI and will not reduce the sales charge previously paid. Sales charges will
be adjusted if LOI is not met.
◾ If the
employer maintaining a SEP IRA plan and/or SIMPLE IRA plan has elected to
establish or change ROA for the IRA accounts associated with the plan to a
plan-level grouping, LOIs will also be at the plan-level and may only be
established by the employer.
Other
Important Information REGARDING TRANSACTIONS THROUGH EDWARD JONES
Minimum
Purchase Amounts
◾ Initial
purchase minimum: $250
◾ Subsequent
purchase minimum: none
Minimum
Balances
◾ Edward
Jones has the right to redeem at its discretion fund holdings with a balance of
$250 or less. The following are examples of accounts that are not included in
this policy:
◾ A
fee-based account held on an Edward Jones platform
◾ A 529
account held on an Edward Jones platform
◾ An account
with an active systematic investment plan or LOI
Exchanging
Share Classes
◾ At any
time it deems necessary, Edward Jones has the authority to exchange at NAV a
shareholder’s holdings in a fund to Class A shares of the same fund.
44
Janney
Montgomery Scott LLC
Effective
May 1, 2020, if you purchase or redeem Fund shares through a Janney Montgomery
Scott LLC (“Janney”) brokerage
account, you will be eligible for the following load waivers (front-end sales
charge waivers and contingent deferred sales charge (CDSC), or back-end sales
charge, waivers) and discounts, which may differ from those disclosed elsewhere
in this Fund’s Prospectus or SAI.
Front-end
sales charge waivers on Class A Shares available at Janney
◾ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family).
◾ Shares
purchased by employees and registered representatives of Janney or its
affiliates and their family members as designated by Janney.
◾ Shares
purchased from the proceeds of redemptions within the same fund family,
provided: (1) the repurchase occurs within ninety (90) days following the
redemption; (2) the redemption and purchase occur in the same account; and (3)
redeemed shares were subject to a front-end or deferred sales load (i.e., right
of reinstatement).
◾ Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans.
◾ Shares
acquired through a right of reinstatement.
◾ Class C
shares that are no longer subject to a contingent deferred sales charge and are
exchanged to Class A shares (or the appropriate share class) of the same fund
pursuant to Janney’s intra-fund share class policies and
procedures.
CDSC
Waivers on Class A and C Shares available at Janney
◾ Shares
sold upon the death or disability of the shareholder.
◾ Shares
sold as part of a systematic withdrawal plan as described in the fund’s
Prospectus.
◾ Shares
purchased in connection with a return of excess contributions from an IRA
account.
◾ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
if the redemption is taken in or after the year the shareholder reaches
qualified age based on applicable IRS regulations.
◾ Shares
sold to pay Janney fees but only if the transaction is initiated by
Janney.
◾ Shares
acquired through a right of reinstatement.
◾ Shares
exchanged into the same share class of a different Federated Hermes fund, if the
shares were held for the applicable CDSC holding period (the holding period on
the shares purchased in the exchange will include the holding period of the
shares sold in the exchange).
Front-end
sales charge discounts available at Janney: Breakpoints, Rights of Accumulation,
and/or Letters of Intent
◾ Breakpoints
as described in the fund’s Prospectus.
◾ Rights of
accumulation (“ROA”), which entitle shareholders to breakpoint discounts, will
be automatically calculated based on the aggregated holding of fund family
assets held by accounts within the purchaser’s household at Janney. Eligible
fund family assets not held at Janney may be included in the ROA calculation
only if the shareholder notifies his or her financial advisor about such
assets.
◾ Letters of
intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over a 13-month time period. Eligible fund family assets
not held at Janney may be included in the calculation of letters of intent only
if the shareholder notifies his or her financial advisor about such
assets.
Merrill
Lynch
Shareholders
purchasing Fund shares through a Merrill Lynch platform or account will be
eligible only for the following
load waivers (front-end sales charge waivers and contingent deferred, or
back-end, sales charge waivers) and discounts, which may differ from those
disclosed elsewhere in this Fund’s prospectus or SAI.
Front-end
Sales Load Waivers on Class A Shares available at Merrill Lynch
◾ Employer-sponsored
retirement, deferred compensation and employee benefit plans (including health
savings accounts) and trusts used to fund those plans, provided that the shares
are not held in a commission-based brokerage account and shares are held for the
benefit of the plan;
◾ Shares
purchased by a 529 Plan (does not include 529 Plan units or 529-specific share
classes or equivalents);
◾ Shares
purchased through a Merrill Lynch affiliated investment advisory program or
exchanged due to the holdings moving from the program;
45
◾ Shares
exchanged due to the holdings moving from a Merrill Lynch affiliated investment
advisory program to a Merrill Lynch brokerage (non-advisory) account pursuant to
Merrill Lynch’s policies relating to sales load discounts and
waivers;
◾ Shares purchased by third
party investment advisors on behalf of their advisory clients through Merrill
Lynch’s platform;
◾ Shares of
funds purchased through the Merrill Edge Self-Directed platform (if
applicable);
◾ Shares
purchased through reinvestment of capital gains distributions and dividend
reinvestment when purchasing shares of the same fund (but not any other fund
within the fund family);
◾ Shares
exchanged from Class C (i.e., level-load) shares of the same fund pursuant to
Merrill Lynch’s policies relating to sales load discounts and
waivers;
◾ Employees
and registered representatives of Merrill Lynch or its affiliates and their
family members;
◾ Directors
or Trustees of the Fund, and employees of the Fund’s investment adviser or any
of its affiliates, as described in the prospectus;
◾ Eligible
shares purchased from the proceeds of redemptions within the same fund family,
provided: (1) the repurchase occurs within 90 days following the redemption; (2)
the redemption and purchase occur in the same account; and (3) redeemed shares
were subject to a front-end or deferred sales load (known as Rights of
Reinstatement). Automated transactions (i.e., systematic purchases and
withdrawals) and purchases made after shares are automatically sold to pay
Merrill Lynch’s account maintenance fees are not eligible for
reinstatement.
CDSC
Waivers on A, B and C Shares available at Merrill Lynch
◾ Death or
disability of the shareholder;
◾ Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus;
◾ Return of
excess contributions from an IRA Account;
◾ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
pursuant to the Internal Revenue Code;
◾ Shares
sold to pay Merrill Lynch fees but only if the transaction is initiated by
Merrill Lynch;
◾ Shares
acquired through a right of reinstatement;
◾ Shares
held in retirement brokerage accounts, that are exchanged for a lower cost share
class due to transfer to certain fee based accounts or platforms (applicable to
A and C shares only);
◾ Class A
Shares received through an exchange due to the holdings moving from a Merrill
Lynch affiliated investment advisory program to a Merrill Lynch brokerage
(non-advisory) account pursuant to Merrill Lynch’s policies relating to sales
load discounts and waivers.
Front-end
load Discounts Available at Merrill Lynch:
Breakpoints, Rights of Accumulation & Letters of Intent
Breakpoints, Rights of Accumulation & Letters of Intent
◾ Breakpoints
as described in this prospectus;
◾ Rights of
Accumulation (ROA) which entitle shareholders to breakpoint discounts as
described in the Fund’s prospectus will be automatically calculated based on the
aggregated holding of fund family assets held by accounts (including 529 program
holdings, where applicable) within the purchaser’s household at Merrill Lynch.
Eligible fund family assets not held at Merrill Lynch may be included in the ROA
calculation only if the shareholder notifies his or her financial advisor about
such assets;
◾ Letters of
Intent (LOI) which allow for breakpoint discounts based on anticipated purchases
within a fund family, through Merrill Lynch, over a 13-month period of time (if
applicable).
Morgan
Stanley Smith Barney
Shareholders
purchasing Fund shares through a Morgan Stanley Wealth Management transactional
brokerage account will be
eligible only for the following front-end sales charge waivers with respect to
Class A shares, which may differ from and may be more limited than those
disclosed elsewhere in this Fund’s Prospectus or SAI.
Front-End
Sales Charge Waivers on Class A Shares Available at Morgan Stanley Wealth
Management
◾ Employer-sponsored
retirement plans (e.g., 401(k) plans, 457 plans, employer-sponsored 403(b)
plans, profit sharing and money purchase pension plans and defined benefit
plans). For purposes of this provision, employer-sponsored retirement plans do
not include SEP IRAs, Simple IRAs, SAR-SEPs or Keogh plans;
◾ Morgan
Stanley employee and employee-related accounts according to Morgan Stanley’s
account linking rules;
◾ Shares
purchased through reinvestment of dividends and capital gains distributions when
purchasing shares of the same fund;
46
◾ Shares
purchased through a Morgan Stanley self-directed brokerage account;
◾ Class C
(i.e., level-load) shares that are no longer subject to a contingent deferred
sales charge and are exchanged to Class A shares of the same fund pursuant to
Morgan Stanley Wealth Management’s intra-fund share class exchange
program;
◾ Shares
purchased from the proceeds of redemptions within the same fund family, provided
(i) the repurchase occurs within 90 days following the redemption, (ii) the
redemption and purchase occur in the same account, and (iii) redeemed shares
were subject to a front-end or deferred sales charge.
OPPENHEIMER
& CO., INC.
Effective
May 1, 2020, shareholders purchasing Fund shares through an Oppenheimer &
Co., Inc. (OPCO) platform or account
are eligible only for the following load waivers (front-end sales charge waivers
and contingent deferred, or back-end, sales charge waivers) and discounts, which
may differ from those disclosed elsewhere in this Fund’s prospectus or
SAI.
Front-end
Sales Load Waivers on Class A Shares available at OPCO
◾ Employer-sponsored
retirement, deferred compensation and employee benefit plans (including health
savings accounts) and trusts used to fund those plans, provided that the shares
are not held in a commission-based brokerage account and shares are held for the
benefit of the plan
◾ Shares
purchased by or through a 529 Plan
◾ Shares
purchased through an OPCO affiliated investment advisory program
◾ Shares
purchased through reinvestment of dividends and capital gains distributions when
purchasing shares of the same fund (but not any other fund within the fund
family)
◾ Shares
purchased from the proceeds of redemptions within the same fund family,
provided: (1) the repurchase occurs within 90 days following the redemption; (2)
the redemption and purchase occur in the same account; and (3) redeemed shares
were subject to a front-end or deferred sales load (known as Rights of
Reinstatement).
◾ A
shareholder in the Fund’s Class C shares will have their shares automatically
exchanged at net asset value to Class A shares (or the appropriate share class)
of the Fund if the shares are no longer subject to a CDSC and the automatic
exchange is in line with the policies and procedures of OPCO
◾ Employees
and registered representatives of OPCO or its affiliates and their family
members
◾ Directors
or Trustees of the Fund, and employees of the Fund’s investment adviser or any
of its affiliates, as described in this prospectus
CDSC
Waivers on A, B and C Shares available at OPCO
◾ Death or
disability of the shareholder
◾ Shares
sold as part of a systematic withdrawal plan as described in the Fund’s
prospectus
◾ Return of
excess contributions from an IRA Account
◾ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
pursuant to the Internal Revenue Code
◾ Shares
sold to pay OPCO fees but only if the transaction is initiated by
OPCO
◾ Shares
acquired through a right of reinstatement
Front-end
load Discounts Available at OPCO: Breakpoints, Rights of Accumulation &
Letters of Intent
◾ Breakpoints
as described in this prospectus.
◾ Rights of
Accumulation (ROA), which entitle shareholders to breakpoint discounts, will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at OPCO. Eligible fund family
assets not held at OPCO may be included in the ROA calculation only if the
shareholder notifies his or her financial advisor about such assets
Raymond
James & Associates, Inc., Raymond James Financial Services, Inc. and each
entity’s affiliates (“Raymond James”)
Effective
March 1, 2019, shareholders purchasing and redeeming Fund shares through a
Raymond James platform or account,
or through an introducing broker-dealer or independent registered investment
adviser for which Raymond James provides trade execution, clearance, and/or
custody services, will be eligible only for the following load waivers
(front-end sales charge waivers and contingent deferred, or back-end, sales
charge waivers) and discounts, which may differ from those disclosed elsewhere
in this Fund’s prospectus or SAI.
47
Front-End
Sales Load Waivers on Class A Shares Available at Raymond James
◾ Shares
purchased in an investment advisory program.
◾ Shares
purchased within the same fund family through a systematic reinvestment of
capital gains and dividend distributions.
◾ Employees
and registered representatives of Raymond James or its affiliates and their
family members as designated by Raymond James.
◾ Shares
purchased from the proceeds of redemptions within the same fund family,
provided: (1) the repurchase occurs within 90 days following the redemption; (2)
the redemption and purchase occur in the same account; and (3) redeemed shares
were subject to a front-end or deferred sales load (known as Rights of
Reinstatement).
◾ A
shareholder in the Fund’s Class C shares will have their shares automatically
exchanged at net asset value to Class A shares (or the appropriate share class)
of the Fund if the shares are no longer subject to a CDSC and the automatic
exchange is in line with the policies and procedures of Raymond
James.
CDSC
Waivers on A, B and C Shares Available at Raymond James
◾ Death or
disability of the shareholder.
◾ Shares
sold as part of a systematic withdrawal plan as described in the fund’s
prospectus.
◾ Return of
excess contributions from an IRA Account.
◾ Shares
sold as part of a required minimum distribution for IRA and retirement accounts
due to the shareholder reaching the qualified age based on applicable IRS
regulations as described in the fund’s prospectus.
◾ Shares
sold to pay Raymond James fees but only if the transaction is initiated by
Raymond James.
◾ Shares
acquired through a right of reinstatement.
Front-End
Load Discounts Available at Raymond James: Breakpoints, Rights of Accumulation,
and/or Letters of Intent
◾ Breakpoints
as described in this prospectus;
◾ Rights of
accumulation which entitle shareholders to breakpoint discounts will be
automatically calculated based on the aggregated holding of fund family assets
held by accounts within the purchaser’s household at Raymond James. Eligible
fund family assets not held at Raymond James may be included in the calculation
of rights of accumulation only if the shareholder notifies his or her financial
advisor about such assets.
◾ Letters of
Intent which allow for breakpoint discounts based on anticipated purchases
within a fund family, over a 13-month time period. Eligible fund family assets
not held at Raymond James may be included in the calculation of letters of
intent only if the shareholder notifies his or her financial advisor about such
assets.
Stifel,
Nicolaus & Company, Incorporated
Effective
July 1, 2020, shareholders purchasing Fund shares through a Stifel, Nicolaus
& Company, Incorporated (“Stifel”)
platform or account or who own shares for which Stifel or an affiliate is the
broker-dealer of record are eligible for the following additional sales charge
waiver.
Front-End
Sales Load Waiver on Class A Shares
◾ Class C
shares that have been held for more than seven (7) years will be converted to
Class A shares of the same Fund pursuant to Stifel’s policies and
procedures
All
other sales charge waivers and reductions described elsewhere in the Fund’s
Prospectus or SAI still apply.
U.S.
Bancorp Investments, Inc.
Effective
November 1, 2021, shareholders purchasing Fund shares through a U.S. Bancorp
Investments, Inc. (“USBI”) platform or who own shares
for which USBI is the broker-dealer, where the shares are held in an omnibus
account, will be eligible for the following front-end sales charge waivers and
discounts, which may differ from those disclosed elsewhere in the Funds’
Prospectus or SAI. All other sales charge waivers and reductions described
elsewhere in the Fund’s Prospectus or SAI still apply.
USBI Conversion
of Class C Shares
Class C
(i.e., level-load) shares that are no longer subject to a contingent deferred
sales charge are systematically converted to the Class A
shares of the same fund pursuant to USBI’s intra-fund share class policy. No
front-end sales charge will apply to such conversions.
48
An SAI dated August 31,
2022, is incorporated by reference into this Prospectus. Additional information
about the Fund and its investments is contained in the Fund’s SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual
Report’s Management’s Discussion of Fund Performance discusses market conditions
and investment strategies that significantly affected the Fund’s performance
during its last fiscal year. The SAI contains a description of the Fund’s
policies and procedures with respect to the disclosure of its portfolio
securities. To obtain the SAI, Annual Report, Semi-Annual Report and other
information without charge, and to make inquiries, call your financial
intermediary or the Fund at 1-800-341-7400.
The
Fund’s
shareholder reports will be made available on FederatedInvestors.com/FundInformation, and you will be notified
and provided with a link each time a report is posted to the website. You may
request to receive paper reports from the Fund or from your financial
intermediary, free of charge, at any time. You may also request to receive
documents through e-delivery.
These
documents, as well as additional information about the Fund (including portfolio
holdings, performance and distributions), are also available on FederatedInvestors.com.
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
Short-Intermediate Municipal Fund
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us
at
FederatedInvestors.com
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities
Corp., Distributor
Investment
Company Act File No. 811-3181
CUSIP
313907305
CUSIP 31423H106
CUSIP 313907107
CUSIP 313907206
CUSIP 31423H106
CUSIP 313907107
CUSIP 313907206
35584
(8/22)
© 2022 Federated Hermes,
Inc.