Prospectus
December
31, 2023
|
NYSE
Arca | FDV |
Federated Hermes U.S. Strategic Dividend ETF
A Portfolio of Federated Hermes ETF Trust
A fund
seeking income and long-term capital appreciation by investing primarily in high
dividend-paying stocks of U.S. issuers with dividend growth
potential.
As with
all funds, the Securities and Exchange Commission (SEC) has not approved or
disapproved these securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
Not
FDIC Insured ▪ May Lose Value ▪ No Bank Guarantee
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Management
Fee |
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Distribution
(12b-1) Fee1 |
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Other
Expenses |
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Total
Annual Fund Operating Expenses |
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|
Fee
Waivers and/or Expense Reimbursements2 |
( |
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Total
Annual Fund Operating Expenses After Fee Waivers and/or Expense
Reimbursements |
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1
2
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1
Year |
$ |
|
3
Years |
$ |
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5
Years |
$ |
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10
Years |
$ |
1
◾ Stock
Market Risk. The value
of equity securities in the Fund’s portfolio will fluctuate and, as a result,
the Fund’s Share price may decline suddenly or over a sustained period of time.
Information publicly available about a company, whether from the company’s
financial statements or other disclosures or from third parties, or information
available to some but not all market participants, can affect the price of a
company’s shares in the market. Among other factors, equity securities may
decline in value because of an increase in interest rates or changes in the
stock market. Recent and potential future changes in industry and/or economic
trends, as well as changes in monetary policy made by central banks and/or their
governments, also can affect the level of interest rates and contribute to the
development of or increase in volatility, illiquidity, shareholder redemptions
and other adverse effects (such as a decline in a company’s stock price), which
could negatively impact the Fund’s performance.
◾ Mid-Cap
Company Risk. The Fund
may invest in mid-capitalization (or “mid-cap”) companies. Mid-cap companies
often have narrower markets, limited managerial and financial resources, more
volatile performance and greater risk of failure, compared to larger, more
established companies. These factors could increase the volatility of the Fund’s
portfolio, performance and Share price.
◾ Large-Cap
Company Risk. The Fund
may invest in large capitalization (or “large-cap”) companies. Large-cap
companies may have fewer opportunities to expand the market for their products
or services, may focus their competitive efforts on maintaining or expanding
their market share, and may be less capable of responding quickly to competitive
challenges. These factors could result in the share price of large companies not
keeping pace with the overall stock market or growth in the general economy, and
could have a negative effect on the Fund’s portfolio, performance and Share
price.
◾ Risk
Related to the Economy. The value
of the Fund’s portfolio may decline in tandem with a drop in the overall value
of the markets in which the Fund invests and/or other markets. Economic,
political and financial conditions, industry or economic trends and developments
or public health risks, such as epidemics or pandemics, may, from time to time,
and for varying periods of time, cause the Fund to experience volatility,
illiquidity, shareholder redemptions, or other potentially adverse
effects.
2
◾ Risk
Related to Investing for Dividend Income. There is
no guarantee that the issuers of the stocks held by the Fund will declare
dividends in the future or that, if dividends are declared, they will remain at
their current levels or increase over time. Because a dividend is always a
positive contributor to total return, dividend-paying stocks are typically less
volatile than non-dividend-paying stocks. Accordingly, the Fund’s performance
may lag behind the general market when dividend-paying stocks are out of
favor.
◾ Liquidity
Risk. The
equity securities in which the Fund invests may be less readily marketable and
may be subject to greater fluctuation in price than other
securities.
◾ Real
Estate Investment Trust Risk. Real
estate investment trusts (REITs) carry risks associated with owning real estate,
including the potential for a decline in value due to economic or market
conditions.
◾ ETF
Risk. As an
ETF, the Fund is subject to the following 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.
FUND
MANAGEMENT
The Fund’s
Investment Adviser is Federated Equity Management Company of
Pennsylvania.
The Fund’s
portfolio managers are jointly and primarily responsible for the day-to-day
management of the Fund.
Daniel
Peris, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since November of 2022.
Deborah D.
Bickerstaff, Portfolio Manager, has been the Fund’s portfolio manager since
November of 2022.
Jared S. Hoff, Senior
Portfolio Manager, has been the Fund’s portfolio manager since November of
2022.
Michael R. Tucker, Senior
Portfolio Manager, has been the Fund’s portfolio manager since November of
2022.
3
purchase
and sale of fund shares
The
Fund is an exchange-traded fund (ETF). Individual Fund Shares may only be
purchased and sold on a national securities exchange
through a broker-dealer and may not be purchased or redeemed directly with the
Fund. The price of Fund Shares is based on market price, and because ETF shares
trade at market prices rather than net asset value (NAV), Shares may trade at a
price greater than NAV (a premium) or less than NAV (a discount). An investor
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase shares of a Fund (“bid”) and the lowest price a
seller is willing to accept for shares (“ask”) when buying or selling shares in
the secondary market (the “bid-ask spread”). Recent information, including
information about the Fund’s NAV, market price, premiums and discounts, and
bid-ask spreads, is included on the Fund’s website at
FederatedHermes.com/us.
Tax
Information
The
Fund’s distributions are taxable as ordinary income, qualified dividend income
or capital gains except when your investment
is through a 401(k) plan, an Individual Retirement Account or other
tax-advantaged investment plan.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Fund and/or its related
companies may pay the intermediary for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund
over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
What are
the Fund’s Investment Strategies?
The
Fund is an actively managed exchange-traded fund (ETF), and the Shares of the
Fund are listed for trading on NYSE Arca.
The market price for a Share of the Fund may be different from the Fund‘s most
recent net asset value (NAV). ETFs are funds that trade like other publicly
traded securities. Unlike shares of a mutual fund, which can be bought and
redeemed from the issuing fund by all shareholders at a price based on NAV,
Shares of the Fund may be purchased or redeemed directly from the Fund at NAV
solely by Authorized Participants. Also, unlike shares of a mutual fund, Shares
of the Fund are listed on a national securities exchange and trade in the
secondary market at market prices that change throughout the day.
The
Fund’s investment objective is to seek income and long-term capital
appreciation. The investment objective may be changed by
the Fund’s Board without shareholder approval. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the principal strategies and policies described in this
Prospectus.
The
Fund pursues its investment objective by investing primarily in high
dividend-paying common stocks of U.S.
issuers with dividend growth potential. The Fund intends to invest exclusively
in U.S. issuers (i.e., companies domiciled and/or with operations in the United
States, or listed on U.S.-based exchanges), and generally invests in large-cap
or mid-cap stocks (which are generally defined as of the date of this prospectus
as stocks of companies with market capitalizations above $7 billion and $2
billion, respectively). The Fund may also invest in real estate investment
trusts. The strategy seeks to deliver dividend yield that is higher than the
Standard & Poor’s 500 Index’s averages while targeting long-term dividend
growth and lower volatility than the index, as measured by standard
deviation.
The
Fund’s investment adviser (“Adviser”) believes a strategic emphasis on high
dividend-paying stocks with the potential
for future dividend growth can enhance performance over time. The Adviser
defines high-dividend paying stocks as those with a higher dividend yield than
the S&P 500 Index’s average dividend yield.
The
Fund focuses on high dividend-paying companies that exhibit solid performance in
periods of market weakness in an attempt
to reduce risk. Risk is also managed through exposure to multiple sectors and
industries. At the individual stock level, the Fund generally adheres to
position size limits which may be adjusted over time and are designed to further
control portfolio risk.
Companies
highly ranked in the prioritization process are scrutinized to determine whether
the company is an attractive investment
proposition. This process is driven primarily by bottom-up fundamental
proprietary research. Broad macroeconomic trends that can influence the outlook
of sectors and industries are also taken into account. The Adviser’s security
selection process involves prioritizing stocks based on attractive combinations
of dividend yield and dividend growth potential over time following review of
appropriate fundamental criteria, including, but not limited to, balance sheet
strength, earnings growth, and cash flow durability.
The
Adviser’s sell discipline is a critical component of the investment process.
Generally, a stock is reviewed for sale when one
or more of the following occur:
◾ the
combination of dividend yield and dividend growth becomes notably lower than the
portfolio’s average dividend yield or dividend growth outlook;
◾ the
investment thesis deteriorates; and
4
◾ diminished
management commitment to the dividend.
The
Fund will invest its assets so that at least 80% of its net assets (plus any
borrowings for investment purposes) are invested
in dividend-paying securities of U.S. issuers. For purposes of this limitation,
U.S. issuers will be defined as issuers i) that are organized under the laws of
the U.S. or that maintain their principal place of business in the U.S.; (ii)
whose securities are traded principally on U.S. based exchanges; or (iii) that,
during the issuer’s most recent fiscal year, derived at least 50% of their
revenues or profits from goods produced or sold, investments made, or services
performed in the U.S. or that have at least 50% of their assets in the U.S. The
Fund will notify shareholders at least 60 days in advance of any change in its
investment policy to invest, under normal circumstances, less than 80% of its
net assets (plus any borrowings for investment purposes) in dividend-paying
securities of U.S. issuers.
TEMPORARY
INVESTMENTS
The
Fund may temporarily depart from its principal investment strategies by
investing its assets in shorter-term debt securities
and similar obligations or holding cash. It may do this in response to unusual
circumstances, such as: adverse market, economic or other conditions (for
example, to help avoid potential losses, or during periods when there is a
shortage of appropriate securities); to maintain liquidity to meet shareholder
redemptions; or to accommodate cash inflows. It is possible that such
investments could affect the Fund’s investment returns and/or the ability to
achieve the Fund’s investment objectives.
What are
the Fund’s Principal Investments?
The
following provides general information on the Fund’s principal investments. The
Fund’s Statement of Additional Information
(SAI) provides information about the Fund’s non-principal investments and may
provide additional information about the Fund’s principal
investments.
Equity
Securities
Equity
securities represent a share of an issuer’s earnings and assets, after the
issuer pays its liabilities. The Fund cannot predict
the income it will receive from equity securities because issuers generally have
discretion as to the payment of any dividends or distributions. However, equity
securities offer greater potential for appreciation than many other types of
securities, because their value increases directly with the value of the
issuer’s business.
The
following describes the equity securities in which the Fund principally
invests.
Common
Stocks
Common
stocks are the most prevalent type of equity security. Common stocks receive the
issuer’s earnings after the issuer
pays its creditors and any preferred stockholders. As a result, changes in an
issuer’s earnings directly influence the value of its common stock and its
ability to pay dividends.
Real
Estate Investment Trusts (REITs)
REITs
are real estate investment trusts that lease, operate and finance commercial
real estate. REITs in the United States are exempt
from federal corporate income tax if they limit their operations and distribute
most of their income. Such tax requirements limit a U.S. REIT’s ability to
respond to changes in the commercial real estate market.
OTHER
INVESTMENTS, TRANSACTIONS, TECHNIQUES
Additional
Information Regarding the Security Selection Process
As
part of analysis in its security selection process, among other factors, the
Adviser also evaluates whether environmental,
social and governance factors could have a positive or negative impact on the
risk profiles of many issuers in the universe of securities in which the Fund
may invest. The Adviser may also consider information derived from active
engagements conducted by its in-house stewardship team with certain issuers on
environmental, social and governance topics. This qualitative analysis does not
automatically result in including or excluding specific securities but may be
used by Federated Hermes as an additional input in its primary
analysis.
What are
the Specific Risks of Investing in the Fund?
The
following provides general information on the risks associated with the Fund’s
principal investments. Any additional
risks associated with the Fund’s non-principal investments are described in the
Fund’s SAI. The Fund’s SAI also may provide additional information about the
risks associated with the Fund’s principal investments.
5
Stock
Market Risk
The
value of equity securities in the Fund’s portfolio will rise and fall over time.
These fluctuations could be a sustained trend or a
drastic movement. Historically, the equity market has moved in cycles, and the
value of the Fund’s securities may fluctuate from day to day. The Fund’s
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund’s Share price may
decline. The Adviser attempts to manage market risk by limiting the amount the
Fund invests in each company’s equity securities. However, diversification will
not protect the Fund against widespread or prolonged declines in the stock
market.
Information
publicly available about a company, whether from the company’s financial
statements or other disclosures or from
third parties, or information available to some but not all market participants,
can affect the price of a company’s shares in the market. The price of a
company’s shares depends significantly on the information publicly available
about the company. The reporting of poor results by a company, the restatement
of a company’s financial statements or corrections to other information
regarding a company or its business may adversely affect the price of its
shares, as would allegations of fraud or other misconduct by the company’s
management. The Fund may also be disadvantaged if some market participants have
access to material information not readily available to other market
participants, including the Fund.
Mid-Cap
Company Risk
The
Fund may invest in mid-capitalization (or “mid-cap”) companies. Market
capitalization is determined by multiplying
the number of a company’s outstanding shares by the current market price per
share. Mid-cap companies often have narrower markets and limited managerial and
financial resources compared to larger, more established companies. The
performance of mid-cap companies can be more volatile and they face greater risk
of business failure, compared to larger, more established companies, which could
increase the volatility of the Fund’s portfolio and performance. Shareholders
should expect that the value of the Fund’s Shares will be more volatile than a
fund that invests exclusively in large-cap companies.
Large-Cap
Company Risk
The
Fund may invest in large-capitalization (or “large-cap”) companies. Market
capitalization is determined by multiplying
the number of a company’s outstanding shares by the current market price per
share. Larger, more established, companies may have fewer opportunities to
expand the market for their products or services, may focus their competitive
efforts on maintaining or expanding their market share, and may be unable to
respond quickly to new competitive challenges, like price competition, changes
in consumer tastes or innovative products. These factors could result in the
share price of larger companies not keeping pace with the overall stock market
or growth in the general economy, and could have a negative effect on the Fund’s
portfolio, performance and Share price.
RISK
RELATED TO THE ECONOMY
The
value of the Fund’s portfolio may decline in tandem with a drop in the overall
value of the markets in which the Fund
invests and/or other markets based on negative developments in the U.S. and
global economies. Economic, political and financial conditions, or industry or
economic trends and developments, may, from time to time, and for varying
periods of time, cause volatility, illiquidity or other potentially adverse
effects in the financial markets. The commencement, continuation or ending of
government policies and economic stimulus programs, changes in monetary policy,
increases or decreases in interest rates, or other factors or events that affect
the financial markets may contribute to the development of or increase in
volatility, illiquidity, shareholder redemptions and other adverse effects (such
as a decline in a company’s stock price), which could negatively impact the
Fund’s performance. For example, the value of equity securities may rise and
fall in response to changes in interest rates. Market factors, such as the
demand for particular equity securities, may cause the price of certain equity
securities to fall while the prices of other securities rise or remain
unchanged.
Epidemic
and Pandemic Risk
An outbreak of respiratory
disease caused by a novel coronavirus was first detected in China in late 2019
and subsequently spread globally. This coronavirus has resulted in, and may
continue to result in, closed borders, enhanced health screenings, disruptions
to healthcare service preparation and delivery, quarantines, cancellations, and
disruptions to supply chains, workflow operations and consumer activity, as well
as general concern and uncertainty. The impact of this coronavirus has resulted
in substantial economic volatility. Health crises caused by outbreaks, such as
the coronavirus outbreak, may exacerbate other pre-existing political, social
and economic risks. The impact of this outbreak, and other epidemics and
pandemics that may arise in the future, could continue to negatively affect the
worldwide economy, as well as the economies of individual countries, individual
companies, including certain Fund service providers and issuers of the Fund’s
investments, and the markets in general in significant and unforeseen
6
ways. In
addition, governments, their regulatory agencies, or self-regulatory
organizations may take actions in response to the pandemic, including
significant fiscal and monetary policy changes, that may affect the instruments
in which the Fund invests or the issuers of such instruments. Any such impact
could adversely affect the Fund’s performance.
Risk
Related to Investing for dividend income
There
is no guarantee that the issuers of the stocks held by the Fund will declare
dividends in the future or that, if dividends
are declared, they will remain at their current levels or increase over time.
Because a dividend is always a positive contributor to total return,
dividend-paying stocks are typically less volatile than non-dividend-paying
stocks. Accordingly, the Fund’s performance may lag behind the general market
when dividend-paying stocks are out of favor.
Liquidity
Risk
Trading
opportunities are more limited for equity securities that are not widely held.
This may make it more difficult to sell or
buy a security at a favorable price or time. Consequently, the Fund may have to
accept a lower price to sell a security, sell other securities to raise cash or
give up an investment opportunity, any of which could have a negative effect on
the Fund’s performance. Infrequent trading of securities may also lead to an
increase in their price volatility.
Liquidity
risk also refers to the possibility that the Fund may not be able to sell a
security 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.
REAL
ESTATE INVESTMENT TRUST RISK
Real
estate investment trusts (REITs) are subject to risks associated with the
ownership of real estate. Some REITs experience
market risk due to investment in a limited number of properties, in a narrow
geographic area, or in a single property type, which increases the risk that
such REIT could be unfavorably affected by the poor performance of a single
investment or investment type. These companies are also sensitive to factors
such as changes in real estate values and property taxes, interest rates, cash
flow of underlying real estate assets, supply and demand and the management
skill and creditworthiness of the issuer. Borrowers could default on or sell
investments that a REIT holds, which could reduce the cash flow needed to make
distributions to investors. In addition, REITs may also be affected by tax and
regulatory requirements impacting the REITs’ ability to qualify for preferential
tax treatments or exemptions. REITs require specialized management and pay
management expenses. REITs also are subject to physical risks to real property,
including weather, natural disasters, terrorist attacks, war, or other events
that destroy real property.
REITs
include equity REITs and mortgage REITs. Equity REITs may be affected by changes
in the value of the underlying
property owned by the trusts, while mortgage REITs may be affected by the
quality of any credit extended. Further, equity and mortgage REITs are dependent
upon management skills and generally may not be diversified. Equity and mortgage
REITs are also subject to heavy cash flow dependency, defaults by borrowers and
self-liquidations. In addition, equity and mortgage REITs could possibly fail to
qualify for tax-free pass-through of income under applicable tax laws or to
maintain their exemptions from registration under the Investment Company Act of
1940, as amended. The above factors may also adversely affect a borrower’s or a
lessee’s ability to meet its obligations to the REIT. In the event of a default
by a borrower or lessee, the REIT may experience delays in enforcing its rights
as a mortgagee or lessor and may incur substantial costs associated with
protecting its investments. In addition, even many of the larger REITs in the
industry tend to be small to medium-sized companies in relation to the equity
markets as a whole.
Effective
for taxable years beginning after December 31, 2017, the Tax Cuts and Jobs Act
generally allows individuals and
certain non-corporate entities, such as partnerships, a deduction for 20% of
qualified REIT dividends. Related regulations allow a regulated investment
company to pass the character of its qualified REIT dividends through to its
shareholders, provided certain holding period requirements are met.
ETF
RISK
As an ETF,
the Fund is subject to the following risks:
Authorized
Participants Concentration Risk
To the
extent that the Fund invests in instruments that trade outside of a
collateralized settlement system, it may have a limited number of financial
institutions that act as Authorized Participants. To the extent they cannot or
are otherwise unwilling to engage in creation and redemption transactions with
the Fund and no other Authorized Participant steps in, trading in Shares of the
Fund may be significantly diminished, bid-ask spreads may widen, and the market
price of Shares may represent a significant discount to net asset value (NAV).
To the extent that no Authorized Participants are willing to trade in the Fund’s
shares, the Fund may have difficulty maintaining compliance with the
requirements of the Exchange necessary to maintain the listing of the Fund, and
the Fund may face delisting from the Exchange.
7
Premium/Discount
Risk
The NAV of the Fund’s
Shares will generally fluctuate with changes in the market value of the Fund’s
securities holdings. The market prices of Fund Shares will generally fluctuate
in accordance with changes in the Fund’s NAV and supply and demand of Shares on
the secondary market. It cannot be predicted whether Fund Shares will trade
below, at or above their NAV, and when bid-ask spreads widen. As a result,
shareholders of the Fund may pay more than NAV when purchasing Shares and
receive less than NAV when selling Fund Shares. This risk is heightened in times
of market volatility and steep market declines, particularly to the extent that
the Fund’s portfolio holdings are or become illiquid. In such market conditions,
market or stop-loss orders to sell the ETF Shares may be executed at market
prices that are significantly below that day’s NAV, as subsequently calculated.
In addition, Authorized Participants and/or market makers in the Fund’s Shares
may step away from the market, resulting in a disruption to creations and
redemptions, which may result in trading prices that differ significantly from
the Fund’s NAV. In addition, market prices of Fund Shares may deviate
significantly from the NAV if the number of Fund Shares outstanding is small,
such that there is less active trading in Fund Shares. Investors purchasing and
selling Fund Shares in the secondary market may not experience investment
results consistent with those experienced by those creating and redeeming
directly with the Fund. In addition, a Fund’s end-of-day market price may
deviate from its NAV to the extent that the Fund invests in foreign securities
whose local trading markets close before the U.S. market
closes
because, although the Fund may value such securities at their local market
closing prices for purposes of calculating NAV, the broader market may assign
them a different value, including due to after-hours developments in their local
markets, which may be reflected in the market price of Shares.
Secondary
Market Trading Risk
Investors
buying or selling Shares in the secondary market will normally pay brokerage
commissions, which are often a fixed amount and may be a significant
proportional cost for investors buying or selling relatively small amounts of
Shares. In addition, secondary market investors will incur the cost of the
difference between the price that an investor is willing to pay for Shares (the
bid price) and the price at which an investor is willing to sell Shares (the ask
price). This difference in bid and ask prices is often referred to as the
“spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and is generally lower if the
Fund’s Shares have more trading volume and market liquidity and higher if the
Fund’s Shares have little trading volume and market liquidity. Increased market
volatility may cause increased bid/ask spreads.
Although
Fund Shares are listed for trading on the Exchange, there can be no assurance
that an active trading market for such Shares will develop or be maintained,
that bid-ask spreads will be narrow, or that the Fund’s Shares will continue to
be listed. Trading in Fund Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares is subject to trading halts caused by
extraordinary market volatility pursuant to Exchange “circuit breaker” rules.
There can be no assurance that the requirements of the Exchange necessary to
maintain the listing of any Fund will continue to be met or will remain
unchanged or that the Shares will trade with any volume, or at all.
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
The
Fund’s net asset value of a Share (NAV) is determined as of the end of regular
trading on the New York Stock Exchange (NYSE) (normally
4:00 p.m. Eastern time) each day the NYSE is open. The Fund calculates the NAV
by valuing its assets, subtracting its liabilities and dividing the balance by
the number of Shares outstanding. The Fund’s current NAV and/or public offering
price may be found at FederatedHermes.com/us, via online news sources and in
certain newspapers.
The
value of the Fund’s assets may change on days you cannot purchase or redeem
Shares. This may occur when the U.S.
markets for fixed-income securities are open on a day the NYSE is
closed.
In
calculating its NAV, the Fund generally values investments as
follows:
◾ Equity
securities listed on an exchange or traded through a regulated market system are
valued at their last reported sale price or official closing price in their
principal exchange or market.
8
If any
price, quotation, price evaluation or other pricing source is not readily
available when the NAV is calculated, if the Fund cannot obtain
price evaluations from a pricing service or from more than one dealer for an
investment within a reasonable period of time as set forth in the Adviser’s
valuation policies and procedures, or if information furnished by a pricing
service, in the opinion of the Valuation Committee, is deemed not representative
of the fair value of such security, the Fund uses the fair value of the
investment determined in accordance with the procedures generally described
below. There can be no assurance that the Fund could obtain the fair value
assigned to an investment if it sold the investment at approximately the time at
which the Fund determines its NAV per share.
Shares
of other funds are valued based upon their reported NAVs. The prospectuses for
these funds explain the circumstances
under which they will use fair value pricing and the effects of using fair value
pricing.
Fair
Valuation
Pursuant
to Rule 2a-5 under the Investment Company Act of 1940, the Board has designated
the Adviser as the Fund’s valuation
designee to perform the fair valuation determination for securities and other
assets held by the Fund. The Adviser, acting through its “Valuation Committee,”
is responsible for determining the fair value of investments for which market
quotations are not readily available. The Valuation Committee is comprised of
officers of the Adviser and certain of the Adviser’s affiliated companies and
determines fair value and oversees the calculation of the NAV. The 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. The Valuation Committee is
subject to Board oversight and certain reporting and other requirements intended
to provide the Board the information it needs to oversee the Adviser’s fair
value determinations.
The
Valuation Committee is also authorized to use pricing services to provide fair
price evaluations of the current fair value of
certain investments for purposes of calculating the NAV. In the event that
market quotations and price evaluations are not available for an investment, the
Valuation Committee determines the fair value of the investment in accordance
with procedures adopted by the Adviser as the valuation designee. The Board has
also approved the Adviser’s fair valuation and significant events procedures as
part of the Fund’s compliance program and will review any changes made to the
procedures. The Fund’s SAI discusses the methods used by pricing services and
the Valuation Committee in valuing investments.
Using
fair value to price investments may result in a value that is different from an
investment’s most recent closing price and
from the prices used by other registered funds to calculate their NAVs. The
application of the fair value procedures to an investment represents a good
faith determination of such investment’s fair value. There can be no assurance
that the Fund could obtain the fair value assigned to an investment if it sold
the investment at approximately the time at which the Fund determines its NAV
per share, and the actual value could be materially different.
How Do You
Buy and Sell Shares?
individual
shares
Shares
of the Fund are listed for trading on a national securities exchange during the
trading day. The Fund’s primary listing
exchange is NYSE Arca. Shares can be bought and sold throughout the trading day
like Shares of other publicly traded companies, and when you buy or sell the
Fund’s Shares in the secondary market, you will pay or receive the market price.
However, there can be no guarantee that an active trading market will develop or
be maintained, or that the Fund Shares listing will continue or remain
unchanged. Buying or selling the Fund’s Shares involves certain costs that apply
to all securities transactions. For example, when buying or selling Shares of
the Fund through a financial intermediary, you may incur a brokerage commission
or other charges determined by your financial intermediary. The commission is
frequently a fixed amount and may be a significant cost for investors seeking to
buy or sell small amounts of Shares. In addition, you may also incur the cost of
the spread (the difference between the bid price (the price secondary market
investors are willing to pay for Shares) and the ask price (the price at which
secondary market investors are willing to sell Shares)). The spread varies over
time for Shares of the Fund based on its trading volume and market liquidity,
and is generally less if the Fund has more trading volume and market liquidity
and more if the Fund has less trading volume and market liquidity.
Creations
and Redemptions
Shares
of the Fund may only be acquired through the Distributor and redeemed directly
with the Fund by or through an Authorized Participant in
Creation Units or multiples thereof. A Creation Unit is comprised of 5,000
Shares, as discussed in the “Creation and Redemption of Creation Units” section
of the SAI. “Authorized Participants” are registered clearing agents that enter
into an agreement with the Distributor to transact in Creation Units. For a list
of the Fund’s Authorized Participants, contact the Distributor at 888-400-7838.
Once created, Shares of the Fund normally trade in the secondary market in
amounts less than a Creation Unit.
9
The
Fund is open on every “Business Day,” which is any day the NYSE is open. The New
York Stock Exchange (NYSE) is open for trading
Monday through Friday and is closed on the following holidays: New Year’s Day,
Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day,
Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day. On days when the NYSE closes earlier than normal, the
Fund may require orders to create or redeem Creation Units to be placed earlier
in the day. See the “Creation and Redemption of Creation Units” section of the
SAI.
Purchases
and redemptions of Creation Units will primarily take place in-kind; however, at
times, may take place for cash at
the discretion of the Fund. The determination of whether purchases and
redemptions of Creation Units will be for cash or in-kind depends primarily on
the regulatory requirements and settlement mechanisms relevant to the Fund’s
portfolio holdings and the Fund is not limited to engaging in in-kind
transactions to any particular market circumstances. As further described in the
SAI, Creation Units typically are issued on a two Business Days (“T+2”) basis
after a purchase order has been received in good order and the transfer of good
title to the Fund of any in-kind securities and/or cash required to purchase a
Creation Unit have been completed (subject to certain exceptions). Similarly,
and also as further described in the SAI, deliveries of redemption proceeds by
the Fund generally will be made on a T+2 basis after a redemption order has been
received in good order and the requisite number of Fund Shares have been
delivered (subject to certain exceptions). The Fund may delay redemptions up to
seven days or longer as permitted by applicable law, regulations and
interpretations, such as where unusual market conditions affect the NYSE or an
emergency exists which makes it impracticable for the Fund to dispose of or
value securities it owns or the Fund has received an SEC exemptive
order.
The
Fund intends to comply with the U.S. federal securities laws in accepting
securities for deposit and satisfying redemptions
with redemption securities by, among other means, assuring that any securities
accepted for deposit and any securities used to satisfy redemption requests will
be sold in transactions that would be exempt from registration under the
Securities Act. Further, an Authorized Participant that is not a “qualified
institutional buyer,” as such term is defined under Rule 144A of the Securities
Act, will not be able to receive restricted securities eligible for resale under
Rule 144A.
For more information on
how to buy and sell Shares of the Fund, call 1-800-341-7400 or visit
FederatedHermes.com/us.
Share
Trading Prices
The
trading prices of the Fund’s Shares listed on its Exchange may differ from the
Fund’s daily NAV and will normally be
affected by market forces, such as supply and demand, economic conditions, the
market value of the Fund’s disclosed portfolio holdings and other factors. As a
result, trading prices may be lower, higher or the same as the Fund’s NAV; and
investors may pay more than NAV when buying Shares and receive less than NAV
when selling Shares through the Exchange.
Book
Entry
Shares
of the Fund are held in book-entry form, which means that no stock certificates
are issued. The Depository Trust Company
(DTC) or its nominee is the record owner of all outstanding Shares of the Fund
and is recognized as the owner of all Shares for all purposes.
Investors
owning Shares of the Fund are beneficial owners as shown on the records of DTC
or its participants. DTC serves as
the securities depository for Shares of the Fund. DTC participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and other institutions that directly or indirectly maintain a custodial
relationship with DTC. As a beneficial owner of Shares, you are not entitled to
receive physical delivery of stock certificates or to have Shares registered in
your name, and you are not considered a registered owner of Shares. Therefore,
to exercise any right as an owner of Shares, you must rely upon the procedures
of DTC and its participants. These procedures are the same as those that apply
to any other exchange-traded securities that you hold in book-entry or “street
name” form.
Premium/Discount
Information
The
NAV of the Fund will fluctuate with changes in the market value of its portfolio
holdings. The market price of the Fund will
fluctuate in accordance with changes in its NAV, as well as market supply and
demand.
There
may be differences–premiums
or discounts–between the daily market prices on secondary markets for Shares of
the Fund and
the Fund’s NAV. NAV is the price per share at which the Fund issues and redeems
Shares. The Fund’s market price may be at, above or below its NAV. A premium is
the amount that the Fund is trading above the reported NAV, expressed as a
percentage of the NAV. A discount is the amount that the Fund is trading below
the reported NAV, expressed as a percentage of the NAV. A discount or premium
could be significant. Information regarding the Fund’s NAV, market price and
daily premiums or discounts can be found at
www.federatedhermes.com/products/exchange-traded-funds/us-strategic-dividend-etf.do.
10
Investments
by Registered Investment Companies
Section
12(d)(1) of the 1940 Act restricts investments by investment companies in the
securities of other investment companies,
including Shares of the Fund. Registered investment companies are permitted to
invest in the Fund beyond the limits set forth in Section 12(d)(1) subject to
certain terms and conditions, including that such investment companies enter
into an agreement with the Fund.
Continuous
Offering
The
method by which Creation Units of Fund Shares are created and traded may raise
certain issues under applicable securities
laws. Because new Creation Units of Shares are issued and sold by the Fund on an
ongoing basis, a “distribution,” as such term is used in the Securities Act, may
occur at any point. Broker-dealers and other persons are cautioned that some
activities on their part may, depending on the circumstances, result in their
being deemed participants in a distribution in a manner which could render them
statutory underwriters and subject them to the prospectus delivery requirement
and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an
order with the Distributor, breaks them down into constituent Shares and sells
the Shares directly to customers or if it chooses to couple the creation of a
supply of new Shares with an active selling effort involving solicitation of
secondary market demand for Shares. A determination of whether one is an
underwriter for purposes of the Securities Act must take into account all the
facts and circumstances pertaining to the activities of the broker-dealer or its
client in the particular case, and the examples mentioned above should not be
considered a complete description of all the activities that could lead to a
characterization as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in Shares, whether or
not participating in the distribution of Shares, are generally required to
deliver a prospectus. This is because the prospectus delivery exemption in
Section 4(3) of the Securities Act is not available in respect of such
transactions as a result of Section 24(d) of the 1940 Act. As a result,
broker-dealer firms should note that dealers who are not “underwriters” but are
participating in a distribution (as contrasted with engaging in ordinary
secondary market transactions) and thus dealing with the Shares that are part of
an overallotment within the meaning of Section 4(3)(C) of the Securities Act,
will be unable to take advantage of the prospectus delivery exemption provided
by Section 4(3) of the Securities Act. For delivery of prospectuses to exchange
members, the prospectus delivery mechanism of Rule 153 under the Securities Act
is only available with respect to transactions on a national
exchange.
Dealers
effecting transactions in the Fund’s Shares, whether or not participating in
this distribution, are generally required
to deliver a Prospectus. This is in addition to any obligation of dealers to
deliver a Prospectus when acting as underwriters.
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.
RULE
12b-1 FEES
The
Board has adopted a Rule 12b-1 Plan, which allows payment of marketing fees of
up to 0.25% of the Fund’s average
net assets. Because these fees would be paid out of the Fund’s assets on an
on-going basis, over time these fees would increase the cost of your investment.
The Fund’s Shares have 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.
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
11
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. 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.
Account
and Share Information
Fund
Distributions
The
Fund distributes substantially all of its net investment income to shareholders
in the form of dividends. The Fund intends to
declare and distribute income dividends monthly to shareholders of record. In
addition, the Fund distributes any net capital gains earned from the sale of
portfolio securities to shareholders no less frequently than annually. Net
short-term capital gains may be paid more frequently. Dividend payments are made
through DTC participants and indirect participants to beneficial owners then of
record with proceeds received from the Fund.
No
dividend reinvestment service is provided by the Trust. Financial intermediaries
may make available the DTC book-entry
Dividend Reinvestment Service for use by beneficial owners of Fund Shares for
reinvestment of their dividend distributions. Beneficial owners should contact
their financial intermediary to determine the availability and costs of the
service and the details of participation therein. Financial intermediaries may
require beneficial owners to adhere to specific procedures and timetables. If
this service is available and used, dividend distributions of both income and
net capital gains will be automatically reinvested in additional whole Shares of
the Fund purchased in the secondary market.
TAX
INFORMATION
The
Fund and/or your financial intermediary provides year-end tax information and an
annual statement of your account activity
to assist you in completing your federal, state and local tax returns. Fund
distributions of dividends and capital gains are taxable to you whether paid in
cash or reinvested in the Fund. Dividends are taxable at different rates
depending on the source of dividend income. Distributions of net short-term
capital gains are taxable to you as ordinary income. Distributions of net
long-term capital gains are taxable to you as long-term capital gains regardless
of how long you have owned your Shares.
Fund
distributions are expected to be primarily dividends. Redemptions and exchanges
are taxable sales. Please consult your tax
adviser regarding your federal, state and local tax liability.
Taxes
on Creations and Redemptions of Creation Units
A
person who purchases a Creation Unit by exchanging securities in-kind generally
will recognize a gain or loss equal to the
difference between: (i) the sum of the market value of the Creation Units at the
time of the exchange and any net amount of cash received by the Authorized
Participant in the exchange; and (ii) the sum of the purchaser’s aggregate basis
in the securities surrendered and any net amount of cash paid for the Creation
Units. A person who redeems Creation Units and receives securities in-kind from
the Fund will generally recognize a gain or loss equal to the difference between
the redeemer’s basis in the Creation Units, and the aggregate market value of
the securities received and any net cash received. The IRS, however, may assert
that a loss realized upon an in-kind exchange of securities for Creation Units
or an exchange of Creation Units for securities cannot be deducted currently
under the rules governing “wash sales,” or on the basis that there has been no
significant change in economic position. Persons effecting in-kind creations or
redemptions should consult their own tax adviser with respect to these matters.
The Fund has the right to reject an order for Creation Units if the purchaser
(or a group of purchasers) would, upon obtaining the Shares so ordered, own 80%
or more of the outstanding Shares of the Fund and if, pursuant to section 351 of
the Code, the Fund would have a basis in the deposit securities different from
the market value of such securities on the date of deposit. The Fund also has
the right to require information necessary to determine beneficial share
ownership for purposes of the 80% determinations.
FREQUENT
TRADING POLICIES
As
described above, when buying or selling shares of the Fund through a financial
intermediary, you may incur a brokerage
commission or other charges determined by your financial intermediary. Due to
these brokerage costs, if any, frequent buying and selling of Fund Shares on the
secondary market may detract significantly from investment returns.
The
Trust’s Board of Trustees has determined not to adopt policies and procedures
designed to prevent or monitor for frequent
purchases and redemptions of the Fund’s shares because the Fund sells and
redeems its shares at NAV only in Creation Units pursuant to the terms of an
Authorized Participant Agreement between the Authorized Participant and the
Distributor, and such direct trading between the Fund and Authorized
Participants is critical to ensuring that the Fund’s shares trade at or close to
NAV. Further, the vast majority of trading in Fund shares occurs on the
secondary market, which does not involve the Fund directly and therefore does
not cause the Fund to experience many of the harmful effects
12
of market timing, such as
dilution and disruption of portfolio management. In addition, the Fund imposes a
transaction fee on Creation Unit transactions, which is designed to offset
transfer and other transaction costs incurred by the Fund in connection with the
issuance and redemption of Creation Units and may employ fair valuation pricing
to minimize potential dilution from market timing. The Fund reserves the right
to reject any purchase order at any time and reserves the right to impose
restrictions on disruptive, excessive, or short-term trading.
Portfolio
Holdings Information
A
description of the Trust’s policies and procedures with respect to the
disclosure of the Fund’s portfolio securities is available in the Fund’s
Statement of Additional Information. The Fund discloses its portfolio holdings
daily at FederatedHermes.com/us. Fund fact sheets are also available on
FederatedHermes.com/us and provide information regarding the Fund’s top
holdings. Other information may be requested by calling
1-800-341-7400.
Declaration
of Trust Provisions
The
Board has adopted, and from time to time amends, an Amended and Restated
Declaration of Trust for the Trust and the Fund,
which governs its operations and by which each shareholder shall be held
expressly to have agreed to be bound by the provisions thereof.
The
Fund’s Declaration of Trust also places limitations on the forum in which claims
against the Trust may be heard and
includes a waiver of a jury trial. Other than federal securities law claims,
claims against the Trust are required to be brought in the Court of Chancery of
the State of Delaware to the extent there is subject matter jurisdiction in such
court for the claims asserted or, if not, then in the Superior Court of the
State of Delaware. Accordingly, shareholders may be required to bring claims in
an inconvenient or less favorable forum.
Who
Manages the Fund?
The
Board governs the Fund. The Board selects and oversees the Adviser, Federated
Equity Management Company of Pennsylvania.
The Adviser manages the Fund’s assets, including buying and selling portfolio
securities. Federated Advisory Services Company (FASC), an affiliate of the
Adviser, provides research, quantitative analysis, equity trading and
transaction settlement and certain other support services to the Adviser. The
fee for these services is paid by the Adviser and not by the Fund.
The
address of the Adviser and FASC is 1001 Liberty Avenue, Pittsburgh, PA
15222-3779.
The
Fund has received and can rely upon an order from the Securities and Exchange
Commission (SEC) that permits the
Adviser, subject to approval by the Board of Trustees, to appoint a sub-adviser
or change the terms of a sub-advisory agreement without obtaining shareholder
approval. The Fund is permitted to rely upon the SEC order to change
sub-advisers, or the fees paid to a sub-adviser, without the expense and delays
associated with obtaining shareholder approval of the change. This order does
not, however, permit the Adviser to increase the aggregate advisory fee rate of
the Fund without the approval of the shareholders.
The
Adviser and other advisory subsidiaries of Federated Hermes combined, advise
approximately 102 registered investment companies
spanning equity, fixed-income and money market mutual funds and also manage a
variety of other pooled investment vehicles, private investment companies and
customized separately managed accounts (including non-U.S./offshore funds).
Federated Hermes’ assets under management totaled approximately $668.9 billion
as of December 31, 2022. Federated Hermes was established in 1955 as Federated
Investors, Inc. and is one of the largest investment managers in the United
States with nearly 2,000 employees. Federated Hermes provides investment
products to more than 11,000 investment professionals and
institutions.
The
Adviser advises approximately 16 registered investment
companies and also manages sub-advised funds. The Adviser’s assets under
management totaled approximately $16.7 billion as of December 31,
2022.
PORTFOLIO
MANAGEMENT INFORMATION
Daniel
Peris
Daniel
Peris, CFA, Senior Portfolio Manager, has been the Fund’s portfolio manager
since November of 2022.
Mr.
Peris is jointly responsible for the day-to-day management of the Fund and
develops investment strategy for the Fund. He
has been with the Adviser or an affiliate since 2002; has worked in investment
management since 1999; and has managed investment portfolios since 2006.
Education: B.A., Williams College; M.Phil., Oxford University; and Ph.D.,
University of Illinois.
Deborah
D. Bickerstaff
Deborah D.
Bickerstaff, Portfolio Manager, has been the Fund’s portfolio manager since
November of 2022.
13
Ms.
Bickerstaff is jointly responsible for the day-to-day management of the Fund,
with emphasis on portfolio analytics and implementation. She
has been with the Adviser or an affiliate since 1996; has worked in investment
management since 2000; and has managed investment portfolios since 2005.
Education: B.S., La Roche College.
Jared
S. Hoff
Jared S. Hoff, Senior
Portfolio Manager, has been the Fund’s portfolio manager since November of
2022.
Mr.
Hoff is jointly responsible for the day-to-day management of the Fund. He has
been with the Adviser or an affiliate since
2000; has worked in investment management since 2000; and has managed investment
portfolios since 2017. Education: B.S., Duquesne University; M.B.A., Carnegie
Mellon University.
Michael
R. Tucker
Michael R. Tucker, Senior
Portfolio Manager, has been the Fund’s portfolio manager since November of
2022.
Mr.
Tucker is jointly responsible for the day-to-day management of the Fund. He has
been with the Adviser or an affiliate
since 1993; has worked in investment management since 1993; and has managed
investment portfolios since 2017. Education: B.S. and M.S., Carnegie Mellon
University.
The
Fund’s SAI provides additional information about the Portfolio Managers’
compensation, management of other accounts
and ownership of securities in the Fund.
ADVISORY
FEES
The
Fund’s investment advisory contract provides for payment to the Adviser of an
annual investment advisory fee of 0.60% of
the Fund’s average daily net assets. The Adviser may contractually or
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses. The Adviser and its affiliates have also agreed to certain
“Fee Limits” as described in the footnote to the “Risk/Return Summary: Fees and
Expenses” table found in the “Fund Summary” section of the
Prospectus.
Under
the Investment Advisory Agreement between the Trust and the Adviser, the Adviser
is responsible for reviewing, supervising and
administering the Fund’s investment program and the general management and
administration of the Trust. In this regard, among other things, the Adviser
arranges for transfer agency, custody, fund administration and accounting, and
other non-distribution related services necessary for the Fund to operate. The
Adviser may engage a sub-adviser to assist it in managing the Fund’s
investments, but will be responsible for overseeing any sub-advisers. The
Adviser manages the Fund’s business affairs, provides office facilities and
equipment and certain clerical, bookkeeping and administrative services, and
permits its officers and employees to serve as officers or Trustees of the
Trust. Under the Investment Advisory Agreement, the Adviser bears all of its own
costs associated with providing advisory services to the Fund. In addition, the
Adviser has contractually agreed to pay all operating expenses of the Fund,
except: (i) interest and taxes (including, but not limited to, income, excise,
transaction, transfer and withholding taxes) and registration fees and expenses;
(ii) expenses of the Fund incurred with respect to the acquisition and
disposition of portfolio securities and the execution of portfolio transactions,
including brokerage commissions and short sale dividend or interest expense;
(iii) expenses incurred in connection with any distribution plan adopted by the
Trust in compliance with Rule 12b-1 under the 1940 Act, including distribution
fees; (iv) Acquired Fund Fees and Expenses; (v) litigation expenses; (vi)
proxy-related expenses; (vii) tax reclaim recovery expenses; and (viii) any
expenses determined to be extraordinary expenses. Nevertheless, there exists a
risk that a Trust service provider will seek recourse against the Trust if is
not timely paid by the Adviser for the fees and expenses for which it is
responsible, which could materially adversely affect the Fund.
A
discussion of the Board’s review of the Fund’s investment advisory contract will
be available in the Fund’s annual and
semi-annual shareholder reports for the periods ended October 31 and April 30,
respectively.
Financial
Information
FINANCIAL
HIGHLIGHTS
The
Financial Highlights will help you understand the Fund’s financial performance
for its past five fiscal years, or since inception, if the
life of the Fund is shorter. Some of the information is presented on a per Share
basis. Total returns represent the rate an investor would have earned (or lost)
on an investment in the Fund, assuming reinvestment of any dividends and capital
gains.
This information has been
audited by KPMG LLP,
an
independent registered
public
accounting firm, whose report, along with the Fund’s audited financial
statements, is included in the Annual
Report.
14
Financial
Highlights
(For a Share Outstanding Throughout
the Period)
|
|
Period
Ended
10/31/20231 |
|
Net
Asset Value, Beginning of Period |
$25.16 |
|
Income
From Investment Operations: |
|
|
Net
investment income2 |
0.83 |
|
Net
realized and unrealized gain (loss) |
(3.57) |
|
Total
from Investment Operations |
(2.74) |
|
Less
Distributions: |
|
|
Distributions
from net investment income |
(0.69) |
|
Net
Asset Value, End of Period |
$21.73 |
|
Total
Return3 |
(11.11)% |
|
Ratios
to Average Net Assets: |
|
|
Net
expenses4 |
0.50%5 |
|
Net
investment income |
3.60%5 |
|
Expense
waiver/reimbursement 6 |
0.12%5 |
|
Supplemental
Data: |
|
|
Net
assets, end of period (000 omitted) |
$65,393 |
|
Portfolio
turnover7 |
35% |
|
1 |
Reflects
operations for the period from November 15, 2022 (commencement of
operations) to October 31, 2023. |
|
2 |
Per
share number has been calculated using the average shares
method. |
|
3 |
Based
on net asset value. Total returns for periods of less than one year are
not annualized. |
|
4 |
Amount
does not reflect net expenses incurred by investment companies in which
the Fund may invest. |
|
5 |
Computed
on an annualized basis. |
|
6 |
This
expense decrease is reflected in both the net expense and net investment
income ratios shown above. Amount does not reflect expense
waiver/
reimbursement
recorded by investment companies in which the Fund may
invest. |
|
7 |
Securities
that mature are considered sales for purposes of this
calculation. |
Further information
about the Fund’s performance is contained in the Fund’s Annual Report, dated
October 31, 2023, which can be obtained free of charge.
15
Appendix
A: Hypothetical Investment and Expense Information
The
following chart provides additional hypothetical information about the effect of
the Fund’s expenses, including investment advisory fees
and other Fund costs, on the Fund’s assumed returns over a 10-year period. The
chart shows the estimated expenses that would be incurred in respect of a
hypothetical investment of $10,000, assuming a 5% return each year, and an
investor’s continued holding of Shares. The chart assumes that Shares are
purchased at the Fund’s net asset value. However, individual Shares cannot be
purchased or redeemed at net asset value, and rather are typically bought and
sold on an exchange at a market price, which may be higher or lower than net
asset value. The 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 the chart is the gross expense
ratio as stated in the “Fees and Expenses” table of this Prospectus (and thus
does not reflect any fee waiver or expense reimbursement currently in effect).
The hypothetical investment information does not reflect the effect of charges
such as brokerage commissions or other fees to financial intermediaries that you
may pay (if any). 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 U.S. STRATEGIC DIVIDEND ETF | |||||
|
ANNUAL
EXPENSE RATIO: 0.62% | |||||
|
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 |
$63.36 |
$10,438.00 |
|
2 |
$10,438.00 |
$521.90 |
$10,959.90 |
$66.13 |
$10,895.18 |
|
3 |
$10,895.18 |
$544.76 |
$11,439.94 |
$69.03 |
$11,372.39 |
|
4 |
$11,372.39 |
$568.62 |
$11,941.01 |
$72.05 |
$11,870.50 |
|
5 |
$11,870.50 |
$593.53 |
$12,464.03 |
$75.21 |
$12,390.43 |
|
6 |
$12,390.43 |
$619.52 |
$13,009.95 |
$78.50 |
$12,933.13 |
|
7 |
$12,933.13 |
$646.66 |
$13,579.79 |
$81.94 |
$13,499.60 |
|
8 |
$13,499.60 |
$674.98 |
$14,174.58 |
$85.53 |
$14,090.88 |
|
9 |
$14,090.88 |
$704.54 |
$14,795.42 |
$89.28 |
$14,708.06 |
|
10 |
$14,708.06 |
$735.40 |
$15,443.46 |
$93.19 |
$15,352.27 |
|
Cumulative |
|
$6,109.91 |
|
$774.22 |
|
16
An SAI dated December 31,
2023, is incorporated by reference into this Prospectus. Additional information
about the Fund and its investments is contained in the Fund’s SAI and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual
Report’s Management’s Discussion of Fund Performance discusses market conditions
and investment strategies that significantly affected the Fund’s performance
during its last fiscal year. The SAI contains a description of the Fund’s
policies and procedures with respect to the disclosure of its portfolio
securities. To obtain the SAI,
Annual
Report, Semi-Annual Report and other information without charge, and to make
inquiries, call your financial intermediary or the Fund at
1-800-341-7400.
The Fund’s shareholder
reports
will be made
available on FederatedHermes.com/us/FundInformation, and you will be notified
and provided with a link each time a report is posted to the website. You may
request to receive paper reports from the Fund or from your financial
intermediary, free of charge, at any time. You may also request to receive
documents through e-delivery.
These documents, as well
as additional information about the Fund (including portfolio holdings,
performance and distributions), are also available on
FederatedHermes.com/us.
You can
obtain information about the Fund (including the SAI) by accessing Fund
information from the EDGAR Database on the SEC’s website at sec.gov. You can
purchase copies of this information by contacting the SEC by email at
[email protected].
Federated Hermes U.S.
Strategic Dividend ETF
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Federated Hermes Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at
FederatedHermes.com/us
or call 1-800-341-7400.
or call 1-800-341-7400.
Federated Securities
Corp., Distributor
Investment
Company Act File No. 811-23730
CUSIP
31423L305
Q455723
(12/23)
© 2023 Federated Hermes,
Inc.